EVOLUTION MINING LIMITED - M&A Activity 2011

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14 September 2011

Manager Announcements Company Announcements Office ASX Limited Level 4 20 Bridge Street Sydney NSW 2000

Dear Sir/ Madam

MARKET UPDATE

Catalpa Resources Limited ‐ Explanatory Memorandum Supplement

Attached is Catalpa’s Explanatory Memorandum Supplement, which is referred to in the Explanatory Memorandum released on Tuesday 13 September 2011. The Explanatory Memorandum Supplement contains a full version of the Independent Expert’s Report.

Yours Sincerely,

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Erik Palmbachs

Chief Financial Officer & Company Secretary

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G R A N T S A M U E L & A S S O C I A T E S

L E V E L 6

12 September 2011

1 C O L L I NS S T R E E T ME L B O UR N E V I C 3 0 0 0 T : + 6 1 3 9 9 4 9 8 8 0 0 / F : + 6 1 3 9 9 9 4 9 8 8 3 8 w w w . g r a n t s a m u e l . c o m . a u

The Directors Catalpa Resources Limited Level 1, 9 Havelock Street West Perth, Western Australia 6005

Dear Directors

Proposed Merger with Conquest and acquisition of Newcrest Assets

1 Introduction

Catalpa Resources Limited (“Catalpa”) is an ASX-listed Australian gold company. Its major assets are the Edna May gold mine in Western Australia and a 30% interest in the Cracow gold mine in Queensland. Conquest Mining Limited (“Conquest”) is also an ASX-listed Australian gold company. Its major assets are the Pajingo gold mine and the Mt Carlton gold-silver-copper development project, both located in Queensland.

On 15 June 2011 Conquest and Catalpa announced that they had reached agreement on a proposal (“Proposal”) comprising two inter-conditional elements:

a merger between Catalpa and Conquest (“Merger”), on a “merger of equals” basis, to be effected via a scheme of arrangement in Conquest (“Scheme”). Conquest shareholders will receive 0.30 new Catalpa shares for every Conquest share; and
the acquisition of two gold assets from Newcrest Mining Limited (“Newcrest”) (“Asset Acquisition”). The assets to be acquired are a 70% interest in the Cracow gold mine and the Mt Rawdon gold mine (“Newcrest Assets”), located in Queensland. Consideration for the acquisition will be an issue of shares in the merged Catalpa/Conquest (“Share Issue”), which will give Newcrest an interest of approximately 38% on a fully diluted basis in the merged company. Immediately following the Merger, Catalpa shareholders will hold approximately 31% of the merged company, with the remaining 31% held by Conquest shareholders.

Subject to Catalpa shareholder approval, the merged company will be renamed Evolution Mining Limited (“Evolution”). It will seek to raise $150 million shortly after completion of the Proposal, by way of a pro-rata renounceable entitlement offer to shareholders (the “Entitlement Offer”). Newcrest will not participate in the Entitlement Offer. As a result, its entitlements will be offered for sale in conjunction with the Entitlement Offer and its interest is expected to fall to approximately 33% of Evolution.

The Proposal will require the approval of the Share Issue by Catalpa shareholders and the approval of the Scheme by Conquest shareholders.

The directors of Catalpa have engaged Grant Samuel & Associates Pty Limited (“Grant Samuel”) to prepare an independent expert’s report setting out whether, in its opinion, the Proposal overall (including the Merger, the Asset Acquisition and the Share Issue) is fair and reasonable having regard to the interests of Catalpa shareholders, and to state reasons for that opinion.

A concise version of the report will accompany the Notice of Meeting and Explanatory Memorandum to be sent to shareholders by Catalpa. The full report will be available on the Catalpa website or available to Catalpa shareholders on request. This letter contains a summary of Grant Samuel’s opinion and main conclusions.

G R A N T S A M U E L & A S S O C I A T E S P T Y L I M I T E D A B N 2 8 0 5 0 0 3 6 3 7 2 A F S L I C E N C E N O 2 4 0 9 8 5

2 Summary of Opinion

ASIC[1] policy requires that the Proposal be assessed as if it were a takeover by Newcrest of the merged Catalpa/Conquest. Grant Samuel has estimated that the underlying value of Catalpa is in the range $2.03-2.25 per share. In Grant Samuel’s view the trading price of shares in Evolution is unlikely to match the underlying value of shares in Catalpa (assuming market conditions consistent with those at the time of the valuation). Accordingly, the Proposal is not “fair”. However, Grant Samuel believes that Catalpa shareholders will be better off if the Proposal is implemented than if it is not. On this basis, while not fair, the Proposal is reasonable. In Grant Samuel’s view the Proposal is in shareholders’ best interests, in the absence of a superior proposal.

The elements of the Proposal (the Merger, the Asset Acquisition and the Share Issue) are interconditional. Accordingly, while evaluation of the Proposal involves an assessment of each individual element, it ultimately requires an overall judgement as to whether Catalpa shareholders are likely to be better off if the Proposal is implemented than if it is not.

The terms of the Merger are equitable: Catalpa shareholders will collectively hold a share of the merged Catalpa/Conquest that is consistent with their contribution to the merged company. The acquisition of the Newcrest Assets is on attractive terms, resulting (on the basis of Grant Samuel’s valuation analysis) in an uplift in the underlying value attributable to Catalpa shareholders.

From an investor perspective, Evolution should be a significantly more attractive gold company than a standalone Catalpa. Evolution will be one of only a few mid-cap Australian gold producers, offering meaningful scale in terms of market capitalisation and gold production, operational diversification across a number of mine sites and short to medium term growth potential. Evolution should be able to access capital (both debt and equity) with more certainty and at lower cost than Catalpa. Over time, Evolution’s relationship with Newcrest has the potential to deliver growth opportunities not accessible by Catalpa.

Having regard to the attractive investment characteristics of Evolution and the value uplift inherent in the Asset Acquisition, Grant Samuel believes that Evolution shares should trade at higher prices than Catalpa shares (after adjusting for the subsequent Entitlement Offer).

As a result of the Share Issue, Newcrest will hold a 38% economic interest in Evolution (to be diluted down to approximately 33% following the Entitlement Offer). Newcrest will not have Board control of Evolution: it will appoint only two out of a total of eight directors on the board of Evolution. While Newcrest’s shareholding will mean that it will have the ability to influence the outcome of any change of control proposal for Evolution, the Proposal will not close off the opportunity for Catalpa shareholders to realise full underlying value for their interests at some time in the future. From Newcrest’s perspective the Proposal represents an opportunity to liberate value for gold assets that do not fit within its portfolio of world class gold projects. Newcrest’s shareholding in Evolution will be a non-core investment for Newcrest and there is no reason to believe that Newcrest would not consider any fully priced change of control proposal in relation to Evolution.

A conclusion as to whether the Proposal is “fair” is not straightforward. The Proposal is to be assessed as if it were a takeover by Newcrest of the merged Catalpa/ Conquest. Given that Newcrest will not provide any consideration directly to Catalpa shareholders, application of takeover analysis to the Proposal requires that the “consideration” be taken to be Catalpa shareholders’ shares in Evolution (valued at expected trading prices) following implementation of the Proposal.

Grant Samuel has estimated that Catalpa’s underlying value is in the range $2.03-2.25 per share. At the time of the valuation, Catalpa’s shares were trading around $1.46 per share. Accordingly,

1 ASIC refers to the Australian Securities and Investments Commission

for the Proposal to be fair it would need to result in an effective re-rating of at least $0.57 per Evolution share, or 39%.

In Grant Samuel’s opinion, a re-rating of that magnitude is improbable (at least in the short term). It is unlikely that shares in Evolution would trade at prices that would equate to the full underlying value of Catalpa (at least in the short term). Full underlying value generally represents a significant premium to share trading values (of the order of 25-40%). Notwithstanding the value uplift resulting from the Asset Acquisition and Share Issue, the superior investment characteristics of Evolution relative to Catalpa and the consequent prospect of a positive re-rating of Evolution shares, it appears unlikely that the short term impact of the Proposal would be to lift the trading value of Evolution shares to this extent (assuming no change in market conditions).

On the basis that the “consideration” to be received by Catalpa shareholders (that is, shares in Evolution valued at their trading price) is unlikely to equate to the full underlying value of Catalpa, the Proposal is not “fair”.

Notwithstanding that the Proposal is not “fair”, Grant Samuel believes that Catalpa shareholders will be better off if the Proposal is implemented. Evolution shares are likely to trade at higher prices than shares in a standalone Catalpa and the Proposal will result in an uplift in the underlying value attributable to Catalpa shareholders. Shareholders will have an opportunity to realise this increased underlying value at some time in the future through a takeover of Evolution. By comparison with Catalpa, Evolution will be a lower risk company with significant growth prospects. The disadvantages of the Proposal (principally related to one-off transaction costs) are not material by comparison with the benefits of the Proposal.

In Grant Samuel’s view, the benefits of the Proposal clearly outweigh the disadvantages and risks. Accordingly, while the Proposal is not fair if viewed as a takeover by Newcrest, in Grant Samuel’s opinion the Proposal is reasonable. The Proposal is in Catalpa shareholders’ best interests, in the absence of a superior proposal.

3 Key Conclusions

ASIC policy requires Grant Samuel to assess the Proposal as if it were a takeover by Newcrest of the merged Catalpa/Conquest.

The Proposal will only be implemented if Catalpa shareholders approve the Share Issue. However, the Share Issue is only one component of the Proposal, the elements of which are inter-conditional. Assessment of the Proposal requires analysis of the Merger, the Asset Acquisition and the Share Issue.

Following implementation of the Proposal, Newcrest will hold a 38% equity interest in Evolution, to be diluted to around 33% following the Entitlement Offer. Under the regulatory framework dealing with the preparation of independent expert’s reports[2] , because Newcrest will hold more than 20% of Evolution, the Proposal or elements of the Proposal are deemed to constitute a change of control transaction. One interpretation of the regulatory framework is that the Proposal overall must be evaluated on the basis of takeover analysis, as if it were a takeover of the merged Catalpa/Conquest by Newcrest. ASIC has advised Grant Samuel that this is ASIC’s preferred approach. Takeover analysis involves a comparison of the value of the consideration to be received by Catalpa shareholders with the estimated underlying value of Catalpa shares before the Proposal. If the value of the consideration is equal to or greater than the estimated underlying value of Catalpa shares, then the Proposal is “fair”.

2 Principally set out in Regulatory Guide 111 (Content of Expert Reports), issued by ASIC.

Given that Newcrest will not provide any consideration directly to Catalpa shareholders, application of takeover analysis to the Proposal requires that the “consideration” be taken to be the shares in Evolution following implementation of the Proposal. On this basis the Proposal would be fair if the expected trading price of shares in Evolution was equal to or greater than the estimated underlying value of Catalpa before the Proposal.

In its assessment as to whether the Proposal is fair and reasonable, Grant Samuel has had regard to the following:

the estimated underlying value of Catalpa on a standalone basis;
the terms of the Merger and their potential impact on the underlying value and trading price of shares in the merged Catalpa/Conquest;
the terms of the Asset Acquisition and Share Issue and their potential impact on the underlying value and trading price of shares in Evolution;
the investment characteristics of Evolution by comparison with the investment characteristics of Catalpa on a standalone basis;
the effect of the Proposal on control of Evolution; and
other advantages and disadvantages of the Proposal.

The Merger is a genuine merger of equals.

The Merger is a genuine merger of equals. Following the Merger (but before the Share Issue), Catalpa shareholders will hold approximately 49.8% of the shares in Evolution, with Conquest shareholders holding the remaining 50.2%.

Catalpa and Conquest will each contribute three members to Evolution’s board of directors, with Newcrest nominating a further two directors. The current executive chairman of Conquest will become the executive chairman of Evolution, while the chief executive officer of Catalpa will be Evolution’s managing director and chief executive officer.

 Valuation analysis suggests that the terms of the Merger are equitable.

Grant Samuel’s valuations of Catalpa and Conquest are summarised below:

Catalpa – Valuation Summary	Catalpa – Valuation Summary
	Valuation(A$ million)
	Low High
Edna May	400 440
Cracow (30% interest)	57 63
Corporate costs	(20) (15)
Enterprise Value	437 488
Adjusted net debt Value of hedge book (tax-effected) Value attributable to options Equity value attributable to shareholders Shares on issue (including performance rights) (millions)3	(9) (9) (55) (65) (9) (11) 364 403 179.2 179.2
Value per share	2.03 2.25

Conquest – Valuation Summary	Conquest – Valuation Summary
	Valuation(A$ million)
	Low High
Mt Carlton Pajingo Exploration interests and other	250 280 100 110 5 10
Corporate costs	(20) (15)
Enterprise Value	335 385
Adjusted net cash Value attributable to options	33 33 (9) (11)
Equity value attributable to shareholders	359 407

The valuations reflect evidence as to value derived from the gold futures methodology, discounted cash flow analysis, comparable company analysis and valuation benchmarks commonly used in the gold sector.

Grant Samuel appointed AMC Consultants Pty Ltd (“AMC”) as technical specialist to review the Newcrest Assets and the gold assets of Catalpa and Conquest. AMC’s role included a review of reserves and resources, development plans, production schedules, operating costs, capital costs and exploration potential. AMC also prepared valuations of the exploration interests of Catalpa and Conquest. AMC’s report is attached to Grant Samuel’s report.

Grant Samuel’s financial analysis was based on valuation scenarios prepared in conjunction with AMC, reflecting AMC‘s judgements regarding the range of assumptions as to ultimate mining inventory, mine life, production volumes, capital costs and operating costs that could reasonably be adopted for valuation purposes. Reflecting recent gold prices in the range A$1,400-1,500 per ounce, the valuation adopted a gold price assumption in the range of A$1,425-1,475 per ounce. The financial models projected Australian dollar denominated cash flows from 1 July 2011 onwards. Present values were estimated using a range of discount rates.

3 The number of Catalpa shares on issue for valuation purposes assumes the conversion of 1.1 million Catalpa performance rights into ordinary shares.

The valuations are based on a number of important assumptions, including assumptions regarding gold prices and exchange rates. The valuations reflect the technical judgements of AMC regarding the prospects for each of the operations of Catalpa and Conquest. Gold prices, exchange rates and expectations regarding future operating performance can change significantly over short periods of time. Such changes can have significant impacts on underlying value. In particular, the gold price has displayed extreme volatility, in early August 2011 breaking out of a range of approximately A$1,400-1,500 per ounce to reach highs of around A$1,800 per ounce. However, share prices for Australian gold companies have not reflected this increase in the gold price and there is no evidence that underlying value (the price that might be paid in a change of control transaction) has increased to reflect the recent increase in the gold price. On this basis, Grant Samuel has adopted a gold price assumption in the range of A$1,425-1,475 per ounce. Different gold price assumptions could produce significantly different estimates of underlying value.

The valuations of Catalpa and Conquest represent Grant Samuel’s assessment of the full underlying value of each company. They have been prepared principally to allow a comparison of the relative values to be contributed by each company to Evolution. They do not represent Grant Samuel’s view of the likely share market value of the companies, individually or on a merged basis. Shares in listed companies typically trade at a discount to full underlying value. Accordingly, while the values estimated are believed to be appropriate for the purpose of assessing the Merger and the Proposal, they may not be appropriate for other purposes or in the context of changed economic circumstances or different operational prospects for the mining assets of Catalpa and Conquest.

The following table summarises the relative value contributed by Catalpa and Conquest, based on the estimated full underlying value of each company:

Relative Value Contributions – Underlying Value	Relative Value Contributions – Underlying Value
	Conquest	Catalpa
Value Contribution – High (A$ million)	407	403
Value Contribution – Low (A$ million)	359	364
Relative Value Contributions – Conquest High/ Catalpa High	50.2%	49.8%
Relative Value Contributions – Conquest Low/Catalpa Low	49.7%	50.3%
Relative Value Contributions – Conquest Low/Catalpa High	47.1%	52.9%
Relative Value Contributions – Conquest High/Catalpa Low	52.8%	47.2%

The analysis above suggests a narrow range of relative value contributions, with Catalpa contributing approximately 50% of the value of the merged company (before the Asset Acquisition).

Valuation in the gold sector is subject to considerable uncertainty, given that traditional valuation methodologies have historically been poor predictors of observed market values. Estimates of underlying value are highly sensitive to gold price assumptions, exchange rates and judgements about future project potential. Valuation of Conquest’s major asset, the Mt Carlton project, is inherently judgemental given that development of the project has not yet commenced. Current economic volatility exacerbates the imprecision inherent in estimates of underlying value. In this context the analysis set out above implies a degree of precision not justified by the available evidence as to value.

For the purpose of assessing the terms of the Merger, Grant Samuel believes it reasonable to conclude that Catalpa shareholders are contributing somewhere between 47% and 53% of the underlying value of Evolution (before the Asset Acquisition). This range has been determined by comparing the bottom end of the estimated range of values for Catalpa with the top end of the estimated range of values for Conquest, and the top end of the estimated range of values for Catalpa with the bottom end of the estimated range of values for Conquest.

Catalpa shareholders will have a shareholding of approximately 49.8% in Evolution (before the Asset Acquisition). This shareholding percentage falls within the proportionate contribution of

value to be made by Catalpa shareholders to Evolution (ie in the range 47-53%). On this basis the terms of the Merger are equitable to Catalpa shareholders.

 Analysis of other valuation parameters suggests that the terms of the Merger are equitable.

The following table shows the relative contributions of reserves, resources, production and share market value that the two groups of shareholders will make to Evolution (prior to the Newcrest Asset Acquisition):

Relative	Contributions
	Conquest	Catalpa	Catalpa Contribution
Gold reserves (000’s oz)	952	1,000	51.2%
Gold resources (000’s oz)	2,366	2,032	46.2%
Gold production
- 12 months ending 30 June 2011 (000’s oz)	45.9	96.1	67.6%
- forecast 12 months ending 30 June 2012 (000’s oz)4	75.0	122.0	62.8 %
Share market values pre announcement (A$ billion)	263	304	53.6%
Share of Evolution (merger terms)			50%5

In Grant Samuel’s view the relative contribution analysis provides general support for the conclusion that the terms of the Merger are fair: Catalpa shareholders’ collective interest in Evolution will be broadly consistent with Catalpa’s contribution to the merged company. In this regard, while Catalpa shareholders will hold around 49.8% of the shares in Evolution (prior to the Share Issue to Newcrest):

Catalpa is contributing approximately 51% of reserves and approximately 46% of resources;
Catalpa is contributing approximately 62% of forecast production for the 2012 financial year; and
based on share market values immediately before the announcement of the Merger, Catalpa shareholders were contributing slightly less than 54% of the value of the merged Evolution.

However, it must be recognised that the parameters set out above are relatively crude measures of the relative contributions of value to Evolution. In particular:

while Conquest is contributing marginally less than 50% of the gold reserves of Evolution (prior to the Asset Acquisition), the bulk of the reserves contributed relate to the Mt Carlton project. Development of the project, which has not yet commenced, will have an initial cost of around $127 million. By contrast, all of Catalpa’s reserves relate to mining operations currently in production. To the extent that Conquest’s Mt Carlton reserves are subject to development risk and require major capital expenditure to bring into production, they are less valuable than Catalpa’s reserves. On the other hand, the expected costs of production for Mt Carlton are significantly lower than for Edna May, largely because of the substantial silver credits that Mt Carlton will enjoy in the early years of its production;
the gold reserve analysis does not take into account the significant silver reserves at Mt Carlton (of the order of 8 million ounces.) At current gold and silver prices these silver reserves have approximately the same value as 200,000 ounces of gold. Mt Carlton is expected to mine and sell a substantial proportion of its silver reserves in the early years of its operations, delivering low operating costs (on a per ounce of gold basis);

4 Based on the AMC valuation cases.

5 Based on the number of Evolution shares on issue immediately after the Merger and before the Share Issue and Asset Acquisition.

Catalpa appears to be contributing disproportionately to Evolution’s gold production. However, Conquest’s gold production is expected to increase in the 2012 financial year as Pajingo production is ramped up and to increase materially from 2014 as Mt Carlton commences operation;
the analysis does not take into account debt and the mark to market value of hedge positions. At 30 June 2011 Conquest’s adjusted net cash was approximately $33 million, while Catalpa had net debt of $9 million and, based on a gold price of A$1,700 per ounce, a hedge book with a negative mark to market value of approximately $80 million (before any tax effect); and
based on share market values at the time the Merger was announced, Conquest shareholders are contributing less than 50% of the market value of Evolution and on that basis the terms of the Merger appear favourable to Conquest shareholders. However, it is likely that the Catalpa share price was affected by market speculation based on the conditional acquisition proposal for Catalpa made on 13 May 2011 by St Barbara Limited (“St Barbara”). The Catalpa share price fell by approximately 10% following the announcement of the Proposal and Catalpa’s confirmation that it had discontinued discussions with St Barbara. Analysis based on Catalpa and Conquest share prices for the period prior to the announcement of the St Barbara proposal suggests that the terms of the Merger deliver a premium and are favourable to Catalpa shareholders. However, this conclusion is equally problematic. Since 13 May 2011 Catalpa has announced substantial improvements in the operating performance of Edna May (fourth quarter production was up 42% relative to the prior quarter, with cash costs reduced by 7.8%), an expectation of further production growth and significant expected cost reductions for Edna May for the 2012 financial year, and exploration success pointing towards an increased prospect of an underground development at Edna May. Accordingly, Catalpa share prices prior to 13 May 2011 are not particularly relevant to an assessment of the relative values of Catalpa and Conquest. The reality is that there is no recent “undisturbed” Catalpa share price that can be referenced as a market estimate of the value of Catalpa on a standalone basis. Accordingly, analysis of contributions of share market value needs to be treated with caution.

Notwithstanding the uncertainties inherent in the relative contribution analysis, in Grant Samuel’s view the analysis provides general support for the conclusion that Catalpa shareholders’ collective interest in Evolution will be broadly consistent with Catalpa’s contribution to the merged company. On this basis the terms of the Merger are equitable.



The terms of the Newcrest Asset Acquisition are favourable to Catalpa shareholders.

Based on Grant Samuel’s valuation analysis, the underlying value of Evolution (immediately before the Share Issue and Asset Acquisition) is as follows:

Evolution – Valuation Summary (pre-Asset Acquisition) (A$ million)	Evolution – Valuation Summary (pre-Asset Acquisition) (A$ million)
	Valuation(A$ million)
	Low High
Edna May Mt Carlton Cracow (30%) Pajingo Exploration interests and other	400 440 250 280 57 63 100 110 5 10
Corporate costs	(40) (30)
Enterprise value	772 873
Adjusted net cash Value of hedge book (tax effected) Equity value attributable to options	24 24 (55) (65) (18) (22)
Equity value attributable to shareholders	723 810
Shares on issue (including performance rights) (millions)	359.6 359.6
Underlying value per share	2.01 2.25

Under the Share Issue, Newcrest will be issued shares representing 38% of the equity value (including the value of options on issue) of Evolution. For this purpose, the options will be assigned value on the basis of Catalpa’s volume weighted average share price (“VWAP”) for the five days before the implementation date of the Proposal. On the basis of an assumed Catalpa five day VWAP of $1.47, a total of approximately 228.7 million shares will be issued to Newcrest.

Grant Samuel has valued the assets to be acquired from Newcrest (Mt Rawdon and a 70% interest in Cracow) in the range $558-622 million(although, because they are non-core and not significant in the context of Newcrest’s $30 billion market capitalisation, it is likely that the value for these assets reflected in Newcrest’s share price is substantially less). The valuation is summarised below:

Valuation of Newcrest Assets and Estimate of Share Issue Price (A$ million)	Valuation of Newcrest Assets and Estimate of Share Issue Price (A$ million)
	Valuation(A$ million)
	Low High
Mt Rawdon Cracow (70%)	425 475 133 147
Total value of Newcrest Assets	558 622
Shares to be issued to Newcrest (millions)	228.7 228.7
Implied issue price per share	2.44 2.72

The effective price at which the 228.7 million shares would be issued to Newcrest is in the range $2.44-2.72 per share, by comparison with an estimated underlying value per Evolution share before the Asset Acquisition of $2.01-2.25.

The terms of the Asset Acquisition and Share Issue are attractive to Evolution, in the sense that the issue price is greater than the estimated underlying value of Evolution on a per share basis. On the basis of estimated underlying values, Evolution is issuing shares with a theoretical value of $460515 million in exchange for assets with an estimated value of $558-622 million. Shares in Evolution would be expected to trade at prices well below estimated underlying value. Newcrest is effectively paying a substantial premium to market value for the 38% shareholding that it will receive. On one view, Newcrest is paying a full premium for control for its shareholding (although the concept of a premium for control in this context is not particularly meaningful, given that any premium is not directly accessible by Evolution shareholders and Newcrest will in any event not be achieving control of Evolution.)

The following table sets out the estimated underlying value of Evolution immediately following the Share Issue and Asset Acquisition (but before the Entitlement Issue):

Evolution – Valuation Summary (after Asset Acquisition) (A$ million)	Evolution – Valuation Summary (after Asset Acquisition) (A$ million)
	Valuation(A$ million)
	Low High
Mt Rawdon Edna May Mt Carlton Cracow (100%) Pajingo Exploration interests and other	425 475 400 440 250 280 190 210 100 110 5 10
Corporate costs	(40) (30)
Enterprise value	1,330 1,495
Adjusted net cash6 Value of hedge book (tax effected) Equity value attributable to options	(11) (6) (55) (65) (18) (22)
Equity value attributable to shareholders	1,246 1,402
Shares on issue	588.4 588.4
Underlying value per share	2.12 2.38

The estimated underlying value per Evolution share will increase from $2.01-2.25 to $2.12-2.38 as a result of the Asset Acquisition and Share Issue.

The estimated underlying value attributable to a Catalpa share will increase from $2.03-2.25 to $2.12-2.38 following the Merger, the Asset Acquisition and the Share Issue.

Catalpa shareholders should note that, while the estimated underlying value attributable to a Catalpa share will increase as a result of the Proposal, shareholders will have no way to realise that increased underlying value (other than through some subsequent change of control transaction for Evolution). Shares in Evolution would be expected to trade at a discount to underlying value, in the same way that shares in a standalone Catalpa would be expected to trade at a discount to underlying value.

Evolution will be a significant Australian mid-cap gold company with investment characteristics clearly superior to those of Catalpa on a standalone basis.

Evolution will be a significant Australian mid-cap gold company. Based on current market values, it is expected to be one of only five Australian mid-cap gold companies with market capitalisations of more than $1 billion:

6 Adjusted for estimated transaction costs of $30-35 million

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Market Capitalisation
(A$m)
$30,000$2,500
$2,000
$1,500
$1,000
$500
$0
29,9002,500
1,421
1,358
1,246 1,205 1,180
807
646 646
549 525 486 469 455 451 447
293 262 257 253 227 212
137
Market Capitalisation (A$m)
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Evolution will have investment characteristics considerably more attractive than those of Catalpa on a standalone basis. In particular:

Evolution’s market capitalisation, free float and resultant liquidity should attract institutional investor support;
Evolution will be a significant gold producer (projected pro-forma 2012 gold production of 335,000-375,000 ounces), with production diversified across four operating mines;
the development of Mt Carlton and underground development at Edna May will provide potential to grow production to more than 450,000 ounces by the 2014 financial year;
Evolution will enjoy considerable financing flexibility. Following the Entitlement Issue, it will have net cash of approximately $145 million. It should have superior access to both equity and debt capital than would Catalpa on a standalone basis and a range of options for financing the development of Mt Carlton;
Catalpa’s hedge position currently has material negative value. The significance of this position will be considerably reduced in the context of the much larger Evolution;
the relationship with Newcrest has the potential to deliver growth opportunities over time. Growth prospects that Newcrest chooses not to pursue (because they do not meet Newcrest’s criteria in terms of scale) could instead become available to Evolution.

Having regard to these characteristics, there is a realistic prospect of a positive market re-rating of Evolution over time (although it is difficult to estimate what the magnitude of any re-rating might be).

 Shares in Evolution should trade at higher prices than shares in a standalone Catalpa.

The investment characteristics of Evolution will be considerably more attractive than those of a standalone Catalpa. The Asset Acquisition is favourable to Evolution and will result in an uplift in its underlying value per share. Accordingly (after adjusting for the terms of the Entitlement Offer) shares in Evolution should trade at higher prices than shares in a standalone Catalpa. The level at which Evolution shares will trade and the extent of any positive re-rating will depend on a variety of factors, including gold price, exchange rates, operational issues and overall equity market sentiment.

In the context of recent extreme market volatility, it is not possible to reliably predict the Evolution share price or the extent of any positive market re-rating of Evolution.

The Proposal is not “fair” if viewed as a takeover by Newcrest, but Newcrest will only hold 33% of the expanded capital of Evolution and will not have Board control.

Application of takeover analysis to the Proposal raises a number of issues. While Newcrest will hold over 20% of Evolution, it will have only two board representatives on a board of eight. The impact of Newcrest’s shareholding on shareholders’ prospects of realising full underlying value through a change of control transaction for Evolution is unclear. As a practical matter, Newcrest’s 33% fully diluted shareholding probably means that any change of control transaction could only proceed on an agreed basis (although in recent times all significant change of control transactions in the Australian gold sector have been on an agreed basis). There is no obstacle to Newcrest’s acceptance of a fully priced offer and in some circumstances Newcrest’s 33% fully diluted shareholding could facilitate a change of control transaction. From Newcrest’s perspective the Proposal represents an opportunity to liberate value for gold assets that do not fit within its portfolio of world class gold projects. Newcrest’s interest in Evolution will be a non-core asset, and there is no reason to believe that Newcrest would not consider any fully priced offer for Evolution. In the Scheme Booklet, Newcrest articulates its intentions in relation to its shareholding in Evolution in the following terms: “As with all investments, Newcrest will continue to review its investment in Evolution Mining so as to maximise value to Newcrest’s shareholders.” Grant Samuel notes that Black Rock Investment Management (UK) and Baker Steel Managed Funds, two sophisticated institutional investors, have agreed to subscribe for $50 million of Evolution shares under the Entitlement Offer. It is unlikely that such institutional investors would invest if they thought that there was no prospect of realising full underlying value for their shares in Evolution.

On balance, it appears reasonable to conclude that Catalpa shareholders will continue to have an opportunity to realise full underlying value for their interests. In these circumstances, the concept that shareholders should be entitled to receive consideration representing full underlying value (ie including a premium for control) to compensate for a passing of control is of uncertain relevance.

Given that Newcrest will not provide any consideration directly to Catalpa shareholders, application of takeover analysis to the Proposal requires that the “consideration” be taken to be Catalpa shareholders’ holdings of shares in Evolution (valued at expected trading prices) following implementation of the Proposal. Share market and gold price volatility are such that there can be no reasonable basis for predicting the price at which shares in Evolution are likely to trade. However, share prices and underlying value should move more or less in tandem. An assessment as to whether the Proposal is likely to be fair can be made by considering the relativities between Grant Samuel’s estimate of underlying value and Catalpa’s share price at the time.

Grant Samuel has estimated that Catalpa’s underlying value is in the range $2.03-2.25 per share. At the time of the valuation, Catalpa’s shares were trading around $1.46 per share. Accordingly, for the Proposal to be fair it would need to result in an effective re-rating of at least $0.57 per Evolution share, or 39%.

Shareholders should understand that a conclusion that a transaction is “not fair” is more meaningful in the context of a genuine takeover where shareholders surrender control and any future opportunity to realise full underlying value. Newcrest will not have Board control of Evolution and shareholders will retain an opportunity to realise full underlying value through some future change of control proposal for Evolution.

The disadvantages of the Proposal are not material having regard to the benefits.

The Proposal has a number of disadvantages:

Newcrest will have a 33% shareholding following implementation of the Proposal and the Entitlement Offer. This shareholding will mean that Newcrest will be able to influence the outcome of any change of control proposal for Evolution. It is likely that any change of control proposal could only proceed on an agreed basis (although all recent significant transactions in the Australian gold sector have been on an agreed basis). While there is no reason to believe that Newcrest would ever view its investment in Evolution as other than non-core, there can be no absolute certainty as to Newcrest’s future position and so no guarantee that Evolution shareholders would be able to realise full underlying value through a takeover of Evolution;
Newcrest’s shareholding will reduce Evolution’s free float and will presumably therefore have an adverse effect on trading liquidity (although it should still be substantially greater than for Catalpa on a standalone basis). While there is no indication that Newcrest would attempt to sell its shareholding on market, any future perception that Newcrest might seek to sell on market could have an adverse effect on the Evolution share price;
while Catalpa shareholders will be gaining exposure to the upside in Conquest’s asset base (particularly the value uplift that would be expected with the successful development of the Mt Carlton project), they will also be exposed to the development risk associated with Mt Carlton. These risks should already be reflected in share market values for Catalpa and in Grant Samuel’s valuation assessments. Catalpa shareholders are effectively swapping exposure to current production for increased growth potential;
the Merger is not expected to offer any material cost synergies;
while the Proposal will provide Catalpa shareholders with increased geographic and project diversification, it should be recognised that shareholders can diversify directly (through their investment decisions). Some shareholders may prefer to make their own diversification decisions rather than having the diversification choices inherent in the Proposal imposed on them;
although Evolution will be a substantially larger entity than Catalpa on a standalone basis, the reality is that in terms of asset quality it will remain a collection of “second tier” assets, without the long lives or low production costs characteristic of premium gold assets;
the Proposal will involve a variety of transaction costs, including stamp duty, advisor costs and other professional fees. The aggregate transaction costs (ie for both Catalpa and Conquest) are estimated at approximately $35 million. Approximately $3 million will be incurred by Catalpa regardless of whether the Proposal proceeds. The transaction costs, while significant, are not material in the context of a business with an estimated market value in excess of $1 billion. Moreover, the Merger and the Asset Acquisition are expected to provide significant tax benefits (through a step-up in tax carrying values). While these benefits have not been fully quantified, they will potentially fully offset (over time) the value leakage of the stamp duty payable.

Assessment of these disadvantages is essentially judgemental. While the transaction costs can be estimated with some precision, other disadvantages of the Proposal are not capable of quantification. In Grant Samuel’s view, however, the disadvantages are unlikely to be material having regard to the benefits of the Proposal.

There are no alternatives currently available to Catalpa shareholders that are more attractive than the Proposal.

On 13 May 2011 St Barbara announced a conditional proposal for the acquisition of Catalpa by way of a scheme of arrangement. The proposed consideration was 0.4535 St Barbara shares plus cash of $0.9613 for each Catalpa share. Based on the closing St Barbara share price on 12 May 2011, the proposed consideration had a value of $1.86 per Catalpa share and represented a premium of approximately 35% relative to the closing Catalpa share price on 12 May 2011, although a fall in the St Barbara share price on 13 May 2011 following the announcement resulted in a reduction in the premium to 32%.

In its response to the St Barbara announcement, the Catalpa board stated that it believed that St Barbara had “taken the opportunity to make this unsolicited proposal public at a time when the Catalpa share price (had) underperformed its peers”, and that “this relative underperformance is a reflection of short term operational challenges which have now been largely resolved”. Subsequently, Catalpa announced that it had achieved substantially improved operating performance for the June 2011 quarter and that it expected to achieve further improvements (in terms of lower cash operating costs and higher rates of production) during the 2012 financial year. Accordingly, it is at least plausible that the Catalpa share price would have strengthened in the absence of the St Barbara offer and that the premium implicit in the proposed consideration was not as attractive as it appeared (although it is not possible to estimate the price at which Catalpa shares would have traded or what the premium would have been had the Catalpa share price reflected the improved performance for the June quarter).

In any event, the Catalpa board terminated discussions with St Barbara when it entered into the agreements required to give effect to the Proposal and there is no alternative St Barbara proposal available to Catalpa shareholders. St Barbara has had an opportunity to put a proposal directly to Catalpa shareholders (by way of a takeover offer) since the Proposal was announced on 15 June 2011 and will be able to do so at any time up to the shareholder meetings at which the Proposal will be considered, potentially with reference to the information disclosed in the transaction documentation of Catalpa and Conquest.

More generally, if the Proposal is implemented, Catalpa shareholders will be giving up the opportunity to crystallise the full underlying value of their shareholdings in Catalpa through some alternative change of control proposal for Catalpa. Catalpa has an open share register and (in that sense) there is no impediment to a change of control transaction for Catalpa. Grant Samuel is not aware of any alternative change of control proposal for Catalpa (other than the St Barbara proposal). Since the announcement of the Proposal there has been ample time for a counter proposal to be brought forward, but none has been forthcoming. In the absence of a superior proposal from St Barbara (or from a third party), Catalpa shareholders can reasonably conclude that the Proposal is in their best interests.

 Catalpa shareholders are likely to be better off if the Proposal is implemented.

In Grant Samuel’s view Catalpa shareholders are likely to be better off if the Proposal is implemented than if it is not. The terms of the Merger with Conquest are equitable and the acquisition of the Newcrest Assets is value accretive for the merged Catalpa/Conquest. Catalpa shareholders will participate in a substantially larger, more diversified and less risky gold company, with more attractive investment characteristics than Catalpa in its current form. While, in Grant Samuel’s view, shares in Evolution are unlikely in the short term to trade at prices equating to the underlying value of Catalpa (and in this sense the Proposal is not “fair”), shares in Evolution can be expected to trade at prices higher than shares in a standalone Catalpa (after adjusting for the terms of the Entitlement Offer). The underlying value attributable to Catalpa shareholders will increase and Catalpa shareholders will retain the prospect of realising this increased underlying value, through a subsequent change of control transaction for Evolution. Because Catalpa shareholders are likely to be better off if the Proposal is implemented that if it is not, the Proposal, while not fair, is reasonable. In Grant Samuel’s view the Proposal is in Catalpa shareholders’ best interests, in the absence of a superior proposal.

4 Other Matters

This report is general financial product advice only and has been prepared without taking into account the objectives, financial situation or needs of individual Catalpa shareholders. Accordingly, before acting in relation to their investment, shareholders should consider the appropriateness of the advice having regard to their own objectives, financial situation or needs. Shareholders should read the Explanatory Memorandum issued by Catalpa in relation to the Proposal.

Voting for or against the Share Issue is a matter for individual shareholders, based on their own views as to value, their expectations about future market conditions and their particular circumstances including risk profile, liquidity preference, investment strategy, portfolio structure and tax position. Shareholders who are in doubt as to the action they should take in relation to the Share Issue should consult their own professional adviser.

Similarly, it is a matter for individual shareholders as to whether to buy, hold or sell securities in Catalpa or Evolution. This is an investment decision upon which Grant Samuel does not offer an opinion and is independent of a decision on whether to vote for or against the Share Issue. Shareholders should consult their own professional adviser in this regard.

Grant Samuel has prepared a Financial Services Guide as required by the Corporations Act, 2001. The Financial Services Guide is included at the beginning of the full report .

This letter is a summary of Grant Samuel’s opinion. The full report from which this summary has been extracted is attached and should be read in conjunction with this summary.

The opinion is made as at the date of this letter and reflects circumstances and conditions as at that date.

Yours faithfully GRANT SAMUEL & ASSOCIATES PTY LIMITED

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Financial Services Guide and Independent Expert’s Report in relation to the Proposed Share Issue to Newcrest Mining Limited

Grant Samuel & Associates Pty Limited (ABN 28 050 036 372)

12 September 2011

G R A N T S A M U E L & A S S O C I A T E S

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Financial Services Guide

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Grant Samuel & Associates Pty Limited (“Grant Samuel”) holds Australian Financial Services Licence No. 240985 authorising it to provide financial product advice on securities and interests in managed investments schemes to wholesale and retail clients.

The Corporations Act, 2001 requires Grant Samuel to provide this Financial Services Guide (“FSG”) in connection with its provision of an independent expert’s report (“Report”) which is included in a document (“Disclosure Document”) provided to members by the company or other entity (“Entity”) for which Grant Samuel prepares the Report.

Grant Samuel does not accept instructions from retail clients. Grant Samuel provides no financial services directly to retail clients and receives no remuneration from retail clients for financial services. Grant Samuel does not provide any personal retail financial product advice to retail investors nor does it provide market-related advice to retail investors.

When providing Reports, Grant Samuel’s client is the Entity to which it provides the Report. Grant Samuel receives its remuneration from the Entity. In respect of the Report for Catalpa Resources Limited (“Catalpa”) in relation to the proposed issue of shares to Newcrest Mining Limited (“Newcrest”) (“Catalpa Report”), Grant Samuel will receive a fixed fee of $400,000 plus reimbursement of out-of-pocket expenses for the preparation of the Report (as stated in Section 14.3 of the Catalpa Report).

No related body corporate of Grant Samuel, or any of the directors or employees of Grant Samuel or of any of those related bodies or any associate receives any remuneration or other benefit attributable to the preparation and provision of the Catalpa Report.

Grant Samuel is required to be independent of the Entity in order to provide a Report. The guidelines for independence in the preparation of Reports are set out in Regulatory Guide 112 issued by the Australian Securities & Investments Commission on 30 March 2011 . The following information in relation to the independence of Grant Samuel is stated in Section 14.3 of the Catalpa Report:

“ Grant Samuel and its related entities do not have at the date of this report, and have not had within the previous two years, any business or professional relationship with Catalpa or Conquest or any financial or other interest that could reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Proposal.

Concurrent with its engagement by Catalpa to prepare this report, Grant Samuel was engaged by Conquest to prepare an independent expert’s report setting out Grant Samuel’s opinion as to whether:

the Merger is in the best interests of Conquest shareholders; and
the Proposal is in the best interests of Conquest shareholders.

Grant Samuel advises that it has been engaged by Newcrest, in August 2005 and December 2009, to undertake preparatory work that would form the basis of an independent expert’s report if such a report was required. These engagements did not result in the commissioning of an independent expert’s report and Grant Samuel did not provide Newcrest with views on valuation. The engagement did not affect Grant Samuel’s independence or its ability to prepare an independent expert’s report in relation to the Proposal.

Grant Samuel had no part in the formulation of the Proposal. Its only role has been the preparation of this report.

Grant Samuel will receive a fixed fee of $400,000 for the preparation of this report. This fee is not contingent on the outcome of the Proposal. Grant Samuel’s out of pocket expenses in relation to the preparation of the report will be reimbursed. Grant Samuel will receive no other benefit for the preparation of this report.

Grant Samuel considers itself to be independent in terms of Regulatory Guide 112 issued by the ASIC on 30 March 2011.”

Grant Samuel has internal complaints-handling mechanisms and is a member of the Financial Ombudsman Service, No. 11929. If you have any concerns regarding the Catalpa Report, please contact the Compliance Officer in writing at Level 19, Governor Macquarie Tower, 1 Farrer Place, Sydney NSW 2000. If you are not satisfied with how we respond, you may contact the Financial Ombudsman Service at GPO Box 3 Melbourne VIC 3001 or 1300 780 808. This service is provided free of charge.

Grant Samuel holds professional indemnity insurance which satisfies the compensation requirements of the Corporations Act, 2001.

G R A N T S A M U E L & A S S O C I A T E S P T Y L I M I T E D

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Grant Samuel is only responsible for the Catalpa Report and this FSG. Complaints or questions about the Disclosure Document should not be directed to Grant Samuel which is not responsible for that document. Grant Samuel will not respond in any way that might involve any provision of financial product advice to any retail investor.

1	Details of the Proposal ..................................................................................................................................1	Details of the Proposal ..................................................................................................................................1
2	Scope	of the Report .......................................................................................................................................5
	2.1	Purpose of the Report........................................................................................................................5
	2.2	Basis of Evaluation.............................................................................................................................6
	2.3	Sources of the Information................................................................................................................7
	2.4	Limitations and Reliance on Information........................................................................................8
3	Profile of Catalpa ........................................................................................................................................ 11
	3.1	Background ...................................................................................................................................... 11
	3.2	Business Operations......................................................................................................................... 11
	3.3	Financial Performance .................................................................................................................... 13
	3.4	Financial Position............................................................................................................................. 14
	3.5	Cash Flow ......................................................................................................................................... 15
	3.6	Group Hedging................................................................................................................................. 16
	3.7	Taxation Position ............................................................................................................................. 16
	3.8	Capital Structure and Ownership .................................................................................................. 16
	3.9	Share Price Performance................................................................................................................. 18
4	Profile of Catalpa’s Assets.......................................................................................................................... 20
	4.1	Edna May.......................................................................................................................................... 20
	4.2	Cracow Project (30%) ..................................................................................................................... 24
5	Profile of Conquest...................................................................................................................................... 28
	5.1	Background ...................................................................................................................................... 28
	5.2	Business Operations......................................................................................................................... 29
	5.3	Financial Performance .................................................................................................................... 30
	5.4	Financial Position............................................................................................................................. 31
	5.5	Cash Flow ......................................................................................................................................... 32
	5.6	Group Hedging................................................................................................................................. 32
	5.7	Taxation Position ............................................................................................................................. 32
	5.8	Capital Structure and Ownership .................................................................................................. 33
	5.9	Share Price Performance................................................................................................................. 35
6	Profile of Conquest’s Assets ....................................................................................................................... 37
	6.1	Pajingo .............................................................................................................................................. 37
	6.2	Mt Carlton........................................................................................................................................ 40
7	Profile of the Newcrest Assets .................................................................................................................... 42
	7.1	Mount Rawdon................................................................................................................................. 42
	7.2	Cracow (70%) .................................................................................................................................. 44
8	Profile of Evolution ..................................................................................................................................... 45
	8.1	Overview........................................................................................................................................... 45
	8.2	Market Capitalisation...................................................................................................................... 45
	8.3	Reserves, Resources and Production.............................................................................................. 46
	8.4	Board and Senior Management...................................................................................................... 47
	8.5	Pro forma financials ........................................................................................................................ 47
9	Valuation Approach.................................................................................................................................... 49
	9.1	Valuation Methodology ................................................................................................................... 49
	9.2	Valuation Assumptions.................................................................................................................... 50
	9.3	Resources Projects and Optionality ............................................................................................... 52
10	Valuation of Catalpa................................................................................................................................... 54
	10.1	Summary........................................................................................................................................... 54

	10.2	Edna May.......................................................................................................................................... 55
	10.3	Cracow.............................................................................................................................................. 58
	10.4	Other ................................................................................................................................................. 58
11	Valuation of Conquest ................................................................................................................................ 60
	11.1	Summary........................................................................................................................................... 60
	11.2	Pajingo .............................................................................................................................................. 61
	11.3	Mt Carlton........................................................................................................................................ 64
	11.4	Other ................................................................................................................................................. 68
12	Valuation of the Newcrest Assets............................................................................................................... 69
	12.1	Summary........................................................................................................................................... 69
	12.2	Mt Rawdon....................................................................................................................................... 69
	12.3	Cracow.............................................................................................................................................. 71
13	Evaluation of the Proposal ......................................................................................................................... 75
	13.1	Summary........................................................................................................................................... 75
	13.2	Approach .......................................................................................................................................... 76
	13.3	Merger Analysis ............................................................................................................................... 77
	13.4	Impact on Underlying Value........................................................................................................... 79
	13.5	Evolution Investment Characteristics............................................................................................ 81
	13.6	Impact on Share Market Values..................................................................................................... 82
	13.7	Takeover Analysis............................................................................................................................ 82
	13.8	Disadvantages and Risks ................................................................................................................. 83
	13.9	Alternatives....................................................................................................................................... 84
	13.10	Overall Impact of the Proposal....................................................................................................... 85
	13.11	Shareholder Decision....................................................................................................................... 85
14	Qualifications, Declarations and Consents................................................................................................ 86
	14.1	Qualifications ................................................................................................................................... 86
	14.2	Disclaimers ....................................................................................................................................... 86
	14.3	Independence.................................................................................................................................... 86
	14.4	Declarations...................................................................................................................................... 87
	14.5	Consents............................................................................................................................................ 87
	14.6	Other ................................................................................................................................................. 88

Appendices

1 Valuation Concepts for Gold Projects

2 Market Evidence – Comparable Listed Companies

3 Report by AMC Consultants Pty Ltd

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1 Details of the Proposal

On 15 June 2011, Catalpa Resources Limited (“Catalpa”) and Conquest Mining Limited (“Conquest”) announced that they had entered into a binding agreement for a merger of equals between Catalpa and Conquest. Under the terms of the merger, Catalpa shares will be issued to Conquest shareholders at a ratio of 0.30 new Catalpa shares for each Conquest share (“Merger”). The Merger is to be effected by way of a scheme of arrangement between Conquest and its shareholders (“Scheme”), under Section 411 of the Corporations Act, 2001 (“Corporations Act”).

In a separate but interconditional transaction (the “Asset Acquisition”), the merged entity will purchase certain assets from Newcrest Mining Limited (“Newcrest”). The assets to be acquired are a 70% interest in the Cracow gold mine joint venture and the Cracow exploration joint venture ( “Cracow Project”) and 100% of the Mount Rawdon gold mine (together, the “Newcrest Assets”). The consideration for the Asset Acquisition will be the issue of Catalpa shares representing approximately 38%[1] interest in the merged entity (the “Share Issue”). Following the Merger and Asset Acquisition, and subject to Catalpa shareholder approval, the merged Catalpa/Conquest will be renamed Evolution Mining Limited (“Evolution”).

The effect of the Merger, Share Issue and Asset Acquisition (together, the “Proposal”) is presented diagrammatically below:

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Catalpa and Conquest Shareholder
Positions before the Proposal
Conquest Shareholders Catalpa Shareholders
100% 100%
Conquest Catalpa
100% 100% 100% 30%
Pajingo Mount Carlton Edna May Cracow
gold mine gold-silver-copper gold mine gold mine
project
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1 Newcrest’s interest prior to the proposed Entitlement Issue will be 38% on a fully diluted basis based on a valuation of outstanding Conquest and Catalpa shares and options agreed between Conquest, Catalpa and Newcrest. Newcrest’s actual interest in the merged entity will vary depending on the volume weighted average price of Catalpa shares during the 5 trading days prior to the date on which the Merger is implemented.

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----- Start of picture text -----

Catalpa and Conquest Shareholder
Positions after the Proposal
Conquest Shareholders Catalpa Shareholders Newcrest
31% 31% 38%
Evolution
100% 100% 100% 100% 100%
Pajingo Mount Carlton Edna May Cracow Mount Rawdon
gold mine gold-silver-copperproject gold mine gold mine gold-silvermine
----- End of picture text -----

If the Proposal is approved and implemented, current Catalpa shareholders will have an interest of approximately 31% in Evolution, current Conquest shareholders will have an interest of approximately 31% and Newcrest will have an interest of approximately 38% in Evolution on a fully diluted basis.

Evolution will seek to raise $150 million shortly after completion of the Proposal, by way of a pro-rata renounceable entitlement offer to shareholders (the “Entitlement Offer”). Newcrest will not participate in the Entitlement Offer. As a result, its entitlements will be offered for sale in conjunction with the Entitlement Offer and its interest is expected to be diluted to approximately 33%[1] of the merged entity. On 19 July 2011, Catalpa and Conquest announced that two leading global investors in gold equities, BlackRock Investment Management (UK) and Baker Steel Managed Funds, had committed to subscribe for a total of $50 million of new shares under the Entitlement Offer, representing most of Newcrest’s entitlement. Their commitment is subject to the Entitlement Offer being underwritten and the shares being issued under the offer before 31 December 2011. The purpose of the capital raising is to strengthen Evolution’s balance sheet, increasing its financial flexibility to progress its growth plans and pursue additional growth opportunities.

Conquest has a total of 68.2 million options on issue. Of these, 32 million options (“Minority Options”) are held by Jake Klein, James Askew and Nicholas Curtis, who are Conquest directors. Subject to Conquest shareholder approval, Conquest will issue a total of 18.1 million new Conquest shares for the benefit of these option holders in consideration for the cancellation of the Minority Options. These shares will be acquired by Catalpa pursuant to the Merger. Of the Catalpa shares issued in exchange, 50% will be subject to escrow arrangements for two years. The remaining options (“Majority Options”) will be exchanged for equivalent options in the merged entity.

Based on recent market values, Evolution will have a pro forma market capitalisation post the Entitlement Offer of around $1,250 million.

On 15 June 2011, Catalpa also announced that it had formally terminated discussions with St Barbara Limited (“St Barbara”) in relation to a conditional takeover proposal announced by St Barbara on 13 May 2011. St Barbara’s proposal involved a mix of 50% cash and 50% St Barbara shares comprising 0.4535 St Barbara shares plus $0.9613 cash for each Catalpa share. St Barbara had proposed a scheme of arrangement between Catalpa and its shareholders to implement the St Barbara proposal. At St Barbara’s closing share price on 13 May 2011, St Barbara’s proposal was equivalent to $1.81 per Catalpa share. On 16 June 2011, St Barbara announced that it was considering its position in relation to its proposal. St Barbara has not made any further announcements changing its position in relation to its proposal since 16 June 2011.

Catalpa is a junior Australian gold producer with a 100% interest in the Edna May gold mine in Western Australia and a 30% interest in the Cracow Project in Queensland (the remaining 70% interest in Cracow is owned by Newcrest). Gold production from Edna May and Cracow (30% basis) was approximately 66,000 ounces and 30,500 ounces respectively for the year ended 30 June 2011. Catalpa expects production of at least 85,000 ounces at Edna May and at least 27,000 ounces at Cracow (30% basis) in the 2012 financial year. Edna May and Cracow (30% basis) have a combined mineral resource of more than 2 million ounces of gold and a combined ore reserve of approximately 1 million ounces of gold. Catalpa shares are listed on the Australian Securities Exchange (“ASX”) and Catalpa had a market capitalisation as at 9 September 2011 of approximately $343 million.

Conquest is a junior Australian gold company with two 100%-owned projects in Queensland, Australia. The Pajingo gold mine is located in a high-grade epithermal district that has produced more than 3 million ounces of gold. Gold production from Pajingo totalled approximately 46,000 ounces in the year ended 30 June 2011 and Conquest expects its improvement initiatives to result in an increase in production to at least 70,000 ounces in the 2012 financial year. Pajingo has mineral resources containing 728,000 ounces of gold. The development of the Mt Carlton gold-silver-copper project was approved by the Conquest board in December 2010. Mt Carlton hosts mineral resources containing a total of 1.2 million ounces of gold, 34.7 million ounces of silver and 68,200 tonnes of copper. Conquest shares are traded on the ASX and Conquest had a market capitalisation as at 9 September 2011 of approximately $338 million.

Newcrest is Australia’s largest gold producer listed on the ASX and one of the world’s top ten gold mining companies by production, reserves and market capitalisation. The company’s operating mines are Cadia Valley Operations (near Orange, New South Wales), Telfer (Pilbara region, Western Australia), Lihir (Papua New Guinea), Hidden Valley (Papua New Guinea)(50%), Bonikro (Cote d’Ivoire, West Africa)(90%), Gosowong (Indonesia)(82.5%), Mount Rawdon and the 70% interest in Cracow. Newcrest also has a pipeline of substantial growth/development projects including at Cadia East, Lihir and Wafi Golpu (50% interest) in Papua New Guinea. For the financial year ended 30 June 2011, Newcrest produced approximately 2.7 million ounces of gold and 75,600 tonnes of copper. Mt Rawdon produced approximately 90,000 ounces for the 2011 financial year. Newcrest has mineral resources of approximately 147.5 million ounces of gold and 19.9 million tonnes of copper and ore reserves of approximately 80 million ounces of gold and 8.4 million tonnes of copper. Mt Rawdon has approximately 1 million ounces of mineral resources and 0.9 million ounces of ore reserves. Newcrest shares are listed on the ASX and Newcrest had a market capitalisation as at 9 September 2011 of approximately $30.5 billion.

Catalpa, Conquest and Newcrest have entered into a Transaction Implementation Deed (“Implementation Deed”) in connection with the Proposal. Under the terms of the Implementation Deed, the Proposal is subject to a number of conditions, including:

the approval of the Scheme in relation to the Merger by Conquest shareholders. The Scheme must be approved by a majority in number of the Conquest shareholders who vote at the Scheme meeting (in person or by proxy) and by at least 75% of the total number of shares voted at the meeting;
the approval of the Scheme in relation to the Merger by the Federal Court;
the approval of the Share Issue by Catalpa shareholders under section 611(7) of the Corporations Act. The Share Issue must be approved by a majority in number of the Catalpa shareholders who vote at the meeting (in person or by proxy);
all relevant regulatory approvals;
approval from the Foreign Investment Review Board (“FIRB”);
no material adverse change affecting Conquest, Catalpa or the Newcrest Assets;
no prescribed occurrences in respect of Conquest or Catalpa;

the issue by an Independent Expert of an Independent Expert’s Report concluding that the Scheme is in the best interests of Conquest shareholders;
the issue by an Independent Expert of an Independent Expert’s Report concluding that the Share Issue is fair and reasonable to Catalpa shareholders (other than Newcrest and its associates);
the S&P/ASX 300 index not closing below 85% of its level as at close of trading on 15 June 2011 for a period of five or more consecutive trading days;
the execution of an underwriting agreement for the Entitlement Offer by the second court date on terms acceptable to the parties; and
the aggregate market capitalisation of Conquest and Catalpa not falling below 80% of its level as at close of trading on 15 June 2011 for a period of three or more consecutive trading days.

The Implementation Deed also contains no shop and no talk provisions, matching and notification rights in the event of a competing proposal and a mutual break fee payable by Conquest or Catalpa in specified circumstances of $3.2 million divided equally between Newcrest and the other party.

2 Scope of the Report

2.1 Purpose of the Report

Section 606 of the Corporations Act effectively prohibits a person from acquiring a relevant interest in a public company where that person’s voting power increases from 20% or below to in excess of 20% or, if that person already has voting power in excess of 20%, their voting power would increase further, except in certain limited circumstances. Item 7 of Section 611 allows non associated shareholders to waive the Section 606 prohibition by passing a resolution in a general meeting. The Share Issue will result in Newcrest acquiring a relevant interest in approximately 38% of the shares in the merged entity. Consequently, Catalpa is seeking shareholder approval for the issue of shares in excess of 20% of issued capital to Newcrest under the Asset Acquisition.

Shareholders voting pursuant to Item 7 of Section 611 of the Corporations Act are to be provided with a comprehensive analysis of the proposed transaction. The directors of the company may satisfy their obligations to provide such an analysis by commissioning an independent expert’s report.

The Share Issue is an integral part of the Proposal and the Proposal will not be implemented unless the Share Issue is approved by Catalpa shareholders. Although there is no requirement in the present circumstances for an independent expert’s report pursuant to the Corporations Act or the ASX Listing Rules, the directors of Catalpa have engaged Grant Samuel & Associates Pty Limited (“Grant Samuel”) to prepare an independent expert’s report setting out whether, in its opinion, the Proposal is fair and reasonable having regard to the interests of Catalpa shareholders, and to state reasons for that opinion.

A concise version of the report will accompany the notice of meeting and explanatory memorandum (the “Explanatory Memorandum”) to be sent to shareholders by Catalpa. The full report will be available on the Catalpa website or available to Catalpa shareholders on request.

Grant Samuel has also been engaged by Conquest to prepare an independent expert’s report setting out whether, in its opinion:

the Proposal is fair and reasonable having regard to the interests of Conquest shareholders; and
the Scheme is in the best interests of Conquest shareholders;

and to state reasons for that opinion. A concise version of the report will accompany the notice of meeting and explanatory memorandum (the “Scheme Booklet”) to be sent to shareholders by Conquest. The full report will be available on the Conquest website or available to Conquest shareholders on request.

Voting for or against the Share Issue is a matter for individual shareholders based on their views as to value, their expectations about future market conditions and their particular circumstances including risk profile, liquidity preference, investment strategy, portfolio structure and tax position. Shareholders who are in doubt as to the action they should take in relation to the Proposal should consult their own professional adviser.

Similarly, it is a matter for individual shareholders as to whether to buy, hold or sell shares in Catalpa, Conquest, Newcrest or the merged entity. This is an investment decision independent of

a decision to vote for or against the Share Issue upon which Grant Samuel does not offer an opinion. Shareholders should consult their own professional adviser in this regard.

2.2 Basis of Evaluation

The term “fair and reasonable” has no legal definition although over time a commonly accepted interpretation has evolved. In the context of a takeover, an offer is considered fair and reasonable if the price fully reflects the value of a company’s underlying businesses and assets. ASIC[2] Regulatory Guide 111 differentiates between the analysis required for control transactions and other transactions. In the context of control transactions (whether by takeover bid, by scheme of arrangement, by the issue of securities or by selective capital reduction or buyback), the expert is required to distinguish between “fair” and “reasonable”. Fairness is said to involve a comparison of the offer price with the value that may be attributed to the securities that are the subject of the offer based on the value of the underlying businesses and assets. In determining fairness any existing entitlement to shares by the offeror is to be ignored. Reasonableness is said to involve an analysis of other factors that shareholders might consider prior to accepting a takeover offer such as:

the offeror’s existing shareholding;
other significant shareholdings;
the probability of an alternative offer; and
the liquidity of the market for the target company’s shares.

A takeover offer could be considered “reasonable” if there were valid reasons to accept the offer notwithstanding that it was not “fair”.

Fairness is a more demanding criteria. A “fair” offer will always be “reasonable” but a “reasonable” offer will not necessarily be “fair”. A fair offer is one that reflects the full market value of a company’s businesses and assets. A takeover offer that is in excess of the pre-bid market prices but less than full value will not be fair but may be reasonable if shareholders are otherwise unlikely in the foreseeable future to realise an amount for their shares in excess of the bid price. This is commonly the case in takeover offers where the bidder already controls the target company. In that situation the minority shareholders have little prospect of receiving full value from a third party offeror unless the controlling shareholder is prepared to sell its controlling shareholding.

Following implementation of the Proposal, Newcrest will hold a 38% equity interest in Evolution, to be diluted to around 33% following the Entitlement Offer. Under the regulatory framework dealing with the preparation of independent expert’s reports, because Newcrest will hold more than 20% of Evolution, the Proposal or elements of the Proposal are deemed to constitute a change of control transaction. One interpretation of the regulatory framework is that the change of control transaction is the Share Issue. This interpretation would require an opinion as to whether the terms of the Share Issue are fair and reasonable. An alternative approach it to evaluate the Proposal overall on the basis of takeover analysis, as if it were a takeover of the merged Conquest/Catalpa by Newcrest. ASIC has advised Grant Samuel that this is ASIC’s preferred approach.

The Proposal does not involve the direct provision by Newcrest of any consideration to Catalpa shareholders. Following the Proposal Catalpa shareholders will continue to hold shares in the merged Catalpa/Conquest, although the value and likely trading price of those shares will be affected by the Asset Acquisition and Share Issue to Newcrest. Given that Newcrest will not provide any consideration directly to Catalpa shareholders, application of takeover analysis to the Proposal requires that the “consideration” be taken to be the shares in Evolution following

2 ASIC refers to the Australian Securities & Investments Commission

implementation of the Proposal. On this basis the Proposal would be fair if the expected trading price of shares in Evolution was equal to or greater than the estimated underlying value of Catalpa.

In considering whether the Proposal is reasonable, Grant Samuel has considered the following:

whether the Proposal is fair;
the terms of the Merger;
the terms of the Asset Acquisition and Share Issue and the impact on the underlying value of the merged Catalpa/Conquest;
the investment characteristics of Evolution by comparison with those of Catalpa on a standalone basis;
the potential for a re-rating of Evolution shares and their likely market price by comparison with the likely market price of shares in a standalone Catalpa;
the effect on control of Evolution;
the prospects for Catalpa shareholders to realise full underlying value through a subsequent takeover of Evoluation; and
the costs, disadvantages and risks of the Merger.

The Proposal would be reasonable, notwithstanding that it was not fair, if the likely benefits of the Proposal outweighed the costs, disadvantages and risks such that Catalpa shareholders would be better off if the Proposal was implemented that if it was not.

2.3 Sources of the Information

The following information was utilised and relied upon, without independent verification, in preparing this report:

Publicly Available Information

the Transaction Implementation Deed;
the Scheme Booklet (including earlier drafts);
the Explanatory Memorandum for Catalpa shareholders in relation to the Share Issue (including earlier drafts);
annual reports of Conquest, Catalpa and Newcrest for the three years ended 30 June 2010;
the half year announcements of Conquest, Catalpa and Newcrest for the six months ended 31 December 2010;
quarterly production reports for Conquest, Catalpa and Newcrest;
press releases, public announcements, media and analyst presentation material and other public filings by Conquest and Catalpa including information available on their websites;
brokers’ reports and recent press articles on Conquest, Catalpa, Newcrest and the gold industry; and
sharemarket data and related information on Australian and international listed companies engaged in the gold industry and on acquisitions of companies and businesses in this industry.

Non Public Information provided by Conquest, Catalpa and Newcrest

life of mine plans for Pajingo, Mt Carlton, Edna May, Cracow and Mt Rawdon;
studies and technical information relating to these assets;

management reports and strategy documents;
financial results for the year ended 30 June 2011 prepared by management of Conquest and Catalpa;
budgets for the year ending 30 June 2012 prepared by management; and
other confidential documents, board papers, presentations and working papers.

In preparing this report, representatives of Grant Samuel held discussions with, and obtained information from, senior management and advisers of each company. Representatives of Grant Samuel and AMC Consultants Pty Ltd (“AMC”) visited the major operations of Conquest and Catalpa, as well as Newcrest’s Mt Rawdon and Cracow operations. Refer to Section 2.4 for further details on AMC’s role.

2.4 Limitations and Reliance on Information

Grant Samuel believes that its opinion must be considered as a whole and that selecting portions of the analysis or factors considered by it, without considering all factors and analyses together, could create a misleading view of the process underlying the opinion. The preparation of an opinion is a complex process and is not necessarily susceptible to partial analysis or summary.

Grant Samuel’s opinion is based on economic, sharemarket, business trading, financial and other conditions and expectations prevailing at the date of this report. These conditions can change significantly over relatively short periods of time. If they did change materially, subsequent to the date of this report, the opinion could be different in these changed circumstances.

This report is also based upon financial and other information provided by Conquest, Catalpa and their respective advisers. Grant Samuel has considered and relied upon this information. Conquest and Catalpa have represented in writing to Grant Samuel that to its knowledge the information provided by it was complete and not incorrect or misleading in any material aspect. Grant Samuel has no reason to believe that any material facts have been withheld.

The information provided to Grant Samuel has been evaluated through analysis, inquiry and review to the extent that it considers necessary or appropriate for the purposes of forming an opinion as to whether the Proposal is in the best interests of Conquest shareholders. However, Grant Samuel does not warrant that its inquiries have identified or verified all of the matters that an audit, extensive examination or “due diligence” investigation might disclose. While Grant Samuel has made what it considers to be appropriate inquiries for the purposes of forming its opinion, “due diligence” of the type undertaken by companies and their advisers in relation to, for example, prospectuses or profit forecasts, is beyond the scope of an independent expert. Grant Samuel is not in a position nor is it practical to undertake its own “due diligence” investigation of the type undertaken by accountants, lawyers or other advisers.

Accordingly, this report and the opinions expressed in it should be considered more in the nature of an overall review of the anticipated commercial and financial implications rather than a comprehensive audit or investigation of detailed matters.

An important part of the information used in forming an opinion of the kind expressed in this report is comprised of the opinions and judgement of management. This type of information was also evaluated through analysis, inquiry and review to the extent practical. However, such information is often not capable of external verification or validation.

Preparation of this report does not imply that Grant Samuel has audited in any way the management accounts or other records of Conquest or Catalpa. It is understood that the accounting information that was provided was prepared in accordance with generally accepted accounting principles and in a manner consistent with the method of accounting in previous years (except where noted).

AMC was appointed as technical specialist to review the operations and assets of Conquest and Catalpa, as well as the Newcrest Assets, for Grant Samuel. AMC’s review included a review of the reserves, development plans, production schedules, operating costs, capital costs, potential reserve extensions and exploration activities. AMC also prepared valuations of the exploration interests of Conquest and Catalpa. The report prepared by AMC is attached to and forms part of this report (see Appendix 3).

The information provided to Grant Samuel and AMC included mine development plans, forecasts and feasibility studies for the key assets of Conquest and Catalpa. Conquest and Catalpa (as appropriate) are responsible for the information contained in their respective mine development plans, forecasts and feasibility studies (“forward looking information”). Grant Samuel and AMC have considered and, to the extent deemed appropriate, relied on this information for the purpose of their analysis.

On the basis of the information provided to Grant Samuel and AMC, and the review conducted by Grant Samuel and AMC of such information, Grant Samuel and AMC have concluded that the forward looking information was prepared appropriately and accurately based on the information available to management at the time and within the practical constraints and limitations of such forward looking information. Grant Samuel and AMC have concluded that the forward looking information does not reflect any material bias, either positive or negative. Grant Samuel has no reason to believe otherwise. However, the achievability of the forward looking information is not warranted or guaranteed by Grant Samuel. Future profits and cash flows are inherently uncertain. They are predictions by management of future events that cannot be assured and are not necessarily based on assumptions, many of which are beyond the control of the company or its management. Actual results may be significantly more or less favourable. Moreover, the forward looking information provided by Conquest and Catalpa was not originally generated for, and may not be appropriate in the context of, a valuation of the gold assets of either company.

Accordingly, AMC conducted a detailed review of the significant assumptions and technical factors underlying the forward looking information provided by Conquest and Catalpa to AMC and Grant Samuel. This review included a review of the basis on which resources and reserves have been estimated, a review of likely future operating and capital costs, a review of likely future gold recovery rates, a review of the potential for the conversion of resources to reserves and the potential to mine mineralisation not currently in resources, a review of environmental factors and such other reviews as AMC deemed appropriate. Having regard to these reviews, AMC made independent judgements regarding the technical assumptions that can reasonably be adopted for the purposes of the valuation of the gold assets of Conquest and Catalpa (“technical valuation assumptions”).

As part of its analysis, Grant Samuel has developed cash flow models on the basis of the technical valuation assumptions deemed appropriate by AMC. Grant Samuel has reviewed the sensitivity of net present values to changes in key variables. The sensitivity analysis isolates a limited number of assumptions and shows the impact of the expressed variations to those assumptions. No opinion is expressed as to the probability or otherwise of those expressed variations occurring Actual variations may be greater or less than those modelled. In addition to not representing best and worst case outcomes, the sensitivity analysis does not, and does not purport to, show all the possible variations in mine operating performance. The actual performance of the mines may be negatively or positively impacted by a range of factors including, but not limited to:

variations to the assumptions other than those considered in the sensitivity analysis;
variations to the assumptions considered in the sensitivity analysis greater or less than those modelled; and
combinations of different variations to a number of different assumptions that may produce outcomes different to the combinations modelled.

In forming its opinion, Grant Samuel has also assumed that:

matters such as title, compliance with laws and regulations and contracts in place are in good standing and will remain so and that there are no material legal proceedings, other than as publicly disclosed;
the information set out in the Explanatory Memorandum sent by Catalpa to its shareholders is complete, accurate and fairly presented in all material respects;
the publicly available information relied on by Grant Samuel in its analysis was accurate and not misleading;
the Proposal will be implemented in accordance with its terms; and
the legal mechanisms to implement the Proposal are correct and will be effective.

To the extent that there are legal issues relating to assets, properties, or business interests or issues relating to compliance with applicable laws, regulations, and policies, Grant Samuel assumes no responsibility and offers no legal opinion or interpretation on any issue.

3 Profile of Catalpa

3.1 Background

Catalpa (formerly known as Westonia Mines Ltd (“Westonia Mines”)) is a mid-tier Australian gold company. Catalpa’s principal assets are the Edna May gold mine and a 30% interest in the Cracow gold mine. The company also owns a suite of exploration tenements covering over 790 square kilometres in the Westonia Greenstone Belt, prospective for gold, nickel and base metals.

Listed below are some significant events in Catalpa’s history since its listing in 2002:

Date	Event
2002	Westonia Mines lists on the ASX
2006	Drilling results confirm significant high grade mineralisation at Westonia Gold Project (later renamed
	Edna May).
2008	Company name is changed to Catalpa
2009	Project finance facility secured to assist in funding the development of Edna May gold mine
	Construction of the Edna May gold mine commences. Site constructor GRES is appointed and site
	works and refurbishment begins
	During the March quarter $31.4 million of new equity is raised through a placement
	During the June quarter a further $7.5 million of new equity is raised via a Share Purchase Plan
	Merger with Lion Selection Limited completed – Catalpa acquires 30% stake in Cracow Gold mine and
	exploration joint venture with Newcrest
2010	First production gold is poured at the Edna May
	Edna May Ore Reserve is increased to more than one million ounces
	Edna May concludes ramp up phase of commissioning
	In the September quarter, Catalpa announces a maiden underground gold resource at Edna May of
	660,000 tonnes at 9.1 g/t Au for 195,000 contained ounces (inferred resource)
2011	During the March quarter, $23.4 million before costs is raised through an institutional share placement
	to fund plant improvement programmes and exploration at Edna May
	In May, Catalpa receives a conditional merger proposal from St Barbara of $1.92 per share.
	Discussions are subsequently terminated by the Catalpa board
	In June, Catalpa, Conquest and Newcrest announce the Proposal

3.2 Business Operations

The following map shows the location of Catalpa’s operations:

==> picture [397 x 248] intentionally omitted <==

----- Start of picture text -----

Cracow
Gold Operations
Edna May Gold Brisbane
Operations
Perth
----- End of picture text -----

Source: Catalpa

The reserves, resources and production at Catalpa’s operations are summarised as follows:

	Catalpa – Reserves, Resources and Production	Catalpa – Reserves, Resources and Production	Catalpa – Reserves, Resources and Production
		Resources3	ReservesEr	Production
Asset	Catalpa Interest	(‘000 ounces)	ror! Bookmark not defined. (‘000	Year ended 30 June 2011 (‘000 ounces)
			ounces)
Edna May4	100%	1,763	927	65.6
Cracow5	30%	268	73	30.5
Total		2,032	1,000	96.1

Source: Catalpa

In the second half of the 2011 financial year, Catalpa announced an upgrade to its underground Mineral Resource estimate to 700,000 tonnes at 7.4g/t for 166,000 contained ounces of gold (indicated and inferred categories) at Edna May.

Catalpa produced a total of 96,100 ounces of gold for the year ending 30 June 2011 at cash costs of A$930 per ounce, comprising 65,600 ounces at a cash of cost of A$1,121 per ounce from Edna May and 30,500 attributable ounces of gold from Cracow at a cash cost of A$602 per ounce. The cash costs at Edna May were impacted by deferred mining costs and a number of ramp-up issues including the failure of new tank agitator blades, unreliable utilities and episodes of pit wall instability.

4 Includes Greenfinch and stockpiles

5 Cracow stated on a 30% attributable basis

3 As at 30 June 2011

3.3 Financial Performance

The financial performance of Catalpa for the three years ended 30 June 2010 and the half year ended 31 December 2010 is summarised below:

Catalpa - Financial Performance6 ($’000)	Catalpa - Financial Performance6 ($’000)
	Year ended 30 June Half year ended 31 December
	2008 actual 2009 actual 2010 actual 2010 actual
Gold produced (‘000 ounces) Gold sold (‘000 ounces) Average realised gold price (A$/ounce) Total cash cost (A$/ounce) Total sales revenue	24.8 46.1 17.3 46.6 $1,286 $1,492 $537 $713 - - 22,274.0 48,060.0
EBITDA7	(2,659.8) (6,906.3) 3,912.0 13,172.0
Depreciation and amortisation	(142.5) (162.0) (6,806.0) (8,900.0)
EBIT8	(2,802.3) (7,068.3) (2,894.0) 4,272.0
Net interest revenue / (expense) Income from non-operating activities Impairment of non-current assets Business combination expenses Operating profit before tax Income tax benefit/(expense)	263.3 153.5 685.0 (1,255.0) 10.7 75.3 - - (84.3) - - - - - (2,311.0) -
	(2,612.6) (6,839.4) (4,520.0) 3,017.0 320.9 25.6 10,067.0 (1,036.0)
Profit / (loss) after tax attributable to Catalpa shareholders	(2,291.7) (6,813.8) 5,547.0 1,981.0
*Statistics* Basic earnings / (loss) per share (cents) Production growth (%) EBITDA margin (%) EBIT margin (%)	(0.67) (1.27) 3.93 1.22 na na na na nm nm 17.6% 27.4% nm nm nm 8.9%

Source: Catalpa and Grant Samuel analysis

In reviewing the financial performance of Catalpa set out above, the following should be noted:

Catalpa reported losses in each of the 2008 and 2009 financial years. The company had not yet commenced gold production and expenditure related primarily to exploration and development;
the merger with Lion Selection in the 2010 financial year resulted in Catalpa acquiring a 30% stake in Cracow, a producing gold mine, and thus recording its first gold sales revenue; and
with the commencement of gold production at Edna May in the half year to 31 December 2010, Catalpa announced its maiden pre-tax profit.

6 Financial statements prepared in accordance with the Australian equivalent to international financial reporting standards (“AIFRS”).

7 EBITDA is earnings before net interest, tax, depreciation and amortisation, investment income, and significant and non-recurring items.

8

EBIT is earnings before net interest, tax, investment income, and significant and non-recurring items.

3.4 Financial Position

The financial position of Catalpa as at 30 June 2010 and 31 December 2010 is summarised below:

Catalpa - Financial Position ($’000)	Catalpa - Financial Position ($’000)
	As at 30 June 2010 actual As at 31 December 2010 actual
Debtors and prepayments Inventories Creditors, accruals and provisions	1,358.0 2,259.0 10,117.0 10,461.0 (15,697.0) (14,967.0)
Net working capital	(4,222.0) (2,247.0)
Property, plant and equipment (net) Mine development Provisions Investments Tax assets (net)	85,006.0 96,909.0 70,538.0 62,065.0 (6,125.0) (7,049.0) 560.0 1,260.0 19,036.0 17,752.0
Total funds employed	164,793.0 168,690.0
Cash and deposits Bank loans, other loans and finance leases Net cash	35,113.0 28,910.0 (61,178.0) (56,111.0)
	(26,065.0) (27,201.0)
Net assets	138,728.0 141,489.0
*Statistics* Shares on issue at period end (‘000) Net assets per share ($) NTA9 per share ($) Gearing10(%)	162,749.3 162,832.9 0.85 0.87 0.85 0.87 23.1% 23.8%

Source: Catalpa and Grant Samuel analysis

The net assets of Catalpa increased from $138.7 million as at 1 July 2010 to $141.5 million as at 31 December 2010, reflecting Catalpa’s profit for the period.

Cash held reduced to $28.9 million as at 31 December 2010 as a result of the repayment of debt and continued investment in plant and equipment, mine development and exploration.

During February 2011, Catalpa raised $23.4 million (before costs) through an institutional share placement. The funds will be used for projects at Edna May to improve plant utilisation and reliability and on ongoing exploration and underground development at Edna May.

As at 30 June 2011, Catalpa had net debt of $9.3 million, comprising $38.8 million of cash and gold available for sale of and $48.1 million of borrowings.

9 NTA is net tangible assets, which is calculated as net assets less intangible assets.

10 Gearing is net cash divided by net assets plus net cash.

3.5 Cash Flow

Catalpa’s cash flow for the three years ended 30 June 2010 and six months to 31 December 2010 is summarised below:

Catalpa - Cash Flow ($’000)	Catalpa - Cash Flow ($’000)
	Year ended 30 June Half year ended 31 December
	2008 actual 2009 actual 2010 actual 2010 actual
EBITDA Changes in working capital and other adjustments Capital expenditure (net)	(2,659.8) (6,906.3) 3,912.0 13,172.0 (463.8) 3,578.7 2,655.0 1,653.0 (162.7) (5,456.3) (90,375.0) (14,044.0 )
Operating cash flow	(3,286.3) (8,783.9) (83,808.0) 781.0
Gold sale receipts capitalised Payments to suppliers and employees capitalised Tax credit Net interest received Proceeds from share issues (net of expenses) Proceeds from borrowings (net) Proceeds received from release of tenement bonds Transfer from / (to) term deposits Other	- - - 21,481.0 - - - (21,874.0 ) - - (543.0) - 264.8 262.5 672.0 (1,035.0) 2,888.3 41,124.6 20,829.0 92.0 - (10.0) 62,693.0 (5,648.0) 1,500.0 - - - - (3,121.3) 3,533.0 - 356.8 25.6 (560.0) -
Net cash generated (used)	1,723.5 29,497.5 2,816.0 (6,203.0)
Net cash – opening Net cash – closing	1,075.7 2,799.2 32,296.7 35,112.7 2,799.2 32,296.7 35,115.7 28,909.7

Source: Catalpa and Grant Samuel analysis

Catalpa’s recent equity raisings are reflected in cash flow above:

in the 2010 financial year, Catalpa undertook a combined share placement and entitlement offer to raise $20.0 million:
Catalpa placed 7,575,758 fully paid ordinary shares at $1.32 per share to raise total proceeds of $10 million before costs. The placement was made to institutional investors; and
an entitlement offer to retail shareholders raised $10 million via the issue of 8,013,378 new Catalpa shares at $1.25 per share on the basis of one new Catalpa share for every 19 shares held;
in May 2009 Catalpa raised $7.5 million of new equity via a share purchase plan;
in March 2009, Catalpa raised $31.4 million dollars of new equity through a placement of 524,423,333 shares at $0.06 per share. The placement was made to institutional and sophisticated investors, and Lion subscribed $15 million of the placement; and
in November 2008 Catalpa issued one share and one attaching option per every two shares held at an application price of 2 cents per share to raise approximately $3.5 million. Lion Selection subscribed to its full allocation of $2.2 million and funds were used to continue the company’s drilling program.

Capital expenditure in the year ended 30 June 2010 primarily related to activities at Edna May, including the commencement of mining operations in October 2009 and the continuation of construction activities including the establishment of site roads, project infrastructure and pre-strip activities.

In the 2010 financial year, Catalpa arranged borrowings of approximately $65 million to fund the development of Edna May.

3.6 Group Hedging

As at 30 June 2011, Catalpa had gold forward sales supporting the Edna May project of approximately 287,000 ounces sold forward at A$1,573 per ounce (representing approximately 30% of Edna May’s total reserves).

3.7 Taxation Position

Under the Australian tax consolidation regime, Catalpa and its wholly owned Australian resident entities have elected to be taxed as a single entity.

At 30 June 2011, Catalpa had carried forward income tax losses of approximately $26 million, which were recognised in the balance sheet.

At 30 June 2011, Catalpa had no accumulated franking credits.

Catalpa does not expect to pay income tax in the short to medium term due to its ability to utilise carried forward income tax losses.

3.8 Capital Structure and Ownership

3.8.1 Capital Structure

As at 1 August 2011, Catalpa had the following securities on issue:

178,095,822 ordinary shares;
5,177,542 listed options over unissued ordinary shares exercisable at $1.10 and expiring in October 2011;
8,739,624 unlisted options over unissued ordinary shares;
1,119,000 performance rights over unissued ordinary shares[11] .

Holders of the listed options are exercising the options as the expiry date of 31 October 2011 approaches. The exercise of these options does not have a material impact on the valuation of Catalpa or the number of shares to be issued to Newcrest under the Share Issue. The unlisted options have been issued under the Employees and Contractors Option Plan to eligible directors, employees and contractors for no consideration. Each option on issue is exercisable into one ordinary share and, before exercise, had no dividend entitlement or voting right. Options become exercisable on a date set by the directors.

This reflects the number of performance rights on issue on 3 August 2011.

	Catalpa – Unlisted	Options on Issue as at 1 August 2011	Options on Issue as at 1 August 2011
Issue Date	Expiry Date	Exercise Price	Issued Options	Exercisable Options
December 2008	23 December 2013	$0.867	375,004	375,004
December 2008	23 December 2013	$1.087	375,004	375,004
December 2008	23 December 2013	$1.307	397,731	397,731
December 2008	23 December 2013	$1.527	340,912	-
December 2008	23 December 2013	$0.647	56,819	56,819
March 2009	11 March 2014	$0.647	113,637	113,637
March 2009	11 March 2014	$0.867	113,637	113,637
March 2009	11 March 2014	$1.087	113,637	113,637
March 2009	11 March 2014	$1.307	113,637	113,637
May 2009	31 March 2014	$0.83	6,060,60612	6,060,606
n.a.	30 June 2015	$1.69	679,000	-
Total			8,739,624	7,719,712

Source: Catalpa

Catalpa’s performance rights have been issued to senior executives of Catalpa pursuant to the Catalpa Employee Options and Performance Rights Plan. Subject to the satisfaction of performance and other conditions, on vesting of each performance right, the holder will automatically be issued one fully paid ordinary share in Catalpa with a nil exercise price. The relevant employee must also remain employed by Catalpa or a related group company until the vesting of the performance rights, as relevant, subject to the discretion of the board. All performance rights that do not vest and become exercisable in accordance with the applicable conditions will automatically lapse, subject to the discretion of the board. The Catalpa Board has exercised its discretion such that subject to the Proposal being implemented, the performance rights will vest.

3.8.2 Ownership

At 1 August 2011, there were 8,160 registered shareholders in Catalpa. The top ten shareholders accounted for approximately half of the ordinary shares on issue:

Catalpa - Major Shareholders as at 1 August	Catalpa - Major Shareholders as at 1 August
	Number of Shares	%
HSBC Custody Nominees Australia Limited	22,926,311		14.09
National Nominees Limited	12,849,451		7.89
JP Morgan Nominees Australia Limited	10,466,755		6.43
JP Morgan Nominees Australia Limited	7,613,202		4.68
HSBC Custody Nominees Australia Limited	6,373,842		3.92
Cogent Nominees Pty Ltd	5,767,638		3.54
Citicorp Nominees Pty Ltd	4,953,341		3.04
Nomex Nominees Pty Ltd	4,820,011		2.96
Mark Gareth Creasy	3,223,687		1.98
ANZ Nominees Pty Ltd	2,475,747		1.52
Subtotal - Top ten shareholders	81,469,985		50.05
Other shareholders	81,282,424		49.95
Total	162,752,409		100.00

Source: Catalpa

12 Issued outside of the Employees and Contractors Option Plan

Based on the notices received up to 1 August 2011, Catalpa did not have any substantial as at that date.

3.9 Share Price Performance

A summary of the price and trading history of Catalpa since January 2006 is set out below:

	Catalpa - Share Price	Catalpa - Share Price	History
	Share Price High Low		($) Close	Average Weekly Volume (‘000)	Average Weekly Transactions
Year ended 31 December
2006	2.46	0.94	1.31	280	115
2007	1.61	0.52	0.71	258	85
2008	1.02	0.21	0.38	176	49
2009	1.96	0.33	1.37	852	249
2010	2.27	1.21	1.98	2,498	1,559
Quarter ended
31 March 2011	1.98	1.38	1.77	2,908	1,942
30 June 2011	1.82	1.25	1.36	4,177	2178
Month ended
31 July 2011	1.63	1.33	1.56	3,293	2,251
Week ended
5 August 2011	1.57	1.35	1.41	4,528	2,779
12 August 2011	1.49	1.33	1.46	3,057	2,900

Source: IRESS

The following graph illustrates the movement in the Catalpa share price and trading volumes since January 2006:

==> picture [400 x 245] intentionally omitted <==

----- Start of picture text -----

Catalpa - Share Price and Trading Volume
(Jan 2006 - Aug 2011)
$2.20 16,000
$2.00
14,000
$1.80
12,000
$1.60
$1.40 10,000
$1.20
8,000
$1.00
$0.80 6,000
$0.60
4,000
$0.40
2,000
$0.20
$0.00 0
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11
Price
Volume (000's)
----- End of picture text -----

Source: IRESS

From January 2006 to May 2006 Catalpa’s shares traded broadly in line with the increasing gold price. However, from May 2006 Catalpa’s share price trended steadily downwards, reaching an all-time low of $0.02 (equivalent to $0.22 post a share consolidation in 2009) in December 2008 as a result of the global financial crisis and the resulting volatility in the share market. The share price recovered strongly in late 2008 and early 2009 reflecting the increase in the A$ gold price during this period. Upon the merger with Lion Selection in December 2009, Catalpa restructured its share register, with a one-for-eleven consolidation of its shares.

Catalpa shares traded to a recent high of $2.27 in September 2010, following commissioning of the Edna May plant in May 2010. The share price declined during early 2011 as Edna May experienced some ramp up issues which impacted production. On 13 May 2011, the share price increased from $1.375 to close at $1.69 following St Barbara’s announcement of a conditional merger proposal with Catalpa. Catalpa’s shares traded in the range $1.635 to $1.81 at a VWAP of $1.71 between 13 May 2011 and 14 June 2011, the day immediately prior to the date of the announcement of the Proposal on 15 June 2011.

Between the announcement of the Proposal on 15 June 2011 and 12 August 2011, Catalpa shares have traded in the range $1.25-$1.65 at a VWAP of $1.44. On 12 August 2011, Catalpa shares closed at $1.46.

The following graph illustrates the performance of Catalpa shares since January 2006 relative to the S&P/ASX All Ordinaries Gold Index and the spot gold price expressed in Australian dollars:

==> picture [400 x 245] intentionally omitted <==

----- Start of picture text -----

Catalpa vs S&P/ASX All Ordinaries Gold Index
vs Spot Gold Price (A$/oz)
(1 Jan 2006 - Aug 2011)
250
200
150
100
50
0
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11
Catalpa S&P/ASX All Ordinaries Gold Index Gold Spot Price (A$/oz)
Common Base 100 (as at Jan 2006)
----- End of picture text -----

Source: Bloomberg

The Catalpa share price has underperformed relative to the S&P/ASX All Ordinaries Gold Index and the gold spot price in aggregate over the period. However, since the commencement of construction of Edna May in early 2009, the share price has outperformed both the S&P/ASX All Ordinaries Gold Index and the gold spot price.

Catalpa has 5,241,663 listed options, which expire in October 2011. Since first listing on 28 December 2008, the options have traded to a high of $1.13 on 23 September 2010. Between the announcement of the Proposal on 15 June 2011and 12 August 2011, these options have traded in the range $0.24 - $0.50 per option. The market capitalisation of these options as at 12 August 2011 was around $1.6 million.

4 Profile of Catalpa’s Assets

4.1 Edna May

Overview

Edna May is located in the Eastern wheat belt of Western Australia, 312 kilometres east of Perth and about one kilometre north of the township of Westonia. Westonia is an established town with local infrastructure including access to grid power and the State water supply.

==> picture [198 x 243] intentionally omitted <==

----- Start of picture text -----

WESTERN
AUSTRALIA
EDNA MAY Kalgoorlie
GOLD PROJECT
Southern Cross
Perth Westonia
Merredin
Albany
----- End of picture text -----

Source: Catalpa

Gold was initially discovered in Westonia in 1911 and has been mined intermittently since then. Total field production since 1911 exceeds 630,000 ounces of gold: 360,000 ounces from historic underground mines and 270,000 ounces from open cut operations at an average grade between 11g/t and 16g/t. The primary production focus was the Edna May Reef, which was mined to a depth of 245 metres. However a number of other reefs were also exploited to depths of up to 180 metres.

From 1985 to 1991, Australian Consolidated Minerals Limited (“ACM”) recovered approximately 274,000 ounces of gold from an open pit operation. In addition to its open pit operations ACM conducted a drilling campaign to maximum depths of 850 metres. The general continuity of the mineralisation was considered sufficient to justify a commitment to an underground exploration program. An exploration decline was commenced in early 1988. This was completed to a depth of 500 metres, but ACM discontinued its underground operation without stopping any of the ore it had defined.

Catalpa acquired the project in 1994 and advanced the project through various scoping studies, leading to the commissioning of a feasibility study that was completed in 2004. The project was not viable at the gold price at that time and did not proceed.

A feasibility study updated by Catalpa in 2006 concluded that ore confidence levels had significantly increased and that the project was feasible. A second hand processing plant was subsequently acquired from the Big Bell mine and moved to Westonia in preparation for scheduled production in 2007. However, although financing could be secured, production was not commenced as a result of a Board decision to await higher gold prices.

The project was subsequently reassessed and a further feasibility study was completed in January 2009 indicating increased annual production in excess of 100,000 ounces of gold recovered per annum for a life of mine of more than nine years. Following construction during 2009 and early 2010, the first gold was poured in April 2010.

Geology and Mineralisation

The Westonia Greenstone Belt is a narrow and northwest trending discontinuous linear sequence of supracrustal rocks. It extends for approximately 100 kilometres from the Southern Cross Greenstone Belt near Edwards Find, towards the western margin of the Southern Cross Province within the Archaean Yilgarn Craton. The greenstone sequence in the vicinity of the Edna May deposit strikes 100 degrees to 140 degrees and dips approximately 60 degrees to the northeast. The Catalpa tenements are situated at the northern extremity of the Westonia Greenstone Belt.

The Greenstone Belts of the Yilgarn District is depicted below:

==> picture [398 x 365] intentionally omitted <==

Source: Catalpa

Gold mineralisation at Westonia is largely restricted to the Edna May Gneiss (“EMG”). The EMG is an irregular, but broadly conformable body, which has been traced over a distance of 1,400 metres and averages 100 metres in thickness. The EMG hosts most of the gold mineralisation, with lesser resources being located on the contact zones with the footwall and hangingwall and locally on the margins of the pegmatitic intrusions.

Mining and Processing

The mine extracts ore adjacent to and below the bottom of the previously mined pit. Mining is through conventional open pit methods, utilising a dry hire fleet supplied by an equipment hire group. The supply and maintenance of the mobile mining equipment is the responsibility of the equipment hirer and maintenance contractor. The mining operation uses a typical mining fleet consisting of hydraulic excavators in the 190 tonne class and trucks in the 90 tonne class. Typically, ore and waste is drilled and blasted on 5-10 metre benches and excavated on 2.5 metre benches.

The pit has been designed to be mined in four stages. Mining operations commenced at Edna May in October 2009 alongside process plant construction activities, including the establishment of site roads, project infrastructure and pre-strip activities. Consistent access to open pit ore commenced in late August 2010. Catalpa is also continuing studies on an underground operation and is expecting to rehabilitate the existing decline and commence trial underground mining in early 2012.

Ore is processed by a conventional carbon-in-leach processing plant. The processing plant was purchased in 2007 from the Big Bell mine and re-installed on site. The wet and dry commissioning of the processing plant was completed on 15 May 2010 upon successful performance testing of the plant at its 2.8Mtpa design capacity.

Edna May is expected to average gold production of more than 100,000 ounces per annum over a mine life of approximately 9 years. Catalpa is also aiming to establish an underground operation concurrent with the existing open pit operations. If successful, this would increase the production.

Reserves and Resources

Edna May Reserves and Resources at 30 June 2011 are summarised below:

		Edna May - Mineral Resource	Edna May - Mineral Resource

	Measured	Indicated	Inferred	Total Measured, Indicated & Inferred
	Tonnes (m) Gold (g/t) Ounces (‘000)	Tonnes (m) Gold (g/t) Ounces (‘000)	Tonnes (m) Gold (g/t) Ounces (‘000)	Tonnes (m) Gold (g/t) Ounces (‘000)
Green- finch Edna May & Golden Point Edna May Under- ground13 Stockpiles Total	0.9 1.1 30 19.7 1.0 660 - - - - - - 20.6 1.0 690	2.5 1.0 80 15.5 1.0 494 0.4 7.3 98 2.2 0.5 38 20.6 1.1 710	0.6 1.0 20 10.0 0.9 276 0.3 7.6 69 - - - 10.9 1.1 365	4.0 1.1 130 45.2 1.0 1,430 0.7 7.4 166 2.2 0.5 38 52.1 1.1 1,763

Source: Catalpa

13 Edna May underground updated as at 15 May 2011.

Edna May - Ore Reserve[14]

	Proved	Probable	Total Proved & Probable
	Tonnes (m) Gold (g/t) Ounces (‘000)	Tonnes (m) Gold (g/t) Ounces (‘000)	Tonnes (m) Gold (g/t) Ounces (‘000)
Greenfinch Edna May & Golden Point Stockpiles Total	0.8 1.1 28 14.4 1.1 504 - - - 15.2 1.1 532	1.7 1.0 58 8.5 1.1 298 2.2 0.5 38 12.4 1.0 394	2.5 1.1 86 22.8 1.1 803 2.2 0.5 38 27.5 1.1 927

Source: Catalpa

Exploration

Edna May is surrounded by 790 square kilometres of exploration tenements held 100% by Catalpa. Catalpa has exploration programs underway to assess new areas of potential mineralisation, all of which are still at a very early stage of evaluation. In addition, there is an opportunity through infill drilling to convert Inferred Resources to Reserves within the current pit design and to continue to define and extend the open pit and underground resource. These programs have the potential to add to the Reserve in the near term, discover new Resources and further extend the mine life.

In November 2010, Catalpa reported a maiden underground inferred mineral resource at Edna May of 660,000t at 9.1g/t for 195,000 contained ounces. In May 2011, Catalpa announced revised underground Mineral Resource comprising a total indicated and inferred resource of 700,000t at 7.4g/t for a total of 166,000 contained ounces of gold, which upgraded a high proportion (60%) of the inferred resource to the indicated category. The underground resource is estimated to a relatively shallow depth of approximately 550m below surface with potential for extensions at depth and along strike.

Catalpa is continuing with a drilling programme targeting expansion and definition of the underground resource with a view to establishing an underground operation concurrent with the existing open pit operations. Early in 2012 Catalpa expects to commence the rehabilitation of the existing decline, commence trial underground mining and continue the drilling programme from underground.

Operating Performance

Edna May produced 65,592 ounces of gold for the year ended 30 June 2011 at net cash costs of $1,121 per ounce. The plant treated a total of 2.3Mt of ore and achieved average recoveries of 90%. For the six months ended 30 June 2011, production was 35,032 ounces at a net cash cost of $1,203 per ounce. Cash costs were impacted by deferred mining costs and issues associated with ramp-up of production.

Catalpa is progressing studies to increase processing capacity from the current 2.8Mtpa to 3.2 Mtpa as per the feasibility study and 92% recovery. Since commissioning, actual production has fallen short of production targets because of the failure of new tank agitator blades, unreliable utilities (power and water) and deferred access to higher grade ore following episodes of pit wall instability. Catalpa considers these issues have now been satisfactorily resolved.

Catalpa expects Edna May gold production of 85,000-93,000 ounces in FY12 at cash costs of between A$890 to $990 per ounce.

14 Reported to 0.4g/t Au cut-off.

4.2 Cracow Project (30%)

Overview

The Cracow gold mine is a high grade, underground gold operation situated in the Cracow Goldfield approximately 1.5 kilometres from the township of Cracow and about 500 kilometres northwest of Brisbane in central Queensland. Gold has been mined intermittently in the Cracow Goldfield since 1932 with historical ventures producing more than 850,000 ounces of gold, predominantly from the Golden Plateau deposit.

==> picture [397 x 313] intentionally omitted <==

Source: Catalpa

The Cracow Project is a joint venture between Catalpa (30%) and Newcrest (70%). Newcrest is the operator and both parties have pre-emptive rights over each other’s stake in the joint venture.

The current mining operations at Cracow are focused on deposits discovered since 1996. In 2004 the underground mine was developed and the treatment plant refurbished and upgraded. Approximately $90 million was spent developing the operation. The Cracow operation has consistently produced around 100,000 ounces of gold per annum over the last six years with throughput capacity now exceeding 550,000 tonnes per annum.

Lion acquired a 30% interest in the Cracow Project in 2007, following its merger with AuSelect. In May 2008, Beadell Resources Ltd (“Beadell Resources”) agreed to acquire 100% of the Cracow mine for a total of $280 million. Lion agreed to sell its 30% interest in the Cracow Project to Beadell Resources for $80 million. Beadell Resources was unsuccessful in raising the capital required and the transaction was terminated in July 2008.

Catalpa acquired a 30% interest in the Cracow Project effective 10 December 2009, following its merger with Lion.

Geology and Mineralisation

The Cracow gold deposits are quartz (carbonate), low sulphidation, epithermal gold-silver deposits formed within lode channels in steep-dipping fault zones, which range in strike from north-north-east to north-west. The main deposits occur within a zone around 6 kilometres long by 2 kilometres wide, although there are a number of other historical mines some kilometres to the east. The structural regime is developed within Permian andesitic lavas, tuffs and coarse fragmentals. Gold mineralisation is generally high grade (approximately 10g/t) and is associated with silver.

The major deposits are depicted below:

==> picture [395 x 202] intentionally omitted <==

Source: Catalpa

Mining and Processing

The mining and development activities at the Cracow mine are undertaken by Downer EDI under an Alliance Agreement. All mining is from underground, using the downhole benching method with concurrent backfill. After blasting, ore is transported directly to the ROM pad located adjacent to the ore treatment plant. A decline driven from the surface at a gradient of approximately 1:7 provides access to the Royal Shoot deposit while the Klondyke North and Crown Shoot ore bodies are accessed via a decline that branches off the Royal decline. The Sovereign ore body is also accessed by a decline branching off the Crown decline. The Kilkenny ore body is accessed from another new decline branching off the Crown decline. Ventilation is currently provided by three exhaust raises and an additional exhaust raise may be developed as the mine workings progress deeper. Roses Pride will be accessed by a new decline currently being developed.

Cracow employs a conventional gold processing technology which includes a carbon-in-leach (“CIL”) gold processing circuit and associated mill and onsite infrastructure. The processing plant comprises:

a 3-stage crushing plant consisting of a primary jaw crusher and secondary and tertiary cone crushers;
a grinding section, comprising a 1,400 kilowatt ball mill, a 460 kilowatt ball mill, eight 250mm cyclones and a thickener;
a carbon-in-leach circuit, comprising three 540m[3] leach tanks and six 149m[3] adsorption tanks;

a Pressure Zadra Plant comprising separate acid wash and elution columns;
a closed electrowinning circuit and barring furnace; and
a tailing storage facility.

Reserves and Resources

Cracow Reserves and Resources as at 30 June 2011 are summarised below:

	Cracow - Resources and Reserves15	Cracow - Resources and Reserves15
	Tonnes	Average Grade	Contained Gold
	(‘000 tonnes)	(g/t)	(‘000 ounces)
Resources16
Measured	278	9.7		86
Indicated	1,042	7.7		258
Inferred	3,101	5.5		548
Total Resources	4,422	6.3		893
Catalpa’s 30% share	1,327	6.3		268
Reserves17
Proved	236	8.1		61
Probable	840	6.8		182
Total Reserves	1,075	7.0		244
Catalpa’s 30% share	322	7.0		73

Source: Catalpa

Exploration

Exploration at the Cracow Goldfield is conducted by Newcrest on behalf of the Cracow Mine Joint Venture. The exploration has been directed at identifying high-grade gold mineralisation within close proximity to the existing deposits. Recent exploration has focused on drilling of the Kilkenny structure as well as identifying additional resource potential within the Roses Pride, Empire, Phoenix and Stirling vein structures. Drilling has also commenced to the north and south of the mine.

In the March 2011 quarter, resource definition drilling to support an upgrade of the Tipperary and Kilkenny Resources continued at Cracow with a total of 40 underground holes drilled for 6,111 metres. Drilling validated the Kilkenny and Tipperary shoots and extended the vertical extent of the Tipperary shoot. A further high grade intersection of 2.9 metres at 68.0g/t gold from 185.0 metres was returned from outside the defined Mineral Resource, increasing the potential for additional Resource ounces.

15 Numbers may not add up due to rounding.

16 Royal, Crown, Klondyke North, Sovereign, Kilkenny, Tipperary, Empire, Roses Pride, Phoenix and stockpiles. Resources have been estimated using US$900 per ounce gold price and 0.80 USD:AUD exchange rate.

17 Royal, Crown, Klondyke North, Sovereign, Kilkenny, Roses Pride, Phoenix, Tipperary and stockpiles. Reserves have been estimated using US$1,000 per ounce gold price and 0.80 USD:AUD exchange rate.

Operating Performance

Cracow mine’s operating performance for the four years ended 30 June 2010 is summarised below:

Cracow Gold Mine – Operating Statistics18	Cracow Gold Mine – Operating Statistics18
	Year ended 30 June
	2007 2008 2009 2010 2011
Reserves (‘000 ounces) Resources (‘000 ounces) Ore mined (‘000 tonnes) Ore milled (‘000 tonnes) Average head grade (g/t) Gold recovery (%) Gold produced (‘000 ounces) Net cash costs (A$ per ounce)19	290 176 230 230 244 850 704 840 1,080 893 376 431 463 483 462 386 414 437 480 500 10.1 8.7 7.6 7.2 6.9 93.9 92.0 92.4 92.0 92.2 116.7 107.4 99.2 102.8 101.7 342 473 519 539 652

Source: Newcrest

The financial year ending 30 June 2006 was the first full year of gold production at Cracow mine. Since then gold production at Cracow mine has been reasonably consistent at around 100,000 ounces per annum. The production level has been maintained despite declining head grades by increased mill throughput, although cash costs have increased over the period, reflecting increased site costs associated with higher plant throughput.

Forecast production at Cracow for FY2012 is 107,183 ounces of gold at a cash cost of $729 per ounce.

18 Cracow gold mine reported on 100% basis

19 Includes by products and royalties

5 Profile of Conquest

5.1 Background

Conquest is an Australian gold mining company, headquartered in Sydney, Australia. It has been listed on the ASX since 1994. The company owns two gold operations in Queensland, Australia:

the Pajingo Gold Mine; and
the Mt Carlton Gold-Silver-Copper Project.

Pajingo and Mt Carlton are both 100% owned by Conquest.

Listed below are some significant events in Conquest’s history since its listing in 1994:

Date	Event
1994	Conquest listed on the ASX
2003	Conquest purchased 100% of the Mt Carlton tenements from Xstrata (following Xstrata takeover of
	MIM)
2006	Silver Hill gold-silver-copper deposit discovered at the 100% owned Mt Carlton project
2007	Completed a $22.4 million institutional placement
2009	Conducted a $50.3 million equity raising comprising an institutional placement raising $50 million
	and a share purchase plan to existing shareholders raising $0.3 million
2010	In May, announced a takeover offer for North Queensland Metals Limited (“North Queensland
	Metals”), owner of a 60% interest in the Pajingo gold mine, for approximately $60 million
	In September, acquired remaining 40% interest in Pajingo gold mine from Heemkirk Consolidated
	Limited for $37 million
	In September, announced offtake agreement with Shandong Guoda Gold for concentrate from the V2
	deposit at Mt Carlton
	In November, raised $50 million through an institutional placement and share purchase plan
	In December, announced Board approval for the development of the Mt Carlton gold-silver-copper
	project.
2011	In February sold the Baal Gammon and Herberton base metals tenements to Monto Minerals Ltd for
	$1.5m cash, $1.5 m deferred cash payment, shares and options giving Conquest a 23% stake in Monto
	In February, announced appointment of Calder Project Services to undertake the engineering and
	procurement phase for Mt Carlton and also announced a $5.5million exploration program for
	Mt Carlton
	In June, announced (with Catalpa and Newcrest) the Proposal.

5.2 Business Operations

The following map shows the location of Conquest’s operations:

==> picture [397 x 369] intentionally omitted <==

Source: Conquest

The gold reserves, resources and production at Conquest’s operations are summarised as follows:

	Conquest – Reserves, Resources and Production	Conquest – Reserves, Resources and Production	Conquest – Reserves, Resources and Production	Conquest – Reserves, Resources and Production
Asset	Conquest Interest	Resources (‘000 ounces)	Reserves (‘000 ounces)	Production Year ended 30 June 2011 (‘000 ounces)
Pajingo20	100%	728	140	45.9
Mt Carlton21	100%	1,240	812	-
Twin Hills	100%	398	-
Total		2,366	952	45.9

Source: Conquest

20 Not owned by Conquest until the half year ended 31 December 2010.

21 Mt Carlton also has silver and copper resources and reserves.

5.3 Financial Performance

The financial performance of Conquest for the three years ended 30 June 2010 and the half year ended 31 December 2010 is summarised below:

Conquest - Financial Performance22 ($’000)	Conquest - Financial Performance22 ($’000)
	Year ended 30 June Half year ended 31 December
	2008 actual 2009 actual 2010 actual 2010 actual
Total sales revenue	- - - 12,126.4
EBITDA23	(1,772.8) (1,650.0) (3,819.8) (3,686.5)
Depreciation and amortisation	(27.5) (21.9) (14.4) (2,382.0)
EBIT24	(1,800.3) (1,671.9) (3,834.1) (6,068.5)
Net interest revenue / (expense) Income from non-operating activities Other non-recurring income Exploration and evaluation costs written off Loss on sale of tenements, sale of fixed assets and scrapping of fixed assets Corporate fees Share based payment expense Impairment in fair value of available for sale investments Fair value of re-measurement of previously held interest in NQM at date of acquisition Share of loss of equity accounted investment Other expenses Operating profit before tax Income tax benefit	1,974.4 1,926.6 2,502.3 883.5 161.1 68.3 54.4 118.8 1,868.0 - - - (326.7) (260.1) (439.4) - (48.4) (18.5) (50.1) - (1,630.6) - - - - (5.2) (2,002.1) (3,622.1) - (1,537.6) (328.0) - - - - 2,642.3 - - - (372.6) (39.4) (5.7) (0.8) 4.9
	162.7 (1,504.1) (4,097.8) (6,413.6) 297.1 352.9 398.0 840.1
Profit / (loss) after tax attributable to Conquest shareholders	459.8 (1,151.2) (3,699.8) (5,573.5)
*Statistics* Basic earnings / (loss) per share (cents) Production growth (%) EBITDA margin (%) EBIT margin (%)	0.18 (0.42) (1.14) (0.73) na na na na nm nm nm nm nm nm nm nm

Source: Conquest and Grant Samuel analysis

Until the acquisition of the Pajingo gold mine in the half year to 31 December 2010, Conquest’s activities were focussed on its Mt Carlton development project. As such, it had no revenue from gold sales and its historical expenditure related to exploration and development activities at its Mt Carlton project.

For the half year to 31 December 2010, the Pajingo gold mine produced 17,133 ounces of gold and 19,880 ounces of silver.

22 Financial statements prepared in accordance with the Australian equivalent to international financial reporting standards (“AIFRS”).

23 EBITDA is earnings before net interest, tax, depreciation and amortisation, investment income, and significant and non-recurring items.

24 EBIT is earnings before net interest, tax, investment income, and significant and non-recurring items.

5.4 Financial Position

The financial position of Conquest as at 30 June 2010 and 31 December 2010 is summarised below:

Conquest - Financial Position ($’000)	Conquest - Financial Position ($’000)
	As at 30 June 2010 actual As at 31 December 2010 actual
Debtors and prepayments Inventories Creditors, accruals and provisions	1,232.3 3,491.3 - 5,962.5 (1,543.9) (8,242.9)
Net working capital	(311.6) 1,210.9
Property, plant and equipment (net) Mineral exploration and evaluation Mine development Intangible assets Provisions Assets held for sale Investments Other assets (net)	518.8 20,024.1 35,233.8 60,616.0 - 18,719.8 - 60,345.2 (39.5) (7,927.7) - 8,500.0 265.7 8.1 500.9 1,549.0
Total funds employed	36,168.0 163,045.5
Cash and deposits Bank loans, other loans and finance leases Net cash	56,088.0 39,515.7 - -
	56,088.0 39,515.7
Net assets	92,256.0 202,561.2
*Statistics* Shares on issue at period end (000s) Net assets per share ($) NTA25 per share ($) Gearing26(%)	353,151.1 583,241.5 0.26 0.35 0.26 0.24 (37.8)% (16.3)%

Source: Conquest and Grant Samuel analysis

The significant increase in net assets between 30 June 2010 and 31 December 2010 reflects Conquest’s acquisition of a 100% interest in the Pajingo mine.

As at 30 June 2011, Conquest had net cash of $31.9 million, comprising $26.4 million of cash and $5.5m of gold and silver available for sale. In addition, Conquest expects to receive $1.5 million from Monto in relation to the sale of the North Queensland base metal tenements.

25 NTA is net tangible assets, which is calculated as net assets less intangible assets.

26 Gearing is net cash divided by net assets plus net cash.

5.5 Cash Flow

Conquest’s cash flow for the three years ended 30 June 2010 is summarised below:

Conquest - Cash Flow ($’000)	Conquest - Cash Flow ($’000)
	Year ended 30 June Half year ended 31 December
	2008 actual 2009 actual 2010 actual 2010 actual
EBITDA Changes in working capital and other adjustments Capital expenditure (net)	(1,772.8) (1,650.0) (3,819.8) (3,686.5) 175.5 48.2 494.8 (17.7) (6,361.2) (5,678.5) (15,385.8) (19,769.1)
Operating cash flow	(7,958.6) (7,280.3) (18,710.8) (23,473.3)
Acquisitions Tax credit Net interest received Proceeds from share issues (net of expenses) Other	- - (43,959.3) 312.3 352.9 - 398.0 1,642.5 2,023.8 1,939.2 1,721.2 21,924.4 40.0 46,216.4 48,741.1 20.5 - (18.7) -
Net cash generated (used)	15,941.2 (4,863.6) 29,426.2 (16,572.3)
Net cash (borrowings) – opening Net cash (borrowings) – closing	15,584.1 31,525.4 26,661.8 56,088.0 31,525.4 26,661.8 56,088.0 39,515.7

Source: Conquest and Grant Samuel analysis

Over the three and a half years ended 31 December 2010, Conquest’s major applications of cash were on capital and development expenditure at its Mt Carlton Project and on the acquisition of a 40% interest in the Pajingo gold mine.

Major equity raisings to fund the development of the Mt Carlton project reflected in the cash flow above include:

in November 2007, Conquest completed a $22.4 million institutional placement of 33,000,000 fully paid ordinary shares at $0.68 million;
in October 2009, Conquest conducted a $65 million equity raising comprising an institutional placement of 80.6 million shares raising $50 million and a share purchase plan to existing shareholders raising $15 million; and
Conquest completed an institutional placement in October 2010 and share purchase plan in November 2010 that together raised gross proceeds of $50 million.

5.6 Group Hedging

Conquest does not have any hedging in place.

5.7 Taxation Position

Under the Australian tax consolidation regime, Conquest and its wholly owned Australian resident entities have elected to be taxed as a single entity.

At 30 June 2011, Conquest expects to have carried forward income tax losses of approximately $60-70 million, none of which were recognised in the balance sheet.

At 30 June 2011, Conquest had no accumulated franking credits.

Conquest does not expect to pay income tax in the short to medium term due to the ability to utilise carried forward income tax losses.

5.8 Capital Structure and Ownership

5.8.1 Capital Structure

As at 1 August 2011, Conquest had the following securities on issue:

583,241,478 ordinary shares; and
68,189,734 options over unissued ordinary shares.

If the Minority Options Offer becomes unconditional, Conquest will issue a further 18,094,801 shares to the holders of those options as consideration for the cancellation of 32 million options.

As at 1 August 2011, Minority Options comprised:

16,000,000 options issued to Jake Klein, James Askew and Nicholas Curtis with an exercise price of $0.28 and expiring on 1 June 2015, of which 13,500,000 have attached vesting conditions; and
16,000,000 options issued to Jake Klein, James Askew and Nicholas Curtis with an exercise price of $0.32 and expiring on 1 June 2016, of which 13,500,000 have attached vesting conditions.

The Majority Options on issue as at 1 August 2011 comprised:

2,000,000 options issued to Southern Cross Equities as consideration for services rendered in relation to Conquest’s capital raising in the 2010 financial year. These options have an exercise price of $0.93 and expire on 26 February 2013 and have been purchased (and are now held) by Jake Klein;
5,500,000 options issued to Baker Steel as consideration for underwriting Conquest’s capital raising during the 2011 financial year. These options have an exercise price of $0.60 and expire on 19 October 2012; and
30,949,096 options issued to directors and employees of Conquest with various exercise prices, expiry dates and vesting conditions.

In addition, Conquest proposes to issues 2,259,392 options to Jake Klein, James Askew and Nicholas Curtis pursuant to non-dilution rights granted to those parties on their appointment as Directors. The non-dilution rights require options to be issued where Conquest issues shares before the expiry or exercise of the Minority Options. Conquest has made a number of share issues since October 2010 that trigger this right. The issue of these options is subject to shareholder approval. If approved, these options will be treated as Majority Options.

5.8.2 Ownership

At 17 August 2011 there were 5,370 registered shareholders in Conquest. The top ten shareholders accounted for approximately 49% of the ordinary shares on issue:

Conquest - Major Shareholders as at	17 August 2011
	Number of Shares	%
National Nominees Limited	74,603,808	12.79
St Ives Gold Mining Company Pty Limited	50,754,817	8.70
HSBC Custody Nominees (Australia) Limited	34,967,095	6.00
Citicorp Nominees Pty Limited	28,651,311	4.91
Lujeta Pty Ltd	26,445,968	4.53
Mr Donald Robin Walker	20,051,283	3.44
JP Morgan Nominees Australia Limited	19,609,379	3.36
HSBC Custody Nominees (Australia) Limited – A/C 2	13,477,340	2.31
JP Morgan Nominees Australia Limited	11,957,115	2.05
JJ Holdings (VIC) Pty Ltd	8,125,448	1.39
Subtotal - Top 10 shareholders	288,643,564	49.49
Other shareholders	294,597,914	50.51
Total	583,241,478	100.00

Source: Conquest

Conquest has received notices from the following substantial shareholders:

Conquest – Substantial Shareholders as at 1	Conquest – Substantial Shareholders as at 1	August 2011
Shareholder	Number of Shares	Percentage
Gold Fields Australasia Ltd	51,783,388	8.88
Baker Steel Capital Mangers	34,007,860	5.83
Lujeta Pty Limited	33.500.000	5.74

Source: Conquest

5.9 Share Price Performance

A summary of the price and trading history of Conquest since January 2006 is set out below:

	Conquest - Share Price History	Conquest - Share Price History	Conquest - Share Price History
				Average
	Share Price		($)	Weekly	Average
	High	Low	Close	Volume (‘000)	Weekly Transactions
Year ended 31 December
2006	0.54	0.04	0.52	11,136	512
2007	0.98	0.32	0.60	5,596	565
2008	0.70	0.15	0.21	2,500	249
2009	0.80	0.14	0.50	3,147	274
2010	0.72	0.20	0.58	6,414	427
Quarter ended
31 March 2011	0.63	0.48	0.57	10,077	1,070
30 June 2011	0.59	0.39	0.42	4,657	560
Month ended
31 July 2011	0.53	0.40	0.50	3,779	671
Week ended
5 August 2011	0.50	0.41	0.45	4,286	803
12 August 2011	0.48	0.40	0.45	6,040	1,889

Source: IRESS

The following graph illustrates the movement in the Conquest share price and trading volumes since January 2006:

==> picture [391 x 245] intentionally omitted <==

----- Start of picture text -----

Conquest - Share Price and Trading Volume
(Jan 2006 - Aug 2011)
$1.00 100,000
$0.90 90,000
$0.80 80,000
$0.70 70,000
$0.60 60,000
$0.50 50,000
$0.40 40,000
$0.30 30,000
$0.20 20,000
$0.10 10,000
$0.00 0
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11
Price
Volume (000's)
----- End of picture text -----

Source: IRESS

Movements in Conquest’s share price have generally mirrored those of the market. During 2007 and 2008, Conquest’s share price began to fall in line with Australian shares generally as a result of the global financial crisis, hitting a low of $0.15 on 2 November 2008. The share price

recovered strongly in late 2008 and early 2009 reflecting the strong drilling results at the Mt Carlton project .

In the three months prior to the announcement of the Proposal on 15 June 2011, Conquest’s shares traded between $0.40 and $0.61 at a volume weighted average price (“VWAP”) of $0.53. From the announcement of the Proposal on 15 June 2011 to 12 August 2011, Conquest shares have traded in the range $0.39-$0.53 at a VWAP of $.45. On 12 August 2011, Conquest shares closed at $0.45.

The following graph illustrates the performance of Conquest shares since January 2006 relative to the S&P/ASX All Ordinaries Gold Index and the spot gold price expressed in Australian dollars:

==> picture [391 x 240] intentionally omitted <==

----- Start of picture text -----

Conquest vs S&P/ASX All Ordinaries Gold Index
vs Spot Gold Price (A$/oz)
(Jan 2006 - Aug 2011)
2,500
2,000
1,500
1,000
500
0
Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11
Conquest S&P/ASX All Ordinaries Gold Index Gold Spot Price (A$/oz)
Common Base 100 (as at Jan 2006)
----- End of picture text -----

Source: Bloomberg

Conquest shares substantially outperformed the gold index in 2006 following the discovery of Mt Carlton.

6 Profile of Conquest’s Assets

6.1 Pajingo

Overview

Pajingo is a well-established operation mining a large epithermal gold system located 53 kilometres south of Charters Towers in North Queensland. It has yielded nearly 2.5 million ounces of gold at an average grade of 11.4g/t since 1987. Pajingo’s history can be summarised as follows:

Date Event

1983 Pajingo field discovered by Battle Mountain Gold Company (“Battle Mountain”) 1986 First gold production from open pit mines 1991 Initial joint venture formed between Battle Mountain and Normandy Mining Limited (“Normandy”) 1996 First gold production from underground mining 2001 Newmont Mining Corporation (“Newmont”) acquires Battle Mountain 2002 Newmont acquires 100% of Pajingo via its takeover of Normandy 2007 North Queensland Metals and Heemskirk Consolidated Limited (“Heemskirk”) purchase Pajingo from Newmont 2010 Conquest acquires 100% of Pajingo via its takeover of North Queensland Metals and purchase from Heemskirk

North Queensland Metals and Heemskirk acquired the Pajingo operations from Newmont in December 2007 as a going concern but with very limited reserves. North Queensland Metals implemented more selective underground mining techniques and reduced the mill throughput to 300,000 tonnes a year (from 535,000 tonnes in 2007).

Conquest recommenced open pit mining in the March 2011 quarter and is currently reviewing plans to develop further satellite and open-pit sources in order to utilise the spare capacity of the processing facility, increase gold production and lower costs.

Geology and Mineralisation

Gold mineralisation at Pajingo is contained in a series of sub-vertical, high grade, lowsulphidation epithermal veins, defined over an east-west strike length of over five kilometres and to a maximum depth of 800 metres below surface.

The deposits in the Pajingo field are structurally controlled with several different orientations. However, most of the know mineralisation is within the northwest-southeast trending VeraNancy structural corridor, which contains repeating lodes each yielding in excess of 300,000 ounces of high-grade gold (averaging between 11 and 14g/t gold). The diagram below indicates areas of known gold mineralisation to the east of the areas currently being mined:

==> picture [391 x 183] intentionally omitted <==

Source: Conquest Mining

The epithermal gold mineralisation is contained within quartz veins hosted by volcanic rocks. The veins occur as discrete steeply plunging ore shoots with short strike lengths. The mineralised lodes can vary from less than one metre to 15 metres in width but are generally two to three metres wide and extend vertically to more than 800 metres below surface.

Recently completed development work at Vera-Nancy has opened up access to a series of undeveloped areas to the east of the mine (Zed, Sonia, Bunty, Faith and Dawn). The system remains open along strike to the east.

Mining and Processing

Ore is mined primarily by underground methods using long-hole open-bench stoping, with ore hauled to surface via a decline. The underground mining fleet is owner operated while open pit mining is undertaken by a contractor.

Ore is processed through a conventional crushing, grinding and carbon-in pulp plant to produce gold doré on site. Metallurgy is simple and gold and silver recoveries are very high. Although the plant is currently being operated to process 300,000 tonnes per annum, it has the capacity to process up to 650,000 tonnes per annum.

Resources and Reserves

Pajingo Reserves and Resources at 30 June 2011 are summarised below:

		Pajingo - Mineral	Resources
	Measured	Indicated	Inferred	Total Measured, Indicated & Inferred
	‘000 Tonnes Gold g/t ‘000 Ounces	‘000 Tonnes Gold g/t ‘000 Ounces	‘000 Tonnes Gold g/t ‘000 Ounces	‘000 Tonnes Gold g/t ‘000 Ounces
Pajingo- underground Pajingo- open pit Total	200 5.4 35 - - - 200 5.4 35	2,502 4.7 375 306 3.0 30 2,808 4.5 405	2,337 3.8 288 8 1.0 0.3 2,346 3.8 288	5,039 4.3 698 314 3.0 30 5,354 4.2 728

Source: Conquest

	Pajingo - Ore Reserves	Pajingo - Ore Reserves
	Proved	Probable	Total Proved & Probable
	‘000 Tonnes Gold g/t ‘000 Ounces	‘000 Tonnes Gold g/t ‘000 Ounces	‘000 Tonnes Gold g/t ‘000 Ounces
Pajingo- underground Pajingo- open pit Total	54 5.7 10 - - - 54 5.7 10	471 6.6 100 339 2.8 30 810 5.0 130	525 6.5 110 339 2.8 30 864 5.1 140

Source: Conquest

Expansion and Exploration

Recent exploration at Pajingo has been focused on near-mine targets, primarily within the main Vera-Nancy structural corridor. Pajingo has an extensive fault system with a complex distribution of splays, low-grade haloes and mineralisation styles.

In mid-2010, drilling from recently completed access drives intersected up to four lodes outside defined reserves, extending over one kilometre of strike length. Significantly, one of these ore shoots is interpreted to represent an eastern extension of Pajingo’s main mineralised structure.

The Pajingo leases outside the mine camp area are also highly prospective for major new discoveries. The developing Moonlight discovery is interpreted to be an intact and complete epithermal system that is known to host both high-grade feeder vein style mineralisation and semi-massive breccia mineralisation. Moonlight is located within the 10 kilometre-long Toby structural trend that is parallel to and about one kilometre east of the main Pajingo trend. While it does not represent a short-term ore supply, progressive exploration of the Moonlight area may reveal this to be a major parallel Vera-Nancy style system. The Barking Spider prospect, which has a strike length of approximately three kilometres and is directly along strike to the East of the existing workings, is also considered promising.

Conquest is also investigating sourcing ore from satellite deposits, such as Twin Hills located 200 kilometres south of Pajingo, to utilise the excess capacity in the processing plant. As at 30 June 2011 Twin Hills had mineral resources totalling 398,000 ounces of gold.

Operating Performance

Pajingo’s operating performance since mining recommenced in January 2008 is detailed below:

	Pajingo – Production Summary
	Year ended 30 June
	2008 2009	2010	2011
Ore Mined (t)	95,587 283,082	313,808	330,219
- underground	95,587 283,082	313,808	281,585
- open pit	- -	-	48,634
Ore Milled (t)	98,152 289,239	303,914	287,173
Head grade (g/t)	7.22 5.9	5.9	5.4
Recovery (%)	94.2 95.1	96.0	94.0
Gold produced (ounces)27	20,607 52,417	54,964	45,889
Cash cost ($A/ounce)	605 684	735	950
Silver produced (ounces)	21,239 67,897	79,863	51,694

Source: Conquest and North Queensland Metals

27 After silver credits and royalties

Pajingo had been operated in a capital constrained environment under previous owners. When Conquest assumed ownership of the mine on 18 October 2010, it implemented a number of development and exploration initiatives aimed at improving the economics of the mine. This included the resumption of production from open pits and resulted in an increase in ore production and a reduction in per tonne unit costs, although these improvements were offset by lower gold grades.

Outlook

For the year ending 30 June 2012, Conquest expects to mine approximately 250,000 tonnes of ore from underground and 100,000 tonnes from open pit, yielding at least 70,000 ounces of gold at cash operating costs (before royalties) of approximately A$800 per ounce.

6.2 Mt Carlton

Overview

The Mt Carlton gold-silver-copper project is located 150 kilometres south of Townsville. It comprises the gold-rich V2 deposit and the silver-rich Area 39 deposit, both discovered by Conquest in 2006. The Board of Conquest approved the development of the project in December 2010 based on the results of an Optimisation Study that followed the February 2010 Definitive Feasibility Study. The project will yield a gold-rich concentrate from the V2 deposit and a silver-rich concentrate from the Area 39 deposit, with first production expected in 2012.

Geology and Mineralisation

The high-sulphidation epithermal mineralisation at Mt Carlton occurs within felsic volcanic rocks on the northern margin of the Permian Bowen Basin. Gold, silver and copper are found mainly as copper and silver sulphides, although there is also some gold pyrite. The V2 deposit is gold dominant with associated silver, copper and zinc. The Area 39 deposit to the southwest is silver dominant with very high silver grades and only minor gold.

Development, Mining and Processing

The V2 and Area 39 deposits will be mined from two separate open pits. V2 will be mined as an open pit in three stages. High grade ore will be processed first and lower grade ore will be stockpiled and processed after the completion of open pit mining. Area 39 will be mined as a single stage open pit. Mining of both deposits will be done by a contractor.

Ore from the two deposits, which are located 200 metres apart, will be processed alternately on a batch basis through the same conventional crush-grind-float treatment plant to produce two polymetallic concentrates (gold-silver-copper from V2 and silver-copper from Area 39). The plant has a design capacity of 800,000 tonnes per annum.

The studies envisage that V2 will yield a total of 500,000 tonnes of a gold-copper-silver concentrate containing 735,000 ounces of gold, 8.2 million ounces of silver and 30,000 tonnes of copper. Operating costs for the V2 deposit average US$565 ($630) per ounce of gold produced (including smelting charges and based on a copper price of US$3.50 per pound, a silver price of US$22 per ounce and the A$:US=$0.90). Area 39 is projected to contribute approximately 46,000 tonnes of concentrate containing 7.4 million ounces of silver and limited amounts of copper. Cash operating costs for Area 39 are expected to average US$11.25 ($12.50) per ounce of silver produced (including smelting charges and assuming no credit for the copper content of the Area 39 concentrate).

Construction costs, including pre-stripping, are estimated at $127 million.

On 4 July 2011, Conquest announced that its environmental plan for the Mt Carlton project had been accepted by the relevant authorities. Development is still subject to the signing of landholders agreements and the issue of a mining licence. Construction is set to commence in

the December 2011 half, first production of concentrate is expected in mid-2012 and project life should extend for a minimum of 12 years based on current reserves.

In September 2010, Conquest entered into a long-term concentrate offtake contract with Shandong Guoda Gold for the sale of 490,000 wet metric tonnes of gold-silver-copper concentrate from the V2 deposit. Conquest will be paid for a proportion of the gold, silver and copper contained in the V2 concentrate. On 14 July 2011, Conquest announced that it had entered into a concentrate offtake contract with Shandong Humon Smelting Co Limited for the provision of 60,000 dry metric tonnes of silver-copper concentrate from the Area 39 deposit. Conquest will be paid for a proportion of the silver and copper contained in the Area 39 concentrate.

Resources and Reserves

Mt Carlton’s Mineral Resources and Ore Reserves as at 30 June 2011 are summarised below:

Mt Carlton A39 - Mineral Resource and Ore Reserves	Mt Carlton A39 - Mineral Resource and Ore Reserves	Mt Carlton A39 - Mineral Resource and Ore Reserves
	Grade	Contained Metal
Tonnes (Mt)	Silver (g/t) Copper (%)	Silver (Moz) Copper (‘000 t)
Measured 1.9 Indicated 0.44 Inferred 0.3	226 0.18 99 0.06 62 0.03	13.8 3.4 1.4 0.3 0.7 0.1
Total Resources 2.7	185 0.14	15.8 3.8
Proved 0.47 Probable 0.0	553 0.64 352 0.41	8.3 3.0 0.0 0.0
Total Reserves 0.47	552 0.64	8.3 3.0

Source: Conquest

Mt Carlton V2 - Mineral Resource and Ore Reserves	Mt Carlton V2 - Mineral Resource and Ore Reserves	Mt Carlton V2 - Mineral Resource and Ore Reserves
	Grade	Contained Metal
Tonnes (Mt)	Gold (g/t) Silver (g/t) Copper (%)	Gold (Moz) Silver (Moz) Copper (‘000 t)
Measured 12.7 Indicated 10.9 Inferred 1.2	1.78 27 0.30 1.41 20 0.23 0.67 29 0.17	0.72 11.0 37.7 0.49 7.0 24.8 0.03 1.1 1.9
Total Resources 24.7	1.56 24 0.26	1.24 19.1 64.4
Proved 5.1 Probable 4.1	2.90 36 0.40 2.51 23 0.26	0.48 6.0 21.0 0.33 3.0 11.0
Total Reserves 9.3	2.73 30 0.34	0.81 9.0 31.0

Source: Conquest

Expansion and Exploration

In April 2011, the Conquest board approved a $5.5 million exploration budget for the Mt Carlton project and surrounding tenements with the aim of converting resources to reserves at V2 East and identifying additional mineralisation in the vicinity of the known deposits.

7 Profile of the Newcrest Assets

7.1 Mount Rawdon

Overview

The Mount Rawdon project is an open pit gold-silver operation located in south-east Queensland, approximately 80 kilometres south-west of Bundaberg and 300 kilometres northnorth-west of Brisbane. The mine site is serviced from the small township of Mount Perry, approximately 20 kilometres north of the mine. The project is wholly owned by Newcrest and was acquired through its acquisition of LGL in September 2010.

Equigold NL (“Equigold”) acquired the project in August 1998 from a joint venture which included Samson Exploration and Resolute Limited and successfully completed a bankable feasibility study in June 1999. The construction of the treatment plant and related infrastructure was completed in early 2001 at a total cost of US$35.5 million and gold production commenced in February 2001. Following an increase in the reserve base, the pit was extended and the capacity of the treatment plant was increased from 2.5 to 3.4 million tonnes per annum in 2003. LGL acquired the Mount Rawdon project in June 2008 through its acquisition of Equigold. More than one million ounces of gold have been produced at Mount Rawdon since 2001. Current reserves are expected to support annual production of approximately 100,000 ounces of gold over the next eight years.

Geology and Mineralisation

The Mount Rawdon deposit lies at the southern end of the Carboniferous Coastal Block. The gold deposit is a massive, volcaniclastic hosted, low grade deposit, which supports low cost mining and treatment. The local geology is dominated by co-magmatic dacite intrusives and dacite-rich volcaniclastics, which have been intruded by a sequence of acid to basic dykes and plugs. Two major lineaments in the region are the east-north-east trending Swindon Fault zone and the north-north-west trending Perry Fault zone. The surface extent of mineralisation forms a roughly ovoid zone of 200 metres by 300 metres at gold grades greater than 0.7 grams per tonne. Mineralisation occurs as fine pyrite disseminations within a matrix of volcaniclastics and more discrete sulphide veinlets. The gold grades generally increase with pyrite alteration and sulphide veining intensity. The host volcaniclastics strike north-east and have a shallow to moderate dip to the south-west. Drilling results suggest that exploration potential in the area is limited.

Mining and Processing

The ore is mined from a single open pit using conventional mining techniques. The treatment process includes primary and secondary crushing, SAG and ball milling and conventional cyanidation leaching. Mill feed is based on a gold cut-off grade of 0.31 grams per tonne. Lower grade material (>0.2 grams per tonne) is stockpiled. A gravity circuit is included in the design to recover coarse gold. The main carbon in leach circuit recovers gold and silver, which are stripped from the carbon using a Zadra elution circuit. The gold and silver recovery rates have remained fairly stable at approximately 90% and 60% respectively.

The plant has a throughput of approximately 3.6 million tonnes per annum. Power for the operations is supplied from the grid and the water is sourced from either the nearby Perry River weir or the Burnett River.

Following a re-optimisation of the resources, a major cutback to access additional ore commenced in late 2009. The cutback is expected to be completed over three years. Although it will increase cash costs during this period, it will extend the life of the operation.

Reserves and Resources

Mount Rawdon’s Mineral Resources and Ore Reserves as at 30 June 2011 are summarised below:

	Mount Rawdon - Resources and Reserves28	Mount Rawdon - Resources and Reserves28
	Tonnes	Average Grade	Contained Gold
	(Mt)	(g/t)	(million oz)
Resources29
Measured	-	-
Indicated	37	0.87	1.0
Inferred	0.2	0.64	-
Total Resources	37	0.87	1.0
Reserves30
Proved	0.2	1.1	-
Probable	32	0.89	0.9
Total Reserves	32	0.89	0.9

Source: Newcrest

Operating Performance

Mount Rawdon’s operating performance for the five years ended 30 June 2011 is summarised below:

Mount Rawdon Gold Mine – Operating Statistics	Mount Rawdon Gold Mine – Operating Statistics
	Year ended 30 June
	2007 2008 2009 2010 2011
Ore mined (M tonnes) Ore milled (M tonnes) Average head grade (g/t) Gold recovery (%) Gold produced (‘000 ounces) Net cash costs (A$ per ounce)31	3.4 3.4 3.4 3.1 3.4 3.4 3.5 3.4 3.4 3.5 1.14 1.14 1.06 1.01 0.88 88.9 89.5 90.6 91.2 90.7 111.0 115.0 103.3 100.7 89.6 373 375 380 476 693

Source: Newcrest

The production of gold at Mount Rawdon has been fairly consistent over the last few years at slightly above 100,000 ounces per annum. During this period, mined ore has demonstrated positive reconciliations in terms of both tonnes and grade against the reserves. Mount Rawdon’s cash costs of production have historically been low but have increased since 2010 due to the ongoing cut-back development work. Cash costs for the year ending 30 June 2011 were A$693per ounce. Newcrest is projecting gold production of 106,000 ounces at cash costs of A$704 per ounce for the year ending 30 June 2012.

28 Rounding conforming to the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) may cause some computational discrepancies.

29 Mineral resources have been reported above a cut-off grade of 0.38g/t Au. This is the marginal low grade cut-off that covers all operating costs excluding mining fixed costs and is based on a US$900 per ounce gold price and a A$1/US$0.80 exchange rate.

30 Ore reserves have been reported above a cut-off grade of 0.4g/t Au. This is the marginal low grade cut-off that covers all operating costs excluding mining fixed costs and is based on a US$850 per ounce gold price and a A$1/US$0.80 exchange rate. Ore reserves include 153,000 tonnes of stockpile material.

31

Includes by-product credits and royalties.

7.2 Cracow (70%)

Details of the Cracow operation are set out in section 4.2 above.

8 Profile of Evolution

8.1 Overview

The Merger will create a geographically diversified Australian mid-cap gold company with five operations/projects, as illustrated in the map below:

==> picture [396 x 248] intentionally omitted <==

----- Start of picture text -----

Merged Entity – Asset Location
Townsville
Pajingo M t Carlton
Mackay
Gladstone
Cracow
Mt Rawdon
Brisbane
Edna May
Perth
----- End of picture text -----

Source: Conquest, Catalpa and Newcrest

8.2 Market Capitalisation

Evolution will be substantially larger than Conquest and Catalpa on a standalone basis. Based on share prices as at 18 August 2011, the Merged Entity will have a pro forma market capitalisation over $1 billion:

==> picture [400 x 245] intentionally omitted <==

----- Start of picture text -----

Market Capitalisation
(A$m)
$30,000$2,500
$2,000
$1,500
$1,000
$500
$0
0
0
9,9,50
2
1,421
1,358
1,246 1,205 1,180
807
646 646
549 525 486 469 455 451 447
Market Capitalisation (A$m) 293 262 257 253 227 212
137
----- End of picture text -----

Source: Conquest, Catalpa and Newcrest

8.3 Reserves, Resources and Production

Evolution will have a combined resource base of approximately 5.7 million ounces of gold, and reserves of approximately 3 million ounces of gold. In addition, Evolution will have reserves of more than 17 million ounces of silver and 34,000 tonnes of copper. The graph below illustrates gold reserves by asset:

==> picture [391 x 235] intentionally omitted <==

----- Start of picture text -----

Evolution - Reserves by Asset
Mt Rawdon Edna May
30% 30%
Mt Carlton Cracow
7% Pajingo 8%
5%
----- End of picture text -----

Source: Conquest, Catalpa and Newcrest

The pro forma Reserves and Resources for Evolution are set out below:

	Evolution – Reserves & Resources	Evolution – Reserves & Resources
Location	Reserves (Au, ‘000 ounces)	Resources (Au, ‘000 ounces)
Mt Rawdon	920	1,020
Cracow	244	893
Edna May	927	1,763
Pajingo	140	728
Mt Carlton	81232	1,24032
Total	3,043	5,650

Evolution’s four operating gold mines (Edna May, Cracow, Mt Rawdon and Pajingo) already produce close to 300,000 ounces of gold per annum, which would rank Evolution as a top five ASX listed gold producer. The pro forma production of Evolution for the 2012 financial year is expected to be within the range 335,000 to 375,000 ounces.

32 Mt Carlton also has silver and copper reserves and resources.

Forecast gold production for the 2012 financial year by asset is depicted below:

==> picture [391 x 226] intentionally omitted <==

----- Start of picture text -----

Evolution - FY12E Production by Asset
Edna May
Mt Rawdon 25%
30%
Pajingo Cracow
20% 30%
----- End of picture text -----

Source: Conquest, Catalpa and Newcrest Note: the forecasts are as per guidance provided by the respective companies.

8.4 Board and Senior Management

The Board of Evolution is expected to comprise the following:

	Evolution Board
Board Member	Merged Group Board Position	Prior Board Position
Jake Klein	Executive Chairman	Conquest Chairman
Bruce McFadzean	Managing Director and Chief Executive	Catalpa Managing Director
	Officer
Graham Freestone	Director	Catalpa Director
John Rowe	Director	Catalpa Director
James Askew	Director	Conquest Director
Paul Marks	Director	Conquest Director
Peter Smith	Director	Newcrest Executive
Lawrie Conway	Director	Newcrest Executive

Source: Catalpa/Conquest

Following the Merger, Evolution will have its corporate head office in Sydney, with offices in Perth and Townsville.

8.5 Pro forma financials

The pro forma financial position of Evolution following completion of the Entitlement Offer as at 31 December 2010 is set out below:

Evolution– Proforma Financial Position ($’000)	Evolution– Proforma Financial Position ($’000)
	As at 31 December 2010
Debtors and prepayments Inventories Creditors, accruals and provisions	5,5571 29,480 (46,357)
Net working capital	(11,306)
Property, plant and equipment (net) Mine development Exploration and evaluation assets Provisions Assets held for sale Tax assets (net) Other assets (net)	166,312 604,331 73,693 (23,057) 9,768 11,010 3,130
Total funds employed	833,881
Cash and deposits Bank loans, other loans and finance leases Net cash	199,126 (56,111)
	143,015
Net assets	976,896

Source: Explanatory Memorandum and Grant Samuel analysis

Further detailed information can be found at Section 7.9 of the Explanatory Memorandum.

9 Valuation Approach

9.1 Valuation Methodology

Grant Samuel’s valuation of Catalpa, Conquest and the Newcrest Assets has been assessed by aggregating the estimated market values of the relevant gold assets and (for Conquest and Catalpa) adjusting for net cash or net debt and other assets and liabilities. The valuation of the gold assets has been made on the basis of fair market value defined as the maximum price that could be realised in an open market over a reasonable period of time given current market conditions and currently available information, assuming that potential buyers have full information. Other assets have been valued on the basis of the net realisable value of those assets.

There are four primary methodologies commonly used for valuing operating businesses:

capitalisation of earnings or cash flow,
discounting projected cash flows (“DCF”),
industry rules of thumb, and
estimation of the aggregate proceeds from an orderly realisation of assets.

Each of these valuation methodologies has application in different circumstances. The primary criterion for determining which methodology is appropriate is the actual practice adopted by purchasers of the type of business involved.

Grant Samuel’s preferred approach to valuing gold assets is through the application of the gold futures methodology. The gold futures methodology involves the valuation of future gold production by reference to the gold futures market. The present value of future gold production is estimated by discounting at discount rates that reflect the time value of money only (i.e. risk free rates). Similarly, future extraction costs (both capital and operating) are discounted to a present value using discount rates approximating risk free rates. The use of risk free rates is consistent with a view that there is limited systematic riskiness associated with variability in production profiles or extraction costs. Any systematic riskiness associated with the gold price is effectively reflected in the market based gold futures prices used to value future gold production.

Further information on the gold futures methodology is set out in Appendix 1.

While the gold futures methodology is Grant Samuel’s preferred approach to valuing gold projects, many valuations of gold assets use discount rates and gold price assumptions different to those adopted by Grant Samuel. North American analysts sometimes use a zero discount rate when valuing gold assets. Accordingly, for illustrative purposes, Grant Samuel has calculated net present values for the gold assets of Conquest and Catalpa on the basis of constant real gold prices in the range of A$1,425-1,475 per ounce and a real discount rate of 0%.

Many Australian analysts employ conventional DCF analysis in their assessment of gold companies (although gold companies and gold projects are then commonly valued at some multiple of estimated NPV, which in Grant Samuel’s view fundamentally undermines the reliability and utility of the DCF analysis). If discount rates are estimated using the Capital Asset Pricing Model (“CAPM”) on the assumption that costs of capital for gold companies are set in international capital markets, then evidence suggests that betas for gold assets are close to zero. This would imply that discount rates should be around the risk free rate. If discount rates are estimated on the basis that costs of capital are set in (for example) the Australian market place, then much higher beta estimates are supportable.

Accordingly, Grant Samuel has also set out, for illustrative purposes only, the results of DCF analysis using nominal discount rates of 5% and 10%, which reflect rates that could be adopted depending on assumptions as to whether costs of capital for gold assets are set in international or Australian capital markets.

In addition, Grant Samuel has considered the option value inherent in mining operations, having regard to the cost structure, mine life and other characteristics of each of the mining operations of Catalpa, Conquest and the Newcrest Assets.

Grant Samuel developed financial models for the Newcrest Assets and each of the key gold assets of Catalpa and Conquest. The financial models were developed by Grant Samuel on the basis of operating models developed by AMC based on life of mine plans provided by Conquest, Catalpa and Newcrest. AMC reviewed each of the technical assumptions in the operating models, including those regarding reserve estimates, production profiles, operating costs, capital costs and the potential for reserve extensions. Grant Samuel determined the economic and financial assumptions used in the financial models. The models project gold production and costs from 1 July 2011 onwards. The valuations of the gold assets have been prepared as at 30 June 2011. Non trading assets and liabilities at that date have been recorded as adjustments to the valuations of Conquest and Catalpa.

Alternative valuation methodologies have been considered as secondary evidence of value as to the value of Conquest and Catalpa’s gold assets. In particular, the estimates of value have been reviewed in terms of reserve and resource multiples, production multiples and comparable company analysis. These alternative approaches to valuation are useful in determining the reasonableness of estimates of value based on valuation approaches such as the gold futures methodology and traditional DCF analysis, because these estimates are typically sensitive to the assumptions adopted.

Little weight has been placed on an analysis of comparative historical transactions. Implied multiples from historical transactions reflect the market conditions at the time of the transaction, in particular the gold price. As the gold price is very volatile the results of analysing comparable transaction can also vary greatly.

The valuations of the Newcrest Assets and of Catalpa and Conquest represent Grant Samuel’s overall judgements as to value. They do not rely on any one particular scenario or set of economic assumptions. The valuations have been determined having regard to the sensitivity of the financial analysis to a range of technical and economic assumptions. They incorporate Grant Samuel’s judgemental assessment of the impact on value of factors such as development status, resource and reserve upside and optionality to the extent not reflected in the financial analysis. Where appropriate, the valuations take into account direct market based evidence as to the value of broadly comparable projects.

The valuations of the Newcrest Assets and of Catalpa and Conquest represent Grant Samuel’s assessment of full underlying value. They do not represent Grant Samuel’s view of the likely share market value of either of the companies. Shares in listed companies typically trade at a discount to full underlying value.

The valuations are based on a number of important assumptions, including assumptions regarding gold prices, silver prices and exchange rates. The valuations also reflect the technical judgements of AMC regarding the prospects for the Newcrest Assets and each of the operations of Catalpa and Conquest. Gold prices, exchange rates and expectations regarding future operating parameters can change significantly over short periods of time. Such changes can have significant impacts on underlying value. Accordingly, while the values estimated are believed to be appropriate for the purpose of assessing the Proposal, they may not be appropriate for other purposes or in the context of changed economic circumstances or different operational prospects for the gold assets of Conquest and Catalpa.

9.2 Valuation Assumptions

The valuations of the Newcrest Assets and those of Catalpa and Conquest have been determined by reference to the gold futures methodology and other financial analysis. This analysis involves making a number of assumptions regarding gold prices, economic factors and discount rates.

The valuations are sensitive to the assumptions used in the analysis. Relatively small changes in certain variables can cause significant changes in value.

Key assumptions include:

an assumed spot gold price in the range of A$1,425-1,475 per ounce. During June and July 2011, gold traded broadly in the range A$1,400-1,500 per ounce. From early August 2011, as global financial markets experienced extreme volatility on growing concerns about the US budget deficit and the ability of various European nations to service their obligations, the price of gold rose sharply, trading above A$1,750 per ounce. The chart below shows the spot gold price expressed in Australian dollars from 1 June 2011 to 16 August 2011:

==> picture [371 x 500] intentionally omitted <==

----- Start of picture text -----

Spot Gold Price (A$)
(1 Jun 2011 - 16 Aug 2011)
1,800
1,700
1,600
1,500
1,400
1,300
1 Jun 11 16 Jun 11 1 Jul 11 16 Jul 11 31 Jul 11 15 Aug 11
Source: Bloomberg
However, share market values for gold companies generally did not appear to respond to
the dramatic increase in the gold price:
S&P TSX Global Gold Index vs Spot Gold Price
(1 Jun 2011 - 16 Aug 2011)
130
120
110
100
90
80
1 Jun 11 16 Jun 11 1 Jul 11 16 Jul 11 31 Jul 11 15 Aug 11
S&P TSX Global Gold Index (A$) Spot Gold (A$)
Spot Gold Price (A$ / ounce)
Index Base 100 at 1 June 2011
----- End of picture text -----

Source: Bloomberg

However, share market values for gold companies generally did not appear to respond to the dramatic increase in the gold price:

Source: Bloomberg

In Grant Samuel’s view it appears likely that the underlying value of gold companies would, similarly, not have been affected by the increased gold price: real world buyers of gold companies or gold assets would have been unlikely to factor in the higher recent gold price in their assessments of value. On this basis, Grant Samuel has judged it reasonable to assess underlying value on the basis of gold prices in the trading range for June and July 2011 of $1,400-1,500 per ounce. So as to ensure that calculated values fall within a meaningfully narrow range, Grant Samuel has adopted a spot price for the purpose of its valuation in the range $1,425-1,475 per ounce. For the purpose of the gold futures methodology, gold production is valued by reference to gold futures prices, estimated by escalating the assumed spot price at the risk free rate;

silver prices for the 2012, 2013 and 2014 financial years of A$30, A$25 and A$20 per ounce respectively, followed by a long run real price of A$20 per ounce. The price assumptions for 2012-2014 are consistent with brokers’ consensus forecasts;
a risk free rate of 4.5%, based on the 10-year Australian Government Bond yield prevailing around mid-August 2011,
long term Australian inflation rates of 2.5% per annum;
tax depreciation schedules determined on the basis of tax written down values for various asset categories. Accumulated carry forward expenditures that are deductible for tax purposes have been allowed for in the financial models; and
an Australian corporate tax rate of 30%.

9.3 Resources Projects and Optionality

The conventional gold futures methodology implicitly assumes that the rate of output from a mining operation is pre-determined. This methodology ignores the value inherent in management’s ability to vary production and other operating parameters in reaction to changes in commodity prices or other circumstances. Management may change the rate of production of a mine, close or re-open the mine or in certain circumstances even abandon it. Accordingly, a mine may be regarded as an option (or series of options) over the resources it contains.

The value of management flexibility is illustrated by the example of a marginal mine, where the marginal cash production cost is equal to expected revenue. Application of the conventional discounted cash flow methodology would result in the estimate of a zero value for the mine. In reality, however, the mine will have some value, because management is able to reduce or cease production if marginal revenue falls below the marginal cash cost of production and to resume or increase production if commodity prices rise.

Similarly, the designs and long term development alternatives for many mines allow management to change operating plans in the light of future commodity prices and operating costs. Life of mine plans frequently involve mining marginal ore, making additional cut backs or making other operational decisions at some point in the future. However, management is commonly not required to commit to such decisions at the commencement of the mining project. Firm commitments are only required much later in the project, at which time management will be able to make decisions on the basis of the commodity prices and other circumstances then prevailing. The mining operations as they relate to (for example) the mining of marginal ore or a final cut back may be thought of as a series of call options exercisable at the marginal mining costs to be incurred at the time. These options represent additional value not captured by the conventional discounted cash flow or gold futures methodology.

An alternative perspective is that management flexibility results in changes in commodity prices having an asymmetric impact on the value of a mining operation. If commodity prices rise unexpectedly, the mine will earn greater revenue (and may be able to mine additional mineralisation not originally scheduled for production). If commodity prices fall unexpectedly, production will be curtailed or, in the worst case, stopped. The mine will not continue, in the long term, to be operated at a cash operating loss. By contrast, deterministic valuation models

implicitly assume that there is some possibility of the mine operating on a long term basis at a cash operating loss, in the same way that it implicitly assumes that the mine may earn “super profits” as a result of a persistent increase in commodity prices.

Grant Samuel is aware of valuation methodologies which attempt to incorporate the option value associated with management flexibility, using a combination of conventional discounted cash flow analysis and option theory. However, the application of these methodologies is impractical in the context of the complex and unpredictable nature of mining operations. In making judgments on value, Grant Samuel has given general consideration as to the characteristics of the various mining operations and the value of management flexibility or underlying option value implicit in those characteristics. In particular, Grant Samuel has considered the extent to which:

operations are marginal or incorporate significant resources, not currently planned for mining, of marginal economics (i.e. the operations represent or incorporate options “close to the money”); and
length of mine life or other characteristics give management flexibility over the conduct of mining operations.

The valuation of each project includes a subjective assessment of the real option value inherent in the project.

10 Valuation of Catalpa

10.1 Summary

Catalpa has been valued in the range $364-403 million. The valuation represents the estimated full underlying value of Catalpa.

The value for Catalpa is the aggregate of the estimated market value of Catalpa’s operating mines and regional exploration, less the capitalised value of head office costs, net debt and the mark to market value of Catalpa’s gold hedge book. The valuation is summarised below:

Catalpa - Valuation Summary
Report Section Reference	Value Range ($ m)
	Low High
Edna May 10.2 Cracow (30%) 10.3 Head office costs (net of savings) 10.4.1	400 440 57 63 (20) (15)
Enterprise value	437 488
Net debt 10.4.2	(9) (9)
Hedge book (tax effected) 10.4.3	(55) (65)
Value attributable to options 10.4	(9) (11)
Value attributable to shareholders	364 403
Shares on issue (including performance rights) (millions)33	179.2 179.2
Value per share	2.03 2.25

The valuation reflects evidence as to value from the gold futures methodology, discounted cash flow analysis, comparable company analysis and valuation benchmarks commonly used in the gold sector.

The valuation is based on a number of important assumptions, including assumptions regarding gold prices, exchange rates and future operational performance. Gold prices, exchange rates and expectations regarding future operating performance can change significantly over short periods of time. Such changes can have significant impacts on underlying value.

Grant Samuel’s enterprise valuation of Catalpa in the range $437-488 million implies the following valuation parameters:

Catalpa – Implied Valuation Parameters ($/oz)
Multiples of Variable (000s oz)	Implied Multiple
	Low High
Gold resources 2,032 Gold reserves 1,000 Actual gold production – year ending 30 June 2011 96 Forecast gold production - year ending 30 June 2012 12234	215 240 437 488 4,552 5,083 3,582 4,000

The multiples of gold resources, reserves and production implied by the valuation appear reasonable by comparison with the resource and reserve multiples implied by the share prices of

33 The number of Catalpa shares on issue for valuation purposes assumes the conversion of 1.1 million Catalpa performance rights into ordinary shares.

34 Based on AMC’s valuation cases. Catalpa expects production in the year ending 30 June 2012 in the range 115,000-125,000 ounces of gold.

comparable listed gold companies, taking into account that the valuation of Catalpa reflects full underlying value whereas the multiples for the comparable companies are based on share market values. The multiples for the comparable companies are set out in Appendix 2.

10.2 Edna May

Grant Samuel has valued the Edna May mine in the range $400-440 million. The valuation incorporates the value of regional exploration around Edna May.

Detailed financial models were developed to analyse the mining operations, based on two valuation cases incorporating production, capital and operating cost projections developed by AMC using information provided by Catalpa.

Case 1 assumes the mining of Edna May’s current open pit reserves and the development of an underground mining operation to exploit the resources identified by Catalpa. The underground mine is assumed to cost approximately $16 million to develop principally relating to decline refurbishment and underground development, and commences commercial production in the 2013 financial year, lifting annual Edna May production to around 125,000 ounces. In total, the underground mine is assumed to produce 0.4 million tonnes of ore grading 8.5 g/t. In total, 27.5 million tonnes of ore are milled over the life of the project at an average gold grade of 1.17 g/t and average recovery of 91.9% for gold production of 951,000 ounces. Total capital expenditure over the life of the operation is estimated at approximately $69.5 million, including the underground mine development and a $19 million mill expansion. In addition, closure costs of approximately $8 million are incurred in the last three years of the mine life.

Case 2 is an extended version of Case 1, assuming the conversion of resources to reserves to extend the life of mine for a further two years, with an added year of underground mining and additional open pit mining. This results in operations continuing until 2022. A total of 1.30 million ounces of contained gold is mined, including 330 thousand ounces sourced from resources not currently in reserves as well as new exploration. In essence, relative to Case 1, Case 2 assumes that Edna May is more successful in terms of resource to reserve conversions and in terms of new exploration both underground and in the open pit. In total, 33.2 million tonnes of ore are milled over the project life at an average gold grade of 1.21 g/t and average recover of 94.1%, for gold production of 1.220 million ounces of gold. The increase in average gold recovery of 2.2% from Case 1 to Case 2 is a result of the assumed inclusion of a tungsten (WO3) recovery plant, which is expected to cost $10 million to implement, and is forecast to recover just over 3,000 tonnes of WO3 over the life of the mine. Total capital expenditure over the life of the operation is estimated at approximately $100.7 million, including the underground mine development, tungsten recovery plant and a $19 million mill expansion. In addition, closure costs of approximately $8 million are incurred in the last three years of the mine life.

The following table summarises projected production and costs for the two scenarios for Edna May:

Edna May – Model Parameters (100%)	Edna May – Model Parameters (100%)	Edna May – Model Parameters (100%)	Edna May – Model Parameters (100%)	Edna May – Model Parameters (100%)
		Year ended 30		June		Total Life
	2012	2013	2014	2015	2016	of Mine
Case 1
Ore milled (000’s tonnes)	2,743	3,153	3,200	3,200	3,209	27,496
Gold milled grade (g/t)	1.11	1.34	1.56	1.38	1.03	1.17
Gold production (000’s ounces)	90	125	149	131	98	951
Total cash costs ($ / oz au)35	1,034	1,008	965	954	1,198	942
Capital expenditure ($ million)	37.2	16.4	8.9	1.7	3.2	77.7
Case 2
Ore milled (‘000 tonnes)	2,743	3,153	3,200	3,200	3,209	33,219
Gold milled grade (g/t)	1.12	1.34	1.52	1.62	1.36	1.21
Gold production (000’s ounces)	90	128	150	160	135	1,220
Tungsten production (WO3) (tonnes)	-	255	393	393	394	3,009
Total cash costs ($ / oz au)Error! Bookmark
not defined.	1,027	957	922	881	961	902
Capital expenditure ($ million)	38.0	25.4	13.4	9.6	6.4	106.7

The results of the financial analysis are summarised below:

Edna May – Results of Financial Analysis ($ million)	Edna May – Results of Financial Analysis ($ million)	Edna May – Results of Financial Analysis ($ million)	Edna May – Results of Financial Analysis ($ million)
		Spot Gold Price
100%	A$1,425	A$1,450	A$1,475	A$1,700
Case 1
Gold futures methodology	354	370	386	532
DCF - 0% real discount rate	298	314	330	473
DCF – 5% nominal discount rate	267	282	296	427
DCF – 10% nominal discount rate	211	223	235	344
Case 2
Gold futures methodology	479	500	521	710
DCF - 0% real discount rate	389	410	430	614
DCF – 5% nominal discount rate	344	362	380	546
DCF – 10% nominal discount rate	265	279	294	428

Grant Samuel’s valuation of Edna May in the range $400-440 million takes into account the results of the financial analysis set out above and the value of regional exploration at Edna May, which AMC valued in the range $2-4 million.

35 Total cash costs are per ounce of gold produced and after refining charges and royalties and net of tungsten credits.

The valuation range for Edna May of $400-440 million implies the following valuation parameters:

Edna May – Implied Valuation Parameters ($/oz)	Edna May – Implied Valuation Parameters ($/oz)
Variable	Implied Multiple
Multiples of (000’s oz)	Low High
Gold resources 1,763 Gold reserves 927 Gold production 2011 66 Gold production 2012 (projected)36 90	227 250 431 475 6,098 6,708 4,458 4,904

Grant Samuel has compared these valuation parameters with the reserve, resource and production multiples implied by the share market capitalisations of broadly comparable listed companies with operating open pit gold projects:

Comparable Analysis	Comparable Analysis
Enterprise	EV Multiples($/oz)
	Cash Costs Forecast37
Locations Value ($ m)	(US$/oz) Resources Reserves Production
Edna May - Low Australia 400 - High 440 Mines Adamus Ghana, Liberia 304 Aura39 Brazil, Honduras, Mexico 426 Avocet40 Burkina Faso, Guinea, Mali 630 OceanaGold41 NZ, Philippines 554 Regis Resources Australia 1,296	227 431 4,458 1,03038 250 475 4,904 160 315 2,964 575 76 284 2,423 1,018 195 669 3,816 550 59 155 2,111 870 224 525 12,958 62542

Source: Company reports, Company announcements and Grant Samuel analysis

36 Based on AMC’s valuation cases. Catalpa expects production in the year ending 30 June 2012 in the range 85,000-93,000 ounces of gold.

37 Data for Edna May, Adamus and Regis Resources is forecast 2012 data as these companies have 30 June year ends. Data for Aura, Avocet and OceanaGold is forecast 2011 data as these companies have 31 December year ends.

38 Cash costs are in Australian Dollars and correspond to the average between Case 1 and Case 2 for the 2012 financial year.

39 Production forecast for the 2011 financial year has been calculated as the midpoint of the range announced for Aura’s three operational mines, 60-65koz, 42-45koz and 68-72koz. Cash costs have been calculated as the overall cost achieved per ounce if Aura’s three mines were to produce the midpoint of their announced ranges and at the midpoint of their respective announced cost ranges of US$1,000-1,200/oz, US$1,250-1,350/oz and US$700-750/oz.

40 Avocet’s cash costs have been calculated as the midpoint of the announced range of US$525-575/oz.

41 Production forecast for the 2011 financial year has been calculated as the midpoint of the announced range of 255-270koz. Cash costs have been calculated as the midpoint of the announced range of US$850-890/oz.

42 Cash costs are in Australian dollars.

the comparable company analysis is based on share market trading values (i.e. portfolio values), whilst the valuation of Edna May represents Grant Samuel’s estimate of the full underlying value, including a premium for control;
a number of the peers have their operations in countries with higher sovereign risk than Australia
Adamus’ producing open pit gold mine is in Ghana, with exploration activities in Ghana and Liberia;
Avocet’s producing open pit gold mine is in Burkina Faso, with exploration activities in Burkina Faso, Guinea and Mali; and
Aura has three open pit gold mines in South America (one in Honduras and two in Brazil) as well as development projects in Mexico and Brazil, and further exploration activities in Brazil;
Regis Resources is currently mining by way of a single open pit the Moolart Well deposit at its Duketon Gold Project. Production rates are expected to more than double with the development of the Garden Well deposit, for which Regis has recently completed a definitive feasibility study and arranged financing. Regis has a number of prospective development opportunities in the area. Overall, the Duketon Gold Project has significantly more resources and reserves than Edna May and will produce at higher volumes and lower costs;
OceanaGold has experienced a significant increase in cash costs and has downgraded its production expectation for its 2011 financial year. Revised 2011 production guidance was downgraded by 3% to 255-270koz from 260-280koz, and full year cash cost guidance increased more than 30% to US$850-890/oz (from US$645-685/oz). Approximately 40% of OceanGold’s reserve base is in the Didipio mine in the Philippines. The initial capital for the development of Didipio is estimated at around US$170 million;
Catalpa announced that it had achieved its first gold pour at Edna May on 29 April 2010. Both Adamus and Regis Resources only began producing in their 2011 financial years and are still ramping up their gold production; and
an acquirer of Edna May could potentially access significant tax benefits through a step-up of Edna May’s depreciable cost base. The value of these tax benefits is not reflected in Grant Samuel’s financial analysis and is not available to Catalpa on a standalone basis.

10.3 Cracow

Grant Samuel has valued 100% of the Cracow Project in the range $190-210 million (refer Section 12.3). On this basis, Grant Samuel has attributed value in the range $57-63 million to Catalpa’s 30% interest in Cracow.

10.4 Other

10.4.1 Corporate Costs

Catalpa incurs corporate costs that have not been included in the valuations of the gold assets. The costs include expenses associated with maintaining a head office, the executive management team and finance, human resources and administration activities. It is likely that a significant portion of these costs could be eliminated by a corporate acquirer. Costs associated with being a public listed company would also be eliminated by an acquirer of Catalpa. An allowance of $15-20 million has been made in the valuation for the capitalised value of the residual overhead costs.

10.4.2 Net Debt

Catalpa’s net debt at 30 June 2011 was $9 million.

10.4.3 Hedge Book

Catalpa has a gold hedge book of 286,588 million ounces sold forward at A$1,573. At recent gold prices in the range A$1,680-1,720 million, the hedge book has a negative mark to market value of $75-85 million. After taking into account the timing of potential of the tax benefits that would be associated with realisation of the hedge book, Grant Samuel has attributed negative value of $55-65 million to the hedge book.

11 Valuation of Conquest

11.1 Summary

Conquest has been valued in the range $364-412 million. The valuation represents the estimated full underlying value of Conquest.

The value for Conquest is the aggregate of the estimated market value of Conquest’s operating mines and regional exploration plus adjusted net cash, less the capitalised value of head office costs. The valuation is summarised below:

Conquest - Valuation Summary
Report Section Reference	Value Range ($ m)
	Low High
Pajingo 11.2 Mt Carlton 11.3 Regional exploration and Other 11.4.1 Head office costs (net of savings) 11.4.2	100 110 250 280 5 10 (20) (15)
Enterprise value	335 385
Adjusted net cash 11.4.3	33 33
Value attributable to options 11.4.4	(9) (11)
Value attributable to shareholders	359 407

The valuation reflects evidence as to value from the gold futures methodology, discounted cash flow analysis, comparable company analysis and valuation benchmarks commonly used in the gold sector.

Grant Samuel appointed AMC as technical specialist to review the Newcrest Assets and the gold assets of Conquest and Catalpa. AMC’s role included a review of reserves and resources, development plans, production schedules, operating costs, capital costs and exploration potential. AMC prepared valuations of Conquest’s exploration interests. AMC’s report is attached as Appendix 3 to this Report.

Grant Samuel’s financial analysis was based on valuation scenarios prepared in conjunction with AMC, reflecting AMC’s judgements regarding the range of assumptions as to ultimate mining inventory, mine life, production rates, capital costs and operating costs that could reasonably be adopted for valuation purposes. The valuation adopted a gold price assumption of A$1,4251,475 per ounce. Grant Samuel also calculated the present values of the various assets using a gold price of A$1,700 per ounce to show the theoretical impact on values of spot gold prices prevalent as at the date of this report. The financial models for Conquest’s mining operations projected A$ cash flows from 1 July 2011 onwards. Present values were estimated using a range of discount rates.

The valuation is based on a number of important assumptions, including assumptions regarding gold prices, silver prices, exchange rates and future operational performance. Gold prices, silver prices, exchange rates and expectations regarding future operating performance can change significantly over short periods of time. Such changes can have significant impacts on underlying value.

Grant Samuel’s enterprise valuation of Conquest in the range $335-385 million implies the following valuation parameters:

Conquest – Implied Valuation Parameters ($/oz)	Conquest – Implied Valuation Parameters ($/oz)
Multiples of Variable (000s oz)	Implied Multiple
	Low High
Gold resources 2,366 Gold reserves 952 Actual gold production – year ending 30 June 2011 46 Forecast gold production - year ending 30 June 201243 75	142 163 352 404 7,283 8,370 4,507 5,133

The multiples of gold resources and reserves implied by the valuation appear reasonable by comparison with the resource and reserve multiples implied by the share prices of comparable listed gold companies, taking into account that the valuation of Conquest reflects full underlying value whereas the multiples for the comparable companies are based on share market values. The production multiples are high compared to the production multiples for comparable companies, given that the major part of Conquest’s value is contributed by the Mt Carlton project, which is only expected to achieve full scale production in the 2014 financial year. The multiples for the comparable companies are set out in Appendix 2.

11.2 Pajingo

Grant Samuel has valued the Pajingo mine in the range $100-110 million. The valuation incorporates the value of regional exploration around Pajingo and at Twin Hills.

The valuation of Pajingo is an overall judgement on value. The valuation reflects evidence as to value derived from the gold futures methodology, discounted cash flow analysis, comparable company analysis and valuation benchmarks commonly used in the gold sector.

Case 1 assumes the mining of approximately 2.7 million tonnes of ore containing 463,000 ounces of gold, which is considerably more than the gold reserves of 140,000 ounces as at 30 June 2011 but represents less than two thirds of Pajingo’s gold resource ounces. Most of the 323,000 ounces of gold assumed to be mined over and above current gold reserves relates to material contained in resources although a limited amount is assumed to be mined from mineralisation still to be delineated. In total, 2.7 million tonnes of ore are milled over the life of the project at an average gold grade of 5.3 g/t and average recovery of 95% for gold production of 440,000 ounces and some silver. Total capital expenditure over the life of the operation is estimated at approximately $139 million and includes $9 million in closure related expenditure incurred after the completion of mining and processing operations in 2016.

Case 2 is an extended version of Case 1, assuming the delineation of additional mineralisation to support a further year of mining. This results in operations continuing until 2017. In total, 3.3 million tonnes of ore are milled over the life of the project at an average gold grade of 5.2 g/t and average recovery of 95% for gold production of 531,000 ounces and some silver. Total capital expenditure over the life of the operation is estimated at approximately $169 million and includes $9 million in closure related expenditure incurred after the completion of mining and processing operations in 2017.

The cost base used for tax depreciation purposes reflects the consideration paid by Conquest for its acquisition of Pajingo in the December 2010 quarter.

43 Based on AMC’s valuation cases. Conquest expects production in the year ending 30 June 2012 to exceed 70,000 ounces of gold.

The following table summarises projected production and costs for the valuation scenario for Pajingo:

	Pajingo – Model Parameters (100%)	Pajingo – Model Parameters (100%)	Pajingo – Model Parameters (100%)	Pajingo – Model Parameters (100%)
		Year ended 30		June		Total
						Life of
	2012	2013	2014	2015	2016	Mine
Case 1
Ore milled (000’s tonnes)	449	533	592	591	575	2,739
Gold milled grade (g/t)	5.5	5.4	5.1	5.0	5.3	5.3
Gold production (000’s ounces)	75	88	92	91	94	440
Total cash costs ($ / oz Au)44	899	952	971	886	897	922
Capital expenditure ($ million)	30.0	35.0	35.0	20.0	19.4	139.4
Case 2
Ore milled (‘000 tonnes)	449	533	592	591	575	3,324
Gold milled grade (g/t)	5.5	5.4	5.1	5.0	5.3	5.2
Gold production (000’s ounces)	75	88	92	91	94	531
Total cash costs ($ / oz au)44	899	952	971	886	897	922
Capital expenditure ($ million)	30.0	35.0	35.0	30.0	20.0	169.4

The results of the financial analysis are summarised below:

Pajingo –	Results of Financial Analysis ($ million)	Results of Financial Analysis ($ million)	Results of Financial Analysis ($ million)
		Spot Gold Price
100%	A$1,425	A$1,450	A$1,475	A$1,700
Case 1
Gold futures methodology	78	87	96	168
DCF - 0% real discount rate	62	70	79	151
DCF – 5% nominal discount rate	57	65	73	142
DCF – 10% nominal discount rate	48	55	62	123
Case 2
Gold futures methodology	94	104	114	201
DCF - 0% real discount rate	68	78	88	174
DCF – 5% nominal discount rate	62	71	81	161
DCF – 10% nominal discount rate	50	58	66	136

Grant Samuel’s valuation of Pajingo in the range $100-110 million takes into account the results of the financial analysis set out above and the value of regional exploration at Pajingo and Twin Hills. AMC valued the exploration potential at Pajingo and Twin Hills in the range $5-9 million. The value of exploration is not reflected in the financial analysis above.

44 Cash costs are per ounce of gold and are after refining charges and royalties and net of silver revenue.

The valuation range implies the following valuation parameters:

Pajingo – Implied Valuation Parameters ($/oz)	Pajingo – Implied Valuation Parameters ($/oz)
Variable	Implied Multiple
Multiples of (000’s oz)	Low High
Gold resources 728 Gold reserves 140 Gold production 2011 46 Gold production 2012 (projected) 45 75	137 151 714 786 2,174 2,391 1,333 1,467

The gold resources used for the calculation of the implied multiples exclude the Twin Hills resources as AMC has attributed little value to them and Conquest announced in its June 2011 quarterly report that redevelopment of the project had been put on hold.

Grant Samuel has compared these valuation parameters with the reserve, resource and production multiples implied by the share market capitalisations of comparable listed companies with projects in Australia:

	Comparable Analysis	Comparable Analysis
Enterprise	Variable(Gold) (000’s oz)	EV Multiples($/oz)
Value	2012	Cash Costs 2012
($ m)	Resources Reserves Production	($/oz) Resources Reserves Production
	728 140 75 2,250 247 115 883 - 8747 3,108 - 123 2,301 402 4147

Source: Company reports and Grant Samuel analysis

The multiples of reserves and resource implied by the valuation of Pajingo are broadly consistent with the multiples for the comparable companies, given the characteristics of each of the projects considered, in particular with regards to upside resource potential and production and cash costs profile. In particular, the comparable companies all have reserves and/or resources in projects that are yet to be developed. The valuation of Pajingo represents full underlying value, while the multiples for the comparable companies are based on share market trading values.

The valuation of Pajingo in the range $100-110 million is also supported by the price Conquest paid to acquire the mine. In October 2010, Conquest acquired North Queensland Metals through an off market takeover offer. The offer valued North Queensland Metals at approximately $80 million. North Queensland Metals’ major asset was a 60% interest in Pajingo. After adjusting for North Queensland Metals’ net cash and the value of its other assets, the transaction implied a value for the 60% interest in Pajingo of approximately $60 million, or $100 million for 100%. Shortly thereafter, Conquest acquired the remaining 40% interest in the mine through an asset purchase from Heemskirk. The consideration of $37 million implied a value for 100% of Pajingo of $92.5 million. Various value-enhancing measures have been implemented by Conquest since its acquisition of Pajingo. These have already resulted in improvements in the mine’s operational performance and are expected to continue to improve the economics of the

45 Based on AMC’s valuation cases. Conquest expects production in the year ending 30 June 2012 to exceed 70,000 ounces of gold.

46 Based on company 2012 guidance of $800 per ounce excluding royalties, royalty rate of 5% and gold price of $1,450 per ounce as per the model assumptions.

47 Relates to 2011 production.

mine. The benefits of these enhancements are reflected in the valuation scenarios developed by AMC and are accordingly captured in the NPV analysis set out above.

11.3 Mt Carlton

Grant Samuel has valued the Mt Carlton Project in the range $250-280 million. The valuation incorporates the value of regional exploration around Mt Carlton.

The valuation of Mt Carlton is an overall judgement on value. The valuation reflects evidence as to value derived from the gold futures methodology, discounted cash flow analysis, comparable company analysis and valuation benchmarks commonly used in the gold sector.

Detailed financial models were developed to analyse the Mt Carlton operation, based on two valuation cases incorporating production, capital and operating cost projections developed by AMC using information provided by Conquest.

Case 1 assumes that development activities including pre-stripping of the mine will commence in the second half of the 2012 financial year. The total initial capital expenditure is $128 million, to be incurred principally in calendar year 2012, before production commences in early calendar year 2013. Initial mining focuses on the high grade A39 silver deposit, with a total of 2.7 million ounces of silver in concentrate being produced in the second half of the 2013 financial year. Ore from the V2 and A39 deposits is treated alternately on a campaign basis until the A39 deposit is exhausted in 2015. Thereafter all production is sourced from the V2 deposit. Mining is assumed to continue until 2023 with stockpile processing continuing to 2025. Total capital expenditure over the life of the operation (including initial development expenditure) is estimated at approximately $152 million.

A total of 470,000 tonnes of ore at an average silver grade of 553 g/t, representing the A39 reserves as at 30 June 2011, is processed from the A39 deposit, at recovery rates of approximately 90% to recover around 7.3 million ounces of silver in concentrate. Based on the contractual arrangements with Shandong Humon Smelting Co. Ltd (“Humon”), a proportion of the silver in the silver rich concentrate from the A39 ore is payable. In addition, 9.3 million tonnes of ore from the V2 deposit at an average gold grade of 2.7 g/t are mined and treated over the life of the project. This essentially represents the V2 reserves as at 30 June 2011. Based on average gold recovery rates of 86%, V2 ore yields approximately 700,000 ounces of gold, 8.2 million ounces of silver and 30,000 tonnes of copper in concentrate. In terms of the contractual arrangements with Humon, a proportion of the gold, silver and copper in the concentrate is payable.

Case 2 is an extended version of Case 1, and assumes the delineation of additional mineralisation at both the A39 and the V2 deposits, which extends the operations until 2030. A total of 850,000 tonnes of ore at an average silver grade of 486 g/t are processed from the A39 deposit with roughly 55% of the ore processed during the initial three years of the operation and the remaining ore processed in the last two years. In addition, 12.6 million tonnes of ore are sourced from the V2 deposit over the life of the project at an average gold grade of 2.4 g/t and average recovery of 86% for production of 836,000 ounces of gold, 10.6 million ounces of silver and 42,000 tonnes of copper in concentrate. Total capital expenditure over the life of the operation is estimated at approximately $154 million, including $128 million of initial development expenditure.

The following table summarises projected production and costs for the two scenarios:

Mt	Carlton – Model Parameters (100%)	Carlton – Model Parameters (100%)	Carlton – Model Parameters (100%)	Carlton – Model Parameters (100%)
		Year ended 30		June		Total Life
	2012	2013	2014	2015	2016	of Mine
Case 1
Ore milled (000’s tonnes)	-	274	800	800	802	9,739
Gold milled grade (g/t)	-	1.2	3.7	2.7	2.7	2.6
Silver milled grade (g/t)	-	362	217	51	32	45
Gold production (000’s ounces)	-	9	82	59	60	701
Silver production (000’s ounces)	-	2,658	5,045	1,186	754	15,495
Gold sales (000’s ounces)	-	7	67	48	50	580
Silver sales (000’s ounces)	-	2,014	3,745	737	415	10,130
Total cash costs ($ / oz au)48	-	n.m.	(27)	944	506	446
Capital expenditure ($ million)	43.8	84.6	0.6	0.5	0.5	151.8
Case 2
Ore milled (‘000 tonnes)	-	274	800	800	802	13,418
Gold milled grade (g/t)	-	1.2	3.7	2.7	2.7	2.3
Silver milled grade (g/t)	-	362	217	51	32	41
Gold production (000’s ounces)	-	9	82	59	60	840
Silver production (000’s ounces)	-	2,658	5,045	1,186	754	22,360
Gold sales (000’s ounces)	-	7	67	48	50	694
Silver sales (000’s ounces)	-	2,014	3,745	737	415	14,885
Total cash costs ($ / oz au)48	-	n.m.	(27)	944	506	575
Capital expenditure ($ million)	43.8	84.6	0.6	0.5	0.5	154.3

The results of the financial analysis are summarised below:

Mt Carlton – Results of	Mt Carlton – Results of	Financial Analysis ($ million)	Financial Analysis ($ million)
		Spot Gold Price
100%	A$1,425	A$1,450	A$1,475	A$1,700
Case 1
Gold futures methodology	294	304	314	405
DCF - 0% real discount rate	245	254	264	352
DCF – 5% nominal discount rate	198	206	214	289
DCF – 10% nominal discount rate	122	128	134	190
Case 2
Gold futures methodology	324	337	350	460
DCF - 0% real discount rate	232	244	257	361
DCF – 5% nominal discount rate	188	198	209	296
DCF – 10% nominal discount rate	117	124	131	191

Grant Samuel’s valuation of Mt Carlton in the range $250-280 million represents a discount to the values calculated by the gold futures methodology set out above. In particular, the valuation range reflects Mt Carlton’s development status. Based on the current development schedule, the project is approximately 18 months away from the commencement of commercial production. The development timing is dependent on the receipt of a mining licence and the completion of an environmental impact assessment. Delays in receiving the necessary approvals could push back the development of the project. Moreover, the project is subject to construction and

48 Cash costs are per ounce of gold produced and are after refining charges and royalties and net of silver and copper credits.

commissioning risk, and capital and operating costs could vary from those projected, given the inherent uncertainty associated with project development and the potential consequence of cost pressures arising from competition for development resources in Queensland. In this context Grant Samuel believes that it is appropriate to adopt a valuation range representing a significant discount to unrisked NPVs (while acknowledging that the extent of this discount is essentially judgemental).

In addition, the valuation takes into consideration the following factors:

the value of Mt Carlton is sensitive to movements in silver prices. Grant Samuel’s valuation assumes that silver prices average A$30 per ounce in the 2012 financial year, A$25 per ounce in the 2013 financial year and A$20 per ounce in the 2014 financial year. If current prices of around A$38 per ounce were to persist for the life of the mine, the estimated NPV would increase by approximately $110 million. On the other hand, if the silver price was to fall more quickly so that Mt Carlton receives a price of A$20 per ounce from the time of its first silver production in early calendar year 2013, the NPV reduces by approximately $7 million (NPVs of Case 1 estimated using the gold futures methodology and a gold price of A$1,450 per ounce);
AMC’s judgement is that it is likely that Mt Carlton will ultimately produce more gold and silver than is assumed in Case 1;
AMC’s estimated value of regional exploration at Mt Carlton in the range $2-4 million. The exploration value is not included in the financial analysis above; and
tax benefits are potentially available to an acquirer of Mt Carlton through resetting asset values for tax depreciation purposes. The extent of the tax benefit would depend on the value attributed to Mt Carlton. For a valuation of Mt Carlton of $250 million (i.e. the bottom end of Grant Samuel’s valuation range) the potential tax benefit increases calculated NPVs by of the order of around $58 million[49] (not included in the NPV results set out above). While these benefits could be available to a number of hypothetical acquirers of Mt Carlton, they are not available to Conquest on a standalone basis. In Grant Samuel’s view, given the pre-development status of Mt Carlton, a potential acquirer of the project would be unlikely to attribute significant value to these tax benefits.

The valuation range for Mt Carlton of $250-280 million implies the following valuation parameters:

Mt Carlton – Implied Valuation Parameters ($/oz)	Mt Carlton – Implied Valuation Parameters ($/oz)
Variable	Implied Multiple
Multiples of (000’s oz)	Low High
Gold resources 1,240 Gold reserves 812 Gold production 2011 n/a Gold production 2014 (projected) 50 82	202 226 308 345 n/a n/a 3,057 3,424

49 NPVs of Case 1 estimated using the gold futures methodology and a gold price of A$1,450 per ounce

50 FY2014 represents the first full year of gold production at Mt Carlton

		Comparable Analysis	Comparable Analysis	Comparable Analysis
	Enterprise	Initial	Gold	Gold	Gold	Gold	Cash
	Value	Capex	Resources	Reserves	Resources	Reserves	Costs54
	($ m)	($ m)51	(‘000 oz)	(‘000 oz)	($/oz)52	($/oz)53	($/oz)
Mt Carlton - Low	250				305	465	446
- High	280	128	1,240	812	329	502	575
Red 5 Ltd	159	34	1,122	708	173	274	US$364
Kula Gold	177	135	1,840	584	170	535	550
Noble Minerals Resources	265	0	1.980	605	134	437	514
Adamus Resources	304	0	1,901	963	160	316	US$492

Source: Company reports and Grant Samuel analysis

The multiples of reserves and resource implied by the valuation of Mt Carlton are broadly consistent with the multiples for the comparable companies, given that the valuation of Mt Carlton represents a full underlying value, including a premium for control, while the multiples for the comparable companies are based on share market trading values.

The market value of Red 5 Ltd (“Red 5”) in particular provides useful evidence as to the value of Mt Carlton.

Red 5’s key asset is the Siana gold project in Philippines. The Siana gold project has gold reserves of 708,000 ounces at an average grade of 4.3g/tonne and resources of 1,122,000 ounces at an average grade of 5.2g/t. It also has silver reserves of 1.1 million ounces at an average grade of 8.9 g/tonne and resources of 2.1 million ounces at an average grade of 9.7g/tonne. The project is being developed initially as an open pit mine and then transitioning to an underground operation. The operation is forecast to produce 849,000 ounces of gold over a 10 year mine life at average LOM cash costs of US$364 per ounce. Red 5 estimated that $34.4 million remain to be spent from 1 July 2011 to first gold pour expected in late November 2011.

Red 5’s current enterprise value based on share market trading and option values is approximately $159 million (taking into account net cash of $52.5 million). This suggests that on a full underlying value basis (which typically would be at a premium of, say, around 25-40% to share trading values) Red 5 could have an enterprise value of around $212–243 million, the bulk of which would be attributable to the Siana gold project. Notwithstanding differences between the projects (including Siana’s more advanced development status, lower expected initial capital expenditure and operating costs and less favourable Philippines country risk profile), in Grant Samuel’s view the market value of Red 5 provides general support for the valuation of Mt Carlton in the range of $250-280 million.

Valuation analysis based on reserve and resource ounce benchmarks is inevitably imprecise, given that these benchmarks do not take into account differential capital and operating costs, prospectivity, sovereign and development risks and other factors that potentially affect valuation judgements. In the case of Mt Carlton, comparisons based on reserve and resource multiples are made more complex because only around 83% of Mt Carlton recovered gold is payable, given concentrate sales arrangements. Nonetheless, in Grant Samuel’s opinion, the reserve and resource ounce multiples implied by the valuation of Mt Carlton are broadly consistent with the trading multiple evidence set out above, having regard to the size, mine life, operating costs and development status of Mt Carlton.

51 Represents the remaining initial capital expenditure to first gold pour

52 Based on the enterprise values adjusted for the initial capital expenditure still to be incurred.

53 Based on the enterprise values adjusted for the initial capital expenditure still to be incurred.

54 Cash costs for Mt Carlton are the average LOM cash costs after silver credits and as per model assumptions. The cash costs for the comparable projects are the reported average LOM cash costs.

11.4 Other

11.4.1 Regional Exploration and Other

Conquest’s North Queensland regional exploration assets have been valued by AMC in the range $1-2 million. The value of exploration interests near Mt Carlton and Pajingo has been included in the value of those assets. Conquest has a 23% shareholding in Monto Minerals. As of mid-August 2011, this shareholding had a market value of approximately $6-7 million. Grant Samuel has attributed overall value in the range $510 million to Conquest’s regional exploration interests and other assets.

11.4.2 Corporate Costs

Conquest incurs corporate costs that have not been included in the valuations of the gold assets. The costs include expenses associated with maintaining a head office, the executive management team and finance, human resources and administration activities. It is likely that a significant portion of these costs could be eliminated by a corporate acquirer. Costs associated with being a public listed company would also be eliminated by an acquirer of Conquest. An allowance of $15-20 million has been made in the valuation for the capitalised value of the residual overhead costs.

11.4.3 Adjusted Net Cash

Conquest’s net cash at 30 June 2011 for valuation purposes was $33 million, calculated as follows.

Conquest – Adjusted Net Cash
	$ million
Cash and cash equivalents as at 30 June 2011	31.5
Receivable from Monto	1.5
Adjusted Net Cash	33.0

11.4.4 Options

Of the total Conquest options on issue, 32 million (the “Minority Options”) are to be cancelled in exchange for the issue of shares to the option holders. Grant Samuel has valued the remaining options for the purposes of this valuation analysis in the range $9-11 million, based on Conquest share prices around mid-August 2011.

12 Valuation of the Newcrest Assets

12.1 Summary

The Newcrest Assets have been valued in the range $558-622 million. The valuation represents the estimated full underlying value of Mt Rawdon, a 70% interest in Cracow and associated exploration interests.

The valuation is summarised below:

Newcrest Assets - Valuation Summary
Report Section Reference	Value Range ($ m)
	Low High
Mt Rawdon 12.2 Cracow (70%) 12.3	425 475 133 147
Total value of Newcrest Assets	558 622

The valuation reflects evidence as to value from the gold futures methodology, discounted cash flow analysis, comparable company analysis and valuation benchmarks commonly used in the gold sector. The valuation is based on a number of important assumptions, including assumptions regarding gold prices, exchange rates and future operational performance. Gold prices, exchange rates and expectations regarding future operating performance can change significantly over short periods of time. Such changes can have significant impacts on underlying value.

12.2 Mt Rawdon

Grant Samuel has valued the Mt Rawdon mine in the range $425-475 million. The valuation incorporates the value of regional exploration around Mt Rawdon.

The valuation of Mt Rawdon is an overall judgement on value. The valuation reflects evidence as to value derived from the gold futures methodology, discounted cash flow analysis, comparable company analysis and valuation benchmarks commonly used in the gold sector.

Grant Samuel prepared a detailed financial model for the Mt Rawdon operation. The model was based on a single valuation case, which incorporates production, capital and operating cost projections developed by AMC using information provided by Newcrest. The decision to value Mt Rawdon using a single valuation case reflects the established operating history of the Mt Rawdon operation and the limited potential for mine life extension beyond the reported reserves.

The model assumes the mining of approximately 0.9 million ounces of contained gold, which is consistent with reserves of 0.9 million ounces as at June 2011. In total, 32 million tonnes of ore are milled over the life of the project at an average gold grade of 0.89 g/t and average recovery of 89% for gold production of 818,000 ounces. Total capital expenditure over the life of the operation is estimated at approximately $27.7 million, not including $15 million in closure related expenditure incurred after the completion of mining and processing operations in 2020.

The following table summarises projected production and costs for the valuation scenario for Mt Rawdon:

Mt	Rawdon –	Model Parameters	Model Parameters
		Year ended 30		June		Total Life of
100%	2012	2013	2014	2015	2016	Mine
Ore milled (000’s tonnes)	3,641	3,631	3,631	3,631	3,641	32,020
Gold milled grade (g/t)	1.00	0.95	1.00	1.05	1.10	0.89
Gold production (000’s ounces)	104	99	104	110	115	818
Silver production (000’s ounces)	235	175	175	175	176	1,518
Total cash costs ($/oz)55	840	924	628	578	557	676
Capital expenditure ($ million)	8.2	2.9	9.7	1.5	1.8	42.7

The results of the financial analysis are summarised below:

Mt Rawdon – Results of Financial Analysis ($ million)	Mt Rawdon – Results of Financial Analysis ($ million)	Mt Rawdon – Results of Financial Analysis ($ million)	Mt Rawdon – Results of Financial Analysis ($ million)
		Spot Gold Price
100%	A$1,425	A$1,450	A$1,475	A$1,700
Gold futures methodology	483	497	512	640
DCF - 0% real discount rate	437	451	465	588
DCF – 5% nominal discount rate	410	423	436	552
DCF – 10% nominal discount rate	348	359	370	469

Grant Samuel’s valuation of Mt Rawdon in the range $425-475 million takes into account the results of the financial analysis set out above and the value of regional exploration at Mt Rawdon, which AMC valued in the range $1-3 million.

The valuation range for Mt Rawdon of $425-475 million implies the following valuation parameters:

Mt Rawdon – Implied Valuation Parameters ($/oz)	Mt Rawdon – Implied Valuation Parameters ($/oz)
Variable	Implied Multiple
Multiples of (000’s oz)	Low High
Gold resources 1,026 Gold reserves 920 Gold production 2011 90 Gold production 2012 (projected)56 104	409 468 457 522 4,688 5,357 4,027 4,602

55 Total cash costs are per ounce of gold produced and after refining charges and royalties.

56 Based on AMC’s valuation case. Newcrest expects production in the year ending 30 June 2012 in the range 100,000-105,000 ounces of gold.

Comparable Analysis	Comparable Analysis
	EV Multiples ($/oz)
Locations Enterprise	FY12 Cash FY1257
Value ($ m)	Costs US$/oz Resources Reserves Production
Mt Rawdon - Low Australia 420 - High 480 Mines Adamus Ghana, Liberia 304 Aura59 Brazil, Honduras, Mexico 426 Avocet60 Burkina Faso, Guinea, Mali 630 OceanaGold61 NZ, Philippines 554 Regis Resources Australia 1,296	409 457 4,027 85658 468 522 4,602 160 315 2,964 575 76 284 2,423 1,018 195 669 3,816 550 59 155 2,111 870 224 525 12,958 62562

Source: Company reports, Company announcements and Grant Samuel analysis

Commentary on the comparable companies is set out in Section 11.2 of this report. Valuation analysis based on reserve and resource ounce benchmarks is inevitably imprecise, given that these benchmarks do not take into account differential capital and operating costs, prospectivity, sovereign and development risk and other factors that potentially affect valuation judgements. Nonetheless, in Grant Samuel’s opinion, the reserve and resource multiples implied by the valuation of Mt Rawdon are broadly consistent with the trading multiple evidence set out above, having regard to the following:

the comparable company analysis is based on share market trading values (i.e. portfolio values), whilst the valuation of Mt Rawdon represents Grant Samuel’s estimate of the full underlying value, including a premium for control;
Mt Rawdon has a history of reliable production at reasonable cash costs. Cash costs are expected to fall significantly after 2013, following the completion of current cut back activities; and
while Mt Rawdon is significantly lower risk than many of the comparable companies (in terms of both development and sovereign risk), its potential to produce more gold than estimated gold reserves is limited, even at current high gold prices.

12.3 Cracow

Grant Samuel has valued 100% of the Cracow mine in the range $190-210 million. On this basis, Grant Samuel has valued Newcrest’s 70% interest in Cracow in the range $133147 million. The valuation incorporates the value of regional exploration around Cracow.

57 Data for Mt Rawdon, Adamus and Regis Resources is forecast 2012 data as these companies have 30 June year ends. Data for Aura, Avocet and OceanaGold is forecast2011 data as these companies have 31 December year ends.

58 Cash costs are in AUD

59 Production forecast for the 2011 financial year has been calculated as the midpoint of the range announced for Aura’s three operational mines, 60-65koz, 42-45koz and 68-72koz. Cash costs have been calculated as the overall cost achieved per ounce if Aura’s three mines were to produce the midpoint of their announced ranges and at the midpoint of their respective announced cost ranges of US$1,000-1,200/oz, US$1,250-1,350/oz and US$700-750/oz.

60 Avocet’s cash costs have been calculated as the midpoint of the announced range of US$525-575/oz.

61 Production forecast for the 2011 financial year has been calculated as the midpoint of the announced range of 255-270koz. Cash costs have been calculated as the midpoint of the announced range of US$850-890/oz.

62 Cash costs are in Australian dollars.

Case 1 assumes that resource to reserve conversion and the delineation of additional mineralisation allows the mining of a total of 499,700 ounces of contained gold (by comparison with current reserves of around 244,000 ounces). The majority of the additional contained gold (255,700 ounces) is assumed to be sourced from resource to reserve conversions, as well as from low grade stockpiles. The production plan assumes an increase in the plant throughput rate to 600,000 tonnes from 2013. The gold recovery is however expected to decline slightly from around 92% to 90% for the high grade material at the increased throughput rate while gold recovery for the low grade material is assumed to average around 70% over the remaining life of the operation. Operations continue until 2016. In total, 3.0 million tonnes of ore are milled over the project life at an average gold grade of 5.27 g/t, for gold production of approximately 450,500 ounces. Total capital expenditure over the life of the operation is estimated at $94 million which includes $70 million of ongoing underground development. Closure costs of approximately $7.7 million are incurred in the last year of the mine life.

Case 2 is an extended version of Case 1, assuming the delineation of additional mineralisation to support a further two years of mining. This results in operations continuing until 2018. A total of 677,300 contained ounces of gold is mined, including 433,300 ounces sourced from resources not currently in reserves. In essence (relative to Case 1), Case 2 assumes that Cracow is more successful in terms of resource to reserve conversions. In total, 4.2 million tonnes of predominantly high grade ore from underground mineralisation and modest amounts of low grade ore from open pit and dump material is milled over the project life at an average gold grade of 5.1 g/t, for gold production of 607,000 ounces. Total capital expenditure over the life of the operation is estimated at $154 million which includes $125 million of underground development. Closure costs of approximately $7.7 million are incurred in the last year of the mine life.

The following table summarises projected production and costs for the two scenarios:

	Cracow – Model Parameters (100%)	Cracow – Model Parameters (100%)	Cracow – Model Parameters (100%)	Cracow – Model Parameters (100%)
		Year ended 30		June		Total
						Life of
	2012	2013	2014	2015	2016	Mine
Case 1
Ore milled (000’s tonnes)	550	600	600	600	600	2,950
Gold milled grade (g/t)	6.6	5.1	5.0	5.0	4.9	5.3
Gold production (000’s ounces)	107	88	86	86	84	450
Total cash costs ($ / oz au)63	689	844	857	863	835	812
Capital expenditure ($ million)	33.5	22.5	17.5	10.0	5.5	94
Case 2
Ore milled (‘000 tonnes)	550	600	600	600	600	4,150
Gold milled grade (g/t)	6.6	5.1	5.0	5.0	4.9	5.1
Gold production (000’s ounces)	107	88	86	86	84	607
Total cash costs ($ / oz au)¹	689	844	857	863	835	827
Capital expenditure ($ million)	33.5	22.5	17.5	35.0	22.5	154

Note: assumes 100% interest

The results of the financial analysis for the two cases are summarised below:

63 Total cash costs are per ounce of gold produced and after refining charges and royalties and net of silver credits.

Cracow –	Results of Financial Analysis ($ million)	Results of Financial Analysis ($ million)	Results of Financial Analysis ($ million)
		Spot Gold Price
100%	A$1,425	A$1,450	A$1,475	A$1,700
Case 1
Gold futures methodology	174	183	193	268
DCF - 0% real discount rate	162	171	181	256
DCF – 5% nominal discount rate	153	162	171	243
DCF – 10% nominal discount rate	136	144	152	216
Case 2
Gold futures methodology	193	205	217	318
DCF - 0% real discount rate	164	176	187	289
DCF – 5% nominal discount rate	152	163	174	268
DCF – 10% nominal discount rate	129	138	148	228

Note: assumes 100% interest

Grant Samuel’s valuation of Cracow in the range $190-210 million takes into account the results of the financial analysis set out above and the value of regional exploration at Cracow, which AMC valued in the range $2-4 million. The valuation reflects AMC’s judgement that Cracow will ultimately produce substantially more gold than is in the current reserves base.

The valuation range implies the following valuation parameters:

Cracow – Implied Valuation Parameters ($/oz)	Cracow – Implied Valuation Parameters ($/oz)
Vibl	Implied Multiple
arae (000 ozs) Multiples of	Low High
Gold production (FY2012) 107 Gold resources 893 Gold reserves 244	1,773 1,960 213 235 779 861

Grant Samuel has estimated resource and reserve multiples for a number of comparable gold producing companies with key operations in Australia and listed on the ASX:

	Comparable Analysis	Comparable Analysis
Enterrise	Variable(Gold) (000’s oz)	EV Multiples($/oz)
p Value	2012	Cash Costs 2012
($ m)	Resources Reserves Production	($/oz)64 Resources Reserves Production
Cracow - Low 190 - High 210 Comparable Companies Focus Minerals 225 Northern Star 153 Silver Lake 455 Tanami Gold 270 Ramelius 356 Comparable Transactions Acquisition of Dominion by Kingsgate 288	893 244 107 2,250 247 115 883 - 8764 3,108 - 123 2,301 402 4126 2,961 474 120 950 420 9265	213 779 1,773 539 235 861 1,960 100 911 1,960 915 173 - 1,76626 593 147 - 3,717 692 117 670 6,64926 947 120 752 2,969 364 303 686 3,130 69766

Source: Company reports and Grant Samuel analysis

Valuation analysis based on reserve and resource ounce benchmarks is inevitably imprecise, given that these benchmarks do not take into account differential capital and operating costs, prospectivity, sovereign and development risk and other factors that potentially affect valuation judgements. Nonetheless, in Grant Samuel’s opinion, the reserve and resource ounce multiples implied by the valuation of Cracow are broadly consistent with the trading multiple evidence set out above, considering that the comparable company analysis is based on share market trading values (i.e. portfolio values), whilst the valuation of Cracow represents Grant Samuel’s estimate of the full underlying value.

The acquisition of Dominion Mining Ltd (“Dominion”) by Kingsgate Consolidated Limited (“Kingsgate”) also provides useful evidence as to the value of Cracow. In October 2010, Kingsgate and Dominion announced the signing of a merger implementation agreement whereby Dominion shareholders were to receive 0.31 Kingsgate shares for every Dominion share held. Based on Kingsgate’s share price of around $9.50 at the time shareholders voted on the scheme, the transaction valued Dominion (in terms of enterprise value) at around $288 million67.

Dominion’s main asset is the Challenger underground mine in Western Australia. At the time of the transaction, Challenger mine had gold reserves of 420,000 ounces, considerably higher than that at the Cracow mine. The higher value attributed to the Challenger mine implied by the transaction in comparison to Grant Samuel’s assessed valuation range for Cracow mine reflects the larger reserves and resources base at the Challenger mine.

64 Relates to FY2011 production

65 Relates to FY2011 forecast gold production at Challenger mine as disclosed in the scheme booklet relating to Dominion/Kingsgate transaction.

66 Relates to FY2010 historical gold production at Challenger mine.

67 The implied equity value of Dominion was $304 million and the company had cash and short term investments of around $16 million.

13 Evaluation of the Proposal

13.1 Summary

ASIC policy requires that the Proposal be assessed as if it were a takeover by Newcrest of the merged Catalpa/Conquest. Grant Samuel has estimated that the underlying value of Catalpa is in the range $2.03-2.25 per share. In Grant Samuel’s view the trading price of shares in Evolution is unlikely to match the underlying value of shares in Catalpa (assuming market conditions consistent with those at the time of the valuation). Accordingly, the Proposal is not “fair”. However, Grant Samuel believes that Catalpa shareholders will be better off if the Proposal is implemented than if it is not. On this basis, while not fair, the Proposal is reasonable. In Grant Samuel’s view the Proposal is in shareholders’ best interests, in the absence of a superior proposal.

As a result of the Share Issue, Newcrest will hold a 38% economic interest in Evolution (to be diluted down to approximately 33% following the Entitlement Offer). Newcrest will not have board control Evolution: it will appoint only two out of a total of eight directors on the board of Evolution. While Newcrest’s shareholding will mean that it will have the ability to influence the outcome of any change of control proposal for Evolution, the Proposal will not close off the opportunity for Catalpa shareholders to realise full underlying value for their interests at some time in the future. From Newcrest’s perspective the Proposal represents an opportunity to liberate value for gold assets that do not fit within its portfolio of world class gold projects. Newcrest’s shareholding in Evolution will be a non-core investment for Newcrest and there is no reason to believe that Newcrest would not consider any fully priced change of control proposal in relation to Evolution.

Grant Samuel has estimated that Catalpa’s underlying value is in the range $2.03-2.25 per share. At the time of the valuation, Catalpa’s shares were trading around $1.46 per share. Accordingly,

for the Proposal to be fair it would need to result in an effective re-rating of at least $0.57 per Evolution share, or 39%.

13.2 Approach

Following implementation of the Proposal, Newcrest will hold a 38% equity interest in Evolution, to be diluted to around 33% following the Entitlement Offer. Under the regulatory framework dealing with the preparation of independent expert’s reports[68] , because Newcrest will hold more than 20% of Evolution, the Proposal or elements of the Proposal are deemed to constitute a change of control transaction. One interpretation of the regulatory framework is that the Proposal overall must be evaluated on the basis of takeover analysis, as if it were a takeover of the merged Catalpa/Conquest by Newcrest. ASIC has advised Grant Samuel that this is ASIC’s preferred approach. Takeover analysis involves a comparison of the value of the consideration to be received by Catalpa shareholders with the estimated underlying value of Catalpa shares before the Proposal. If the value of the consideration is equal to or greater than the estimated underlying value of Catalpa shares, then the Proposal is “fair”.

68 Principally set out in Regulatory Guide 111 (Content of Expert Reports), issued by ASIC.

Given that Newcrest will not provide any consideration directly to Catalpa shareholders, application of takeover analysis to the Proposal requires that the “consideration” be taken to be the shares in Evolution following implementation of the Proposal. On this basis the Proposal would be fair if the expected trading price of shares in Evolution was equal to or greater than the estimated underlying value of Catalpa before the Proposal.

In its assessment as to whether the Proposal is fair and reasonable, Grant Samuel has had regard to the following:

the estimated underlying value of Catalpa on a standalone basis;
the terms of the Merger and their potential impact on the underlying value and trading price of shares in the merged Catalpa/Conquest;
the terms of the Asset Acquisition and Share Issue and their potential impact on the underlying value and trading price of shares in Evolution;
the investment characteristics of Evolution by comparison with the investment characteristics of Catalpa on a standalone basis;
the effect of the Proposal on control of Evolution; and
other advantages and disadvantages of the Proposal.

13.3 Merger Analysis

The following table summarises the relative value contributed by Catalpa and Conquest, based on the estimated full underlying value of each company:

Relative Value Contributions – Underlying Value	Relative Value Contributions – Underlying Value
	Conquest	Catalpa
Value Contribution – High (A$ million)	407	403
Value Contribution – Low (A$ million)	359	364
Relative Value Contributions – Conquest High/ Catalpa High	50.2%	49.8%
Relative Value Contributions – Conquest Low/Catalpa Low	49.7%	50.3%
Relative Value Contributions – Conquest Low/Catalpa High	47.1%	52.9%
Relative Value Contributions – Conquest High/Catalpa Low	52.8%	47.2%

The analysis above suggests a narrow range of relative value contributions, with Catalpa contributing approximately 50% of the value of the merged company (before the Asset Acquisition).

Catalpa shareholders will have a shareholding of approximately 49.8% in Evolution (before the Asset Acquisition). This shareholding percentage falls within the proportionate contribution of value to be made by Catalpa shareholders to Evolution (ie in the range 47-53%). On this basis the terms of the Merger are fair to Catalpa shareholders.

Relative Contributions	Relative Contributions
			Catalpa
	Conquest	Catalpa	Contribution
Gold reserves (koz)	952	1,000	51.2%
Gold resources (koz)	2,366	2,032	46.2%
Gold production
- 12 months ending 30 June 2011 (000’s oz)	45.9	96.1	67.6%
- forecast 12 months ending 30 June 2012 (000’s oz)69	75.0	122.0	62.9%
Share market values pre announcement (A$ million)	263	304	53.6%
Share of Evolution (merger terms)			49.8%70

In Grant Samuel’s view the relative contribution analysis provides general support for the conclusion that the terms of the Merger are equitable: Catalpa shareholders’ collective interest in Evolution will be broadly consistent with Catalpa’s contribution to the merged company. In this regard, while Catalpa shareholders will hold around 49.8% of the shares in Evolution (prior to the Share Issue to Newcrest):

Catalpa is contributing approximately 51% of reserves and approximately 46% of resources;
Catalpa is contributing approximately 63% of forecast production for the 2012 financial year; and
based on share market values immediately before the announcement of the Merger, Catalpa shareholders were contributing slightly less than 54% of the value of the merged Evolution.

However, it must be recognised that the parameters set out above are relatively crude measures of the relative contributions of value to Evolution. In particular:

while Conquest is contributing marginally less than 50% of the gold reserves of Evolution (prior to the Asset Acquisition), the bulk of the reserves contributed relate to the Mt Carlton project. Development of the project, which has not yet commenced, will have an initial cost of around $120 million. By contrast, all of Catalpa’s reserves relate to mining operations currently in production. To the extent that Conquest’s Mt Carlton reserves are subject to development risk and require major capital expenditure to bring into production, they are less valuable than Catalpa’s reserves. On the other hand, the expected costs of production for Mt Carlton are significantly lower than for Edna May, largely because of the substantial silver credits that Mt Carlton will enjoy in the early years of its production;
the gold reserve analysis does not take into account the significant silver reserves at Mt Carlton (of the order of 8 million ounces.) At current gold and silver prices these silver reserves have approximately the same value as 200,000 ounces of gold. Mt Carlton is expected to mine and sell a substantial proportion of its silver reserves in the early years of its operations, delivering low operating costs (on a per ounce of gold basis);

69 Based on the AMC valuation cases.

70 Based on the number of Evolution shares on issue immediately after the Merger and before the Share Issue and Asset Acquisition.

Catalpa appears to be contributing disproportionately to Evolution’s gold production. However, Conquest’s gold production is expected to increase in the 2012 financial year as Pajingo production is ramped up and to increase materially from 2014 as Mt Carlton commences operation;
the analysis does not take into account debt and the mark to market value of hedge positions. At 30 June 2011 Conquest’s adjusted net cash was approximately $33 million, while Catalpa had net debt of $9 million and, based on a gold price of A$1,700 per ounce, a hedge book with a negative mark to market value of approximately $80 million (before any tax effect); and
based on share market values at the time the Merger was announced, Conquest shareholders are contributing less than 50% of the market value of Evolution and on that basis the terms of the Merger appear favourable to Conquest shareholders. However, it is likely that the Catalpa share price was affected by market speculation based on the conditional acquisition proposal for Catalpa made on 13 May 2011 by St Barbara. The Catalpa share price fell by approximately 10% following the announcement of the Proposal and Catalpa’s confirmation that it had discontinued discussions with St Barbara. Analysis based on Catalpa and Conquest share prices for the period prior to the announcement of the St Barbara proposal suggests that the terms of the Merger deliver a premium and are favourable to Catalpa shareholders. However, this conclusion is equally problematic. Since 13 May 2011 Catalpa has announced substantial improvements in the operating performance of Edna May (fourth quarter production was up 42% relative to the prior quarter, with cash costs reduced by 7.8%), an expectation of further production growth and significant expected cost reductions for Edna May for the 2012 financial year, and exploration success pointing towards an increased prospect of an underground development at Edna May. Accordingly, Catalpa share prices prior to 13 May 2011 are not particularly relevant to an assessment of the relative values of Catalpa and Conquest. The reality is that there is no recent “undisturbed” Catalpa share price that can be referenced as a market estimate of the value of Catalpa on a standalone basis. Accordingly, analysis of contributions of share market value needs to be treated with caution.

13.4 Impact on Underlying Value

Based on Grant Samuel’s valuation analysis, the underlying value of Evolution (immediately before the Share Issue and Asset Acquisition) is as follows:

Evolution – Valuation Summary (pre-Asset Acquisition) (A$ million)	Evolution – Valuation Summary (pre-Asset Acquisition) (A$ million)
	Valuation(A$ million)
	Low High
Edna May Mt Carlton Cracow (30%) Pajingo Exploration interests and other	400 440 250 280 57 63 100 110 5 10
Corporate costs	(40) (30)
Enterprise value	772 873
Adjusted net cash Value of hedge book (tax effected) Equity value attributable to options	24 24 (55) (65) (18) (22)
Equity value attributable to shareholders	723 810
Shares on issue (including performance rights) (millions)	359.6 359.6
Underlying value per share	2.01 2.25

Grant Samuel has valued the assets to be acquired from Newcrest (Mt Rawdon and a 70% interest in Cracow) in the range $558-622 million (although, because they are non-core and not significant in the context of Newcrest’s $30 billion market capitalisation, it is likely that the value for these assets reflected in Newcrest’s share price is substantially less). The valuation is summarised below:

Valuation of Newcrest Assets and Estimate of Share Issue Price (A$ million)	Valuation of Newcrest Assets and Estimate of Share Issue Price (A$ million)
	Valuation(A$ million)
	Low High
Mt Rawdon Cracow (70%)	425 475 133 147
Total value of Newcrest Assets	558 622
Shares to be issued to Newcrest (millions)	228.7 228.7
Implied issue price per share	2.44 2.72

The terms of the Asset Acquisition are attractive to Evolution. The price at which shares will be issued to Newcrest under the Share Issue is greater than the estimated underlying value of Evolution on a per share basis. On the basis of estimated underlying values, Evolution is issuing shares with a theoretical value of $460-515 million in exchange for assets with an estimated value of $558-622 million. Shares in Evolution would be expected to trade at prices well below estimated underlying value. Newcrest is effectively paying a substantial premium to market value for the 38% shareholding that it will receive. On one view, Newcrest is paying a full premium for control for its shareholding (although the concept of a premium for control in this context is not particularly meaningful, given that any premium is not directly accessible by Evolution shareholders and Newcrest will in any event not be achieving control of Evolution.)

The following table sets out the estimated underlying value of Evolution immediately following the Share Issue and Asset Acquisition (but before the Entitlement Issue):

Evolution – Valuation Summary (after Asset Acquisition) (A$ million)	Evolution – Valuation Summary (after Asset Acquisition) (A$ million)
	Valuation(A$ million)
	Low High
Mt Rawdon Edna May Mt Carlton Cracow (100%) Pajingo Exploration interests and other	425 475 400 440 250 280 190 210 100 110 5 10
Corporate costs	(40) (30)
Enterprise value	1,330 1,495
Adjusted net cash71 Value of hedge book (tax effected) Equity value attributable to options	(11) (6) (55) (65) (18) (22)
Equity value attributable to shareholders	1,246 1,402
Shares on issue	588.4 588.4
Underlying value per share	2.12 2.38

The estimated underlying value per Evolution share will increase from $2.01-2.25 to $2.12-2.38 as a result of the Asset Acquisition and Share Issue.

The estimated underlying value attributable to a Catalpa share will increase from $2.03-2.25 to $2.12-2.38 following the Merger, the Asset Acquisition and the Share Issue.

13.5 Evolution Investment Characteristics

Evolution will have investment characteristics considerably more attractive than those of Conquest on a standalone basis. In particular:

Evolution’s market capitalisation, free float and resultant liquidity should attract institutional investor support;
Evolution will be a significant gold producer (projected pro-forma 2012 financial year gold production of 335,000-375,000 ounces), with production diversified across four operating mines;

71 Adjusted for estimated transaction costs of $30-35 million

the development of Mt Carlton and underground development at Edna May will provide potential to grow production to more than 450,000 ounces by the 2014 financial year;
Evolution will enjoy considerable financing flexibility. Following the Entitlement Issue, it will have net cash of approximately $145 million. It should have superior access to both equity and debt capital than would Conquest on a standalone basis. The financing for the development of Mt Carlton should be achievable on terms more attractive than those available to Conquest; and
the relationship with Newcrest has the potential to deliver growth opportunities over time. Growth prospects that Newcrest chooses not to pursue (because they do not meet Newcrest’s criteria in terms of scale) could instead become available to Evolution.

13.6 Impact on Share Market Values

13.7 Takeover Analysis

ASIC policy requires that Grant Samuel evaluate the Proposal as if it was a takeover by Newcrest of the merged Catalpa/Conquest. Application of such analysis to the Proposal raises a number of issues. While Newcrest will hold over 20% of Evolution, it will not have board control of Evolution, with only two board representatives on a board of eight.

The impact of Newcrest’s shareholding on shareholders’ prospects of realising full underlying value through a change of control transaction for Evolution is unclear. As a practical matter, Newcrest’s 33% fully diluted shareholding probably means that any change of control transaction could only proceed on an agreed basis (although in recent times all significant change of control transactions in the Australian gold sector have been on an agreed basis). There is no obstacle to Newcrest’s acceptance of a fully priced offer and in some circumstances Newcrest’s 33% fully diluted shareholding could facilitate a change of control transaction. From Newcrest’s perspective the Proposal represents an opportunity to liberate value for gold assets that do not fit within its portfolio of world class gold projects. Newcrest’s interest in Evolution will be a non-core asset, and there is no reason to believe that Newcrest would not consider any fully priced offer for Evolution. In the Scheme Booklet, Newcrest articulates its intentions in relation to its shareholding in Evolution in the following terms: “ As with all investments, Newcrest will continue to review its investment in Evolution Mining so as to maximise value to Newcrest’s shareholders.” Grant Samuel notes that Black Rock and Baker Steel, two sophisticated institutional investors, have agreed to subscribe for $50 million of Evolution shares under the Entitlement Offer. It is unlikely that such institutional investors would invest if they thought that there was no prospect of realising full underlying value for their shares in Evolution.

Catalpa shareholders. Following the Proposal Catalpa shareholders will continue to hold shares in the merged Catalpa/Conquest, although the value and likely trading price of those shares will be affected by the Asset Acquisition and Share Issue to Newcrest.

Given that Newcrest will not provide any consideration directly to Catalpa shareholders, application of takeover analysis to the Proposal requires that the “consideration” be taken to be the shares in Evolution following implementation of the Proposal. On this basis the Proposal would be fair if the expected trading price of shares in Evolution was equal to or greater than the estimated underlying value of Catalpa.

Share market and gold price volatility are such that there can be no reasonable basis for predicting the price at which shares in Evolution are likely to trade. However, share prices and underlying value should move more or less in tandem. An assessment as to whether the Proposal is likely to be fair can be made by considering the relativities between Grant Samuel’s estimate of underlying value and Catalpa’s share price at the time.

On the basis that the “consideration” to be received by Catalpa shareholders (that is, shares in Evolution valued at their likely trading price) is unlikely to equate to the full underlying value of Catalpa, the Proposal is not fair.

Shareholders should understand that a conclusion that a transaction is “not fair” is more meaningful in the context of a genuine takeover where shareholders surrender control and any future opportunity to realise full underlying value. Newcrest will not have board control of Evolution and shareholders will retain an opportunity to realise full underlying value through some future change of control proposal for Evolution.

13.8 Disadvantages and Risks

The Proposal has a number of disadvantages:

Newcrest will have a 33% shareholding following implementation of the Proposal and the Entitlement Offer. This shareholding will mean that Newcrest will be able to influence the outcome of any change of control proposal for Evolution. It is likely that any change of control proposal could only proceed on an agreed basis (although all recent significant transactions in the Australian gold sector have been on an agreed basis). While there is no reason to believe that Newcrest would ever view its investment in Evolution as other than non-core, there can be no absolute certainty as to Newcrest’s future position and so no guarantee that Evolution shareholders would be able to realise full underlying value through a takeover of Evolution;
Newcrest’s shareholding will reduce Evolution’s free float and will presumably therefore have an adverse effect on trading liquidity (although it should still be substantially greater than for Catalpa on a standalone basis). While there is no indication that Newcrest would attempt to sell its shareholding on market, any future perception that Newcrest might seek to sell on market could have an adverse effect on the Evolution share price;

while Catalpa shareholders will be gaining exposure to the upside in Conquest’s asset base (particularly the value uplift that would be expected with the successful development of the Mt Carlton project), they will also be exposed to the development risk associated with Mt Carlton. These risks should already be reflected in share market values for Catalpa and in Grant Samuel’s valuation assessments. Catalpa shareholders are effectively swapping exposure to current production for increased growth potential;
the Merger is not expected to offer any material cost synergies;
while the Proposal will provide Catalpa shareholders with increased geographic and project diversification, it should be recognised that shareholders can diversify directly (through their investment decisions). Some shareholders may prefer to make their own diversification decisions rather than having the diversification choices inherent in the Proposal imposed on them;
Evolution will be a substantially larger entity than Catalpa on a standalone basis. However, the reality is that in terms of asset quality it will remain a collection of “second tier” assets, without the long lives or low production costs characteristic of premium gold assets; and
the Proposal will involve a variety of transaction costs, including stamp duty, advisor costs and other professional fees. The aggregate transaction costs (for both Conquest and Catalpa) are estimated to total approximately $35 million. Approximately $3 million will be incurred by Catalpa regardless of whether the Proposal proceeds. The transaction costs, while significant, are not material in the context of a business with an estimated market value in excess of $1 billion. Moreover, the Merger and the Asset Acquisition have the potential to provide significant tax benefits (through a step-up in tax carrying values). While these benefits have not been fully quantified, they will potentially fully offset (over time) the value leakage of the stamp duty payable.

13.9 Alternatives

In any event, the Catalpa board terminated discussions with St Barbara when it entered into the agreements required to give effect to the Proposal and there is no alternative St Barbara proposal

available to Catalpa shareholders. St Barbara has had an opportunity to put a proposal directly to Catalpa shareholders (by way of a takeover offer) since the Proposal was announced on 15 June 2011 and will be able to do so at any time up to the shareholder meetings at which the Proposal will be considered, potentially with reference to the information disclosed in the transaction documentation of Catalpa and Conquest.

13.10 Overall Impact of the Proposal

In Grant Samuel’s view Catalpa shareholders are likely to be better off if the Proposal is implemented than if it is not. The terms of the Merger with Conquest are equitable and the acquisition of the Newcrest Assets is value accretive for the merged Catalpa /Conquest. Catalpa shareholders will participate in a substantially larger, more diversified and less risky gold company, with more attractive investment characteristics than Catalpa in its current form. While, in Grant Samuel’s view, shares in Evolution are unlikely in the short term to trade at prices equating to the underlying value of Catalpa (and in this sense the Proposal is not “fair”), shares in Evolution can be expected to trade at prices higher than shares in a standalone Catalpa (after adjusting for the terms of the Entitlement Offer). The underlying value attributable to Catalpa shareholders will increase and Catalpa shareholders will retain the prospect of realising this increased underlying value, through a subsequent change of control transaction for Evolution. Because Catalpa shareholders are likely to be better off if the Proposal is implemented that if it is not, the Proposal, while not fair, is reasonable. In Grant Samuel’s view the Proposal is in Catalpa shareholders’ best interests, in the absence of a superior proposal.

13.11 Shareholder Decision

The decision whether to vote for or against the Share Issue is a matter for individual shareholders based on each shareholder’s views as to value, their expectations about future market conditions and their particular circumstances including risk profile, liquidity preference, investment strategy, portfolio structure and tax position. In particular, taxation consequences may vary from shareholder to shareholder. If in any doubt as to the action they should take in relation to the Share Issue, shareholders should consult their own professional adviser.

Similarly, it is a matter for individual shareholders as to whether to buy, hold or sell securities in Evolution. This is an investment decision upon which Grant Samuel does not offer an opinion. It is independent of a decision on whether to vote for or against the Share Issue. Shareholders should consult their own professional adviser in this regard.

14 Qualifications, Declarations and Consents

14.1 Qualifications

The Grant Samuel group of companies provide corporate advisory services (in relation to mergers and acquisitions, capital raisings, debt raisings, corporate restructurings and financial matters generally), property advisory services, manages specialist funds and provides marketing and distribution services to fund managers. The primary activity of Grant Samuel & Associates Pty Limited is the preparation of corporate and business valuations and the provision of independent advice and expert’s reports in connection with mergers and acquisitions, takeovers and capital reconstructions. Since inception in 1988, Grant Samuel and its related companies have prepared more than 455 public independent expert and appraisal reports.

The persons responsible for preparing this report on behalf of Grant Samuel are Stephen Cooper BCom (Hons) ACA CA(SA) ACMA and Cameron Stewart LLB BCom. Each has a significant number of years of experience in relevant corporate advisory matters. Matt Leroux M.Aero.E MBA, Shakeel Mohammed MS MBA, Sophie Whitlam BCom BSc and Bo Briedis BCom CA assisted in the preparation of the report. Each of the above persons is a representative of Grant Samuel pursuant to its Australian Financial Services Licence under Part 7.6 of the Corporations Act.

14.2 Disclaimers

It is not intended that this report should be used or relied upon for any purpose other than as an expression of Grant Samuel’s opinion as to whether the Share Issue is fair and reasonable and the Proposal is in the best interests of shareholders. Grant Samuel expressly disclaims any liability to any Catalpa shareholder who relies or purports to rely on the report for any other purpose and to any other party who relies or purports to rely on the report for any purpose whatsoever.

This report has been prepared by Grant Samuel with care and diligence and the statements and opinions given by Grant Samuel in this report are given in good faith and in the belief on reasonable grounds that such statements and opinions are correct and not misleading. However, no responsibility is accepted by Grant Samuel or any of its officers or employees for errors or omissions however arising in the preparation of this report, provided that this shall not absolve Grant Samuel from liability arising from an opinion expressed recklessly or in bad faith.

Grant Samuel has had no involvement in the preparation of the Explanatory Memorandum issued by Catalpa and has not verified or approved any of the contents of the Explanatory Memorandum. Grant Samuel does not accept any responsibility for the contents of the Explanatory memorandum (except for this report).

14.3 Independence

Grant Samuel and its related entities do not have at the date of this report, and have not had within the previous two years, any business or professional relationship with Catalpa or Conquest or any financial or other interest that could reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Proposal.

Concurrent with its engagement by Catalpa to prepare this report, Grant Samuel was engaged by Conquest to prepare an independent expert’s report setting out Grant Samuel’s opinion as to whether:

the Merger is in the best interests of Conquest shareholders; and
the Proposal is in the best interests of Conquest shareholders.

expert’s report and Grant Samuel did not provide Newcrest with views on valuation. The engagement did not affect Grant Samuel’s independence or its ability to prepare an independent expert’s report in relation to the Proposal.

Grant Samuel had no part in the formulation of the Proposal. Its only role has been the preparation of this report.

Grant Samuel considers itself to be independent in terms of Regulatory Guide 112 issued by the ASIC on 30 March 2011.

14.4 Declarations

Catalpa has agreed that it will indemnify Grant Samuel and its employees and officers in respect of any liability suffered or incurred as a result of or in connection with the preparation of the report. This indemnity will not apply in respect of the proportion of any liability found by a court to be primarily caused by any conduct involving gross negligence or wilful misconduct by Grant Samuel. Catalpa has also agreed to indemnify Grant Samuel and its employees and officers for time spent and reasonable legal costs and expenses incurred in relation to any inquiry or proceeding initiated by any person. Any claims by Catalpa are limited to an amount equal to the fees paid to Grant Samuel. Where Grant Samuel or its employees and officers are found to have been grossly negligent or engaged in wilful misconduct Grant Samuel shall bear the proportion of such costs caused by its action.

Advance drafts of this report were provided to Catalpa and its advisers. Advance drafts of Sections 5, 6 and 7 of this report were also provided to Conquest and section 7 to Newcrest. Certain changes were made to the drafting of the report as a result of the circulation of the drafts.

Advance drafts of this report were provided to ASIC. Pursuant to the terms of Grant Samuel’s engagement by Catalpa, the advance drafts set out Grant Samuel’s opinion as to whether the Share Issue was fair and reasonable having regard to the interests of Catalpa shareholders and whether the Proposal overall was in shareholders’ best interests.

Following a review of the drafts, ASIC advised Grant Samuel and Catalpa that in its view the opinion that Catalpa should seek in relation to the Proposal should be whether the Proposal overall (including the Merger, the Asset Acquisition and the Share Issue) is fair and reasonable having regard to the interests of Catalpa shareholders, rather than whether the Share Issue is fair and reasonable having regard to the interests of Catalpa shareholders. Furthermore, ASIC advised that in its opinion the appropriate basis for this opinion is to analyse the Proposal as a single transaction that has the effect of a takeover of the merged Catalpa/Conquest by Newcrest, such that an assessment of “fairness” should involve a comparison of the likely trading price of shares in Evolution with the underlying value of Catalpa before the Proposal.

Following discussions with and the receipt of revised instructions from Catalpa, Grant Samuel prepared a revised draft of its report. The revised draft incorporated substantial changes to the overall analytical framework adopted to assess the Proposal. There was no alteration to the valuation methodology used, the conclusions as to value, or to Grant Samuel’s overall conclusion that Catalpa shareholders will be better off if the Proposal is implemented than if it is not.

14.5 Consents

Grant Samuel consents to the issuing of this report in the form and context in which it is to be included in the Explanatory Memorandum to be sent to shareholders of Catalpa. Neither the

whole nor any part of this report nor any reference thereto may be included in any other document without the prior written consent of Grant Samuel as to the form and context in which it appears.

14.6 Other

The accompanying letter dated 12 September 2011 and the Appendices form part of this report.

Grant Samuel has prepared a Financial Services Guide as required by the Corporations Act. The Financial Services Guide is set out at the beginning of this report.

GRANT SAMUEL & ASSOCIATES PTY LIMITED

12 September 2011

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Appendix 1 Valuation Concepts for Gold Projects

1 Overview

Despite the extensive analysis of gold companies and gold projects by analysts, valuers and other market commentators, there is little consensus on an appropriate basis for the valuation of gold assets. While the discounted cash flow (“DCF”) methodology is frequently applied to valuing gold companies and gold projects, there is considerable uncertainty about the extent to which the results properly explain observed market values. This uncertainty is reflected in the reliance on rules of thumb based on quantities of gold reserves and resources and the frequent use of DCF valuations as an indicator of relative rather than absolute value. This Appendix examines some difficulties inherent in using the DCF methodology to value gold companies and gold projects and examines modifications to the DCF approach to obtain more meaningful results. In particular, it sets out the theoretical background to Grant Samuel’s adoption of the gold futures methodology as its preferred approach to the valuation of gold assets.

2 Limitations of the Discounted Cash Flow Methodology

Although the DCF methodology is widely used for valuing gold projects, it has a number of shortcomings. Most importantly, the ability of DCF valuations to explain the value of gold assets is at best limited. The value of gold assets estimated by DCF valuations is frequently substantially less than the value of the assets observable by reference to equity market values or the price at which the assets are purchased and sold. This is particularly the case with long life gold assets. DCF analysis attributes little value to the later years of production of such long life assets.

Some of the difference between values estimated using the DCF methodology and market values may be explained by reference to exploration and development potential not explicitly captured by the DCF methodology. Analysts and other gold market observers frequently refer to a “gold premium” to explain the residual difference between DCF valuations and market values. In Grant Samuel’s view, this is unsatisfactory. The notion of a “gold premium” does not provide an intellectually rigorous and replicable technique for valuing gold assets. To the contrary, it represents no more than a confirmation that DCF valuations frequently fail to explain the observable value of gold assets.

In summary, it appears that the DCF methodology as traditionally applied may be flawed for the valuation of gold assets. This view is supported by:

the diversity of assumptions made by valuers as to discount rates and future gold prices; and
the poor predictive power of DCF analysis when applied to the valuation of gold assets.

2.1 Selection of Discount Rates

Discount rates are normally estimated by reference to the cost of capital of a company or the industry in which it trades. The cost of capital is usually calculated as the weighted average cost of equity and debt. The cost of equity is commonly estimated on the basis of the Capital Asset Pricing Model (“CAPM”). This in turn requires an estimate of the beta to apply to the valuation process.

Published valuations of gold assets have made a variety of assumptions regarding the betas of gold companies. The betas used have been generally in the range 0.5 to 1.5. The range of betas reflects, amongst other factors, differing assumptions regarding the appropriate sharemarket against which to measure returns on gold stocks. Betas estimated against the Australian sharemarket are commonly in the approximate range 1.0 to 1.5. However, if it is assumed that the marginal price setting investor in a gold company is an international investor, then the appropriate sharemarket against which to measure the correlation of returns on gold stocks is an international sharemarket. Betas measured on this basis may range between 0 and 0.5.

In Grant Samuel’s view, the available evidence is insufficient to reach any firm conclusion as to the value of betas for Australian gold companies. There is unlikely to be any single correct beta for a

company. In any event, the relevant beta is not the beta measured using historical data or a particular statistical technique but rather the beta used or implicit in the pricing decisions of investors in, and acquirers of, gold assets. Betas for gold companies in which domestic investors are likely to be the price setters may broadly be in the approximate range 0.7 - 1.3. The beta of a gold company is likely to reduce as the perceived quality and expected life of its assets increase, the company is able to attract international investment and its shares are traded more deeply. For large gold companies or assets in which foreign investors are likely to be the price setters a beta in the range 0.0 - 0.5 appears reasonable.

2.2 Forecasting of Future Gold Prices

Projecting future gold prices for the purpose of calculating expected revenues from gold mining operations also involves uncertainty. The gold price has historically demonstrated considerable volatility.

Valuers use a wide variety of assumptions regarding future gold prices, including assumptions that:

the current real spot price, expressed in United States (“US”) dollar terms, will continue for the foreseeable future. This assumption is defensible on the basis that the current spot price should incorporate market expectations regarding the future spot price. However, DCF valuations using this assumption typically undervalue gold assets by substantial margins;
there will be real movements in gold prices. Such assumptions amount to a belief that the valuer has a better view of the gold market than the market in general;
gold prices will be realised on the basis of actual gold company hedging policies. This assumption results in the use of higher gold prices for part of the output from a gold project. While it is true that actual hedge positions will add to or subtract from value, Grant Samuel is not aware of any evidence that hedging programs increase value on a prospective basis. To the contrary, there is a common market view that hedging reduces investor interest in gold stocks and destroys value; and
all gold will be sold at prices equal to the prices currently obtainable for future delivery of gold (“futures prices”). The use of futures prices may be justified on the basis that futures prices provide a reliable indicator of the value of future gold production. However, the use of futures prices is not obviously consistent with traditional DCF methodology. The DCF methodology involves the estimation of expected future cash flows. The gold futures price is not equal to the expected future spot gold price. Use of the gold futures price will result in the estimation of “notional cash flows” that are not equal to expected actual future cash flows. Moreover, use of the gold futures price represents an adjustment in full for gold price risk. To the extent that gold price risk is a component of non diversifiable risk, use of the gold futures price and a discount rate estimated using the conventional CAPM framework may result in an effective “double-counting” of some or all of the gold price risk.

3 Gold Futures Methodology

Theoretical valuation methodologies such as the DCF methodology are based on the premise that the value of an asset or project can be estimated by identifying a portfolio of financial assets of similar cash flow and risk characteristics and extrapolating the value of that portfolio. The DCF methodology assumes that the appropriate analogous asset portfolio is a portfolio of riskless bonds and increases the discount rate to adjust for the additional risks involved in real assets.

It is not clear that conventional DCF methodology is the most appropriate methodology for valuing gold mining projects. There is a body of argument that suggests that the analogous asset portfolio for gold projects is a portfolio comprised of bonds and gold or bonds and futures contracts over gold. Valuation models which attempt to incorporate the value of management flexibility assume that a mining project may be viewed as a portfolio of complex options over the commodity being mined. However, such an analysis increases practical complexities substantially. This section of the Appendix discusses the valuation of gold projects on the basis that the value of gold projects may be estimated by reference to the value of asset portfolios consisting of bonds and either gold futures or physical gold.

The limited usefulness of the DCF methodology for valuing gold assets may be a consequence of the fact that gold is not a commodity. Rather, it is commonly viewed as a financial asset. Through the gold futures market, it is possible to earn returns on gold commensurate with the returns on low risk financial instruments.

The gold futures market also provides a precise measure of the present value of gold delivered at some time in the future. A gold futures contract is a contract to buy and sell a quantity of gold for a specified price (the “futures price”) to be delivered at some point in the future. The present value of the future gold delivery is given by the futures price discounted at the risk free rate for the period to delivery of the gold.

Valuation of a gold project requires the subtraction of the present value of future extraction costs from the present value of future gold production. Future gold production may be represented as a series of expected gold deliveries. Expected gold deliveries are defined as the mean of all probability adjusted gold deliveries. These expected gold deliveries can be valued by reference to the relevant futures prices, discounted at the risk free rate. This does not represent an attempt to estimate actual future gold revenues. Rather, it is a means of estimating the current value of future gold production. It is argued that it is appropriate to use the risk free rate to value future production because:

all gold price risk has been taken into account through the use of futures prices;
development, mining and related risks have been taken into account by using expected future gold production. Expected future gold production represents risk adjusted future gold production; and
other risks associated with gold revenues should be fully diversifiable. Accordingly, diversified portfolio investors would require no return above the risk free rate.

Use of the risk free rate does not suggest that the cash flows from any asset are certain or risk free. It implies only that the cash flows are not subject to any systematic risk. Therefore, given that all specific (non systematic) risks can be diversified away on a portfolio basis, it is appropriate to apply the risk free rate.

Consequently, the present value of a gold mining project is given by the present value of future production less the present value of future extraction costs. This may be represented as follows:

==> picture [189 x 26] intentionally omitted <==

where

PV is the present value of the gold mine given by summing the present value for future production less the present value of future costs;

Ft is the gold futures price for delivery in each future period t;

Pt is the expected production in each period t;

Ct is the expected extraction cost in each period t; and Rf is the risk free rate for duration t.

Gold producers are frequently unable to write gold futures contracts for more than five years. For valuation purposes, however, gold futures prices can be estimated for longer periods. Gold futures prices may be estimated by compounding the current spot price at the risk free rate for the period of the futures contract. This may be represented as follows:

==> picture [87 x 14] intentionally omitted <==

where

==> picture [136 x 10] intentionally omitted <==

This simplifies the earlier present value for a gold mine to the following:

==> picture [173 x 26] intentionally omitted <==

Accordingly, gold projects maybe valued by valuing expected future gold production at the current spot gold price, without discounting, and subtracting expected future extraction costs discounted at the risk free rate.

Gold producers typically achieve a contango (the premium to the current spot price) through the futures market that is somewhat less than the current spot price compounded at the risk free rate. This discount reflects counterparty or credit risk and transaction costs. As between credit risk free counterparties, the gold futures price should always be equal to the current spot price compounded at the risk free rate. If the gold futures price was less than the current spot price compounded at the risk free rate, holders of gold could lock in infinite risk free profits. They could sell their gold, invest the amount realised in risk free bonds and buy back the equivalent volume of gold in the futures market at a price less than the proceeds and accumulated interest from their bond holdings. Conversely, if the gold futures price was greater than the current spot compounded at the risk free rate, infinite risk free profits could be secured by selling bonds (or borrowing), buying gold in the spot market, delivering the gold into futures contracts and repurchasing the bonds.

Gold producers are not risk free counterparties. However, for the purpose of valuing expected future gold production, it is appropriate to assume that the futures price is given by the current spot price compounded at the risk free rate. Counterparty and other diversifiable risks are taken into account through the process of estimating expected future production, which represents risk-adjusted production.

The valuation of gold projects by reference to the gold futures market (“gold futures methodology”) does not reflect general practice. However, this approach has a strong theoretical underpinning. Its conclusions are consistent with the common market rules of thumb for valuing gold companies and gold projects on the basis of the quantity of gold in reserves and resources.

Aspects of the gold futures methodology have been incorporated in a variety of valuations. Various published valuations of long life Australian mining assets have used spot gold prices compounded at the risk free rate as proxies for the expected future spot price.

Although gold futures pricing is not commonly used in Australia it is indirectly supported by international market practice. US gold analysts frequently use a zero discount rate in valuing US gold projects. Use of a zero discount rate is equivalent to valuing future gold production at current spot prices on an undiscounted basis, although it may overstate the present value of future production costs. The market capitalisation of the majority of large, well traded gold companies is better explained by DCF analysis using a zero discount rate than by traditional DCF analysis using a discount rate representing estimates of weighted average cost of capital.

Appendix 2 Market Evidence - Comparable Listed Companies

	Sharemarket Ratings of Selected Listed Gold Companies1	Sharemarket Ratings of Selected Listed Gold Companies1
		Variables	Multiples
Enterprise	Gold Resources (000’s oz) Gold Reserves (000’s oz)	Gold Production(000’s oz) Cash Costs (A$ / oz)	Gold Resources (A$ / oz) Gold Reserves (A$ / oz)	Gold Production(A$ / oz)
Value (A$
million)		Actual Forecast Actual		Actual Forecast
			59 155 195 670 76 284 147 n/a 160 315 224 525 100 911 117 670 120 752 173 n/a 218 345 170 535 134 335

Gold Resources and Reserves are as at last reported. Gold production is based on company forecasts. Production forecasts are for the year ending 30 June 2012, except for Oceana Gold Corporation, Avocet Mining, and Aura Minerals Inc., for which the forecast is for the year ending 31 December 2011. Analysis uses share prices as at 17 August 2011

Appendix 3 Report of AMC Consultants Pty Ltd

AMC Consultants Pty Ltd

ABN 58 008 129 164

Level 12, 179 North Quay BRISBANE QLD 4000

T +61 7 3839 0099 F +61 7 3839 0077 E [email protected]

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12 September 2011

The Directors Grant Samuel & Associates Pty Ltd Level 6, 1 Collins Street MELBOURNE VIC 3000

Dear Sirs

CONQUEST MINING LIMITED AND CATALPA RESOURCES LIMITED

TECHNICAL SPECIALISTS REPORT

On 15 June 2011 Catalpa Resources Limited (Catalpa) and Conquest Mining Limited (Conquest) announced that they have entered into a binding transaction agreement between Catalpa and Conquest (the Merged Entity). In a separate and interconditional transaction, the Merged Entity will concurrently purchase Newcrest Mining Limited’s (Newcrest) interests in the Cracow and Mt Rawdon gold mines.

Scope of the Report

The Directors of Catalpa and Conquest commissioned Grant Samuel & Associates Pty Ltd (Grant Samuel) to prepare an independent expert report concerning the value of the mineral assets of both companies, plus two mineral assets owned by Newcrest. At the request of Grant Samuel, in its role as independent expert, Catalpa and Conquest have jointly engaged AMC Consultants Pty Ltd (AMC) as a specialist to advise Grant Samuel on certain technical matters relating to the proposed transaction and purchase of Newcrest’s assets, in particular, to provide Grant Samuel with:

Schedules of prospective production and capital and operating costs that AMC believes are based on reasonable grounds in accordance with Australian Securities and Investment Commission Regulatory Guidelines 170 (RG170).
A technical specialists report (Report) including a description of the mineral assets and their planned development, conclusions as to the reasonableness of the mineral resource, and ore reserve estimates reported by Catalpa, Conquest and

ADELAIDE BRISBANE MELBOURNE PERTH UNITED KINGDOM VANCOUVER +61 8 8201 1800 +61 7 3839 0099 +61 3 8601 3300 +61 8 6330 1100 +44 1628 778 256 +1 604 669 0044 www.amcconsultants.com.au

CONQUEST MINING & CATALPA RESOURCES Project Fort Knox

Newcrest and the extent to which they have been reported in accordance with the JORC[1] Code.

A valuation of the exploration properties that are remote from or are not included in the production schedules for the existing operations and development projects that AMC has provided to Grant Samuel.

Reporting

During preparation of its Report, AMC visited each operating mine and project site, and reviewed material technical reports and management information. AMC has held discussions with management and technical staff on the various sites.

AMC has prepared the attached Report in the following form:

Section 1. Introduction.

Section 2. Description of the Edna May Gold Mine.

Section 3. Description of the Pajingo Gold Mine.

Section 4. Description of the Mt Rawdon Gold Mine. Section 5. Description of the Cracow Gold Mine.

Section 6. Description of the Mt Carlton Project.

Section 7. Valuation of exploration assets.

Section 8. Sources of Information.

Section 9. Qualifications.

AMC has prepared schedules of prospective production and capital and operating costs as valuation inputs for use by Grant Samuel (modelling scenarios). AMC has modelled two scenarios for each operation with the exception of Mt Rawdon gold mine where a single scenario has been modelled. Summaries of the detailed production and cost schedules provided to Grant Samuel are included in the Report.

AMC’s modelling scenarios (Cases) have been developed from detailed information provided by the owners of each asset. Case 1 scenarios are generally based on operating plans and approved expansions for mining known reserves and some resources, which AMC reasonably expects will be converted to reserves with further drilling and evaluation work. In general, AMC expects a greater than 75% probability of achieving or exceeding its Case 1 modelling scenarios.

Case 2 scenarios may include more aggressive operating parameters and expected conversion of resources to reserves. AMC considers its Case 2 scenarios to be

1 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, The JORC Code 2004 Edition, Effective December 2004, Prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC).

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optimistic but not unreasonable given favourable conditions. AMC believes the modelling scenarios are based on reasonable grounds in accordance with Australian Securities and Investment Commission, Regulatory Guide 170 (RG170).

The cost forecasts included in the modelling scenarios have been prepared in real terms. AMC has not made any assumptions in regard to forward inflationary factors. The modelling scenarios are based on ore reserves and mineral resources as at 30 June 2011.

Excluded from AMC’s scope are consideration of commodity prices, exchange rates, financing and taxation issues. AMC understands that these matters have been addressed by Grant Samuel in its Independent Expert’s Report.

AMC has received legal advice regarding the status of tenements underlying the mineral assets involved in the transactions, except for the Twin Hills tenements that form part of Conquest’s exploration assets; and this advice confirms that the tenements are in good standing in all material aspects. AMC does not believe that the Twin Hills tenements are material within the overall context of the transactions.

In preparing the Report, AMC has relied on information provided by Catalpa and Conquest, and AMC has no reason to believe that information is materially misleading or incomplete or contains any material errors. Catalpa and Conquest have been provided with drafts of the Report to enable correction of any factual errors and notation of any material omissions. The views, statements, opinions and conclusions expressed by AMC are based on the assumption that all data provided to it by Catalpa and Conquest is complete, factual and correct to the best of Catalpa and Conquest’s knowledge.

AMC has not audited the information provided to it, but has aimed to satisfy itself that all of the information has been prepared in accordance with proper industry standards and is based on data that AMC considers to be of acceptable quality and reliability. Where AMC has not been satisfied, it has included comment in the Report and where necessary adjusted the estimates and forecasts provided by AMC to Grant Samuel.

AMC's use, in the Report, of the terms mineral resources and ore reserves are in accordance with the JORC Code. The mineral resource and ore reserve estimates presented as tables in the Report are a reproduction of those reported by Catalpa, Conquest and Newcrest in its Australian Securities Exchange (ASX) Releases, except that AMC has reformatted the tables for consistency with the style of the Report and applied rounding adjustments and totals to some of the tables where it considers this necessary for clarity. In all cases, the mineral resources shown in the tables include mineral resources that have been converted to ore reserves.

AMC has not performed, nor does it accept the responsibilities of a Competent Person as defined by the JORC Code in respect to the mineral resources and ore reserves estimates presented in the Report, except for certain Pajingo resources performed independently of this review. AMC personnel, not involved in the preparation of this report, undertook some of the Pajingo mineral resource estimates, including the role of Competent Person for those estimates.

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CONQUEST MINING & CATALPA RESOURCES Project Fort Knox

To a limited extent, AMC’s projections and assessments have taken into account confidential information which, in accordance with ASIC policy and the VALMIN[2] Code, has not been detailed in this report.

AMC has given its consent for this report to be appended to Grant Samuel’s Expert Report and to be included in a Scheme Booklet for Conquest and an Explanatory Memorandum for Catalpa, and has not withdrawn that consent before their lodgement with the Australian Securities and Investments Commission. Neither this report nor any part of it may be used for any other purpose without written consent from AMC.

This report and the conclusions in it are effective at 25 August 2011. Those conclusions may change in the future with changes in relevant commodity prices, exploration and other technical developments in regard to the projects and the market for mineral properties.

Production and costs are generally presented on a financial (July to June) basis and prefaced with the letters FY, all monetary figures are expressed in Australian Dollars ($) unless otherwise stated and costs are presented on a current cash cost basis.

Independence

AMC has completed assignments of a similar nature for Grant Samuel. AMC and its sub-consultants have also carried out technical consulting assignments for Conquest, Catalpa and Newcrest. In these assignments, AMC and its sub-consultants have acted as independent parties.

Neither AMC nor its sub-consultants have any business relationship with Grant Samuel, Conquest, Catalpa or Newcrest other than the carrying out of individual consulting assignments as engaged.

While some employees of AMC and its sub-consultants may have small direct or beneficial shareholdings in Conquest, Catalpa or Newcrest, neither AMC nor the contributors to this report nor members of their immediate families have any interests in Conquest, Catalpa or Newcrest that could be reasonably construed to affect their independence. AMC has no other pecuniary interest, association or employment relationship with Conquest, Catalpa, Newcrest or Grant Samuel.

AMC is being paid a fee according to its normal per diem rates and out-of-pocket expenses in the preparation of this report. AMC’s fee is not contingent upon the outcome of the transaction subject to this report.

2 Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports, The VALMIN Code 2005 Edition, Prepared by The VALMIN Committee, a joint committee of the Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and the Mineral industry Consultants Association with the participation of the Australian Securities and Investment Commission, the Australian Stock Exchange Limited, the Minerals Council of Australia, the Petroleum Exploration Society of Australia, the Securities Association of Australia and representatives from the Australian finance sector.

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Compliance

AMC is of the opinion that this report complies with all mandatory requirements of the VALMIN Code. It is the only report issued by AMC in respect of the assignment.

Conquest and Catalpa and Newcrest have provided AMC with confirmation of its compliance with the obligations of the Commissioning Entity under the VALMIN Code including that to the best of their knowledge complete, accurate and true disclosure of all relevant material information has been made to AMC and that AMC’s independence has been respected.

Conquest and Catalpa have provided AMC with indemnities in regard to damages, losses and liabilities related to or arising out of our reliance on information provided by the commissioning entity or from extensions of workload arising as a result of this report.

The signatories to this report are corporate members of the AusIMM and bound by its Code of Ethics.

Yours sincerely

==> picture [161 x 47] intentionally omitted <==

M Dorricott FAusIMM (CP) Principal Mining Engineer

==> picture [139 x 72] intentionally omitted <==

M Thomas MAusIMM (CP) Director

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QUALITY CONTROL

The signing of this statement confirms this report has been prepared and checked in accordance with the AMC Peer Review Process. AMC’s Peer Review Policy can be viewed at www.amcconsultants.com.au.

Project Manager Mal Dorricott 12 September 2011 Signed Date Peer Reviewer Mike Thomas 12 September 2011 Signed Date

IMPORTANT INFORMATION ABOUT THIS REPORT Confidentiality

This document and its contents are confidential and may not be disclosed, copied, quoted or published unless AMC Consultants Pty Ltd (AMC) has given its prior written consent.

AMC accepts no liability for any loss or damage arising as a result of any person other than the named client acting in reliance on any information, opinion or advice contained in this document.

This document may not be relied upon by any person other than the client, its officers and employees.

Information

AMC accepts no liability and gives no warranty as to the accuracy or completeness of information provided to it by or on behalf of the client or its representatives and takes no account of matters that existed when the document was transmitted to the client but which were not known to AMC until subsequently.

Currency

This document supersedes any prior documents (whether interim or otherwise)

dealing with any matter that is the subject of this document.

Recommendations

AMC accepts no liability for any matters arising if any recommendations contained in this document are not carried out, or are partially carried out, without further advice being obtained from AMC.

Outstanding Fees

No person (including the client) is entitled to use or rely on this document and its contents at any time if any fees (or reimbursement of expenses) due to AMC by its client are outstanding. In those circumstances, AMC may require the return of all copies of this document.

Public Reporting Requirements

If a Client wishes to publish a mineral resource or ore / mineral reserve estimate prepared by AMC, it must first obtain the Competent / Qualified Person’s written consent, not only to the estimate being published but also to the form and context of the published statement. The published statement must include a statement that the Competent / Qualified Person’s written consent has been obtained.

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EXECUTIVE SUMMARY

1	INTRODUCTION ..................................................................................................... 1	INTRODUCTION ..................................................................................................... 1	INTRODUCTION ..................................................................................................... 1
2	EDNA MAY GOLD MINE (WA) ................................................................................ 3
	2.1	Location and Background ............................................................................... 3
		2.1.1	Location ............................................................................................ 3
		2.1.2	Background ...................................................................................... 4
	2.2	Geology .......................................................................................................... 5
	2.3	Edna May Mineral Resource Estimate ........................................................... 6
		2.3.1	Edna May and Golden Point Resource Estimation .......................... 6
			2.3.1.1 Data Available ................................................................ 6
			2.3.1.2 Resource Estimation ...................................................... 8
			2.3.1.3 Resource Classification and Reporting .......................... 8
			2.3.1.4 Conclusion ..................................................................... 9
		2.3.2	Greenfinch Mineral Resource Estimate ............................................ 9
			2.3.2.1 Data Available ................................................................ 9
			2.3.2.2 Resource Estimation .................................................... 10
			2.3.2.3 Resource Classification and Reporting ........................ 10
			2.3.2.4 Conclusion ................................................................... 11
		2.3.3	Edna May Underground Resource Estimate .................................. 11
			2.3.3.1 Background .................................................................. 11
			2.3.3.2 Data Available .............................................................. 11
			2.3.3.3 Resource Estimation .................................................... 12
			2.3.3.4 Resource Classification and Reporting ........................ 13
			2.3.3.5 Conclusion ................................................................... 13
	2.4	Exploration ................................................................................................... 13
	2.5	Geotechnical and Hydrological Issues ......................................................... 14
		2.5.1	Geotechnical ................................................................................... 14
		2.5.2	Hydrology ....................................................................................... 14
		2.5.3	Conclusion ...................................................................................... 15
	2.6	Ore Reserves ............................................................................................... 15
		2.6.1	Edna May Open Pit ........................................................................ 15
		2.6.2	Greenfinch Open Pit ....................................................................... 16
		2.6.3	Surface Stockpiles .......................................................................... 16
		2.6.4	Conclusion ...................................................................................... 17
	2.7	Mining	Operations ........................................................................................ 17
		2.7.1	Equipment ...................................................................................... 18
		2.7.2	Mining Performance ....................................................................... 18
		2.7.3	Voids............................................................................................... 19
		2.7.4	Conclusion ...................................................................................... 19
	2.8	Non-Reserve Inventory Sources .................................................................. 19
		2.8.1	Underground ................................................................................... 19
		2.8.2	Resource Conversion ..................................................................... 20
		2.8.3	Exploration Success ....................................................................... 20
		2.8.4	Tungsten ......................................................................................... 20
	2.9	Metallurgy and Processing Operations ........................................................ 21
		2.9.1	Process Plant Description .............................................................. 21

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		2.9.2	Process Plant Performance ............................................................ 22
		2.9.3	Metallurgy and Future Plant Performance ...................................... 24
			2.9.3.1 Throughput ................................................................... 24
			2.9.3.2 Recovery ...................................................................... 25
			2.9.3.3 Tungsten Recovery ...................................................... 25
	2.10	Waste Rock and Tailings Disposal ............................................................... 26
	2.11	Infrastructure and Power .............................................................................. 26
		2.11.1	Access ............................................................................................ 26
		2.11.2	Water Supply .................................................................................. 26
		2.11.3	Electricity ........................................................................................ 27
		2.11.4	Accommodation .............................................................................. 27
	2.12	Environmental and Community Issues ......................................................... 27
	2.13	Capital	and Operating Costs ........................................................................ 27
		2.13.1	Capital Costs .................................................................................. 28
			2.13.1.1 Exploration ................................................................... 28
			2.13.1.2 Mining .......................................................................... 28
			2.13.1.3 Processing ................................................................... 28
			2.13.1.4 Closure ......................................................................... 28
			2.13.1.5 Sustaining .................................................................... 28
		2.13.2	Operating Costs .............................................................................. 28
	2.14	Edna May Modelling Scenarios .................................................................... 29
	2.15	Risks ............................................................................................................. 30
3	PAJINGO GOLD MINE (QLD) ............................................................................... 31
	3.1	Location and Background ............................................................................. 31
	3.2	Geology ........................................................................................................ 33
		3.2.1	Regional Geology ........................................................................... 33
		3.2.2	Local Geology ................................................................................. 33
		3.2.3	Jandam Lode .................................................................................. 34
		3.2.4	Veracity Lode .................................................................................. 34
		3.2.5	Cindy Lode ..................................................................................... 35
		3.2.6	Faith Lode ....................................................................................... 35
		3.2.7	Sonia Lode ..................................................................................... 35
		3.2.8	Zed Lode ........................................................................................ 35
		3.2.9	Venue and Vera North .................................................................... 35
	3.3	Pajingo Gold Mine Mineral Resource ........................................................... 35
		3.3.1	Data Available ................................................................................ 36
		3.3.2	Resource Estimation ...................................................................... 37
		3.3.3	Resource Classification .................................................................. 37
		3.3.4	Conclusion ...................................................................................... 38
	3.4	Exploration and Resource Development ...................................................... 38
		3.4.1	Resource Definition Adjacent to Known Mineralisation .................. 38
		3.4.2	Near Mine Resource Development ................................................ 39
	3.5	Ore Reserves ............................................................................................... 40
		3.5.1	Conclusion ...................................................................................... 41
	3.6	Mine Planning Inventory ............................................................................... 41
	3.7	Mining	Operations ........................................................................................ 43
	3.8	Metallurgy and Processing Operations ........................................................ 44
		3.8.1	Introduction ..................................................................................... 44
		3.8.2	Historical Production ....................................................................... 45

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		3.8.3 Gold Recovery ................................................................................ 46
		3.8.4 Silver Recovery .............................................................................. 46
		3.8.5 Production Scenarios ..................................................................... 46
	3.9	Infrastructure and Power .............................................................................. 46
	3.10	Environmental and Community Issues ......................................................... 46
		3.10.1 Environmental Impact Studies and Management Plans ................. 46
		3.10.2 Environmental Compliance ............................................................. 47
		3.10.3 Project Infrastructure ...................................................................... 48
		3.10.4 Waste Rock Dumps ........................................................................ 48
		3.10.5 Tailings Storage Facilities ............................................................... 49
		3.10.6 Environmental Management Practices and Reporting Procedures 49
	3.11	Capital and Operating Costs ........................................................................ 50
		3.11.1 Capital Costs .................................................................................. 50
		3.11.2 Operating Costs .............................................................................. 50
	3.12	Pajingo Modelling Scenarios ........................................................................ 51
	3.13	Risks ............................................................................................................. 52
4	MT RAWDON GOLD MINE ................................................................................... 53
	4.1	Location and Background ............................................................................. 53
	4.2	Geology ........................................................................................................ 55
	4.3	Mineral Resources and Ore Reserves ......................................................... 57
		4.3.1 Data Available ................................................................................ 57
		4.3.2 Resource Estimation ...................................................................... 58
		4.3.3 Classification and Reporting ........................................................... 58
		4.3.4 Conclusion ...................................................................................... 60
		4.3.5 Potential for Additional Resources ................................................. 60
	4.4	Ore Reserves ............................................................................................... 60
		4.4.1 Conclusion ...................................................................................... 61
	4.5	Mining Operations ........................................................................................ 61
	4.6	Metallurgy and Processing Operations ........................................................ 63
		4.6.1 Introduction ..................................................................................... 63
		4.6.2 Historical Production ....................................................................... 63
		4.6.3 Gold Recovery ................................................................................ 64
		4.6.4 Future Production ........................................................................... 65
	4.7	Waste Rock and Tailings Storage ................................................................ 65
	4.8	Infrastructure and Power .............................................................................. 65
	4.9	Environmental and Community Issues ......................................................... 65
		4.9.1 Surface Water and Stream Sediments ........................................... 65
		4.9.1.1 Groundwater Issues ..................................................... 66
		4.9.1.2 Mount Perry Dam ......................................................... 66
		4.9.2 Mine Closure and Rehabilitation Costs .......................................... 67
	4.10	Capital and Operating Costs ........................................................................ 67
	4.11	Mt Rawdon Modelling Scenarios .................................................................. 67
	4.12	Risks ............................................................................................................. 68
5	CRACOW GOLD MINE (QLD) .............................................................................. 69
	5.1	Location and Background ............................................................................. 69
	5.2	Geology and Resources ............................................................................... 70
		5.2.1 Leases and Tenure ......................................................................... 70
		5.2.2 Geology and Exploration ................................................................ 70

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	5.3	Mineral Resource Estimation ....................................................................... 74
		5.3.1 Data Available ................................................................................ 74
		5.3.2 Resource Estimation ...................................................................... 74
		5.3.3 Classification and Reporting ........................................................... 76
		5.3.4 Conclusion ...................................................................................... 76
		5.3.5 Near Mine Exploration Targets ....................................................... 77
	5.4	Ore Reserves and Mining Inventory ............................................................. 77
		5.4.1 Conclusion ...................................................................................... 78
	5.5	Mine Planning Inventory ............................................................................... 79
	5.6	Mining Operations ........................................................................................ 79
		5.6.1 Overview of Mining Operations ...................................................... 79
		5.6.2 Mine Performance .......................................................................... 81
	5.7	Metallurgy and Processing Operations ........................................................ 81
		5.7.1 Historical Production ....................................................................... 82
		5.7.2 Gold Recovery ................................................................................ 83
	5.8	Infrastructure and Power .............................................................................. 83
	5.9	Environmental and Community Issues ......................................................... 84
		5.9.1 Environmental Impact Studies ........................................................ 84
		5.9.2 Environmental Management Plans ................................................. 84
		5.9.3 Permits and Licences ..................................................................... 85
		5.9.4 Environmental Management Practices and Reporting Procedures 85
		5.9.5 Indigenous and Community Relations ............................................ 85
		5.9.6 Social Impact .................................................................................. 85
	5.10	Capital and Operating Costs ........................................................................ 86
	5.11	Cracow Modelling Scenarios ........................................................................ 86
	5.12	Risks ............................................................................................................. 87
6	MT CARLTON GOLD PROJECT (QLD) ................................................................ 88
	6.1	Location and Background ............................................................................. 88
	6.2	Project Tenure .............................................................................................. 89
	6.3	Geology ........................................................................................................ 89
	6.4	Mt Carlton Mineral Resources ...................................................................... 90
		6.4.1 Data Available ................................................................................ 90
		6.4.2 Resource estimation ....................................................................... 91
		6.4.3 Resource Classification and Reporting .......................................... 92
		6.4.4 Conclusions .................................................................................... 92
	6.5	Geotechnical Issues ..................................................................................... 93
	6.6	Ore Reserves ............................................................................................... 93
		6.6.1 Conclusion ...................................................................................... 94
	6.7	Mining Operations ........................................................................................ 94
	6.8	Metallurgy and Processing Operations ........................................................ 96
	6.9	Waste Rock and Tailings Storage ................................................................ 97
	6.10	Infrastructure and Power .............................................................................. 97
	6.11	Environmental and Community Issues ......................................................... 98
	6.12	Capital and Operating Costs ........................................................................ 99
		6.12.1 Capital Cost .................................................................................... 99
		6.12.2 Operating Cost ............................................................................. 100
	6.13	Mount Carlton Modelling Scenarios ........................................................... 101
	6.14	Risks ........................................................................................................... 102

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7	EXPLORATION PROPERTIES ........................................................................... 104	EXPLORATION PROPERTIES ........................................................................... 104
	7.1	Introduction ................................................................................................. 104
	7.2	Exploration Valuation Methods ................................................................... 104
	7.3	Edna May ................................................................................................... 106
		7.3.1 Status ........................................................................................... 106
		7.3.2 Valuation ....................................................................................... 106
	7.4	Pajingo ....................................................................................................... 106
		7.4.1 Status ........................................................................................... 106
		7.4.2 Valuation ....................................................................................... 107
	7.5	Mt Rawdon ................................................................................................. 108
		7.5.1 Status ........................................................................................... 108
		7.5.2 Valuation ....................................................................................... 108
	7.6	Cracow ....................................................................................................... 109
		7.6.1 Status ........................................................................................... 109
		7.6.2 Valuation ....................................................................................... 109
	7.7	Mt Carlton ................................................................................................... 109
		7.7.1 Status ........................................................................................... 109
		7.7.2 Valuation ....................................................................................... 110
	7.8	Twin Hills .................................................................................................... 110
		7.8.1 Project Description and History .................................................... 110
		7.8.2 Status ........................................................................................... 112
		7.8.3 Valuation ....................................................................................... 112
	7.9	North Queensland Regional Exploration .................................................... 113
		7.9.1 Description .................................................................................... 113
		7.9.2 Status ........................................................................................... 114
		7.9.3 Valuation ....................................................................................... 114
	7.10	Valuation Summary .................................................................................... 114
8	QUALIFICATIONS ............................................................................................... 115
9	REFERENCES .................................................................................................... 116

TABLES

		TABLES
Table	2.1	Edna May Gold Mine Mineral Resource at 30 June 2011 ......................... 6
Table	2.2	Edna May Ore Reserve at 30 June 2011 ................................................ 15
Table	2.3	Edna May Ore Reserve Input Parameters (December 2008) .................. 16
Table	2.4	2011 Actual Mining Tonnages ................................................................. 18
Table	2.5	Process Plant Performance ..................................................................... 23
Table	2.6	Total Operating Costs .............................................................................. 29
Table	2.7	Unit Operating Costs ............................................................................... 29
Table	2.8	Case 1 and Case 2 Mining Inventories for Edna May ............................. 30
Table	3.1	Exploration Permits and Mining Leases .................................................. 32
Table	3.2	Exploration Permits Under Application .................................................... 32
Table	3.3	Exploration Permits Proposed ................................................................. 32
Table	3.4	Mineral Resource for Pajingo at 30 June 2011 ........................................ 36
Table	3.5	Pajingo Ore Reserve at 30 June 2011 ..................................................... 41
Table	3.6	Non-Reserve Material at 30 June 2011 ................................................... 42
Table	3.7	Basis for Additional Mining Inventory at 30 June 2011 ............................ 43
Table	3.8	Mine Production FY2011 ......................................................................... 43

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Table	3.9	Historical and Forecast Mill Performance ................................................ 45
Table	3.10	Case 1 and Case 2 Mining Inventories for Pajingo .................................. 51
Table	4.1	Mt Rawdon Tenement Holding ................................................................ 55
Table	4.2	Mt Rawdon Mineral Resource at 30 June 2011 ....................................... 59
Table	4.3	Mt Rawdon Ore Reserve at 30 June 2011 .............................................. 61
Table	4.4	Mt Rawdon Historical Production and FY2012 Budget ............................ 64
Table	5.1	Cracow Mining Leases ............................................................................ 70
Table	5.2	CGM Mineral Resource at 30 June 2011 ................................................ 76
Table	5.3	CGM Ore Reserve at 30 June 2011 ........................................................ 78
Table	5.4	Mining Inventory at 31 March 2011 ......................................................... 79
Table	5.5	Historical Mine Production and Budget for FY2012 ................................. 81
Table	5.6	CGM Historical Production and Budget for FY2012 ................................ 83
Table	5.7	AMC Case 1 and Case 2 Mining Inventories for Cracow ........................ 87
Table	6.1	Summary of Mt Carlton Drilling (to September 2009) .............................. 90
Table	6.2	Mt Carlton Mineral Resource at 30 June 2011 ........................................ 92
Table	6.3	Mt Carlton Ore Reserve at 15 December 2010 ....................................... 93
Table	6.4	Summary of Production Schedule ........................................................... 96
Table	6.5	Capital Estimates ..................................................................................... 99
Table	6.6	Operating for the DFSOS ...................................................................... 100
Table	6.7	AMC Case 1 and Case 2 Mining Inventories for Mount Carlton ............ 102
Table	7.1	Selection of Relevant Transactions Providing Yardstick Values ........... 105
Table	7.2	Twin Hills Project Mineral Resources at 30 June 2011 ......................... 112
Table	7.3	Conquest North Queensland Exploration Tenements Status ................ 113
Table	7.4	Summary of Exploration Valuations ....................................................... 114

		FIGURES
Figure	2.1	Edna May Project Location Map ................................................................ 3
Figure	2.2	Simplified Geology of the Westonia Area .................................................. 5
Figure	2.3	Geology Plan at 1050 mRL Showing Interpreted Reefs and Halos ......... 12
Figure	2.4	Scheduled Mining Tonnages ................................................................... 17
Figure	2.5	Equipment Productivity ............................................................................ 19
Figure	2.6	Simplified Block Flowsheet ...................................................................... 22
Figure	2.7	Monthly Plant Operating Performance ..................................................... 23
Figure	3.1	Location of Pajingo Gold Mine ................................................................. 31
Figure	3.2	Spatial Locations of Main Deposits at Pajingo ......................................... 34
Figure	3.3	Near Mine Exploration Targeting Untested Areas ................................... 40
Figure	3.4	Open Pit Resource Potential Overview ................................................... 40
Figure	4.1	Location of Mt Rawdon Gold Mine ........................................................... 53
Figure	4.2	Mt Rawdon Tenements ............................................................................ 54
Figure	4.3	Generalised Geology in Plan ................................................................... 56
Figure	4.4	Generalised Cross-Section (Looking North) ............................................ 57
Figure	4.5	Pit Stage Sequence with Gold Grades .................................................... 63
Figure	5.1	Cracow Location ...................................................................................... 69
Figure	5.2	Relative Location of Cracow Mining Leases and EPM ............................ 71
Figure	5.3	Location of Deposits ................................................................................ 72
Figure	6.1	Mt Carlton Location Plan ......................................................................... 88
Figure	7.1	Pajingo Resources and Reserves History ............................................. 107
Figure	7.2	Twin Hills Project Location ..................................................................... 111

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APPENDICES

APPENDIX A ABBREVIATIONS

Distribution list:

1 copy to Mr Stephen Cooper, Grant Samuel Australia 1 copy to Mr Aaron Colleran, Conquest Mining Ltd 1 copy to Mr Adrian Pelliccia, Catalpa Resources Ltd 1 copy to Mr Brian Kinsella, Newcrest Mining Limited 1 copy to AMC Brisbane & Perth offices

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1 INTRODUCTION

This Report should be read together with the covering letter to the Directors of Grant Samuel & Associates Limited (Grant Samuel) dated 18 August 2011. The covering letter sets out the purpose and scope of the report together with essential background information.

The Report provides a description of each of the assets of Catalpa Resources Limited (Catalpa), Conquest Mining Limited (Conquest), and of the Cracow and Mt Rawdon gold mines. It also provides modelling scenarios for each operating mine and non-producing project, and provides estimates of the value of the exploration interests. The assets considered by the Report are as follows:

The Edna May Gold Mine , 100% owned by Catalpa is located in the eastern part of the Central Wheat Belt of Western Australia, approximately 300 km east of Perth.
The Pajingo Gold Mine , 100% owned by Conquest is located 53 km south of Charters Towers in north Queensland.
The Mt Rawdon Gold Mine, 100% owned by Newcrest Mining Limited’s (Newcrest) is situated in southeast Queensland, approximately 80 km southwest of Bundaberg and 300 km north-northwest of Brisbane.
The Cracow Gold Mine , owned 70% by Newcrest and 30% by Catalpa is located approximately 100 km south of Biloela, southeast Queensland.
The Mt Carlton Project 100% owned by Conquest is located 150 km south of Townsville in the Charters Towers Mining Region of north Queensland.

The following aspects of each operation and project have been reviewed:

a) Geology and Resources.
b) Geotechnical Issues.
c) Ore Reserves.
d) Mining Operations.
e) Metallurgy and Processing Operations.
f) Waste Rock and Tailings Storage.
g) Environmental Issues.
h) Capital and Operating Costs.

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When valuing exploration interests, AMC has considered methods commonly used in Australia to value exploration projects. These methods are discussed in the Report. The VALMIN Code defines a Technical Value as an assessment of future net economic benefit and a Fair Market Value as one which adds to or subtracts from a Technical Value a premium or discount relating to market, strategic or other considerations. AMC's values of exploration assets are Technical Values.

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2 EDNA MAY GOLD MINE (WA)

2.1 Location and Background

2.1.1 Location

The Edna May Gold Mine is located in the eastern part of the Central Wheat Belt of Western Australia, approximately 300 km east of Perth.

Access from Perth is gained via the Great Eastern Highway to the settlement of Carrabin, 40 km east of Merredin, and thence by 10 km of sealed road north to the township of Westonia. Westonia has a population of about 80 and serves as the administrative centre for the surrounding Westonia Shire. The Edna May project location is shown in Figure 2.1.

The project area features flat to gently undulating terrain and averages about 340 m above sea level.

The area has a Mediterranean climate with hot dry summers and cool moist winters. Rainfall averages 328 mm per year.

The dominant land use is broad-acre dry-land cropping of wheat. Much of the original vegetation has been cleared for agriculture. Remnant vegetation comprises mallee eucalypt and acacia woodland.

Figure 2.1 Edna May Project Location Map

==> picture [432 x 296] intentionally omitted <==

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2.1.2 Background

Mining at Edna May has occurred in four phases.

Gold was discovered at Edna May in 1911. Several mining companies worked the field, with the main Edna May Reef mined to a depth of 245m below surface (mbs) and other reefs to about 130 mbs, before ore depletion in the smaller leases, de-watering difficulties and manpower shortages following World War 1 forced the closure of all operations by 1922.

The old leases were amalgamated in 1935 by Westonia Amalgamated Mining Company Limited (WA). Underground mining was undertaken from 1935 until 1947, with annual ore production ranging from 11,000 to 17,000 tpa at average grades of 11 g/t Au to 16 g/t Au. Mining continued throughout World War 2 despite manpower and equipment shortages in part due to the subsidised production of tungsten to aid the war effort. Mining was concentrated on reefs other than the Edna May Reef, with mining reaching down to 180 mbs. The mine was closed in 1947 due to the collapse of metal prices after World War 2.

Production from the first two phases was estimated at 575,000 t at a recovered grade of 19.5 g/t Au for approximately 360,000 oz.

In 1984, Australian Consolidated Minerals Limited (ACM) entered into an option to purchase agreement over the Edna May area. Following an intensive drilling programme ACM completed a feasibility study that outlined an ore reserve containing 213,666 oz based on open pit mining of predominantly oxide material.

Construction began in September 1985, with first gold poured in April 1986.

The underground potential was tested via a surface drilling campaign which provided sufficient encouragement to commence underground decline development in 1988. The decline reached 260 mbs, providing a platform for diamond drilling. However, underground mining was stopped in early 1990 due to a variety of reasons including change of ownership, poor geological understanding and depletion of open pit reserves.

Following completion of the open pit and treatment of low grade stockpiles, the mine was closed in 1991, the site rehabilitated and the process plant sold. Total production by ACM was 274,500 oz.

Catalpa acquired the Edna May project in 1994. Between 1994 and 2004 Catalpa undertook extensive drilling programmes, technical design, and environmental studies resulting in completion of a feasibility study in 2004. The feasibility study outlined a 90,000 ozpa project with a seven year mine life and capital cost of $46M. The project did not proceed based on this study due to the low gold price.

In December 2008, an updated feasibility study was completed that outlined a project containing an ore reserve of 19.1 Mt, grading 1.2 g/t Au and containing 738,000 oz at a $1,025/oz gold price and cut-off grade of 0.5 g/t Au. The ore would be processed at an initial rate of 2.8 Mtpa, increasing to 3.2 Mtpa after two years using a

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refurbished and upgraded process plant. The mine life was scheduled at seven years producing 675,000 oz of gold.

Mining and plant construction commenced in late 2009, with first gold produced in April 2010.

2.2 Geology

The Edna May and Greenfinch gold deposits are hosted by quartz-feldspar-biotite gneiss (the Edna May Gneiss) that forms part of the Westonia greenstone belt in the Archaean Yilgarn Craton. The gneiss forms an irregular body over about 1,400 m strike and averaging about 100m thick as shown in Figure 2.2. The body of gneiss dips to the north at about 50° and is in contact to the south with mafic amphibolite and to the north with ultramafic amphibolite.

Figure 2.2 Simplified Geology of the Westonia Area

==> picture [431 x 278] intentionally omitted <==

Historic mining and underground development in the 1980s targeted high-grade arcuate quartz-sulphide veins that form splays from a footwall shear zone. Seven prominent veins were mined. Larger tonnage and lower grade gold mineralisation comprises swarms of thin sheeted quartz veins throughout the gneiss that mainly follow the gneissic foliation, but can cross cut to form stockworks. Gold can also be associated with alteration selvedges consisting of diopside, amphibole, biotite, and silica with minor associated sulphide minerals. Individual veins are generally less than 5 cm thick but locally can be up to several metres wide. Veining tends to be better developed in the footwall half of the Edna May Gneiss around the reefs.

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Post-mineralisation pegmatite dykes intrude the gneiss, stoping out parts of the mineralised gneiss. A younger series of microgranite dykes also post-date mineralisation and metamorphism. The dykes are generally sub-horizontal.

Total oxidation occurs from about 30 mbs in the western part of the potential open pit area and up to 60 mbs in the east. The top of fresh rock occurs at about 50 mbs in the west and 60 mbs to 70 mbs in the east.

Mining in the 1980s removed much of the oxide mineralisation.

Gold mineralisation at Greenfinch is contained within the western continuation of the Edna May Gneiss, slightly offset by a series of north to north-northwest trending faults. The gneiss is 80 m thick and is locally cut by a series of flat to moderately dipping leucogranite dykes that are barren of gold and generally less than 10 m thick. No modern mining has occurred at Greenfinch but there are small scale historical underground workings.

The Golden Point Gneiss is a separate body of gneiss in the footwall to the Edna May Gneiss. Mineralisation in the Golden Point Gneiss did not form part of the mineral resource at the time of the restart of mining operations, but drilling since 2008 has indicated that this mineralisation can be mined as part of the Edna May pit. The mineralisation forms part of the Edna May open pit resource estimate.

2.3 Edna May Mineral Resource Estimate

Mineral resources for the Edna May Gold Mine reported at 30 June 2011 are listed in Table 2.1. The mineral resources are inclusive of ore reserves. Edna May and Golden Point, and Greenfinch open pit resource estimates have been reported at a 0.4 g/t Au cut-off. The Edna May underground resource estimate has been reported at a 3 g/t Au cut-off.

Table 2.1 Edna May Gold Mine Mineral Resource at 30 June 2011

	Measured Resource	Measured Resource	Indicated Resource	Indicated Resource	Inferred Resource	Inferred Resource	Total Resource	Total Resource
	Tonnes (Mt)	Au (g/t)	Tonnes (Mt)	Au (g/t)	Tonnes (Mt)	Au (g/t)	Tonnes (Mt)	Au (g/t)
Edna May & Golden Point Greenfinch Edna May Underground Stockpiles	19.7 0.9 – –	1.0 1.1 – –	15.5 2.5 0.4 2.2	1.0 1.0 7.3 0.5	10.0 0.6 0.3 –	0.9 1.2 7.6 –	45.2 4.0 0.7 2.2	1.0 1.0 7.4 0.5
Total	20.6	1.0	20.6	1.1	10.9	1.1	52.1	1.1

2.3.1 Edna May and Golden Point Resource Estimation

2.3.1.1 Data Available

Drilling has been carried out in many campaigns and has consisted of rotary air blast (RAB), reverse circulation (RC) and diamond drillholes (DDH). RAB drillholes have not been used for resource estimation. The area covered by the

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mineral resource estimate has been drilled to between 25 mE x 12.5 mN and 25 mE x 25 mN spacing to about 90 m below surface which is approximately the level of the 1980s open pit. Drilling from surface and from underground in the 1980s was augmented by subsequent RC and DDH drilling since 2003. Drill coverage beneath the 1980s pit varies with depth but approximates 30 m x 30 m spacing.

Subsequent to the 2006 resource estimate, drilling has been completed:

Beneath the planned open pit to increase confidence in resource estimation from inferred resource to indicated resource classification.
To drill the Golden Point mineralisation for inclusion in the open pit resource estimate.
To test the Edna May Gneiss and higher-grade quartz reefs at depth with deep diamond drillholes.

All DDH and most RC drillholes have been surveyed downhole, and drillhole collars have been surveyed with conventional surveying and GPS.

Surface topography is based on photogrammetry and incorporates the 1980s open pit.

Assaying of drillhole samples for gold has been conducted using various methods over time, including:

50 g charge fire assay.
Mixed acid digest with Inductively Coupled Plasma Optical Emission Spectrometer (ICPOES).
2 kg bottle roll cyanide leach.
1 kg accelerated cyanide leach.
Pulverise and leach (PAL).
Screen fire assay.

No independent sample quality control data are available for drilling undertaken prior to 1994. A data review in 2006 examined different drillhole sample types and assay types comparing older data with more recently obtained data. The comparison was acceptable with older data possibly under-representing true grades.

A common industry assay protocol was not used in drilling up to 2006, but routine laboratory quality control data are available. Although there is considerable scatter in the results for assays of standards, there is no evident overall bias. Correlation between repeat analyses is high and there is no bias to higher or lower grade in either of the data sets.

Drilling since 2006 has been supported by a common industry assay quality control protocol involving certified reference materials, repeat assays and blanks. The results of these protocols are generally acceptable, with an indication that the accelerated cyanide leach method for routine assaying under-calls grades of certified reference materials.

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Comparison of cyanide leach to fire assays shows good correlation between 0.5 g/t Au and 1.0 g/t Au with cyanide leach indicating slightly higher grades below 0.5 g/t Au and fire assays slightly higher above 1.0 g/t Au.

Mineralisation and waste bulk densities have been applied to the mineral resource estimate based on determination of bulk densities using the Archimedes method as follows:

Wash material 2 t/m[3] .
Oxide material 1.8 t/m[3]
Transition 2.4 t/m[3] .
Fresh rock 2.7 t/m[3] .

Catalpa has identified tungsten as scheelite in tailings from the Edna May process plant and has been conducting studies for plant modification that might lead to recovery of a tungsten-bearing concentrate and concomitant enhanced gold recovery. The drillhole data include some tungsten assays, and Catalpa has been sampling the tailings stream from the plant to determine an average tungsten grade. The mineral resource estimate does not include an estimated grade for tungsten.

2.3.1.2 Resource Estimation

The Edna May resource estimate was updated in May 2010 incorporating deeper drilling and the extension into the Golden Point Gneiss.

A geological interpretation was developed for the boundaries of the Edna May Gneiss, Edna May pegmatite dykes, base of total oxidation and top of fresh rock and surface mineralised wash material. A mineralised domain was interpreted to incorporate all samples grading above about 0.2 g/t Au which approximates the boundary of the Edna May Gneiss. A separate domain was interpreted that delineates the mineralised part of the Golden Point Gneiss.

Historic mine development and stopes were interpreted, and the proportion of each panel comprising stope void was flagged in the model.

Recoverable resources have been estimated using the multiple indicator kriging (MIK) method with block support adjustment. The method estimates grades above cut-offs, for a range of cut-offs into panels with dimensions of 25 mE x 20 mN x 5 mRL. Estimation of the grade indicators used parameters determined from variography based on 2 m composites and an octant search strategy. A block support adjustment was used to estimate the recoverable gold resources assuming a selective mining unit of 8 mE x 5 mN x 2.5 mRL and grade control sampling at 8 mE x 5 mN x 1.25 mRL.

2.3.1.3 Resource Classification and Reporting

The MIK resource estimate provides a range of tonnages and grades above specified cut-offs. The resource estimate was classified into measured, indicated and

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inferred resource categories by flagging the model using a number of criteria that indicate confidence in the estimate.

The criteria considered were:

Minimum number of composites found in the search neighbourhood. Measured and indicated resources required a minimum of 16 composites for successful estimation and inferred resources required a minimum of eight composites.
Minimum number of spatial octants informed. Measured and indicated resources required at least four octants to contain at least one composite, and inferred resources required at least two octants with at least one composite.
Distance to informing data. Measured resources were estimated in a search ellipse of rotated dimensions of 30 m x 35 m x 10 m and, indicated and inferred resources were estimated with a search ellipse of 39 m x 45.5 m x 13 m.

AMC considers these to be appropriate criteria to indicate confidence in the grade estimate although it can result in discontinuous zones of mineral resource categories. AMC notes that the classification is appropriate at the proposed operating cut-off grade of 0.4 g/t Au, but that the continuity of the mineralisation is poorer at higher cut-offs.

2.3.1.4 Conclusion

AMC concludes that the Edna May mineral resource estimate has been carried out using acceptable industry practice, providing non-selective mining is carried out at a low cut-off grade (e.g. 0.4 g/t Au). The estimate may be less reliable at higher cut-offs.

AMC considers that classification as measured, indicated and inferred resource is appropriate at the proposed mining cut-off (0.4 g/t Au).

AMC concludes that the Edna May mineral resource has been estimated using appropriate methods by a Competent Person, and has been classified and reported in accordance with the JORC Code.

2.3.2 Greenfinch Mineral Resource Estimate

2.3.2.1 Data Available

Sixteen drillholes were drilled at Greenfinch in the 1980s but further drilling was carried out in two main drilling phases completed in 2007 and 2009. Drilling is mostly RC with four DDH. Most drillholes have been sampled at 1 m intervals and assayed at commercial laboratories using the LeachWell cyanide leach method. DDH core was sampled at 1 m intervals.

Drillhole spacing ranges from 25 mE x 12.5 mN to 25 mE x 25 mN up to about 100 mbs. Drilling extends a further 50 vertical metres but at highly variable spacing.

All 2007 to 2009 drillholes are surveyed downhole. Drillhole collars are surveyed.

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Drilling up to 2007 was not supported by an industry standard assay quality control programme. Retrospective assay quality control drilling was conducted by twinning RC drillholes with DDH to judge whether the assays from earlier drilling are appropriate. The twinned holes provided support for the RC sampling although locally a significant variance was attributed to the nature of gold distribution.

Sixteen RC drillholes were selected for repeat sampling, which confirmed the original assays.

2.3.2.2 Resource Estimation

A geological interpretation was developed for the boundaries of the Edna May Gneiss, leucogranite dykes, base of total oxidation, and top of fresh rock, and surface mineralised wash material. A separate hangingwall domain was interpreted associated with a structural contact. No mine voids were interpreted.

Recoverable resources have been estimated using the MIK method with block support adjustment. The method estimates proportions of panels and grades above cut-offs for a range of cut-offs into panels with dimensions of 25 mE x 15 mN x 5 mRL. Estimation of the grade indicators used parameters determined from variography based on 2 m composite grades and an octant search strategy. A block support adjustment was used to estimate the recoverable gold resources assuming a selective mining unit of 5 mE x 3 mN x 2.5 mRL and grade control sampling at 8 mE x 5 mN x 1 mRL.

Bulk densities have been applied as for the Edna May estimate.

2.3.2.3 Resource Classification and Reporting

The MIK resource estimate provides a range of tonnages and grades above specified cut-offs. The resource estimate was classified into measured, indicated and inferred resource categories by flagging the model using a number of criteria that indicate confidence in the estimate. The criteria considered were:

Minimum number of composites found in the search neighbourhood. Measured and indicated resources required a minimum of 16 composites for successful estimation, and inferred resources required a minimum of eight composites.
Minimum number of spatial octants informed. Measured and indicated resources required at least four octants to contain at least one composite, and inferred resources required at least two octants with at least one composite.
Distance to informing data. Measured resources were estimated in a search ellipse of rotated dimensions of 25 m x 20 m x 10 m, and indicated and inferred resources were estimated with this search ellipse expanded by 50%.

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2.3.2.4 Conclusion

AMC concludes that the Greenfinch mineral resource estimate has been carried out using acceptable industry practice, providing non-selective mining is carried out at a low cut-off grade (e.g. 0.4 g/t Au). Even at 0.4 g/t Au cut-off, continuity might be poor.

AMC considers that classification of part of the estimate as measured resource on a cell-by-cell basis could be reviewed given the poor continuity of the highest confidence resource category.

AMC concludes that the Greenfinch mineral resource has been estimated using appropriate methods by a Competent Person, and has been classified and reported in accordance with the JORC Code.

2.3.3 Edna May Underground Resource Estimate

2.3.3.1 Background

Historic mining operations at Edna May consisted of small scale underground mining of arcuate quartz reefs within the Edna May Gneiss. Seven principal veins, stacked west to east, are known as the Western, Edna May Hangingwall, Edna May, South, Central, Middle and Consolidated reefs. Each of the reefs has a similar antiformal shape, comprising a thin (<1 m) limb along the footwall contact, thickening (up to 6 m) in the west facing hinge zone and thinning again to 1 m or less as it conforms to wallrock foliation towards the hangingwall contact. In detail, the reef geometries are more complex with individual limbs splitting, converging and traversing other veins. The thickened hinge zones were the focus of historic mining, and historic mine plans indicate the west-north-west plunge persisting to at least 250 mbs. The reefs are often associated with lower grade halo mineralisation.

In the 1980s, a decline was developed to access the reefs below the open pit, but this was unsuccessful, possibly because the decline approached the reefs where they interacted with a major pegmatite dyke, and a change in orientation of the reefs in a hinge zone. Fans of drillholes targeting the reefs were drilled during this period.

2.3.3.2 Data Available

Surface drilling targeting the reefs has occurred sporadically since the 1980s, but a drilling campaign by Catalpa in 2010 completed 19 drillholes in the reef area. All of the available drillholes (98 drillholes) have been used to develop a resource estimate.

Some diamond drillholes completed before 1994 were logged to geological contacts but sampled uniformly at 1 m intervals making them less effective for modelling narrow reefs. Underground drillholes were logged and sampled to geological contacts, and whole core submitted for assay. Assays from these older holes were carried out using fire assay. An assay quality control protocol was not in place.

All the recent drillholes are surface diamond drillholes completed using contemporary industry practices. Drillholes were logged and sampled to geological contacts with half-core samples submitted for assay. Samples before 2010 had been variably assayed

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using fire assay, cyanide leach and screen fire assay. Since 2010, assays have been completed by fire assay with an Atomic Absorption Spectrometry (AAS) finish with an industry-standard assay quality protocol in place. The results indicate that there are no significant concerns with sample preparation and assaying procedures.

In the area of the resource estimate drillhole spacing is about 15 m x 20 m.

2.3.3.3 Resource Estimation

Eight quartz reefs were identified with corresponding mineralised haloes (Figure 2.3). The interpretation of the reefs was constrained within the Edna May Gneiss and bound to the south by a sub-vertical pegmatite dyke. The upper parts of reefs are constrained by a sub-horizontal leucogranite dyke. Some of the interpreted reefs correspond to historically mined reefs. The Edna May Reef zone and interpreted South Reef and Western Reef zones have been identified.

Figure 2.3 Geology Plan at 1050 mRL Showing Interpreted Reefs and Halos

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Hinge zones that historically hosted the best mineralisation appear to be a combination of converging reefs.

Interpretation of the reefs was based on geology with assistance of computer software. The arcuate geometry of the reefs was based broadly on historical mapping. The mineralised haloes surrounding the reefs were modelled using a 1 g/t Au grade envelope around each vein. The pegmatite and leucogranite dykes were also interpreted.

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A resource model was developed using software that uses a uniform cell size (5 m x 5 m x 5 m) and assigns proportions of reef, halo or host rock that occur within the cell. Grade was estimated using ordinary kriging, using parameters derived from a study of variography with a two pass approach of increasing search ellipse dimensions. The resulting model returns a grade for each rock type that falls within the model cell. A uniform density of 2.7 t/m[3] was applied to the model.

2.3.3.4 Resource Classification and Reporting

The classification of the estimate as indicated and inferred resource is based on distinguishing the two estimation passes, geological confidence, and model validation. Parts of the model estimated in the smaller search ellipse were classified as indicated resource, and those estimated with the wider search ellipse were classified as inferred resource.

AMC considers the search parameters are an appropriate indicator of overall confidence in the estimate, although application of the classification to individual model cells can result in discontinuous zones of mineral resource categories.

2.3.3.5 Conclusion

AMC concludes that the Edna May underground mineral resource estimate has been carried out using acceptable industry practice. The possibility of economically mining halo mineralisation should be assessed as part of underground mining studies.

The classification of the estimate as indicated and inferred resource is appropriate.

AMC concludes that the Edna May underground mineral resource has been estimated using appropriate methods by a Competent Person and has been classified and reported in accordance with the JORC Code.

2.4 Exploration

Catalpa has a 100% interest in the Edna May gold mine and surrounding tenements covering 20 km to 30 km of strike of the Westonia greenstone belt. A number of historic mining operations are located within this area. Most recent exploration and resource definition has focused on down-dip continuity of the Edna May open pit, the adjacent Golden Point mineralisation and the Greenfinch deposit. Deep drilling has tested the continuity of higher grade quartz reefs for possible underground mining.

In 2009, Catalpa carried out an extensive auger geochemical sampling over the entire group of tenements that identified anomalies for further work. In 2011, an exploration consultant compiled exploration data and recommended areas for further work. Exploration of these targets is at an early stage.

In AMC’s modelling scenarios, Case 2 makes provision for some exploration success resulting in additional mine production, production from a conceptual underground mining operation, and possible recovery of tungsten from plant tails with a concomitant increase in gold recovery.

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2.5 Geotechnical and Hydrological Issues

2.5.1 Geotechnical

The ACM open pit contained a significant quantity of water that had accumulated since the decommissioning of previous mining operations. The pit water has impacted the weathered material surrounding the pit, and resulted in significant wall failures along the entire north side of the pit and 50% of the southern wall.

Since Catalpa obtained ownership of the project, ground conditions influencing open pit wall stability have been assessed by a number of geotechnical consultants.

For the 2008 Updated Feasibility Study, the pit area was divided into six design sectors based on the orientation of the pit wall and the possible failure mechanisms that may occur in each sector. Slope parameters for weathered and fresh material types were developed for each sector and applied to the open pit design.

Since the commencement of mining by Catalpa, wall stability has varied from very poor (collapsed) to good.

Persistent instability has occurred in the stage B pit, upper north wall. An extensive failure occurred in mid 2010, which disrupted the planned mining schedule for a period of several months until the failed material was removed.

The stage C pit north wall design was significantly flattened to less than 30[o] to minimise the risk of further wall stability impacting on ore supply.

The final wall design is not required for a further 2 to 3 years, allowing time to monitor stage wall performance prior to designing the final wall.

2.5.2 Hydrology

Average annual rainfall at the project area is typically 328 mm of which over half typically falls in the four months May to August. Rainfall run-off is likely to occur as a broad, shallow sheet-flow across the site with some localised channelling.

Ground water is encountered some 28 m to 40 m below surface and is saline at approximately 25,000 mg/L TDS. Inflows experienced in previous phases of mining at Edna May have been estimated at 60 L/sec.

Pit dewatering is achieved through transient sumps established in the open pit in conjunction with the mining operations, along with production bores drilled to intersect underground voids from prior mining operations. It is assumed the network of voids is sufficiently clear and connected to the underground aquifers.

There are no significant natural potable water sources in the region.

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2.5.3 Conclusion

AMC considers that geotechnical and hydrogeological assessment and design approaches are consistent with good industry practice, and that these matters should not impose material risk to the project.

The staged approach to open pit development is appropriate and allows the upper north wall stability to be monitored and assessed prior to design of the final pit wall.

2.6 Ore Reserves

The most recent ore reserve estimate was completed at 30 June 2011 and is shown in Table 2.2. The ore reserves are estimated based on depletion of a previous ore reserve completed as at 31 December 2010.

Table 2.2 Edna May Ore Reserve at 30 June 2011

Ore Reserve Locations	Proved Reserve	Proved Reserve	Proved Reserve	Probable Reserve	Probable Reserve	Probable Reserve	Total Reserve	Total Reserve	Total Reserve
	Tonnes (Mt)	Au (g/t)	Au (koz)	Tonnes (Mt)	Au (g/t)	Au (koz)	Tonnes (Mt)	Au (g/t)	Au (koz)
Edna May Greenfinch Stockpiles	14.4 0.8 –	1.1 1.1 –	504 28 –	8.5 1.7 2.2	1.1 1.0 0.5	298 58 38	22.8 2.5 2.2	1.1 1.1 0.5	803 86 38
Total Reserve	16.5	1.1	532	12.4	1.0	394	27.5	1.1	927

2.6.1 Edna May Open Pit

The initial ore reserves for the Edna May open pit were prepared in December 2008 as part of the 2008 Updated Feasibility Study. Key parameters on which the December 2008 Edna May ore reserve have been established are summarised in Table 2.3.

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Table 2.3 Edna May Ore Reserve Input Parameters (December 2008)

Parameter	Unit	Value
Ore Production Rate: Years 1 & 2	Mtpa	2.8
Year 3	Mtpa	3.2
Gold Price (Average)	$/oz	1,025
ProcessingCost: 2.8 Mtpa	$/t ore	12.40
3.2 Mtpa	$/t ore	11.71
ProcessingRecovery: Oxide	%	88.6
Transition	%	91.8
Primary	%	91.8
MiningCosts	$/t	3.59
General and Administration Cost IncludingMarketing	$Mpa	3.2
Mine Supervision	$Mpa	1.7
Dewatering	$Mpa	0.15
Grade Control	$/t of ore	0.36
Rehabilitation	$/t of waste	0.20
Royalties	%	4.5

The open pit limits were determined by pit optimisation using Whittle Four-X optimisation software. Only measured and indicated resources were used in the optimisation. Dilution and ore loss were incorporated into the resource model and no further allowances were made.

A pit design was completed based on the optimisation results. Smaller pit shells were used for intermediate pit stage designs.

The ore reserves were updated in December 2010. Significant changes to the ore reserve inputs included an increase in gold price to $1,250/oz and an updated resource model, with other inputs remaining as listed in Table 2.3. The December 2010 ore reserves are based on the May 2010 model resource model and a pit design optimised using Whittle Four-X software. This work resulted in a larger pit and an increase in ore reserves at a gold cut-off grade of 0.4 g/t Au.

2.6.2 Greenfinch Open Pit

The ore reserve estimate for the Greenfinch deposit was prepared in November 2009 utilising the mineral resource as discussed in Section 2.3.2 of this report. The ore reserves are based on a gold price of $1,250/oz and a gold cut-off grade of 0.4 g/t Au with all other input parameters the same as for the December 2008 Edna May estimate (See Table 2.3).

2.6.3 Surface Stockpiles

Mineralised waste from prior mining have been tested through RC drilling and converted to probable ore reserves.

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2.6.4 Conclusion

AMC concludes that the Greenfinch and Edna May ore reserves have been estimated using appropriate methods by a Competent Person and have been classified and reported in accordance with the JORC Code.

2.7 Mining Operations

Mining of Edna May open pit is undertaken using standard open pit methods. Backhoe excavators and rigid frame off-highway trucks are used to mine and haul the ore and waste. A 5 m high drill and blast bench height is used with material excavated on 2.5 m flitches.

Mining is by owner mining, utilising a dry hire fleet supplied and maintained by an equipment hire group. Catalpa supplies all personnel to operate the equipment.

The pit is being developed in a series of stages. The first of these is to re-establish the northern wall of the pit which has experienced significant wall failures over the past decade, and to provide ready access to the ore in the pit floor. Mining of the second stage is approaching completion and the third stage is in progress.

The use of staging enables smoothing of the total mining volumes over the mine life, provides regular ore supply to the process plant, and allows review of the interim pit wall performance before designing and mining the final pit walls.

Mining of Greenfinch is scheduled to commence in 2014.

Total material movements for the Edna May and Greenfinch open pits are indicated in Figure 2.4. The annual requirements peak at approximately 15 Mt from 2014 to 2016.

Figure 2.4 Scheduled Mining Tonnages

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EMO BASE CASE ANNUAL OPEN PIT MINING TONNAGES
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----- Start of picture text -----

18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
Waste
8,000,000 Stockpile
Ore
6,000,000
4,000,000
2,000,000
0
2012 2013 2014 2015 2016 2017 2018 2019
----- End of picture text -----

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2.7.1 Equipment

Major items of equipment are:

1 x Ex1900 Excavator (primary loading).
1 x Ex1200 Excavator (backup and miscellaneous works).
7 x Cat777 Trucks.
1 x CatD10 Dozer.

An extra excavator is scheduled from early 2013 until 2016 to meet scheduled movement requirements.

Force Equipment Service & Hire supply and maintain the mobile equipment on a fixed and variable price contract. There is a fixed monthly charge for labour, infrastructure, and overheads, with a variable charge covering Service Meter Units (SMU) hours at a fixed rate per hour and consumables at cost.

Drilling, blasting, and grade control is contracted to Wallis Drilling.

2.7.2 Mining Performance

Actual mining performance for the 2011 financial year is provided in Table 2.5. Total movement was 6% under budget; however ore mined is significantly lower as a result of the north wall failure, which restricted ore access until the failed material was removed.

Table 2.4 2011 Actual Mining Tonnages

Production	Actual (kt)	Budget (kt)
Ore mined Low grade ore mined Re-handle Waste mined	2,075 514 897 6,509	2,828 361 187 7,234
Total Mined	9,994	10,610

Excavator and truck productivities are shown in Figure 2.5. Truck productivity is on target; however, excavator productivity is below target levels of approximately 1,400 tonnes per SMU hour (t/SMU.hr), sitting in a range of 800 to 1,000 t/SMUhr. Lower productivity is attributed by Catalpa to inefficient mining practices used to access ore and operator inefficiencies. AMC assumes that near budget tonnages were mined by either higher equipment hours or use of the backup excavator for production mining.

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Figure 2.5 Equipment Productivity

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2.7.3 Voids

Significant reef mining has occurred on the Edna May and other reefs, as a result, voids or loosely filled stopes and other openings are encountered in the pit. Suitable management practices have been developed to prevent safety concerns and production difficulties. This is common to pits in similar areas of historic mining.

There is a potential for wall instability due to voids intersecting the walls and floor of the pit. AMC believes that with appropriate consideration, this issue should not adversely impact materially on the project.

2.7.4 Conclusion

AMC considers the mining methods to be standard industry practise. The use of dry hire equipment operated by the owner is relatively common.

AMC considers sufficient equipment is scheduled, provided planned productivities and equipment availabilities are achieved.

2.8 Non-Reserve Inventory Sources

2.8.1 Underground

Catalpa is adopting a phased approach to the evaluation of underground mining below the Edna May open pit.

A scoping study, based on reef dimensions and grades from historical records has been completed. The study indicated there is economic potential for small scale, moderate grade underground mining at Edna May.

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An initial underground mineral resource estimate was published in May 2011. The indicated and inferred resources at a 5 g/t Au cut-off grade are similar to the assumed mining inventory used in the scoping study. However, no further work has been conducted on the scoping study to link the mine plan in the scoping study to the resource.

A trial mine is being planned. This entails dewatering the existing underground development, further development and trial stoping to obtain a bulk sample on the 1090 mRL. From this bulk sample, a mine scale understanding of ore continuity and grades can be obtained. The development will also provide a drill platform to allow higher density drilling of 100 m to 150 m below the 1090 mRL.

AMC consider a small higher grade underground mine will provide a useful boost to the lower grade open pit ore. The phased approach, with small capital investments at each step, and with each step providing a higher level of confidence, is an appropriate approach to the project evaluation.

For AMC’s Case 1 modelling scenario, the scoping study mining inventory of 408 kt at 8.5 g/t Au (112 koz) has been used.

Underground costs from the scoping study are considered reasonable and have been used. These total $39M capital and $59M operating costs.

Significant drill intercepts have been obtained down dip of the existing resource, and on the adjacent Greenfinch lode. For the Case 2 modelling scenario, AMC has extended the mine life by 1.25 years with a mining inventory of 631 kt at 8.1 g/t Au (164 koz). This represents extensions to the current Edna May resource and the successful conversion of the drill intercepts to mining inventory at the nearby Greenfinch lode.

2.8.2 Resource Conversion

The Edna May resource model indicates significant mineral resource below the open pit. In addition, the Greenfinch resource model is constrained by lack of drilling below the open pit. AMC believes there is a reasonable possibility that additional mining inventory will be established through further drilling and mining studies, and is of the opinion it is reasonable to include an additional 3.5 Mt at 1.1 g/t Au (124 koz) in the Case 2 modelling scenario.

2.8.3 Exploration Success

AMC considers that Catalpa will, with further exploration activity, establish additional mining inventories from the tenements held in the region. For the purposes of its Case 2 projections, AMC has assumed the addition to open pit inventories approximately equivalent to the current Greenfinch ore reserve. For the upside case, AMC has assumed 2 Mt at 1.2 g/t (77 koz).

2.8.4 Tungsten

Tungsten was extracted during the second phase of mining during the World War 2 period.

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Catalpa has undertaken scoping metallurgical test programmes on Edna May tailings to determine the feasibility of extracting tungsten minerals. Further work with larger samples is underway to upgrade the project to feasibility study level.

Tungsten grades are estimated at 0.019% scheelite (WO3) based on tails sampling.

Gravity separation tests with spirals indicated that approximately 65% of the scheelite in the sample tested could be recovered to a pre-concentrate. Catalpa has assumed that with further metallurgical development, a tungsten concentrate will be able to be produced at a grade of 68% WO3, and a tungsten recovery of 65%.

Tungsten recovery is only included in the Case 2 modelling scenario.

Testwork indicates the potential to also increase gold recoveries by approximately 3% through addition of the gravity circuit. This was factored into the Case 2 modelling scenario for Edna May and Greenfinch open pit ore only from 2013 onwards.

Capital costs of $10M are included for a gravity recovery circuit and operating costs of approximately $100,000 per month fixed and $0.22/t variable.

2.9 Metallurgy and Processing Operations

2.9.1 Process Plant Description

The refurbished Edna May gold processing plant is a conventional milling and carbon in leach (CIL) facility. A significant number of equipment items installed at Catalpa were sourced from a previous operation at Big Bell gold mine in Western Australia. Commissioning of the refurbished plant commenced in April 2010. The plant consists of the following unit operations:

Primary crushing of run-of-mine ore in a new single toggle jaw crusher.
Storage of primary crushed ore in a coarse ore stockpile with reclaim facilities.
Milling of ore in a two-stage circuit consisting of:
A primary semi-autogenous grind (SAG) mill (6.71 m ID x 2.59 m EGL) fitted with a 2 MW motor.
Secondary ball mill (5.03 m ID x 8.21 m EGL) fitted with a 3.72 MW motor.
Pebble crushing of SAG mill oversize in a cone crusher with crushed pebbles conveyed forward to the ball mill.
Classification of ground slurry in hydrocyclones in closed circuit with the ball mill to an overflow size of approximately 80% passing 150 microns.
Gravity concentration via a 40 inch Knelson concentrator to recover coarse gold, and subsequent recovery of gold using an Acacia intensive cyanidation circuit equipped with an electrowinning cell.
Cyanidation of ground ore slurry in a CIL circuit consisting of two 2,000 m[3] leach tanks, and six 1,100 m[3] adsorption tanks all in series.

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Acid washing of loaded carbon in a dedicated eight tonne rubber lined column.
Desorption of gold from carbon by elution in an 8t Zadra elution column, followed by recovery of gold by electrowinning and smelting.
Reagent storage and addition systems.
Residue thickening and subsequent pumping of thickened barren residue to a residue storage facility.

A simplified process plant flowsheet is presented in Figure 2.6.

Figure 2.6 Simplified Block Flowsheet

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2.9.2 Process Plant Performance

The Edna May plant was commissioned in April/May 2010 and has achieved a slow ramp up. Production from June 2010 to May 2011 is compared with budget data in Table 2.5.

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Table 2.5 Process Plant Performance

Production Parameter	Unit	YTD June 10-May 11	Budget YTD June 10-May 11
Ore Milled Ore Grade Gold Recovery Gold Production	t g/t Au % koz	2,134,371 0.95 89.6 58.4	2,557,814 1.12 92.7 85.4

The production data shows that actual ore processed is 17% below budget, and gold production is 32% below budget. The below budget gold production is a combination of below budget ore grade, throughput, and gold recovery. Plant throughput and gold recovery have been inconsistent on a monthly basis as presented in Figure 2.7. Plant throughput finally achieved design levels in May 2011.

Figure 2.7 Monthly Plant Operating Performance

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The processing plant has experienced a number of operational issues that have limited both ore throughput and gold recovery. The main causes of poor performance and resolution of the issues are summarised below:

SAG Mill Liner Wear. Excessive wear was experienced with the liners in the SAG mill requiring the mill to be taken off line for frequent liner replacements. This issue seriously impacted the utilisation of the plant and hence throughput. Resolution of the issue was achieved with a change of liner design, and increased fresh ore in feed blend. Wear rates are now at satisfactory levels. Further design changes to mill discharge ports and grates are being undertaken to improve SAG throughput.

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Leach Tank Agitator Failures. The agitators installed in the plant have systematically failed from fatigue due to poor design. The agitator gearboxes have also experienced bearing failures. The failures have resulted in leach tanks being taken off line for repair, and have impacted gold recovery and throughput. The problem is being rectified by the installation of a new style of agitators from a proven and reliable supplier.
Process Water Availability. Inadequate process water availability has necessitated temporary reductions in plant throughput. A new tailings thickener has been installed to overcome the water limitations, as well as installation of additional borefield capacity.
CIL Tank Screen Deficiencies. The amount of wood fibre in slurry from old workings resulted in screening deficiencies in the CIL tanks, causing tank overflows, losses of carbon, slurry short circuiting, and therefore loss of recovery and throughput. The issue has mostly been resolved by a change in screen design and systematic removal of wood from stockpiles.
Power Outages. Power outages have been at an unsatisfactory level due to a number of issues including extreme weather conditions, regional power grid tie-ins to a wind-farm, and a number of spares issues. This has impacted on plant utilisation and throughput. Catalpa has engaged in discussions with Western Power to improve future power reliability.

AMC considers that most of these issues have been resolved and understands throughput is expected to reach the design throughput of 2.8 Mtpa in coming months. Gold recovery is also expected to improve with plant improvements. AMC notes that the ore grind size has been generally coarser than the target 80% passing 150 microns, but it has not been possible to obtain full load power on the ball mill. Options for installing grates in the ball mill to increase the power draw are currently being evaluated.

2.9.3 Metallurgy and Future Plant Performance

2.9.3.1 Throughput

Catalpa plans to increase the plant capacity to over 3.2 Mtpa in 2012. Comminution modelling was undertaken during the feasibility study by specialist consultants Orway Mineral Consultants (OMC) to establish the expansion requirements for the higher throughput. OMC determined that the addition of a secondary crushing circuit would result in a throughput of 3.28 Mtpa at 94% availability. Preliminary engineering cost studies by GR Engineering Services (GRES,) have indicated that the total capital for the increased plant throughput to 3.28 Mtpa will be $12.1M which includes $4.6M for the crushing circuit, and $7.5M in other plant modifications to meet the increased throughput.

Based on the documentation available, AMC’s opinion is that the increased throughput can be achieved.

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2.9.3.2 Recovery

Metallurgical testwork undertaken as part of the 2008 Updated Feasibility Study showed relatively consistent gravity-leach gold extractions of around 92% to 94% for primary ore across the orebody. Testwork on the oxide laterite ore resulted in lower extractions of around 89% to 90% at the target grind size of 80% passing 150 microns. The amount of oxide in blend as shown in the life-of-mine plan is initially around 10% to 20%, but will decrease to around 5% from 2013.

No testwork has been sighted by AMC for samples from the Greenfinch deposit. AMC expects the ore rock type and mineralogy of the Greenfinch oxide and primary ore zones to be similar to that of Edna May, and therefore plant performance of this ore should be similar to Edna May.

No testwork has been sighted for the Edna May underground mineralisation. For the purposes of this review, it is assumed that ore from this source will have similar metallurgy to that of the fresh ore currently being mined.

2.9.3.3 Tungsten Recovery

Historical records have shown that tungsten was recovered from Edna May in previous operations. Catalpa has undertaken scoping metallurgical test programmes on Edna May tailings to determine the feasibility of extracting tungsten minerals. Further work with larger samples is underway.

Mineralogical work has shown that tungsten is present as scheelite, Grain size was shown to be variable, but mostly less than 100 microns. Scheelite grains were observed to be nearly all composite grains with gangue.

Conventional processing for recovery of scheelite usually involves a combination of gravity concentration and flotation. Flotation is used to remove pyrite from concentrate, and oxide flotation can be used to further concentrate tungsten minerals. Finally magnetic separation can be used to further upgrade the gravity concentrate.

Initial gravity separation tests with spirals indicated that approximately 65% of the scheelite in the sample tested could be recovered to a pre-concentrate. Sighter testwork on concentrate suggested that the scheelite responded to oxide flotation. A pilot spiral has since been installed at site and used to obtain larger samples of pre-concentrate for testing. Analyses of the tailings slurry fed to the spiral have shown that the tailings contain around 0.02% WO3 to 0.03% WO3. Survey samples from the pilot spiral have shown that up to 40% of the tungsten and 50% of the gold in the CIP tail may be recovered to a pre-concentrate of around 6% mass of feed. Work is continuing to examine recovery of gold and scheelite from the collected samples. Testing has included fine grinding of gold bearing pyrite to recover gold.

For the purposes of AMC’s Case 2 modelling scenario, it has been assumed that a tungsten recovery plant will be installed to treat CIL tailings. An initial capital cost allowance of $5.5M for a gravity plant is made to recover coarse scheelite, followed by a further $4.5M to install a centrifuge to recover fine scheelite. It is assumed that with further metallurgical development a tungsten concentrate will be able to be produced at

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a grade of 68% WO3 and a tungsten recovery of 65%. It is also assumed that gold will be recovered from gravity concentrate using flotation, fine grinding, and cyanidation techniques. It is assumed that gold recovered will be 3% of gold in feed to the CIP plant.

AMC stresses that the assumptions used in the recovery of a suitable tungsten concentrate are unproven and notes that testwork is continuing.

2.10 Waste Rock and Tailings Disposal

Waste rock from the open pit mining is placed on waste dumps located around the Edna May and Greenfinch open pits. Waste dumps are located on previously disturbed areas in order to minimise new land clearance. The waste dumps have a planned height of 25 m above surface.

The tailings storage facility (TSF) is located north of the open pit and to the north of the previous TSF. The TSF is designed to store 28.8 Mt of tailings and constructed in a number of stages.

2.11 Infrastructure and Power

Compared to many like mining operations, the Edna May Gold Mine generally is well serviced with support infrastructure, principally as a result of its location.

2.11.1 Access

The Great Eastern Highway, the main road from Perth to Kalgoorlie and the east coast of Australia runs some 12 km to the south of the mine. A sealed road connects the township of Westonia, which sits adjacent to the mine and the highway. Being situated some 312 km from Perth by highway, the mine has good access to industrial support.

The majority of personnel are bussed to the mine, principally from Perth; a trip taking approximately four hours.

An airstrip is situated some 5 km south of the mine and is suitable for the Royal Flying Doctors Service.

2.11.2 Water Supply

The Goldfields water supply pipeline runs adjacent to the highway to the south, and currently supplies water to the township of Westonia. A reverse osmosis plant has recently been installed by Catalpa to increase supply of potable quality water to the mine site.

Process water is obtained from the underground mine. A borefield is under construction 15 km northwest of the site with completion expected in late 2011. This will allow dewatering of the underground mine prior to re-establishing underground mine access.

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2.11.3 Electricity

Electricity is sourced from the southwest interconnected system via a 22 kV line from the Carrabin 66/22 kV substation located 12 km to the south of the mine.

2.11.4 Accommodation

Catalpa has established a 136 room camp to accommodate mine personnel in the township of Westonia.

2.12 Environmental and Community Issues

Environmental management at the project involves significant challenges in rare flora protection, noise management and, later in project life, acid mine drainage. These challenges have been addressed in a thorough, pre-emptive manner and, while they will continue to demand close scrutiny and commitment of appropriate resources, are expected by AMC to be manageable without significant marginal cost or restriction of access to resources. There are no current or foreseeable environmental challenges which could have a significant impact on the project.

Statutory approvals for current operations are in place, and planning of future approvals well advanced. In particular, clearing permits and licenses to disturb rare flora are obtained well in advance of operations and carefully implemented, enhancing regulators’ confidence that biological conservation aims are being met.

Acid drainage is a potentially-significant issue in future, but the quantities of sulphidic material involved are likely to be sufficiently small, and easily managed using established techniques, and without significant incremental closure and rehabilitation costs.

Noise impacts on nearby residents will continue to demand vigilance and impactminimisation initiatives, but a solid track record of complaint management and noise amelioration can be expected to protect the operation from risk of significant curtailment.

Closure and rehabilitation have been addressed in a conceptual closure plan (no detailed costings), and AMC estimates a closure liability ranging from $6.1M to $8.3M, depending on the extent of acid drainage risks of mine waste and tailings. These risks have yet to be fully assessed. It will be critical for Catalpa to complete acid drainage risk assessments in the next 12 months.

Given the relatively small proportion of total mine waste at Edna May that could be potentially acid forming (PAF), AMC considers it unlikely that management of this material will pose either a technical or financial constraint on the project.

2.13 Capital and Operating Costs

AMC was provided with budget and actual costs for the 2011 financial year contained in the Catalpa monthly reports, 2012 budget, and Catalpa developed life-of-mine physical and cost models for Case 1 and Case 2 modelling scenarios.

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2.13.1 Capital Costs

2.13.1.1 Exploration

In Case 1, no exploration expenditure is allocated and 50% of underground diamond drilling is allocated to resource development.

Catalpa has planned exploration expenditure of $1M to $2M per year that is included in Case 2.

2.13.1.2 Mining

No open pit mining capital costs were included. All mining pre-strip is included in operating costs.

Underground capital is allocated as follows:

All costs until the commencement of ore production is capital – expansion.
Capital costs post commencement of ore production is sustaining capital.
50% of diamond drilling costs allocated to resource development.

2.13.1.3 Processing

Current capital projects are associated with improving the reliability of the mill to achieve a consistent design throughput, and ensuring a reliable water and power supply. A further $12M is allowed for the upgrade of processing facilities to a throughput of 3.2 Mtpa.

2.13.1.4 Closure

AMC estimate closure costs ranging from $6.1M to $8.3M based on the current reserves, and depending on the significance of the impact of acid mine drainage. AMC used the upper end of this range to allow for closure of the underground mine as well.

AMC allowed an additional $0.1M for rehabilitation of another open pit in Case 2.

2.13.1.5 Sustaining

TSF lifts are allocated $2M approximately every 3 years.

Other sustaining capital is allocated at 1% of project capital or approximately $0.53M per year.

2.13.2 Operating Costs

AMC has reviewed the 2011 budget and actual costs and 2012 budget costs. 2011 actual costs were significantly higher than the 2011 budget. The 2012 budget reflects the 2011 actual costs and will be approximately $90M total site costs.

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AMC considers the 2011 actual and 2012 budget costs to be a reasonable guide for the life-of-mine costs.

2011 actual and 2012 budget costs are shown at department level in Tables 2.6 and 2.7 for total costs and unit costs respectively.

Table 2.6 Total Operating Costs

Cost Area	Actual Cost 2011 ($M)	Budget Cost 2012 ($M)
Mining and geology Processing Administration HSEC	40.2 36.9 5.7 1.8	40.2 42.3 5.3 2.1
Total Site Costs	84.6	89.9

Table 2.7 Unit Operating Costs

Cost Area	Actual Cost 2011 ($/t)	Budget Cost 2012 ($/t)
Open pit tonne mined including pre-strip (cost per tonne mined) Open pit ore tonne mined (cost per tonne mined) Process (cost per tonne milled) HSEC (cost per tonne milled) Administration (costper tonne milled)	4.02 19.37 15.95 0.78 2.45	4.01 13.67 14.39 0.73 1.80
Total cost excluding royalties (cost per tonne milled)	36.53	30.59

2.14 Edna May Modelling Scenarios

AMC has prepared two modelling scenarios for the Edna May Gold Mine.

Case 1 production plan is based on the December 2010 open pit ore reserve, less AMC’s adjustment for estimated depletion to June 2011[5] , plus a portion of the current underground mineral resource that AMC believes may be recovered by underground mining. The Ore Reserve at 30 June 2011 has subsequently been released by Catalpa and varies slightly to that used as the basis for Case 1, due to actual depletion and the final stockpile being slightly different to AMC’s estimates.

Case 2 production plan adds material to the Case 1 mining inventory to reflect the potential for mining a greater portion of the open pit resource, and mining additional material discovered through successful exploration. AMC has also extended the underground mining inventory based on the potential for exploration success. Case 2 assumes that a tungsten recovery plant will be constructed.

5 The 30 June 2011 Ore reserve estimate had not been prepared prior to AMC completing its modelling scenarios.

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The mining inventories used in the two cases are summarised in Table 2.8. Case 2 represents a 24% increase in contained gold ounces over Case 1.

Table 2.8 Case 1 and Case 2 Mining Inventories for Edna May

		Case 1			Case 2
Source	Tonnes (Mt)	Au (g/t)	Au (Moz)	Tonnes	Au	Au (Moz)
				(Mt)	(g/t)
Edna May & Greenfinch open pits Stockpiles Underground Edna May & Greenfinch extensions New open pit (regional discovery)	25.2 1.6 0.4 – –	1.1 0.7 8.5 – –	0.89 0.04 0.11 – –	25.2 1.6 0.6 3.5 2.0	1.1 0.7 8.1 1.1 1.2	0.89 0.04 0.16 0.12 0.08
Total	27.5	1.2	1.04	33.2	1.2	1.30

Note: Totals do not necessarily equal the sum of the components due to rounding adjustments.

Operating costs in both cases have been based on the 2012 budget provided by Catalpa. Underground mine operating costs have been estimated by consultants engaged by Catalpa. AMC considers the costs to be reasonable.

Capital expenditure for Case 1 includes expenditure associated with improving the reliability of the mill to achieve a consistent design throughput, and ensuring reliable water and power supplies ($6.9M). A further $12M is provided to upgrade processing facilities to a throughput rate of 3.2 Mtpa. Expenditure of $16.1M has been included for establishment of the underground mining operation.

Capital expenditure for Case 2 includes the additional cost of constructing the tungsten recovery plant. AMC considers that the exploration budget is adequate for the envisaged discovery and resource conversion assumed in Case 2.

Sustaining capital costs have been included in both cases. These costs include $2M every three years for expansion of the tailings storage facility.

Closure costs of $8.3M have been included in both Cases. A further $0.1M has been added to Case 2 for rehabilitation of another small open pit.

2.15 Risks

Open pit mining may continue to be impacted by the north wall instability. The Stage C pit wall has been laid back at <30° to secure ore supply. The final wall design has not been adjusted from the feasibility study design; however it is likely that the wall will need to be redesigned to a flatter angle.

There is a risk that the trial underground mine does not provide the confidence to commence full underground mining.

No environmental risks exist at project that AMC considers likely to cause significant operational constraint or significantly-increased management costs, provided the exemplary environmental management programmes operated to date are sustained.

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3 PAJINGO GOLD MINE (QLD)

3.1 Location and Background

The Pajingo Gold Mine (Pajingo) is located 53 km south of Charters Towers in north Queensland and is accessed by sealed road from Townsville via Charters Towers (Figure 3.1).

Figure 3.1 Location of Pajingo Gold Mine

==> picture [431 x 383] intentionally omitted <==

Mineralisation in the Pajingo area was discovered in 1983 by Battle Mountain Gold Company and an open pit operation commenced in 1986. In 1991, a joint venture was formed between Battle Mountain Gold Company (Battle Mountain) and Normandy Mining Limited (Normandy), and underground mining commenced in 1996. Newmont Mining Corporation (Newmont) acquired Battle Mountain in 2001, and in 2002 acquired 100% of Pajingo via its takeover of Normandy. In 2007, North Queensland Metals (60%) and Heemskirk Consolidated (40%) purchased Pajingo from Newmont.

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In May 2010, Conquest Mining Ltd (Conquest) initiated a takeover of North Queensland Metals and in September 2010, Conquest agreed to purchase the remaining 40% of Pajingo from Heemskirk Consolidated. The mine is now wholly owned and operated by Conquest.

The operation has the capability to process up to 650,000 tpa, but in recent years, underground production has been approximately 300,000 tpa. Conquest has recently commenced open cut production to supplement the underground ore feed and is actively seeking to delineate additional open cut resources to better utilise processing capacity.

Mining and processing takes place on three mining leases (MLs) which are enclosed by three Exploration Permits for Minerals (EPM’s). The total area of the tenements is 925 km[2] . Details of the tenements are shown in Table 3.1.

Table 3.1 Exploration Permits and Mining Leases

Tenement	Granted	Expiry	Size	Annual Rent	Holder
ML1575	1/05/1987	30/01/2021	2716 Ha	$129,417.40	NQM Gold Australia Pty Ltd
ML10215	1/12/1996	30/11/2016	230 Ha	$10,959.50	NQM Gold Australia PtyLtd
ML10246	1/06/2001	31/05/2021	1255/386 Ha	$29,848.40	NQM Gold Australia Pty Ltd
EPM 11152	15/08/1996	14/08/2011	162 Sub-blocks	$19,496.70	NQM Gold Australia PtyLtd
EPM 14187	4/03/2004	3/03/2012	5 Sub-blocks	$616.75	NQM Gold Australia Pty Ltd
EPM 17792	16/06/2010	15/06/2015	16 Sub-blocks	$1,973.60	NQM Gold Australia PtyLtd

AMC notes that all leases are held in the name of NQM Gold Australia Pty Ltd (NQM). It appears the leases have not been transferred into Conquest’s name.

Three additional EPMs are under application, see Table 3.2. A further three EPM applications are proposed, see Table 3.3 below.

Table 3.2 Exploration Permits Under Application

Tenement	Size
EPM18810	7 sub-blocks
EPM18801	23 sub-blocks
EPM18809	17 sub-blocks

Table 3.3 Exploration Permits Proposed

Tenement	Size
EPM17793	34 sub-blocks
EPM18407	17 sub-blocks
EPM 18405	12 sub-blocks

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3.2 Geology

3.2.1 Regional Geology

The Pajingo Epithermal System (PES) is located in the northern margin of the DevonianCarboniferous Drummond Basin which has an area of approximately 25,000 km[2] . The Pajingo tenements cover the contact between the Lolworth-Ravenswood block to the north and the Drummond Basin to the south.

Within the Drummond Basin, three stratigraphic cycles of sedimentation have been recognised, the most important of which is the Cycle 1 group, which consists of volcanics and volcaniclastics. This group is the host of all epithermals discovered so far, in the Pajingo area, it contains the Molly Darling Formation and the Mt Janet Volcanics.

Throughout the area, the Drummond Basin sequences are partially overlain by the Tertiary Southern Cross Formation sediments, alluvials and colluvials. Steeply dipping normal and transfer faults have formed at the margins of and within the basin.

Pajingo-style mineralisation is a low-sulphidation quartz-adularia epithermal-style gold system, which typically occurs in a volcanic environment associated with acid to intermediate rock types, and appears to be of a consistent age.

The mineralisation model is based on the Buchanan model. The model identifies a boiling zone that controls the deposition of precious metals, volatile element, and base metals in combination with quartz textures.

Boiling zones are usually marked by a silver to gold ratio of nearly 1:1, the presence of quartz textures such as crustiform, colloform and moss textures, and specific mineralogy such as adularia. A high level within the boiling zone may have higher silver to gold ratio such as 4:1 with high trace elements such as arsenic or antimony. The base of the boiling zone may have relatively high levels for copper, lead, zinc +/- antimony and relatively low trace elements.

For any drilling intercept of a quartz vein, the recognition of the level of boiling zone, by recognizing textures, element associations and the alteration assemblages is an important pointer for exploration in the PES.

3.2.2 Local Geology

The epithermal mineralisation at Pajingo, is hosted by the Mt. Janet Volcanic sub-group (part of Cycle 1) which is an andesitic package of massive lava flows, intrusives, auto-brecciated lava and fine ash to block tuffs, which dip approximately 30[o] to the south.

These andesites are also intruded by multiple thin barren basaltic dykes and sills. The Mt Janet Volcanics overlies the Molly Darling Formation dacitic group, and in the southern areas is overlain by felsic volcanics and epiclastics of the Doongara Formation which is then overlain by Tertiary sediments. Oxidation extends to 80 m below surface.

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The Vera Nancy fault corridor is the main mineralised structure within the PES. Regional seismic data suggest the corridor is dipping at 75° south near surface, and progressively flattens to 50° with depth. There are numerous epithermal quartz veins within the fault corridor. In general, veining strikes grid east with tensional jogs and intersecting faults producing high grade pods which trend grid east-north-east. The mine grid (VN1) is orientated with grid north towards 045.5° AMG. The location of the known individual lodes within the Vera Nancy fault corridor is shown in Figure 3.2.

Figure 3.2 Spatial Locations of Main Deposits at Pajingo

==> picture [432 x 249] intentionally omitted <==

Most lodes comprise a main vein, which carries the bulk of the precious metals, and splay veins. The main veins can vary from less than 1 m to 15 m in width, but are generally 2 m to 3 m wide. The veins are steeply dipping and plunge gently at about 20° to grid east. The corridor can be traced northwest to southeast for some 6 km. The main lodes are described in the following sections.

3.2.3 Jandam Lode

The Jandam Lode is located mine grid southeast of Vera and consists of two main veins J1 and J2 which are both highly variable in vein thickness, ranging from 0.3 m to 14 m in width. The J2 vein contains the majority of the mineralisation. Jandam has a higher variation in gold and silver values, and gold mineral types than the rest of the Vera Nancy System.

3.2.4 Veracity Lode

The Veracity Lode is covered by approximately 20 m of Tertiary sediments. It is located in the footwall of the Vera South deposit and is composed of two main veins with linking structures which trend grid northeast as footwall splays off the Vera Nancy fault corridor.

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Production for Veracity in Financial Year (FY) 2011 totalled 7,455 t grading 3.53 g/t Au for 846 oz.

3.2.5 Cindy Lode

The Cindy Lode is located south of the original Scott Lode and parallel to the Anne and Veracity Lodes.

3.2.6 Faith Lode

The Faith Lode occurs east of the Jandam Lode and appears to be a continuation of the Jandam-Vera South (J1/V1) structure. The Faith Lode appears to be truncated on its eastern edge by the Guinness Fault but is still open down dip. Current down dip depth is reported to be 365 m. The lode strikes east west on the VN1 grid for approximately 500 m.

3.2.7 Sonia Lode

Sonia Lode is composed of two structures which strikes eastwest for approximately 500 m and has a down dip extent of 200 m. The structures also appear to be truncated against the Guinness Fault. Production from Sonia for FY2011 totalled 23,825 t, grading 26.36 g/t Au for 20,190 oz. A total of 5,725 m was drilled for resource definition purposes in FY2011.

3.2.8 Zed Lode

The Zed Lode has been split into Zed-East, Zed-West, Zed-Central Upper and Zed-Central Lower for targeted drilling campaigns during 2011. The Zed Lode strikes east-west for over 900 m with a down dip extent of 280 m. Production on the Zed Lode for FY2011 totalled 6,000 t, grading 2.57 g/t Au, and producing 497 oz.

3.2.9 Venue and Vera North

The Venue and Vera North Upper resources make up an open pit resource composed of a series of veins extending to the Nancy vein system, and in mainly oxidised zones above 1150 mRL.

3.3 Pajingo Gold Mine Mineral Resource

Mineral resources for Pajingo are summarised in Table 3.4. The mineral resources are inclusive of ore reserves and are reported at a 1.0 g/t Au cut-off for underground resources and 0.65 g/t Au for open pit resources.

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Table 3.4 Mineral Resource for Pajingo at 30 June 2011

	Measured	Measured	Measured	Indicated	Indicated	Indicated	Inferred	Inferred		Total	Total
Vein	Tonnes (kt)	Au (g/t)	Au (koz)	Tonnes	Au (g/t)	Au	Tonnes	Au	Au	Tonnes	Au	Au
				(kt)		(koz)	(kt)	(g/t)	(koz)	(kt)	(g/t)	(koz)

			Underground (Cut-off grade 1.0 g/t Au)
Cindy	–	–	–	69	6.5	15	46	4.4	7.0	115	5.7	21
Faith	19	4.7	3	105	6.5	22	101	4.7	15	225	5.6	40
Jandam	110	5.1	18	997	4.3	138	453	2.7	39	1,560	3.9	195
Sonia	26	3.6	3	151	9.8	47	206	10.7	71	382	9.9	121
Venue-VNU	–	–	–	356	2.4	28	262	1.3	11	617	1.9	39
Veracity	2	16.9	1	299	6.0	58	123	3.8	15	425	5.4	74
Zed	43	7.1	10	526	4.0	68	1,147	3.5	130	1,715	3.8	208
Subtotal UG	200	5.4	35	2,502	4.7	375	2,337	3.8	288	5,039	4.3	698
			Open Pit (Cut-off grade 0.65 g/t Au)
VNU	–	–	–	102	2.5	8	7	0.9	0.2	110	2.4	8
Venue	–	–	–	203	3.3	22	1	1.7	0.1	205	3.3	22
Sub Total OP	–	–	–	306	3.0	30	8	1.0	0.3	314	3.0	30
Total Resource	200	5.4	35	2,808	4.5	405	2,346	3.8	288	5,354	4.2	728

3.3.1 Data Available

The resource data set for Pajingo is based on RC and DDH, and underground resource definition drilling. The spacing of surface drillholes approximates 60m along strike and 80m down dip. The spacing of underground DDH has varied over time between current 25m x 25m to 30m x 30m patterns, in comparison to previous 40m x 40m or 50m x 50m drilled patterns under Newmont ownership.

Mapping of development working faces provides geological control with the digitised positions of hangingwall and footwall contacts being used in the construction of the resource and the grade control models.

The majority of surface DDH are NQ sized (47.6mm core), while underground drilling is of a compatible LTK60 size (40.7mm core). Logging procedures are standardised in either spreadsheet (2008-2009 data) or Acquire database formats, with validation to restrict data entry to legal codes. All core is routinely photographed.

Surface diamond core has been sampled on 0.3 m to 1 m intervals, controlled by the nearest lithological contact, with the smallest sample being 0.3 m. Sampling has been conducted with half or a full core protocol, full core being used in 2003-2004 after coarse visible gold was discovered. Half coring resumed after 2004. Recoveries are recorded as being generally excellent (about 100%). Underground diamond drill core has been sampled on 0.5 m to 1.0 m intervals, controlled near lithological boundaries, with the smallest sample being 0.3 m.

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For the Jandam and Cindy Lodes, all samples were composited to 1 m for the resource estimation process. For the Faith, Sonia, Zed, Veracity and Venue-VNU Lodes, samples at full vein width were used in the resource estimation.

Analysis of exploration samples has taken place at SGS laboratories in Townsville. Standard sample preparation and wet chemical procedures are used with fire assay for Au and ICP400 analysis for Ag, As, Cu, Pb, Sb and Zn, occasional Hg, Se and Te analyses were completed.

Analysis of grade control samples (face samples) and underground drilling has taken place at ALS laboratories in Townsville. Standard ALS sample preparation and wet chemical procedures have been used with AAS analysis for gold and silver. At different times, silver has not been routinely assayed from face samples. All silver values are based on underground diamond drilling.

All Quality Assurance/Quality Control (QA/QC), database validation and geological interpretation is the responsibility of Pajingo Mine Geologist. The QA/QC protocol uses blanks and standards submitted with each batch. The QA/QC programme was last audited in 2006. This audit showed a 3.6% relative error in pulp duplicates and a 10.1% error in drill core duplicates.

Bulk densities have been determined (since 2006) by a standardised method (Archimedes Principle/Lipton’s Water Displacement Method 2).

The database used for the 2011 resource estimates has been verified by site personnel for its validity.

3.3.2 Resource Estimation

The current mineral resource estimate for Pajingo is a combination of deposits which are modelled independently of each other. The deposits designed to be mined by underground methods are the Cindy, Faith, Jandam, Sonia, Venue-VNU, Veracity, and Zed. The deposits designed to be mined by open pit methods are VNU and Venue.

Resource estimation has been carried using the 2D accumulation method for most lodes and 3D block modelling for the Jandam and Cindy lodes. Univariate statistics were carried out on gold and silver for each deposit and ordinary kriging has been used for grade estimation. Wireframes of the vein hangingwall and footwall surfaces, constructed using underground drilling and face sampling information, have been used as hard boundaries with respect to domaining. An inverse distance squared method was used as a check on the ordinary kriged estimates. The checks produced comparable result within the expected error limits.

3.3.3 Resource Classification

Classification of the mineral resource into measured, indicated and inferred resources has been carried out in two stages. An initial classification based on review of the average distance parameter in conjunction with first search pass ellipse. The following distance parameters were applied.

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Conf 1 = <25 m
Conf 2 = 25-40 m
Conf 3 = 40-65 m

The initial classification was then refined using a combination of average distance, drill density, and the presence of development/workings.

Measured – (Conf 1 = <25 m) + (drill density <20 m) + (mine development)
Indicated – (Conf 2 = 25-40 m) + (drill density <40 m) +/- (mine development)
Inferred – (Conf 3 = 40-65 m) + (drill density <70 m) + (no mine development)

3.3.4 Conclusion

In AMC’s opinion, the data used to inform the mineral resource estimate has been adequately validated and is suitable for mineral resource modelling and estimation. AMC considers that the modelling and estimation has been carried out using acceptable industry practice and that the resource classification into measured, indicated and inferred resources is appropriate.

AMC concludes that the 30 June 2011 Pajingo mineral resource estimate has been prepared using acceptable industry practice and that the classification of the estimate as measured, indicated, and inferred resource is appropriate. In AMC’s opinion the mineral resource estimate has been prepared by a Competent Person[6] in accordance with the JORC Code.

3.4 Exploration and Resource Development

Conquest has a programme for increasing its ore reserve inventory. The programme comprises three components:

Identification of resources and reserves in areas of known mineralisation.
Identification of resources and reserves near existing mine developments.
Regional exploration.

Components 1 and 2 are discussed in the following sections. The regional exploration is considered in Section 7.

3.4.1 Resource Definition Adjacent to Known Mineralisation

There are clearly defined areas between existing open pit and underground lodes where there is insufficient drill data or geological understanding to estimate an inferred mineral resource. Many of these targets are extensions of known lodes, in particular, adjacent to

6 For certain Pajingo deposits the Competent Person is Sonia Konopa (an AMC consultant), but this work has been performed independently of the current review.

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the Jandam, Zed and Faith lodes. In AMCs opinion, there is a reasonable prospect for additional mineral resources within these target areas.

3.4.2 Near Mine Resource Development

Where the Veracity Corridor is modelled to intersect with the Mt Wright-Ravenswood corridor trend (southwest-northeast), a study is targeting co-incident magnetic lows and induced potential (IP) anomalies. These targets are proposed as possible deep intrusions or extensions of mineralisation.

Conquest has an approved budget and 18 month work plan for its near mine exploration programme. The goal of the programme is to replace 60,000 oz of reserves and increase resources by 100,000 oz. Exploration targets include: Powerline, Lower Leaping Dog-Vera South and Jandam-Sub-Guinness projects. Other targets include possible vein extensions in the area between the Cindy Pit and the Bell Vein development.

The Sub-Guinness project area is being targeted by an underground drill programme of three holes to test a broad prospective area including the hangingwall of the Jandam vein, and the depth extension of the Vera-Nancy vein system below the Guinness Fault. The Jandam footwall also lies open at this depth and coincides with a magnetic low anomaly. Two holes are designed to test the Jandam hangingwall, and one hole to test the proposed down plunge extension and kink on the Vera-Nancy vein system.

The near mine underground exploration targets are shown Figure 3.3.

In addition to targeting additional mineral resources suitable for underground mining, Conquest is also targeting additional open pit mineral resources with the potential to sustain production of 10,000 ozpa. Figure 3.4 shows these open pit target areas relative to the current workings. Areas shown in red are areas that have been drilled and scheduled. Areas shown in blue are at the planning stage.

Opportunities are being sought by looking at existing data. Conquest considers the best potential for additional open cut resources to be adjacent to Janine, Nancy North, Orchid and Veracity.

Drilling programmes are also planned on potential extensions to known mineralisation near Nancy North and the Ralph Porter Prospect, where sparse drilling and surface rock chip sampling has intersected areas of mineralisation interpreted along strike, and to the west-southwest of the Annie underground workings.

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Figure 3.3 Near Mine Exploration Targeting Untested Areas

==> picture [432 x 212] intentionally omitted <==

Figure 3.4 Open Pit Resource Potential Overview

==> picture [432 x 188] intentionally omitted <==

3.5 Ore Reserves

The Pajingo ore reserve estimates as at 30 June 2011 are shown in Table 3.5. The reserves are reported at a cut-off grade of 3.9 g/t Au for underground and 0.7 g/t Au for open pit. AMC has reviewed the assumptions, processes and modifying factors involved in the estimation of ore reserves, and considers them to be appropriate for this style of orebody and methods of mining.

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Table 3.5 Pajingo Ore Reserve at 30 June 2011

Vein	Proved	Proved	Proved	Probable	Probable	Probable		Total
	Tonnes (kt)	Au (g/t)	Au (koz)	Tonnes (kt)	Au (g/t)	Au (koz)	Tonnes (kt)	Au (g/t)	Au (koz)
		Underground (Cut-off grade 3.9 g/t gold)
Cindy	-	-	-	33	5.5	6	33	5.5	6
Faith	6	5.8	1	83	6.1	16	90	6.1	18
Jandam	-	-		43	5.1	7	43	5.1	7
Sonia	7	4.4	1	116	9.3	35	123	9.0	36
Veracity	-	-		74	5.3	13	74	5.3	13
Zed	41	5.9	8	122	6.0	23	163	6.0	31
Subtotal UG	54	5.7	10	471	6.6	100	525	6.5	110
		Open Pit (Cut-off grade 0.7 g/t gold)
VNU	-	-	-	120	2.2	8	120	2.2	8
Venue	-	-	-	219	3.1	22	219	3.1	22
Subtotal OC	-	-	-	339	2.8	30	339	2.8	31
Total Reserve	54	5.7	10	810	5.0	130	864	5.1	140

3.5.1 Conclusion

In AMC’s opinion, the 30 June 2011 ore reserve for Pajingo has been prepared using acceptable industry practice and that the classification of the estimate as proved and probable ore reserves is appropriate. In AMC’s opinion, the estimate has been prepared by a Competent Person in accordance with the JORC Code.

3.6 Mine Planning Inventory

Long-term production planning for Pajingo is based on a mine planning inventory that includes ore reserves, plus material derived from the following sources:

Extensions to existing lodes where there is reasonable expectation, based on the historical performance, that inferred resources and in some cases unclassified material will ultimately be converted to reserves. (Conquest refer to this as non-reserve material – NRM). It includes both open pit and underground material. Conquest’s estimate of NRM material is summarised in Table 3.6. The estimate includes material that is being mined or evaluated in the Janet A pit, the potential Janine pit and the Nancy North pit, which is the subject of a scoping study.

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Table 3.6 Non-Reserve Material at 30 June 2011

Vein	Tonnes (kt)	Au (g/t)
Underground
Bell Vein Cindy Faith Jandam Sonia Vera South Vera South V3 Veracity Zed West Zed East	59.2 10.5 36.0 66.6 33.2 50.0 55.2 1.6 12.8 4.8	4.9 6.0 7.9 6.0 17.0 3.4 5.2 5.3 9.2 4.5
Subtotal	329.9	6.8
	Open Pit
Janet A Janine Nancy North	228.6 126.2 71.0	1.3 3.1 5.2
Subtotal	425.8	2.5
Total	755.6	4.3

Pajingo has historically recovered a significant amount of remnants from previously mined underground areas, which may not have been economic or practical to mine at that time. Although often at a lower grade, it is a valuable additional source of ore at the current gold price. The Pajingo long-term production plan assumes that approximately 10% of its underground gold production will come from remnants over the next few years, and has a drilling programme to delineate this material.
Future production from reasonably assured exploration success. This material is derived from both inferred resources in the lodes hosting ore reserves, and from exploration targets. There are large quantities of inferred resources at a cut-off grade of 1 g/t Au, particularly in Jandam, Sonia, Veracity and Zed, and it is likely that further drilling will identify economic zones within these resources. Conquest has estimated the total resources in these lodes at cut-off grades of 4 g/t Au and 2.0 g/t Au for in VNU, and has used this estimate as a basis for estimating the mine planning inventory from reasonably assured exploration success shown in Table 3.7.

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Table 3.7 Basis for Additional Mining Inventory at 30 June 2011

Vein	COG (g/t Au)	Tonnes (kt)	Au (g/t)	Ag (g/t)
Cindy Jandam Faith Sonia Veracity Zed East Zed West VNU	4 4 4 4 4 4 4 2	60 534 134 330 241 378 203 126	8.4 6.9 8.0 11.6 7.5 5.8 7.4 3.8	6.3 11.7 4.3 11.3 10.7 4.7 7.6 4.5
Total	–	2,006	7.5	8.7

3.7 Mining Operations

Pajingo is an owner operation, with employees commuting on a daily basis from Charters Towers. This ensures a more stable workforce compared with many fly in-fly out operations. It has been predominantly an underground mine in recent years, but with a renewed focus on supplementing underground production with production from small open pits. Typical narrow vein bench stoping methods are employed using mechanised mobile equipment.

Actual production in FY2011 is shown in Table 3.8.

Table 3.8 Mine Production FY2011

Mine	Ore (kt)	Au (g/t)	Au (koz)
Underground Open Pit	279 171	8.1 2.5	72 14
Total	450	6.0	86

The underground mine has suffered from a lack of capital investment in equipment, capital development, and resource drilling under the previous owners. Conquest has embarked on an ambitious programme to redress these issues and return the mine to a sound operational basis with reasonable future ore supplies. The benefits of this are already evident on site, with two new Atlas Copco MT 6020 trucks contributing to steadily increasing production, and a substantial increase in resources and reserves. A third truck, two new loaders, a jumbo and some new ancillary plant are budgeted for FY2012.

Provided the capital equipment purchases proceed as planned, AMC considers that the underground mine has the capability to increase production from the current rate to approximately 500 ktpa over the next five years. The gold grade is expected to decrease slightly (from 6 g/t Au to 5.5 g/t Au), based on current planning inventory, but the contained gold should still increase to approximately 85,000 ozpa over this period.

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Only uncemented rockfill is currently used at Pajingo. In the future, post-grouting of this fill and the use of cemented rock fill may be considered to improve extraction of remnant pillars in higher grade areas.

The mine ventilation system is currently adequate, but will need to be extended significantly over the next few years to support the increased development and production activities. Some new ventilation airways will be required and a ventilation rise is included in the current year budget.

AMC expects open pit production will be variable due to changes in the stripping ratios and resource grades of the individual pits. There will usually only be one pit in production at a time and the small size of the pits will limit blending opportunities. However, AMC consider it reasonable to expect that the open pits should be able to sustain an average production of 10,000 ozpa.

There are no obvious geotechnical issues associated with either the small pits or the relatively shallow underground operations. As underground mining extends to greater depths, stress levels will increase, but are expected to be manageable provided that current mining practices are continued, and appropriate geotechnical input is incorporated into future designs and operating practices.

Safety performance at Pajingo was poor prior to the transfer of ownership to Conquest. Since then, there has been a significant improvement, with the Lost Time Injury Frequency Rate down from 20 to 7, but this needs to continue to achieve industry standards.

To achieve the planned production rate increase, additional personnel will be required. Pajingo will have to compete for personnel in a tight labour market, but the residential nature of the operation and the attractiveness of Charters Towers should give them an advantage over most operations.

3.8 Metallurgy and Processing Operations

3.8.1 Introduction

The plant is a typical small gold operation employing conventional gold-ore processing technology comprising:

Crushing (three stages).
Milling & Classification.
Thickening.
CIL (Carbon-in-Leach).
Tailings Disposal.
Elution/Carbon Regeneration.
Gold Room.

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Since re-commencing operations in 1997, the process plant has principally treated ore from numerous underground sources in the Vera-Nancy System. Future production is expected to be sourced from extensions of the existing deposits and from small open pits.

3.8.2 Historical Production

The annual production data for the past three financial years of operation since ownership changed on 31 December 2007 is presented in Table 3.9 along with the corresponding budget targets for FY2012. The major points of interest are:

Since re-commencing operations in 1997, the processing plant has been upgraded to treat 700 ktpa and achieve the desired grind size P80 of 38 microns. After mine ownership changed at the end of 2007, the mining production profile changed and one grinding mill was taken off-line. Re-commissioning of this mill is planned for the beginning of Q4 2011. Whilst the mill throughput rate will exceed the mining production rate, the processing plant can be operated on a campaign basis and consistently achieve the target grind size.
While the gold recovery data provided was incomplete, the plant performance over the past three financial years has been reviewed. The gold recovery average was 95.1% and typically ranged from 94.2% to 97.4% with an exception of 74.3% during December 2010 when very poor gold recovery was observed when Janet A outcrop material was processed. The plant has since processed further Janet A material from the open pit and typical gold recovery has been observed.
The silver recovery data provided was also incomplete and only the past two financial years have been reviewed. Silver recovery averaged 76.6% and typically ranged from 60.5% to 87.3% with an exception of 41.6% during December 2010.
The processing costs for FY2011 indicate that the unit cost is predominantly fixed. Escalating prices, particularly for power and reagents, have also contributed to the relatively high unit processing cost.

Table 3.9 Historical and Forecast Mill Performance

Parameter	Units		Financial Year	Financial Year
		2009	2010	2011	2012
Ore Milled (dry)	kt	302	304	287	401
Gold Grade (recon.)	Aug/t	5.57	5.69	5.43	6.1
Gold Recovery	%	94.9*	96.3*	94.3	95.0
Gold Production (shipped)	koz	52.4	55.0	45.9	74.9
Silver Grade (recon.)	Ag g/t	n/a	9.34*	7.16*	6.1
Silver Recovery	%	n/a	84.6*	72.1*	95.0
Silver Production (shipped)	koz	66.5	79.9	51.7	74.5
Mill Cost	$/t	30.86	37.71	44.19	40.00

Note: * incomplete data set provided.

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3.8.3 Gold Recovery

The numerous underground lodes are grind sensitive and require optimum leaching conditions, which include the addition of oxygen, to achieve recovery in-line with historic metallurgical testwork. Re-commissioning of the second mill will result in a higher mill throughput rate whilst consistently achieving the target grind size P80 of 38 microns.

When mine ownership changed, the addition of oxygen to the leaching circuit ceased. Historic metallurgical testwork has shown that oxygen addition is required to enhance the leaching rate. Oxygen addition to the first leach tank was re-commissioned in April 2011 and the second leach tank is due to be re-commissioned in August 2011. With the resumption of oxygen addition to the plant, a gold recovery of 95% is considered suitable for modelling purposes.

In terms of assessing potential gold recovery from future ore deposits, no metallurgical testwork has been completed recently. Over the years, a multitude of orebodies have been processed and metallurgical testwork completed has yielded relatively similar gold recovery performance at optimum leaching conditions and desired grind size.

3.8.4 Silver Recovery

A silver recovery of 95% budgeted in FY2012 is not considered realistic by AMC. The actual silver recovery in the plant has been achieved without oxygen addition. Following re-commissioning of oxygen addition to the plant, a silver recovery of 80% is considered suitable for modelling purposes.

3.8.5 Production Scenarios

Production scenarios for Pajingo envisage the mill throughput rate increasing progressively from 450 ktpa to 590 ktpa. Mill throughput capacity is expected to exceed the mine production rate over this range.

3.9 Infrastructure and Power

Pajingo is a mature mine with generally good infrastructure, services, access and communications, which AMC considers adequate for the current and planned operations. Some infrastructure is being moved to allow for the future open pits.

3.10 Environmental and Community Issues

3.10.1 Environmental Impact Studies and Management Plans

The original Environmental Management Overview Strategy (EMOS) for PGM was prepared in 1995 and has had several updates over the years, but has now been superseded by a more recent Environmental Management Plan (EMP).

The EMP is designed to facilitate management of PGM’s significant environmental aspects in a sustainable manner consistent with site policy, and all legal and other requirements.

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A draft Plan of Operations (PoO) covering the period September 2010 to September 2015, has been prepared in accordance with Section 234 of the Environmental Protection Act, 1994 and relevant Queensland Government guidelines. The draft PoO provides an overview of mining operations; a summary of the statutory background and requirements, PGM also holds an Environmental Authority (number MIN100936609) for the Twin Hills deposit.

The draft PoO indicates that PGM currently holds a bank guarantee/financial assurance with the State of Queensland for site rehabilitation costs of $6,835,225. However, there is currently no financial assurance calculation detail in the draft PoO document as this is still the subject of negotiation with the Queensland Government. AMC consider that the monetary value of the financial assurance is reasonably well aligned with the financial assurance calculation spreadsheet provided. In that, calculation of the financial assurance was $6.9M for 2010 and $7.2M for 2011.

While the financial assurance has been calculated based on relevant State of Queensland guidelines, PGM has now agreed with the government on the concept of a double capillary break layer for the final cover for the two areas where tailings are currently being stored (the Turkeys Nest TSF and Scotts Lode Pit which cover a total area of 28.5 hectares). The total cost of rehabilitating the tailings storage facility areas at closure is currently about $2.75M. The additional cost of a double capillary break cover at the tailings storage areas is estimated to be $2.25M, which would take the tailings storage areas’ closure cost closer to $5M. Hence, actual closure costs could be greater than currently predicted and certainly higher than those currently addressed by the financial assurance. The most likely closure cost is estimated to be approximately $9.4M.

3.10.2 Environmental Compliance

Under Section 250 of the Queensland Environmental Protection Act 1994 (EPA, 1994), a mining project is an environmentally relevant activity that requires a corresponding Environmental Authority (EA). An EA is a legal instrument that includes a list of regulatory conditions related to the environmental management of a mine. EAs are granted and regulated by the Queensland Department of Environment and Resource Management (DERM). An annual return associated with the current EA conditions is required to be submitted to DERM. However, no annual returns were available to AMC. The annual return would typically describe any instances of non-compliance with EA trigger limits, for example, for surface receiving waters and groundwater.

Pajingo has reportedly passed a recent environmental audit conducted by DERM personnel and there have been no instances of non-compliance with water quality release criteria during the 2010/11 wet season. There are reportedly some ongoing minor issues with the site sewage treatment system.

Previous non-compliance (DERM reportable) incidents have occurred at PGM associated with seepage to surface water from the K-Dump and Scott Lode waste rock dump. These non-compliances appear to have been resolved by remedial works. However, site water quality monitoring programmes indicate that naturally acidic surface water occurs at the site which is not related to site activities. This makes compliance with the current EA water quality conditions difficult to meet and site personnel have

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utilised alkaline treatment of surface water to ensure that Pajingo remains in compliance with the conditions of the EA. The limited background water quality data for the site means that the calculation of water quality trigger values as required by the EA is currently not possible. Pajingo is working with DERM to resolve these issues.

3.10.3 Project Infrastructure

Key project infrastructure elements associated with the environmental component of this review include:

Underground mines.
Open pits.
Waste Rock Dumps (WRDs).
Tailings Storage Facilities (TSFs).

In terms of risk and potential for environmental impact, the underground mines and open pits generally have a lower risk profile than WRDs and TSFs.

3.10.4 Waste Rock Dumps

Waste rock at the Pajingo site has historically been generated from Scott Lode and Cindy pits and was disposed of in the Scott Lode and Cindy WRDs.

The Scott Lode WRD has been rehabilitated and revegetated, although some maintenance work was completed during 2011 to repair the main drainage line. At the time of the site inspection (and from recent aerial photographs) it is clear that significant erosion is occurring on the batter slopes. Some potentially acid forming (PAF) waste rock material is encapsulated in the dump; hence, it is likely that further works will be required to address longer-term closure issues of the dump.

Rehabilitation of the Cindy WRD was completed in approximately 1996 and has largely been successful.

K-Dump is located close to Scott Lode WRD and has previously been used to store waste rock and low-grade ore. Most of the ore has been removed and processed, but in February 2010 acidic (pH 2.57) seepage originating from K-Dump was identified. Remedial works to redirect clean water around K-Dump and rectify the ponding issue at the back of K-Dump have been completed. It is planned to monitored the performance of the remedial works and identify if any improvements are required to increase the effectiveness of the drainage structures.

The Vera WRD has not been rehabilitated and contains material as it is removed from underground during mining activities. Approximately 1.3 Mt are contained within the dump, although material is periodically removed and added to meet operational requirements. It is expected that approximately 0.9 Mt of material will remain on the surface at the completion of mining. The majority of this material is comprised of the run-of-mine embankment, and will be sampled to assist with determining post closure uses and rehabilitation requirements.

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Mining also occurs at the Janet ‘A’ open pit and is proposed at the Nancy, Venue and VNU open pits. The current plan is to approach each WRD on a facility by facility basis, with detailed rehabilitation planning undertaken for each section of that landform as required, ensuring that the most appropriate plan is developed to suit each area, and is relevant to the conditions specific to that area.

3.10.5 Tailings Storage Facilities

Tailings generated at PGM are currently pumped to the Turkeys Nest TSF. A design for Lift 7 of the TSF has been commissioned to provide additional tailings storage capacity of approximately 14 months.

A project to increase the tailings storage capacity of the Scott Lode TSF is also planned by designing a buttress to provide an additional 12 months of tailings storage. It is understood that an application for this course of action has been made to DERM and that an approval decision is pending. The likely cost of the additional storage is likely to be $1M.

Results for geochemical tests on tailings materials at Pajingo indicate that their acid forming potential is variable, but at least some of the tailings are PAF. Both PAF and non-acid forming (NAF) tailings are a potential source of neutral mine drainage containing elevated concentrations of some metals and sulphate salts. It is understood that hydrogeological assessment work will be completed by Pajingo as part of the approval process for a further lift of the Scott Lode TSF. It is important to understand the potential groundwater impacts of any seepage from the tailings stored at both Scott Lode and the Turkey Nest TSFs.

The final closure and rehabilitation of Scott Lode Pit TSF and the Turkeys Nest TSF is currently being investigated as part of a three year PhD research study, and includes field trials for cover and rehabilitation requirements.

3.10.6 Environmental Management Practices and Reporting Procedures

The site has a full-time Environmental Officer and Environmental Technical Officer. Pajingo also has a site-specific environmental management system (EMS) and associated documentation.

Pajingo has an environmental monitoring programme in place that is documented in the EMP and PoO to address the requirements of the current EA. In AMC’s opinion, the monitoring programme is adequate to monitor environmental performance at the site give the scale of the operation and the sensitivity of the downstream environment.

Pajingo submits an annual return to DERM regarding performance against compliance criteria documented in the EA. Any other DERM reporting requirements detailed in the EA are generally triggered by any incidents involving any exceedance of specific conditions of the EA (e.g. surface water quality). Monthly executive reporting is also undertaken with reports being reviewed by senior Pajingo Management. A review of four monthly executive reports from the past 10 months indicates that these reports contain limited information on site environmental issues. The reports do however confirm that

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the number and type of environmental incidents for the period were small and relatively minor in nature (e.g. oil spills).

The EA for Pajingo stipulates that the weak acid dissociable (WAD) cyanide concentrations in the tailings surface liquor must not exceed 50 mg/l. In addition, eight samples of tailings per 100,000 tonnes of tailings pumped to the TSF must be taken and subjected to geochemical testing. Kinetic tests are also required for any identified PAF materials. The documentation available to AMC, including monthly executive reports, contains no information as to performance in this area and ongoing compliance with these EA conditions.

3.11 Capital and Operating Costs

3.11.1 Capital Costs

Pajingo has a capital budget of $41M for the mine in FY2012, comprising purchase and leasing of new mobile equipment, which will be partially offset by sale of some surplus equipment, capital development and underground diamond drilling.

Capital expenditure totalling $3.5M has been scheduled for expenditure in FY2012 for the processing plant. This capital will complete the re-commissioning of the second mill and oxygen addition to the leaching circuit as well as necessary replacement and refurbishment of various pieces of equipment. Approximately $1M will be for earthworks on the Scott Lode TSF Stage 1 Embankment for increasing the current tailings storage capacity. Further expansion of the tailings storage facilities, such as Scott Lode TSF Stage 2 Embankment, will be required for the current long-term mine plan.

Pajingo’s exploration budget for FY2012 is $2.7M for the mine and $2.8M for regional exploration.

AMC considers that the proposed FY2012 capital budget is realistic and that a similar level of expenditure will be required in 2013, after which sustaining capital is expected to progressively decrease.

3.11.2 Operating Costs

Mining costs were high in 2010-11 at approximately $100/t for underground ore and $100/t for open pit ore. As the new mining equipment is introduced and the production rate increases, AMC expects the unit cost to gradually drop to about $80/t. Cracow Gold Mine, which is very similar in mining method and output to Pajingo, is expected to have a similar unit cost in the coming year.

Open pit unit costs of total material mined are expected to continue at about $4.50/t to $5.00/t, depending on the haul distance for waste. The unit cost for ore will vary, depending on the stripping ratio at the time. The stripping ratio of the new open pits scheduled for the next five years ranges from 12:1 to 25:1, with an average of approximately 18:1.

The processing unit costs are predominantly fixed, with few variable inputs, due to the spare milling capacity of the processing plant. Escalating prices, particularly for power

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and reagents, have also contributed to the relatively high unit processing cost of $42/t in FY2011. Unit costs will only reduce slightly as the mill throughput increases.

Administration costs (including environment, OH&S and overheads) are largely fixed and so the total cost should only increase marginally with increasing production. In FY2011 total cost was approximately $16/t and this can be expected to gradually drop as production increases. Conquest has assumed some efficiencies in the future and AMC considers that this is realistic with improved management practices.

3.12 Pajingo Modelling Scenarios

AMC has prepared two modelling scenarios for Pajingo.

Case 1 underground mining production plan is based on the 30 June 2011 ore reserves, plus substantial additional material from an inventory of non-reserve material (prepared by Conquest, which AMC accepts is reasonable), remnant material, and mineral resources yet to be fully evaluated for mining. A small amount of material is included from assumed exploration success in Year 5.

AMC’s open pit mining plan for Case 1 is based on the 30 June 2011 ore reserves and Conquest’s estimate of non-reserve material and additional mining inventory in the designed pits (Janet A, Venue, VNU and Nancy North).

Case 2 extends the Case 1 underground and open pit production plans by one year. The additional open pit production is assumed to come from a new pit on one of the current exploration targets at a similar grade and stripping ratio as the other pits.

The mining inventories used in both Cases are shown in the Table 3.10.

Table 3.10 Case 1 and Case 2 Mining Inventories for Pajingo

Source		Case 1			Case 2
	Tonnes (Mt)	Au (g/t)	Au (Moz)	Tonnes (Mt)	Au (g/t)	Au (Moz)
Ore reserves - Underground Non-reserve material - Underground Ore reserves - Open pits Non-reserve material – Openpits	0.52 1.71 0.34 0.17	6.5 5.5 2.8 3.9	0.11 0.30 0.04 0.02	0.52 2.21 0.34 0.25	6.5 5.5 2.8 3.6	0.11 0.39 0.04 0.03
Total	2.74	5.3	0.46	3.32	5.2	0.56

In both cases, the mill throughput rate has been increased progressively from 0.45 Mtpa in 2012 to 0.59 Mtpa in 2014 to compensate for declining feed grades. A metallurgical recovery of 95% has been assumed in both cases.

The underground mining unit costs are initially based on recent performance, but decrease as the underground mining fleet is updated with new equipment. Open pit mining unit costs are based on those provided by Conquest, but adjusted by AMC to reflect the actual stripping ratios each year.

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Processing unit costs reflect recent performance initially, but decreases slightly as throughput increases. Administration unit costs are also adjusted in accordance with throughput to maintain a fairly constant total cost, but with the benefit of some efficiency improvement.

Sustaining capital costs are based on Conquest’s FY2012 budget and adjusted in future years to ensure that underground capital development and exploration drilling is maintained at an adequate level. AMC has included the cost of open pit development in the open pit operating costs.

Closure costs of $9.4M have been included in both cases.

3.13 Risks

The main risk at Pajingo is that of future ore sources, which is typical of this type of epithermal vein gold operation. However, the mine has substantial inferred resources and many prospective targets, so provided that an aggressive exploration and infill drilling programme is maintained, the production targets in both modelled scenarios should be achieved.

The other significant risk is that of gold price. The mine has relatively high operational costs and modest gold grades, so a substantial fall in the gold price would threaten viability. There are opportunities to decrease costs by capital expenditure on new mining equipment and increasing the mill throughput to better utilise the existing plant capacity.

An absence of metallurgical testwork on new orebodies, both underground and open pit, is of some concern as any drop in gold recoveries reports straight to the bottom line.

Lack of timely approval from DERM for Scott Lode Pit Stage 2 Embankment could present issues with future tailings disposal capacity, but this should be resolved.

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4 MT RAWDON GOLD MINE

4.1 Location and Background

Mt Rawdon open cut gold mine is situated in southeast Queensland, approximately 80 km southwest of Bundaberg and 300 km north-northwest of Brisbane. Access to the mine is from Gin Gin on the Bruce Highway via a sealed road for 52 km to the township of Mt Perry, and then southeast for 18 km on a gazetted, but mostly unsealed road (Figure 4.1).

The deposit is located beneath the southern side of Mt Rawdon, which is located between Mingham Creek and the Perry River, both of which drain to the Burnett River.

Figure 4.1 Location of Mt Rawdon Gold Mine

==> picture [431 x 221] intentionally omitted <==

Construction of the Mt Rawdon project commenced in early 2000 and was commissioned in January 2001. In 2001, the owner at the time (Equigold NL) completed a diamond drilling programme immediately below and adjacent to the operating pit, which increased the ore reserves from 22.8 Mt to 45.9 Mt. In 2005, a redesign of the open pit (involving a change in cut-off grades and steeper ultimate pit wall angles) increased the reserves even further.

Lihir acquired the operation during a merger with Equigold in 2008. On 7 July 2009, the operation celebrated 25 t of gold poured. In 2010, a merger with Newcrest saw new management installed and a new resource model completed in October 2010.

Based on the current life-of-mine plan, the mine is scheduled to cease production in 2019 with milling of low-grade stockpiles continuing into the first half of 2020.

The Mt Rawdon operation takes place on nine Mining Leases (ML’s) occupying a total area of 19.6 km[2 ] within Perry Shire. The company also holds five Exploration Permits for Minerals (EPMs). The area under tenement totals 680 km[2] and is shown in Figure 4.2.

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Figure 4.2 Mt Rawdon Tenements

==> picture [434 x 467] intentionally omitted <==

----- Start of picture text -----

N
----- End of picture text -----

The mining leases were granted between 1974 and 2001, and are all registered in the name of LGL Mt Rawdon Operations Pty Ltd (LGL-MROPL). Expiry dates on the tenements range from May 2013 to April 2023 (Table 4.1).

The Mt Rawdon Mining Leases are totally enclosed by EPMs with expiry dates between 2011 and 2015. Reviews are in hand to assess the viability of retaining all 213 sub-blocks currently held. Expenditure on EPM tenements in 2009 and 2010 has met and exceeded minimum commitment levels overall, with an underspend on EPM 10566, and all other EPMs showing higher than the required minimum expenditure

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than the minimum level over the two years viewed. Mining and ore processing infrastructure is contained within the mining lease areas.

Table 4.1 Mt Rawdon Tenement Holding

Tenement	Prospect Name	Expiry Date	Area	Rent	Holder/Manager
ML 1192	Hopeful	31/05/2013	1.8 HA	$93.80	LGL-MROPL
ML 1203	West Ridge	31/01/2020	0.4 HA	$46.90	LGL-MROPL
ML 1204	Mt Rawdon	31/01/2020	2.0 HA	$93.80	LGL-MROPL
ML 1206	Swindon	30/09/2022	41.8 HA	$1,969.80	LGL-MROPL
ML 1210	Hut	30/04/2023	16.0 HA	$797.30	LGL-MROPL
ML 1231	Overflow II	31/08/2022	8.0 HA	$351.60	LGL-MROPL
ML 1259	Rawdon	31/05/2013	593.7 HA	$27,858.60	LGL-MROPL
ML 50119	Rawdon Ext.	31/01/2014	485.5 HA	$22,793.40	LGL-MROPL
ML 80095	Rawdon Ext.	31/05/2013	865.8 HA	$40,615.40	LGL-MROPL
EPM 9563	Mt Shamrock	02/11/2011	9 Sub-blocks	$1,110.15	LGL-MROPL
EPM 10566	Outer Rawdon	31/12/2011	79 Sub-blocks	$9,744.65	LGL-MROPL
EPM 18173	South Burnett	18/02/2015	54 Sub-blocks	$6,600.90	LGL-MROPL
EPM 17455	Paradise East 2	03/07/2013	47 Sub-blocks	$5,656.45	LGL-MROPL
EPM 17302	Yeatman 2	22/05/2013	24 Sub-blocks	$2,960.40	LGL-MROPL

Note: LGL-MROPL – abbreviated for LGL Mt Rawdon Operations Pty Ltd.

4.2 Geology

The Mt Rawdon deposit is located at the southern end of the Carboniferous Coastal Block. The deposit is located in a dilational jog at the intersection of the Mt Rawdon Fault (a fault parallel to the north-northwest trending Perry Fault) and the east-north-east trending Swindon Fault. The gold mineralisation is hosted within the Late Triassic Aranbanga Volcanic Group, a volcaniclastic sequence that strikes northeast and plunges to the southwest.

Locally, the Aranbanga Group consists of sequence of volcaniclastics intruded by a multi-phased dacite stock. The volcaniclastics are also dacite to rhyrodacite rich and have polymictic, matrix supported and poorly sorted textures. The intruded pile and the intrusive stock are considered genetically linked and are both intruded by acidic to basic un-mineralised dykes and plugs, which are either syn or pre mineralisation.

The alteration and mineralisation at Mt Rawdon result from multi-stage events which overprint the volcaniclastic sequence, the dacite suite, and to a lesser extent the trachyandesite suite. The effects of the various stages of alteration on the different rock types within the deposit have resulted in a wide range of alteration rock types. The mineralisation is considered synchronous and subsequent to most of the intrusive activity. All of the major rock types within the deposit are mineralised to some degree.

An intrusive dacitic dome feature with associated andesite and trachyandesite dykes occurs south of the main mineralised zone. The contact is steeply dipping and the margins are brecciated. This area generally hosts the highest grade gold mineralisation.

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The surface extent of mineralisation forms a roughly ovoid zone of 200 m x 300 m with gold grades greater than 0.7 g/t Au (Figure 4.3).

Figure 4.3 shows a generalised mine geology of Mt Rawdon Mine in plan.

Figure 4.3 Generalised Geology in Plan

==> picture [431 x 295] intentionally omitted <==

Source: MRO Operations May 2011.ppt.

The gold mineralisation is associated with pyrite and minor base metal veining, and to a lesser extent with disseminated pyrite and base metals. The mineralisation zone contains 1-3% disseminated pyrite.

Within the Mt Rawdon deposit, the gold grades generally increase with increasing pyrite content and sulphide veining. The pyrite is present in three forms: an early disseminated phase, followed by sulphide veining and finally breccia veining.

Veinlets are a significant host to the gold mineralisation and carry pyrite and minor galena, chalcopyrite, sphalerite, arsenopyrite and free gold. Veinlet widths rarely exceed 5 mm. Approximately 72% of the gold is hosted within pyrite and base metal veinlets, with the rest contained in the surrounding disseminated sulphide mineralisation. However, the grades of Cu, Pb, Zn and As are not considered significant to the operation.

Figure 4.4 shows a generalised east-west cross-section of the Mt Rawdon Mine coloured by gold grade contours.

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Figure 4.4 Generalised Cross-Section (Looking North)

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TRAC = Trachyandesite FDAC = Fragmental Dacite

Gold and electrum occurs as free grains within base metal sulphides and fractures within pyrite. On close inspection, hand specimens grading greater than 5 g/t Au generally contain visible gold. In thin sections, gold is apparent in most intervals with gold grades greater than 0.2 g/t Au. Microprobe analysis indicates two populations of gold grain sizes. The first population has a gold grain size ranging from 348-881 microns, with the second gold population having grain sizes in the 10-30 microns range. Approximately 10% of the recovered gold comes from a gravity circuit. Silver is considered a credit element.

4.3 Mineral Resources and Ore Reserves

4.3.1 Data Available

The Mt Rawdon deposit is defined by over 400 drillholes of which approximately 15% are diamond drillholes, with the remaining holes being drilled using reverse circulation and percussion methods. All samples have been analysed for gold and silver, with selective analysis for base metals.

Historical drilling at Mt Rawdon from 1979 to 1984 comprised open hole percussion (rotary drilling) and limited diamond core drilling. There is uncertainty regarding the quality of sampling of the early rotary drilling. However, these holes now constitute only a small part of the total database and AMC does not believe that they will have any material effect on the current resource estimates.

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Drilling completed post 1984 (Placer Pacific and Equigold) was audited by external consultants in 2000 and found to be of suitable quality and that appropriate diligence had been exercised. In 2000, approximately 30% of the resource database was Equigold data.

In 2009, the results of an additional 39 resource definition drillholes were added to the database, a new resource model and a pit re-optimisation study completed.

4.3.2 Resource Estimation

Resource estimates were updated in October 2010 using 457 drillholes. Drillholes were composited to 6 m lengths producing 7,347 samples to be used in the estimation. Estimation was constrained using 3D geological wireframes.

Ten lithological domains, two geographic zones (north and south) and three zones of oxidation were created to control the domaining of lithology and grade domains. A grade envelope was established to constrain the area to be estimated.

In the October 2010 resource model, gold and silver were estimated using ordinary kriging into a regular block size of 10 m x 10 m x 10 m. A minimum of six samples and maximum of 16 samples were used. Estimation was conducted in two passes with initial search ellipses of 310 m x 120 m x 120 m which was expanded to 450 m x 245 m x 245 m for the second pass.

As well as gold and silver, additional fields were added for waste rock categorisation, bulk density, lithology, oxidation state, resource classification and an area domain.

Bulk density values used in the current resource model are based on the average values of each weathering domain, taken from diamond drill core. The method for determining bulk density has changed over time where:

Previous to 2000, Placer had used a non-standard variation on the immersion method to determine a bulk density (1,433 samples).
Between 2000-2006, the method used was the displacement method (where Bulk Density = Mass(g)/Volume Displaced (cc)); (2,128 samples).
From 2007 onwards, the immersion method has been used (where SG = Dry Weight/Dry Weight-Immersed Weight); (2,501 samples).

4.3.3 Classification and Reporting

The mineral resource at June 2011 is shown in Table 4.2. The estimate is based on a resource model prepared by Newcrest in October 2010 (2010 Surpac Resource Model mrooct10.mdl) depleted against the forecast face position by mining at end June 2011, and further constrained by a wireframe representing an optimised pit based on a Whittle shell at a US$1,200/oz gold price at an exchange rate of A$1.00 = US$0.75.

The resource within the pit has been reported at a cut-off grade of 0.38 g/t Au and includes the resource that has been converted to ore reserve. Classification of the

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resource is based on drillhole density and the number of samples used to estimate the block. The measured resource is stockpile material (note that the resource published by Newcrest did not include this stockpile material.

Table 4.2 Mt Rawdon Mineral Resource at 30 June 2011

Resource Classification	Tonnes (Mt)	Au (g/t)	Ag (g/t)	Au (Moz)	Ag (Moz)
Measured Indicated Inferred	0.2 36.3 0.2	1.10 0.87 0.64	1.87 2.43 2.00	0.01 1.02 0.00	0.01 2.84 0.01
Total Resource	36.7	0.87	2.42	1.03	2.86

AMC was provided the model mrooct10BM, the US$1,200 optimised pit wireframe, and the appropriate mining surfaces at 30 June 2011. AMC conducted a check of the resource estimate using an alternative evaluation process to that used by Newcrest. The check results were consistent with those produced by Newcrest.

Historically, the resource model has consistently underperformed with respect to the mill reconciliation, manifesting itself both in increased tonnes being mined in comparison to model estimates, and higher mill feed grades in comparison to mine head grades. Since November 2010, the new resource model has been used for planning purposes. Monthly mine reconciliation reports for the last 12 months show mine grades to be an average of 4% above mill grades, and contained gold mined an average of 14% above the contained gold in mill feed.

Reconciliations between the mine and mill are complicated by intervening stockpiling which played a large part over the extended FY2011 wet season. For the previous 11 months, four months gave negative mine grade reconciliations against mill head grade, while seven months gave positive reconciliations for the mine.

Positive tonnage reconciliations have been verified by a grade control programme conducted with blast hole sampling using 3.2 m x 3.6 m patterns (within areas defined as ore in the block model), compared to the original resource drilling conducted on 35 m x 35 m and 50 m x 50 m patterns. The higher than expected gold grades in the mill are most likely a result of a nugget-effect associated with free coarse gold causing difficulties in being able to adequately model gold distribution.

The grade control model has been compared to the October 2010 model and the comparison to date has found that at economic cut-off grades, the grade control model reports higher mean grades and contained more metal than the block model in equivalent areas. This finding is consistent with historical mine to mill head grade comparisons.

Mining of ore is also controlled by the grade control programme to define ore boundaries. Monthly reporting for FY2011 shows that with respect to the previous model, small areas of ore above the mining cut-off grade (205-210 mRL) were defined by grade control that were not part of the resource model, while areas in the western cutback 60-80 mRL were converted to waste; and an area in the southeast of the pit

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between 50-60 mRL was converted to higher grade ore by grade control drilling. This situation continues with the new model, and minor differences in grade are apparent in areas in the southeast between 40-60 mRL and in the northern cutback between 180-190 mRL.

Mill reconciliation in the future will continue to rely on issues related to the ratio of historical to recent drilling, drilling density, distribution of free gold and changes in the style of mineralisation with depth.

4.3.4 Conclusion

In AMC’s opinion, the Mt Rawdon mineral resource is well understood and the current resource estimate appears to have been generated with due care. Historical reconciliation results suggested that previous resource models consistently underestimated both tonnes and grade. The new 2010 resource model seems less consistent based on recent reconciliations, but AMC does not consider this to be a material deficiency.

AMC concludes that the 30 June 2011 Mt Rawdon mineral resource estimate has been prepared using acceptable industry practice and that the classification of the estimate as measured, indicated, and inferred resource is appropriate. In AMC’s opinion the mineral resource estimate has been prepared by a Competent Person in accordance with the JORC Code.

4.3.5 Potential for Additional Resources

The structural and lithological controls on the Mt Rawdon gold mineralisation appear to bound the mineralisation within an inlier, and limit its cross-strike and along-strike potential in the immediate vicinity of the mine.

Potential exists to increase the resource and reserve at Mt Rawdon at depth and down plunge to the south and southwest of the main pit along the contact between the fragmented dacite and main dacite body. The Mt Rawdon mineralisation is currently open at depth. The stripping ratio and average gold grade pose the most significant issues to the viability of mining at greater depth.

Three drillholes totalling 2,400 m are planned as part of a resource definition drilling programme to test the southern extent of the resource envelope, and for indications of a feeder structure at depth. A current step out drillhole of 160 m to the south and down-plunge of known mineralisation is being drilled to a depth of 900 m to test for alteration and host rock continuity.

4.4 Ore Reserves

Ore reserves reported by Newcrest at 30 June 2011 are shown in Table 4.3. They are based on a cut-off grade of 0.4 g/t Au contained within a pit design revised in February 2011. The ore reserve is based on metal prices of US$850/oz Au and US$13.50/oz Ag at an exchange rate of A$1.00 = US$0.75. The reserve includes 220 kt of stockpile material which is classified as Proved. All in-situ reserve is classified as Probable.

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Table 4.3 Mt Rawdon Ore Reserve at 30 June 2011

Reserve Classification	Tonnes (Mt)	Au (g/t)	Ag (g/t)	Au (Moz)	Ag (Moz)
Proved Probable	0.2 31.8	1.10 0.89	1.87 2.46	0.01 0.91	0.01 2.52
Total Reserve	32.0	0.89	2.46	0.92	2.53

AMC has reviewed the input parameters to the cut-off grade calculation and the pit optimisation on which the reserve is based. Although the metal prices and exchange rates appear to be out of line with current values, AMC considers the combined effect results in reasonable inputs to the reserve estimation process.

Further extensions to the size of the pit are limited by the presence of main mine infrastructure which would be very costly to relocate. This has been accounted for in the pit optimisation by designating appropriate blocks as “heavy blocks”, which carry the cost equivalent of relocating this infrastructure.

The maximum mining rate was limited to 20 Mtpa total ore and waste, and the processing rate was limited to 3.6 Mtpa. Substantial capital investment would be needed to remove these constraints and this is not considered to be economic with the current reserve at forecast metal prices.

Loss and dilution factors were set to zero, based on historical positive reconciliations for tonnes and grades. Mining costs have been updated to reflect recent performance and the current contract rates.

AMC understands that non-reserve material above a cut-off grade of 0.31 g/t Au within the pit will be stockpiled for processing at the end of the mine life, providing the opportunity to extend the processing operation by approximately 15 months. AMC supports this strategy which is intended to maximise value within the processing constraint.

4.4.1 Conclusion

In AMC’s opinion, the 30 June 2011 ore reserve for Mt Rawdon has been prepared using acceptable industry practice and that the classification of the ore reserve estimate as proved and probable is appropriate. In AMC’s opinion the estimate has been prepared by a Competent Person in accordance with the JORC Code.

4.5 Mining Operations

Mining at Mt Rawdon uses conventional drill, blast, load and haul techniques. The main earthmoving operation is carried out by a mining contractor Golding Contractors Pty Ltd (Golding) under a schedule of rates contract. Golding has been involved since the inception of operations. Other contractors involved in mining operations are:

Drilling – Rock Australia (replaced Hughes in January 2010).
Blasting – Orica.
Other earthworks (including expansion of TSF) – BDN Earthmoving.

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A major change to operations has recently occurred, with all mining activities now on a continuous roster, which removes a significant constraint on material movement. This has required an increase in manning levels with a commensurate cost increase. Accommodation pressure may require the establishment of additional accommodation in Mt Perry. A Single Persons Quarters is being considered.

At the time of the site visit, the pit was virtually waste bound, with ore supply expected to be tight for the current quarter. The mining schedule has been re-optimised to defer some waste mining and expose more ore in the short term. The pit is expected to be mainly in ore by the end of December 2011.

Bench by bench grade control incorporates assaying blast hole drill cuttings. These are assayed for gold in an on-site laboratory. Blasting is carried out on a 10 m bench with subsequent mining on 3 m x 3.5 m flitches.

Ore is fed to the primary crusher direct from haul trucks and by front end loader from stockpiles. Oversize rocks are stockpiled and broken by a rock breaker. Low grade ore is currently stockpiled for future processing, either to overcome shortfalls in pit production or when the pit is exhausted.

A Ground Management Plan exists and a Geotechnical Risk Assessment was conducted in January 2007. A Draft Slope Stability Management Plan was prepared in April 2006. There has been a modest failure in the north wall and the east wall is being monitored for potential structural failures. A comprehensive database of rockfall events is maintained. Cable bolting is done on final pit walls as required.

AMC considers that with a continuation of current practices, geotechnical risks to the operation are low.

The mine has an excellent safety record and has been Lost Time Injury (LTI) free for over two years.

Short term mine planning is carried out on site. The current life-of-mine plan was developed by IMC Consultants in early 2011, based on an optimised pit design, using inputs provided by Newcrest. The stages of the optimised pit with gold grades are shown in Figure 4.5.

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Figure 4.5 Pit Stage Sequence with Gold Grades

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4.6 Metallurgy and Processing Operations

4.6.1 Introduction

The plant is a typical gold operation employing conventional gold-ore processing technology comprising:

Crushing (2-stage).
Milling & Classification.
Leach/Absorption.
Tailings Disposal.
Elution/Carbon Regeneration.
Gold Room.

The process plant treats ore from a single open cut deposit. The host lithologies for the gold and silver mineralisation are volcaniclastic and dacite rock types. Volcaniclastic ore tends to be blockier and harder than the dacite. Blending is performed when possible to reduce the variation in the run-of-mine size distribution and ore hardness presented to the primary crusher.

4.6.2 Historical Production

The annual production data for the past four years of operation is presented in Table 4.4, together with the corresponding budget targets for FY2012. The majority of this information has been sourced from monthly production reports. These reports had been prepared as either calendar or financial year periods depending on the mine owner

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at that time. Where data was not readily available from these monthly reports, the required information was provided by site personnel. The major points of interest are:

Annual throughputs over the past four years have averaged 3.45 Mt. The plant treated 3.52 Mt of ore during FY2011. This throughput was hampered by the construction of the open pit cut-back resulting in ore supply disruptions and limiting the scope for blending of the host lithologies. In addition to the feed disruptions, high rainfall resulted in elevated water levels within the tailings dam requiring a plant shutdown for a 10 day period to restore the buffer capacity within the dam.
Annual gold production has declined significantly over the last four years. With throughputs and gold recovery largely unchanged, the declining feed grade to the process plant is the major contributor to the fall in gold production.
The annual production results indicate that the unit cost of ore treatment has steadily increased over the past four years. The processing cost for FY2011 represents a 29% increase over that experienced for FY2008. Comparison of the budget and actual processing costs for full year production generally shows good agreement.

Table 4.4 Mt Rawdon Historical Production and FY2012 Budget

Parameter	Units		Financial Year	Financial Year	Financial Year
		2008	2009	2010	2011	2012
Ore Milled (dry)	kt	3,519	3,356	3,392	3,515	3,653
Gold Grade (recon.)	Aug/t	1.14	1.06	1.03	0.88	1.00
Gold Recovery	%	90.2	90.2	90.6	89.8	90.2
Gold Recovered	oz	115,792	102,779	100,703	89,637	106,137
Gold Poured	oz	115,069	103,266	100,673	89,181	–
Mill Cost (actual)	$/t	7.07	8.01	8.38	9.15	–
Mill Cost (budget)	$/t	7.41	7.83	8.5	8.75	9.40
Difference`-`actual vs budget cost	%	(4.6)	2.3	2.4	4.6	–

4.6.3 Gold Recovery

The annual gold recovery values obtained for the past four years have been consistent, ranging from 89.8-90.6%. Leach test results on future ore supplies from the pit were not provided for review. In terms of setting gold recovery targets for budget purposes, mine operating personnel have developed the following relationship between gold recovery and the modelled feed grade, and this is considered satisfactory by AMC for predicting future recoveries.

Gold Recovery% = (6.474*Gold Grade in g/t+83.731)-1)/100

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4.6.4 Future Production

The life-of-mine plan shows future annual ore throughputs of 3.63 to 3.64 Mt, which seem slightly optimistic based on historical production. However, the change to a 7-day continuous roster in the open pit should eliminate ore shortages at the weekends, and reduce run-of-mine re-handle, making the targets achievable.

4.7 Waste Rock and Tailings Storage

Additional waste dump and storage capacity will be required over the remaining mine life. In the short term, the walls on the TSF can be raised, but eventually new locations may be required for tailings storage and a new waste rock dump. These are not expected to present any permitting issues.

4.8 Infrastructure and Power

A new supply contract has been signed with Origin Energy to 31 December 2012 with potential for $1.4M in savings over that period. The current connection and access agreement with Ergon has been extended until 30 June 2012, and is subject to further current discussions.

Power supply is at 66 kV from Gin Gin. The transmission line to site has limited capacity and any upgrade would be very expensive. The existing incoming site transformer is planned to be replaced.

Water is sourced from the site weir (Perry weir), and from the Burnett River at Paradise Dam. The water supply from the Burnett River is based on two contracts, a base supply contract, and a priority contract if additional water is required. The Perry weir overflowed recently, and when full, nominally has sufficient water for a year.

The main access road is prone to flooding during high rainfall events, but the durations are quite short and have not caused serious disruptions to site operations. In addition to the main access road, there is an emergency road which is rarely used.

Communications with the mine site is via a Telstra microwave link to Mt Perry, which can be affected periodically by storm damage. There is no reliable mobile service on site.

4.9 Environmental and Community Issues

4.9.1 Surface Water and Stream Sediments

An overflow event from a set of dams during extreme weather conditions occurred in December 2010. Some of the dams were known to contain levels of contaminants above trigger values set out in the Environmental Authority for the Project. It is noted that receiving waters were likely to be in flood or in high flows at that time, due to the extreme weather conditions.

Subsequent and ongoing surface water monitoring downstream of the mine has been carried out by the Mt Rawdon mine. A review of the cyanide monitoring results

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presented in the January 2011 indicated that all sampling results were less than 0.004 mg/L weak acid dissociable (WAD) cyanide concentration in Twelve Mile Creek or Perry River downstream of the project. One sample (out of six) provided a result of 0.01 mg/L WAD cyanide was recorded in Rawdon creek downstream of the project. This result exceeds the ‘impacted storm water contaminant release limit’ of 0.007 mg/L WAD cyanide provided in the Environmental Authority for the project.

The issue of potentially greater concern is that no stream sediment sampling has been completed. As such, there is potential risk of stream sediment contamination downstream of the project. While this risk may not necessarily have a high likelihood, or large extent (it is likely that any contaminated sediments would be trapped by the Perry River Dam) the risk remains uncharacterised, and the potential cost of remediation or rehabilitation of a stream or streams could be significant in a worst case scenario.

4.9.1.1 Groundwater Issues

The Annual Returns for the mine note exceedance of groundwater quality criterion for a number of bores, and also report that this has been an ongoing issue.

A high level review of the geochemical report was carried out. The report concludes that there is evidence of groundwater issues and potential impacts to the groundwater system from the operation of the mine, and that the issues are likely to continue with ongoing operations.

The report also identified potential impact management options/strategies for the operation and mine closure phases. A preferred option was not identified. The groundwater management measures have not been specifically included in the financial assurance calculations, although some of the rehabilitation and remediation measures included in the financial assurance calculation (e.g. remediation of the tailings storage facility) are likely to at least partially address the groundwater issues.

Additionally, if requested or directed by the Department of Environment and Resource Management (DERM), the cost of the remediation of a contaminated groundwater system could be significant, but are unknown at this point.

4.9.1.2 Mount Perry Dam

The Mount Perry Dam is owned and operated by Newcrest Mining Ltd for the Mt Rawdon Gold Mine.

A failure Impact Assessment was completed in 2011 and was accepted by the A/Director of Dam Safety (assigned as delegate for the Chief Executive) of DERM on 18 April 2001. The dam has been given a failure impact rating of Category 1 and is therefore a referable dam. Dam safety of referable dams is regulated to protect the community from dam failure. The chief executive of DERM is responsible for regulating referable dams.

Draft Safety Conditions for the Perry River Dam were reviewed as part of AMC’s review. The draft conditions include a number of activities and reports that must be completed

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by 31 August 2011, 1 November 2011, and 30 November 2011. Of particular interest is the requirement to demonstrate the spillway adequacy of the dam (by 31 August 2011).

The potential (worst case) implication of this requirement would be that the spillway is not of sufficient capacity, and some auxiliary spillway capacity would be required to be constructed for the dam. The cost for an auxiliary spillway or alterative management strategy (e.g. raising the dam wall) could be significant.

4.9.2 Mine Closure and Rehabilitation Costs

The 2010 Plan of Operations calculated the financial assurance for the operation at the end of 2012 to be $10,069,930 (inclusive of GST). However, a notice of acceptance for the Plan of Operations (including verification of the sum of financial assurance) has not been reviewed.

Newcrest has reported that a financial assurance of $12M has been lodged with the Department for Employment, Economic Development and Innovation.

4.10 Capital and Operating Costs

Rock excavation costs have steadily increased in recent years, reflecting the rising costs of inputs (labour, energy, and consumables) over the period. The life-of-mine plan prepared by Newcrest forecasts further increases from $2.90/t mined FY2012 to $4.70/t FY2018. Reflecting the increased depth of mining and the cost of extra personnel required for the new 7-day roster.

Total mining costs are expected to peak over the next two years due to the high stripping ratio and then reduce. Total mining costs decrease sharply from 2014 onwards. There are no capital costs associated with the contact mining operation.

Unit processing costs are projected to increase from $9.40/t milled in FY2012 to $10.30/t in FY2016. Unit milling costs are expected to reduce to $9.10/t and $7.80/t in the last two years of operation when processing lower grade stockpile material. The costs include the cost of cyanide destruction.

AMC considers Newcrest’s forecast of mining and processing cost to be realistic.

4.11 Mt Rawdon Modelling Scenarios

AMC has prepared a single modelling scenario for Mt Rawdon (Case 1), based on the life-of-mine plan prepared by Newcrest. The plan is based on the 30 June 2011 ore reserve estimate and envisages mining until 2018 and processing until 2020.

AMC has not changed the production plan except for the following minor changes to metal recoveries and costs.

The algorithm relating gold recovery to head grade has been used to forecast average annual recoveries, which are marginally lower than those in the life-of-mine plan. Metallurgical recoveries over the life of the plan average approximately 90%.

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The capital cost of the cyanide destruction plant ($2M) has been removed from the budget.
The increase in processing costs of $1.80/t associated with cyanide destruction has been removed from the budget.
A load and haul cost of $0.50/t has been applied to the low grade stockpile material to be treated after cessation of mining.
An amount of $5M has been added to the closure cost in addition to the guarantee lodged with the state government. The additional amount brings the total closure cost to $15M.

In AMC’s opinion, there are currently no additional mineral resources with a reasonable expectation of being mined to justify a Case 2 modelling scenario.

4.12 Risks

Overall, Mt Rawdon open pit operation is a stable 100 kozpa gold producer with positive community support. The greatest risk concerning the operation of the Mt Rawdon open pit involves maintaining a stable, high calibre workforce in competition with other mining operations in the region, and the new projects that will be actively recruiting such personnel. This may require the establishment of Single Persons Quarters in Mt Perry and the payment of higher remuneration, resulting in higher operating costs.

Geotechnical risks in the open pit will increase as the pit gets deeper, but these are expected to be manageable.

The main ore processing risk results from the lack of quantification of ore hardness as the pit develops. This limits the confidence in achieving the predicted grinding circuit throughput, in particular in several years time, following the cut-back.

Another significant risk is the potential for an environmental incident, notably any type of spill involving cyanide and any increase in wildlife deaths on or in the TSF.

The capacity of the spillway on the Mt Perry Dam is currently being assessed. The cost for an auxiliary spillway or alterative management strategy (e.g. raising the dam wall) could be significant.

The main geological risks are associated with the volatility in grade. Positive grade reconciliation appears to be dependent on mining activity in the vicinity of fragmented dacite intrusives in the southwest corner of the pit.

Exploration potential in the region is considered to be low.

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5 CRACOW GOLD MINE (QLD)

5.1 Location and Background

The Cracow Gold Project is operated by Cracow Gold Mine (CGM) and is located in the Cracow Goldfield in Banana Shire, approximately 1.5 km west-northwest of the town of Cracow and some 100 km south of Biloela, southeast Queensland. CGM is, in turn, operated by the Cracow Joint Venture (CJV), between Newcrest Mining Ltd (Newcrest) 70% and Catalpa Resources Ltd (Catalpa) 30%. Newcrest manages the CJV.

The historical Cracow Gold Field is located within the northern New England Fold belt on the western margin of the Connor-Auburn Arc. The location of the CGM tenements is shown in Figure 5.1.

The Cracow area hosts numerous deposits of current and historical importance. CGM has defined nine deposits for which current mineral resources have been estimated. There are other deposits adjacent to the main mineralised zones with exploration potential, and a large exploration area.

Figure 5.1 Cracow Location

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Source: Cracow Operations Overview November 2010.

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5.2 Geology and Resources

5.2.1 Leases and Tenure

The Cracow operation takes place on 18 Mining Leases (ML’s) listed below in Table 5.1. The mining leases were granted between 1974 and 2008. The Cracow Mining Leases are totally enclosed by EPM 15981, a permit of 179 sub-blocks which was granted on 26 February 2007 and has a current expiry date of 25 February 2012.

Table 5.1 Cracow Mining Leases

Lease	Project	Granted	Expiry	Area	Holder
EPM15981	Cracow	26/02/2007	25/02/2012	179 Sub- blocks	Newcrest Operations Limited
ML3219	Golden Mile	21/03/1974	31/07/2035	18.57 Ha	Newcrest Operations Limited
ML3221	Cracow Slimes	19/03/1981	31/03/2023	40.12 Ha	Newcrest Operations Limited
ML3223	Cracow Slimes West	27/09/1984	30/09/2026	1.131 Ha	Newcrest Operations Limited
ML3224	Cracow Slimes South	1/10/1984	30/09/2026	1.476 Ha	Newcrest Operations Limited
ML3227	Golden Plateau	5/06/1986	30/06/2028	110.9 Ha	Newcrest Operations Limited
ML 3228	Ferneyside	10/07/1986	30/07/2028	110.9 Ha	Newcrest Operations Limited
ML 3229	Rose’s Pride	10/07/1986	31/07/2028	98 Ha	Newcrest Operations Limited
ML 3230	White Hope	1/08/1986	31/07/2028	128 Ha	Newcrest Operations Limited
ML 3231	Cracow South	30/11/1989	31/07/2035	128 Ha	Newcrest Operations Limited
ML 3232	Excelsior Extended	1/10/1987	31/07/2035	28.8 Ha	Newcrest Operations Limited
ML 3234	Southern Tailings	1/12/1989	31/07/2035	16.2 Ha	Newcrest Operations Limited
ML 3243	Golden Pheonix	1/05/1989	30/04/2025	17.05 Ha	Newcrest Operations Limited
ML 80024	White Hope Extended	1/05/1994	31/07/2028	1.6 Ha	Newcrest Operations Limited
ML 80088	Royal Standard	1/09/2001	31/08/2022	85.2168 Ha	Newcrest Operations Limited
ML 80089	Klondyke	24/07/2003	31/07/2024	334.727 Ha	Newcrest Operations Limited
ML 80114	Infrastructure lease	1/11/2001	31/10/2034	33.0403 Ha	Newcrest Operations Limited
ML 80120	Cracow – Southern Royal	1/08/2005	31/07/2035	22.0503 Ha	Newcrest Operations Limited
ML 80144	Kilkenny	1/08/2008	31/07/2035	312.637 Ha	Newcrest Operations Limited

5.2.2 Geology and Exploration

The Cracow gold deposits are located within the northern New England Fold belt on the western margin of the Connor-Auburn Arc. Gold mineralisation occurs in structurally controlled, steeply dipping, quartz (carbonate), low sulphidation, epithermal, gold-silver deposits formed within lode channels in steep-dipping fault zones which range in strike from north-north-east to northwest. The main deposits occur within a zone approximately 6 km long x 2 km wide, although a number of other historical mines occur some kilometres to the east. The structural regime is developed within Permian

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andesitic lavas, tuffs and coarse fragmentals of the Camboon Volcanics Group. The regional geological setting is shown in Figure 5.2.

Figure 5.2 Relative Location of Cracow Mining Leases and EPM

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Source: AMC report 209056.

CGM hosts numerous epithermal gold-silver deposits, including well known historical deposits such as, the Golden Plateau and the Golden Mile, which were part of the historical Cracow Goldfield.

The CGM resource is currently composed of nine deposits for which resources have been estimated. There are other deposits adjacent to the main mineralised zones and the larger exploration area with exploration potential. The location of the various deposits is shown in Figure 5.3. The deposits have widths ranging from less than 1 m to over 20 m and dip extents of up to 500 m (Royal Shoot). Hangingwall and footwall splay structures and stockworks are common and lodes can vary significantly in width over short distances.

Mineralisation can include what is termed a ‘bonanza event’ within a low-suphide quartz-carbonate-adularia banded vein and stockwork. Secondary structures occur as splays which are modelled in the stockwork domains. High grade mineralisation is developed in plunging shoots, mostly at changes of strike within the structure.

Faulting is present, which causes thickening and thinning of lodes and some offsets.

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The deposits with current mineral resources are: Royal, Crown, Sovereign, Klondyke North, Empire, Roses Pride, Kilkenny, Tipperary and Phoenix.

Figure 5.3 Location of Deposits

==> picture [432 x 290] intentionally omitted <==

Source: Cracow Operations Overview November 2010.

The Royal Shoot extends for 450 m in strike and 375 m in depth with an average thickness of 4 m up to a maximum of 20 m. Gold in the Royal Shoot is fine grained and occasionally clustered, resulting in visible gold. There are occasional very high gold grades.

The Crown Shoot was modelled for 475 m along strike and 500 m in depth and contains a high grade shoot. Crown contains a bonanza event.

The Sovereign Shoot of 400 m strike length and 380 m in depth, is located 400 m north of the Crown Shoot and is interpreted to be similar in a geological setting, however striking at about +45[o] to the Crown Shoot. The structure geometry shows flexures along strike resulting in splay structures. Between the main structure and the splays is brecciated and veined infill. Where best developed, these main shoot and splay intersections with infill breccia can result in mineralised widths up to 20 m. The Sovereign Shoot also contains a bonanza event.

The Klondyke North Shoot of 350 m in strike length and with a depth extent from surface to 1,950 mRL is located 200 m north of and on the same structure as the Royal Shoot. The Klondyke structure trends parallel to and approximately 80 m from the Crown

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Decline which connects the Royal and Crown shoots. The mineral resource model was depleted for the historical Klondyke mine workings.

Kilkenny is located 450 m west of the Crown Shoot and has splays with veining and mineralisation. The top of economic mineralisation at Kilkenny appears to be at the level of the base of the Crown decline. Kilkenny is a northeast striking structure of 760 m in strike and 700 m in depth. It is inclined up to 30° from the Klondyke grid. The Kilkenny structure can be traced for over 2 km between Tipperary in the south and Sterling in the north and dips steeply west. The Kilkenny Shoot also contains a bonanza event.

The Kilkenny structural regime is different to the rest of the deposits at Cracow and therefore mining and geotechnical analysis of this structure is carried out as an individual project.

Tipperary is along the same structure as Kilkenny and is modelled as part of the Kilkenny model. This northeast striking structure strikes up to 30[o ] from the Klondyke grid north. Tipperary is the southwest end of the Kilkenny structure, of 75 m strike length and 700 m in depth and finishes at 5600 mN.

Roses Pride is located 2 km north of Kilkenny with historical workings down to 70 m below surface. The mineralisation has developed on a north striking structure of 1,025 m strike length and 480 m in depth, which dips steeply west and could be the continuation of the Kilkenny-Sterling structure. The style of mineralisation is similar to the Klondyke North with a ‘bonanza vein event’. The main high grade mineralisation shows a shallow plunge to the south and appears to be below historic workings. Whilst digital files have been created defining historic workings these need to be validated.

Empire is located 550 m north of Sovereign Shoot with the mineralisation developing on a steeply west dipping structure of 500 m strike length, and 400 m in depth which strikes north. A total of thirty diamond holes (as at 30 May 2009) were used to model the resource. Empire is similar to Klondyke North with a bonanza vein. In the upper north area, the structure is interpreted to split into two. The footwall structure is the primary structure with the hangingwall acting as a splay from the footwall structure. Mineralisation is best developed in the northern end of the structures.

The Phoenix structure which lies on the southern end of the Crown structure, strikes 30[o] north for 200 m and dips steeply to the east for 150 m. This structure’s geometry is contrary to all other mineralisation in the Cracow western zone. The Phoenix is similar to the Royal Deposit with a bonanza vein event. The main high-grade mineralisation is interpreted to occur in two lodes.

Both Sterling and the western extension of the Golden Plateau are known deposits; however, they have been insufficiently explored to provide resource estimations.

Deposits with significant exploration potential are:

Royal Deeps and Crown Deeps.
Area between Klondyke and Phoenix.
Area between Royal and Klondyke.

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Golden West.
Dawn.
White Hope (Central Extended).

Several other areas of exploration potential are also being explored with encouraging results.

5.3 Mineral Resource Estimation

5.3.1 Data Available

Data used to estimate the resources are collected using four methods:

Underground face sampling and backs mapping.
Surface exploration diamond core drilling and reverse circulation percussion drilling.
Underground diamond core drilling as part of resource definition programmes.
Inline diamond drilling as part of mine development.

All sample submissions to the ALS Laboratory for analysis must conform to the Newcrest procedural document titled ALS Invoice and Sample Submission Management Procedure. This ensures all samples are tracked through the system and QA/QC checks are applied.

Audits by AMC of the 2006 mineral resource and annual reviews of the 2007, 2008, 2009 and 2010 mineral resource estimates did not find any material problems relating to use of the data in the preparation of mineral resource estimates.

For each of the annual reviews AMC considered the quality of resource data, including QA/QC programmes and data collection. Each review was completed by discussions with Newcrest personnel, review of audit reports, resource computer models and other documentation. The QA/QC programmes include standards, check samples, sizing tests, blind resubmissions, barren flush analysis, external laboratory checks and screen fire assays. No issues of material concern were identified.

Geotechnical considerations have not been used to constrain the mineral resource estimates, but have been taken into account when preparing the mine design and the resulting ore reserve estimates.

5.3.2 Resource Estimation

Two dimensional (2D) resource models have been prepared for Royal and Crown deposits, with a remodel of the Crown shoot in 2010. In the 2D models thickness, gold accumulation and silver accumulation have been estimated using ordinary kriging. The areas of the Royal and Crown Shoots classified as a measured resource have been estimated using three dimensional (3D) estimation models, based on the additional data

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provided by face sampling and underground drilling results. The three dimensional models have been overprinted over the 2D models.

Mineral resource estimates for the Sovereign, Klondyke North, Kilkenny, Tipperary, Phoenix, and Rose’s Pride Shoots were updated in 2010 using 3D modelling and employing ordinary kriging estimation methods. The Empire shoot was updated in 2010 as a 3D model using the inverse distance squared estimation method.

AMC considers both the 2D and 3D models give a reasonable estimation of the mineral resource. The updated 3D of modelling uses appropriate block sizes with respect to data density and uses sub-blocking where required for boundary definition and domaining of high grade portions of shoots or secondary splays.

Block model construction is pegged to localised mine grids so the X, Y and Z orientations are based on the grid used for each deposit. In general terms, the parent block sizes for the deposits are:

Crown, Klondyke and Sovereign deposits use 5 m (X) x 5 m (Y) x 10 m (Z) parent blocks.
Rose’s Pride deposit uses 5 m (X) x 10 m (Y) x 10 m (Z) parent blocks.
Kilkenny-Tipperary deposits use 5 m (X) x 25 m (Y) x 25 m (Z) parent blocks.

Resource definition drilling has various spacing in the plane of the structure, for example 25 m x 25 m for the Klondyke Shoot, 4 0m x 4 0m for the Sovereign Shoot, and 50 m x 50 m for the Empire Shoot. Grade control data takes the form of sampling of the development face at each 3 m advance with mapping and LTK60 diamond drill holes every 5 m spacing where the ore is wider than the drive. Development levels average 20 m apart in RL from floor to floor.

Samples have been composited to lengths of 1 m, 1.5 m or 2 m intervals depending on the shoot. Variography used has been provided by Quantitative Group who carried out the variogram analysis. Top-caps have been used on the composited drillhole files, and are specific to each deposit. Several shoots have high-grade domains which have been flagged and modelled separately. In each case, if a main shoot and splays are present they have been modelled as separate domains. The bulk density values for each shoot vary between 2.63 t/m[3] to 2.64 t/m[3] .

No new bulk density determinations have been carried out since June 2000 except for 16 samples taken from the Kilkenny surface drilling. Previously, 346 samples from 58 drillholes were tested from the Royal Shoot, 111 samples from the Crown Shoot and 38 samples from the Sovereign Shoot. The Kilkenny drilling included 16 samples for bulk density testing carried out by ALS Strafford using method OA-GRA08 (using wax seal).

Bulk density measurements were determined on drill cores using the water displacement method. Results show only minor variation between the density of barren wall rock, and mineralised rock types, and between deposits. The average bulk density was 2.62 t/m[3] for the Royal Shoot, 2.64 t/m[3] for the Crown Shoot and 2.63 t/m[3 ] for the Sovereign and Kilkenny Shoots. Comparisons between the survey volume reconciliation

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from underground excavations and truck weightometer checks have confirmed the density values used in the resource model.

5.3.3 Classification and Reporting

The combined mineral resource estimate for Cracow as at 30 June 2011 is shown in Table 5.2. The mineral resource is inclusive of ore reserves.

Resource classification is predominantly based on data density and observed continuity of mineralisation. Data includes drilling and underground face sampling in development drives. The classification into a measured resource was based on the extent of mine development, indicated resource by a smoothed shape around blocks estimated by the first pass search and inferred resources by a smoothed shape around the second pass search volume.

An approximate drill spacing of 40 m x 40 m in the plane of the structure is locally varied at each deposit and used to define inferred resources. Drill spacing modified by underground drilling to spacing approaching 25 m x 40 m has been used to define indicated resources. Measured resources are defined by the presence of ore development face sampling which is conducted at each 3 m face advance.

Table 5.2 CGM Mineral Resource at 30 June 2011

Deposit	Measured	Measured	Measured	Indicated	Indicated	Indicated	Inferred	Inferred			Total
	Tonnes (kt)	Au (g/t)	Au (koz)	Tonnes (kt)	Au (g/t)	Au (koz)	Tonnes (kt)	Au (g/t)	Au (koz)	Tonnes (kt)	Au (g/t)	Au (koz)
Royal Crown Klondyke Sovereign Kilkenny Tipperary Empire Roses Pride Phoenix Stockpiles	32 77 1 108 42 – – – 12 6	12.5 9.8 8.0 7.0 13.1 – – – 15.5 5.0	13 24 0 24 18 – – – 6 1	– – 185 120 213 345 – 51 129 –	– – 5.7 4.7 7.3 7.5 – 14.6 11.8 –	– – 34 18 50 84 – 24 49 –	85 364 189 357 1,056 196 424 429 1 –	6.7 4.8 4.2 3.8 6.0 5.0 6.5 6.0 4.3 –	18 56 26 43 203 32 89 82 0 –	117 441 375 585 1,311 541 424 480 142 6	8.3 5.7 4.9 4.5 6.4 6.6 6.5 6.9 12.1 5.0	31 81 60 85 270 115 89 106 55 1
Total	278	9.7	86	1,042	7.7	258	3,101	5.5	548	4,422	6.3	893

All mineral resources are reported at a cut-off grade of 2.5 g/t Au which is the marginal low-grade cut-off covering all operating costs, a US$1,000/oz gold price and an exchange rate of US$0.80:A$1.00. Silver is not taken into consideration and fixed mining costs are not included in the cut-off grade calculation.

5.3.4 Conclusion

AMC was able to import supplied models in Datamine format for the Royal, Crown, Kilkenny-Tipperary, Klondyke, Rose’s Pride, Empire and Phoenix shoots which were depleted of mining to the date 31 March 2011. Using a Datamine evaluation macro,

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AMC was able to obtain an equivalent estimate of tonnes and grade as stated by Newcrest for that date. Overall, AMC found the models to be well constructed and suitable for resource estimation.

AMC concludes that the 30 June 2011 Cracow Mineral Resource estimate has been prepared using acceptable industry practice and that the classification of the estimate as Measured, Indicated and Inferred Resource is appropriate. In AMC’s opinion the mineral resource estimate has been prepared by a Competent Person and reported in accordance with the JORC Code.

5.3.5 Near Mine Exploration Targets

There is insufficient drilling to enable a resource to be estimated for the Sterling structure. Only six holes have been drilled in the area with two holes intersecting mineralisation. Based on this drilling, the target mineralisation may be approximately located from 1,400 mN to 1,700 mN and from 1,650 mRL to 1,850 mRL.

All data from the Golden Plateau mine has been compiled, a model prepared and a number of 50 to 100 koz targets generated.

Other target areas include possible extensions to existing structures. Comments on the areas are summarised below:

There is a limited potential for additional resources below the currently drilled areas of the Royal Shoot. Additional drilling is required in order to gain an understanding of the mineralisation and size and grade of any possible resources.
The drillholes in the area between Royal and Klondyke show the mineralisation to be either too thin or at a grade not high enough to meet the current resource classification requirements. One intersection of 5.4 m at 4.1 g/t Au is surrounded by holes with poor results.
Two narrow vein structures have been identified in the area between Klondyke and Phoenix. The drill intercepts in the area are narrow and high grade but are not considered mineable under the current mining grade and thickness requirements.

5.4 Ore Reserves and Mining Inventory

The CGM ore reserve estimate at 30 June 2011 is shown in Table 5.3.

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Table 5.3 CGM Ore Reserve at 30 June 2011

Category	Proved	Proved		Probable	Probable		Total	Total
Ore Shoot	Tonnes (kt)	Au (g/t)	Au (oz)	Tonnes (kt)	Au (g/t)	Au (oz)	Tonnes (kt)	Au (g/t)	Au (oz)
Royal	44	10.6	15	`-`	`-`	`-`	44	10.6	15
Crown	41	7.3	9	3	17.8	2	44	8.0	11
Klondyke North	`-`	`-`	`-`	30	5.2	5	30	5.2	5
Sovereign	91	6.1	18	48	5.0	8	138	5.7	25
Kilkenny	45	9.8	14	231	5.9	44	276	6.5	58
Tipperary	`-`	`-`	`-`	325	5.6	59	325	5.6	59
Roses Pride	`-`	`-`	`-`	76	9.0	22	76	9.0	22
Phoenix	9	13.2	4	128	10.6	43	137	10.8	47
Stockpiles	6	5.0	1	`-`	`-`	`-`	6	5.0	1
Total	236	8.1	61	840	6.8	182	1,075	7.0	244

The ore reserve has been reported above a cut-off grade of 2.4 g/t Au, the grade that covers all operating costs except mining fixed costs, calculated using a gold price of US$1,000/oz at an exchange rate of A$1.00 = US$0.80.

The conversion of mineral resources to ore reserves in stopes assumes:

98% recovery of development ore with zero dilution.
90% recovery of stope ore.
400 mm of wall dilution from both hangingwall and footwall for stopes.
Backfill dilution of 4% in stopes and 20% for crown pillars.

Recovery and dilution factors applied to sill pillars vary depending on whether the overlying fill is cemented or not. In Royal, the fill was un-cemented, but is being post-grouted prior to pillar extraction. The pillars in Crown and Sovereign were both constructed of cemented backfill. The recovery and dilution factors used in these areas are as follows:

Royal – 20% ore loss with 20% backfill dilution.
Crown and Sovereign – 40% ore loss with 40% backfill dilution.

5.4.1 Conclusion

AMC has conducted independent reviews of the ore reserve estimates for Cracow from 2005 to 2010 inclusive and found them to be satisfactory in terms of their preparation to acceptable industry standards. The procedures used to estimate the June 2011 Ore Reserves are consistent with the procedures used in the preparation of previous estimates.

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In AMC’s opinion, the 30 June 2011 ore reserve for Cracow Gold Mine has been prepared using acceptable industry practice and that the classification of the estimate as proved and probable ore reserves appropriate. In AMC’s opinion, the estimate has been prepared by a Competent Person in accordance with the JORC Code.

5.5 Mine Planning Inventory

Newcrest has provided AMC with a mine planning inventory which includes the June 2011 ore reserves and additional material based on resources which Newcrest anticipates will be converted to reserves with further exploration and evaluation. The mine planning inventory as at 31 March 2011 is shown in Table 5.4.

The estimate is based on an established history at CGM of resource conversion to reserves as a result of exploration by drilling and sampling from underground mine development. AMC has reviewed the mining inventory and is of the opinion that it forms a reasonable basis for long-term production planning.

Table 5.4 Mining Inventory at 31 March 2011

Ore Shoot	Tonnes (kt)	Au (g/t)	Ag (g/t)	Au (koz)	Ag (koz)
Royal Crown Klondyke North Sovereign Kilkenny Roses Pride Phoenix Tipperary Empire Stockpile	46 72 30 221 1,218 301 145 429 325 39	10.5 9.4 5.2 6 5.6 5.8 10 5.8 4.3 4	9 6.8 2.7 3.3 3.5 2.1 42.5 5.5 1.8 2.6	16 22 5 43 218 56 46 80 45 5	13 16 3 23 136 20 198 75 19 3
Total	2,825	6.1	6.1	537	508

5.6 Mining Operations

5.6.1 Overview of Mining Operations

CGM is a modern, mechanised underground mine utilising standard mobile equipment in a benching operation with fill. The phases of the operation are as follows:

An access decline 5.8 m high x 5.5 m wide is developed to the orebody.
Cross cuts are developed from the decline across to the orebody.
Strike drives are developed north and south along the orebody under geological control.
These strike drives are then stripped to the full width of the orebody (up to 10m wide). If the width exceeds 10m, then two drives are developed.

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Once the strike drives have been completed, production holes (64 mm) are drilled between two levels and reverse fired from the slot.
The broken ore is loaded from the stope into 50t trucks and transported to the run- of-mine stockpile at the mill.
Once the ore has been extracted, the void created is filled with waste rock.
Sill pillars have been left in some shoots to create multiple mining zones.

Major issues relate to the narrow orebody and the relatively small stope sizes, typically only 5-10 kt each. Although a high proportion of ore is produced from the development and stripping of ore drives, several stopes must be extracted each month to achieve the production target.

The narrow orebody widths make dilution a significant issue, which must be well managed to maintain planned ore grades. The nature of the mine means that from month to month there will be significant fluctuations in output and grade, but that on an annual basis production is fairly predictable.

The mine has generally been successful in achieving tonnage and grade targets. The introduction of "reverse blasting" has led to higher output by reducing the amount of stope ore that must be extracted with remote controlled loaders, but with a small consequential increase in dilution from backfill.

Recently, poor ground conditions in the Kilkenny shoot have required a change to the overhand cut-and-fill method to reduce the size of hangingwall exposures. This should allow the problem areas to be managed, but will reduce the productivity in these areas and result in slightly higher mining costs.

The new, separate mining operation in Roses Pride will help achieve increased production.

Waste rock is used to fill mined out stope voids, providing a working platform for the next lift and to support the hangingwall and footwall. At times, there has been insufficient fill material generated by underground waste development, so waste rock has been backloaded from the old Golden Plateau waste dumps at a higher cost.

The mine has the usual services, including power, water, ventilation, communications, emergency egresses and dewatering systems. AMC considers these to be appropriate for the operation and readily extended to cope with planned operations. The mine is relatively dry, and there is no evidence of problems arising from the presence of groundwater. The mine dewatering system is adequate to meet foreseeable requirements. Adequately ventilating future extension into new mining areas may require additional ventilation shafts and fan upgrades to be constructed.

Until recently, the mine has not experienced any major geotechnical issues. Most ground instability around underground openings are structurally controlled. However, the rock strengths are only moderate and large exposure spans are not practical. Attempts to increase the lateral and vertical stope dimensions have led to wall failures and unacceptable levels of dilution.

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The extraction of crown pillars, which will contribute significant production in FY2012, will introduce some additional geotechnical issues, due to the increased stress in these pillars.

The mine has a full-time geotechnical engineer which reflects the increasing importance of regular assessment and continuous monitoring of this key aspect of mine performance. AMC considers that the mine has the capability to adequately manage geotechnical risk in the foreseeable future.

5.6.2 Mine Performance

Mined gold grades have decreased steadily in recent years and no new high-grade ore shoots have been discovered. Consequently, the mine has increased the production rate to maintain gold output at approximately 100 kozpa. A recent mill upgrade has further increased the nominal capacity to 550 ktpa, with potential to treat up to 600 ktpa. Any further increases in milling capacity would be expensive and in AMC’s opinion are unlikely (Table 5.5).

Table 5.5 Historical Mine Production and Budget for FY2012

Year	FY2006	FY2007	FY2008	FY2009	FY2010	FY2011	FY2012*
Ore Milled (kt) Grade Au (g/t) Contained Au (koz)	316 11.6 118	386 10.1 126	415 8.6 115	438 7.6 107	480 7.2 112	468 7.1 107	589 6.1 116

*Budget

In the absence of a newly discovered high grade ore shoot, the grade will decrease further, eventually making it unlikely that the 100 koz gold target will be achieved, despite the higher throughput. AMC considers that the mine will struggle to sustain production of more than 550 ktpa of ore from underground, even with the benefit of the separate Roses Pride mine. Any production above this will need to be sourced from another separate mine, either open pit or underground.

A large low grade stockpile (IO Dump) exists at Golden Plateau containing approximately 800 kt of material at approximately 1 g/t Au, based on limited sampling. A parcel of this material was recently treated to assess its potential for future recovery with promising results. In early 2011, AMC conducted a scoping study on the feasibility of mining a cutback at the old Golden Plateau open pit. Using conservative gold grades, a potential operation to produce more than 1 Mt at 1.7 g/t Au was identified. Further drilling is required to increase confidence in the geological model. Both the IO Dump and the Golden Plateau pit are potential future supplementary sources of low grade ore that might be processed, provided it does not displace higher grade ore from underground.

5.7 Metallurgy and Processing Operations

The plant is a typical small gold operation employing conventional gold-ore processing technology comprising:

Crushing (3-stage).

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Milling & Classification.
Thickening.
CIL (Carbon-in-Leach).
Detox / Tailings Disposal.
Elution / Carbon Regeneration.
Gold Room.

Since commencing operation, the process plant has principally treated ore from three main underground deposits, Royal, Crown, and Sovereign. The former two deposits are now essentially depleted. Production from the Sovereign deposit is expected to be largely depleted by the end of FY2012. During this time, Sovereign ore will be supplemented with material principally sourced from the Kilkenny, Phoenix and Roses Pride deposits. Other areas identified for future underground production include the Empire and Tipperary deposits.

Additional mill feed could be produced from the Golden Plateau pit and the IO Dump.

5.7.1 Historical Production

The annual production data for the past four years of operation is presented in Table 5.6 together with the corresponding budget targets for FY2012. This information has been sourced from monthly reports produced by CGM personnel. The major points of interest are:

Originally designed for an annual throughput of 300 kt, the plant has continued to treat increasing ore quantities year-on-year. The latest increase was implemented by a plant upgrade completed prior to March 2011. This increase was achieved by incorporating additional grinding capacity and reducing the product size from the crushing circuit. Monthly production data for March 2011 onwards indicates that the anticipated annual production rate of 550 kt is being achieved.
Despite the increasing ore throughputs and declining feed gold grades, the annual production results in Table 5.6 show the plant achieving consistent gold recoveries, ranging from 92-92.4%. Production data from March 2011 onwards indicates that gold recovery is being maintained at these levels despite the increase to plant throughput.
Increases in ore throughput have enabled annual gold production to be maintained at or around 100 koz despite the declining feed gold grades.
Annual production results indicate that the unit cost of ore treatment has been restrained somewhat despite increasing price pressures for labour, reagents, consumables, fuel and power. By way of example, the processing cost for FY2011 represents a modest 9% increase over that experienced for FY2008. Comparison of the annual budget and actual processing costs shows good agreement.

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Table 5.6 CGM Historical Production and Budget for FY2012

Parameter	Units			Financial Year	Financial Year
		2008	2009	2010	2011	2012
Ore Milled (dry)	kt	414.6	437.7	479.9	500.2	550.3
Gold Grade (recon.)	Aug/t	8.65	7.60	7.24	6.86	6.59
Gold Recovery	%	92.0	92.4	92.0	92.2	92.0
Gold Recovered	oz	107 393	99 204	102 758	101 722	107 183
Gold Poured	oz	107 394	97 705	103 040	102 058	–
Process Cost (actual)	$/t	27.68	28.88	27.77	30.14	–
Process Cost (budget)	$/t	26.51	29.37	30.13	28.93	27.99
Difference - actual vs budget	%	4.4	(1.7)	(7.8)	4.2	–

5.7.2 Gold Recovery

The annual gold recovery for the past four years has been consistent, ranging from 92-92.4%. The majority of deposits treated during this period are largely depleted. The majority of the Sovereign orebody will be depleted by the end of FY2012 and there has been little direct experience of processing ore from future deposits.

Limited leach test work on future deposits appears to have been carried out, although reports detailing metallurgical testing of four Kilkenny samples, and five Roses Pride samples were reviewed by AMC. The relationship of these samples to the respective deposits is unknown. The leach responses for the majority of the samples were generally good with rapid leach kinetics observed. The samples yielded average leach extractions of 91.2% and 92.9% respectively for the 24 hour cyanidation tests. In all cases, the tests were undertaken for a feed P80 sizing of approximately 53 micron and cyanidation performed with oxygen sparging in the absence of carbon.

5.8 Infrastructure and Power

Power is supplied by Ergon Energy on Tariff No. 43 comprising separate 'Day' and 'Night' rates per kWh, plus a demand component based on the maximum kW reading for each meter. Mineral processing accounts for approximately 64% of total CGM power consumption, mining 33%, and the camp approximately 3%.

The two 22 kV power lines from Theodore substation have a combined rated capacity of 5.4 MW. Ergon funded construction of one of the two power lines on the basis that CGM takes power for a thirty year period. In the event that power is not taken for the full duration, CGM is committed to repaying the residual amount from an initial sum of $5.5M diminishing linearly to zero at the end of the thirty year period.

Process water supply emanates from three sources:

Raw water from the Dawson Valley Water Supply Scheme.
Tailings dam return water.
Underground water flowing through the old Golden Valley underground workings into the Central Extended Pit from which it is pumped into the tailings dam.

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CGM now has sealed road access from Bioela via Theodore. This enhances the commute arrangements for employees and for delivery of supplies to site.

The local airport used for charter flights has very basic facilities, but is adequate for the current scale of operations. Commercial flights operate out of Biloela with daily services.

At site, there are two airfields suitable for Royal Flying Doctor Service use and a helipad for emergency use.

The mine has satisfactory telephone and electronic data facilities.

All surface buildings and support facilities were constructed new for the current operation and are suitable and adequate. Additional workshop facilities may be required if an open pit operation commenced in the future.

5.9 Environmental and Community Issues

5.9.1 Environmental Impact Studies

The Cracow Goldfield has been the subject of several historical ventures since the 1930’s and has evidence of past mining activities includes tailings storage facilities (TSFs), open cut pits, waste rock dumps, underground workings, low grade ore stockpiles, some of which will require additional work to complete final rehabilitation.

An Environmental Management Overview Strategy (EMOS) for Cracow Joint Venture Project was prepared in 2000 and subsequently updated in January 2005 (CJV, 2005). The 2005 EMOS is essentially the Environmental Impact Study for the project.

5.9.2 Environmental Management Plans

An Environmental Management Plan (EMP) has been prepared for the site and is dated 25 January 2011. The document is designed to facilitate management of CGM’s significant environmental aspects in a sustainable manner consistent with site policy and all legal and other requirements.

A Plan of Operations (PoO) covering the period December 2010 to November 2015 has been prepared in accordance with the Environmental Protection Act, 1994 and relevant Queensland Government guidelines. The PoO described how the site will (through an action programme) comply with the conditions of the Environmental Authority (EA) and implement the relevant control strategies presented in the EMP.

The PoO also presents a rehabilitation programme for land disturbed or proposed to be disturbed, and a proposed amount of financial assurance for the plan period. The PoO indicates that CGM currently holds a bank guarantee for $4.7M for mine rehabilitation with the State of Queensland.

Whilst the financial assurance has been calculated based on relevant State of Queensland guidelines, there are still some mine closure knowledge gaps associated with low grade ore stockpiles, final voids and waste rock dumps. Therefore, AMC expects that that actual closure costs could be greater than those currently addressed

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by the financial assurance. The expected worst case scenario for mine rehabilitation is approximately $8M.

Tailings are currently deposited in Tailings Storage Facility 1, which has sufficient remaining capacity to accommodate tailings production until May 2012. It is understood that CGM has plans to further augment Tailings Dam 4 and lift the dam by approximately 4 m to 6 m. Initial indications are that the lift could provide capacity for tailings storage up to early 2015 at an approximate cost of $2M to $2.4M.

The most recent information of the CGM tailings is that they are non-acid forming.

5.9.3 Permits and Licences

CGM holds a current water licence for extraction of 375 ML of water from the Dawson River under Water Allocation 725, granted by the Department of Natural Resources and Mines under Section 121(1) of the Water Act, 2000.

CGM also holds various permits and licences required to operate the mine.

5.9.4 Environmental Management Practices and Reporting Procedures

The site has a full-time Senior Environmental Officer and Environmental Technical Officer. CGM also has a site-specific environmental management system and associated documentation in progress.

CGM has an environmental monitoring programme in place that is documented in the EMP to address the requirements of the current EA. In AMC’s opinion, the monitoring programme is adequate to monitor environmental performance at the site given the scale of the operation and the sensitivity of the downstream environment.

AMC noted a number of minor non-compliance reportable incidents associated with breaching of the TSF1 and TD4 receiving dams and water quality exceedance during above average rainfall in December 2010 and January 2011. A report was sent to DERM regarding these incidents and water management equipment has been upgraded and plans are in place to increase the waste holding capacity at the site to avoid a repeat of these incidents.

5.9.5 Indigenous and Community Relations

A Cultural Heritage Assessment of the Cracow Mining Lease Areas has been completed and an Indigenous Land Use Agreement (ILUA) has been formalised between the Indigenous Native Title Claimants and the CJV. The formal Deed related to the ILUA was completed in February 2007. According to CGM monthly reports, financial and other conditions of the ILUA are in place and in good standing.

5.9.6 Social Impact

CGM currently employs approximately 261 personnel of which 59 are CGM employees and the remainder are contractors. CGM is essentially a fly in-fly out operation with

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employees living and commuting from various areas in southeast Queensland and beyond. An 8-day on, 6-day off roster is used by the mine.

The mining contractor employees approximately 152 personnel and is commissioned on a “cost plus” contract, with profit linked to quarterly performance in safety, productivity, cost and quality. The contract is due to expire in December 2011.

5.10 Capital and Operating Costs

AMC was provided with the CGM FY2012 budget and five-year plan, including cost projections. AMC has used this information as primary sources for its review and to estimate appropriate cost for the modelling scenarios described in Section 5.11.

5.11 Cracow Modelling Scenarios

AMC has prepared two modelling scenarios for Cracow.

Case 1 production plan is based on the 30 June 2011 ore reserve estimate plus a significant quantity of non-reserve material. AMC’s estimate of non-reserve material is based on the mining inventory prepared by Newcrest in March 2011, with some adjustments based on discussions with site personnel, plus a small amount of exploration success. AMC’s estimate of non-reserve material also includes low-grade material recovered from the IO Dump. The production plan includes an increase in the milling rate from 550 ktpa in FY2012 to 600 ktpa in subsequent years. Production continues at this rate for four years.

Case 1 has lower gold grades than are scheduled by Newcrest in its long-term plan for Cracow. AMC considers the plan grade of 6.0 g/t for years 2013 to 2016 to be unrealistic given the current mining inventory and lack of recent exploration success.

Case 2 production plan extends the Case 1 underground mine life by a further two years at a production rate of 430 ktpa, and a gold grade of 5.8 g/t based on further exploration success. Production from the underground mine is supplemented by production from the Golden Plateau open pit and from low-grade dumps to enable the throughput rate to be maintained at 600 ktpa.

A summary of the mining inventories used in both Cases is shown in Table 5.7.

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Table 5.7 AMC Case 1 and Case 2 Mining Inventories for Cracow

Source		Case 1			Case 2
	Tonnes (Mt)	Au (g/t)	Au (Moz)	Tonnes (Mt)	Au (g/t)	Au (Moz)
Ore reserves - Underground Non-reserve material - Underground Exploration success - Underground Non-reserve material - Open Pit Non-reserve material - LG Dumps	1.08 1.50 0.13 – 0.25	7.0 4.7 6.0 – 1.0	0.24 0.23 0.02 – 0.01	1.08 1.86 0.63 0.24 0.35	7.0 4.8 6.0 1.7 1.0	0.24 0.29 0.12 0.01 0.01
Total	2.95	5.3	0.50	4.15	5.1	0.68

Newcrest planned that the increase in plant throughput will be achieved by producing a coarser feed sizing to the leach circuit. This coarsening is expected to have a moderate impact on gold recovery. AMC has estimated a reduction in recovery from 92% at a throughput of 550 ktpa to 90% at 600 ktpa. AMC has estimated 70% gold recovery from low-grade open pit and dump material.

A capital amount of $1M has been included in both cases for the completion of the mill expansion work. Sustaining capital of $2.5M per annum and a one off amount of $2.5M to expand the tailings storage facility, has been included in both cases.

Operating costs have been based on Newcrest’s FY2012 budget, which AMC considers reasonable. In subsequent years, unit costs of $80/t mined, $27/t milled, and $12/t milled have been used to estimate total mining, processing and administration costs respectively.

Closure costs of $7.7M have been included in both cases.

5.12 Risks

The main risk at Cracow is that ore reserves will not be replaced at a sufficient rate to meet its long-term production plan. This situation is fairly typical of this type of epithermal narrow vein gold mines. However, the mine has substantial inferred resources and some prospective targets, so provided an aggressive exploration and infill drilling programme is maintained, the production targets in Case 1 scenario should be achieved, as should Case 2, albeit with a lower level of confidence. The main concern is the grade of new discoveries. Cracow needs at least one high grade (>10 g/t) ore source to achieve its historic gold output of 100 kozpa.

The other significant risk is that of gold price. The mine has relatively high operational costs and modest gold grades, so a substantial fall in the gold price would threaten viability. The mine is currently running very efficiently and there are few opportunities to achieve significant cost reductions.

The reliance on production from extraction of five crown pillars in the current year is a risk, as the total contribution from this ore source is approximately 25% of total gold.

An absence of metallurgical testwork on new orebodies, both underground and open pit, is of some concern as any drop in gold recoveries reports straight to the bottom line.

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6 MT CARLTON GOLD PROJECT (QLD)

6.1 Location and Background

The Mt Carlton gold-silver-copper project is located 150 km south of Townsville, 45 km north-northwest of Collinsville and 80 km southwest of Bowen within the Charters Towers Mining Region of north Queensland, approximately 25 km west of the Burdekin River (Figure 6.1). The Mt Carlton project is 100% owned by Conquest.

Figure 6.1 Mt Carlton Location Plan

==> picture [431 x 364] intentionally omitted <==

Conquest discovered Mt Carlton in 2006 and completed a Definitive Feasibility Study (DFS) on Mt Carlton as an open pit poly-metallic gold-silver-copper project in late 2009, and a DFS Optimisation Study (DFSOS) in late 2010.

Mineralisation comprises a refractory sulphide ore contained within a complex network of narrow veins that will require selective mining and blending. Conquest proposes mining two open pits located adjacent to a processing plant. The largest pit (V2) contains gold-silver-copper ore and the smaller pit (A39) a high grade silver rich ore.

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The proposed ore processing plant is designed for a throughput of 0.8 Mtpa to produce a high grade concentrate, which will be bagged for transport by road–train to the coast and for export to smelters in Asia. The ore is metallurgically complex, abrasive and hard. It is envisaged that different concentrates will be produced from ore sourced from each pit.

The proposed project infrastructure consists of a camp, upgraded site access road, administration facilities, mining contractor’s facilities, power connection to the state grid, water storage dam, drainage facilities to control acid water run-off and pit dewatering facilities. The project is currently scheduled to begin construction under an EPCM model by the end of 2011 and be completed in 2013.

6.2 Project Tenure

The project is associated with a number of Exploration Permits for Minerals (EPMs) including EPM16480, EPM13867, EPM12527, EPM14783 and EPM10164 (Conquest); and EPM17745 and EPM15952 (Cloncurry Metals Limited). All EPMs held by Conquest listed above appear on the Conquest Tenement Listing of Exploration Permits database (Conquest, 2011).

The Real Property descriptions underlying the Project are Lot 4899 on SB765 and Lot 7 on SB730. The tenements cover an area of 1,640 km[2] .

The project is relatively isolated and the local community and surrounding properties are mainly pastoralists. The nearest inhabited residences are located 10 km or more from the northern perimeter of the project and therefore dust and noise/vibration from the Project activities are unlikely to cause environmental nuisance to sensitive receivers.

The Birri People are the Native Title Claimants for the project area. An access Agreement between Conquest and the Birri People is in place for exploration and it is understood that negotiations for an agreement for an MLA are underway.

The climate of the project site is characterised by a minimum mean daily temperature of 9[o] C in July and a maximum mean daily temperature greater than 33[o] C from November to January. The mean annual rainfall is approximately 714 mm with a distinct wet season from December to March. The project lies in the Burkedin river catchment.

6.3 Geology

The Mt Carlton deposit is located along the northern margins of the Permian Bowen Basin and is hosted in a basal sequence of intermediate to felsic breccias, volcanoclastics, and flow banded rhyodacites. The sequence is transected in parts by occasional narrow syn-mineralisation to post-mineralisation mafic to intermediate dykes that include a sill component.

The stratigraphy in the area is almost flat lying with a gentle 10° southerly dip. The project area hosts four deposits plus numerous prospects. Sulphide veins dipping at moderate to steep angles to the northwest host a majority of the known economic mineralisation.

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The deposit is an Au-Ag-Cu high-sulphidation epithermal style deposit. Mineralisation comprises copper, primarily as copper arsenic sulphides (enargite), silver arsenic sulphides (tetrahedrite/polybasite), and some native gold (within pyrite).

The deposit comprises two discrete zones: the large gold dominant V2 deposit and the smaller, silver rich A39 zone. The V2 body is flat lying and situated 20m to 180m below surface and is 70 m thick with a 500 m x 500 m areal extent. A39 mineralisation is a geologically discrete sub-vertical unit, located in a fault zone 200m from V2. The A39 mineralisation is considered to be a more distal part of the mineralisation system.

6.4 Mt Carlton Mineral Resources

6.4.1 Data Available

The Mt Carlton resource estimate prepared for the DFS (the October 2009 Mineral Resource Estimate) was based on total drilling of 81,631 m from 506 holes. Not all holes contained within the resource area were used in estimation, as 11 holes totalling 2,239 m were drilled for geotechnical studies and were not assayed. Table 6.1 shows a summary listing of holes used in this study.

Table 6.1 Summary of Mt Carlton Drilling (to September 2009)

Exploration Drilling	RC	RC	Pre-Collared DD	Pre-Collared DD	Diamond Core	Diamond Core	Total	Total
	No. Holes	Meters	No. Holes	Meters	No. Holes	Meters	No. Holes	Meters
2003-2005 2006 2007 2008 2009	6 97 122 50 9	552 10,287 17,185 6,115 907	- 29 79 67 3	- 5,682 16,680 14,190 1,957	- 2 8 9 25	- 312 1,244 2,137 4,383	6 128 209 126 37	552 16,281 35,109 22,442 7,247
Subtotal	284	35,046	178	38,509	44	8,076	506	81,631
			Grade Control
2009	99	6,837	-	-	-	-	99	6,837
Total	383	41,883	178	38,509	44	8,076	605	88,468

Additional drilling undertaken since the DFS and which informs the current (30 June 2011) mineral resource estimate includes:

175 RC holes completed for a trial grade control assessment over the A39 deposit.
15 Diamond tail RC holes surrounding, but particularly in the down plunge direction from the proposed A39 pit to assess the potential for a small underground operation.
22 RC and diamond tail RC holes investigating a small high grade gold extension from the eastern margin of V2.
3 holes internal to the V2 resource.
3 RC holes following a trend in mineralization to the south of V2.
RC holes in the north-eastern sector of V2 to test controls on mineralisation.

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In addition to the above, nine holes from the V2 and four from the Area 39 trial grade control programmes were used in the June 2011 mineral resource estimate. This is consistent with the approach taken with V2 trial grade control drilling in the October 2009 estimate. Nine and four holes respectively brought the drilled density in the trial grade control areas to that required for measured resources and were selected to infill gaps in resource drilling. New holes represent approximately 5.8 % of the total number of holes used for the 30 June 2011 estimate.

Drilling section lines are orientated north-south with 25 m spacing. Drillhole spacing along section lines range from 25 m in the higher-grade areas to 50 m spacing on the eastern flanks of the deposits. Sterilisation drilling has been undertaken on a 200 m x 200 m grid spacing.

There appears to be a grade bias around 10% to 20% with the RC drilling biased high compared to the diamond drilling. Exact reasons for this bias are not known but AMC believe that given the “nugget” nature of the vein style mineralisation, and the different sampling protocols, drilling methods and volume variance effect of the two drilling methods will result in differences in this order of magnitude.

AMC does not consider any potential grade bias issues related to the two different drilling methods used (diamond drilling and reverse circulation drilling) to be significant to the project viability.

Reports commenting on the data quality indicate no bias between the ALS and SGS laboratories used to assay the Mt Carlton drilling samples. Review of documentation commenting on the quality control data indicates that the current resource database is robust and suitable for resource modelling.

6.4.2 Resource estimation

The mineral resource has been estimated using the multiple indicated kriging (MIK) method, which produces a recoverable resource estimate. AMC supports the use of the MIK method. However, the estimation technique is predicated on the assumption that the gold, silver, and copper grades are well correlated. AMC could see limited evidence of this and concludes that the assumed correlation in the estimation process is weak, as evident from multivariate statistics and observations of the grades in the composite files.

Given the close proximity of the A39 and V2 deposits, there is a marked difference in the style of mineralisation and mineralogical composition. The A39 deposit is dominated by silver rich minerals, and the V2 deposit is characterised by gold rich mineral assemblages. The complex nature of the host lithology, limited outcrop, alteration assemblages, brecciation, and faulting has hindered a good understanding of the genesis and relationship between the various styles of mineralisation.

Grades and values have been estimated into the blocks with horizontal dimensions of 25 m by 25 m, and vertical dimension of 5 m. The values reflect the expected value recovered by mining and processing resource blocks net of all off-site costs, but before deducting mining, processing and other site costs. The value field is based on a gold price of US$1,140/oz, a silver price of US$18.30/oz, a copper price of US$3.14/lb and an exchange rate of A$0.90 to US$1.00.

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The complexity of the deposit geology and mineralogy has resulted in uncertainties surrounding the metallurgical responses to the various styles of mineralisation, in particular, the more refractory pyritic rich gold mineralisation in the V2 deposit. Conquest has recently completed a re-logging programme to improve geological and mineralogical understanding.

In AMC’s opinion, visual grade control is unlikely to be an option at Mt Carlton and a rigorous grade control Reverse Circulation (RC) drilling programme will be required to ensure mining and processing targets are achieved in the ramp-up, and early full production stages.

Conquest’s exploration objectives include identifying additional mineralisation adjacent to known deposits. AMC notes that the 2011 drilling programme is focused on identifying extensions to the V2 East deposit, followed by A39 and then the Far East to Central East area. AMC considers Conquest’s exploration objective reasonable.

6.4.3 Resource Classification and Reporting

The mineral resource estimate as at 30 June 2011 published by Conquest and released to the Australian Securities Exchange (ASX) on 9 August 2011 is summarised in Table 6.2.

Table 6.2 Mt Carlton Mineral Resource at 30 June 2011

Category	Tonnes (Mt)	Au (g/t)	Ag (g/t)	Cu (%)	Au (Moz)	Ag (Moz)	Cu (kt)
V2 deposit
Measured Indicated Inferred	12.7 10.9 1.2	1.78 1.41 0.67	27 20 29	0.30 0.23 0.17	0.70 0.49 0.03	11.0 7.0 1.1	38 25 2
Total Resource	24.7	1.56	24	0.26	1.24	19.1	64
A39 deposit
Measured Indicated Inferred	1.9 0.4 0.3	– – –	226 99 62	0.18 0.06 0.03	– – –	13.8 1.4 0.7	3.4 0.3 0.1
Total Resource	2.7	–	185	0.14	–	15.8	3.8

A value cut-off has been applied to accommodate the spatially separate gold and silver values. Mineral resources are reported using a value cut-off of A$20/t. The mineral resource estimate is inclusive of ore reserves.

6.4.4 Conclusions

Data quality appears to be appropriate for resource modelling and classification. Resource estimates have been verified by independent external consultants.

AMC concludes that the Mt Carlton 30 June 2011 Mineral Resource estimate has been prepared using acceptable industry practice and that the classification of the estimate as

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measured, indicated and inferred resource is appropriate. In AMC’s opinion, the mineral resource estimate has been prepared by a Competent Person in accordance with the JORC Code.

6.5 Geotechnical Issues

AMC believes the recovery of geotechnical data is generally sufficient and has mostly been collected, treated and presented in an acceptable fashion.

The overall pit slope angle and inter-ramp slope angles will most likely be structurally controlled and there is insufficient evidence in the material viewed by AMC that the locally present faults, dykes and shears have been fully accounted for in the structural analysis of slope stability. AMC believe that insufficient information has been obtained on the orientation, persistence and infill of faults, shears and dykes to properly assess the effects of larger scale structure on the stability of the pit slopes.

Considering the lack of structural information and analysis, AMC believe that the inter-ramp slope angles used in the pit designs are very aggressive; however, the overall slope geometries of the pit designs, including access ramps, are very much lower and in AMC’s opinion are reasonable.

6.6 Ore Reserves

When developing the ore reserve estimate for the V2 and A39 deposits, net metal value calculations were used to define the ore. The ore reserve estimate published by Conquest on 9 August 2011 is summarised in Table 6.3 reported at a cut-off value of A$25/t.

Table 6.3 Mt Carlton Ore Reserve at 15 December 2010

Category	Tonnes (Mt)	Au (g/t)	Ag (g/t)	Cu (%)	Au (Moz)	Ag (Moz)	Cu (kt)
V2 Pit
Proved Probable	5.2 4.1	2.90 2.51	36 23	0.40 0.26	0.48 0.33	6.0 3.0	21 11
Total Reserve	9.3	2.73	30	0.34	0.81	9.0	31
A39 Pit
Proved Probable	0.47 0.0003	– –	553 352	0.64 0.41	– –	8.3 0.004	3 0
Total Reserve	0.47	–	552	0.64	–	8.3	3

The V2 pit has a waste to ore stripping ratio of 3.9:1. The A39 Pit has a waste to ore stripping ratio of 11.9:1.

The ore reserve estimate is based on a mineral resource estimate completed in October 2009 and has not been updated with the more recent mineral resource estimate dated 30 June 2011, shown in Table 6.2. The 30 June 2011 mineral resource estimate shows a reduction of about 9% in contained, gold, 5% in contained silver and 4% contained copper compared with the October 2009 mineral resource estimate.

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AMC notes that a portion of the reduction in contained metal occurs in the inferred mineral resource classification, which is not included in the ore reserve estimate.

The resource model on which the mineral resource and ore reserve estimates are based includes the effect of waste dilution during mining. A minor amount of additional dilution has been included in the estimate to be conservative. AMC believes this approach is reasonable.

Final pit limits and pit phase designs have been developed based on a family of pit shells generated by Whittle pit optimisation software. AMC has reviewed the Whittle inputs and considers them appropriate. Conquest has selected the maximum cash flow shell for the V2 pit and a significantly larger shell for the A39 pit as the basis for final pit designs. Because of the small size of the A39 deposit, AMC does not believe the selection of a larger pit shell will have a materially adverse impact on the economics of the project.

Pit design parameters were generally industry standard, except for the inter-ramp pit slope angles. However, AMC considers the ramp widths to be too narrow for two way haulage using the size of haul trucks selected by mining contractors for the project. Ramp widths may need to be widened or passing bays included to ensure safe operation.

6.6.1 Conclusion

AMC has reviewed the ore reserve estimate, and in AMC’s opinion, the mine planning work documented in the DFS and DFSOS is of a high standard and completed in sufficient detail and level of accuracy for a DFS, and for reporting ore reserves. Although the most recent mineral resource estimate shows a reduction in contained metal compared to the estimate on which the ore reserve estimate is based, AMC considers that the December 2010 ore reserve estimate forms a reasonable base for its Case 1 modelling scenario.

In AMC’s opinion, the December 2010 ore reserve estimate for Mt Carlton has been prepared using acceptable industry practice and that the classification of the estimate as proved and probable ore reserves appropriate. In AMC’s opinion the estimate has been prepared by a Competent Person in accordance with the JORC Code.

6.7 Mining Operations

Conquest proposes mining the V2 and A39 deposits by conventional open pit methods using a mining contractor. The contractor has proposed using 85t to 120t hydraulic excavators and Caterpillar 777D haul trucks mining 5 m benches in two passes. AMC believe the mining and support equipment proposed is appropriate for the degree of selectivity required to mine the pits, provided appropriate ramp widths are included in pit and surface layout designs.

A total labour force of approximately 84 personnel on a continuous roster was selected by the contractor, with an average of 25 to 30 personnel per shift and 50 to 60 personnel on site at any time. AMC believe this is a reasonable estimate of manning numbers for a contract mining operation. In addition to the contractor’s personnel, Conquest propose a

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mining technical services team of 12 personnel on dayshift, Monday to Friday, with rostered weekend coverage. In AMC’s opinion this is lean, with limited capacity to cover for absences.

All material was assumed as drill and blast. AMC considers that the proposed powder factors are adequate and are generally consistent with the designed pit slopes. Wet blasting using water resistant blasting products was assumed to make up 25% of blasting below 110 mRL, the approximate level of the water table. AMC believe this is reasonable as an overall estimate, but that more water resistant blasting products will be required as the pit deepens. Pre-split blasting has been recommended in fresh rock.

The DFSOS has allowed for a grade control programme by a dedicated RC drilling rig on a campaign basis. A pattern of 10 m x 10 m to a depth of 15 m has been assumed by Conquest, with composite samples taken every 2.5 m and assayed for gold, silver, copper, iron and arsenic. An allowance of 20% of holes outside ore zones has been included. AMC believes this is a reasonable approach for costing.

AMC has summarised the proposed mine production schedule in Table 6.4. Vertical rates of advance and bench lag between cutbacks are standard for the industry and AMC consider the production schedule to be achievable.

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Table 6.4 Summary of Production Schedule

Period	Ore to Mill (kt)	Ore to Stockpile (kt)	Total Ore Mined (kt)	Stockpile Reclaim (kt)	Stockpile Balance (kt)	Ore Milled (kt)	Waste Mined (kt)	NAF Waste (kt)	PAF Waste (kt)
Year -1	–	–	–	–	–	–	5,810	2,325	3,485
Year 1	627	731	1,358	–	731	627	11,915	3,290	8,625
Year 2	802	1,330	2,132	–	2,061	802	8,275	1,315	6,960
Year 3	800	19	819	–	2,080	800	3,890	1,765	2,125
Year 4	800	7	807	–	2,087	800	3,970	1,280	2,690
Year 5	782	–	782	18	2,069	800	3,355	515	2,840
Year 6	802	4	806	–	2,073	802	1,255	50	1,205
Year 7	731	–	731	69	2,004	800	1,330	55	1,275
Year 8	800	101	901	–	2,105	800	1,075	55	1,020
Year 9	800	22	822	–	2,127	800	710	30	680
Year 10	581	–	581	221	1,906	802	330	10	320
Year 11	–	–	–	800	1,106	800	–	–	–
Year 12	–	–	–	800	306	800	–	–	–
Year 13	–	–	–	306	–	306	–	–	–
Total	7,525	2,214	9,739	2,214	–	9,739	41,915	10,690	31,225
A39	–	–	–	–	–	9,269	5,593	–	–
V2	–	–	–	–	–	470	36,204	–	–
Check	–	–	–	–	–	9,739	41,797	–	–

Conquests scheduling strategy is to commission the mill using V2 ore, then campaign A39 ore through the mill until it is exhausted, approximately 10 months later, then change back to 100% V2 feed. The strategy maintains higher grade feed to the mill in the early stage of the project and defers processing lower grade material to the end of the mine life. The proposed rapid build-up of low and medium grade stockpiles provides a buffer for mill feed during wet periods when it may be difficult to access the pit.

6.8 Metallurgy and Processing Operations

Conquest propose to process ore from the V2 and A39 deposits to produce a bulk pyrite concentrate containing gold, silver, and copper values. The processing flowsheet includes primary crushing, semi-autogenous grinding (SAG), flotation and concentrate filtering. It is proposed that concentrate will be bagged, transported from site and exported. An ore processing rate of 800 ktpa is envisaged.

AMC’s comments on the proposed plant design are summarised as follows:

The concept of producing a bulk concentrate and maximising gold recovery is supported by the mineralogy and appears a simple, robust option.
In AMC’s opinion the process plant design is generally fit for purpose. AMC consider the selected 800 ktpa mill throughput rate to be achievable. The selection

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of a single stage SAG mill for the grinding circuit is not ideal with respect to achieving a stable and predictable grind size. This may adversely impact on the grade-recovery performance of the flotation circuit.

AMC believe that there is a need to increase the process control aspects of the plant design.
Concentrate moisture levels greater than the allowable transportable moisture levels (TML) may result in the need for some concentrate re-handling and drying.

In regard to metallurgical recovery and concentrate quality, marketing efforts have resulted in a sales agreement for V2 material. The agreement provides for payment for gold in concentrate, providing the gold grade exceeds 40 g/t. The payment reduces if the grade falls below 40 g/t Au. Payments for contained copper and silver are also reduced if the gold grade drops below this level. Maintaining concentrate grades above 40 g/t Au will therefore be important to the success of the project.

Concentration performance of V2 ore exhibits some variability with respect to gold feed grade. The gold grade of the planned production schedule reduces over the mine life from 3.0 g/t to 1.5 g/t. If concentrate grades are to be maintained above 40 g/t Au, the recovery of gold to concentrate is likely to reduce. AMC believes it appropriate in its modelling scenarios to an overall gold recovery of 86%, when processing ore at the average reserve grade of 2.73 g/t Au, not 90.6% as is shown in the optimisation study. This recovery would apply to a nominal concentrate grade of 50 g/t Au.

A39 ore has very similar flotation characteristics to V2 ore and is amenable to the campaign treatment programme planned for this material. However, the higher sulphide grades of A39 ore will result in a large increase in mass pull to concentrate may limit the plant throughput rate.

6.9 Waste Rock and Tailings Storage

Up to 31 Mt of waste rock will be PAF and will require encapsulation. Conquest proposes to shape the base of proposed waste dump and to fill fractured surface areas with clay or sealing concrete. The remaining surface is to be lined with compacted clay to reduce seepage. The perimeter of the dump is to be covered with non-acid forming (NAF) waste rock to encapsulate PAF waste rock within the dump. Toe drains will be required around the dump to drain seepage into V2 pit. Storm water runoff is to be directed into a lined pond for use in the plant.

In AMC’s opinion, the volume of PAF waste rock to be mined in the initial years of production will be difficult to encapsulate with the volume of NAF rock mined during the corresponding period. AMC is of the opinion that additional NAF material is likely to be required to encapsulate PAF material generated by the project. This material could potentially be obtained from borrow pits.

6.10 Infrastructure and Power

Personnel for the project will be accommodated locally in a rented accommodation village managed by a catering contractor. Other major items of infrastructure include administration offices, laboratory, workshops, and warehouse facilities.

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Conquest proposes that the mining facilities including workshop, offices, change house, explosives magazine, and a fuel facility will be provided by the mining contractor.

Access to Mt Carlton will be from Townsville or Bowen via the Bruce Highway and onto sealed and unsealed local roads, some of which require upgrading at major creek crossings, including road alignment, straightening and widening.

Power supply for the project will be sourced through, Ergon from their existing 132 kV line and substation, 15 km west of the mine. Power transmission to the site is planned through a new 132 kV line and a new 132/11 kV switchyard.

The supply of water for the project is proposed from three separate sources; pit dewatering, bore fields, and surface run-off and storages. A substantial water storage dam is included within the site to store contaminated water run-off, provide buffering against storm surges, and to provide process water to the ore processing plant.

AMC has reviewed the site infrastructure proposed and believe it is suitable for the project.

6.11 Environmental and Community Issues

The Project has been approved by the Queensland Department of Environment and Resource Management (DERM) to advance under an Environmental Management Plan (EM Plan).

An EM Plan was prepared and submitted to DERM in May 2011. The EM Plan has now been approved and it is understood that DERM will issue Conquest with a draft Environmental Authority (EA). The EM Plan concludes that the majority of the projected waste rock and final pit wall exposure should be considered as being PAF and recommended that this material be encapsulated within the waste rock storage facility as quickly as possible after being mined.

The waste rock management strategy contained in the Revised EM Plan advocates progressive encapsulation of PAF waste rock with a 2 m layer of NAF waste rock followed by a water shedding cover including double capillary break gravel layers separated by a 1 m thick clay liner. The Revised EM Plan states that the WRD will have a geosynthetic liner at the base of PAF waste rock to capture any seepage that percolates through the dump.

About 9 Mt of tailings would be produced over the mine life. The mine waste management plan indicates that tailings are likely to have a low potential to generate acid and are more likely to generate neutral pH leachate.

The Revised EM Plan indicates that the base of the TSF will be constructed with a clay liner and a geo-membrane to capture any TSF seepage. At the end of operations the TSF would be capped with a double capillary break layer including woven geotextile and a clay liner. It is noted that the mine waste management plan indicates that the total TSF cover will be 1 m thick and will only contain a single layer capillary break.

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In AMC’s opinion, the tailings management strategy is reasonable, however a number of residual risks remain. AMC believe these can be managed with ongoing adherence to sound environmental practices.

Given the PAF nature of many of the mine materials, the potential to impact surface and groundwater quality and the mines location in the Burdekin river catchment it is likely that water quality will remain a material risk to the Project. Conquest is currently developing a site water quality model. The model is intended to be developed and maintained over the mine life, and post closure, to help manage water quality in the area impacted by the Project. AMC consider Conquest’s proposed water quality management strategy to be reasonable and if well implemented should effectively mitigate this risk.

6.12 Capital and Operating Costs

6.12.1 Capital Cost

The capital estimates for the project summarised from the DFS and the DFSOS are shown in the Table 6.5.

Table 6.5 Capital Estimates

Facility	Capital Cost (A$M) 2009 DFS	Capital Cost (A$M) 2010 DFSOS
Mining Process Plant Tailings Management Facility Infrastructure	22.1 45.3 9.6 29.9	1.9 53.5 5.6 15.7
Total Direct Costs	106.9	76.7
EPCM Owner’s Costs	9.5 10.4	10.1 29.6
Total Indirect Costs	19.9	39.7
Estimate AccuracyProvision	11.0	10.5
Total	137.8	126.9

Note: Pre-stripping costs were recorded under Mining in the 2009 DFS, but have been recorded under Owner’s Costs in the 2010 Optimisation Study.

Major changes to the capital estimate from the DFS to DFSOS include changing to a mining contractor and renting accommodation facilities. Capital estimates appear to be in the expected range of accuracy for a definitive feasibility study.

Capital cost estimates for the ore processing plant were derived from the original Arccon DFS estimate and revised to reflect the capacity reductions and revisions to the flowsheet in the optimisation study. AMC believes this work has been well done, resulting in a robust estimate. However, AMC believes that an extra $1M for an on-stream analyser is required to achieve the level of process control required for the ore processing plant.

The overall allowance of EPCM costs and Owners costs are considered to be adequate.

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AMC believes the sustaining capital cost estimate included in the DFSOS is likely to be insufficient for a project of this complexity, and believe an allowance of 2% of operating costs each year should be included in its modeling scenarios.

AMC considers that a rehabilitation cost between $15M and $20M will be required given the PAF nature of many of the materials generated by the project.

A constructability review has been carried out to highlight construction risks and anticipate opportunities for improvement and risk mitigation. AMC believes that the aggressive construction schedule, which compresses multiple activities within a short time period, is a risk to the capital cost estimate.

6.12.2 Operating Cost

Major changes in operating cost from the DFS to DFSOS include changing to a mining contractor and renting accommodation facilities. The following Table 6.6 summarises operating costs for the DFSOS.

Table 6.6 Operating for the DFSOS

Operating Costs 2010$	Operating Costs 2010$
Item	Unit Cost	Model Total $M
Mining
Mining ore Mining waste Crusher feed Management & technical services	$4.18/t ore $3.36/t waste $1.19/t ore $3.02/t ore	40.0 136.9 11.6 29.4
Subtotal Mining	$22.40/t ore	217.8
Processing
Fixed Variable	$5,301,000pa $11.65/t ore	67.6 113.5
Subtotal Processing	$18.60/t ore	181.1
General and Administration Concentrate Transport Royalties	$6.35/t ore $6.46/t ore $8.73/t ore	61.9 62.9 85.1
Total	$62.50/t ore	608.7

AMC believes the rationale for basing mining costs on a contractor operation is sound and the proposed equipment fleet and related plant is suitable. The proposed owner’s technical team of 12 personnel is very lean, with limited capacity to cover any absences.

AMC considers that, in general, the mining cost estimates are reasonable for an operation of this type, but that costs may have been underestimated in some areas.

AMC considers the ore processing consumable and power costs to be reasonable, but believe labour costs (approximately 30% of ore processing costs) are significantly under-estimated, both in terms of labour numbers and salary levels.

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Overall AMC considers processing labour costs have been under-estimated by up to 40%, equivalent to approximately $2/t on the plant unit cost.

AMC believe that technical and administrative staff complements are too lean, and dependent on the level of off-site support from head office in Townsville. As a consequence AMC believes that the fixed costs for general and administration are low and have been adjusted in AMC’s modeling scenarios.

6.13 Mount Carlton Modelling Scenarios

AMC has prepared two modelling scenarios for Mount Carlton. The scenarios are based on the production and cost schedule prepared by Conquest as part of the DFS Optimisation Study. AMC has changed the production and cost schedules where it believes is reasonable to do so. Although Conquest does not report gold grades for the A39 deposit, AMC has attributed value to the contained gold, based on grades advised by Conquest.

The Case 1 production plan is based on the December 2010 ore reserve. As there are no inferred resource blocks within the pit design or advanced exploration projects that are likely to provide additional tonnages at a high level of certainty, no non-reserve material has therefore been included in Case 1.

The Case 2 production plan includes additional tonnages, based on mining depth extensions to both V2 and A39 deposits identified during the pit optimisation process. The additional tonnages within the 1.32 revenue factor pit optimisation shells (equivalent to a gold price of $1,607/oz and a silver price of $26/oz) are summarised as follows:

V2 Pit: 2.5 Mt @ 1.51 g/t Au, 25 g/t Ag, 0.39% Cu. Waste 15.5 Mt.

A39 Pit: 0.38 Mt @ 0.15 g/t Au, 404 g/t Ag, 0.26% Cu. Waste 11.0 Mt.

In addition to the incremental tonnages within the enlarged pit shells, AMC has added 0.8 Mt at the same grade as the V2 pit extension to the Case 2 mining inventory on the basis of its reasonable expectation for exploration success.

Grades within the V2 and A39 deposits decrease with depth, and AMC considers it reasonable to assume that there is limited potential for underground mining at either deposit.

A summary of the mining inventories used in both cases is shown in the following Table 6.7.

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Table 6.7 AMC Case 1 and Case 2 Mining Inventories for Mount Carlton

Source		Case 1	Case 1			Case 2	Case 2
	Tonnes (Mt)	Au (g/t)	Ag (g/t)	Cu (%)	Tonnes (Mt)	Au (g/t)	Ag (g/t)	Cu (%)
Ore reserves – V2 Non-reserve material – V2	9.27 –	2.73 –	30 –	0.34 –	9.27 3.30	2.73 1.51	30 25	0.34 0.39
Total Inventory – V2	9.27	2.73	30	0.34	12.57	2.41	29	0.35
Ore reserve – A39 Non-reserve material – A39	0.47 –	0.15 –	553 –	0.64 –	0.47 0.38	0.15 0.15	553 404	0.64 0.26
Total Inventory – A39	0.47	0.15	553	0.64	0.85	0.15	486	0.47

AMC applied an average gold recovery of 86% in both Cases. The recovery is based on mineral processing test work and reflects a feed grade of 2.73 g/t Au (average grade of the V2 deposit) and a 50 g/t Au concentrate grade to avoid incurring concentrate penalties. Average silver recoveries of 91% and 90.2% have been used for the V2 and A39 deposits respectively. Copper recoveries of approximately 95% have been applied to both deposits.

AMC has adjusted the costs estimated in the DFSOS to reflect AMC’s assessment that some costs have been underestimated. The adjustments apply to both cases.

A cost of $0.35/t (approximately 8%) has been added to mining costs to cover AMC’s expectation of higher labour costs and to allow for additional peripheral mining costs not included within the original estimate.

A cost equating to $2.13/t processed has been added to the processing costs to cover AMC’s expectation of higher labour costs.

General and administration costs have been increased by $0.76/t processed.

Project capital costs have been increased by $1M for the purchase of an on-stream analyser.

Sustaining capital costs have been increased to 2% of the ore processing and administration costs.

Closure costs have been increased from $5.6M to $17.6M as AMC considers the original estimate is too low to cover the costs of rehabilitating the site, considering the quantities of PAF material produced by mining.

6.14 Risks

The following key risks have been identified from the review:

The inter ramp slope angles appear to be very steep and may lead to pit wall instability and increased waste stripping.

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Pit access ramps are too narrow for two-way haulage using the equipment nominated by mining contractors and may lead to higher costs or increased waste stripping.
The aggressive construction schedule achieved through compression of multiple activities within a short time period coupled with an overly ambitious owner role may lead to an extended construction and commissioning period, thus increasing capital costs.

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7 EXPLORATION PROPERTIES

7.1 Introduction

AMC assessed the exploration assets of Catalpa, Conquest and Newcrest relevant to this proposed transaction, specifically:

Catalpa’s exploration assets associated with the Edna May mine.
Conquest’s exploration assets associated with the Pajingo mine, the Mt Carlton project and the Twin Hills project.
Conquest’s North Queensland regional exploration assets.
Newcrest’s exploration assets associated with the Mt Rawdon and Cracow mines.

7.2 Exploration Valuation Methods

AMC has considered a range of industry valuation methods to value the exploration assets considered. Where possible, AMC has applied more than one method to each asset and generated ranges of values. Values have been rounded and outliers sometimes excluded before selecting a most likely value range and a Preferred Value for the asset. The valuation methods that have been considered for some or all of the assets are described as follows:

a) The Past Expenditure method: A Prospectivity Enhancement Multiplier (PEM), generally between 0.5 and 3.0, is applied to past direct expenditure which AMC judges to be effective in regard to future prospectivity. Planned future expenditure, whether or not committed, has not been included in the base expenditure to which a PEM is applied, but may be taken into consideration in the assessment of prospectivity through the PEM range selected.
b) The Yardstick Value method: A value per unit of product is assigned to an actual resource or to our own estimate of a resource reasonably likely to be delineated by further work. The Yardstick Values that AMC have applied are based on AMC’s assessment of transactions in recent years, the likely complexity of mining and processing and AMC’s assessment of the relative quality of the deposit.
c) Actual or Comparable Transaction method: A value is determined by reference to either actual transactions for the property in question or to recent transactions in the same general geological environment for properties deemed to be at a similar level of exploration and prospectivity. As many such transactions are of a farm-in nature, AMC has assessed a "cash equivalent" value for them by assessing from the terms the "deemed expenditure" on the property at the time of the deal, discounted by a time and probability factor for the likelihood that the farm-in will complete its earning requirement. AMC has adjusted the resulting value for any other terms of the joint venture and/or for the results of work carried out since the commencement of the farm-in.

The exploration properties covered by this valuation are owned by three different companies and AMC has elected to use a similar approach to ensure consistency and relativity between the assets. To do this, AMC has assessed the valuation methods

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appropriate to each asset and has generated a Yardstick Value, represented in dollars per square kilometre, to estimate the exploration value of each asset.

The Yardstick Values AMC has considered are based on our assessment of transactions in recent years, and generally range from less than $500 per km[2] for exploration properties in greenfields areas, or areas deemed to have relatively low prospectivity, to values greater than $10,000 per km[2] for exploration properties deemed to have relatively high prospectivity. Table 7.1 presents a number of the transactions that have influenced AMC’s assessment.

Table 7.1 Selection of Relevant Transactions Providing Yardstick Values

Date and Project Location	Transaction Details	Area (km2)	Implied Value ($/km2)
Aug 2011 WA	Southern Cross Goldfields (SXG) to purchase Mt Rankin Gold project from Renaissance Metals for 5M SXG shares and 10M options. Project valued at $350K	285	1,230
June 2011 WA	Integra Mining Limited to enter JV with Rubicon Resources Limited to attain 51% of the Queen Lapage Gold project, for expenditure of $1.0M over 3 years. Project valued at $0.27 – 0.45M.	113	3,200
Feb 2011 WA	Rox Resources to purchase Mt Fisher Gold-Nickel project from Avoca Resources for 20M Rox shares. Project valued at $1.3M.	615	2,100
Jan 2011 TAS	Bondi Mining Ltd to purchase Mt Owen Gold-Copper project from Pangean Resources Pty Ltd for $0.09M plus 1.75M Bondi shares. Project valued at $0.27M.	19	13,950
Jan 2011 WA	Phoenix Gold Ltd to purchase Broads Dam Gold project from Australian Gold Investments Ltd for $0.5M plus 10M Phoenix shares. Project valued at $2.3M.	30	76,700
Aug 2010 QLD	Independent Expert’s Report for North Queensland Metals valued the Twin Hills exploration prospectivity (exclusive of mineral resources) at a preferred value of $2.72M.	185	14,700
Apr 2010 QLD	Ramelius Resources to enter JV with Liontown Resources to attain 60% of the Mt Windsor project, for expenditure of $7.0M over 4 years. Project valued at $1.2 – 2.1M.	3,500	470
Feb 2010 Qld	JOGMEG to enter JV with Minotaur to attain 51% of the Cloncurry project, for expenditure of $4.0M over 3 years. Project valued at $1.1 – 1.8M.	546	2,660
July 2009 QLD	Pajingo Joint Venture acquired the Twin Hills project from Gold One International for $1.75M	185	9,460
Mar 2008 WA	Claremont Resources agrees to a JV with De Grey Mining to attain 70% of the Turner River project, for expenditure of $5.0M over 2 years. Project valued at $0.6 – 1.0M.	287	2,800

In the case of the Twin Hills project, there are mineral resources that have not been valued by generating production scenarios and estimating a NPV. Here, AMC has also generated a Yardstick Value, represented in dollars per ounce of contained gold in the mineral resource to assess value.

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7.3 Edna May

7.3.1 Status

Catalpa has a 100% interest in the Edna May gold mine and surrounding exploration tenements totaling 855 km[2] .

Most recent exploration and resource definition has focused on down-dip continuity of the Edna May open pit, the adjacent Golden Point mineralisation and the Greenfinch deposit. Deep drilling has also tested the continuity of higher grade quartz reefs for possible underground mining.

Away from the immediate mining area, the tenements are considered prospective for further discoveries however exploration is at an early stage. In 2009, Catalpa carried out extensive auger geochemical sampling over the entire group of tenements that identified anomalies for further work. In 2011, an exploration consultant compiled exploration data and recommended areas for further work. Exploration of these targets is at an early stage.

7.3.2 Valuation

AMC has prepared two production scenarios for Edna May. Case 1 is based on the existing open pit reserves plus a portion of the current underground mineral resource that AMC believes may be recovered by underground mining. Case 2 reflects the potential for mining a greater portion of the open pit resource, and mining additional material discovered through successful exploration. The Case 2 underground mining inventory is also extended based on the potential for exploration success.

AMC considers there is an exploration value attributable to near-mine and regional exploration not incorporated into Cases 1 and 2. Edna May exploration prospectivity is considered to be reasonable and has been valued by applying Yardstick Values of $2,000 to $5,000 per km[2] to the total tenement area, which are in the lower to middle region of AMC’s Yardstick Values. These methods indicate a value of $1.71M to $4.28M with a preferred value of $3.00M.

7.4 Pajingo

7.4.1 Status

Conquest has a 100% interest in the Pajingo gold mine and surrounding exploration tenements, covering some 630 km[2] .

Figure 7.1 presents the resource/reserve inventory for Pajingo and shows that resources and reserves peaked at nearly 4 Moz gold in 2001, but since 2005 the total has hovered around 0.5 to 0.7 Moz. Previous owners Normandy Mining Ltd and Newmont Mining undertook significant exploration up to 2006, but from 2006 to 2010 exploration was minimal and focused on the area in and adjacent to mining areas.

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Figure 7.1 Pajingo Resources and Reserves History

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Source – Conquest Presentation, 2011

Since assuming ownership in late 2010, Conquest announced it would ramp up exploration and has implemented a three phase program to increase the resource and reserve base i.e.:

In-mine exploration to convert resources at Jandam, Zed and Faith to reserves.
Resource development to increase resources at Lower Leaping Dog, Powerline, Bunty, Cindy to Bell Vein, Anne West and Jandam Hangingwall.
Regional exploration, with an initial focus to add new resources at the Starlight, Moonlight and Barking Spider prospects, close to the existing mine.

This work has already resulted in an increase in total mineral resources and ore reserves, with Conquest reporting resources inclusive of reserves of 0.73 Moz, and reserves of 0.14 Moz, as of the end of June 2011. In addition, several very encouraging intersections have been drilled in the regional area e.g. at Moonlight (4.0m @ 19.5 g/t Au in hole JMRD3680) and at Starlight (3.0m @ 6.4 g/t Au in hole JMRD3659 and 2.0m @ 7.5 g/t Au in hole JMRD3657).

7.4.2 Valuation

AMC has prepared two production scenarios for Pajingo. Case 1 is based on the existing ore reserves, plus remnant material, existing mineral resources yet to be evaluated for mining and a small amount of material resulting from exploration success. Case 2 extends the Case 1 underground and open pit production plans by one year.

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The additional open pit production is assumed to come from a new pit on one of the current exploration targets at a similar grade and stripping ratio as the other pits.

AMC considers there is no additional exploration value attributable to the current resource inventory at Pajingo and the in-mine component of exploration because this potential has been incorporated into the modeling scenarios. There is an exploration value attributable to both the resource development and regional exploration. Pajingo exploration prospectivity is considered to be very good and has been valued by applying Yardstick Values of $5,000 to $8,000 per km[2] to the total tenement area, which are in the middle to upper region of AMC’s Yardstick Values. These methods indicate a value of $3.15M to $5.04M with a preferred value of $4.10M.

7.5 Mt Rawdon

7.5.1 Status

NML has a 100% interest in the Mt Rawdon gold mine and surrounding exploration tenements, covering some 680 km[2] .

Most recent exploration has focused on the area immediately adjacent to the Mt Rawdon open pit testing for along strike and down dip extensions to mineralisation. Away from the immediate mining area, the tenements are considered prospective for further discoveries; however, exploration is at an early stage. In 2011, Newcrest intends to undertake small exploration programmes at two prospects i.e.:

Follow up drilling of the Kent’s Knob Breccia prospect, located 25 km southeast of Mt Rawdon. This prospect lies immediately northeast of the historic Mt Shamrock mine which produced a total of 35,000 oz gold.
Testing of gold anomalies in soil samples at the Mt Dell prospect, believed to be associated with a shallow intrusive body.

None of these anomalies are considered advanced exploration targets at present.

7.5.2 Valuation

AMC has prepared only one production scenario for Mt Rawdon based on the current ore reserves, as there are currently no additional mineral resources with a reasonable expectation of being mined to justify a Case 2 modelling scenario. Therefore AMC considers there is no additional exploration value attributable to the current resource inventory and the exploration planned to test the immediate along strike and down dip extensions of the known mineralisation at the mine.

AMC considers there is an exploration value attributable to regional exploration not incorporated into Case 1, but prospectivity is considered to be low. Mt Rawdon exploration prospectivity has been valued by applying Yardstick Values of $1,000 to $4,000 per km[2] to the total tenement area, which are in the lower region of AMC’s Yardstick Values. These methods indicate a value of $0.68M to $2.72M with a preferred value of $1.70M.

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7.6 Cracow

7.6.1 Status

The Cracow gold mine and surrounding tenements, owned jointly by Newcrest (70% interest) and Catalpa (30% interest), covers some 570 km[2] .

The joint venture is actively exploring the mine leases and surrounding exploration tenements and has a $7M budget for 2010/11 with three key aims:

Convert resources to reserves in the immediate mine area, focusing on Kilkenny, Tipperary, Phoenix, Sovereign North, Roses Pride and Empire.
Identify new resources adjacent to and along strike from known mineralisation in the immediate mining areas.
Add new resources from regional exploration, with a focus north and south of the Cracow Goldfield.

7.6.2 Valuation

AMC has prepared two production scenarios for Cracow. Case 1 is based on the existing ore reserves plus a significant quantity of non-reserve material, including lowgrade material recovered from the IO Dump. Case 2 production extends the Case 1 underground mine life by a further two years (based on some exploration success), supplemented by production from the Golden Plateau open pit and from low-grade dumps.

AMC considers there is no additional exploration value attributable to the current resource inventory at Cracow because this has already been included in the modeling scenarios. There is an exploration value attributable to both near mine and regional exploration. Cracow exploration prospectivity is considered to be good and has been valued by applying Yardstick Values of $4,000 to $7,000 per km[2] to the total tenement area, which are in the middle to upper region of AMC’s Yardstick Values. These methods indicate a value of $2.28M to $3.99M with a preferred value of $3.15M.

7.7 Mt Carlton

7.7.1 Status

Conquest has a 100% interest in the Mt Carlton project and surrounding exploration tenements, covering some 880 km[2] .

The development project is anticipated to commence production in 2012 and therefore, most recent exploration has focused on the V2 and A39 deposits. In April 2011, Conquest approved a $5.5M exploration programme to be directed at the Mt Carlton area and surrounding tenements, with the aim of:

Locating additional mineralising centres adjacent to the V2 and A39 deposits.
Converting resources to reserves at the V2 East deposit.

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Locating additional high grade silver mineralisation similar to the A39 deposit.

7.7.2 Valuation

AMC has prepared two modelling scenarios for Mount Carlton. Case 1 production is based on the existing ore reserve. Case 2 includes additional material based on mining depth extensions to both the V2 and A39 deposits, plus a provision for some exploration success.

AMC considers that there is no additional exploration value attributable to the current resource inventory at V2 and A39 because this has been incorporated into the Case 2 modeling scenario. There is an exploration value attributable to areas near these deposits as well as regional exploration. Mt Carlton exploration prospectivity is considered to be reasonable and has been valued by applying Yardstick Values of $2,500 to $5,000 per km[2] to the total tenement area, which are in the lower to middle region of AMC’s Yardstick Values. These methods indicate a value of $2.20M to $4.40M with a preferred value of $3.30M.

7.8 Twin Hills

7.8.1 Project Description and History

Conquest has a 100% interest in the Twin Hills gold project located in QLD, 190 km south of the Pajingo mine. The project consists of one granted ML and six EPM’s covering approximately 180 km[2] (see Figure 7.2).

Gold mineralisation at Twin Hills was discovered in the 1980’s at the 309 Deposit and the Lone Sister Deposit. Previous owners operated a small underground operation from 2005 to 2007 with the ore trucked some 280 km north to Rishton for processing. The operation was not profitable.

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Figure 7.2 Twin Hills Project Location

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The Pajingo Joint Venture (60% North Queensland Metals and 40% Heemskirk Consolidated) purchased the project in July 2009 for $1.75M and completed additional drilling prior to estimation of new mineral resources and reserves. Conquest acquired the project in November 2010 as part of its successful takeover of North Queensland Metals and purchased the remaining interest held by Heemskirk Consolidated soon after.

In late 2010, Conquest announced it would recommence underground mining at the 309 Deposit to provide feed to the Pajingo mill and started redevelopment with a view to commence production by June 2011. However, additional dewatering requirements and the need to develop a bypass around an area of fallen ground in the main access decline resulted in a decision in June 2011 to cease the redevelopment and place the operation under care and maintenance.

7.8.2 Status

The Twin Hills project comprises two known deposits (309 Deposit and Lone Sister) and Conquest has reported mineral resources as of June 2011, reproduced in Table 7.2. The 309 Deposit has both open pit resources (reported at a cut-off of 0.5 g/t Au within a pit shell designed using a $1,500/oz gold price) and underground resources (reported using a cut-off of 2.0 g/t Au below the pit shell). The Lone Sister resource has been reported at a cut-off of 2.0 g/t Au to reflect an underground mining scenario.

Table 7.2 Twin Hills Project Mineral Resources at 30 June 2011

	Measured Resource	Measured Resource	Indicated Resource	Indicated Resource	Inferred Resource	Inferred Resource	Total Resource	Total Resource
	Tonnes (Mt)	Au (g/t)	Tonnes (Mt)	Au (g/t)	Tonnes (Mt)	Au (g/t)	Tonnes (Mt)	Au (g/t)
309 Deposit Lone Sister	– 0.54	– 4.10	2.45 0.28	2.20 3.40	1.15 0.20	2.84 2.80	3.60 1.02	2.40 3.70
Total	0.54	4.10	2.73	2.30	1.35	2.80	4.62	2.70

No ore reserves are reported for either the 309 Deposit or Lone Sister. AMC considers this appropriate given that Conquest has placed the redevelopment of the 309 Deposit on care and maintenance.

There is potential to discover limited additional mineralisation in the immediate vicinity of both the 309 Deposit and Lone Sister, but AMC considers prospectivity is low at both, because significant drilling has been carried out. Away from the two main deposits, the tenements are considered prospective for further discoveries; however, exploration is at an early stage. The main targets are the lateral extensions of the 309 Deposit, the structural corridor between the two deposits, and other potential 309 style deposits in the northern part of the tenement.

7.8.3 Valuation

AMC has not developed production scenarios for Twin Hills because economic evaluations yield negative NPV’s for the project. Consequently, AMC has valued the project using exploration valuation methods.

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In assessing the value of this project, AMC notes:

In December 2008, an independent consulting firm prepared a technical valuation of the Twin Hills project for BMA Gold Limited, using a Comparable Transactions approach. This resulted in a valuation ranging from $1.02M to $4.65M, with a preferred value of $1.93M, selected by the consulting firm at the lower end of the range.
In July 2009, the Twin Hills project was acquired by the Pajingo Joint Venture for $1.75M.
In August 2010, an Independent Expert’s Report for North Queensland Metals included a valuation of the Twin Hills project. Twin Hills and Pajingo were combined in the analysis, so it is not possible to isolate the value of the Twin Hills project; however, a Fair Market Value of the exploration potential outside of the defined resources and reserves existing at the time was estimated. This resulted in a valuation ranging from $1.47M to $3.96M, with a preferred value of $2.72M.

AMC has adopted an approach that values the mineral resources based on a Yardstick Value in dollars per ounce of contained gold in resources, with an additional component of value for the exploration potential of the tenement area using a Yardstick Value in dollars per square kilometre. Values of $7.5 to $10.0/oz for measured resources, $5.0 to $7.5/oz for indicated resources, $2.5 to $5.0/oz for inferred resources were applied. Twin Hills exploration prospectivity is considered to be relatively low and has been valued by applying Yardstick Values of $1,000 to $4,000 per km[2] to the total tenement area, which are in the lower region of AMC’s Yardstick Values. These methods indicate a value of $2.04M to $3.58M with a preferred value of $2.80M.

7.9 North Queensland Regional Exploration

7.9.1 Description

Conquest has a 100% interest in a portfolio of exploration tenements in the North Queensland area, south and west of the Mt Carlton project. The portfolio consists of seven granted EPM’s and one application, covering approximately 880 km[2] (see Table 7.3 and Figure 6.1).

Table 7.3 Conquest North Queensland Exploration Tenements Status

Tenement	Granted	Size	Annual Rent	Holder
EPM 11971	31/08/2004	8 sub blocks	$2,500	Conquest
EPM 14155	25/11/2004	9 sub blocks	$2,500	Conquest
EPM 15597	22/05/2008	123 sub blocks	$2,500	Conquest
EPM 15598	Application	14 sub blocks	–	Conquest
EPM 15623	20/02/2008	50 sub blocks	$2,500	Conquest
EPM 15630	2/05/2007	25 sub blocks	$2,500	Conquest
EPM 17242	26/11/2009	32 sub blocks	$2,500	Conquest
EPM 17243	26/11/2009	14 sub blocks	$2,500	Conquest

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These tenements are considered prospective for a range of mineralisation styles and targets, including:

Mt Carlton style gold-silver-copper deposits.
Porphyry copper-gold ± molybdenum deposits.
Epithermal gold deposits.

7.9.2 Status

In April 2011, Conquest announced it would focus its regional North Queensland exploration activities on mineralisation targets akin to the Mt Carlton style deposits and seek joint venture partners for those tenements that were assessed as being less prospective for this style of mineralisation, including EPM’s 11971, 15598, 15623 and 17243.

7.9.3 Valuation

To date, Conquest has spent $0.95M in exploration expenditure on all of the tenements. A valuation based on the Past Expenditure method applying a PEM of 1.0 to 1.5 generates an exploration valuation ranging from $0.95M to $1.43M.

AMC considers Twin Hills exploration prospectivity is low and has been valued by applying Yardstick Values of $500 to $2,500 per km[2] to the total tenement area, which are in the low region of AMC’s Yardstick Values. These methods indicate a value of $0.44M to $2.20M with a preferred value of $1.30M, and compare favourably with the Past Expenditure method.

7.10 Valuation Summary

Table 7.4 presents a summary for the exploration valuations and indicates a value of $12.50M to $26.20M with a preferred value of $19.35M.

Table 7.4 Summary of Exploration Valuations

Summary Exploration Valuations ($M)	Low	Preferred	High
Edna May Pajingo Mt Rawdon Cracow Mt Carlton Twin Hills North QLD Regional Exploration	$1.71 $3.15 $0.68 $2.28 $2.20 $2.04 $0.44	$3.00 $4.10 $1.70 $3.15 $3.30 $2.80 $1.30	$4.28 $5.04 $2.72 $3.99 $4.40 $3.58 $2.20
Total	$12.50	$19.35	$26.20

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8 QUALIFICATIONS

AMC is a firm of mineral industry consultants whose activities include the preparation of due diligence reports and reviews on mining and exploration projects for equity and debt funding and for public reports.

Signatories to this report are Mr M Dorricott, FAusIMM(CP) and Mr M Thomas, MAusIMM(CP). Both Mr Dorricott and Mr Thomas are employees of AMC.

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9 REFERENCES

Annual Resources and Reserves Update. ASX Release, 9 August 2011, Conquest Mining Limited.

Second Quarter Activities and Cash Flow Report, 21 January 2010, Conquest Mining Limited.

NQM (2011). NQM MRO Operations, May 2011.ppt.

NQM (2011). MRO Exploration May Presentation_2011.ppt.

NQM (2011). NQM Mt Rawdon – Budget FY12 Summary Final.xls, June 2011.

NQM (2011). NQM Mt Rawdon – Open Pit Mineral Resource: (MRO MR 11-06, Revision L1&L2); July 2011; C. Ryan.

NQM (2011). NQM Mt Rawdon-Ore Reserve Report (MRO OR 11-06, Revision L1&L2); June 2011; N Spicer.

NQM (2011). NQM MRO SPM 5YP-FY12 110511-MC LOM-mine schedule.xls.

NQM (2011). NQM FY11 .Reserve reporting Mt Rawdon Open Pit, March 2011.

NQM (2011) IMC01343 Mt Rawdon Ore Reserve as of January 1, 2011.

NQM (2011) Memorandum June 2011 Mineral Resource April_June 2011 RRSC version.

NQM (2010-2011) MRO EOM – monthly reports.

NQM (2011). NQM Mt Rawdon-Open Pit Mineral Resource: MRO MR 11-06, Revision L1&L2; June 2011; B. Cox & T Murphy.

NQM (2011). NQM June 2011 Mineral Resource; B. Cox & T Murphy.

NQM (2011) Mt Rawdon Tenement Schedule.xlsx.

NQM (2011) Exploration Expenditure Mt Rawdon.xlsx.

A Tomasett (2008); Tenzing Pty Ltd: LGL02016 Report Estimation of Gold and Silver Resources at Mt Rawdon.

PGM (2011). Conquest Mining Pajingo Geology Overview.pptx.

PGM (2011). Conquest Mining 20110504 Pajingo Geology Exploration.pptx.

PGM (2011). Conquest Mining Pajingo Exploration Monthly Report May 2011.

PGM (2011). Conquest Mining 101111 NQM current list of tenements – February 2011.xlsx.

PGM (2011 Conquest Mining LOM Pajingo Base Case July 2011 v3.xlsx.

PGM (2011). Conquest Mining Pajingo Executive Summary June 2010.

PGM (2011). Conquest Mining Pajingo Executive Summary December 2010.

PGM (2011). Conquest Mining Pajingo Executive Summary May 2011.

PGM (2011). Conquest Mining Pajingo R&R Table_260711 as at 1935 hrs.xlsx. PGM (2011). Conquest Mining Life of Mine interim Report.

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NQM (2008). NQM Mineral Resource and Ore Reserve Report as of 31[st] March 2008: Pajingo Gold Mine.

NQM (2010). NQM Mineral Resource and Ore Reserve Report as of 30[th] June 2010: Pajingo Gold Mine.

A Richmond (2004); Golder Associates: Technical Memorandum on ‘Anne and Veracity geostatistical study’.

(NQM) (2010) Conquest Mining Drilling Report January-March 2010-Twin Hills.

Hackett S (2009) Snowden Draft Re: Twin Hills Recoverable Resource Estimate October 2009.

Graindorge J (2011) Snowden Re: Twin Hills Mineral Resource Update March 2010.

Cox C (2011) Snowden Re: Twin Hills Mineral Resource – June 2011.

Lutherborrow C.H. (2006) Twin Hills Lone Sister Deposit Resource Estimate September 2006.

(Catalpa) (2011) Cracow FY12 Budget.xlsx.

(Catalpa) (2011) Cracow SPM 5YP 290311_xlt – mine schedule.xls.

(Catalpa) (2011) Cracow resource reconciliation Mar 11.xls.

(Catalpa) (2010-2011) Cracow Gold Mine – Cracow Monthly Reports.

(Catalpa) (2010-2011) Cracow Gold Mine – Operations Overview at Cracow May 2011.ppt.

(Catalpa) (2011) Cracow Gold Mine – QA/QCR Summary Report produced 17 05 2011.

(Catalpa) (2011) Cracow Gold Mine – BM_Naming Example text document.

(Catalpa) (2009) Cracow Gold Mine – Standard Operating Procedure – Development Face Sampling.

(Catalpa) (2005) Cracow Gold Mine – Standard Operating Procedure – Core Logging and Sampling Procedure for LTK60 core size.

(Catalpa) (2007) Cracow Gold Mine R Taube – QA/QC documentation Crown and Royal Shoots, Cracow April 2006 to April 2007: Sample Preparation and Standards Data.

(Catalpa) (2011) Tenement list Cracow 2011-05-30.xlsx.

(Newcrest) (2010) Cracow MR OR Report June 2010 – Cracow Mineral Resources and Ore Reserves March 2011.

(Newcrest) (2010) Cracow MR OR Report Dec 2010 L1+signoff – Cracow Mineral Resources and Ore Reserves December 2010.

(Newcrest) (2011) Cracow MR OR Report March 2011 – Cracow Mineral Resources and Ore Reserves March 2011.

(Newcrest) (2011) Cracow MR OR Report L1 and L2+signoff – Cracow Mineral Resources and Ore Reserves June 2011.

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(Newcrest) (2010) Cracow Project (Cracow Joint Venture & Cracow Mining Joint Venture) Interim Report – FY11 Completed Exploration Program Results and Expenditure.

(Newcrest) (2010) Cracow Project Proposed Exploration Program & Budget 1 July 2010 to 30 June 2011.

(AMC) (2007) Preliminary Geotechnical Evaluation of Sovereign Shoot Area at the Cracow Gold Mine, Newcrest Mining Limited.

(Mining One) (2006) Rock Stress Measurement Royal and Crown Declines for the Cracow Gold Mine.

AARC (2010). Mt Carlton Project Environmental Management Plan. Report prepared for Conquest by AustralAsian Resource Consultants Pty Ltd, December 2010.

ARCCON (2009). Mt Carlton Project Definitive Feasibility Study. Report collated by Arccon Mining Services for Conquest.

AMDAD (2010). Silver Hill Project Ore Reserve Statement. Report prepared for Conquest by Australian Mine Design and Development Pty Ltd, December 2010.

Conquest (2010). Mt Carlton Optimisation Study. Conquest Mining Limited, December 2010.

Conquest (2011). Tenement Listing of Exploration Permits. Conquest Mining Limited, February 2011.

Golder Associates (2010a). Mt Carlton Project Mine Waste Management Plan. Report No. 107311012-018 Rev0 submitted to Conquest, 6 December 2010.

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APPENDIX A

ABBREVIATIONS

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Abbreviation

Definition

AMC
CAPEX
CGM
CIL
CJV
DERM
EA
EMOS
EMP
EPM
FY
GSA
LOM
ML
NAF
NPV
NRM
NSW
OK
OoM
PAF
PEM
PGM
PoO
TSF
WAD
WRD

AMC Consultants Pty Ltd
Capital Expenditure
Cracow Gold Mine
Carbon-in-Leach
Cracow Joint Venture
Queensland Department of Environment and Resource Management
Environmental Authority
Environmental Management Overview Strategy
Environmental Management Plan
Exploration Permit for Minerals
Financial Year
Grant Samuel & Associates Pty Ltd
Life of mine
Mining Leases
Non-acid forming
Net Present Values
Non-reserve material
New South Wales
Ordinary Kriging
Order of Magnitude
Potential acid forming
Past Expenditure Method
Pajingo Gold Mine
Plan of Operations
Tailings Storage Facility
Weak acid dissociable
Waste rock dump

General
3D
2D
$ %
Ag
All AMC modelling scenarios
Au
Cu
DDH
EPA
g
g/t
GST

Three dimensional
Two dimensional
Australian dollar
percent
silver
Prospective production and capital and operating cost as valuation inputs
gold
copper
Diamond drillhole
Queensland Environmental Protection Act 1994
gram
grams per tonne
Government Sales Tax

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Abbreviation

Definition

JORC Code
km
km2
koz
kt
ktpa
kW
M
m
m2
Mbcm
mbs
Mg/L
mm
mN
mRL
Mt
Mtpa
Ni
RAB
RC
oC
oz
Pb
QA/QC
t
tpa
tph
US$ Valmin Code
Zn

Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves, The JORC Code 2004 Edition, Effective
December 2004, Prepared by the Joint Ore Reserves Committee of the
Australasian Institute of Mining and Metallurgy, Australian Institute of
Geoscientists and Minerals Council of Australia (JORC).
kilometres
square kilometres
thousand ounces
thousand tonnes
thousand tonnes per annum
kilowatts
million
metres
square metre
million bank cubic metres
Depth below surface in metres
Milligrams per litre
millimetres
Metres north
reduced level
million tonnes
million tonnes per annum
nickel
Rotary air blast drillholes
Reverse circulation (drillholes)
degrees Celsius
ounce
lead
Quality assurance / quality control
tonnes
tonnes per annum
tonnes per hour
United States dollar
Code for the Technical Assessment and Valuation of Mineral and
Petroleum Assets and Securities for Independent Expert Reports, The
VALMIN Code 2005 Edition, Prepared by The VALMIN Committee, a joint
committee of the Australasian Institute of Mining and Metallurgy, the
Australian Institute of Geoscientists and the Mineral industry Consultants
Association with the participation of the Australian Securities and
Investment Commission, the Australian Stock Exchange Limited, the
Minerals Council of Australia, the Petroleum Exploration Society of
Australia, the Securities Association of Australia and representatives from
the Australian finance sector.
Zinc

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AI assistant

EVOLUTION MINING LIMITED — M&A Activity 2011

64885_rns_2011-09-13_cf3b0fd1-ffee-4df4-812d-299ce97d4147.pdf

14 September 2011

Dear Sir/ Madam

MARKET UPDATE

Catalpa Resources Limited ‐ Explanatory Memorandum Supplement

G R A N T S A M U E L & A S S O C I A T E S

Proposed Merger with Conquest and acquisition of Newcrest Assets

1 Introduction

2 Summary of Opinion

3 Key Conclusions

The Merger is a genuine merger of equals.

 Valuation analysis suggests that the terms of the Merger are equitable.

 Analysis of other valuation parameters suggests that the terms of the Merger are equitable.



The terms of the Newcrest Asset Acquisition are favourable to Catalpa shareholders.

 Shares in Evolution should trade at higher prices than shares in a standalone Catalpa.

 Catalpa shareholders are likely to be better off if the Proposal is implemented.

4 Other Matters

Financial Services Guide

Table of Contents

Appendices

1 Details of the Proposal

2 Scope of the Report

2.1 Purpose of the Report

2.2 Basis of Evaluation

2.3 Sources of the Information

Publicly Available Information

Non Public Information provided by Conquest, Catalpa and Newcrest

2.4 Limitations and Reliance on Information

3 Profile of Catalpa

3.1 Background

3.2 Business Operations

3.3 Financial Performance

3.4 Financial Position

3.5 Cash Flow

3.6 Group Hedging

3.7 Taxation Position

3.8 Capital Structure and Ownership

3.8.1 Capital Structure

3.8.2 Ownership

3.9 Share Price Performance

4 Profile of Catalpa’s Assets

4.1 Edna May

Overview

Geology and Mineralisation

Mining and Processing

Reserves and Resources

Exploration

Operating Performance

4.2 Cracow Project (30%)

Overview

Geology and Mineralisation

Mining and Processing

Reserves and Resources

Exploration

Operating Performance

5 Profile of Conquest

5.1 Background

5.2 Business Operations

5.3 Financial Performance

5.4 Financial Position

5.5 Cash Flow

5.6 Group Hedging

5.7 Taxation Position

5.8 Capital Structure and Ownership

5.8.1 Capital Structure

5.8.2 Ownership

5.9 Share Price Performance

6 Profile of Conquest’s Assets

6.1 Pajingo

Overview

Geology and Mineralisation

Mining and Processing

Resources and Reserves

Expansion and Exploration

Operating Performance

Outlook

6.2 Mt Carlton

EVOLUTION MINING LIMITED M&A Activity 2011