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EVOLUTION MINING LIMITED — Proxy Solicitation & Information Statement 2011
Sep 12, 2011
64885_rns_2011-09-12_e8c3ee03-aef0-44e2-8ec1-c8e8fc567fa0.pdf
Proxy Solicitation & Information Statement
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eXplanaTory memorandum
in relation to the proposed merger with conquest mining limited and asset purchase from newcrest mining limited in exchange for new catalpa shares
The direcTors of caTalpa unanimously recommend ThaT you voTe in favour of The resoluTions, in The absence of a superior proposal.
This is an imporTanT documenT and requires your immediaTe aTTenTion. if you are in any doubT abouT how To deal wiTh This documenT, you should conTacT your broker, financial adviser or legal adviser immediaTely.
catalpa resources limited acn 084 669 036
imporTanT noTices
PurPose of this exPlanatory MeMoranduM
This document is important. It contains information for Catalpa Shareholders relating to the Transaction. This Explanatory Memorandum provides Catalpa Shareholders with necessary information to assist them in deciding how to vote on the Resolutions to be considered at the Meeting. This Explanatory Memorandum does not take into account the individual investment objectives, financial situation and particular needs of Catalpa Shareholders or any other person. Accordingly, this Explanatory Memorandum should not be relied upon as the sole basis for any decision in relation to your vote at the Meeting.
You should read this Explanatory Memorandum in its entirety before making a decision as to how to vote at the Meeting. The Frequently asked questions section of this Explanatory Memorandum answers some common questions about the Transaction generally. They are not intended to address all issues relevant to Catalpa Shareholders. If you have any doubt as to what you should do once you have read this Explanatory Memorandum, you should consult your legal, financial or other professional adviser.
exPlanatory MeMoranduM suPPleMent
A concise version of the Independent Expert’s Report (to which is attached a concise version of the Technical Specialist’s Report) is set out at Attachment A. The full version of the Independent Expert’s Report (to which is attached a full version of the Technical Specialist’s Report) is included in the Explanatory Memorandum Supplement which can be viewed and downloaded online at www.catalparesources.com. au. Catalpa Shareholders may also obtain a copy of the Explanatory Memorandum Supplement by contacting the Catalpa Shareholder Information Line on 1300 383 678 (within Australia) or +61 3 9415 4312 (outside Australia) at any time between 9:00am and 5:00pm (Sydney time), Monday to Friday.
disclaiMer as to forward looking stateMents
Some of the statements appearing in this Explanatory Memorandum may be in the nature of forward looking statements. You should be aware that such statements are only predictions and are subject to inherent risks and uncertainties. Those risks and uncertainties include factors and risks specific to the industry in which Catalpa, Newcrest and Conquest (and their Subsidiaries) operate as well as general economic conditions, prevailing exchange rates and interest rates and conditions in the financial markets. Actual events or results may differ materially from the events or results expressed or implied in any forward looking statement. Some of the risks that Catalpa Shareholders may be exposed to if the Transaction is implemented are set out in section 8.1 of this Explanatory Memorandum. None of Catalpa, the officers or employees of Catalpa, any persons named in this Explanatory Memorandum with their consent or any person involved in the preparation of this Explanatory Memorandum, makes any representation or warranty (express or implied) as to the accuracy or likelihood of fulfilment of any forward looking statement, or any events or results expressed or implied in any forward looking statement, except to the extent required by law. You are cautioned not to place undue reliance on any forward looking statement. The forward looking statements in this Explanatory Memorandum reflect views held only as at the date of this Explanatory Memorandum.
The Newcrest Information does not include forecasts in relation to the Newcrest Assets beyond the financial year ending 30 June 2012. To the extent that information included elsewhere in this Explanatory Memorandum refers to, or incorporates forecasts in relation to the Newcrest Assets beyond that date, such information has been prepared by Catalpa and Conquest on the basis of their due diligence enquiries and (in the case of Catalpa) prior knowledge regarding the Cracow Assets, and therefore constitutes Evolution Mining Information.
defined terMs and other references
A number of defined terms are used in this Explanatory Memorandum. These terms are explained in section 10 of this Explanatory Memorandum. In addition, unless the contrary intention appears or the context requires otherwise, words and phrases used in the Corporations Act have the same meaning and interpretation as in the Corporations Act.
Unless expressly stated otherwise: all references in this Explanatory Memorandum to time relate to the time in Perth, Western Australia; all references in this Explanatory Memorandum to ‘$’, ‘A$’ or ‘AUD’ are references to Australian currency; and all references in this Explanatory Memorandum to ‘US$’ or ‘USD’ are references to the currency of the United States of America.
In this Explanatory Memorandum, Catalpa following implementation of the Transaction is referred to as ‘Evolution Mining’ as it is proposed that, from implementation, Catalpa will be renamed ‘Evolution Mining Limited’. This change of company name is subject to approval by Catalpa Shareholders pursuant to the Change of Name Resolution.
Unless expressly stated otherwise, references in this Explanatory Memorandum to gold equivalent are based on the following price assumptions: gold US$1,100 per ounce, silver US$22 per ounce and copper US$3.50 per pound. Relative metal recovery and payability rates are also incorporated into the gold equivalence calculation. Gold equivalent calculations of production, reserves and resources are only applicable to Mt Carlton and are not applicable to Pajingo, Edna May, Cracow or Mt Rawdon.
disclaiMer as to inforMation
No person is authorised to give any information or make any representation in connection with the Transaction which is not contained in this Explanatory Memorandum. Any information or representation not contained in this Explanatory Memorandum may not be relied on as having been authorised by Catalpa or the Catalpa Directors in connection with the Transaction.
resPonsibility for inforMation
Catalpa has prepared, and is responsible for, the Catalpa Information. Conquest and Newcrest (and each of their respective directors, officers and advisers) do not assume any responsibility for the accuracy or completeness of any of the Catalpa Information.
Conquest has prepared, and is responsible for, the Conquest Information. Newcrest and Catalpa (and each of their respective directors, officers and advisers) do not assume any responsibility for the accuracy or completeness of any of the Conquest Information.
Newcrest has prepared, and is responsible for, the Newcrest Information. Conquest and Catalpa (and each of their respective directors, officers and advisers) do not assume any responsibility for the accuracy or completeness of any of the Newcrest Information. The Newcrest Information does not include forecasts in relation to the Newcrest Assets beyond the financial year ending 30 June 2012. To the extent that information included elsewhere in this Explanatory Memorandum refers to, or incorporates forecasts in relation to, the Newcrest Assets beyond that date, such information has been prepared by Catalpa and Conquest on the basis of their due diligence enquiries and (in the case of Catalpa) prior knowledge regarding the Cracow Assets, and therefore constitutes Evolution Mining Information. Neither Newcrest nor any of its directors, officers or advisors assumes any responsibility for the accuracy or completeness of any forecast information in relation to the Newcrest Assets beyond the financial year ending 30 June 2012.
The Cracow Information has been prepared by Newcrest. Newcrest and Catalpa take joint responsibility for the Cracow Information. Conquest (and each of its directors, officers and advisers) does not assume any responsibility for the accuracy or completeness of any of the Cracow Information.
The Evolution Mining Information has been prepared jointly by Catalpa and Conquest and Catalpa and Conquest take joint responsibility for the Evolution Mining Information. Newcrest (and each of its directors, officers and advisers) does not assume any responsibility for the accuracy or completeness of any of the Evolution Mining Information.
Grant Samuel has prepared the Independent Expert’s Report (other than the Technical Specialist’s Report) and takes responsibility for that report and has consented to the inclusion of that report in this Explanatory Memorandum. Catalpa, Conquest and Newcrest do not assume any responsibility for the accuracy or completeness of the Independent Expert’s Report, and nor do their respective directors, officers and advisers (other than in the case of Catalpa and Conquest, Grant Samuel).
AMC Consultants Pty Ltd has prepared the Technical Specialist’s Report and takes responsibility for that report and has consented to the inclusion of that report in this Explanatory Memorandum. Catalpa, Conquest and Newcrest do not assume any responsibility for the accuracy or completeness of the Technical Specialist’s Report, and nor do their respective directors, officers and advisers (other than in the case of Catalpa and Conquest, AMC Consultants Pty Ltd).
Deloitte has prepared the Investigating Accountant’s Report and takes responsibility for that report and has consented to the inclusion of that report in this Explanatory Memorandum. Catalpa, Conquest and Newcrest do not assume any responsibility for the accuracy or completeness of the Investigating Accountant’s Report, and nor do their respective directors, officers and advisers (other than in the case of Catalpa and Conquest, Deloitte).
asx involveMent
A copy of this Explanatory Memorandum has been lodged with the ASX pursuant to the Listing Rules. Neither the ASX nor any of its officers takes any responsibility for the contents of this Explanatory Memorandum.
foreign jurisdictions
The release, publication or distribution of this Explanatory Memorandum in jurisdictions other than Australia may be restricted by law or regulation in such other jurisdictions and persons who come into possession of it should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable laws or regulations. This Explanatory Memorandum has been prepared in accordance with Australian law and the information contained in this Explanatory Memorandum may not be the same as that which would have been disclosed if this Explanatory Memorandum had been prepared in accordance with the laws and regulations outside Australia.
MaPs and diagraMs
Any diagrams, charts, maps, graphs and tables appearing in this Explanatory Memorandum are illustrative only and may not be drawn to scale. Unless stated otherwise, all data contained in diagrams, charts, maps, graphs and tables is based on information available at the date of this Explanatory Memorandum.
rounding
A number of figures, amounts, percentages, prices, estimates, calculations of value and fractions in this Explanatory Memorandum (including those in respect of the Scheme Consideration, the Subscription Shares, Newcrest’s interest in Evolution Mining before and after the Rights Offer and statements of Mineral Resources and Ore Reserves) are subject to the effect of rounding. Accordingly, their actual calculation may differ from the calculations set out in this Explanatory Memorandum.
Privacy
Catalpa has collected your information from the Catalpa Register for the purpose of providing you with this Explanatory Memorandum. The type of information Catalpa has collected about you includes your name, contact details and information on your shareholding or option holding (as applicable) in Catalpa. Without this information, Catalpa would be hindered in its ability to issue this Explanatory Memorandum. The Corporations Act requires the name and address of shareholders and option holders to be held in a public register. Your information may be disclosed on a confidential basis to Catalpa’s related bodies corporate and external service providers (such as the Catalpa Registry and print and mail service providers) and may be required to be disclosed to regulators such as ASIC. If you would like details of information about you held by Catalpa, please contact the Catalpa Registry at Link Market Services Limited at 178 St Georges Terrace, Perth, Western Australia, 6000 or on 1300 554 474 (within Australia) or +61 2 8280 7111 (outside Australia). The registered address of Catalpa is Level 3, 1 Altona Street, West Perth, Western Australia, 6005.
catalPa shareholder inforMation line
If you have any questions in relation to the Transaction, you may call the Catalpa Shareholder Information Line on 1300 383 678 (within Australia) or +61 3 9415 4312 (outside Australia) at any time between 9:00am and 5:00pm (Sydney time) on Monday to Friday.
date
This Explanatory Memorandum is dated 13 September 2011.
EXPLANATORY MEMORANDUM
1
conTenTs
| conTenTs | |
|---|---|
| Important Notices | |
| Letter from the Chairman of Catalpa | 2 |
| Key dates | 4 |
| Meeting details and instructions on how to vote | 5 |
| Overview of Evolution Mining | 6 |
| Overview of reasons to vote for or against the Share Issue Resolution | 7 |
| Frequently asked questions about the Transaction, | |
| the Rights Offer and the Resolutions | 8 |
| 1 Overview of the Transaction |
18 |
| 2 Rationale for the Transaction |
21 |
| 3 Reasons to vote against the Share Issue |
24 |
| 4 Profle of Catalpa |
25 |
| 5 Profle of Conquest |
36 |
| 6 Profle of the Newcrest Assets |
50 |
| 7 Profle of Evolution Mining |
63 |
| 8 Key implications and risks related to the Transaction |
79 |
| 9 Additional Information |
85 |
| 10 Glossary |
99 |
| Attachment A — Concise version of the Independent Expert’s Report | 113 |
| Attachment B — Investigating Accountant’s Report | 179 |
| Attachment C — Notice of Meeting | 182 |
CATALPA RESOURCES
2
leTTer from The chairman of caTalpa
13 september 2011
dear catalpa shareholder,
as announced on 15 June 2011, catalpa and conquest have entered into a binding agreement to implement a merger of equals of catalpa and conquest along with the concurrent acquisition of newcrest’s interests in the gold mining and exploration projects at cracow and mt rawdon (the Transaction). The Transaction is expected to create one of australia’s leading mid-cap, growth focused and asset diversified gold producers. it is proposed that the combined entity will be called ‘evolution mining limited’.
The Transaction is to be implemented by two separate but inter-conditional steps:
-
a scheme of arrangement under which catalpa will acquire all conquest shares in exchange for 0.3 new catalpa shares for each conquest share (the scheme); and
-
the acquisition by catalpa subsidiaries of newcrest’s 70% interest in the cracow gold mining and exploration projects (catalpa already owns the remaining 30%) and its 100% interest in the mt rawdon gold mining and exploration project (the asset purchase) in exchange for issuing newcrest with new catalpa shares (the share issue).
as a result of the Transaction, catalpa and conquest shareholders will each have an initial interest in evolution mining of approximately 31% and newcrest will have an initial interest of 38% (calculated on a fully diluted value basis). The Transaction is subject to a number of conditions, including approval of the scheme by conquest shareholders and the court and approval of the share issue by catalpa shareholders (which is the reason you have received this explanatory memorandum).
it is intended that, shortly following implementation of the Transaction, evolution mining will undertake a renounceable pro-rata entitlement offer to raise approximately $150 million to strengthen evolution mining’s balance sheet and increase financial flexibility. The funds raised will also enable evolution mining to progress its development and exploration plans and to pursue additional growth opportunities.
newcrest has agreed with catalpa and conquest that it will not take up its entitlements under the rights offer. Two global resources investors, blackrock and baker steel, have demonstrated their support for evolution mining by committing to subscribe for a total of $50 million worth of shares to be offered under the proposed rights offer[1] (in addition to their full pro-rata entitlement as shareholders of evolution mining), representing most of newcrest’s entitlements.[2]
following the rights offer, newcrest is expected to have an interest in evolution mining of approximately 33% (calculated on a fully diluted value basis).[3] newcrest will have two nominees on the board of evolution mining.
The catalpa board believes that the Transaction is highly compelling and provides a number of benefits to catalpa shareholders, including:
-
access to a larger and more diversified portfolio of assets combining four gold mines which collectively produced approximately 303,000 ounces of gold in fy2011 and one development asset;
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a stable production platform with organic growth opportunities forecast to increase production to 335,000 to 375,000 ounces of gold in fy2012 and 410,000 to 465,000 ounces of gold equivalent in fy2013;[4]
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an enhanced scale and increased market presence as a top 5 asX-listed gold producer by fy2011 production[5] and top 10 by market capitalisation.[6] as a result, the Transaction is also expected to provide greater liquidity and increased broker coverage;
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a strengthened financial platform to assist evolution mining to pursue growth opportunities, with an expected cash position following the rights offer of approximately $199 million[7] and an expected debt position of approximately $48 million[8] ;
-
1 as announced by catalpa and conquest on 19 July 2011, the commitments of blackrock and baker steel are subject to the proposed rights offer being underwritten, an institutional bookbuild price cap of 15% or more than catalpa’s closing share price on the trading day before the launch of the rights offer and to shares being issued under the rights offer before 31 december 2011.
-
2 newcrest’s entitlements under the rights offer will be in respect of approximately $57 million of the total $150 million proposed to be raised, based on newcrest’s interest in evolution mining on a fully diluted value basis immediately following implementation of the Transaction (being a 38% interest).
-
3 based on an illustrative rights offer price of a 10% discount to Terp, where Terp is calculated based on the vwap of a catalpa share on the last Trading day.
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4 section 7.4 of this explanatory memorandum sets out the basis for these production forecasts.
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5 based on information publicly released by asX-listed gold companies regarding production rates for fy2011.
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6 based on the share prices of asX-listed gold companies as at the close of trading on the last Trading day and the pro forma market capitalisation of evolution mining, assuming $150 million is raised under the proposed rights offer.
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7 based on the cash position of each of catalpa and conquest as at 30 June 2011 (including gold and silver available for sale), assuming $150 million is raised under the proposed rights offer and taking into account the costs associated with the Transaction and the rights offer. This figure does not take into account any stamp duty payable by catalpa in connection with the Transaction or the operating cash flows of catalpa and conquest during the period from 1 July 2011 to completion of the rights offer. it also does not take into account the macquarie facilities. as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities.
-
8 based on the debt position of each of catalpa and conquest as at 30 June 2011. This figure does not take into account the macquarie facilities. as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities.
EXPLANATORY MEMORANDUM
3
-
holding an interest in a company with newcrest as a supportive major shareholder; and
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a proven entrepreneurial and experienced management team with highly complementary skill sets and a strong mandate to grow evolution mining, including a board of eight directors with Jake klein as executive chairman and bruce mcfadzean as managing director and chief executive officer.
section 2 of this explanatory memorandum sets out in further detail the reasons to vote in favour of the resolutions. These reasons should be considered in light of the other information in this explanatory memorandum, including the reasons why catalpa shareholders may wish to vote against the share issue (as set out in section 3 of this explanatory memorandum) and the risks associated with the Transaction (as set out in section 8.1 of this explanatory memorandum).
grant samuel, the independent expert engaged by the catalpa board to opine on the Transaction has concluded that the Transaction is in the best interests of catalpa shareholders, in the absence of a superior proposal.
grant samuel has concluded that the Transaction is not “fair”, on the basis that pursuant to asic policy, the Transaction must be assessed as a control transaction (essentially, a takeover by newcrest) due to the fact that newcrest will have an interest in evolution mining of more than 20% following implementation.
based on market conditions at the time of its valuations, grant samuel believes the trading price of shares in evolution mining is unlikely to equate to the full underlying value of shares in a stand-alone catalpa. whilst this has led grant samuel to conclude that the Transaction is not “fair”, grant samuel is of the view that the underlying value attributable to catalpa shareholders will increase as a result of the Transaction (from $2.03 to $2.25 per share to $2.12 to $2.38 per share), and catalpa shareholders will retain the prospect of realising this increased underlying value through a subsequent change of control transaction for evolution mining. for this, and other reasons, grant samuel has concluded that catalpa shareholders will be better off if the Transaction is implemented than if it is not.
a concise version of the independent expert’s report is attached to this explanatory memorandum. The full version of the independent expert’s report is included in the explanatory memorandum supplement which can be viewed and downloaded online at www.catalparesources.com.au. catalpa shareholders can also obtain a copy of the explanatory memorandum supplement by contacting the catalpa shareholder information line (the details of which are set out below).
For the reasons set out above, the Catalpa Directors unanimously support the Transaction and recommend that you vote in favour of the Resolutions at the Meeting, in the absence of a Superior Proposal. Each Catalpa Director intends to vote the Catalpa Shares he holds or controls in favour of the Resolutions, in the absence of a Superior Proposal. The Conquest Directors also unanimously support the Transaction, in the absence of a Superior Proposal.
This explanatory memorandum provides important information in relation to the Transaction and the resolutions relating to the Transaction on which you, as a catalpa shareholder, will be asked to vote. your vote is extremely important in order to ensure that the Transaction is implemented so that the benefits associated with the Transaction can be delivered for both catalpa shareholders and conquest shareholders.
on behalf of the catalpa board, i encourage you to read this explanatory memorandum carefully and vote in favour of the resolutions at the meeting to be held on 14 october 2011. details of how you may vote at the meeting are set out in this explanatory memorandum.
should you require any further information about the Transaction, please contact the catalpa shareholder information line on 1300 383 678 (within australia) or +61 3 9415 4312 (outside australia) at any time between 9.00am and 5.00pm (sydney time) on monday to friday.
yours sincerely
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Peter Maloney chairman
catalpa resources limited
CATALPA RESOURCES
4
Key daTes
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date of this explanatory memorandum 13 September 2011
Time and date for determining eligibility to vote at the meeting 5pm (Perth time) on
12 October 2011
proxy form to be received by catalpa no later than 10am (Perth time) on
12 October 2011
date and time of the meeting 10am (Perth time) on
14 October 2011
OThER KEy DATES
(These will only take place if the share issue is approved at the meeting, the scheme is approved at the scheme meeting
and, where applicable, the other scheme conditions are satisfied or waived.)
second court date — the date on which court approval of the scheme will 17 October 2011
be sought
effective date (the date on which the scheme will become effective) and last day of 18 October 2011
trading in conquest shares
new catalpa shares issued as scheme consideration commence trading on a 19 October 2011
deferred settlement basis
implementation date for the Transaction — the date on which the asset purchase 2 November 2011
will complete, the subscription shares will be issued to newcrest (or its nominees),
the conquest shares held by the conquest shareholders as at the scheme record
date will be transferred to catalpa and the new catalpa shares will be issued to
eligible conquest shareholders
dispatch of holding statements for new catalpa shares issued as scheme 3 November 2011
consideration
commencement of rights offer (no later than 10 business days after the no later than
implementation date) 16 November 2011
KEy CONTACTS
catalpa shareholder information line at any time between 9.00am and 5.00pm 1300 383 678 (within Australia)
(sydney time) on monday to friday. or +61 3 9415 4312
(outside Australia)
catalpa registry — link market services limited 1300 554 474 (within Australia)
or +61 2 8280 7111
(outside Australia)
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The above dates are indicative only and are subject to change. any changes to the above timetable will be announced through the asX and catalpa’s website at www.catalparesources.com.au.
EXPLANATORY MEMORANDUM
5
meeTing deTails and insTrucTions on how To voTe
Meeting details
The meeting will be held at the rydges perth, level 1, corner hay and king streets, perth, western australia on 14th october 2011 at 10:00am (perth time).
Approval requirements
To be approved, the share issue resolution and each of the majority options resolutions requires that more than 50% of the votes cast at the meeting by catalpa shareholders entitled to vote on the relevant resolution are cast in favour of the relevant resolution. The change of name resolution requires that at least 75% of the votes cast at the meeting by catalpa shareholders entitled to vote on the change of name resolution are cast in favour of the change of name resolution.
Voting entitlements
catalpa shareholders registered on the catalpa register at 5pm (perth time) on 12 october 2011 will be entitled to vote at the meeting (provided they are not restricted from voting on the relevant resolution).
voting will be conducted by poll.
Voting in person
To vote in person at the meeting, catalpa shareholders must attend the meeting. a catalpa shareholder entitled to attend and vote at the meeting will be admitted to the meeting upon providing evidence of their name and address at the point of entry to the meeting.
Voting by proxy or attorney
a proxy form is included with this explanatory memorandum.
catalpa shareholders wishing to appoint a proxy to attend and vote at the meeting must complete and return the proxy form in accordance with the instructions on it.
There are a number of ways proxy forms may be submitted:
Online: The proxy form can be lodged online by visiting www.linkmarketservices.com.au. select ‘investor login’ and enter catalpa resources limited or the asX code (cah) in the issuer name field, your security reference number (srn) or holder identification number (hin) (which is shown on the front of your proxy form), postcode and security code which is shown on the screen and click ‘login’. select the ‘voting’ tab and then follow the prompts. you will be taken to have signed your proxy form if you lodge it in accordance with the instructions given on the website.
By mail: catalpa resources limited
c/o link market services limited
locked bag a14, sydney souTh nsw 1235
By hand: link market services limited
level 12, 680 george street, sydney nsw 2000
By fax: (02) 9287 0309
proxy forms must be received by the catalpa registry by no later than 10:00am (perth time) on 12 october 2011. if you have an attorney sign a proxy form on your behalf, the original or a certified copy of the power of attorney or other evidence of your attorney’s authority must be received by the catalpa registry at the same time as the proxy form (unless previously provided to the catalpa registry).
a proxy will be admitted to the meeting upon providing evidence of their name and address at the point of entry to the meeting.
Voting by attorney
catalpa shareholders may have an attorney attend and vote at the meeting on their behalf. persons attending the meeting as an attorney should bring to the meeting the original or a certified copy of the power of attorney under which they have been authorised to attend and vote at the meeting.
Voting by corporate representative
catalpa shareholders who are bodies corporate may have a corporate representative attend and vote at the meeting on their behalf. The appointment must comply with section 250d of the corporations act. persons attending the meeting as a corporate representative should bring to the meeting evidence of their appointment, including any authority under which the document appointing them as corporate representative was signed.
Further information
please refer to the notice of meeting for further information on voting procedures and details of the resolutions to be voted on at the meeting (including who is entitled to vote on the resolutions).
CATALPA RESOURCES
6
overview of evoluTion mining
if successfully completed, the Transaction is expected to create one of australia’s leading mid-cap, growth focused and asset diversified gold producers. it is proposed that the merged entity will be called ‘evolution mining limited’.
evolution mining will wholly own four gold projects in queensland — three producing gold mines, at cracow, mt rawdon and pajingo, and a development asset at mt carlton — and a producing gold mine at edna may in western australia.
evolution mining will have a combined mineral resource base of 6.9 million ounces of gold equivalent and a combined ore reserve of 3.5 million ounces of gold equivalent.[9] This will position evolution mining as a prominent australian gold miner.
evolution mining has a pro forma market capitalisation of approximately $1.15 billion[10] which will make it one of the largest gold companies on the asX by market capitalisation, ranking top 10 as at the close of trading on the last Trading day.[11]
evolution mining will also be one of the largest asX-listed gold companies by fy2011 production, ranking top 5.[12] The assets that will be owned by evolution mining produced approximately 303,000 ounces of gold in fy2011, and are forecast to produce 335,000 to 375,000 ounces of gold in fy2012 and 410,000 to 465,000 ounces of gold equivalent in fy2013.[13]
Map of Evolution Mining asset portfolio
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PAJINGO MT CARLTON
Current Ownership 100% Conquest Current Ownership 100% Conquest
Gold Reserves (Moz) 0.1 Gold Equiv. Reserves (Moz) 1.3
Gold Resources (Moz) 1.1 Gold Equiv. Resources (Moz) 2.1
FY2011A Gold Production (Koz) 46 Project Status Development
Mine Life (Years) 5 Mine Life (Years) 12
Townsville
MT CARLTON
PAJINGO
Mackay MT RAWDON
Gladstone Current Ownership 100% Newcrest
CRACOW Gold Reserves Gold Resources (Moz(Moz) ) 0.91.0
MT RAWDON FY2011A Gold Production (Koz) 90
Brisbane Mine Life (Years) 8
EDNA MAY
Perth
CRACOW
EDNA MAY Current Ownership 70% Newcrest
Current Ownership 100% Catalpa 30% Catalpa
Gold Reserves (Moz) 0.9 Gold Reserves (Moz) 0.2
Gold Resources (Moz) 1.8 Gold Resources (Moz) 0.9
FY2011A Gold Production (Koz) 66 FY2011A Gold Production (Koz) 102
Mine Life (Years) 9 Mine Life (Years) 5
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9 as at 30 June 2011.
10 based on the catalpa share price as at the close of trading on the last Trading day and assuming $150 million is raised under the proposed rights offer.
11 based on the share prices of asX-listed gold companies as at the close of trading on the last Trading day and assuming $150 million is raised under the proposed rights offer. 12 based on information publicly released by asX-listed gold companies regarding production rates for fy2011.
13 section 7.4 of this explanatory memorandum sets out the basis for these production forecasts.
EXPLANATORY MEMORANDUM
7
overview of reasons To voTe for or againsT The share issue resoluTion
in order for the Transaction to be successfully implemented, the share issue will require the approval of catalpa shareholders. set out below is an overview of the reasons catalpa shareholders may wish to vote for or against the share issue resolution. catalpa shareholders should refer to sections 2 and 3 of this explanatory memorandum for a detailed discussion of these reasons.
Reasons to vote in favour of the Share Issue Resolution
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✓ creation of a leading, growth-focused australian mid-cap gold producer
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✓ evolution mining will have a diversified asset portfolio and a defined growth pathway allowing shareholders to benefit from exposure to the following:
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✓ a diversified portfolio of assets with four producing mines and an immediate development opportunity
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✓ an enhanced production profile combining stable current production of approximately 303,000 ounces of gold in fy2011 with strong growth prospects with production of 410,000 to 465,000 of gold equivalent forecast to be achieved in fy2013[14]
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✓ a significant pipeline of exploration opportunities
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✓ stronger financial platform for growth with an expected cash position of approximately $199 million[15] and an expected debt position of approximately $48 million[16]
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✓ combines highly experienced management teams with complementary skill sets
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✓ enhanced market presence
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✓ The independent expert has concluded that the Transaction is in the best interests of catalpa shareholders, in the absence of a superior proposal
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✓ The resolutions are unanimously recommended by the catalpa board
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✓ The Transaction has the unanimous support of the conquest board
Why you may consider voting against the Share Issue Resolution
-
you may disagree with the unanimous recommendation of the catalpa board and the independent expert’s opinion that the Transaction is in catalpa shareholders’ best interests, in the absence of a superior proposal
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you may be concerned by the independent expert finding that the Transaction is not ‘fair’
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if the Transaction is implemented, you will be exposed to new risks
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you may believe that your interests are best served by catalpa remaining as a stand-alone entity
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you may not wish for your equity interest in catalpa’s assets to be diluted
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you may want to maintain your current investment profile
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you may consider that a better proposal may emerge
14 section 7.4 of this explanatory memorandum sets out the basis for these production forecasts.
15 based on the cash position of each of catalpa and conquest as at 30 June 2011 (including gold and silver available for sale), assuming $150 million is raised under the proposed rights offer and taking into account the costs associated with the Transaction and the rights offer. This figure does not take into account any stamp duty payable by catalpa in connection with the Transaction or the operating cash flows of catalpa and conquest during the period from 1 July 2011 to completion of the rights offer. it also does not take into account the macquarie facilities. as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities.
16 based on the debt position of each of catalpa and conquest as at 30 June 2011. This figure does not take into account the macquarie facilities. as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities.
CATALPA RESOURCES
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frequenTly asKed quesTions abouT The TransacTion, The righTs offer and The resoluTions
| BACKGROuND | |
|---|---|
| Why did I receive this document? |
This document contains information relating to the Transaction, which is: • The Scheme— an all scrip merger of equals of catalpa and conquest to be effected through a scheme of arrangement with conquest shareholders to be issued new catalpa shares in a ratio of 0.3 new catalpa shares for each conquest share held; and • The Asset Purchase and Share Issue—the purchase by catalpa (through its wholly owned subsidiaries) of newcrest’s interests in the cracow assets and the mt rawdon assets (the asset purchase) and the issue of new catalpa shares by catalpa to newcrest (or its nominees) as consideration for that purchase (the share issue). it also contains information about the rights offer, which is a proposed renounceable entitlement offer for the issue of shares by evolution mining to raise approximately $150 million made on a pro-rata basis to all shareholders in evolution mining, to be commenced no later than 10 business days after the implementation date. only the share issue will need to be approved by catalpa shareholders. however, implementation of the Transaction (which also includes the scheme) is subject to (amongst other conditions) conquest shareholder approval of the scheme at the scheme meeting. The information set out in this document will assist you, as a catalpa shareholder, to decide how you wish to vote on the resolution to approve the share issue, as well as the majority options resolutions and the change of name resolutions (which are discussed below). eligible shareholders of evolution mining will separately receive an offer document in relation to the rights offer shortly following the implementation date. |
| What is the Scheme? |
The scheme is the mechanism by which the merger of catalpa and conquest will be effected, being a proposed members’ scheme of arrangement between conquest and conquest shareholders under part 5.1 of the corporations act. pursuant to the scheme, catalpa will acquire all of the shares in conquest in exchange for the issue of approximately 180.4 million shares in the issued capital of catalpa to conquest shareholders.17 catalpa shares will be issued to conquest shareholders in a ratio of 0.3 new catalpa shares for each conquest share held. This ratio corresponds to a merger of equals between catalpa and conquest. conquest shareholders who participate in the scheme will become shareholders in evolution mining. The exception to this is conquest shareholders as at the scheme record date whose address shown in the conquest register is a place outside australia and its external territories and new Zealand and other jurisdictions agreed in writing between conquest, catalpa and newcrest. such shareholders will have the new catalpa shares that would have been issued to them sold on their behalf, with the cash proceeds remitted to them. The scheme does not need to be approved by catalpa shareholders. however, the scheme will require the approval of conquest shareholders at the scheme meeting which is scheduled to be held on the same day as the meeting. |
17 based on 583,241,478 conquest shares on issue plus a further 18,094,801 conquest shares to be issued pursuant to the minority options offers, all multiplied by 0.3 (being the exchange ratio under the scheme).
EXPLANATORY MEMORANDUM
9
| What is the Asset Purchase and Share Issue? |
under the asset sale agreement and the subscription deed: • catalpa (through its wholly owned subsidiaries) will acquire newcrest’s 70% interest in the cracow assets (catalpa already owns the other 30%) and newcrest’s 100% interest in the mt rawdon assets. This is the asset purchase; and • catalpa will issue to newcrest (or its nominees) the subscription shares, being fully paid ordinary shares in catalpa equal to 38% of the share capital of evolution mining (calculated on a fully diluted value basis) prior to the rights offer. This is the share issue. The precise number of subscription shares issued to newcrest (or its nominees) will vary depending on the fve day vwap of catalpa shares ending on the trading day before the implementation date. see section 7.6 of this explanatory memorandum for further details on the capital structure and ownership of evolution mining. |
|---|---|
| What is the Fully Diluted Value Basis? |
This is the basis agreed between catalpa, conquest and newcrest for calculating the number of shares that will be issued to newcrest (or its nominees) by catalpa as consideration for the newcrest assets. The calculation is a complex one which is aimed at giving newcrest an interest in evolution mining of 38% based on the pro forma market value of evolution mining following implementation of the Transaction. as this calculation cannot be determined until the implementation date, it is not possible at this point in time to calculate the exact number of shares to be issued to newcrest (or its nominees) as consideration for the newcrest assets. see section 7.6(c) of this explanatory memorandum for further details about the number of subscription shares that will be issued to newcrest (or its nominees). |
| What is the Rights Offer? |
The rights offer is a proposed renounceable entitlement offer for the issue of shares in evolution mining, to raise approximately $150 million, made on a pro-rata basis to all shareholders in evolution mining, to be commenced no later than 10 business days after the implementation date. This means that both catalpa shareholders and conquest shareholders who hold shares in evolution mining as at the record date for the rights offer will be able to participate in the rights offer to maintain their interest in evolution mining. newcrest is also eligible to participate in the rights offer but has agreed with catalpa and conquest that it will not take up its entitlements, meaning that its shareholding in evolution mining will be reduced to approximately 33% following the rights offer (calculated on a fully diluted value basis).18 eligible shareholders of evolution mining will receive an offer document in relation to the rights offer after implementation of the Transaction. see section 7.3 of this explanatory memorandum for further details on the rights offer. |
18 based on an illustrative rights offer price of a 10% discount to Terp, where Terp is calculated based on the vwap of a catalpa share on the last Trading day.
CATALPA RESOURCES
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frequenTly asKed quesTions abouT The TransacTion, The righTs offer and The resoluTions conTinued
| Who is Newcrest and what are the Newcrest Assets? |
newcrest is the largest gold producer listed on the asX and one of the world’s top 10 gold mining companies by production, reserves and market capitalisation. The newcrest assets are, in summary, newcrest’s: • 70% interest in the cracow gold mine joint venture (an underground epithermal gold operation) and the cracow exploration joint venture. The other 30% interest in the cracow assets is already owned by catalpa; and • 100% interest in the mt rawdon gold mine (an open pit gold and silver mine and process plant). further information on newcrest and the newcrest assets is set out in section 6 of this explanatory memorandum. |
|---|---|
| What is the connection between the Asset Purchase and Share Issue and the Scheme? |
The asset purchase and share issue and the scheme are inter-conditional. if the asset purchase and share issue do not proceed (for example, because catalpa shareholders do not approve the share issue resolution) then the scheme will not proceed. conversely, if the scheme does not proceed (for example, because conquest shareholders do not approve the scheme at the scheme meeting) then neither will the asset purchase and share issue. The asset sale agreement and the subscription deed will only be executed if all of the scheme conditions are satisfed or (if applicable) waived. one of the scheme conditions relates to catalpa shareholders approving the share issue. This condition cannot be waived. The scheme is subject to various conditions. The scheme conditions are summarised in section 9.2 of this explanatory memorandum. |
| ThE MEETING | |
| What am I being asked to vote on? |
catalpa shareholders are being asked to vote on four separate resolutions in relation to the Transaction: • Resolution 1 — Share Issue Resolution— the approval, for the purposes of item 7 of section 611 of the corporations act and for all other purposes, of the share issue to newcrest (or its nominees); • Resolution 2 — Change of Name Resolution— the approval, for the purposes of section 157 of the corporations act, of the change of catalpa’s name to ‘evolution mining limited’; • Resolution 3 — Majority Options Resolution (Jake Klein)— the approval, for the purposes of listing rule 10.14 and for all other purposes, of the issue of catalpa options to Jake klein (who will, at the time of the issue, be executive chairman of evolution mining) to replace his majority options, pursuant to the majority options offers; and • Resolution 4 – Majority Options Resolution (James Askew)– the approval, for the purposes of listing rule 10.14 and for all other purposes, of the issue of catalpa options to James askew (who will, at the time of the issue, be a non-executive director of evolution mining), to replace his majority options, pursuant to the majority options offers. |
| When and where will the Meeting be held? |
The meeting will take place on 14 october 2011 at 10am (perth time) at the rydges perth, level 1, corner king and hay streets, perth, western australia. |
| Is voting compulsory? |
voting is not compulsory. however, your vote is important. if you cannot attend the meeting to be held on 14 october 2011, you are strongly encouraged to complete and return the proxy form that is enclosed with this explanatory memorandum. if you hold your catalpa shares through a broker or nominee holder, you should contact them as soon as possible to instruct them to vote on your behalf. if you require any assistance in completing or lodging your proxy form, please contact the catalpa registry on 1300 554 474 (within australia) or +61 2 8280 7111 (outside australia) or contact your fnancial or other professional advisor. |
EXPLANATORY MEMORANDUM
11
| ThE ShARE ISSuE RESOLuTION | ThE ShARE ISSuE RESOLuTION |
|---|---|
| Why is Catalpa Shareholder approval required for the Share Issue? |
you are a catalpa shareholder and given the nature and size of the share issue, whereby newcrest will obtain fully paid ordinary shares in catalpa equal to 38% of evolution mining (calculated on a fully diluted value basis) prior to the rights offer, approval of the catalpa shareholders for the share issue is required under item 7 of section 611 of the corporations act. |
| What is the voting approval threshold for the Share Issue Resolution? |
The share issue resolution is an ordinary resolution, requiring simple majority approval, meaning that at least 50% of the votes cast at the meeting by catalpa shareholders who are eligible to vote on the share issue resolution must be cast in favour of the share issue resolution for it to be passed. |
| Who can vote on the Share Issue Resolution? |
in accordance with the corporations regulations, the catalpa board has determined that the catalpa shareholders entitled to attend and vote at the meeting shall be those persons who are recorded in catalpa’s register at 5pm (perth time) on 12 october 2011. in accordance with item 7 of section 611 of the corporations act, catalpa will disregard any votes cast on the share issue resolution by newcrest, and any of its associates. notwithstanding this exclusion, catalpa will not disregard a vote if: • it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or • it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides. |
| Why should I vote to approve the Share Issue Resolution? |
catalpa shareholders approving the share issue is a condition precedent to the Transaction proceeding. The catalpa board believes that the Transaction is highly compelling and provides a number of benefts to both catalpa shareholders and conquest shareholders, including: • access to a larger and more diversifed portfolio of assets combining four gold mines which collectively produced approximately 303,000 ounces of gold in fy2011 and one development asset; • a stable production platform with organic growth opportunities expected to increase production to 335,000 to 375,000 ounces of gold in fy2012 and 410,000 to 465,000 ounces of gold equivalent in fy2013;19 • an enhanced scale and increased market presence as a top 5 asX-listed gold producer by fy2011 production20and top 10 by market capitalisation.21as a result, the Transaction is also expected to provide greater liquidity and increased broker coverage; • a strengthened fnancial platform to assist evolution mining to pursue growth opportunities, with an expected cash position following the rights offer of approximately $199 million22 and an expected debt position of approximately $48 million23; and • a proven entrepreneurial and experienced management team with highly complementary skill sets and a strong mandate to grow evolution mining. section 2 of this explanatory memorandum sets out in further detail the reasons to vote in favour of the resolutions. section 3 of this explanatory memorandum sets out some of the reasons why catalpa shareholders may wish to vote against the resolutions. |
-
19 section 7.4 of this explanatory memorandum sets out the basis for these production forecasts.
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20 based on information publicly released by asX-listed gold companies regarding production rates for fy2011.
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21 based on the share prices of asX-listed gold companies as at the close of trading on the last Trading day and the pro forma market capitalisation of evolution mining, assuming $150 million is raised under the proposed rights offer.
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22 based on the cash position of each of catalpa and conquest as at 30 June 2011 (including gold and silver available for sale), assuming $150 million is raised under the proposed rights offer and taking into account the costs associated with the Transaction and the rights offer. This figure does not take into account any stamp duty payable by catalpa in connection with the Transaction or the operating cash flows of catalpa and conquest during the period from 1 July 2011 to completion of the rights offer. it also does not take into account the macquarie facilities. as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities.
-
23 based on the debt position of each of catalpa and conquest as at 30 June 2011. This figure does not take into account the macquarie facilities. as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities.
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frequenTly asKed quesTions abouT The TransacTion, The righTs offer and The resoluTions conTinued
| Why might I consider voting against the Share Issue Resolution? |
despite the benefts set out above, you may consider voting against the share issue resolution for the following reasons: • you may disagree with the unanimous recommendation of the catalpa board and the independent expert’s opinion that the Transaction is in catalpa shareholders’ best interests, in the absence of a superior proposal; • you may be concerned by the independent expert fnding that the Transaction is not “fair”; • if the Transaction is implemented, you will be exposed to new risks; • you may believe that your interests are best served by catalpa remaining as a stand-alone entity; • you may not wish for your equity interest in catalpa’s assets to be diluted; • you may want to maintain your current investment profle; or • you may consider that a better proposal may emerge. section 3 of this explanatory memorandum sets out in further detail the reasons catalpa shareholders may consider voting against the share issue resolution. section 8.3 of this explanatory memorandum sets out some of the key consequences for catalpa shareholders if the share issue resolution is not approved. |
|---|---|
| Risks of the Transaction |
if the Transaction is implemented, catalpa shareholders may be exposed to several risks, including: • risks associated with the assets of conquest, including in relation to off-take agreements and production forecasts; • risks associated with the newcrest assets, including in relation to production forecasts and exploration activities; • risks associated with the implementation of the Transaction, including in relation to integration risks, the newcrest employees and transaction costs; • risks associated with the presence of newcrest as a substantial shareholder in evolution mining; and • general risk factors that may affect evolution mining, including in relation to the operation and funding of evolution mining’s assets. however, evolution mining’s diversifed portfolio of assets will have less exposure to any one asset. |
| how does the Catalpa Board recommend that I vote? |
The Catalpa Board unanimously recommends that Catalpa Shareholders vote to approve the Share Issue Resolution, in the absence of a Superior Proposal. each catalpa director will vote in favour of the share issue resolution in respect of the catalpa shares they hold or control, in the absence of a superior proposal. |
| What is the opinion of the Independent Expert? |
The terms and conditions of the share issue and the Transaction have been reviewed by the independent expert, grant samuel. grant samuel has concluded that the Transaction is in the best interests of catalpa shareholders, in the absence of a superior proposal. grant samuel has concluded that the Transaction is not “fair” on the basis that persuant to asic policy, the Transaction must be assessed as a control transaction (essentially, a takeover by newcrest) due to the fact that newcrest will have an interest in evolution mining of more than 20% following implementation. based on market conditions at the time of its valuations, grant samuel believes the trading price of shares in evolution mining is unlikely to equate to the full underlying value of shares in a stand-alone catalpa. whilst this has led grant samuel to conclude that the Transaction is not “fair”, grant samuel is of the view that the underlying value attributable to catalpa shareholders will increase as a result of the Transaction (from $2.03 to $2.25 per share to $2.12 to $2.38 per share), and catalpa shareholders will retain the prospect of realising this increased underlying value through a subsequent change of control transaction for evolution mining. for this, and other reasons, grant samuel has concluded that catalpa shareholders will be better off if the Transaction is implemented than if it is not. |
EXPLANATORY MEMORANDUM
13
| What will happen if Catalpa Shareholders do not approve the Share Issue Resolution? |
The Transaction is conditional upon catalpa shareholder approval of the share issue resolution as well as other conditions. as a result, if the share issue resolution is not approved by catalpa shareholders, the Transaction will not proceed and neither the scheme nor the asset purchase and share issue will occur. further information on what will happen if catalpa shareholders do not approve the share issue resolution is set out in section 8.3 of this explanatory memorandum. |
|---|---|
| ThE ChANGE OF NAME RESOLuTION | |
| Why is Catalpa Shareholder approval required for the change of name? |
approval by the catalpa shareholders for the change of name of catalpa to ‘evolution mining limited’ is required under section 157 of the corporations act. see section 9.8 of this explanatory memorandum for further information on the change of name resolution. |
| What is the voting approval threshold for the Change of Name Resolution? |
The change of name resolution is a special resolution, requiring approval of catalpa shareholders holding at least 75% of the catalpa shares and who are eligible to vote on the change of name resolution and who actually vote. |
| Who can vote on the Change of Name Resolution? |
in accordance with the corporations regulations 2001 (cth), the catalpa board has determined that the catalpa shareholders entitled to attend and vote at the meeting shall be those persons who are recorded in catalpa’s register at 5pm (perth time) on 12 october 2011. |
| Why should I vote to approve the Change of Name Resolution? |
The catalpa directors consider that the proposed new name aligns with the identity of evolution mining as one of australia’s leading mid-cap, growth focused and asset diversifed gold producers. it is intended that evolution mining will develop a brand which will refect its enhanced market presence and the new name will be central to this. |
| What will happen if Catalpa Shareholders do not approve the Change of Name Resolution? |
if the change of name resolution is not approved, the company name of catalpa will remain ‘catalpa resources limited’. This will not stop the Transaction from proceeding. |
CATALPA RESOURCES
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frequenTly asKed quesTions abouT The TransacTion, The righTs offer and The resoluTions conTinued
| ThE MAJORITy OPTIONS RESOLuTIONS | ThE MAJORITy OPTIONS RESOLuTIONS |
|---|---|
| What are the Majority Options Offers? |
conquest currently has on issue approximately 67.5 million options which are held by or on behalf of certain employees, directors and contractors of conquest. conquest is also seeking shareholder approval at the conquest general meeting for the issue of a further 2.26 million conquest options to certain of the conquest directors pursuant to their existing non-dilution rights. under the Transaction implementation deed, catalpa agreed to make offers (the majority options offers) to the holders of approximately 37.7 million conquest options (being the majority options) to replace those conquest options with approximately 11.3 million catalpa options. The purpose of the majority options offers is to seek to ensure that following implementation of the Transaction, conquest will be a wholly owned subsidiary of catalpa. The terms of the majority options offers refect the original exercise price and number of conquest options with appropriate adjustments to those matters to refect the exchange ratio under the scheme. The expiry dates of the catalpa options to be issued to the majority optionholders in exchange for the majority options are the same as for the majority options. The majority options directly and/or benefcially held by persons who will be employed by, or directors of, evolution mining after the implementation date (including Jake klein and James askew) will be issued under, and subject to the terms of, catalpa’s employee option plans. The majority options offers will be made shortly after the implementation date and only if the scheme has been implemented and conquest shareholders at the conquest general meeting have approved the cancellation of the majority options the subject of the majority options offers. upon completion of the majority options offers, the majority optionholders will hold options over unissued shares in evolution mining. separately, conquest will make offers (the minority options offers) to the holders of the remaining 32 million conquest options (being the minority options) to cancel their minority options in exchange for shares in conquest. The minority options offers are subject to conquest shareholder approval at the conquest general meeting. The conquest shares that will be issued to the holders of minority options will participate in the scheme, with 50% of the catalpa shares that will be issued to the current holders of minority options upon implementation of the Transaction to be escrowed for two years. see section 9.9 of this explanatory memorandum for further information on the majority options offers and the majority options resolution. |
| Why is Catalpa Shareholder approval required for the Majority Options Resolutions? |
catalpa shareholder approval is not required for all of the majority options offers. however, catalpa shareholder approval is required under listing rule 10.14 and for all other purposes for the issue of: • 5,277,435 catalpa options under the catalpa employee share option and performance rights plan for the beneft of Jake klein; and • 488,652 catalpa options under the catalpa employees and contractors option plan for the beneft of James askew , pursuant to the majority options offers. This is because messrs klein and askew (who are currently conquest directors) will, upon the Transaction proceeding, be appointed as directors of catalpa. The majority options resolutions seek this approval. |
| What is the voting approval threshold for the Majority Options Resolutions? |
The majority options resolutions are ordinary resolutions, requiring simple majority approval, meaning that at least 50% of the votes cast at the meeting by catalpa shareholders who are eligible to vote on each majority options resolution must be cast in favour of the relevant majority options resolution for it to be passed. |
EXPLANATORY MEMORANDUM
15
| Who can vote on the Majority Options Resolutions? |
in accordance with the corporations regulations 2001 (cth), the catalpa board has determined that the catalpa shareholders entitled to attend and vote at the meeting shall be those persons who are recorded in catalpa’s register at 5pm (perth time) on 12 october 2011. in relation to the majority options resolution (Jake klein), for the purposes of listing rule 10.14, catalpa will disregard any votes cast on that resolution by Jake klein or any of his associates. in relation to the majority options resolution (James askew), for the purposes of listing rule 10.14, catalpa will disregard any votes cast on that resolution by James askew or any of his associates. however, in relation to each of the majority options resolutions, catalpa need not disregard a vote if: •it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or •it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides. |
|---|---|
| Why should I vote to approve the Majority Options Resolutions? |
approval of the majority options resolutions will mean that catalpa, as the acquiring entity under the scheme, is able to ensure that following implementation of the Transaction, conquest will become a wholly owned subsidiary of catalpa and has a clean capital structure. it will also avoid the requirement for evolution mining to consider alternative and potentially more costly strategies to acquire the majority options following the Transaction. The majority options offers refect (with appropriate adjustments) the original terms of certain conquest options and are designed to replace those options. The options issued pursuant to the majority options offers will assist in incentivising senior management of evolution mining to maximise shareholder value. |
| What will happen if the Catalpa Shareholders do not approve the Majority Options Resolutions? |
if the majority options resolutions are not approved, catalpa will be unable to make the majority options offers in relation to the majority options held by, or on behalf of, Jake klein and James askew, two conquest directors. This will not stop the Transaction from proceeding. catalpa will still make (and, if accepted, complete) the majority options offers to the holders of the majority options other than messrs klein and askew. The majority options held by, or on behalf of, messrs klein and askew will remain on issue in conquest, which will be a subsidiary of catalpa following the Transaction. evolution mining will then need to consider appropriate alternative strategies to acquire the majority options held by, or on behalf of, messrs klein and askew. These may include a further offer (which would again require shareholder approval whilst messrs klein and askew remained directors of evolution mining, absent any waiver from the asX) or seeking to compulsorily acquire the majority options (which would require an independent expert’s report to be commissioned and (absent an asX waiver) shareholder approval). |
CATALPA RESOURCES
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frequenTly asKed quesTions abouT The TransacTion, The righTs offer and The resoluTions conTinued
| IMPLICATIONS OF ThE TRANSACTION | IMPLICATIONS OF ThE TRANSACTION |
|---|---|
| If the Share Issue Resolution is approved and the Transaction proceeds, what will happen? |
if catalpa shareholders approve the share issue resolution and all the other conditions of the Transaction are either satisfed or waived, including the approval of the scheme by conquest shareholders (which cannot be waived), catalpa will merge with conquest (creating evolution mining) and catalpa / evolution mining will issue the subscription shares to newcrest (or its nominees) in exchange for the newcrest assets. |
| What will Evolution Mining’s asset portfolio look like if the Transaction proceeds? |
if the Transaction proceeds, evolution mining’s assets will include 100% interests in the following projects: •mt rawdon (open pit gold and silver mine and process plant in queensland); •cracow (underground epithermal gold operation and exploration assets in queensland); •edna may (an open pit gold mine in western australia); •pajingo (open pit and underground gold mines in queensland); and •mt carlton (gold development asset in queensland). further information about the assets of evolution mining is set out in section 7.4 of this explanatory memorandum. |
| has Catalpa agreed to pay a break fee? |
as is customary for transactions of this nature, catalpa and conquest have each agreed to pay break fees in certain circumstances. in the event that the break fee became payable by catalpa, catalpa would be required to pay $3.2 million, which would be shared equally between conquest and newcrest. section 9.1(a)(4) of this explanatory memorandum sets out the circumstances in which catalpa would be required to pay the break fee in connection with the Transaction. |
| how will the structure of Catalpa’s ownership change? |
prior to the rights offer, the number of catalpa shares held by existing catalpa shareholders will not change. however, as a result of catalpa issuing shares to newcrest (or its nominees) pursuant to the share issue and issuing shares to conquest shareholders pursuant to the scheme, the total number of catalpa shares on issue will increase from approximately 178.3 million catalpa shares to approximately 588.7 million catalpa shares. on a fully diluted value basis, prior to the rights offer, the existing catalpa shareholders will hold approximately 31% of evolution mining, the existing conquest shareholders will hold approximately 31% of evolution mining and newcrest will hold the remaining 38%. evolution mining is intending to issue additional shares pursuant to the rights offer. shareholders will have the ability to maintain their interest in evolution mining by taking up their entitlements, but will be diluted if they do not do so. newcrest has agreed with catalpa and conquest not to take up its entitlements under the rights offer. newcrest’s holding in evolution mining will be diluted to approximately 33% as a result (calculated on a fully diluted value basis).24 accordingly, if the Transaction proceeds there will be more catalpa shares on issue and therefore your overall percentage holding in evolution mining will be less than your current percentage holding in catalpa. however, evolution mining will hold a larger asset portfolio and will be much larger and you will own a smaller percentage of a far more signifcant company. see section 7.6 of this explanatory memorandum for further details on the capital structure of evolution mining if the Transaction proceeds. |
24 based on an illustrative rights offer price of a 10% discount to Terp, where Terp is calculated based on the vwap of a catalpa share on the last Trading day.
EXPLANATORY MEMORANDUM
17
| Will anything happen to my Catalpa Shares? Will I still be able to sell them on the ASX after the Transaction? |
following the Transaction, you will continue to own the same number of catalpa shares, albeit that they will be shares in the combined and renamed entity, evolution mining. evolution mining will be listed on the asX and you will be able to continue to trade your shares in evolution mining as you normally would. |
|---|---|
| Who will sit on the board of Evolution Mining after the Transaction? |
following the Transaction, the composition of the catalpa board will be changed to refect the new shareholder base of evolution mining. evolution mining will have a board of eight directors, three of whom are existing catalpa directors, three of whom are members of the current conquest board and two of whom are directors nominated by newcrest. Jake klein will be appointed executive chairman of evolution mining and bruce mcfadzean will be appointed managing director and chief executive offcer. please refer to section 7.2 of this explanatory memorandum for further details about the board of directors of evolution mining. |
| Further Questions | if you have any questions regarding the Transaction after having read this explanatory memorandum, please call the catalpa shareholder information line on 1300 383 678 (within australia) or +61 3 9415 4312 (outside australia), or contact your fnancial or other professional advisor. |
CATALPA RESOURCES
18
1 overview of The TransacTion
1.1 Transaction overview
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----- Start of picture text -----
The Scheme There will be an all-scrip merger of equals between conquest and catalpa, pursuant to which
catalpa will acquire conquest. conquest shareholders will be issued new catalpa shares that
will give them an interest in catalpa that is approximately the same as the interest of catalpa
shareholders.
NEW CATALPA SHARES CONQUEST
CATALPA
SHAREHOLDERS
ACQUIRES
100%
CONQUEST
CONQUEST CATALPA
SHAREHOLDERS SHAREHOLDERS
~50% ~50%
CATALPA /
EVOLUTION MINING
The Majority in addition to the conquest shares that will be acquired by catalpa through the scheme,
Options Offers conquest has approximately 67.5 million conquest options on issue and a further 2.26 million
conquest options will be issued pursuant to the non-dilution right, subject to conquest
shareholder approval.
separately, subject to conquest shareholder approval, 32 million of the conquest options
(being the minority options) will be acquired by conquest in exchange for a total of approximately
18.1 million conquest shares prior to the scheme being implemented, with those conquest
shares to participate in the scheme.
To seek to ensure that catalpa holds 100% of all conquest securities on issue following
implementation of the scheme, the remaining approximately 37.7 million conquest options (being
the majority options) will be the subject of the majority options offers, pursuant to which catalpa
will offer to acquire the majority options in exchange for the issue of approximately 11.3 million
new catalpa options.
The cancellation of the majority options requires conquest shareholder approval. in addition,
the offer of a total of approximately 5.8 million catalpa options to certain current conquest
directors in exchange for the majority options held by them, on their behalf, requires catalpa
shareholder approval pursuant to the majority options resolutions the subject of this explanatory
memorandum. The Transaction is not conditional upon the acceptance of the majority options
offers by the offerees or the passing of the majority options resolutions.
for further information on the majority options offers see sections 7.6 and 9.9 of this explanatory
memorandum.
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EXPLANATORY MEMORANDUM
19
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----- Start of picture text -----
The Asset on the same day as the scheme is implemented, catalpa subsidiaries will acquire newcrest’s
Purchase and interest in the gold mining and exploration projects at mt rawdon (100%) and cracow (70%)
Share Issue in exchange for catalpa issuing new catalpa shares to newcrest (or its nominees) that will
give newcrest an interest in evolution mining of 38% (calculated on a fully diluted value basis).
This will reduce the collective interests of conquest shareholders and catalpa shareholders
in evolution mining to approximately 31% each (calculated on a fully diluted value basis). see
section 7.6(c) of this explanatory memorandum for full details on the number of catalpa shares
that will be issued to newcrest (or its nominees).
NEW CATALPA SHARES
CATALPA / NEWCREST
EVOLUTION MINING (38%)
100% 70% (other 30% already
owned by Catalpa)
MT RAWDON CRACOW
ASSETS ASSETS
The Transaction The ‘Transaction’ is the scheme, the asset purchase and the share issue. The asset purchase
and the share issue are inter-conditional with implementation of the scheme. That is, catalpa
subsidiaries will not acquire the newcrest assets unless the merger between catalpa and
conquest proceeds and catalpa and conquest will not merge unless catalpa subsidiaries
also acquires the newcrest assets.
The Rights Offer it is intended that, within 10 business days after implementation of the Transaction, evolution
mining will undertake a renounceable pro-rata entitlement offer to raise approximately $150 million.
newcrest will be eligible to participate in the rights offer but has agreed with catalpa and
conquest that it will not take up its entitlements. assuming the rights offer is successfully
completed, it is expected to reduce newcrest’s interest in evolution mining to approximately 33%
(calculated on a fully diluted value basis). [26]
further information in relation to the rights offer is set out in section 7.3 of this explanatory
memorandum.
The end result The Transaction will result in the creation of a leading, mid-cap australian gold company with a
pro forma market capitalisation of approximately $1.15 billion [27] and capital resources to deliver
financial flexibility and to enable it to pursue growth opportunities and develop its assets base,
which will include:
• four wholly owned producing gold mines at edna may in western australia and cracow, mt
rawdon and pajingo in queensland; and
• a wholly owned development project at mt carlton in queensland;
and which will comprise part of a combined mineral resource base of 6.9 million ounces of gold
equivalent and a combined ore reserve of 3.5 million ounces of gold equivalent (as referred to in
section 7.4 of this explanatory memorandum). [28]
----- End of picture text -----
25 catalpa already owns the other 30% of the cracow gold mining and exploration project.
26 based on an illustrative rights offer price of a 10% discount to Terp, where Terp is calculated based on the vwap of a catalpa share on the last Trading day.
27 based on the catalpa share price as at the close of trading on the last Trading day and assuming $150 million is raised under the proposed rights offer. 28 as at 30 June 2011.
CATALPA RESOURCES
20
1 overview of The TransacTion conTinued
1.2 Approvals being sought
The approval of catalpa shareholders is required:
-
(a) for the purposes of item 7 of section 611 of the corporations act and for all other purposes, for the issue by catalpa to newcrest (or its nominees) of up to that number of new catalpa shares that amounts to 38% of evolution mining prior to the rights offer (calculated on a fully diluted value basis), as consideration for the newcrest assets. full details of newcrest’s interest in evolution mining are set out in section 7.6 of this explanatory memorandum;
-
(b) for the purposes of section 157 of the corporations act, for the change of the name of catalpa to ‘evolution mining limited’;
-
(c) for the purposes of listing rule 10.14 and for all other purposes, for the grant of 5,277,435 catalpa options to Jake klein under the catalpa employee share option and performance rights plan pursuant to the majority options offers; and
-
(d) for the purposes of listing rule 10.14 and for all other purposes, for the grant of 488,652 catalpa options to James askew under the catalpa employees and contractors option plan pursuant to the majority options offers.
1.3 Catalpa Directors’ Recommendation
based on the information available, including the information contained in this explanatory memorandum and the independent expert’s report, all of the catalpa directors consider that the Transaction and the resolutions are in the best interests of catalpa shareholders and catalpa.
each of the catalpa directors recommends that catalpa shareholders vote in favour of the resolutions, in the absence of a superior proposal.
each of the catalpa directors voted for the proposal to put the resolutions to catalpa shareholders as contained in the notice of meeting and this explanatory memorandum.
each catalpa director who holds catalpa shares (or whose associated entities hold catalpa shares) and is entitled to vote will vote those catalpa shares in favour of the resolutions, in the absence of a superior proposal.
EXPLANATORY MEMORANDUM
21
2 raTionale for The TransacTion
This section 2 sets out some of the reasons why catalpa shareholders may wish, consistent with the unanimous recommendation of the catalpa board, to vote in favour of the share issue resolution at the meeting. These reasons should be considered in light of the other information in this explanatory memorandum, including the reasons why catalpa shareholders may wish to vote against the share issue (as set out in section 3 of this explanatory memorandum) and the risks associated with the Transaction (as set out in section 8.1 of this explanatory memorandum).
2.1 Creation of a leading, growth-focused Australian mid-cap gold producer
The Transaction will enable catalpa shareholders to participate in a leading, growth-focused australian mid-cap gold producer. evolution mining will have enhanced scale and increased market presence, providing access to growth opportunities which are unlikely to otherwise be available to catalpa as a stand-alone entity.
evolution mining has a pro forma market capitalisation of approximately $1.15 billion.[29] This compares to catalpa’s market capitalisation of approximately $303 million.[30]
The size of evolution mining will make it one of the largest gold companies on the asX by market capitalisation, ranking seventh as at the close of trading on the last Trading day.[31]
it will also make evolution mining one of the largest asX-listed gold companies by fy2011 production, ranking top 5.[32 ] see section 2.2(b) of this explanatory memorandum below for further details of evolution mining’s forecast production for fy2012 and fy2013.
2.2 Evolution Mining will have a diversified asset portfolio and a defined growth pathway
Through having an equity interest in evolution mining, catalpa shareholders will benefit from exposure to the following:
(a) A diversified portfolio of assets with four producing mines and an immediate development opportunity
evolution mining will wholly own four gold projects in queensland — three producing gold mines, at cracow, mt rawdon and pajingo, and a development asset at mt carlton — and a producing gold mine at edna may in western australia. evolution mining will have a combined mineral resource base of 6.9 million ounces of gold equivalent and a combined ore reserve of 3.5 million ounces of gold equivalent.[33] This will position evolution mining as a prominent australian gold miner.
catalpa shareholders will benefit from having a diversified asset portfolio as it will mean that they will not, as is currently the case, be exposed only to the risks associated with the gold operation at edna may and a 30% interest in cracow. in addition, there is potential for substantial earnings growth from the successful exploration and development of the combined asset base, including the development of the mt carlton project.
further information on the gold projects that will be owned by evolution mining is set out in section 7.4 of this explanatory memorandum.
==> picture [479 x 211] intentionally omitted <==
----- Start of picture text -----
PAJINGO MT CARLTON
Current Ownership 100% Conquest Current Ownership 100% Conquest
Gold Reserves (Moz) 0.1 Gold Equiv. Reserves (Moz) 1.3
Gold Resources (Moz) 1.1 Gold Equiv. Resources (Moz) 2.1
FY2011A Gold Production Mine Life (Years) (Koz) 465 ProMine Life (Years)ject Status Development12
Townsville
MT CARLTON
PAJINGO
Mackay MT RAWDON
Gladstone Current Ownership 100% Newcrest
MT RAWDONCRACOW Gold Reserves Gold Resources FY2011A Gold Production (Moz(Moz) ) (Koz) 0.91.090
Brisbane Mine Life (Years) 8
EDNA MAY
Perth
CRACOW
EDNA MAY Current Ownership 70% Newcrest
Current Ownership 100% Catalpa 30% Catalpa
Gold Reserves (Moz) 0.9 Gold Reserves (Moz) 0.2
Gold Resources (Moz) 1.8 Gold Resources (Moz) 0.9
FY2011A Gold Production (Koz) 66 FY2011A Gold Production (Koz) 102
Mine Life (Years) 9 Mine Life (Years) 5
----- End of picture text -----
figure 1: Assets that will be owned by Evolution Mining[34]
29 based on the catalpa share price as at the close of trading on the last Trading day and assuming $150 million is raised under the proposed rights offer.
30 based on the catalpa share price as at the close of trading on the last Trading day.
31 based on the share prices of asX-listed gold companies as at the close of trading on the last Trading day and the pro forma market capitalisation of evolution mining, assuming $150 million is raised under the proposed rights offer.
- 32 based on information publicly released by asX-listed gold companies regarding production rates for fy2011.
33 as at 30 June 2011.
34 The information in figure 1 is current as at 30 June 2011.
CATALPA RESOURCES
22
2 raTionale for The TransacTion conTinued
(b) An enhanced production profile combining stable current production with strong growth prospects
The gold mines that will be owned by evolution mining collectively produced approximately 303,000 ounces of gold in fy2011. development of mt carlton and the anticipated increases in production at edna may and pajingo are forecast to increase production to 335,000 to 375,000 ounces of gold in fy2012 and 410,000 to 465,000 ounces of gold equivalent in fy2013.[35]
This gives evolution mining a strong growth profile that will place it towards the upper end of mid-tier asX-listed gold producers[36] in terms of production growth (see figure 2). although catalpa enjoys positive growth prospects as a stand-alone entity, evolution mining offers an opportunity for growth on a larger scale and with reduced risk given the broader asset portfolio.
==> picture [480 x 125] intentionally omitted <==
----- Start of picture text -----
97.3%
72.5%
35.3 –
53.5%
34.7%
27.1%
17.7%
8.2%
0.4%
KINGSGATE ALACER EVOLUTION CGA MEDUSA OCEANAGOLD RESOLUTE ST BARBARA
----- End of picture text -----
figure 2: Forecast percentage growth of Evolution Mining from Fy2011[37] to Fy2013 as compared to other mid-tier ASX-listed gold producers[38]
(c) Exposure to a significant pipeline of exploration opportunities
evolution mining will have an extensive exploration portfolio. in addition to catalpa’s existing resource and regional exploration opportunity, as well as a tungsten production opportunity at edna may, if the Transaction is implemented, catalpa shareholders will also have exposure to the following additional prospects:
-
resource and regional exploration opportunities at mt rawdon;
-
full exposure to the resource and regional exploration opportunities at cracow; and
-
resource and regional exploration projects at pajingo and mt carlton, with tenement holdings of more than 2,700 square kilometres.
2.3 Stronger financial platform for growth
evolution mining will have a strong balance sheet and greater financial capacity than catalpa has as a stand-alone entity. it is expected that, following the rights offer, evolution mining will have a cash position of approximately $199 million[39] and a debt position of approximately $48 million.[40] This will put evolution mining in a strong position to capitalise on the significant growth opportunities available to it, including the development of the mt carlton project.
evolution mining’s greater scale and scope are also expected to increase access to additional sources of capital in the equity and debt markets over time.
2.4 Combines highly experienced management teams with complementary skill sets
evolution mining will combine two experienced management teams with complementary skill sets.
catalpa has a motivated and technically accomplished management team that has demonstrated commitment to realising shareholder value from the company’s asset portfolio. conquest’s management team has an entrepreneurial, growthoriented approach focused on delivery of the company’s growth plans to build shareholder value.
further, the operational personnel of catalpa and conquest, together with the newcrest group employees working at the mt rawdon and cracow projects who join evolution mining,[41] will bring a breadth of experience across open pit and underground operations on various scales and at various stages of development.
35 section 7.4 of this explanatory memorandum sets out the basis for these production forecasts.
36 This includes companies listed on the asX who produced between 100,000 ounces and 500,000 ounces of gold in fy2011 and who had a market capitalisation of between $500 million and $3 billion as at the close of trading on the last Trading day.
37 based on the gold produced from the assets that will be owned by evolution mining in fy2011.
-
38 section 7.4 of this explanatory memorandum sets out the basis for the production forecasts for evolution mining. The production estimates for the other companies shown in figure 2 are based on company filings and broker research reports and have not been independently verified.
-
39 based on the cash position of each of catalpa and conquest as at 30 June 2011 (including gold and silver available for sale), assuming $150 million is raised under the proposed rights offer and taking into account the costs associated with the Transaction and the rights offer. This figure does not take into account any stamp duty payable by catalpa in connection with the Transaction or the operating cash flows of catalpa and conquest during the period from 1 July 2011 to completion of the rights offer. it also does not take into account the macquarie facilities. as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities.
-
40 based on the debt position of each of catalpa and conquest as at 30 June 2011. This figure does not take into account the macquarie facilities. as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities.
-
41 under the terms of the asset sale agreement, all such employees will be offered new positions with the evolution mining group. for more information, refer to sections 7.7(f) and 9.1(b) of this explanatory memorandum.
EXPLANATORY MEMORANDUM
23
if the Transaction is implemented, Jake klein (currently the executive chairman of conquest) will become executive chairman and bruce mcfadzean (currently the managing director of catalpa) will become the managing director and chief executive officer of evolution mining.
2.5 Enhanced market presence
evolution mining will be in the top 200 companies listed on the asX by pro forma market capitalisation.[42]
it is expected that evolution mining will receive more analyst coverage and broker attention than currently received by catalpa, which will enhance the profile of evolution mining and make it more visible to the investment community. catalpa shareholders should benefit from evolution mining’s improved liquidity as a result of the Transaction.
also, having newcrest as a major shareholder is expected to further enhance the market presence of evolution mining.
2.6 The Independent Expert has concluded that the Transaction is in the best interests of Catalpa Shareholders, in the absence of a superior proposal
grant samuel was commissioned by the catalpa board to assess the merits of the share issue and the overall Transaction.
grant samuel has concluded that the Transaction is in the best interests of catalpa shareholders, in the absence of a superior proposal. The reasons why grant samuel reached these conclusions are set out in concise version of the independent expert’s report, which is attached to this explanatory memorandum. Those reasons can be summarised as follows:
-
the proposed merger between conquest and catalpa under the scheme is a genuine merger of equals and the terms of the scheme are equitable, as catalpa shareholders will collectively hold a share in evolution mining that is consistent with their contribution to the company;
-
the acquisition of the newcrest assets is on attractive terms;
-
evolution mining will be one of only a few 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;
-
from an investor perspective, evolution mining should be a significantly more attractive gold company than catalpa on a stand-alone basis and there is a realistic prospect of a positive re-rating of the company over time;
-
evolution mining should be able to access capital (both debt and equity) with more certainty and at lower cost than catalpa;
-
evolution mining will have significant growth potential through the development of conquest’s mt carlton project;
-
evolution mining’s relationship with newcrest has the potential to deliver growth opportunities not otherwise accessible to catalpa;
-
shares in evolution mining should trade at higher prices than shares in catalpa on a stand-alone basis and the Transaction will result in an uplift in the underlying value attributable to catalpa shareholders, which value may be realised at some time in the future through a takeover of evolution mining; and
-
catalpa shareholders will be better off if the Transaction is implemented than if it is not.
catalpa shareholders should read the concise version of the independent expert’s report carefully and in its entirety, and should have regard to the disadvantages and risks of the Transaction as set out in that report. in relation to those disadvantages and risks, grant samuel has concluded that they are not material by comparison to the benefits of the Transaction.
when deciding how to vote on the scheme, catalpa shareholders should note that the independent expert has concluded that the Transaction is not “fair” (see section 3.2 of this explanatory memorandum). The independent expert has, however, concluded that the Transaction is reasonable and in the best interests of catalpa shareholders, in the absence of a superior proposal.
a full version of the independent expert’s report is included in the explanatory memorandum supplement, which can be viewed and downloaded online at www.catalparesources.com.au. catalpa shareholders may also obtain a copy of the explanatory memorandum supplement by contacting the catalpa shareholder information line on 1300 383 678 (within australia) or +61 3 9415 4312 (outside australia) at any time between 9:00am and 5:00pm (sydney time), monday to friday.
2.7 The Resolutions are unanimously recommended by the Catalpa Board
after carefully considering the advantages and disadvantages of the Transaction for catalpa shareholders (including the matters set out in section 3 of this explanatory memorandum), for the reasons set out above, the catalpa directors believe that the share issue and the Transaction are in the best interests of catalpa shareholders and unanimously recommend that catalpa shareholders vote in favour of the resolutions at the meeting, in the absence of a superior proposal.
2.8 The Transaction has the unanimous support of the Conquest Board
The Transaction is also unanimously supported by the conquest board. in this regard, it is noted that, in order for the Transaction to be implemented, the scheme must be approved by conquest shareholders at the scheme meeting, which is scheduled to be held on the same day as the meeting.
42 based on the share prices of asX-listed companies as at the close of trading on the last Trading day and assuming $150 million is raised under the proposed rights offer.
CATALPA RESOURCES
24
3 reasons To voTe againsT The share issue
This section 3 sets out some of the reasons why catalpa shareholders may wish not to follow the unanimous recommendation of the catalpa board and instead vote against the share issue resolution at the meeting.
3.1 you may disagree with the unanimous recommendation of the Catalpa Board and the conclusion of the Independent Expert that the Transaction is in shareholders’ best interests
notwithstanding the unanimous recommendation of the catalpa board and the independent expert’s opinion that the Transaction is in catalpa shareholders’ best interests (as referred to in sections 2.7 and 2.6 of this explanatory memorandum respectively), you may believe that the Transaction is not in your best interests.
3.2 you may be concerned by the Independent Expert finding that the Transaction is not “fair”
The independent expert has concluded that the Transaction is not “fair” on the basis that, pursuant to asic policy, the Transaction must be assessed as a control transaction (essentially, a takeover by newcrest) due to the fact that newcrest will have an interest in evolution mining of more than 20% following implementation.
based on market conditions at the time of its valuations, the independent expert believes the trading price of shares in evolution mining is unlikely to equate to the full underlying value of shares in a stand-alone catalpa. whilst this has led the independent expert to conclude that the Transaction is not “fair”, the independent expert is of the view that the underlying value attributable to catalpa shareholders will increase as a result of the Transaction (from $2.03 to $2.25 per share to $2.12 to $2.38 per share), and catalpa shareholders will retain the prospect of realising this increased underlying value through a subsequent change of control transaction for evolution mining. for this, and other reasons, the independent expert has concluded that catalpa shareholders will be better off if the Transaction is implemented than if it is not.
3.3 If the Transaction is implemented, you will be exposed to new risks
catalpa shareholders are currently exposed to certain risks by virtue of having an equity interest in catalpa.
if the Transaction is implemented, catalpa shareholders will maintain a level of exposure to these risks and will become exposed to additional risks associated with having an equity interest in conquest’s assets and the newcrest assets (all of which will be owned by evolution mining) and with the implementation of the Transaction more generally. some of these risks are set out in section 8 of this explanatory memorandum. however, evolution mining’s diversified portfolio of assets will have less risk exposure to any one asset.
3.4 you may believe that your interests are best served by Catalpa remaining as a stand-alone entity
you may believe that catalpa will deliver greater returns to catalpa shareholders by remaining as a stand-alone entity and/or that, having regard to catalpa’s assets and their stage of development, the time is not right for the company to participate in the Transaction.
3.5 you many not wish for your equity interest in Catalpa’s assets to be diluted
your equity interest in catalpa’s assets will be diluted if the Transaction is implemented. in this regard, implementation of the Transaction will reduce catalpa shareholders’ equity interest in catalpa’s assets from 100% to approximately 31% (before the rights offer and calculated on a fully diluted value basis), though catalpa shareholders will gain exposure to conquest’s assets and the newcrest assets.
3.6 you may want to maintain your investment profile
while catalpa and conquest are both gold producers, the operational profile, capital structure, size and geography of evolution mining will be different from that of catalpa on a stand-alone basis. catalpa shareholders may wish to maintain an interest in catalpa as a stand-alone entity because they are seeking an investment in a listed company with the specific characteristics and investment focus of catalpa.
3.5 you may consider that a better proposal may emerge
you may consider that a proposal may emerge in the future that is more attractive for catalpa shareholders than the Transaction. implementation of the Transaction will obviously mean that the current catalpa shareholders will not receive the benefit of any such proposal.
whilst it is possible that a superior proposal for catalpa shareholders could emerge in the future, to the knowledge and in the opinion of the catalpa directors, no alternative proposal currently exists that would provide catalpa shareholders with a better outcome than the Transaction.
EXPLANATORY MEMORANDUM
25
4 profile of caTalpa
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----- Start of picture text -----
CRACOW
GOLD OPERATIONS
Brisbane
EDNA MAY
GOLD OPERATIONS
Perth
----- End of picture text -----
figure 3: Location of Catalpa’s operations
4.1 Catalpa’s background and history
(a) Background
catalpa is a mid-tier gold producer with two existing producing gold assets: a 100% interest in the edna may gold operations in western australia and a 30% interest in the cracow gold operations in queensland.
catalpa has a market capitalisation of approximately $303.1 million.[43] catalpa is publicly listed, with its shares traded on the asX, and is included in the s&p/asX 300 index.
with a combined mineral resource of more than two million ounces of gold and a combined ore reserve of one million ounces of gold, the cracow (30%) and edna may (100%) gold operations together provide cash flows to fund catalpa’s growth strategy and provide shareholder returns.
both the mine at edna may and the mine at cracow offer further ore reserve and mineral resource growth potential, with ongoing exploration programmes at both operations. catalpa has had a five year strategic plan to grow to become a 500,000 ounce of gold per annum producer, which has in part led to the Transaction. The successful completion of the Transaction is a key step in delivering on that strategic plan and will position catalpa for further future growth opportunities.
(b) history
catalpa has been listed on the asX since 15 august 2002 (catalpa traded as westonia mines limited (asX: weZ) from 15 august 2002 to 3 september 2008). in mid-2008, as a result of improved gold prices, catalpa updated its feasibility study and reinvigorated exploration at its edna may project with a view to recommencing operations at edna may, a redevelopment of historical gold operations. This was successfully achieved, with the first gold pour by catalpa at edna may taking place in april 2010. in late 2009 catalpa completed a merger with lion selection limited through which catalpa acquired its 30% interest in the cracow project.
4.2 Catalpa Board and key management
as at the date of this explanatory memorandum, the catalpa board comprises:
-
peter maloney — non-executive chairman;
-
bruce mcfadzean — managing director and chief executive officer;
-
John rowe — non-executive director;
-
barry sullivan — non-executive director;
-
murray pollock — non-executive director; and
-
graham freestone — non-executive director.
profiles of evolution mining’s directors following the Transaction are set out in section 7.2 of this explanatory memorandum.
as at the date of this explanatory memorandum, catalpa’s key executive management comprises:
-
bruce mcfadzean — managing director and chief executive officer;
-
erik palmbachs — chief financial officer and company secretary;
-
stuart pether — chief operating officer;
-
John fraser — general manager, edna may;
-
adrian pelliccia — manager, business development;
-
John winterbottom — manager, geology; and
-
raelene wyatt — manager, human resources.
43 based on the catalpa share price as at the close of trading on the last Trading day.
CATALPA RESOURCES
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----- Start of picture text -----
26
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4 profile of caTalpa conTinued
4.3 Catalpa’s activities and assets
- (a) Group structure
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----- Start of picture text -----
CATALPA
EDNA MAY OPERATIONS WESTONIA MINES LION SELECTION
PTY LTD MINERALS PTY LTD PTY LTD
AUSELECT PTY LTD
LION MINING PTY LTD
SEDGOLD PTY LTD
FERNYSIDE PTY LTD
----- End of picture text -----
figure 4: Structure of the Catalpa Group[44]
(b) Operations and projects overview
- (1) Edna May gold operations (100%)
catalpa’s wholly-owned and operated edna may gold operations are conveniently positioned just two kilometres from the infrastructure of the town of westonia, on the eastern edge of western australia’s wheat-belt region. The mine is approximately half way between perth and kalgoorlie and ideally situated to be serviced by either of these major mining centres. The mine is in close proximity to all required infrastructure, and its workforce is approximately 30% local with the balance commuting from perth by bus on a rostered basis.
==> picture [374 x 258] intentionally omitted <==
figure 5: Location of Edna May gold operations
44 all subsidiaries shown in figure 4 are wholly owned.
EXPLANATORY MEMORANDUM
27
The edna may gold operation is a redevelopment of a historical gold operation. early underground mining produced approximately 365,000 ounces of gold at a grade of 19.5 g/t gold over 23 years of non-continuous operations between 1911 and 1947. more contemporary open pit mining in the late 1980s produced approximately 274,000 ounces of gold at a grade of 1.7 g/t gold between 1986 and 1991.
following catalpa recommencing operations at edna may, first gold was poured in april 2010 and, based on catalpa’s current mine and processing schedule, gold production at the edna may open pit is expected to be in excess of 100,000 ounces of gold recovered on average per annum for a life of mine of more than nine years.
with its robust economics, geologically and metallurgically well defined ore-body, high ore reserve confidence and expected recovery rate of 92%, catalpa’s edna may gold operations are expected to deliver material cash flows for the medium term.
Operations update
wet and dry commissioning of the edna may gold operation processing plant was completed on 15 may 2010 upon successful performance testing of the plant at its 2.8 million tonnes per annum nameplate design capacity.
following an extended ramp up to full production, catalpa remains confident that the operation will continue to achieve bankable feasibility study targets over the coming months with the processing plant at edna may achieving steady state operations during the June quarter 2011 with a record quarterly production of 20,569 ounces of gold (march 2011 quarter: 14,463 ounces of gold). The grade control model continues to reconcile well with production.
production for the year ended 30 June 2011 was 65,592 ounces of gold at a net c1 cash cost of $1,121 per ounce. for the six months ended 30 June 2011, production was 35,032 ounces of gold at a net cash cost of $1,203 per ounce.
studies are in progress to increase processing capacity to 3.2 million tonnes per annum in cy2012 (as per the bankable feasibility study) towards a further increase in gold production.
catalpa continues to focus on further plant optimisations together with advancing the underground opportunity for potential delivery of high grade ore in 2012. ongoing resource definition and extension drilling programmes are planned and budgeted through cy2011 and underground mining studies are in progress.
hedging
catalpa has entered a gold hedging agreement with macquarie under which catalpa has forward sold certain quantities of gold production from its edna may gold operation. under the terms of the hedging agreement, catalpa has forward sold approximately 286,588 ounces of gold to be delivered on a quarterly basis between 1 July 2011 and 30 september 2015 at a price of a$1,573 per ounce. The hedging in place equates to an average of 67,432 ounces of gold per annum to be delivered on a quarterly basis and the forward sold quantity for fy2012 reflects approximately 67% to 73% of edna may’s fy2012 forecast production. under the terms of the hedging agreement, catalpa is required to deliver the following ounces of gold to macquarie in the following financial years:
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FINANCIAL yEAR OuNCES OF GOLD
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| fy2012 | 62,411 |
|---|---|
| fy2013 | 66,589 |
| fy2014 | 71,042 |
| fy2015 | 69,668 |
| fy2016 | 16,878 |
catalpa’s existing hedging was entered into as a requirement of the project finance facility for the development of edna may that catalpa has in place with macquarie. catalpa has no current intention to enter into any new gold or currency hedging arrangements.
Geology
The edna may gold mineralisation is hosted within three en echelon tonalitic gneiss intrusions, namely edna may, greenfinch and golden point. The deposits are bound to the north and south by an ultramafic amphibolite.
The central edna may gneiss forms a continuous but irregular body over a one kilometre strike, with an average thickness of approximately 100 metres. The body of gneiss strikes to the west-north-west and dips at 70 degrees north-north-east.
at 30 June 2011, the edna may gold operations contained mineral resources of 1.7 million ounces of gold at an average grade of 1.1 g/t gold and ore reserves of 0.9 million ounces of gold at average grade of 1.1 g/t gold (as detailed in section 4.4 of this explanatory memorandum below).
CATALPA RESOURCES
28
4 profile of caTalpa conTinued
underground exploration
in may 2011, catalpa announced a revised underground indicated and inferred mineral resource of 700,000 tonnes at 7.4 g/t gold for 166,000 ounces of gold (which is included in the total mineral resource of 1.7 million ounces of gold). The underground mineral resource is estimated to a relatively shallow depth of 550 metres below surface with significant potential for further growth at depth and along strike. This potential was recently demonstrated by the intersection of high grade mineralisation up to 100 metres below the base of the mineral resource.
The recent mineral resource upgrade, along with ongoing mining studies, continues to support the feasibility of an underground operation. catalpa is currently progressing a fully funded cy2011 drilling programme targeting expansion and definition of the underground mineral resource with a view to establishing an underground operation concurrent with existing open pit operations in 2012.
a bore field is being constructed off site to allow for the historical edna may underground decline to be dewatered without impacting process water supply. early in cy2012 catalpa expects to commence the rehabilitation of the existing decline, commence trial mining and continue the drilling of the mineral resource from underground. underground mining studies are currently underway, targeting the supply of high grade feed to the edna may process plant in the march 2012 quarter. The study is expected to be completed in the december 2011 quarter.
once trial mining and underground development has successfully commenced, a decision will be made on whether to progress to full scale underground production. if a decision is taken to proceed with full scale underground production it is expected commence in cy2012. catalpa is currently forecasting underground production of 25,000 to 35,000 ounces of gold in fy2013, subject to the decision to proceed to full scale production.
==> picture [390 x 266] intentionally omitted <==
figure 6: Edna May oblique section (facing east) showing underground Mineral Resource location
EXPLANATORY MEMORANDUM
29
Other exploration
mineralisation at all three identified deposits (edna may, greenfinch and golden point) remain open at depth. in addition to the development of the high grade underground mineral resource at edna may, exploration potential exists below greenfinch and golden point to expand mineral resources and ore reserves with further drilling.
furthermore, catalpa has exploration rights in respect of 790 square kilometres of ground, covering virtually the entire westonia greenstone belt. it extends over 40 kilometres in length and large tracts remain under-explored and untested. The westonia greenstone belt displays many geological similarities to the adjacent southern cross greenstone belt, which is host to several operating and historic gold mines that have produced in excess of 12 million ounces of gold.
Mining, milling, processing and cost profile
The edna may open pit mine has an ore reserve in excess of 25 million tonnes at a grade of 1.1 g/t gold which is planned to be mined in four stages over its nine year mine life. it has a low life-of-mine strip ratio which allows the mine to employ a single owner operated mining fleet for most of the mine life.
The process plant consists of a 2.0kw sag mill and a 3.7kw ball mill along with other components necessary to provide processing capacity of 2.8 million tonnes per annum.
The process plant consists of a conventional carbon in leach process with a typical recovery of approximately 92%. The mine and processing schedule are expected to allow average open pit gold production of more than 100,000 ounces of recovered gold per annum over its nine year mine life.
==> picture [481 x 145] intentionally omitted <==
----- Start of picture text -----
3 MONThS TO 3 MONThS TO
30 SEPTEMBER 31 DECEMBER 3 MONThS TO 3 MONThS TO TOTAL
2010 2010 31 MARCh 2011 30 JuNE 2011 Fy2011
ore mined (t) 301,840 776,387 735,346 743,693 2,557,266
ore milled (t) 568,224 595,053 544,033 608,263 2,315,573
grade (g/t) 0.83 1.00 0.93 1.17 0.99
recovery (%) 88 90 89 91 90
Recovered gold 13,413 17,148 14,463 20,569 65,592
c1 cash cost (a$/ounce) [45] — 953 1,261 1,163 1,121
----- End of picture text -----
Outlook
gold production for the edna may gold operations for fy2012 is expected to be within the range of 85,000 to 93,000 ounces of gold at a c1 cash cost between $830 and $940 per ounce. catalpa publicly disclosed this guidance in its recent asX release quarterly activities and cash flow report June 2011 on 28 July 2011. The production estimate is supported by current ore reserves.
gold production for the edna may gold operations for fy2013 is expected to be within the range of 115,000 to 125,000 ounces of gold based on open pit production of 90,000 to 95,000 ounces of gold and underground production of 25,000 to 30,000 ounces of gold. as discussed above, the edna may fy2013 production figure is subject to the successful completion of the underground development study and trial mining (which are budgeted from existing cashflows), a decision to commence full scale underground production and expansion of the edna may process plant (which is also accounted for in the current budget). it also assumes conversion of underground mineral resources such that a portion of underground mineral resources is mined. The forecast open pit production is supported by current ore reserves.
45 c1 cash cost represents the cost for mining, processing and administration, including accounting movements for stockpiles and gold-in circuit. it does not include costs for exploration, mine development, royalties or processing mill capital works. it includes net proceeds from by-product credits.
CATALPA RESOURCES
30
4 profile of caTalpa conTinued
(2) Cracow gold operations (30% currently)
The cracow gold mining and exploration joint ventures are owned by catalpa (which holds a 30% interest)[46] and newcrest (which holds a 70% interest)[47] . The cracow mine is located in central queensland, australia, approximately four kilometres from the township of cracow and approximately 500 kilometres north-west of the city of brisbane. newcrest manages the mining operations and exploration in the district but will cease to do so following implementation of the Transaction. under the terms of the cracow gold mining and exploration joint ventures, catalpa holds pre-emptive rights over newcrest’s 70% interests in the joint ventures.
as at 30 June 2011, the cracow goldfield contained mineral resources of 0.9 million ounces of gold at an average grade of 6.3 g/t gold and ore reserves of 0.24 million ounces of gold at average grade of 7.0 g/t gold (on a 100% basis). production for the year ended 30 June 2011 was 30,517 ounces of gold at a net cash cost of $602 (on a 30% attributable basis). for the six months ended 30 June 2011 production was 14,996 ounces of gold at a net cash cost of $684 per ounce (on a 30% attributable basis).
see section 6.3 of this explanatory memorandum for further details on the cracow gold operations.
Mining, milling, processing and cost profile (on a 30% attributable basis)
==> picture [480 x 141] intentionally omitted <==
----- Start of picture text -----
3 MONThS TO 3 MONThS TO
30 SEPTEMBER 31 DECEMBER 3 MONThS TO 3 MONThS TO TOTAL
2010 2010 31 MARCh 2011 30 JuNE 2011 Fy2011
ore mined (t) 35,069 36,420 34,828 32,238 138,555
ore milled (t) 36,613 35,342 37,226 40,891 150,072
grade (g/t) 7.19 7.40 6.79 6.16 6.86
recovery (%) 91.2 92.6 92.2 92.6 92.2
Recovered gold 7,727 7,794 7,496 7,500 30,517
c1 cash cost (a$/
ounce) [48] 513 533 621 750 602
----- End of picture text -----
Outlook
section 6.3(e) of this explanatory memorandum sets out production guidance in relation to cracow for fy2012. section 7.4 of this explanatory memorandum provides production guidance for fy2013.
4.4 Catalpa Mineral Resources and Ore Reserves
(a) Mineral Resources
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----- Start of picture text -----
TOTAL MEASuRED,
MEASuRED INDICATED INFERRED INDICATED & INFERRED
Million Gold ‘000 Million Gold ‘000 Million Gold ‘000 Million Gold ‘000
tonnes g/t ounces tonnes g/t ounces tonnes g/t ounces tonnes g/t ounces
greenfinch 0.9 1.1 30 2.5 1.0 80 0.6 1.0 20 4.0 1.0 130
edna may &
golden point 19.7 1.0 660 15.5 1.0 494 10.0 0.9 276 45.2 1.0 1,430
edna may
underground — — — 0.4 7.3 98 0.3 7.6 69 0.7 7.4 166
stockpiles — — — 2.2 0.5 38 — — — 2.2 0.5 38
Total edna
may 20.6 1.0 690 20.6 1.1 710 10.9 1.1 365 52.1 1.1 1,763
cracow Jv
(30%) 0.1 9.7 26 0.3 7.7 77 0.9 5.5 165 1.3 6.3 268
TOTAL
CATALPA 20.7 1.1 716 20.9 1.2 787 11.8 1.4 530 53.4 1.2 2,032
----- End of picture text -----
46 The following wholly owned subsidiaries of catalpa hold interests in the cracow mining joint venture — lion mining pty ltd (20%); sedgold pty ltd (5%) and fernyside pty ltd (5%). lion mining pty ltd also holds catalpa’s 30% interest in the cracow exploration joint venture.
47 a wholly owned subsidiary of newcrest, newcrest operations limited holds newcrest’s 70% interest in the cracow joint ventures.
48 c1 cash cost represents the cost for mining, processing and administration, including accounting movements for stockpiles and gold-in circuit. it does not include costs for exploration, mine development, royalties or processing mill capital works. it includes net proceeds from by-product credits.
EXPLANATORY MEMORANDUM
31
(b) Information relating to Catalpa Mineral Resource statement
Edna May and Greenfinch
-
catalpa owns 100% of edna may operations pty ltd which in turn owns 100% of the edna may gold operations.
-
The edna may april 2010 and greenfinch december 2009 mineral resources were estimated using hellman & schofield multiple indicator kriging block modeling techniques, based on a 0.4 g/t gold cut-off grade within a geologically and grade defined mineralisation envelopes and in accordance with the Jorc code.
-
The edna may mineral resource estimate of recoverable tonnes and grades used multiple indicator kriging with block support correction into 25 metres (east) by 20 metres (north) by 5 metres (elevation) model blocks and assumed smallest mining unit for ore selection in mine grade control of 5 metres (east) by 5 metres (north) by 2.5 metres (elevation). The greenfinch mineral resource estimate of recoverable tonnes and grades used multiple indicator kriging with block support correction into 20 metres (east) by 15 metres (north) by 5 metres (elevation) model blocks and assumed smallest mining unit for ore selection in mine grade control of 5 metres (east) by 3 metres (north) by 2.5 metres (elevation).
-
measured mineral resources and indicated mineral resources lie in areas where drilling is available at a maximum of 25 metres by 25 metres spacing. inferred mineral resources exist in areas of broader spaced drilling, generally peripheral to the measured mineral resource and indicated mineral resource panels.
-
The edna may gold operations and greenfinch mineral resource figures are stated at 30 June 2011, with depletion by production where relevant.
-
There are no known environmental, permitting, legal, taxation, political or other relevant issues that would materially affect the estimates of the mineral resources.
-
mineral resources are inclusive of ore reserves. The stated contained mineral resource metal ounces are considered in situ; beneficiation recovery factors have not been applied.
-
due to rounding of figures, small discrepancies may exist.
Edna May underground
-
catalpa owns 100% of edna may operations pty ltd which in turn owns 100% of the edna may gold operations.
-
edna may underground mineral resources, were estimated using ordinary kriging techniques by catalpa, based on a 3 g/t gold cut-off grade within a geologically and grade defined mineralisation envelopes and in accordance with the Jorc code.
-
edna may underground mineral resources figures are stated as at 15 may 2011, with depletion by production where relevant.
Cracow
-
The cracow project comprises two unincorporated joint ventures between catalpa (30%) and newcrest (70%). catalpa owns 100% of lion mining pty ltd (formerly sedimentary holdings nl), sedgold pty ltd and fernyside pty ltd which in turn own 20%, 5% and 5% respectively of the cracow mining joint venture. lion mining pty ltd holds catalpa’s 30% interest in the cracow exploration joint venture.
-
cracow mineral resource figures are stated on a 30% attributable basis, with depletion by production where relevant to 30 June 2011.
-
due to rounding of figures, small discrepancies may exist.
(c) Ore Reserves
==> picture [481 x 170] intentionally omitted <==
----- Start of picture text -----
TOTAL PROVED
PROVED PROBABLE AND PROBABLE
Million Gold ‘000 Million Gold ‘000 Million Gold ‘000
tonnes g/t ounces tonnes g/t ounces tonnes g/t ounces
greenfinch 0.8 1.1 28 1.7 1.0 58 2.5 1.1 86
edna may & golden point 14.4 1.1 504 8.5 1.1 298 22.8 1.1 803
stockpiles — — — 2.2 0.5 38 2.2 0.5 38
Total edna may 15.2 1.1 532 12.4 1.0 394 27.5 1.1 927
cracow Jv (30%) 0.1 8.1 18 0.3 6.8 55 0.3 7.0 73
TOTAL CATALPA 15.3 1.1 550 12.6 1.1 449 27.8 1.1 1,000
----- End of picture text -----
CATALPA RESOURCES
32
4 profile of caTalpa conTinued
(d) Information relating to Catalpa Ore Reserve statement
Edna May and Greenfinch
-
a gold price of a$1,250/ounce has been assumed in estimating the greenfinch and edna may ore reserves.
-
The economic cut-off grade applied to the edna may and greenfinch ore reserve was 0.4 g/t gold.
-
edna may and greenfinch ore reserve figures are stated at 30 June 2011, with depletion by production where relevant.
-
There are no known environmental, permitting, legal, taxation, political or other relevant issues that would materially affect the estimates of the ore reserves.
-
due to rounding of figures, small discrepancies may exist.
Cracow
-
cracow ore reserve figures are stated on a 30% attributable basis, with depletion by production where relevant to 30 June 2011.
-
due to rounding of figures, small discrepancies may exist.
-
metal price assumptions used by newcrest to convert mineral resource to ore reserves are us$1,000/ounce of gold and a 0.8 usd:aud exchange rate.
4.5 Catalpa’s recent share price performance
The chart below shows the closing price of catalpa shares on the asX over the 12 month period up to (and including) the last Trading day.
==> picture [480 x 183] intentionally omitted <==
----- Start of picture text -----
2.50
2.25
2.00
1.70
1.75
1.50
1.25
1.00
0.75
0.25
0.00
Closing Price (AUD)
Sep 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 July 11 Aug 11 Sep 11
----- End of picture text -----
The closing price of catalpa shares on the asX as at the close of trading on the last Trading day was $1.70.
during the three month period up to (and including) the last Trading day:
-
the highest recorded daily closing price for catalpa shares on the asX was $1.73 (on 9 June 2011); and
-
the lowest recorded daily closing price for catalpa shares on the asX was $1.31 (on 29 June 2011).
The last recorded sale price for catalpa shares on the asX before the public announcement of the Transaction was $1.705 on 14 June 2011.
EXPLANATORY MEMORANDUM
33
4.6 Catalpa capital structure and ownership
as at the date of this explanatory memorandum, the total securities of catalpa on issue were as follows:
-
178,299,049 ordinary shares;
-
4,974,315 listed options exercisable into one catalpa share each at $1.10 and expiring in october 2011;
-
8,739,624 unlisted options which are exercisable into one catalpa share each at various prices on various dates; and
-
1,119,000 unlisted catalpa performance rights. The catalpa performance rights were issued to key executives of catalpa under catalpa’s employee options and performance rights plan. upon vesting each catalpa performance right converts into one catalpa share.
as at the date of this explanatory memorandum, catalpa has the following substantial shareholders:
| SuBSTANTIAL ShAREhOLDERS | NuMBER OF CATALPA ShARES | PERCENTAGE ShAREhOLDING |
|---|---|---|
| orbis investment management (australia) pty ltd 8,964,836 5.03% |
4.7 Catalpa financial information
(a) Introduction
The financial information for the six months ended 31 december 2010 and year ended 30 June 2010 provided below has been extracted from the full and half year financial reports published by catalpa and released on the asX. The financial information is intended to provide a high level financial overview of catalpa’s historical financial position and is not intended to provide the level of detail or understanding which is available from a review of the published financial reports which are available on the asX or catalpa’s website.
The financial reports from which these extracts have been taken have been audited (or reviewed in the case of 31 december 2010) by deloitte and prepared in accordance with the corporations act and upon which deloitte issued on unqualified opinion (and unqualified conclusion, in the case of 31 december 2010).
on 10 december 2009 catalpa successfully completed a merger with its largest shareholder, lion selection limited, resulting in the catalpa group acquiring a 30% stake in the cracow assets, and a pre-emptive right over the remaining 70%. The merger was implemented via a scheme of arrangement approved by lion selection limited shareholders, following which catalpa acquired all of the shares in lion selection limited. under the scheme of arrangement, lion selection limited shareholders received one catalpa share for each lion selection limited share they held, following catalpa’s one for eleven share consolidation. subsequent to the merger, approximately 50 million catalpa shares which catalpa held in itself were cancelled with catalpa shareholder approval.
CATALPA RESOURCES
34
4 profile of caTalpa conTinued
(b) Catalpa historical balance sheet
set out below are catalpa’s consolidated balance sheets as at 31 december 2010 and 30 June 2010.
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----- Start of picture text -----
CONSOLIDATED
31 DECEMBER 2010 30 JuNE 2010
$’000s $’000s
----- End of picture text -----
| CuRRENT ASSETS | ||
|---|---|---|
| cash and cash equivalents | 28,910 | 35,113 |
| other receivables | 1,681 | 1,114 |
| other fnancial assets | — | — |
| prepayments | 578 | 244 |
| inventories | 10,461 | 10,117 |
| mine development | 2,498 | 1,619 |
| TOTAL CuRRENT ASSETS | 44,128 | 48,207 |
| NON CuRRENT ASSETS | ||
| other fnancial assets | 1,260 | 560 |
| property, plant and equipment | 96,909 | 85,006 |
| mine development | 59,567 | 68,919 |
| borrowing costs | — | — |
| deferred tax asset | 17,752 | 19,325 |
| TOTAL NON CuRRENT ASSETS | 175,488 | 173,810 |
| TOTAL ASSETS | 219,616 | 222,017 |
| CuRRENT LIABILITIES | ||
| Trade and other payables | 14,967 | 15,697 |
| income tax payable | — | 289 |
| borrowings | 24,565 | 22,566 |
| provisions | 2,242 | 1,564 |
| TOTAL CuRRENT LIABILITIES | 41,774 | 40,116 |
| NON-CuRRENT LIABILITIES | ||
| borrowings | 31,546 | 38,612 |
| provisions | 4,807 | 4,561 |
| TOTAL NON-CuRRENT LIABILITIES | 36,353 | 43,173 |
| TOTAL LIABILITIES | 78,127 | 83,289 |
| NET ASSETS | 141,489 | 138,728 |
| EQuITy | ||
| issued capital | 162,705 | 162,613 |
| reserves | 5,272 | 4,584 |
| accumulated losses | (26,488) | (28,469) |
| TOTAL EQuITy | 141,489 | 138,728 |
EXPLANATORY MEMORANDUM
35
(c) Material changes in financial position
catalpa successfully raised $23.4 million ($22.3 million net of costs) through an institutional share placement in february 2011 to fund projects at edna may to improve plant reliability and fund ongoing exploration and underground development at the edna may gold project.
4.8 Continuous disclosing entity
as a company listed on the asX and a disclosing entity under the corporations act, catalpa is subject to regular reporting and disclosure obligations. copies of documents lodged with asic in relation to catalpa may be obtained from, or inspected at, an asic office.
copies of catalpa’s annual report for the year ended 30 June 2010, catalpa’s financial report for the half year ended 31 december 2010 and any continuous disclosure notices given by catalpa after the lodgement of the aforementioned annual report may be obtained from catalpa’s website (www.catalparesources.com.au) or the asX’s website (www.asx.com.au). catalpa will provide a copy free of charge to anyone who requests a copy of any of these documents before the meeting.
as at the date of this explanatory memorandum, catalpa is not withholding any information from disclosure on the basis of an exception from disclosure in the listing rules or otherwise where such information is material to a catalpa shareholder’s decision on how to vote on any of the resolutions.
CATALPA RESOURCES
36
5 profile of conquesT
==> picture [468 x 206] intentionally omitted <==
----- Start of picture text -----
Townsville
MT CARLTON
PAJINGO
Mackay
----- End of picture text -----
figure 7: Location of Conquest’s assets
5.1 Conquest’s background and history
(a) Background
conquest is a junior gold producer with two existing assets located in north queensland: a 100% interest in the pajingo gold operations and a 100% interest in a development asset at mt carlton.
conquest is listed on the asX and is included in the s&p/asX 300 index, having a market capitalisation of approximately $303 million as at the close of trading on the last Trading day.
conquest had a combined mineral resource of more than 3.2 million ounces of gold equivalent and a combined ore reserve of approximately 1.4 million ounces of gold equivalent as at 30 June 2011.
conquest is a growth-oriented company that has focused on the delivery of an ambitious growth plan to build substantial value for its shareholders and fill a void created by consolidation in australia’s gold sector. conquest seeks to deliver this growth through successful development of its mt carlton project and by acting on consolidation opportunities.
(b) history
conquest has been listed on the asX since 1987.
in 2006, conquest discovered the silver hill gold-silver-copper deposit at its 100% owned mt carlton project in north queensland.
in november 2010, conquest completed its acquisition of the gold mine at pajingo in north queensland.
5.2 Conquest Board
as at the date of this explanatory memorandum, the conquest board comprises:
-
Jake klein — executive chairman;
-
James askew — non-executive director;
-
nicholas curtis — non-executive director;
-
richard krasnoff — non-executive director;
-
paul marks — non-executive director; and
-
doug stewart — non-executive director.
profiles of evolution mining’s directors following the Transaction are set out in section 7.2 of this explanatory memorandum.
as at the date of this explanatory memorandum, conquest’s key executive management comprises:
-
Jake klein — executive chairman;
-
mark le messurier — chief operating officer;
-
aaron colleran — general manager, corporate; and
-
evan elstein — company secretary.
EXPLANATORY MEMORANDUM
37
5.3 Conquest’s activities and assets (a) Group structure
==> picture [479 x 272] intentionally omitted <==
----- Start of picture text -----
CONQUESTCATALPA
MT CARLTON NORTH QUEENSLAND CQT GOLD
PROJECT METALS LIMITED AUSTRALIA PTY LTD
NQM EXPLORATION BAAL GAMMON WALKER RESOURCES NQM GOLD 2
NQM GOLD PTY LTD
PTY LTD OPERATIONS PTY LTD PTY LTDF PTY LTD 40%
60%
PAJINGO
(UNINCORPORATED
JOINT VENTURE)
PAJIONGO GOLD
MINE (OPERATIONS)
----- End of picture text -----
figure 8: Structure of the Conquest Group[49]
(b) Operations and projects overview
all of conquest’s operations are located in north queensland, as shown below.
==> picture [295 x 265] intentionally omitted <==
figure 9: Closer view of where Conquest’s assets are located in north Queensland
49 all subsidiaries shown in figure 8 are wholly owned, unless stated otherwise. north queensland metals limited is now known as ‘cqT holdings pty limited’.
CATALPA RESOURCES
38
5 profile of conquesT conTinued
(1) Pajingo gold operations (100%)
conquest acquired the pajingo mine in november 2010 following the successful takeover of north queensland metals limited, now known as cqT holdings pty limited, (which held a 60% interest in the mine) and the acquisition of hsk gold australia pty ltd (which held the remaining 40%) from heemskirk consolidated limited.
The pajingo mine is located 53 kilometres south of charters Towers in north queensland.
project tenure covers 962 square kilometres consisting of three mining leases (covering 36.6 square kilometres), three exploration permits (covering 572 square kilometres) and six applications for exploration permits (covering 353 square kilometres).
Geology
The pajingo mine’s mineralisation is hosted in structurally controlled epithermal quartz veins within an andesite host rock. in general, veining strikes grid east with tensional jogs producing high grade pods trending grid east-north-east. The main mineralised veins in the vera nancy corridor plunge at about 20 degrees to grid east.
most ore bodies comprise a main vein, which carries the bulk of the precious metals, and splay veins that can contain economic grades but usually only when close to the main vein. The mineralised structures can vary from less than 1 metre to 15 metres in width, but are generally 2 metres to 3 metres wide.
==> picture [413 x 275] intentionally omitted <==
figure 10: Pajingo regional geology plan
Exploration
exploration at the pajingo mine in fy2012 will focus on increasing the resource base.
The near mine exploration team will focus on drilling known targets underground, including bunty, bell vein to cindy trend, power line, eastern extensions to faith, leaping dog lower and vera south hanging wall and foot wall veins. The team also plans to explore whether the vera-nancy system may be repeated to the south-west (vera-nancy grid south) and at depth.
The regional exploration team will focus on potential resources proximal to the existing operation, in particular the moonlight prospect and within the barking spider Zone, which is located directly along strike and extending for about 3 kilometres to the south-east of the existing workings. approximately 10 kilometres of drilling is planned, split between the moonlight prospect (4,500 metres) and the barking spider Zone (5,500 metres). a 3d induced polarisation program will test the continuance of veining along strike and to the south-east of the existing workings within the barking spider Zone.
EXPLANATORY MEMORANDUM
39
Mining, milling, processing and cost profile
ore is mined by both underground and open pit methods at the pajingo mine. underground mining is based on longhole open stoping with ore hauled to surface via decline. conquest owns and operates the underground mining fleet at pajingo. open pit mining is carried out by a contractor. it is expected that approximately 250,000 tonnes of ore will be mined from underground and 100,000 tonnes from open pit in fy2012.
The ore from the pajingo project is free milling and is treated on site by conventional crush-grind-cip processing to produce gold-silver doré. The pajingo processing plant can be operated at a maximum throughput of approximately 650,000 tonnes per annum, however the processing plant is currently operated at 350,000 to 450,000 tonnes per annum. open pit mining and satellite mining strategies (for example the Twin hills project) are aimed at increasing ore production to utilise the latent capacity in the processing plant.
in fy2011, the pajingo mine produced 45,889 ounces of gold at a cash operating cost of $950 per ounce (including royalties). production data is summarised in the following table.
==> picture [481 x 41] intentionally omitted <==
----- Start of picture text -----
3 MONThS TO 3 MONThS TO
30 SEPTEMBER 31 DECEMBER 3 MONThS TO 3 MONThS TO TOTAL
2010 2010 31 MARCh 2011 30 JuNE 2011 Fy2011
----- End of picture text -----
| underground development | |||||
|---|---|---|---|---|---|
| (metres) | 960 | 1,193 | 1,170 | 1,531 | 4,854 |
| underground ore mined | |||||
| (tonnes) | 63,372 | 59,394 | 70,194 | 88,625 | 281,585 |
| underground grade (g/t gold) | 5.3 | 6.2 | 6.2 | 5.5 | 5.8 |
| open pit ore mined (tonnes) | — | — | 8,517 | 40,117 | 48,634 |
| open pit grade (g/t gold) | — | — | 4.1 | 2.4 | 2.7 |
| mill production (dry tonnes) | 64,236 | 55,817 | 65,101 | 102,019 | 287,173 |
| mill grade (g/t gold) | 4.43 | 5.44 | 7.11 | 5.02 | 5.44 |
| recovery (%) | 95.8 | 82.4 | 95.6 | 95.7 | 94.0 |
| gold produced (ounces) | 9,092 | 8,041 | 14,176 | 14,580 | 45,889 |
| silver produced (ounces) | 11,960 | 7,921 | 11,510 | 20,303 | 51,694 |
| site cash cost | |||||
| ($/ounce of gold)50 | 939 | 1,211 | 781 | 978 | 950 |
Outlook
The pajingo mine is forecast to produce at least 70,000 ounces of gold at a site cash cost of approximately $867 per ounce in fy2012. The forecast increase in production as compared to fy2011 is primarily a result of increased underground and open pit mining rates and mining from higher grade areas underground. The increased underground mining rates in fy2012 are based on an upgraded underground mining fleet, with two new loaders, three new haul trucks, a twin boom jumbo and other ancillary equipment to be purchased, and are subject to the requisite approvals (including environmental approval) being obtained for the development of open pit deposits. production rates are expected to remain reasonably constant into fy2013 with production of 70,000 to 75,000 ounces of gold expected.
The development plan for the pajingo mine includes the following targets:
-
to stabilise at 60,000 ounces of gold per annum production from underground;
-
to build a five year mine life from the underground resources / reserves; and
-
to reduce low grade pit feed to the mill and increase the high grade feed.
some of the risks that catalpa shareholders will be exposed to in relation to the pajingo project are set out in section 8 of this explanatory memorandum.
50 These costs include the cost of mining, processing and administration, including accounting movements for stockpiles, gold in circuit, royalties and silver credits but excluding costs for exploration, development and capital works.
CATALPA RESOURCES
40
5 profile of conquesT conTinued
(2) Mt Carlton gold-silver-copper project (100%)
The mt carlton gold-silver-copper deposit was discovered by conquest in 2006.
conquest completed a definitive feasibility study on the mt carlton project as an open pit poly-metallic gold-silver-copper project in late 2009 and an optimisation study in late 2010. The optimisation study incorporated a series of material improvements to the engineering design, metallurgical process and commercial off-take arrangements that significantly enhanced the project’s economics. in december 2010, the conquest board formally approved development of the project.
The mt carlton project is located 150 kilometres south of Townsville in north queensland.
project tenure covers 915 square kilometres consisting of eight exploration permits (covering 860 square kilometres) and one application for an exploration permit (covering 55 square kilometres).
Geology
The mt carlton project is a high-sulphidation epithermal style deposit with mineralisation occurring within felsic volcanic rocks on the northern margin of the permian bowen basin. The project comprises gold, silver and copper primarily as copper arsenic sulphides (enargite) and silver arsenic sulphides (tetrahedrite/polybasite) and some native gold (within pyrite).
The mt carlton 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 20 metres to 180 metres below surface and is 70 metres thick with a 500 metres by 500 metres areal extent. The two deposits are located approximately 200 metres apart.
==> picture [390 x 218] intentionally omitted <==
figure 11: Mt Carlton regional geology plan
Exploration
conquest is implementing a $5.2 million exploration budget at mt carlton in the current exploration season. The key objectives of the exploration program at mt carlton are to:
-
locate additional mineralised centres adjacent to the v2 and a39 deposits;
-
convert resources to reserves at v2 east; and
-
locate additional high-grade silver mineralisation similar to the a39 deposit.
EXPLANATORY MEMORANDUM
41
Mining, milling, processing and cost profile
mining operations have been planned using a mining contractor with a conventional excavator and haul truck operation, mining 5 metre benches in two passes.
The v2 pit will be mined over approximately nine years. The low-grade ore will be stockpiled and processed after depletion of the high-grade ore. This leaves about 1.8 million tonnes of stockpiled ore, grading approximately 1.5 g/t gold, to be processed post completion of open pit mining.
The a39 pit will be mined out over 16 months.
for overall pit scheduling, it was assumed the mill will be commissioned using v2 ore and then a39 ore will be campaign treated on a three month cycle.
The mt carlton project process flowsheet is based on conventional technology, consisting of crushing, grinding and bulk sulphide flotation to produce a concentrate. The plant has a design capacity of 800,000 tonnes per annum and will provide a project life of at least 12 years based on current ore reserves.
The mt carlton optimisation study estimated an integrated project capital cost of $126.9 million, of which $6.95 million has already been spent following the purchase in august 2010 of a new sag mill, the longest lead-time component of the processing facility. The capital cost estimate is summarised in the table below. The estimate is prepared to an accuracy level of ±15% as at 31 december 2010.
==> picture [229 x 39] intentionally omitted <==
----- Start of picture text -----
CAPITAL COSTS SuMMARy
Facility Capital cost ($ million)
----- End of picture text -----
| mining establishment | 1.9 |
|---|---|
| mine pre-stripping | 15.6 |
| process plant | 53.5 |
| Tailings management facility | 5.6 |
| infrastructure | 15.7 |
| Total direct costs | 92.3 |
| epcm | 10.1 |
| owner’s costs | 14.0 |
| Total indirect costs | 24.1 |
| estimate accuracy | |
| provision | 10.5 |
| TOTAL | 126.9 |
when in full production the v2 deposit is expected to produce approximately 70,000 ounces of gold, 650,000 ounces of silver and 2,500 tonnes of copper in concentrate annually, at an average site cash cost of $630 per ounce of gold produced (including smelting charges). in september 2010, conquest signed a life-of-mine off-take agreement for the sale of goldsilver-copper concentrate from the v2 deposit with sgg, one of the largest gold smelters in china.
The a39 deposit will be campaign processed over two or three years. in total, the deposit is expected to produce approximately 7.4 million ounces of silver and 2,800 tonnes of copper in concentrate, at an average site cash cost of $12.50 per ounce of silver (including smelting charges). in July 2011, conquest signed a life-of-mine off-take agreement for the sale of silver-copper concentrates from the a39 deposit with shandong humon smelting co. limited.
CATALPA RESOURCES
42
5 profile of conquesT conTinued
Outlook
environmental approval and landholder agreements are pre-conditions for the issue of the mining lease and the commencement of development work at mt carlton.
in relation to environmental approval, the queensland department of environment and resource management has accepted conquest’s proposed environmental plan and conquest is currently working with the department to finalise an environmental authority for the project. once this has been finalised and agreements with the relevant landholders have been entered into, it is expected that the mining lease will be issued.
assuming the timely receipt of permits, it is expected that a construction management contract will be awarded and site works will commence later this calendar year and that plant commissioning will occur in the second half of cy2012. successful commissioning and ramp-up is expected to see full scale production achieved in the first half of cy2013. on this basis, initial production of 40,000 to 60,000 ounces of gold equivalent is forecast for fy2013.
conquest has accepted an offer from macquarie for $100 million of debt funding for the mt carlton project to ensure it has the funding available to develop the project in accordance with the timing outlined in the preceding paragraph. The debt funding is to be made available by macquarie by way of the following facilities:
-
$50 million project finance facility to fund construction and working capital of the mt carlton project, which shall be available until 30 september 2012 provided that the first draw down of the facility must occur before 31 march 2012 (unless otherwise agreed in writing by macquarie);
-
$40 million bridge finance facility to fund construction of the mt carlton project, which shall be available until 31 march 2012 (unless otherwise agreed in writing by macquarie) but which conquest may elect to cancel at no cost prior to 31 october 2011; and
-
$10 million performance bond facility for the provision of unconditional performance bonds to satisfy the requirements of the queensland department of mines and energy under the terms and conditions of the tenements for the mt carlton project (or as otherwise agreed with macquarie).
The availability of funding under each of these facilities is subject to satisfaction of certain conditions precedent, including the execution of formal documentation. conquest’s obligations under the facilities will be secured by charges, mortgages and guarantees given by conquest and certain of its related bodies corporate.
The terms agreed with macquarie require conquest to enter into silver and copper hedging arrangements in respect of 2.5 million ounces of silver and 3,420 tonnes of copper between march 2013 and march 2017. no gold hedging is required.
in the event that conquest draws down on the bridge finance facility, it must issue conquest options to macquarie exercisable at a price that is 25% above the vwap of conquest shares on the asX on each of the 10 days prior to the date on which the options are granted (provided that the options will not have an exercise price higher than $0.65). The number of conquest options that would be issued to macquarie in connection with the bridge finance facility is to be determined in accordance with the following formula:
$10 million number of options =
option exercise price
as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities. conquest considers it unlikely that it will do so to a material extent prior to implementation of the Transaction. catalpa and conquest intend that, post implementation, the board of evolution mining will consider the optimum financing structure for the development of the mt carlton project having regard to the cash position, operating cash flows and capital requirements of the company. in this regard, catalpa and conquest expect that evolution mining will be able to secure more favourable financing terms than they are each able to secure on a stand-alone basis. it is their current intention that evolution mining will complete a refinancing following implementation of the Transaction.
if the Transaction is not implemented, conquest will need to utilise the majority of the funds available under the macquarie facilities for the development of the mt carlton project.some of the risks that catalpa shareholders will be exposed to in relation to the mt carlton project are set out in section 8 of this explanatory memorandum.
EXPLANATORY MEMORANDUM
43
- 5.4 Conquest Mineral Resources and Ore Reserves (a) Pajingo Mineral Resources (as at 30 June 2011)
==> picture [481 x 56] intentionally omitted <==
----- Start of picture text -----
TOTAL MEASuRED,
MEASuRED INDICATED INFERRED INDICATED & INFERRED
Gold Gold Gold Gold Gold Gold
Tonnes Gold (g/t) (ounces) Tonnes (g/t) (ounces) Tonnes Gold (g/t) (ounces) Tonnes (g/t) (ounces)
----- End of picture text -----
| underground | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| cindy | — | — | — | 69,000 | 6.5 | 15,000 | 46,000 | 4.4 | 7,000 | 115,000 | 5.7 | 21,000 |
| faith | 19,000 | 4.7 | 3,000 | 105,000 | 6.5 | 22,000 | 101,000 | 4.7 | 15,000 | 225,000 | 5.6 | 40,000 |
| Jandam | 110,000 | 5.1 | 18,000 | 997,000 | 4.3 | 138,000 | 453,000 | 2.7 | 39,000 | 1,560,000 | 3.9 | 195,000 |
| sonia | 26,000 | 3.6 | 3,000 | 151,000 | 9.8 | 47,000 | 206,000 | 10.7 | 71,000 | 382,000 | 9.9 | 121,000 |
| venue- vnu | — | — | — | 356,000 | 2.4 | 28,000 | 262,000 | 1.3 | 11,000 | 617,000 | 1.9 | 39,000 |
| veracity | 2,000 | 16.9 | 1,000 | 299,000 | 6.0 | 58,000 | 123,000 | 3.8 | 15,000 | 425,000 | 5.4 | 74,000 |
| Zed | 43,000 | 7.1 | 10,000 | 526,000 | 4.0 | 68,000 | 1,147,000 | 3.5 | 130,000 | 1,715,000 | 3.8 | 208,000 |
| Subtotal | 200,000 | 5.4 | 35,000 | 2,502,000 | 4.7 | 375,000 | 2,377,000 | 3.8 | 288,000 | 5,039,000 | 4.3 | 698,000 |
| Open pit | ||||||||||||
| vera north upper | — | — | — | 102,000 | 2.5 | 8,000 | 7,000 | 0.9 | 200 | 110,000 | 2.4 | 8,000 |
| venue | — | — | — | 203,000 | 3.3 | 22,000 | 1,000 | 1.7 | 100 | 205,000 | 3.3 | 22,000 |
| Subtotal | — | — | — | 306,000 | 3.0 | 30,000 | 8,000 | 1.0 | 300 | 314,000 | 3.0 | 30,000 |
| TOTAL | 200,000 | 5.4 | 35,000 | 2,808,000 | 4.5 | 405,000 | 2,346,000 | 3.8 | 288,000 | 5,354,000 | 4.2 | 728,000 |
-
The pajingo mineral resources are inclusive of ore reserves.
-
The pajingo mineral resources have been estimated by ordinary kriging and reported using a cut-off grade of 1.0 g/t gold for underground resources and 0.65 g/t gold for open pit resources.
-
The pajingo mineral resource statement has been prepared in accordance with the Jorc code.
-
There are no known environment, permitting, legal, taxation, political or other relevant issues that would materially affect the estimates of the mineral resources.
-
Tonnes and grades are stated to a number of significant digits reflecting the confidence of the estimate. since each number is rounded individually, the columns and rows in the above table may not show exact sums or weighted averages of the reported tonnes and grades.
-
(b) Twin hills Mineral Resources (as at 30 June 2011)
| MEASuRED | MEASuRED | MEASuRED | INDICATED | INDICATED | INDICATED | INFERRED | INFERRED | INFERRED | TOTAL MEASuRED, INDICATED & INFERRED |
TOTAL MEASuRED, INDICATED & INFERRED |
TOTAL MEASuRED, INDICATED & INFERRED |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tonnes | Gold (g/t) |
Gold (ounces) |
Tonnes | Gold (g/t) |
Gold (ounces) |
Tonnes | Gold (g/t) |
Gold (ounces) |
Tonnes | Gold (g/t) |
Gold (ounces) |
|
| 309 deposit — — — 2,450,000 2.20 174,000 1,150,000 2.84 105,000 3,600,000 2.40 278,000 |
||||||||||||
| lone sister 540,000 4.10 71,000 280,000 3.40 31,000 200,000 2.80 18,000 1,020,000 3.70 120,000 |
||||||||||||
| Total Twin hills 540,000 4.10 71,000 2,730,000 2.30 205,000 1,350,000 2.80 123,000 4,620,000 2.70 398,000 |
-
The 309 deposit mineral resources have been calculated using multiple indicatory kriging. The 309 deposit mineral resources are reported above a cut-off of 0.5g/t gold within pit shell optimised at $1500 pit to reflect potential open pit extraction and above a cut-off of 2.0g/t gold outside the $1500/ounce pit shell to reflect potential extraction by underground mining methods.
-
The lone sister mineral resource has been interpolated using ordinary kriging in 5 metres by 5 metres by 5 metres blocks. The lone sister mineral resource is reported at a 2.0g/t gold cut-off grade.
-
The Twin hills mineral resource statement has been prepared in accordance with the Jorc code.
-
Tonnes and grades are stated to a number of significant digits reflecting the confidence of the estimate. since each number is rounded individually, the columns and rows in the above table may not show exact sums or weighted averages of the reported tonnes and grades.
CATALPA RESOURCES
44
5 profile of conquesT conTinued
- (c) Mt Carlton Mineral Resources (as at 30 June 2011)
| MEASuRED | MEASuRED | MEASuRED | INDICATED | INDICATED | INDICATED | INFERRED | INFERRED | INFERRED | TOTAL MEASuRED, INDICATED & INFERRED |
TOTAL MEASuRED, INDICATED & INFERRED |
TOTAL MEASuRED, INDICATED & INFERRED |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tonnes | Grade (g/t Gold, g/t silver, % copper) |
Cont metal (ounces of gold, ounces of silver, tonnes of copper) |
Tonnes | Grade (g/t gold, g/t silver, % copper) |
Cont metal (ounces of gold, ounces of silver, tonnes of copper) |
Tonnes | Grade (g/t gold, g/t silver, % copper) |
Cont metal (ounces of gold, ounces of silver, tonnes of copper) |
Tonnes | Grade (g/t gold, g/t silver, % copper) |
Cont metal (ounces of gold, ounces of silver, tonnes of copper) |
|
| A39 Deposit | ||||||||||||
| silver 1,900,000 226 13,800,000 440,000 99 1,400,000 330,000 62 700,000 2,660,000 185 15,800,000 |
||||||||||||
| copper 0.18 3,400 0.06 300 0.03 100 0.14 3,800 |
||||||||||||
| Gold equivalent 1,900,000 4.40 270,000 440,000 1.90 27,000 330,000 1.20 13,000 2,660,000 3.60 310,000 |
||||||||||||
| V2 Deposit | ||||||||||||
| gold 12,660,000 1.78 700,000 10,900,000 1.41 492,000 1,160,000 0.67 25,000 24,720,000 1.56 1,240,000 |
||||||||||||
| silver 27 11,000,000 20 7,000,000 29 1,100,000 24 19,100,000 |
||||||||||||
| copper 0.30 37,700 0.23 24,800 0.17 1,900 0.26 64,400 |
||||||||||||
| Gold equivalent 12,660,000 2.60 1,100,000 10,900,000 2.00 700,000 1,160,000 1.30 49,000 24,720,000 2.30 1,800,000 |
||||||||||||
| Total gold equivalent 1,370,000 727,000 62,000 2,159,000 |
-
mt carlton mineral resources have been estimated using multiple indicator kriging. value and metal grades have been estimated into panels with dimensions 25 metres by 25 metres (east, west) by 5 metres (elevation).
-
mt carlton mineral resources use a net metal value cut-off of $20 per tonne (calculated using a gold price of us$1140 per ounce, a silver price of us$18.30 per ounce, a copper price of us$3.14 per pound and an usd:aud exchange rate of 0.90, and including metal recovery and payability rates).
-
mt carlton mineral resources are inclusive of ore reserves.
-
The mt carlton mineral resource statement has been prepared in accordance with the Jorc code.
-
The gold equivalence calculation was made by conquest using a gold price of $1100 per ounce, a silver price of us$22.00 per ounce and a copper price of us$3.50 per pound. relative metal recovery and payability rates are also incorporated into the gold equivalence calculation.
-
Tonnes and grades are stated to a number of significant digits reflecting the confidence of the estimate. since each number is rounded individually, the columns and rows in the above table may not show exact sums or weighted averages of the reported tonnes and grades.
EXPLANATORY MEMORANDUM
45
- (d) Pajingo Ore Reserves (as at 30 June 2011)
| PROVED | PROVED | PROVED | PROBABLE | PROBABLE | PROBABLE | TOTAL PROVED & PROBABLE | TOTAL PROVED & PROBABLE | TOTAL PROVED & PROBABLE | |
|---|---|---|---|---|---|---|---|---|---|
| Tonnes | Gold (g/t) |
Gold (ounces) |
Tonnes | Gold (g/t) |
Gold (ounces) |
Tonnes | Gold (g/t) |
Gold (ounces) |
|
| underground | |||||||||
| cindy — — — 33,000 5.5 6,000 33,000 5.5 6,000 |
|||||||||
| faith 6,000 5.8 1,000 83,000 6.1 16,000 90,000 6.1 18,000 |
|||||||||
| Jandam — — — 43,000 5.1 7,000 43,000 5.1 7,000 |
|||||||||
| sonia 7,000 4.4 1,000 116,000 9.3 35,000 123,000 9.0 36,000 |
|||||||||
| veracity — — — 74,000 5.3 13,000 74,000 5.3 13,000 |
|||||||||
| Zed west 41,000 5.9 8,000 122,000 6.0 23,000 163,000 6.0 31,000 |
|||||||||
| Subtotal 54,000 5.7 10,000 471,000 6.6 100,000 525,000 6.5 110,000 |
|||||||||
| Open pit | |||||||||
| vera north upper — — — 120,000 2.2 8,000 120,000 2.2 8,000 |
|||||||||
| venue — — — 219,000 3.1 22,000 219,000 3.1 22,000 |
|||||||||
| Subtotal — — — 339,000 2.8 30,000 339,000 2.8 31,000 |
|||||||||
| TOTAL 54,000 5.7 10,000 810,000 5.0 130,000 864,000 5.1 140,000 |
-
pajingo ore reserves have been estimated at a stope cut-off grade of 3.9g/t gold for underground reserves and 0.7 g/t gold for open pit reserves.
-
pajingo ore reserves assume a gold price of $1350 per ounce.
-
pajingo ore reserves were estimated from geological resource models using vulcan 3d mine design software. potential reserve (resource) mining blocks were generated based upon classification of measured and indicated resources only as defined by the Jorc code.
-
pajingo ore reserves were estimated using a stope and pit evaluation spreadsheet to determine the value of each resource mining block, with only those blocks that returned a positive financial result being included in the reserve base. each resource mining block was valued against costs associated with its extraction, treatment, refining and selling to provide revenue.
-
There are no known environmental, permitting, taxation, political or other relevant issues that would materially affect the estimates of the pajingo ore reserves.
-
Tonnes and grades are stated to a number of significant digits reflecting the confidence of the estimate. since each number is rounded individually, the columns and rows in the above table may not show exact sums or weighted averages of the reported tonnes and grades.
CATALPA RESOURCES
46
5 profile of conquesT conTinued
- (e) Mt Carlton Ore Reserves (as at 31 December 2010)
| PROVED | PROVED | PROVED | PROBABLE | PROBABLE | PROBABLE | TOTAL PROVED & PROBABLE | TOTAL PROVED & PROBABLE | TOTAL PROVED & PROBABLE | |
|---|---|---|---|---|---|---|---|---|---|
| Tonnes | Grade (g/t gold, g/t silver, % copper) |
Cont metals (ounces of gold, ounces of silver, tonnes of copper) |
Tonnes | Grade (g/t gold, g/t silver, % copper) |
Cont metals (ounces of gold, ounces of silver, tonnes of copper) |
Tonnes | Grade (g/t gold, g/t silver, % copper) |
Cont metals (ounces of gold, ounces of silver, tonnes of copper) |
|
| A39 | |||||||||
| silver 469,300 553 8,300,000 300 352 4,000 469,600 552 8,300,000 |
|||||||||
| copper 0.64 3,000 0.41 <1,000 0.64 3,000 |
|||||||||
| Gold equivalent 469,300 11.10 167,000 300 7.10 100 469,600 11.10 167,000 |
|||||||||
| V2 | |||||||||
| gold 5,148,300 2.90 479,000 4,120,900 2.51 333,000 9,269,200 2.73 812,000 |
|||||||||
| silver 36 6,000,000 23 3,000,000 30 9,000,000 |
|||||||||
| copper 0.40 21,000 0.26 11,000 0.34 31,000 |
|||||||||
| Gold equivalent 5,148,300 4.00 661,000 4,120,900 3.20 426,000 9,269,200 3.70 1,088,000 |
|||||||||
| Total gold equivalent 828,000 426,000 1,255,000 |
-
The mt carlton ore reserve estimate was prepared by australian mine design and development pty ltd. all of the ore reserves are for extraction by open pit mining.
-
The mt carlton ore reserve estimate is based on measured and indicated resources only. The ore reserve estimate is based on the mineral resource estimation completed in october 2009 and has not been updated for the more recent estimation as at 30 June 2011. conquest does not believe that a re-estimate of the ore reserve is currently warranted because the change between the october 2009 and June 2011 mineral resources has not been material.
-
The cut-off grade is defined as the grade that equals the combined processing and site fixed cost per tonne. if a tonne of material exposed on a mining bench contains enough gold, copper and silver to cover the processing and site fixed cost after allowing for processing recoveries and selling costs (off site transport, smelting, refining and royalties) then that tonne is above cut-off grade and is classed as ore. if the recoverable value is less than the processing and site fixed cost per tonne it is below cut-off grade and is classed as waste.
-
The gold equivalence calculation was made by conquest using a gold price of us$1100 per ounce, a silver price of us$22.00 per ounce and a copper price of us$3.50 per pound. relative estimated metal recovery and payability rates are also incorporated into the gold equivalence calculation.
-
Tonnes and grades are stated to a number of significant digits reflecting the confidence of the estimate. since each number is rounded individually, the columns and rows in the above table may not show exact sums or weighted averages of the reported tonnes and grades.
EXPLANATORY MEMORANDUM
47
5.5 Conquest’s recent share price performance
The chart below shows the closing price of conquest shares on the asX over the 12 month period up to (and including) the last Trading day.
==> picture [480 x 179] intentionally omitted <==
----- Start of picture text -----
0.80
0.70
0.52
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Closing Price (AUD)
Sep 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 July 11 Aug 11 Sep 11
----- End of picture text -----
figure 12: Conquest share price performance
The closing price of conquest shares on the asX as at the close of trading on the last Trading day was $0.52.
during the three months period up to (and including) the last Trading day:
-
the highest recorded daily closing price for conquest shares on the asX was $0.52 (on 6 september 2011); and
-
the lowest recorded daily closing price for conquest shares on the asX was $0.395 (on 29 June 2011).
The last recorded sale price for conquest shares on the asX before the public announcement of the Transaction was $0.45 on 14 June 2011.
5.6 Conquest’s capital structure and ownership
as at the date of this explanatory memorandum, conquest has the following securities on issue:
-
583,241,478 fully paid ordinary shares (quoted on the asX); and
-
67,489,734 conquest options (not quoted on the asX) exercisable at various prices and having various expiry dates (being the majority options and the minority options).
if the minority options offers become unconditional, conquest will issue a further 18,094,801 fully paid ordinary shares for the benefit of the interested directors as consideration for the cancellation of 32,000,000 conquest options, being the minority options.
as at the date of this explanatory memorandum, conquest has the following substantial shareholders:
==> picture [481 x 21] intentionally omitted <==
----- Start of picture text -----
SuBSTANTIAL ShAREhOLDERS NuMBER OF CONQuEST ShARES PERCENTAGE ShAREhOLDING
----- End of picture text -----
| SuBSTANTIAL ShAREhOLDERS | NuMBER OF CONQuEST ShARES | PERCENTAGE ShAREhOLDING |
|---|---|---|
| gold fields ltd | 51,783,388 | 8.88% |
| baker steel capital managers llp | 34,007,860 | 5.83% |
| lujeta pty limited | 33,400,000 | 5.73% |
CATALPA RESOURCES
48
5 profile of conquesT conTinued
5.7 Conquest’s financial information
The financial information for the six months ended 31 december 2010 and year ended 30 June 2010 provided below has been extracted from the full and half year financial reports published by conquest and released on the asX. The financial information is intended to provide a high level financial overview of conquest’s historical financial position and is not intended to provide the level of detail or understanding which is available from a review of the published financial reports which are available on the asX or conquest’s website.
The full financial reports from which these extracts have been taken have been audited (or reviewed in the case of 31 december 2010) by kpmg and prepared in accordance with section 307c of the corporations act. based on these reviews, kpmg did not become aware of any matters that made them believe that the respective reports were not in accordance with the corporations act, including:
-
giving a true and fair view of the consolidated entity’s financial position and performance; and
-
complying with accounting standard aasb 134: interim financial reporting and the corporations regulations.
The financial statements for the full year ended 30 June 2010 do not incorporate assets and liabilities of north queensland metals limited, which was acquired by conquest after that date.[51] These assets and liabilities are, however, reflected in the financial statements for the half year ended 31 december 2010.
The information in below is only a summary of the financial statements and has been prepared for the purposes of this explanatory memorandum.
==> picture [481 x 41] intentionally omitted <==
----- Start of picture text -----
REVIEWED AuDITED
CONDENSED CONSOLIDATED STATEMENT 31 DECEMBER 2010 30 JuNE 2010
OF FINANCIAL POSITION $ $
----- End of picture text -----
| Current assets | ||
|---|---|---|
| cash and cash equivalents | 39,515,704 | 56,087,972 |
| Trade and other receivables | 3,491,290 | 1,232,270 |
| inventories | 5,962,529 | — |
| held for sale assets | 8,500,000 | — |
| other current assets | 1,476,496 | 414,701 |
| Total current assets | 58,946,019 | 57,734,943 |
| Non-current assets | ||
| investments | 8,114 | 265,686 |
| property, plant and equipment | 20,024,108 | 518,835 |
| exploration and evaluation expenditure | 60,616,020 | 35,233,774 |
| mine development | 18,719,848 | — |
| intangible assets | 60,345,155 | — |
| other non-current assets | 72,500 | 86,167 |
| Total non-current assets | 159,785,745 | 36,104,462 |
| Total assets | 218,731,764 | 93,839,405 |
| Current liabilities | ||
| Trade and other payables | 8,242,882 | 1,543,919 |
| employee benefts | 1,135,975 | 39,479 |
| Total current liabilities | 9,378,857 | 1,583,398 |
| Non-current liabilities | ||
| restoration provision | 6,791,722 | — |
| Total non-current liabilities | 6,791,722 | — |
| Total liabilities | 16,170,579 | 1,583,398 |
| Net assets | 202,561,185 | 92,256,007 |
| Equity | ||
| share capital | 230,472,174 | 121,097,570 |
| reserves | 6,780,856 | 2,666,544 |
| accumulated losses | (34,691,845) | (31,508,107) |
| Total equity | 202,561,185 | 92,256,007 |
51 conquest completed the compulsory acquisition of all outstanding shares in north queensland metals limited on 23 november 2010 following its takeover bid for north queensland metals limited, which closed on 22 october 2010. north queensland metals limited is now known as ‘cqT holdings pty limited’.
EXPLANATORY MEMORANDUM
49
5.8 Continuous disclosing entity
as a company listed on the asX and a disclosing entity under the corporations act, conquest is subject to regular reporting and disclosure obligations. copies of documents lodged with asic in relation to conquest may be obtained from, or inspected at, an asic office.
copies of conquest’s annual report for the year ended 30 June 2010, conquest’s financial report for the half year ended 31 december 2010 and any continuous disclosure notices given by conquest after the lodgement of the aforementioned annual report may be obtained from conquest’s website (www.conquestmining.com.au) or the asX’s website (www.asx. com.au). conquest will provide a copy free of charge to anyone who requests a copy of any of these documents before the scheme is approved by the court.
as at the date of this explanatory memorandum, conquest is not withholding any information from disclosure on the basis of an exception from disclosure in the listing rules.
CATALPA RESOURCES
50
6 profile of The newcresT asseTs
6.1 Overview of Newcrest
newcrest is the largest gold producer listed on the asX and one of the world’s top 10 gold mining companies by production, reserves and market capitalisation.
newcrest has a portfolio of predominantly low cost and long life operating mines, a strong pipeline of growth projects and highly prospective brown and greenfield exploration projects. newcrest has a substantial reserve and resource base combined with a long reserve life. as at 30 June 2011, newcrest had gold reserves of 80.0 million ounces and copper reserves of 8.36 million tonnes and gold resources of 147.5 million ounces and copper resources of 19.91 million tonnes.
newcrest is an asX-listed company with its headquarters located in melbourne, australia. as at 30 June 2011, newcrest was among the top 15 companies listed on the asX by market capitalisation.
6.2 Mt Rawdon (Newcrest, 100%)
(a) Overview
mt rawdon is an open pit gold and silver mine and process plant located in south east queensland, approximately 80 kilometres south-west of bundaberg. mt rawdon is wholly owned by newcrest.[52]
The mt rawdon gold deposit is a volcaniclastic hosted, low grade gold deposit. The deposit is mined as a single open pit, using conventional open pit mining methods of drill, blast, load and haul.
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figure 13: Mt Rawdon location
mt rawdon comprises tenements covering approximately 680 square kilometres. The mt rawdon tenements include the historical paradise, gebangle and chowey goldfields. a wide range of gold mineralisation styles are present within the mt rawdon tenements.
figure 14 sets out the mining and exploration tenements at mt rawdon.[53]
52 newcrest’s interests in mt rawdon are held by newcrest’s wholly-owned subsidiary lgl mount rawdon operations pty ltd, acquired as a result of newcrest’s merger with lihir gold limited in september 2010.
53 as set out in figure 14 exploration licence epm 10566 covers land surrounding the mt rawdon mining leases. epm 10566 expires on 31 december 2011. The application to renew epm 10566 is scheduled to be submitted before 30 september 2011.
EXPLANATORY MEMORANDUM
51
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figure 14: Mt Rawdon tenements
equigold nl commenced mining at the mt rawdon gold mine in 2001. in 2008, lihir gold limited acquired mt rawdon following its merger with equigold nl. subsequently, newcrest acquired mt rawdon through its merger with lihir gold limited in september 2010.
in august 2011, mt rawdon gold mine achieved the milestone of one million ounces of gold produced.
The table below highlights the significant milestones in the ownership and production history of mt rawdon:
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----- Start of picture text -----
DATE MILESTONE
----- End of picture text -----
| 1998 | project acquired by equigold nl |
|---|---|
| 2001 | gold production commences |
| 2002 | crushing circuit upgrade |
| 2008 | equigold nl merger with lihir gold limited |
| 2010 | lihir gold limited merger with newcrest |
| 2011 | 1,000,000 ounces of gold produced since commencement of mining |
CATALPA RESOURCES
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6 profile of The newcresT asseTs conTinued
The historical performance of mt rawdon for the five years ended 30 June 2011 is set out in the table below:
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Fy2007 Fy2008 Fy2009 Fy2010 Fy2011
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| ore processed (kt) | 3,408 | 3,510 | 3,357 | 3,392 | 3,516 |
|---|---|---|---|---|---|
| average grade (g/t) | 1.14 | 1.14 | 1.06 | 1.01 | 0.88 |
| recovery (%) | 88.9 | 89.5 | 90.6 | 91.2 | 90.7 |
| gold production (ounces) | 110,992 | 115,069 | 103,261 | 100,673 | 89,636 |
| cash costs ($a/ounce)54 | 373 | 375 | 380 | 476 | 693 |
notes:
-
fy2007 — fy2010 figures above are based on results publicly reported by equigold nl and lihir gold limited being previous owners of the mt rawdon operation (as set out in the ‘milestone table’ above). lihir gold limited reported financials in calendar years 2008, 2009 and first half 2010, whereas equigold nl and newcrest reported in financial years.
-
The decrease in gold production and increase in cash costs per ounce at mt rawdon from fy2010 to fy2011 is attributable to the processing of lower grade ore during the current cutback phase in the pit, scheduled for completion in late fy2013, along with the impact of extreme rain and flood conditions in south east queensland in december 2010 and January 2011.
(b) Geology
The mt rawdon gold deposit is a volcaniclastic hosted low grade deposit.
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figure 15: Mt Rawdon gold deposit
as at 30 June 2011, mt rawdon contained gold resources of approximately 1.026 million ounces and gold reserves of approximately 920 thousand ounces.
54 cash costs include costs of mining, processing and administration costs, royalties, refining and transport charges, deferred waste stripping, ore inventory adjustments and byproduct credits for silver production.
EXPLANATORY MEMORANDUM
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Mt Rawdon — Mineral Resources (as at 30 June 2011)
| DRy TONNES (MILLIONS) |
GOLD GRADE (G/T GOLD) |
SILVER GRADE (G/T SILVER) |
CONTAINED METAL | CONTAINED METAL | |
|---|---|---|---|---|---|
| Gold (ounces) (000’s) |
Silver (ounces) (000’s) |
||||
| measured resource 0.22 1.1 1.9 |
8 13 |
||||
| indicated resource 36.3 0.87 2.4 |
1,015 2,835 |
||||
| inferred resource 0.18 0.64 2.0 |
4 11 |
||||
| Total Resources 36.7 0.87 2.4 |
1,026 2,859 |
note: mineral resources are inclusive of ore reserves. figures subject to rounding.
mt rawdon mineral resources have been reported above a cut-off grade of 0.38 g/t of gold. This is the marginal low grade cut-off that covers all operating costs excluding mining fixed costs, and is based on $900 per ounce usd gold price and $0.75 usd:aud exchange rate. no economic consideration was attributed to silver.
Mt Rawdon — Ore Reserves (as at 30 June 2011)
| DRy TONNES (MILLIONS) |
GOLD GRADE (G/T GOLD) |
SILVER GRADE (G/T SILVER) |
CONTAINED METAL | CONTAINED METAL | |
|---|---|---|---|---|---|
| Gold (ounces) (000’s) |
Silver (ounces) (000’s) |
||||
| proved reserves 0.22 1.1 1.9 |
8 13 |
||||
| probable reserves 31.8 0.89 2.5 |
912 2,519 |
||||
| Total Reserves 32.0 0.89 2.5 |
920 2,533 |
note: figures subject to rounding.
The mt rawdon ore reserve[55] estimate is based on a gold cut-off grade of 0.40 g/t contained within the pit designs revised in June 2011. This is the marginal low grade cut-off that covers all operating costs excluding mining fixed costs, and is based on a $850 per ounce usd gold price, and $0.75 usd:aud exchange rate. no economic consideration was attributed to silver.
(c) Exploration
There may be potential to extend the existing mt rawdon resource, with the mineralisation and alteration system presently open to the south at depth. in addition, newcrest’s exploration has identified a series of conceptual magnetic targets located adjacent to the present resource and could represent potential new zones of mineralisation.
as at 30 June 2011, newcrest’s primary exploration targets at mt rawdon include:
-
Depth potential of known Mt Rawdon mineralisation — The most southern drill section undertaken by newcrest contains an intercept of 48 metres at 1.07 g/t of gold. The mineralisation is open to the south and at depth and has been the focus of recently completed drilling at mt rawdon.
-
This recently completed drilling has further highlighted the potential for an increase in mt rawdon resource, with two high grade intercepts being reported within this drilling.
-
The two significant intercepts include 44 metres at 4.99 g/t of gold and 32 metres at 2.28 g/t of gold. These significantly “higher than resource grades” returned within these intercepts have the potential to increase the mt rawdon resource. both intervals were contained within highly altered, favourable volcaniclastic stratigraphy. follow-up drilling to assess and define these areas of higher grade mineralisation has been proposed and will be completed during q1 fy2012.
-
ongoing interpretation has demonstrated that there is a significant stratigraphic control to the higher grade intervals within the mineralised volcaniclastic stratigraphy at mt rawdon. This interpretation is also suggesting that the degree and intensity of alteration appears to be increasing to the south.
-
To test these conclusions, a “step-out” hole was drilled, targeting the down-plunge potential of this favourable volcaniclastic stratigraphy. The drill hole was drilled approximately 160 meters to the south of the completed resource definition drilling. although visually the drill hole encountered the targeted stratigraphy, which has shown the degree of alteration expected, the recently returned results have been disappointing, with only sporadic, discrete intervals of low grade gold anomalism returned.
further assessment will be required to assess this result, with infill resource definition drilling planned during september 2011.
55 The ‘ore reserve’ is the economically mineable part of the measured and/or indicated mineral resources and excludes inferred resources.
CATALPA RESOURCES
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-
Near mine targets (brownfield) — newcrest’s exploration has identified three conceptual magnetic targets located adjacent to the known mt rawdon deposit. The three targets are:
-
southern anomaly — located within a favourable structural setting immediately south of the current mt rawdon deposit;
-
western anomaly — located adjacent to the mine surface infrastructure. results from drilling in this area include 4 metres at 1.10 g/t, 2 metres at 3.36 g/t and 2 metres at 3.56 g/t; and
-
north western anomaly — located under the current mt rawdon tailings dam.
newcrest is undertaking drill testing of the western anomaly during q1 fy2012.
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figure 16: Mt Rawdon exploration targets
as shown in figure 14, the mt rawdon tenements include a broad area away from the mt rawdon mine. following newcrest’s acquisition of mt rawdon, newcrest has been undertaking a review of the exploration package and has indentified two targets for further exploration. The two identified targets are:
-
Kent’s Knob Breccia — The kent’s knob breccia target was originally identified during the 1980s, adjacent to the historic mt shamrock mine. shallow drilling has confirmed the presence of mineralised quartz breccia with a best intercept of 19 metres at 1.24 g/t of gold. The mineralisation and associated breccia has not been tested at depth.
-
Mt Dell Anomaly — soil sampling at mt dell has identified an unexplained surface gold anomaly associated with a magnetic anomaly.
newcrest has planned to undertake drill testing of kent’s knob during fy2012.
EXPLANATORY MEMORANDUM
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(d) Mining and processing
equigold nl commenced open-pit mining at mt rawdon in 2001. The open pit is currently entering its final cutback stage, with the current pit design based on modelling undertaken in october 2010, and re-optimised in february 2011. mining is undertaken by golding contractors pty ltd under a mining services contract in place since mining operations commenced at mt rawdon. The golding contract is due to expire during the first half of cy2013. newcrest and catalpa are seeking agreement from golding for the contract to be novated to evolution mining with effect from the implementation date.
ore is processed at mt rawdon using conventional cyanide leaching technology at a rate of approximately 3.5 million tonnes of ore per annum. The ore processing facilities include crushing, two stage grinding, leaching and gold recovery circuits along with associated reagents and tailings storage facility.
ore is dumped into a primary gyratory crusher, and then fed to the secondary crusher. The secondary crusher discharge together with ore bypassing the secondary crusher is conveyed to an open conical crushed ore stockpile. material is then ground in a circuit comprising of a sag mill and a ball mill, in closed circuit with classifying cyclones. cyclone overflow slurry passes over trash screens with the coarse screen oversize returning to the ball mill feed. a knelson concentrator is installed to treat a portion of the cyclone underflow. The knelson concentrate is passed over a gemini table to produce a gravity concentrate which is then smelted. The leach/adsorption circuit consists of one leach tank followed by five carbon adsorption tanks. Typically, one batch of carbon per day is treated through a stripping circuit to recover gold and silver to the electrowinning circuit. The gold/silver sludge is recovered from the electrowinning cell cathodes and smelted. slurry discharged from the leach/adsorption circuit is pumped to a tailings storage facility. water is recovered from the tailings dam together with supplementary fresh water for use in the process plant.
for the year ended 30 June 2011, achieved plant recoveries were 90.7% for gold and 56.5% for silver.
(e) Production
The mt rawdon processing plant produced 89,636 ounces of gold and 125,044 ounces of silver in fy2011, achieved through treating 3,516,000 tonnes of ore with an average gold grade of 0.88 g/t, and an average silver grade of 1.96 g/t. quarterly production figures for fy2011 are set out in the following table:
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3 MONThS TO 3 MONThS TO
30 SEPTEMBER 31 DECEMBER 3 MONThS TO 3 MONThS TO TOTAL
2010 [56] 2010 31 MARCh 2011 30 JuNE 2011 Fy2011
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| ore mined (kt) | 833 | 891 | 785 | 868 | 3,377 |
|---|---|---|---|---|---|
| ore processed (kt) | 913 | 824 | 880 | 898 | 3,516 |
| head grade (g/t) | 0.88 | 0.88 | 0.87 | 0.87 | 0.88 |
| recovery (%) | 93.7 | 90.2 | 89.7 | 87.4 | 90.7 |
| gold production | |||||
| (100%) (ounces) | 23,287 | 21,908 | 22,164 | 22,277 | 89,636 |
| cash costs ($a/ | |||||
| ounce)57 | 641 | 651 | 794 | 686 | 693 |
forecast production for mt rawdon for fy2012 is 100,000 to 105,000 ounces of gold[58] for a total site cash cost of $100 million to $105 million[59] before deductions for deferred waste stripping and ore inventory cost of $24 million to $29 million. head grade for the september quarter of fy2012 is expected to be lower than fy2011 levels, at approximately 0.71 g/t, before recovering to approximately 1.1 g/t for the remainder of fy2012.
56 production results for mt rawdon for the three months ending 30 september 2010 include the period prior to newcrest’s acquisition of mt rawdon (as a result of newcrest’s merger with lihir gold limited).
57 cash costs include costs of mining, processing and administration costs, royalties, refining and transport charges, deferred waste stripping and ore inventory adjustments, and byproduct credits for silver production.
58 The low end of this forecast fy2012 production range for mt rawdon, being 100,000 ounces of gold, differs from the low end of the evolution mining production guidance for mt rawdon in section 7.4 of this explanatory memorandum, being 90,000 ounces of gold. catalpa and conquest have taken a slightly more conservative view than newcrest as to fy2012 production for mt rawdon.
59 fy2012 forecast total site cash costs exclude deferred waste stripping and ore inventory adjustments; third party smelting, refining and transportation costs; and by-product credits.
CATALPA RESOURCES
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6.3 Cracow (Newcrest, 70%) (a) Overview
The mining and exploration activities at cracow are owned by two unincorporated joint ventures, each between newcrest’s wholly owned subsidiary newcrest operations limited (70% ) and subsidiaries of catalpa[60] (collectively, 30%). newcrest currently manages the two joint ventures on behalf of the participants, but will cease to do so following implementation of the Transaction.
The cracow gold mine is an underground mining operation producing gold and silver, located in central queensland, australia, approximately 500 kilometres north-west of the city of brisbane.
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figure 17: Cracow location and tenements
in 1996, newcrest and sedimentary holdings nl (as it was then called)[61] formed an unincorporated exploration joint venture. The cracow exploration joint venture holds approximately 550 square kilometres of exploration tenure within a single[62] exploration licence (epm 15981)[63 ] (the cracow goldfield). The cracow goldfield is adjacent to the historical golden plateau deposit, which was mined commencing in the 1930’s.
exploration was initially focussed on large tonnage, low grade porphyry style mineralisation, but shifted in 1997 to low tonnage, high grade epithermal vein style mineralisation. exploration over five years from 1996 delineated the royal and crown gold deposits.
The cracow mining joint venture was formed in september 2003 to develop and operate the cracow gold mine, commencing with the delineated royal and crown deposits. first production of gold at cracow gold mine occurred in november 2004.
60 catalpa subsidiaries holding interests in cracow mining joint venture — lion mining pty ltd (20%), sedgold pty ltd (5%) and fernyside pty ltd (5%). lion mining pty ltd holds catalpa’s 30% interest in the cracow exploration joint venture.sedimentary holdings ltd, now called lion mining pty ltd, is a wholly owned subsidiary of catalpa. 61 sedimentary holdings nl, now called lion mining pty ltd, is a wholly owned subsidiary of catalpa.
62 in 2007, the suite of exploration licences held by the cracow exploration joint venture were consolidated into the current cracow exploration licence — epm 15981. 63 epm 15981 expires on 25 february 2012. The renewal application for epm 15981 must be submitted before 25 november 2011.
EXPLANATORY MEMORANDUM
57
The table below highlights the significant milestones in the history and development of cracow by the joint ventures:
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----- Start of picture text -----
DATE MILESTONE
----- End of picture text -----
| January 1996 | formation of cracow exploration unincorporated joint venture |
|---|---|
| January 1998 | discovery of the royal deposit |
| march 2001 | discovery of the crown deposit |
| november 2001 | discovery of the sovereign deposit |
| may 2002 | discovery of the empire deposit |
| december 2002 | discovery of the phoenix deposit |
| september 2003 | formation of cracow gold mine unincorporated joint venture |
| november 2004 | first production by cracow mining joint venture |
| January 2005 | discovery of the kilkenny deposit |
The operating performance of the cracow gold mine for the five years ended 30 June 2011 is set out in the table below:
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Fy2007 Fy2008 Fy2009 Fy2010 Fy2011
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| ore milled (kt) | 386 | 414 | 437 | 480 | 500 |
|---|---|---|---|---|---|
| average grade (g/t) | 10.11 | 8.70 | 7.58 | 7.24 | 6.86 |
| recovery (%) | 93.9 | 92.0 | 92.4 | 92.0 | 92.2 |
| gold production (100%) (ounces) | 116,683 | 107,393 | 99,204 | 102,760 | 101,723 |
| newcrest share of production (70%) (ounces) | 81,678 | 75,175 | 69,443 | 71,932 | 71,206 |
| newcrest calculation of cash costs | |||||
| ($a/ounce)64 | 342 | 473 | 519 | 542 | 658 |
64 cash costs include costs of mining, processing and administration costs, royalties, refining and transport charges, deferred mine development, ore inventory adjustments and by-product credits for silver production. catalpa applies a different methodology for the purposes of calculating cash costs in respect of its 30% interest in the cracow mining joint venture. for an explanation regarding the methodology applied by catalpa, refer to section 4.3(b)(2) of this explanatory memorandum.
CATALPA RESOURCES
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6 profile of The newcresT asseTs conTinued
(b) Geology
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figure 18: Cracow Goldfield gold deposits and associated vein structures
The cracow goldfield deposits are hosted within a network of steeply dipping quartz veins that extend over an area of four kilometres by two kilometres. The cracow exploration joint venture has been successful in discovering six major gold bearing veins which are located within an area referred to as the western epithermal field, two kilometres west of the historical golden plateau mine workings.
as at 30 June 2011, the cracow goldfield contained gold resources of approximately 893 thousand ounces and gold reserves of approximately 244 thousand ounces (on a 100% basis).
Cracow — Mineral Resources (as at 30 June 2011) — 100% basis
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CONTAINED METAL
SILVER Gold Silver
DRy TONNES GOLD GRADE GRADE (ounces) (ounces)
DEPOSIT (000’S) (G/T GOLD) (G/T SILVER) (000’s) (000’s)
----- End of picture text -----
| Measured | ||||||
|---|---|---|---|---|---|---|
| Resource | royal | 32 | 12.5 | 9.6 | 13 | 10 |
| crown | 77 | 9.8 | 7.6 | 24 | 19 | |
| klondyke north | 1 | 8.0 | 4.7 | 0 | 0 | |
| sovereign | 108 | 7.0 | 3.9 | 24 | 14 | |
| kilkenny | 42 | 13.1 | 9.0 | 18 | 12 | |
| Tipperary | — | — | — | — | — | |
| empire | — | — | — | — | — | |
| roses pride | — | — | — | — | — | |
| phoenix | 12 | 15.5 | 14.5 | 6 | 6 | |
| stockpiles | 6 | 5.0 | 3.0 | 1 | 1 |
EXPLANATORY MEMORANDUM
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CONTAINED METAL
SILVER Gold Silver
DRy TONNES GOLD GRADE GRADE (ounces) (ounces)
DEPOSIT (000’S) (G/T GOLD) (G/T SILVER) (000’s) (000’s)
Indicated
Resource royal — — — — —
crown — — — — —
klondyke north 185 5.7 2.9 34 17
sovereign 120 4.7 2.9 18 11
kilkenny 213 7.3 4.0 50 27
Tipperary 345 7.5 6.5 84 72
— — — — —
empire
roses pride 51 14.6 5.7 24 9
phoenix 129 11.8 11.4 49 47
— — — — —
stockpiles
Inferred Resource royal 85 6.7 10.2 18 28
crown 364 4.8 3.6 56 42
klondyke north 189 4.2 1.9 26 11
sovereign 357 3.8 2.0 43 23
kilkenny 1,056 6.0 3.5 203 119
Tipperary 196 5.0 4.1 32 26
empire 424 6.5 2.8 89 38
roses pride 429 6.0 0.7 82 9
phoenix 1 4.3 5.7 0 0
— — — — —
stockpiles
Total resources royal 117 8.3 10.0 31 38
crown 441 5.7 4.3 81 61
klondyke north 375 4.9 2.4 60 29
sovereign 585 4.5 2.6 85 48
kilkenny 1,311 6.4 3.8 270 158
Tipperary 541 6.6 5.6 115 98
empire 424 6.5 2.8 89 38
roses pride 480 6.9 1.2 106 18
phoenix 142 12.1 11.7 55 53
stockpiles 6 5.0 3.0 1 1
TOTAL
(100% basis) 4,422 6.3 3.8 893 542
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note: mineral resources are inclusive of ore reserves. figures expressed to one decimal place and subject to rounding.
The cracow mineral resources have been reported above a cut-off grade of 2.5 g/t of gold. This is the marginal low grade cutoff that covers all operating costs excluding mining fixed costs and is based on a $1000 per ounce usd gold price and $0.8 usd:aud exchange rate. no economic consideration was attributed to silver. stockpiles were reported as at 26 June 2011.
CATALPA RESOURCES
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6 profile of The newcresT asseTs conTinued
Cracow — Ore Reserves (as at 30 June 2011) — 100% basis
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CONTAINED METAL
SILVER Gold Silver
TONNES GOLD GRADE GRADE (ounces) (ounces)
DEPOSIT (000’S) (G/T GOLD) (G/T SILVER) (000’s) (000’s)
Proved Reserve royal 44 10.6 8.3 15 12
crown 41 7.3 5.4 9 7
— — — — —
klondyke north
sovereign 91 6.1 3.5 18 10
kilkenny 45 9.8 6.8 14 10
— — — — —
Tipperary
— — — — —
empire
roses pride — — — — —
phoenix 9 13.2 14.4 4 4
stockpiles 6 5.0 3.0 1 1
Probable Reserve royal — — — — —
crown 3 17.8 10.9 2 1
klondyke north 30 5.2 2.7 5 3
sovereign 48 5.0 2.5 8 4
kilkenny 231 5.9 3.3 44 25
Tipperary 325 5.6 5.2 59 54
— — — — —
empire
roses pride 76 9.0 3.6 22 9
phoenix 128 10.6 53.0 43 217
— — — — —
stockpiles
Total Reserve royal 44 10.6 8.3 15 12
crown 44 8.0 5.8 11 8
klondyke north 30 5.2 2.7 5 3
sovereign 138 5.7 3.2 25 14
kilkenny 276 6.5 3.9 58 35
Tipperary 325 5.6 5.2 59 54
— — — — —
empire
roses pride 76 9.0 3.6 22 9
phoenix 137 10.8 50.4 47 222
stockpiles 6 5.0 3.0 1 1
TOTAL
(100% basis) 1,075 7.0 10.3 244 357
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note: figures expressed to one decimal place and subject to rounding.
EXPLANATORY MEMORANDUM
61
The cracow ore reserves[65] have been reported above a cut-off grade of 2.4 g/t of gold. This is the low grade cut off that covers all operating costs, excluding mining fixed costs and is based on a $1000 per ounce usd gold price and $0.8 usd:aud exchange rate. no economic consideration was attributed to silver. stockpiles were reported as at 26 June 2011.
(c) Exploration
The exploration activities at cracow have focussed on increasing the gold resource around the cracow gold mine and/or discovering new deposits in the cracow goldfield.
as at 30 June 2011, the joint venture’s primary exploration targets at cracow include:
-
western epithermal field — The western epithermal field has been the focus of the majority of the exploration since the commencement of the joint venture. approximately 1.6 million ounces (in aggregate) of gold has been discovered within the royal, crown, sovereign, kilkenny, klondyke, Tipperary, empire, roses pride and phoenix veins. potential exists for new discoveries with the main mineralised structures remaining open to north-northwest — south-southeast and to the west.
-
golden Plateau — within the golden plateau area, potential exists to discover smaller size shoots that could provide additional mill feed. as at 30 June 2011, the major targets within the golden plateau are the veins and structures located adjacent to the historical golden plateau mine workings.
-
regional — past exploration by the joint venture has discovered quartz vein bearing structures to the north and south of the known cracow goldfield. The structures to the south are interpreted as extensions of the known mineralised structures of the cracow goldfield. prospects to the north demonstrate the potential for mineralisation at depth.
(d) Mining and processing
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figure 19: Cracow deposits — Schematic longsection
The western side of the cracow goldfield is the focus of current mining activities. as at 30 June 2011, current and near term mining is focussed on the sovereign and kilkenny deposits. ore is mined from multiple underground quartz vein shoots (hosted in volcanic material) using a reverse-stope blasting mining method, introduced at the site in 2007. The various ore bodies are accessed via a decline from the surface which grades generally at 1:7. access to the underground mine is via a portal located to the east of the royal deposit. primary ventilation is provided by two axial fans located on the surface. The decline acts as the intake airway for the underground mine. process water for the underground mine is reticulated from bores that pump water from historical workings.
electrical power used in the mine is supplied through the state grid, via 22 kv lines from the town of Theodore to the mine.
mining at the cracow gold mine is performed by downer edi mining pty limited under a mining alliance agreement. The agreement is currently scheduled to expire on 30 June 2013. newcrest and catalpa are seeking agreement from downer edi to the assignment of the agreement to evolution mining with effect from the implementation date.
65 The ‘ore reserve’ is the economically mineable part of the measured and/or indicated mineral resources and excludes inferred resources.
CATALPA RESOURCES
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6 profile of The newcresT asseTs conTinued
The cracow gold mine treatment plant is a conventional carbon in leach gold processing circuit with associated mill and on site infrastructure. The comminution circuit is comprised of new and refurbished second hand equipment. ore is treated via a three-stage process which involves tertiary crushing, grinding in a ball mill and a cyanide leach. activated carbon absorbs gold from the leach liquor and the gold is then stripped using strong caustic cyanide solution. gold is then electro-won from solution and smelted into gold dorè bars.
for the purposes of commencing operations, the cracow mining joint venture completed a plant upgrade in 2004, which included a third stage of crushing, a larger single stage grinding facility, a pre-leach thickener, new leach and carbon in leach tanks, a new gold recovery circuit, new reagent storage facilities, new piping and some new electrical reticulation. in fy2011, the treatment plant was further upgraded to a nameplate capacity of 550,000 tonnes per annum which involved recommissioning an existing 460kw ball mill, adding a third leach tank and upsizing some other minor equipment.
for the year ended 30 June 2011, achieved plant recoveries were 92.2% for gold, and 70.8% for silver.
(e) Production
The cracow gold mine’s production for fy2011 (100%) was 101,723 ounces of gold and 54,529 ounces of silver, achieved through treating 500,000 tonnes of ore with an average grade of 6.86 g/t (gold) and 4.8 g/t (silver). The table below sets out the fy2011 production results for the cracow gold mine:
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3 MONThS TO 3 MONThS TO
30 SEPTEMBER 31 DECEMBER 3 MONThS TO 3 MONThS TO TOTAL
2010 2010 31 MARCh 2011 30 JuNE 2011 Fy2011
----- End of picture text -----
| ore mined (kt) | 117 | 121 | 116 | 107 | 461 |
|---|---|---|---|---|---|
| ore processed (kt) | 121 | 117 | 124 | 136 | 500 |
| head grade (g/t) | 7.19 | 7.40 | 6.79 | 6.16 | 6.86 |
| recovery (%) | 91.2 | 92.8 | 92.2 | 92.6 | 92.2 |
| gold production (100%) | |||||
| (ounces) | 25,756 | 25,980 | 24,987 | 25,001 | 101,723 |
| newcrest share of | |||||
| production (70%) (ounces) | 18,029 | 18,186 | 17,491 | 17,501 | 71,206 |
| newcrest calculation of cash | |||||
| costs ($a/ounce)66 | 557 | 572 | 697 | 811 | 658 |
in fy2012, head grade is expected to be lower than fy2011 levels, at approximately 6.59 g/t, reflecting the lower grade of ore bodies available for current mining. cash costs per ounce are consequently expected to increase relative to historical averages. newcrest’s forecast production for fy2012 (70% basis) is 70,000 to 75,000 ounces of gold[67] with a total site cash cost of approximately $47 million to $52 million.[68]
66 cash costs include costs of mining, processing and administration costs, royalties, refining and transport charges, deferred mine development and ore inventory adjustments, and by-product credits for silver production. catalpa applies a different methodology for the purposes of calculating cash costs in respect of its 30% interest in the cracow mining joint venture. for an explanation regarding the methodology applied by catalpa, refer to section 4.3(b)(2) of this explanatory memorandum.
67 The low end of this forecast fy2012 production range for cracow, being 70,000 ounces of gold (on a 70% basis, which equates to 100,000 ounces of gold on a 100% basis) differs from the low end of the evolution mining production guidance for cracow in section 7.4 of this explanatory memorandum, being 90,000 ounces of gold (on a 100% basis). catalpa and conquest have taken a slightly more conservative view than newcrest as to fy2012 production for cracow.
68 fy2012 forecast total site cash costs exclude deferred mine development and ore inventory adjustments; third party smelting, refining and transportation costs; royalties; and byproduct credits.
EXPLANATORY MEMORANDUM
63
7 profile of evoluTion mining
7.1 Overview of Evolution Mining
post completion of the Transaction, evolution mining will become one of australia’s leading mid-cap, growth focused and asset diversified gold producers and will have:
-
a pro forma market capitalisation of approximately $1.15 billion;[69]
-
a portfolio of four producing mines and one development asset forecast to produce 335,000 to 375,000 ounces of gold in fy2012 and 410,000 to 465,000 ounces of gold equivalent in fy2013;[70]
-
a combined mineral resource base of 6.9 million ounces of gold equivalent and a combined ore reserve base of 3.5 million ounces of gold equivalent;[71]
-
exposure to a significant pipeline of development opportunities;
-
a strong financial platform to pursue growth with an expected cash position following the rights offer of approximately $199 million[72] and an expected debt position of approximately $48 million;[73]
-
a proven entrepreneurial and operational management team with complementary skill sets, focused on maximising shareholder value; and
-
substantial re-rating potential through earnings growth from enhancement and optimisation of the combined asset base.
if the Transaction is implemented, evolution mining intends to:
-
launch the rights offer to raise approximately $150 million within 10 business days of the implementation date;
-
arrange for conquest to be removed from the official list of the asX; and
-
commence the transition of all support functions currently being performed by newcrest in respect of the cracow and mt rawdon gold mining and exploration projects to evolution mining.
7.2 Board
as a result of the Transaction, the composition of the catalpa board will be changed to reflect the new shareholder base of evolution mining. evolution mining will have a board of eight directors including Jake klein as executive chairman and bruce mcfadzean as managing director and chief executive officer.
of the eight directors, three will be existing catalpa directors (including bruce mcfadzean), three will be existing conquest directors (including Jake klein) and two will be nominated by newcrest. all existing catalpa directors who are not continuing will resign immediately prior to the implementation date.
The board of directors of evolution mining will comprise:
Executive directors
| Executive directors | |
|---|---|
| Jake Klein bcom (hons), aca executive chairman |
mr klein is the current executive chairman of conquest (appointed in may 2010). mr klein was previously president and chief executive offcer of sino gold mining limited where he managed the development of that company into the largest foreign participant in the chinese gold industry. prior to joining sino gold (and its predecessor) in 1995, mr klein was employed at macquarie bank and pricewaterhousecoopers. mr klein is also a non-executive director of lynas corporation limited and oceanagold corporation limited. mr klein is a past president of the nsw branch of the australia china business council. |
| Bruce McFadzean dip mining, fausimm managing director & chief executive offcer |
mr mcfadzean is the current managing director and chief executive offcer of catalpa. mr mcfadzean, a mining engineer, will bring over 30 years of management, mining, processing and project start up experience to evolution mining, including 15 years with global resources majors, rio Tinto and bhp billiton. mr mcfadzean has broad commodity experience in gold, iron ore, diamonds and nickel/cobalt and in a wide range of roles including corporate, managerial, technical and operational roles. mr mcfadzean is also a non-executive director of venture minerals limited. |
69 based on the catalpa share price as at the close of trading on the last Trading day and assuming $150 million is raised under the proposed rights offer.
70 section 7.4 of this explanatory memorandum sets out the basis for these production forecasts.
71 as at 30 June 2011.
-
72 based on the cash position of each of catalpa and conquest as at 30 June 2011 (including gold and silver available for sale), assuming $150 million is raised under the proposed rights offer and taking into account the costs associated with the Transaction and the rights offer. This figure does not take into account any stamp duty payable by catalpa in connection with the Transaction or the operating cash flows of catalpa and conquest during the period from 1 July 2011 to completion of the rights offer. it also does not take into account the macquarie facilities. as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities.
-
73 based on the debt position of each of catalpa and conquest as at 30 June 2011. This figure does not take into account the macquarie facilities. as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities.
CATALPA RESOURCES
64
7 profile of evoluTion mining conTinued
Existing Catalpa Directors
mr rowe brings a wealth of geological and business development skills to evolution mining. mr rowe has 40 years experience within the nickel and gold industries. he has held a variety of positions in mine management, exploration and business development and was previously employed as an executive of lion ore in australia. rowe is also a non-executive director of panoramic resources limited and southern cross goldfields ltd. John Rowe bsc (hons), arsm, mausimm non-executive director
| Existing Catalpa Directors | |
|---|---|
| John Rowe bsc (hons), arsm, mausimm non-executive director |
mr rowe brings a wealth of geological and business development skills to evolution mining. mr rowe has 40 years experience within the nickel and gold industries. he has held a variety of positions in mine management, exploration and business development and was previously employed as an executive of lion ore in australia. rowe is also a non-executive director of panoramic resources limited and southern cross goldfelds ltd. |
| Graham Freestone bec (hons) non-executive director |
mr freestone has over 40 years experience in the natural resources industry. he has a broad based fnance, corporate and commercial background obtained in australia and internationally through senior fnance positions with the shell group, acacia resources limited and anglogold. he had a leading role in the foat of the shell group’s australian gold interests through acacia resources limited and was acacia’s chief financial offcer and company secretary from 1994 until 2001. from 2001 to 2009 he was a non-executive director of lion selection limited and chair of its audit committee. he has been a non-executive catalpa director and chair of its audit committee since 2009. |
| Existing Conquest Directors | |
| James Askew bmining eng (hons), mengsc non-executive director |
mr askew is a current non-executive conquest director (appointed in may 2010). mr askew is a mining engineer with over 30 years’ broad international experience as a director/chief executive offcer for a wide range of australian and international publicly listed mining, mining fnance and other mining related companies. mr askew currently serves on the boards of oceanagold corporation (chairman), golden star resources ltd and ivanhoe australia limited and formerly served on the board of ausdrill limited. |
| Paul Marks beng(chem), mappfin non-executive director |
mr marks is a current non-executive conquest director (appointed in december 2009). mr marks has 35 years of experience across a range of industries from foreign exchange and commodities trading to chemical and hydrocarbon processing. mr marks worked as a chemical engineer with dow chemicals and has previously held the positions of vice-president of foreign exchange with prudential-bache securities, senior strategist foreign exchange aefc (the merchant banking arm of the commonwealth bank of australia) and senior foreign exchange strategist with national australia bank. mr marks formerly served on the board of prana biotechnology ltd. since the mid-1990s mr marks has also led a number of private ventures ranging from property sub-divisions and developments as well as proprietary trading in commodities and derivatives. |
EXPLANATORY MEMORANDUM
65
Newcrest nominees
==> picture [64 x 71] intentionally omitted <==
mr conway is the current newcrest executive general manager (commercial and west africa).
mr conway has more than 21 years commercial experience in the resources sector across a diverse range of commercial and financial activities at newcrest and previously at bhp billiton.
mr conway has held a mix of corporate and operational commercial roles within Lawrie Conway australia, papua new guinea and chile. b bus, cpa non-executive director
mr smith is the current newcrest executive general manager australian operations (appointed in september 2010, following newcrest’s merger with lihir gold limited). mr smith has over 34 years mining experience across a broad spectrum of responsibilities, including a range of senior corporate roles with wmc resources ltd, rio Tinto and lihir gold limited.
mr smith has previously held the positions of chief operating officer at lihir gold Peter Smith limited and, prior to that, executive director of western metals ltd. f ausimm, gaicd, mba usq non-executive director
7.3 The Rights Offer
(a) Overview of the Rights Offer
shortly after implementation of the Transaction, evolution mining will seek to raise approximately $150 million by way of a renounceable pro-rata entitlement offer.
The rights offer will be made on a pro-rata basis to all shareholders in evolution mining, including catalpa shareholders and conquest shareholders who hold shares in evolution mining as at the record date for the rights offer. The rights offer may include an accelerated institutional component pursuant to which eligible institutional and sophisticated shareholders will be given the opportunity to subscribe for new shares before retail shareholders.
some of the risks that catalpa shareholders will be exposed to in relation to the rights offer are set out in section 8.1(a)(14) of this explanatory memorandum.
(b) Details of the Rights Offer
The rights offer will only be conducted by evolution mining if the Transaction is implemented. a condition to implementation of the Transaction is that catalpa must execute an underwriting agreement in respect of the rights offer. This means that unless the condition is waived by newcrest in accordance with the Transaction implementation deed, the rights offer will, if undertaken:
-
(1) be fully underwritten by the second court date; and
-
(2) be priced at a price per share that is not less than 80% of Terp, being the theoretical market price for shares in evolution mining immediately following the rights offer assuming the rights offer is fully subscribed (based on the vwap of evolution mining shares on the last day of trading before the launch of the rights offer).
in addition, if the rights offer is conducted at a price that is less than 85% of Terp then evolution mining must pay to newcrest an amount equal to the Terp shortfall.
The Terp shortfall is intended to compensate newcrest for any difference between the proceeds it receives from the sale of its entitlements under the rights offer and the proceeds it would have received for those entitlements if the price at which shares were issued under the rights offer had been 85% of Terp.
CATALPA RESOURCES
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7 profile of evoluTion mining conTinued
whether or not the Terp shortfall will be payable, and its amount, is subject to a number of variables, including the actual price at which shares are issued under the rights offer, the vwap of shares in evolution mining immediately prior to the launch of the rights offer and the proceeds from the sale of newcrest’s entitlements under the rights offer. accordingly, it is not possible to definitively say at this point in time whether the Terp shortfall will be payable or, if so, what amount newcrest will be entitled to receive. however, if evolution mining is required to pay newcrest the Terp shortfall, it is not expected that this amount would exceed $4 million.[74]
The pricing of the rights offer has not yet been determined as it is dependent on negotiations between catalpa and potential underwriters and on other factors that will need to be considered closer to the time at which the rights offer will be launched, the most notable of which is evolution mining’s share price.
it is intended that the rights offer will commence as soon as reasonably practicable after the implementation date (and, in any event, not more than 10 business days after the implementation date).
if the Transaction is implemented further information about the rights offer will be sent to eligible shareholders of evolution mining (including an offer to participate in the rights offer).
(c) Participation in the Rights Offer
shareholders of evolution mining who are entitled and wish to participate in the rights offer will need to pay evolution mining or its agent an amount equal to the number of shares the shareholder wishes to subscribe for under the rights offer multiplied by the offer price.
The impact of the rights offer on the shareholders of evolution mining will depend on their participation in the rights offer. shareholders who participate in the rights offer will not have their interest in evolution mining diluted, while shareholders who do not participate in the rights offer will be diluted.
under the Transaction implementation deed, newcrest has agreed with catalpa and conquest that newcrest will not take up its entitlements under the rights offer, which is expected to reduce newcrest’s interest in evolution mining to approximately 33% (calculated on a fully diluted value basis).[75] further details about the impact of newcrest’s nonparticipation in the rights offer are set out in section 7.6(e) of this explanatory memorandum.
as announced by catalpa and conquest on 19 July 2011, catalpa entered into commitment letters with two institutional investors (blackrock and baker steel) under which those investors committed to take up most of newcrest’s entitlements, being a total of $50 million worth of shares in evolution mining based on the offer price.[76] The investors will pay the greater of the offer price and the price determined in the institutional bookbuild for their new shares in evolution mining. further information on the commitments is contained in section 9.1(d) of this explanatory memorandum.
7.4 Activities and assets
following completion of the Transaction, evolution mining’s assets will include five wholly owned gold projects: edna may, pajingo, mt carlton, mt rawdon and cracow (see figure 1).
evolution mining will have a combined mineral resource base of 6.9 million ounces of gold equivalent and a combined ore reserve base of 3.5 million ounces of gold equivalent.[77]
The assets that will be owned by evolution mining are described in more detail in sections 4, 5 and 6 of this explanatory memorandum, with mineral resource and ore reserves statements in respect of those assets also set out in those sections.
The combined assets that will be owned by evolution mining produced approximately 303,000 ounces of gold in fy2011, as outlined below.
==> picture [480 x 104] intentionally omitted <==
----- Start of picture text -----
CATALPA CONQUEST NEWCREST ASSETS COMBINED: 303
Cracow Mt Rawdon Edna
32% 30% May
22%
Edna Cracow
May 44%
68% Pajingo Mt Rawdon
100%
56%
Pajingo Cracow
15% 34%
----- End of picture text -----
figure 20: Breakdown of production in Fy2011 from each of the assets that will be owned by Evolution Mining which produced gold in Fy2011
74 assuming that the offer price under the proposed rights offer is not less than 80% of Terp and that not more than $150 million is raised under the rights offer.
75 based on an illustrative rights offer price of a 10% discount to Terp, where Terp is calculated based on the vwap of a catalpa share on the last Trading day.
76 newcrest’s entitlements under the rights offer will be in respect of approximately $57 million of the total $150 million proposed to be raised, based on newcrest’s interest in evolution mining on a fully diluted value basis immediately following implementation of the Transaction (being a 38% interest).
77 as at 30 June 2011.
EXPLANATORY MEMORANDUM
67
evolution mining will benefit from an attractive growth profile through its existing organic growth pipeline, including the development of mt carlton and the expansion potential at pajingo and edna may. based on the production forecasts provided by catalpa, conquest and newcrest for fy2012 as described in sections 4.3, 5.3 and 6 of this explanatory memorandum (respectively), the pro forma production of evolution mining for the 12 months to 30 June 2012 is expected to be within the range of 335,000 to 375,000 ounces of gold. evolution mining’s production for fy2013 is forecast to grow to 410,000 to 465,000 ounces of gold equivalent.
==> picture [479 x 163] intentionally omitted <==
----- Start of picture text -----
410 – 465koz
335 – 375koz
303koz
255koz 268koz
2009 2010 2011 2012 2013
MT RAWDON PAJINGO CRACOW EDNA MAY MT CARLTON
35 – 54% growth
----- End of picture text -----
figure 21: Production from the assets that will be owned by Evolution Mining from Fy2009 to Fy2011 and forecast production from those assets from Fy2012 to Fy2013
evolution mining’s growth in production in fy2012 and fy2013 is based on the forecast production increases set out below:
| ASSET | Fy2011 PRODuCTION (OuNCES OF GOLD) |
FORECAST Fy2012 PRODuCTION (OuNCES OF GOLD) |
FORECAST Fy2013 PRODuCTION (OuNCES OF GOLD EQuIVALENT) |
|---|---|---|---|
| edna may 65,592 85,000 to 93,000 115,000 to 125,000 |
|||
| cracow 101,723 90,000 to 107,000 90,000 to 105,000 |
|||
| mt rawdon 89,636 90,000 to 105,000 95,000 to 100,000 |
|||
| pajingo 45,889 70,000 70,000 to 75,000 |
|||
| mt carlton 0 0 40,000 to 60,000 |
|||
| Total 302,840 335,000 to 375,000 410,000 to 465,000 |
-
forecast production for edna may for fy2012 and fy2013 is based on the information in section 4.3(b)(1) of this explanatory memorandum.
-
forecast production for pajingo for fy2012 and fy2013 and for mt carlton for fy2013 is based on the information in sections 5.3(b)(1) and 5.3(b)(2) of this explanatory memorandum (respectively).
-
forecast production for cracow for fy2012 is based on the information in section 6.3(e) of this explanatory memorandum and the manner in which evolution mining intends to operate cracow following implementation of the Transaction.[78 ] forecast production for cracow for fy2013 is based on catalpa and conquest’s production forecast for cracow for that period, which is based on current ore reserves.
-
forecast production for mt rawdon for fy2012 is based on the information in section 6.2(e) of this explanatory memorandum and the manner in which evolution mining intends to operate mt rawdon following implementation of the Transaction.[79] forecast production for mt rawdon for fy2013 is based on catalpa and conquest’s production forecast for mt rawdon for that period, which is based on current ore reserves.
78 The low end of the fy2012 forecast production range for cracow shown in the above table, being 90,000 ounces of gold, differs from the low end of the range provided by newcrest as set out in section 6.3(e) of this explanatory memorandum, being 70,000 ounces of gold (on a 70% basis, which equates to 100,000 ounces of gold on a 100% basis). conquest and catalpa have taken a slightly more conservative view than newcrest as to fy2012 production for cracow.
79 The low end of the fy2012 forecast production range for mt rawdon shown in the above table, being 90,000 ounces of gold, differs from the low end of the range provided by newcrest as set out in section 6.2(e) of this explanatory memorandum, being 100,000 ounces of gold. conquest and catalpa have taken a slightly more conservative view than newcrest as to fy2012 production for mt rawdon.
CATALPA RESOURCES
68
7 profile of evoluTion mining conTinued
7.5 Market positioning
following completion of the rights offer, evolution mining will be positioned amongst the top 10 asX-listed gold companies by market capitalisation[80] (see figure 22) and top 5 by fy2011 production[81 ] (see figure 23).
==> picture [480 x 233] intentionally omitted <==
----- Start of picture text -----
30.41
NEW PEER GROUP BASED ON MARKET CAPITALISATION
2.94
1.64 1.53
1.25 CURRENT PEER GROUP BASED ON MARKET CAPITALISATION
1.18
1.15
0.96
0.75
0.73
0.61
0.56 0.56 0.52 0.50 0.48 0.47 0.46 0.43 0.42
0.41 0.40 0.37
0.32 0.31 0.30 0.30 0.30 0.27 0.26
NEWCREST ALACER PERSEUS MEDUSA REGIS KINGSGATE EVOLUTION CGA RESOLUTE ST. BARBARA OCEANAGOLD ALLIED GOLD TERANGA BEADELL GRYPHON RAMELIUS SILVER LAKE INTEGRA GOLD ONE TROY AMPELLA KINGSROSE SARACEN NOBLE MINERALS ADAMUS CONQUEST CATALPA FOCUS MINERALS TANAMI RED 5
----- End of picture text -----
figure 22: Comparison of pro forma market capitalisation of Evolution Mining with market capitalisations of ASX-listed gold companies that are expected to be in Evolution Mining’s peer group by market capitalisation[82] and ASX-listed gold companies that are in Catalpa’s current peer group by market capitalisation.[83]
==> picture [480 x 194] intentionally omitted <==
----- Start of picture text -----
2.71
NEW PEER GROUP BY PRODUCTION
0.33 0.32
0.30
0.26 0.26 CURRENT PEER GROUP BY PRODUCTION
0.19
0.16
0.14
0.11 0.10 0.10 0.10
0.08 0.08 0.07 0.06
0.05
0.04
0.03
NEWCREST RESOLUTE ALACER EVOLUTION OCEANAGOLD ST BARBARA CGA KINGSGATE TERANGA SARACEN MEDUSA RAMELIUS GOLD ONE REGIS ALLIED GOLD TROY SILVERLAKE INTEGRA ADAMUS KINGROSE
----- End of picture text -----
figure 23: Comparison of Fy2011 production from the assets that will be owned by Evolution Mining with production from the assets owned by ASX-listed gold companies that are expected to be in Evolution Mining’s peer group by production[84] and ASX-listed gold companies that are in Catalpa’s current peer group by production in Fy2011.[85]
- 80 based on the share prices of asX-listed gold companies as at the close of trading on the last Trading day and the pro forma market capitalisation of evolution mining, assuming $150 million is raised under the proposed rights offer.
81 based on information publicly released by asX-listed gold companies regarding production rates for fy2011.
-
82 This includes companies listed on the asX who had a market capitalisation of between $500 million and $3 billion as at the close of trading on the last Trading day.
-
83 being companies listed on the asX who had a market capitalisation of less than $500 million as at close of trading on the last Trading day.
-
84 This includes companies listed on the asX who produced between 100,000 and 500,000 ounces of gold in fy2011.
-
85 being companies listed on the asX who produced less than 100,000 ounces of gold in fy2011.
EXPLANATORY MEMORANDUM
69
7.6 Capital structure and ownership
(a) Overview
if the Transaction is implemented, catalpa will issue approximately 410.4 million new catalpa shares (though this number may be marginally more or less, depending on the vwap of catalpa shares during the five trading days prior to the implementation date as discussed in section 7.6(c) of this explanatory memorandum).
as a result of the Transaction, the number of catalpa shares on issue will increase from approximately 178.3 million (being the number currently on issue) to approximately 588.7 million (not including the shares to be issued under the rights offer), as illustrated below.
| CATALPA ShARES TO BE ISSuED |
CuMuLATIVE TOTAL OF CATALPA ShARES ON ISSuE |
|
|---|---|---|
| as at the date of this explanatory memorandum n/a 178,299,049 |
||
| To be issued as scheme consideration 180,400,88486 358,699,933 |
||
| To be issued pursuant to the share issue approximately 228,876,32887 587,576,261 |
||
| To be issued upon vesting of the catalpa performance rights88 1,119,000 588,695,261 |
it is intended that, shortly following implementation of the Transaction, evolution mining will conduct a renounceable pro-rata entitlement offer to raise approximately $150 million. The number of shares in evolution mining that will be issued pursuant to the rights offer will depend on the price at which the rights offer is conducted, which is yet to be determined. however, as an example, if the vwap of an evolution mining share on the day before the launch of the rights offer was $1.70[89] , and the rights offer was conducted at a 10% discount to Terp, then approximately 99.7 million shares would be issued by evolution mining pursuant to the rights offer.
based on the conquest and catalpa share registers as at the last Trading day, newcrest is expected to be the only shareholder with a substantial holding in evolution mining.
86 based on 583,241,478 conquest shares on issue plus a further 18,094,801 conquest shares to be issued pursuant to the minority options offers (assuming conquest shareholders pass the relevant resolution at the conquest general meeting), all multiplied by 0.3 (being the exchange ratio under the scheme).
87 assumes the vwap of catalpa shares in the 5 trading days prior to the implementation date is the same as the 5 trading days ending on (and including) the last Trading day. The actual number of subscription shares to be issued will be determined by the formula discussed in section 7.6(c) of this explanatory memorandum. 88 The catalpa board has exercised its discretion to waive the performance conditions that apply to the catalpa performance rights, subject to the Transaction being implemented. 89 This was the catalpa share price as at the close of trading on the last Trading day.
CATALPA RESOURCES
70
7 profile of evoluTion mining conTinued
(b) Catalpa Options and Catalpa Performance Rights on (and assuming) implementation of the Transaction and completion of the majority options offers, the following catalpa options and catalpa performance rights will be on issue:
| LISTED CATALPA OPTIONS |
uNLISTED CATALPA OPTIONS |
CATALPA PERFORMANCE RIGhTS |
|
|---|---|---|---|
| as at the date of this explanatory memorandum 4,974,315 8,739,62490 1,119,000 |
|||
| following completion of the majority options offers 4,974,31591 20,064,36292 093 |
(c) Determining the number of Subscription Shares
The precise number of subscription shares that will be issued to newcrest (or its nominees) by catalpa in consideration of the purchase by catalpa (through its wholly owned subsidiaries) of the newcrest assets will be that number that is required to give newcrest a 38% interest in evolution mining (prior to the rights offer and calculated on a fully diluted value basis). in broad terms that is, that number of fully paid ordinary shares that equates to 38% of the pro forma market value of evolution mining following implementation of the Transaction, taking into account the merger ratio between catalpa and conquest, the value of unexercised options granted by catalpa and conquest, and the issue of the relevant number of ordinary shares to newcrest (or its nominees). existing catalpa and conquest shareholders will each emerge with approximately 31% of evolution mining on the same diluted basis.
The precise number of subscription shares issued to newcrest (or its nominees) will be determined in accordance with the following formula:
number of subscription shares = (a + (b/c)) x 38/62
where:
a is the number of catalpa shares on issue immediately prior to the issue of the subscription shares (including catalpa shares to be issued as scheme consideration);
b is the implied value of;
-
(i) the catalpa options on issue as at the trading day before the implementation date; and
-
(ii) the catalpa options to be issued as consideration under the majority options offers assuming all of those offers are accepted and become unconditional (as if those catalpa options had been issued on or before the trading day before the implementation date), determined in accordance with the financial model agreed between catalpa, conquest and newcrest for this purpose; and
c is the vwap of catalpa shares on the asX during the five day period ending on (and including) the trading day before the implementation date.
(d) Newcrest’s Voting Power in Evolution Mining following the Share Issue as described in the table above, if the 5-day vwap of catalpa shares ending on the trading day before the implementation date was the same as the 5-day vwap of catalpa shares ending on the last Trading day, newcrest would be issued 228,876,328 subscription shares.
newcrest’s voting power in evolution mining (which is calculated by reference to issued catalpa shares, and disregards options over unissued catalpa shares) will exceed 38%. for example, if it is assumed that none of the catalpa options currently on issue or to be issued in connection with the Transaction are exercised, the above shareholding would give newcrest voting power in evolution mining of 38.88%.
as the number of subscription shares is determined by the above formula, newcrest’s voting power in evolution mining may vary and newcrest may have voting power of slightly more or less than 38.88% in evolution mining following the issue of the subscription shares. newcrest’s maximum voting power in evolution mining following the issue of the subscription shares will be 39.7%.
The newcrest associates are associates of newcrest. The newcrest associates will each have the same voting power in evolution mining as newcrest.
(e) Newcrest’s interest in Evolution Mining following the Rights Offer newcrest has agreed with conquest and catalpa that it will not take up its entitlements under the rights offer that relate to the shares it will hold in evolution mining. as a result, following the rights offer, newcrest’s interest in evolution mining will be reduced. The level of reduction in newcrest’s interest will depend upon the price at which the rights offer is conducted. if, for example, the
90 The catalpa board has exercised its discretion to waive the vesting conditions attaching to 679,000 of the unlisted catalpa options, subject to the Transaction being implemented. accordingly all of these 8,739,624 unlisted catalpa options will have vested upon implementation of the Transaction.
91 This assumes no listed catalpa options are exercised between the date of this explanatory memorandum and the implementation date. The listed catalpa options expire on 31 october 2011. 92 This assumes that all of the majority options offers will be completed and therefore assumes that the majority options resolution is passed, such that 11,324,738 catalpa options are issued. 93 The catalpa board has exercised its discretion to waive the performance conditions that apply to the catalpa performance rights, subject to the Transaction being implemented.
EXPLANATORY MEMORANDUM
71
rights offer is conducted at the catalpa share price as at the close of trade on the last Trading day, then newcrest’s interest in evolution mining following the rights offer would be approximately 33% (calculated on a fully diluted value basis)[94] .
existing conquest shareholders and catalpa shareholders’ interests in evolution mining will vary subject to the price at which the rights offer is conducted and the extent to which they participate in the rights offer.
(f) Effect of Newcrest’s interest in Evolution Mining
with approximately 33% (calculated on a fully diluted value basis)[95] of evolution mining following the rights offer and the capacity to nominate two directors to the board, newcrest will be able to exert a degree of influence on evolution mining commensurate with its interest. This represents a significant change in the voting dynamic of catalpa.
The independent expert has considered this in its report on the Transaction and has concluded that the Transaction is in the best interests of catalpa shareholders, in the absence of a superior proposal. whilst the independent expert has concluded that the Transaction is not “fair” (as the trading price of shares in evolution mining is unlikely to match the underlying value of shares in catalpa), for a number of reasons the independent expert has concluded that catalpa shareholders will be better off if the Transaction is implemented than if it is not.
catalpa shareholder approval will be required for significant transactions between newcrest and evolution mining where required by legislation or the listing rules. where catalpa shareholder approval is required, newcrest and the newcrest associates will be excluded from voting. newcrest’s intentions in relation to evolution mining are set out in section 7.8 of this explanatory memorandum.
(g) Summary of ownership of Evolution Mining
The ownership of catalpa shareholders, conquest shareholders and newcrest as discussed in detail in this section 7.6 is summarised in the following table.
==> picture [481 x 61] intentionally omitted <==
----- Start of picture text -----
PRO FORMA PRO FORMA
EVOLuTION EVOLuTION
MINING — MINING —
CATALPA CONQuEST PRE RIGhTS POST RIGhTS
METRIC ShAREhOLDERS ShAREhOLDERS NEWCREST OFFER OFFER
----- End of picture text -----
| ordinary shares in | |||||
|---|---|---|---|---|---|
| evolution mining (millions) | 178.3 | 180.41 | 228.92 | 587.6 | 687.33 |
| market capitalisation4 | |||||
| (a$ million) | $303.1 | $306.7 | $388.1 | $997.9 | $1,147.9 |
| option value (a$ million) | $13.25 | $10.26 | n/a | n/a | n/a |
| market capitalisation | |||||
| (on a fully diluted value | |||||
| basis) (a$ million) | $316.3 | $316.9 | $388.1 | $1,021.2 | $1,171.2 |
| ownership of evolution | |||||
| mining (pre rights offer | |||||
| and calculated on a fully | |||||
| diluted value basis) | ~31.0% | ~31.0% | 38.0% | n/a | n/a |
| ownership of evolution | |||||
| mining (post rights offer | will vary as per | ||||
| and calculated on a fully | rights offer participation | ||||
| diluted value basis) | ~33%7 | n/a | n/a |
notes
-
1 based on 583,241,478 conquest shares on issue plus a further 18,094,801 conquest shares to be issued pursuant to the minority options offers, all multiplied by 0.3 (being the exchange ratio under the scheme).
-
2 calculation assumes that the 5 day vwap of catalpa shares ending on the trading day before the implementation date was the same as the 5 day vwap of catalpa shares ending on the last Trading day, being $1.59. The actual number of subscription shares that will be issued to newcrest will be determined in accordance with the formula discussed in section 7.6(c) of this explanatory memorandum such that newcrest will hold 38% of evolution mining on a fully diluted value basis.
-
3 assumes $150 million is raised under the rights offer at a 10% discount to Terp assuming that the vwap of an evolution mining share on the day before the launch of the rights offer was the same as at the last Trading day, being $1.70, such that approximately 99.7 million evolution mining shares are issued pursuant to the rights offer. The actual
94 based on an illustrative rights offer price of a 10% discount to Terp, where Terp is calculated based on the vwap of a catalpa share on the last Trading day. 95 based on an illustrative rights offer price of a 10% discount to Terp, where Terp is calculated based on the vwap of a catalpa share on the last Trading day.
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7 profile of evoluTion mining conTinued
number of evolution mining shares issued pursuant to the rights offer will be subject to the share price at the time and the discount to Terp at which the rights offer is conducted. by way of illustration, assuming the same closing share price as discussed above in this note 3, if the rights offer was conducted at a 20% discount to Terp (being the maximum permitted under the Transaction implementation deed), the number of shares issued pursuant to the rights offer would be approximately 114.6 million shares
-
4 based on catalpa’s share price of $1.70 as at the close of trading on the last Trading day.
-
5 black & scholes option valuation of the 13,713,939 catalpa options on issue as at the date of this explanatory memorandum based on the 5 day vwap of catalpa shares ending on the last Trading day of $1.59 and including the value of the 1,119,000 performance rights assuming they have vested. The final option value will be based on the 5 day vwap of catalpa shares ending on the trading day before the implementation date.
-
6 black & scholes option valuation of 11,324,738 new catalpa options to issued under the majority options offers (as discussed in section 7.6(b) of this explanatory memorandum) based on the 5 day vwap of catalpa shares ending on the last Trading day of $1.59. The final option value will be based on the 5 day vwap of catalpa shares ending on the trading day before the implementation date.
-
7 applies the assumptions listed in note 3 above in relation to the rights offer with the value of options in evolution mining calculated on the same basis as in notes 5 and 6.
7.7 Intentions of Catalpa and Conquest in relation to Evolution Mining
This section 7.7 sets out the intentions of catalpa and conquest in relation to evolution mining if the Transaction is implemented. The statements in this section 7.7 reflect the intentions of catalpa and conquest at the date of this explanatory memorandum only.
(a) Corporate matters in relation to Conquest and the Conquest Options
if the Transaction is implemented, it is intended that:
-
conquest will be removed from the official list of the asX; and
-
as conquest will be a wholly owned subsidiary of evolution mining, the conquest board will be reconstituted so that it comprises persons nominated by the evolution mining board.
as described in section 7.2 of this explanatory memorandum, three of the current conquest directors will join the evolution mining board.
To the extent that conquest options exist after the Transaction is implemented (for example, as a result of majority options offers not being made or as a result of such offers being made but not accepted or catalpa shareholders not approving the majority options resolutions at the meeting, evolution mining may seek to compulsorily acquire those options (and any shares issued pursuant to their exercise) in accordance with (and subject to) part 6a.2 of the corporations act.
(b) Continuation of Conquest and Catalpa businesses and the Newcrest Assets
it is the intention of catalpa and conquest that evolution mining will continue to operate and develop the businesses of catalpa and conquest as well as the newcrest assets in substantially the same manner as they are currently operated by catalpa, conquest and newcrest (as applicable). no major changes are planned in respect of the operation or development of the assets that will be owned by evolution mining.
following implementation of the Transaction and the rights offer, with an expected cash position of approximately $199 million[96] and access to the macquarie facilities, evolution mining will be well funded to pursue the development of mt carlton and edna may underground. in relation to mt carlton a combination of the macquarie facilities and evolution mining’s cash reserves may be used to finance the development. catalpa and conquest intend that the board of evolution mining will decide how the development is to be funded following implementation of the Transaction having regard to the cash position, operating cash flows and capital requirements of the company. it is the present intention of catalpa and conquest that evolution mining will complete a refinancing following implementation of the Transaction.
it is also expected that, following completion of the rights offer, evolution mining will have excess capital available to pursue further exploration opportunities across its asset portfolio as well as other potential acquisition opportunities.
(c) Dividend policy
The evolution mining board will review the amount of any future dividends to be paid by evolution mining having regard to the company’s profits, its financial position and the board’s assessment of the capital required to grow evolution mining’s businesses.
96 based on the cash position of each of catalpa and conquest as at 30 June 2011 (including gold and silver available for sale), assuming $150 million is raised under the proposed rights offer and taking into account the costs associated with the Transaction and the rights offer. This figure does not take into account any stamp duty payable by catalpa in connection with the Transaction or the operating cash flows of catalpa and conquest during the period from 1 July 2011 to completion of the rights offer. it also does not take into account the macquarie facilities. as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities.
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73
(d) head office
evolution mining’s corporate headquarters will be based at conquest’s existing headquarters in sydney, with the existing catalpa and conquest offices in perth and Townsville respectively to also be retained.
(e) Board and governance
The composition of the board of evolution mining is discussed in section 7.2 of this explanatory memorandum. it is intended that evolution mining will adhere to the asX corporate governance principles consistent with the approach currently adopted by catalpa and conquest.
a remuneration advisory committee has been established comprising nominees from each of catalpa, conquest and newcrest. This committee has been charged with responsibility for making recommendations to the catalpa board regarding:
-
the principles of remuneration to be applied to key management personnel of evolution mining, having regard to the asX corporate governance principles and the remuneration practices of australian mining companies of a comparable size to evolution mining; and
-
the composition and terms of reference or charter of evolution mining’s nomination and remuneration committee.
a remuneration consultant has been engaged to prepare a report to assist the remuneration advisory committee in making these recommendations. as at the date of this explanatory memorandum, that report has not yet been received and the remuneration advisory committee has not yet made recommendations to the catalpa board regarding the above matters.
catalpa must have regard to the recommendations of the remuneration advisory committee when making offers of employment to key management personnel prior to the implementation date.
(f) Management and employees
it is the intention of catalpa and conquest that evolution mining will continue the employment of all existing conquest and catalpa employees, as appropriate having regard to the requirements of evolution mining.
further, under the terms of the asset sale agreement, all current newcrest employees engaged in the operation of the businesses relating to the newcrest assets will be offered new positions with the wholly owned subsidiaries of evolution mining that will hold the newcrest assets on terms that are no less favourable than their current terms, subject to completion of the Transaction.
as at the date of this explanatory memorandum, newcrest has identified a small number of operational employees who it will retain. Those employees will likely be replaced by evolution mining or their roles will be taken over by existing conquest or catalpa employees. it is not envisaged that a material number of employees will not take up the offer of employment with evolution mining. in the event some employees do not accept the offer, evolution mining will need to hire replacements. pursuant to the asset sale agreement, the wholly owned subsidiaries of evolution mining that will hold the newcrest assets will agree not to undertake a redundancy programme for two years post the implementation date and there is no current intention to do so during or beyond this two year term.
(g) Transitional services
a number of support services are currently provided by newcrest in respect of the businesses relating to the newcrest assets such as payroll, accounts payable and iT support. evolution mining will be required to replace these functions and integrate them with the existing conquest and catalpa management, systems and processes. in order to ensure this process occurs smoothly and without disruption, catalpa and newcrest have agreed to negotiate a Transitional services agreement. That agreement will have a term of not more than six months, during which time (assuming the agreement is executed) newcrest will provide transitional services at cost (including a reasonable allocation of overheads).
(h) Reporting
catalpa and conquest intend that evolution mining will continue to lodge its annual and half yearly reports in line with catalpa’s existing timetable and applicable laws (including the listing rules).
(i) hedging
catalpa has an existing gold hedging agreement as described in section 4.3(b)(1) of this explanatory memorandum. at this stage, catalpa has no current intention to enter into any new gold or currency hedging arrangements.
however, as noted in section 5.3(b)(2) of this explanatory memorandum, conquest is required to enter into silver and copper hedging arrangements in connection with the macquarie facilities.
evolution mining’s hedging policy will be reviewed by the board of evolution mining post implementation of the Transaction.
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7 profile of evoluTion mining conTinued
(j) Other intentions in relation to Catalpa (and Conquest)
other than as set out or referred to in this section 7, it is the present intention of catalpa and conquest that evolution mining will:
-
generally continue the businesses of catalpa (and conquest) in a manner consistent with past practice;
-
not make any major changes to the businesses of catalpa nor deploy any of the fixed assets of catalpa (or those of conquest); and
-
continue the employment of catalpa’s present employees (and those of conquest).
7.8 Intentions of Newcrest in relation to Evolution Mining
This section 7.8 describes newcrest’s rationale for pursuing the Transaction and its current intentions in relation to the business and affairs of evolution mining and newcrest’s shareholding in evolution mining.
newcrest’s intentions are based on information and circumstances which are known to newcrest at the time of preparation of this explanatory memorandum. accordingly, the information in this section 7.8 relates only to newcrest’s current intentions, which may change as new information becomes available or circumstances change.
(a) Newcrest’s rationale for the Transaction
newcrest pursues a strategy of delivering competitive shareholder returns by:
-
maintaining a focus on gold;
-
building a portfolio of predominantly low-cost, long-life gold assets, through exploration and acquisition in known gold regions (focus on south east asia);
-
optimising performance at each phase of the gold mining value chain (exploration, projects and operations);
-
utilising its technical expertise across transportation and metallurgical processes;
-
constantly improving environmental performance, community involvement and safety outcomes; and
-
developing its people in technical, commercial and leadership aspects of the industry.
following newcrest’s significant growth in recent years and the strategic review undertaken by newcrest after
implementation of the merger with lihir gold limited (september 2010), the newcrest assets are considered to be non-core assets in the context of newcrest’s strategy.
The Transaction provides the opportunity to position the newcrest assets within evolution mining, to assist to create a new mid-tier australian gold company with a portfolio of complementary assets which will:
-
combine complementary management teams from catalpa and conquest; and
-
be in a position to maximise the potential of evolution mining (including the newcrest assets).
newcrest has demonstrated its support for evolution mining by agreeing to take shares in evolution mining as consideration for the newcrest assets. in doing so, newcrest (as a shareholder in evolution mining) has the opportunity to maintain an indirect interest in the newcrest assets and to participate in potential upside as evolution mining pursues its strategy.
(b) Business and affairs of Evolution Mining
as set out in section 7.2 of this explanatory memorandum, newcrest will nominate two directors to the board of evolution mining (of a total of eight directors on the board of evolution mining).[97] newcrest has no current intention to seek to nominate any further directors to the board of evolution mining.
Through a combination of its shareholding in evolution mining and its entitlement to nominate directors to the board of evolution mining, newcrest will have the ability to influence evolution mining’s business and affairs. To the extent that newcrest is able to influence the business and affairs of evolution mining it currently intends that, following implementation of the Transaction, the business of evolution mining would be conducted in substantially the same manner as the businesses of catalpa and conquest, and operations at the newcrest assets, are presently conducted by catalpa, conquest and newcrest (respectively).
(c) Newcrest shareholding
as described elsewhere in this explanatory memorandum, as a result of the Transaction, newcrest will have an initial shareholding in evolution mining of 38% (calculated on a fully diluted value basis).[98] following implementation of the Transaction, it is intended that evolution mining will undertake the rights offer. at the request of catalpa and conquest, newcrest has agreed not to take up its entitlements under the rights offer[99] and, as a result, newcrest’s interest in evolution mining will be diluted to approximately 33% (calculated on the same fully diluted value basis).[100]
-
97 as described in section 9.1(c) of this explanatory memorandum, newcrest is entitled to nominate:
-
where newcrest’s interest in the ordinary shares of evolution mining is at least 25%, two directors to the board of evolution mining or one quarter of the total number of directors on the board (rounded up to the nearest whole number), whichever is greater; and
-
where newcrest’s interest in the ordinary shares of evolution mining is between 15% and 25%, one director to the board of evolution mining.
-
98 for information regarding the calculation of newcrest’s interest in evolution mining following implementation of the Transaction is set out in section 7.6 of this explanatory memorandum.
-
99 information regarding the proposed rights offer, including details regarding the dilution of newcrest’s shareholding, is set out in section 7.3 of this explanatory memorandum. 100 based on an illustrative rights offer price of a 10% discount to Terp, where Terp is calculated based on the vwap of a catalpa share on the last Trading day.
EXPLANATORY MEMORANDUM
75
newcrest does not have a fixed view as to how long it will maintain its shareholding in evolution mining following implementation of the Transaction. newcrest is supportive of evolution mining’s strategy and believes the investment in evolution mining will maximise the value of the newcrest assets for newcrest shareholders. as with all investments, newcrest will continue to review its investment in evolution mining so as to maximise value to newcrest’s shareholders.
7.9 Evolution Mining’s pro forma historical financial information (a) Financial profile of Evolution Mining
The evolution mining pro forma historical financial information provided in this explanatory memorandum comprises a pro forma consolidated statement of financial position at 31 december 2010 which is based upon:
-
the catalpa consolidated historical statement of financial position as at 31 december 2010;
-
the conquest consolidated historical statement of financial position as at 31 december 2010;
-
the historical statement of financial position relating to the newcrest assets as at 31 december 2010; and
-
the relevant acquisition accounting and other adjustments required to present the pro forma consolidated statement of financial position of evolution mining.
The directors of catalpa and conquest are jointly responsible for the preparation of pro forma historical financial information, including the determination of the pro forma adjustments (as set out in section 7.9(d) of this explanatory memorandum), except that the directors of catalpa are responsible for the information regarding catalpa, the directors of conquest are responsible for the information regarding conquest and the directors of newcrest are responsible for the information regarding the newcrest assets provided to catalpa and conquest to prepare the pro forma historical financial information.
(b) Basis of preparation
The evolution mining pro forma historical financial information is provided for illustrative purposes and is prepared on the assumption that the Transaction was implemented on 31 december 2010 and the proposed rights offer is completed. The pro forma consolidated statement of financial position is based on catalpa’s and conquest’s respective half year financial statements as at 31 december 2010 which were reviewed by deloitte and kpmg, respectively, both of which issued unqualified review conclusions. The newcrest assets are held by subsidiaries of newcrest mining limited which was reviewed to a group materiality level by ernst & young for the half-year ended 31 december 2010. copies of catalpa’s and conquest’s financial statements can be found on their respective websites, being www.catalparesources.com.au and www. conquestmining.com.au.
The historical financial information in respect of catalpa and conquest has been prepared in accordance with the recognition and measurement principles of the australian accounting standards, and in accordance with catalpa’s accounting policies, as set out in the financial report of catalpa for the year ended 30 June 2010.
The historical financial information in respect of the newcrest assets has been prepared using the historical statements of financial position for each of the newcrest subsidiaries holding these assets and adjusted to:
-
exclude those assets and liabilities that will not transfer in accordance with the asset sale agreement; and
-
reflect the final acquisition accounting adopted by newcrest in respect of the mt rawdon gold project. newcrest finalised its purchase price allocation exercise at 30 June 2011.[101]
The historical financial information in respect of the newcrest assets has been prepared in accordance with the recognition and measurement principles of australian accounting standards, and in accordance with newcrest’s accounting policies.
The evolution mining pro forma historical financial information has been presented in an abbreviated form insofar as it does not contain all disclosures required by the australian accounting standards applicable to annual financial reports prepared in accordance with the corporations act.
deloitte has reported on the evolution mining pro forma historical financial information in an investigating accountants’ report which is included in this explanatory memorandum as attachment b. catalpa shareholders should note the comments made in relation to the scope and limitations of the investigating accountants’ report.
following a review by catalpa and conquest of the accounting policies disclosed in the financial statements for conquest and newcrest for the half year ended 31 december 2010, the accounting policies of catalpa are not considered to be materially different. Therefore, at this time, no adjustments have been made to the evolution mining pro forma historical financial information to align accounting policies.
101 newcrest and lihir gold limited entered into a merger implementation agreement on 4 may 2010 to combine the two companies under a scheme of arrangement. The scheme was approved and subsequently became effective on 30 august 2010. newcrest assumed effective management control of lihir on 30 august 2010. The mt rawdon gold project was acquired by newcrest through this scheme. The initial accounting for the acquisition of lihir was provisionally determined at the end of the half year reporting period ended 31 december 2010.
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7 profile of evoluTion mining conTinued
- (c) Evolution Mining’s pro forma consolidated statement of financial position
| CATALPA | CONQuEST | NEWCREST ASSETS |
MATERIAL POST BALANCE ShEET DATE EVENTS |
PRO FORMA CONSOLIDATION ADJuSTMENTS (PRE RIGhTS OFFER) |
PROPOSED RIGhTS OFFER |
PRO FORMA CONSOLIDATION (POST RIGhTS OFFER) |
|
|---|---|---|---|---|---|---|---|
| 31 Dec 2010 ($’000) |
31 Dec 2010 ($’000) |
31 Dec 2010 ($’000) |
31 Dec 2010 ($’000) |
31 Dec 2010 ($’000) |
31 Dec 2010 ($’000) |
31 Dec 2010 ($’000) |
|
| ASSETS Current assets cash and cash equivalents 28,910 39,516 — 22,330 (34,686) 143,054 199,124 Trade and other receivables 1,681 3,491 399 — — — 5,571 inventory 10,461 5,963 13,056 — — — 29,480 assets held for sale — 8,500 — — — — 8,500 mine development assets 2,498 — 3,296 — — — 5,794 other current assets 578 1,476 1,003 — — — 3,057 |
|||||||
| Total current assets 44,128 58,946 17,754 22,330 (34,686) 143,054 251,526 |
|||||||
| Non-current assets available for sale fnancial assets 1,260 8 — — — — 1,268 property, plant and equipment 96,909 20,024 49,379 — — — 166,312 mine development assets 59,567 79,065 250,437 — 209,531 — 598,600 exploration and evaluation assets — 60,616 13,077 — — — 73,693 deferred tax assets 17,752 — — (6,742) — — 11,010 goodwill — — 51,264 — (51,264) — — other non-current assets — 73 — — — — 73 |
|||||||
| Total non-current assets 175,488 159,786 364,157 (6,742) 158,267 — 850,956 |
|||||||
| Total assets 219,616 218,732 381,911 15,588 123,581 143,054 1,102,482 |
|||||||
| CATALPA | CONQuEST | NEWCREST ASSETS |
MATERIAL POST BALANCE ShEET DATE EVENTS |
PRO FORMA CONSOLIDATION ADJuSTMENTS (PRE RIGhTS OFFER) |
PROPOSED RIGhTS OFFER |
PRO FORMA CONSOLIDATION (POST RIGhTS OFFER) |
|
| 31 Dec 2010 ($’000) |
31 Dec 2010 ($’000) |
31 Dec 2010 ($’000) |
31 Dec 2010 ($’000) |
31 Dec 2010 ($’000) |
31 Dec 2010 ($’000) |
31 Dec 2010 ($’000) |
|
| LIABILITIES Current liabilities Trade and other payables 14,967 8,243 17,229 — — — 40,439 interest bearing liabilities 24,565 — — — — — 24,565 provisions 2,242 1,136 2,540 — — — 5,918 |
|||||||
| Total current liabilities 41,774 9,379 19,769 — — — 70,922 |
|||||||
| Non-current liabilities interest bearing liabilities 31,546 — — — — — 31,546 provisions 4,807 6,792 11,458 — — — 23,057 deferred tax liability — — 51,264 — (51,264) — — |
|||||||
| Total non-current liabilities 36,353 6,792 62,722 — (51,264) — 54,603 |
|||||||
| Total liabilities 78,127 16,171 82,491 — (51,264) — 125,525 |
|||||||
| NET ASSETS 141,489 202,561 299,420 15,588 174,845 143,054 976,957 EQuITy contributed equity / net assets of newcrest assets equity interest 162,705 230,472 299,420 22,330 175,068 143,054 1,033,049 reserves 5,272 6,781 — — (6,781) — 5,272 |
|||||||
| accumulated losses (26,488) (34,692) — (6,742) 6,558 — (61,364) |
|||||||
| Total equity 141,489 202,561 299,420 15,588 174,845 143,054 976,957 |
EXPLANATORY MEMORANDUM
77
(d) Pro forma adjustments
The following pro forma adjustments have been made in preparing the evolution mining pro forma consolidated statement of financial position as at 31 december 2010.
-
(1) The Transaction was implemented on 31 december 2010 with:
-
conquest shareholders receiving 0.3 new catalpa shares for each conquest share they hold at the scheme record date, with a total of approximately 180.4 million new catalpa shares issued as scheme consideration;[102]
-
existing majority optionholders being issued approximately 11.3 million new catalpa options valued at $10.24 million as consideration for the cancellation of their majority options; and
-
newcrest receiving approximately 228.9 million new catalpa shares as consideration for the newcrest assets.[103]
The total consideration to complete the Transaction that is included in the evolution mining pro forma consolidated statement of financial position has a value of approximately $704.96 million comprising the issue of approximately 409.25 million new catalpa shares and approximately 11.3 million new catalpa options which has resulted in an increase in contributed equity of approximately $704.96 million (see section 7.9(e) of this explanatory memorandum below relating to acquisition accounting).
for the purposes of the pro forma adjustments described above, the value of the consideration paid to conquest shareholders for their conquest shares under the scheme, and the value of the consideration paid to newcrest as consideration for the newcrest assets, is based on an indicative catalpa share price of $1.70 per catalpa share (being the closing price of catalpa shares on the asX on the last Trading day). The actual value of the consideration paid will depend on the actual catalpa share price at close of trading on the asX on the implementation date (as discussed in section 7.9(e) of this explanatory memorandum below).
-
(2) a decrease in cash and cash equivalents of $34.686 million comprising an increase in accumulated losses of $28.134 million, representing the expensing of catalpa’s transaction costs associated with the Transaction (including an estimate for stamp duty payable) and an increase in pre-acquisition accumulated losses of conquest of $6.552 million representing conquest’s estimated transaction costs associated with the Transaction.
-
(3) catalpa successfully raised $22.3 million net of issue costs through an institutional share placement in february 2011. for the purposes of compiling the evolution mining pro forma consolidated statement of financial position it has been assumed the share placement took place on 31 december 2010.
-
(4) a decrease in deferred tax assets in catalpa of $6.74 million and an increase in accumulated losses of $6.74 million as a result of certain losses not being available as a result of the Transaction.
-
(5) The elimination of the deferred tax liability and goodwill balance of $51.264 million resulting from newcrest’s previous acquisition of the mt rawdon gold project through its merger with lihir gold limited in september 2010.
-
(6) The elimination of conquest’s contributed equity of $230.47 million and elimination of the newcrest assets’ equity of $299.42 million, together with the issue of the equity consideration of $704.96 million by catalpa resulting in additional contributed equity of $175.03 million. in addition, pre-acquisition reserves of $6.78 million and accumulated losses of $34.69 million of conquest have been eliminated on acquisition and consolidation by catalpa.
-
(7) The recognition of additional mine property assets of $209.53 million arising on acquisition of conquest and the newcrest assets (see section 7.9(e) of this explanatory memorandum below relating to acquisition accounting).
-
(8) The proposed rights offer to raise $150 million (or $143.054 million net of estimated issue costs of $6.946 million) has been assumed to have been conducted.
102 based on 583,241,478 conquest shares on issue plus a further 18,094,801 conquest shares to be issued pursuant to the minority options offers, all multiplied by 0.3 (being the exchange ratio used for the calculation of the scheme consideration).
103 assumes the vwap of catalpa shares in the 5 trading days prior to the implementation date is the same as the 5 trading days ending on (and including) the last Trading day. The actual number of subscription shares to be issued will be determined by the formula discussed in section 7.6(c) of this explanatory memorandum.
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7 profile of evoluTion mining conTinued
(e) Acquisition accounting
acquisition accounting will be applied in accordance with aasb3: business combinations. The value of the consideration for the acquisition of the conquest shares under the scheme and the newcrest assets will be measured based upon the value of catalpa shares at close of trading on the implementation date. for the purposes of the evolution mining pro forma consolidated statement of financial position, a value of $1.70 per catalpa share has been assumed, being the closing price of catalpa shares on the asX on the last Trading day. consequently, the value of the purchase consideration for accounting purposes may differ from the amount assumed in the evolution mining pro forma consolidated statement of financial position.
The financial information has been prepared on the assumption that the book value of assets (excluding mine development assets) and liabilities at 31 december 2010 reflected a reasonable approximation of their fair values. The difference between the fair value of the consideration payable by catalpa under the scheme and for the newcrest assets (as discussed in the preceding paragraph) and the book value of the assets and liabilities of conquest and the newcrest assets has been treated as an increase in mine development assets and is illustrated in the table below:
| CARRyING AMOuNT OF NET ASSETS |
EQuITy CONSIDERATION PAID |
EXCESS CONSIDERATION (RECOGNISED IN MINE DEVELOPMENT ASSETS) |
|
|---|---|---|---|
| ($’000) | ($’000) | ($’000) | |
| conquest 196,009* 316,897 120,888 |
|||
| newcrest assets 299,420 388,063 88,643 |
|||
| Total 495,429 704,960 209,531 |
- adjusted for conquest’s estimated transaction costs of $6.5 million
goodwill is the potential residual amount that may arise after the comparison of the fair value of the purchase consideration with the fair value of the net identifiable assets (including contingent liabilities) acquired. based on the pro forma values used to prepare the evolution mining pro forma consolidated statement of financial position, it is anticipated that no significant goodwill will be attributable to the newcrest assets or the conquest assets as there is not expected to be a material difference between the fair values of those assets and the consideration payable by catalpa for them. however, this position could change once actual valuations are performed as at the acquisition date.
following implementation of the Transaction, a detailed valuation of the identifiable assets, liabilities and contingent liabilities of conquest and the newcrest assets will be undertaken to ascertain the appropriate allocation of this difference (if any). The tax carrying values of conquest’s assets will also be required to be reset which will result in a net increase in the deferred tax liabilities of evolution mining. These adjustments will impact depreciation and amortisation charges in future financial periods. for the purposes of compiling the pro forma consolidated statement of financial position an assumption has been made that a full tax step up in the tax cost base is available. as a result no deferred tax liability has been recognised in the pro forma consolidated statement of financial position.
due to the above, the actual impact of acquisition accounting will vary from that disclosed in the evolution mining pro forma consolidated statement of financial position above.
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8 Key implicaTions and risKs relaTed To The TransacTion
8.1 Key risks if the Transaction is approved
This section 8.1 sets out some of the risks that catalpa shareholders may be exposed to if the Transaction is implemented.
The risks and uncertainties described below:
-
are not, and should not be considered to be or relied on as, an exhaustive list of the risks that catalpa shareholders may face if the Transaction is implemented; and
-
are general in nature and regard has not been had to the investment objectives, financial situation, tax position or particular needs of any catalpa shareholder.
additional risks and uncertainties that catalpa is unaware of, or that it currently considers to be immaterial, may also become important factors that can adversely affect evolution mining’s operating and financial performance.
(a) Risk factors specific to the Transaction
- (1) Anticipated increase in Evolution Mining’s production in Fy2012 and Fy2013
as set out in section 7 of this explanatory memorandum, the gold projects that will be owned by evolution mining are forecast to produce 335,000 to 375,000 ounces of gold in fy2012 and 410,000 to 465,000 ounces of gold equivalent in fy2013. The fy2013 forecast is an increase of between 107,160 and 162,160 ounces on the gold produced from those projects in fy2011.
while catalpa, conquest and newcrest (as applicable) consider there to be a reasonable basis for their respective production forecasts[104] , they are subject to a number of factors (many of which cannot be foreseen and are beyond the control of catalpa, conquest and newcrest (as applicable). These factors may cause the production forecasts not to be achieved or to be achieved later than expected.
in particular, catalpa shareholders should note that:
-
in relation to pajingo — the forecast increase in production in fy2012 and fy2013 is subject to the requisite approvals (including environmental approval) being obtained for the development of open pit deposits. it is possible that difficulties may be encountered in obtaining these approvals, which may result in the forecast production increase not being achieved or being achieved later than expected;
-
in relation to mt carlton – successful development of mt carlton is subject to the requisite approvals (including environmental authority) being obtained and the mining lease being granted. it is possible that difficulties and/or delays may be encountered in obtaining the approvals and mining lease, which may prevent or delay the commencement of production at mt carlton; and
-
in relation to edna may — in order for production to commence from edna may underground, an underground mining study and trial mining will need to be completed and the edna may process plant will need to be expanded. it is possible that difficulties may be encountered in undertaking this work, which may prevent or delay anticipated production from edna may underground.
(2) Reliance on single purchaser of the concentrate from the V2 deposit
as noted in section 5.3(b)(2) of this explanatory memorandum, conquest has entered into an off-take agreement with sgg for the sale of the gold-silver-copper concentrate from the v2 deposit at mt carlton, the largest and most significant of the two currently known deposits at mt carlton (the other being the a39 deposit).
only having one purchaser of the concentrate from the v2 deposit gives rise to the risk that if, for whatever reason, sgg does not purchase the concentrate in accordance with the off-take agreement, one or more other buyers will need to be found. in this event, there is no guarantee that terms as favourable as those that have been agreed with sgg will be able to be secured.
(3) Newcrest employees
pursuant to the asset sale agreement, at least 10 business days before the implementation date, the wholly owned subsdiaries of catalpa that will purchase the newcrest assets must make or procure an offer of employment to each employee of a newcrest group member engaged in the undertaking of the businesses related to the newcrest assets. if key employees or a material number of employees do not accept the offer made to them by catalpa, this may have an adverse effect on operations at the relevant mine site.
104 as noted in the Important Notices section at the front of this explanatory memorandum, production forecasts for the newcrest assets beyond 30 June 2012 have been prepared by conquest and catalpa, rather than newcrest.
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(4) Exploration risks
exploration activities are speculative by nature and therefore are often unsuccessful. such activities also require substantial expenditure and can take several years before it is known whether they will result in additional mines being developed. accordingly, if the exploration activities undertaken by evolution mining do not result in additional reserves, this may have an adverse effect on the company’s financial performance.
(5) Investment risks
catalpa and conquest intend that evolution mining will pursue an aggressive growth strategy that may involve making acquisitions. such acquisitions may not be as successful as envisaged when made, which may adversely affect the financial performance of evolution mining.
(6) Newcrest shareholding
as noted earlier in this explanatory memorandum, the consideration payable by catalpa for the newcrest assets is new catalpa shares. as detailed in section 7.6(c) of this explanatory memorandum, following implementation of the Transaction and the rights offer, newcrest will have an interest in evolution mining of approximately 33% (calculated on a fully diluted value basis).[105] as a result, while newcrest will not control evolution mining, it will be able to exercise significant influence over all matters requiring shareholder approval, including the election of directors, significant corporate transactions and certain issues of equity securities. in this regard, newcrest’s interests may not always be aligned with those of other shareholders in evolution mining. newcrest’s intentions in relation to evolution mining are set out in section 7.8 of this explanatory memorandum.
newcrest’s interest in evolution mining will also mean that newcrest must support any proposal by a third party to acquire all of the shares in evolution mining for that proposal to be successful. The presence of newcrest as a substantial shareholder in evolution mining may be perceived by the market as reducing the likelihood of a takeover of evolution mining, thereby removing a portion of the takeover premium in the market for evolution mining’s shares. This may cause the shares to trade at a discount to the value at which they would trade if newcrest did not hold its stake in evolution mining. in addition, the sale of shares in evolution mining in the future by newcrest could adversely affect the market price of the shares.
(7) Integration risks
a key determinant of the long-term success of evolution mining is the successful integration of the businesses of catalpa, conquest and the newcrest assets. whilst a committee comprising representatives from each of catalpa, conquest and newcrest has been established for the purpose of overseeing the integration process, difficulties may be encountered in connection with this process which could result in the failure of evolution mining to realise some of the anticipated benefits of the Transaction or could result in those benefits being realised later than expected.
The methods adopted by evolution mining in respect of operating the projects that will be owned by it may differ from the methods employed prior to the implementation of the Transaction. This may result in revisions to reserves and resources, life of mines, methodology for calculating cash costs, production forecasts and exploration and development targets. in this regard, it is noted that responsibility for the management of the operations at cracow and mt rawdon will be transferred from newcrest to evolution mining on implementation of the Transaction.
(8) Contractual restrictions on change of control and assignment or novation conquest is party to contracts containing change of control provisions that, in the absence of counterparty consent, will be triggered by implementation of the Transaction. if a counterparty’s consent is not obtained, evolution mining may lose the benefit of a material contract. This may adversely impact evolution mining’s operations and performance.
under the asset sale agreement, newcrest is required to procure that certain contracts to which newcrest group members are a party and which relate to the newcrest assets are assigned or novated to the wholly owned subsidaries of evolution mining that will purchase the newcrest assets. in some cases, the assignment or novation would require the consent of third parties. To the extent that any such consents are not obtained, newcrest will hold the relevant contracts on trust for the relevant wholly owned subsidiary of evolution mining pursuant to the terms of the asset sale agreement. in those circumstances, evolution mining will have no direct interest in the contracts, which may make it difficult for it to enforce or otherwise deal with the contracts.
(9) Short term disposal of shares
following the issue of the scheme consideration, some shareholders in evolution mining may decide to sell their shares in the short term. This may have an adverse effect on the share price of evolution mining.
105 based on an illustrative rights offer price of a 10% discount to Terp, where Terp is calculated based on the vwap of a catalpa share on the last Trading day.
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(10) Risk of dilution
as set out in section 7.6(b) of this explanatory memorandum (including the assumptions set out in that section), catalpa has approximately 13.7 million catalpa options on issue. That number will increase to approximately 25 million if all of the majority options offers are accepted and catalpa options are issued as consideration.
if exercised, these options will represent approximately 4.3% of evolution mining’s share capital prior to the rights offer. as such, their exercise would have a dilutive effect on the interests of shareholders in evolution mining.
(11) Discretion in use of cash resources
The board and management of evolution mining will have discretion concerning the use of evolution mining’s cash resources as well as the timing of expenditures. cash resources may be used in ways not previously anticipated or disclosed. The results and the effectiveness of the application of cash resources are uncertain. if they are not applied effectively, evolution mining’s financial and/or operational performance may suffer.
(12) Transaction costs
if the resolutions are approved, transaction costs such as legal and advisory fees will be payable by catalpa. in the event that the resolutions are not approved, catalpa will still be liable for certain costs, including break fees (discussed in sections 8.3(b) and 9.1(a)(4) of this explanatory memorandum).
(13) Majority Options Offer
as discussed in section 7.7(a) of this explanatory memorandum, conquest options may exist after the Transaction is implemented as a result of majority options offers not being accepted or the majority options resolutions not being approved by catalpa shareholders at the meeting. in this event, evolution mining will not have ownership of all existing securities in conquest following implementation of the Transaction and may not be able to realize the benefits of conquest being a wholly owned subsidiary of evolution mining. however, as noted in section 7.7(a) of this explanatory memorandum, if this circumstance were to occur, evolution mining may seek to compulsorily acquire any outstanding conquest options (and any shares issued pursuant to their exercise) in accordance with (and subject to) part 6a.2 of the corporations act.
(14) Rights Offer
as discussed in section 7.3 of this explanatory memorandum, catalpa has agreed with conquest and newcrest that 10 business days after the Transaction is implemented, evolution mining will conduct a pro-rata renounceable entitlement offer to raise approximately $150 million to provide evolution mining with the capital and financial flexibility to enable it to develop its asset base and pursue growth opportunities.
The scheme is subject to a condition precedent that by the second court date, catalpa has executed an underwriting agreement and that agreement has not been terminated.
despite the above, there is a possibility that the Transaction may proceed without the rights offer proceeding (for example if catalpa, conquest and newcrest agree to waive the requirement for the rights offer to be conducted) or the rights offer may proceed on a non-underwritten basis (if newcrest waives the condition precedent requiring an underwriting agreement to be entered into) or the rights offer may not be successfully completed (for example if the underwriting agreement is entered into but is validly terminated). in those cases, evolution mining will not have access to some or all of the funds that would have been raised through the rights offer and its cash balance will be materially less than the expected cash position of $199 million[106] referred to in section 2.3 and elsewhere in this explanatory memorandum (unless an alternative capital raising structure is successfully adopted).
(b) General risk factors that may affect Evolution Mining
(1) Operating and development risk
The ability of evolution mining to achieve production targets, or meet operating and capital expenditure estimates on a timely basis cannot be assured. The assets of evolution mining (which, in addition to catalpa’s current assets, will include the assets of conquest and the newcrest assets), as any others, are subject to uncertainty with ore tonnes, grade, metallurgical recovery, ground conditions, operational environment, funding for development, regulatory changes, accidents and other unforeseen circumstances such as unplanned mechanical failure of plant or equipment. if faced by evolution mining, these circumstances could result in evolution mining not realising its operational or development plans or in such plans costing more than expected or taking longer to realise than expected. any of these outcomes could have an adverse effect on evolution mining’s financial and operational performance.
106 based on the cash position of each of catalpa and conquest as at 30 June 2011 (including gold and silver available for sale), assuming $150 million is raised under the proposed rights offer and taking into account the costs associated with the Transaction and the rights offer. This figure does not take into account any stamp duty payable by catalpa in connection with the Transaction or the operating cash flows of catalpa and conquest during the period from 1 July 2011 to completion of the rights offer. it also does not take into account the macquarie facilities. as at the date of this explanatory memorandum, conquest has not drawn down on any of the macquarie facilities.
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(2) Mineral title risk
The mineral properties associated with the assets that will be owned by evolution mining may be subject to prior unregistered agreements or transfers, and title may be affected by undetected defects. There may be challenges to the title to these mineral properties (including by native title groups), which, if successful, could adversely impact development and operations and could result in evolution mining being required to make compensation payments.
(3) Mining risks
evolution mining will have a greater exposure to a wider range of mining risks given the diversified asset portfolio. These mining risks may adversely affect the financial performance of evolution mining.
(4) Funding risks
in the ordinary course of operations and development, evolution mining will be required to issue financial assurances, particularly insurances and bond/bank guarantee instruments, to secure statutory and environmental performance undertakings and commercial arrangements. evolution mining’s ability to provide such assurances is subject to external financial and credit market assessments, and its own financial position.
subject to successful completion of the rights offer (the success of which itself is subject to the risks discussed in section 8.1(a)(14) of this explanatory memorandum), it is expected that evolution mining will have sufficient funding to support its growth strategy. however, in the future, evolution mining may require financing for development and exploration purposes and for other capital expenditure (such as feasibility studies, approvals, permits and licences and other general operational matters). There can be no guarantee that such financing will be able to be obtained on acceptable terms, particularly having regard to the current condition of global financial markets.
if evolution mining is unable to obtain debt financing on acceptable terms, this could have an adverse effect on the company’s growth prospects. in these circumstances, evolution mining may seek to obtain funding by way of an equity raising, which may be dilutive to existing shareholders.
(5) Market fluctuation risk
substantially all of evolution mining’s revenues and cash flows will be derived from the sale of gold and, to a lesser extent, silver. Therefore, the financial performance of evolution mining is exposed to gold and silver price fluctuations. gold and silver prices may be influenced by numerous factors and events which are beyond the control of evolution mining which include costs of production of other gold and silver producers and other macro-economic factors such as inflationary expectations and interest rates, as well as general global economic conditions and political trends. if the market price for gold and silver should fall below or remain below the cost of production for any sustained period due to these and other factors and events, evolution mining’s business and results of operations could be materially and adversely affected.
(6) hedging risk
as set out in section 4.3(b)(1) of this explanatory memorandum, catalpa has hedging agreements in place for the forward sale of fixed quantities of gold production from its edna may gold operation between 1 July 2011 and 30 september 2015. There is a risk that evolution mining may not be able to deliver the amount of gold required under its hedging arrangements, for example, if there is a production shortage. in this event, evolution mining’s financial performance may be adversely affected.
(7) Labour market risk
evolution mining will be dependent upon a number of key management personnel and executives to manage the day-today requirements of its businesses. The loss of the services of one or more of such key management personnel could have an adverse effect on evolution mining.
The tightening labour market, an accelerating ageing population and a current skills shortage present challenging conditions for staffing the assets of evolution mining. The success of evolution mining relies on being able to recruit skilled staff. not being able to access skilled staff may impact the implementation of the business plan and the ability of evolution mining to achieve production targets within budgetary constraints.
(8) Foreign exchange rate risk
catalpa, conquest and the newcrest assets are australian businesses that report in australian dollars. Their revenue is derived from the sale of gold and silver in us dollars. however costs are mainly in australian dollars, therefore movements in the us$/a$ exchange rate may adversely or beneficially affect evolution mining’s results of operations and cash flows.
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(9) Regulatory risks
The operations of catalpa and conquest and the operation of the newcrest assets are subject to various federal, state and local laws and plans including those relating to mining, prospecting, development, permit and licence requirements, industrial relations, environment, land use, royalties, water, native title and cultural heritage, mine safety and occupational health.
native title may impact on evolution mining’s operations and future plans. for tenements that may still be subject to native title to be validly granted (or renewed), the ‘right to negotiate’ regime established by the native Title act 1993 (cth) must be followed. alternatively, an indigenous land use agreement may be entered into between evolution mining and relevant native title parties.
approvals, licences and permits required to comply with such rules are subject to the discretion of the applicable government or government officials. no assurance can be given that evolution mining will be successful in obtaining any or all of the various approvals, licences and permits or maintaining such authorisations in full force and effect without modification or revocation. To the extent such approvals are required and not retained or obtained in a timely manner or at all, evolution mining may be curtailed or prohibited from continuing or proceeding with production and exploration.
(10) Water risks
The effects of changes in rainfall patterns, water shortages and changing storm patterns and intensities may adversely impact the costs, production levels and financial performance of evolution mining’s operations. There is no guarantee that there will be sufficient future rainfall to support evolution mining’s future water demands in relation to its sites and operations, and this could adversely affect production and evolution mining’s ability to develop or expand projects and operations in the future. in addition, there can be no assurance that evolution mining will be able to obtain alternative water sources on commercially reasonable terms or at all in the event of prolonged drought conditions.
conversely, some of evolution mining’s sites and operations may be subject from time to time to severe storms and high rainfall leading to flooding and associated damage which may result in delays to or loss of production and also delays to development of some of its sites, projects and operations. in this regard, it is noted that extreme rainfall and flood conditions in queensland in late 2010/early 2011 had a material impact on numerous mine sites in queensland, including the operations at mt rawdon.
(11) Estimates risk
The mineral resources and ore reserves for evolution mining’s gold and silver assets are estimates only and no assurance can be given that any particular recovery level of gold and silver will in fact be realised. evolution mining’s estimates comply with the Jorc code, however mineral resources and ore reserves are expressions of judgement based on knowledge, experience and industry practice, and may require revision based on actual production experience. estimates that are valid when made may change significantly when new information becomes available.
(12) Costs risk
evolution mining will have significant commodity and energy requirements and it relies on being able to fulfil those requirements at a cost which does not negatively impact on its cash flows. a number of factors (such as rising oil prices, macro-economic factors such as inflationary expectations, interest rates, currency exchange rates (particularly the strength of the us dollar), as well as general global economic conditions and political trends) may lead to an increase in commodity and energy costs which may materially adversely affect the earnings of evolution mining.
on 10 July 2011, the australian government announced the details of its clean energy future policy proposed to be implemented on 1 July 2012. if that policy is implemented, certain carbon emitters will be required to purchase permits that are equivalent to their emissions volume at an initial price of $23 per tonne of carbon. until the legislation implementing the clean energy future policy is finalised, the impact on evolution mining is uncertain. possible risks to evolution mining include increased operating costs to buy permits, increased capital expenditure to introduce greenhouse gas abatement measures and increased costs due to the overall impact of the policy.
(13) Insurance risk
catalpa, conquest and newcrest currently each maintain insurance coverage as determined appropriate by their respective boards and management, but no assurance can be given that evolution mining will continue to be able to obtain such insurance coverage at reasonable rates (or at all), or that any coverage it obtains will be adequate and available to cover all claims.
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(14) Counterparty risk
substantially all of catalpa, conquest and the newcrest assets’ revenues and cash flows are derived from the sale of gold and silver. Therefore, the financial performance of evolution mining is exposed to any failure by counterparties to sale agreements that evolution mining has entered into to comply with the terms of those contracts, and this is beyond the control of evolution mining.
8.2 Impact on the status of Catalpa under the Foreign Acquisitions and Takeovers Act 1975 (Cth)
foreign investment in australia is regulated principally under commonwealth legislation including the foreign acquisitions and Takeovers act 1975 (cth) (faTa) and by the australian government’s foreign investment policy (policy). The federal Treasurer is ultimately responsible for all decisions relating to foreign investment and administration of the policy and faTa. The Treasurer is advised and assisted by firb which administers faTa in accordance with the policy.
while newcrest is incorporated in australia and listed on the asX, the Treasurer may take the view that newcrest is a ‘foreign person’ for the purposes of faTa, having regard to its aggregate level of foreign ownership. under the Transaction, newcrest will ultimately hold a substantial interest in evolution mining. Therefore, to the extent that the Treasurer considers newcrest to be a ‘foreign person’ for the purposes of faTa, evolution mining may also be a considered a ‘foreign person’.
in this case, the Treasurer would have the power to make orders under faTa preventing evolution mining from proceeding with certain transactions involving australian companies or assets, if the Treasurer considers the transaction to be contrary to australia’s national interest.
if evolution mining were considered to be a ’foreign person’, then it would also be required to give notice under faTa as a pre-condition to undertaking certain transactions. for example, if evolution mining wished to acquire more than 15% of an australian corporation with more than $231 million of assets (based on the current thresholds), before completing that acquisition it would need to give the Treasurer notice of the proposal.
8.3 Key implications if the Share Issue Resolution is not approved
(a) The Transaction will not proceed
if the share issue resolution is not approved, the share issue and asset purchase will not proceed. The scheme is conditional upon the approval of the share issue. as a result, the scheme will also not proceed and nor will the rights issue.
in that case, catalpa shareholders will retain their current interest in catalpa and no catalpa shares will be issued to newcrest (or its nominees) or conquest shareholders. There will be no change to the catalpa board, other than any retirement and re-election of catalpa directors pursuant to catalpa’s constitution.
catalpa will continue to operate as it did prior to the intended Transaction.
(b) Costs and break fee
if the Transaction is not implemented, catalpa will incur significant costs, including significant opportunity costs.
in addition, as discussed further in section 9.1(a)(4) of this explanatory memorandum under the terms of the Transaction implementation deed, catalpa will be liable to pay $1.6 million to each of conquest and newcrest in certain circumstances, including where a competing proposal is announced and the Transaction is not approved by catalpa shareholders.
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9 addiTional informaTion
9.1 Summary of key Transaction documents
(a) Transaction Implementation Deed
on 15 June 2011, catalpa, newcrest and conquest entered into the Transaction implementation deed.
The Transaction implementation deed sets out each party’s obligations in connection with the implementation of the Transaction. a summary of the key terms and conditions of the Transaction implementation deed is set out below.
a copy of the Transaction implementation deed (excluding the attachments) was released to the asX on 15 June 2011 and is available for download from www.catalparesources.com.au.
(1) Scheme Conditions
The scheme is subject to a number of conditions precedent, which are set out in more detail in section 9.2 of this explanatory memorandum. The asset sale agreement and the subscription deed will only be executed if the scheme conditions are satisfied or (if applicable) waived, so the asset purchase and share issue are inter-conditional with the scheme.
(2) Termination
each party may terminate the Transaction implementation deed if (amongst other circumstances):
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the scheme has not become effective by 30 november 2011;
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any scheme condition is not satisfied or (if applicable) waived;
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an event occurs which would or does prevent a scheme condition from being satisfied and that condition is not waived (if applicable); or
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another party materially breaches the deed (other than a breach of warranty under the deed, which is dealt with separately) and that breach is not remedied within 5 business days of the non-breaching party giving written notice to the breaching party.
in addition, subject to the terms of the Transaction implementation deed, one or more of the parties will have a termination right in the event that a catalpa director or conquest director (as the case may be) publicly changes or withdraws their support or recommendation of the Transaction (in the case of a catalpa director) or the scheme (in the case of a conquest director) or endorses a competing proposal.
(3) Exclusivity
catalpa and conquest have each agreed that from 15 June 2011 until the earlier of the date that the scheme becomes effective or the Transaction implementation deed is terminated, that:
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they will not participate in discussions in relation to a competing proposal or facilitate, or enter into an agreement in relation to, such a proposal, unless the board determines that:
-
-
not taking such action would involve a breach of the statutory or fiduciary duties owed by any director or would otherwise be unlawful; and
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the competing proposal is, or may reasonably be expected to lead to, a superior proposal, (the fiduciary exception);
-
-
they will not solicit or invite enquiries, discussions or proposals in relation to, or which are reasonably expected to lead to, a competing proposal;
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they will notify the other parties within 24 hours of any contact, discussions or negotiations in connection with a matter that relates to or may lead to a competing proposal, and will provide all material details of the relevant event;
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in the event that a competing proposal is received, they will provide the other parties with any information made available to any Third party who is or may be considering that competing proposal (which information may only be made available if the fiduciary exception applies); and
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they will not enter into an agreement in relation to a competing proposal without:
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giving the other parties 5 clear business days to submit a written proposal to revise the Transaction; and
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- considering that proposal in good faith,
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and, if the proposed revision would make the Transaction at least as favourable as the competing proposal to conquest shareholders or catalpa shareholders (as applicable), will:
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use best endeavours to agree the necessary amendments to the Transaction implementation deed; and
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take all necessary steps to give effect to the change to the Transaction.
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(4) Payment of break fee
catalpa must pay $1.6 million to each of conquest and newcrest if:
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any member of the catalpa board withdraws or adversely modifies their support of the Transaction or their recommendation that catalpa shareholders vote in favour of the share issue resolution (or makes a public statement indicating that they no longer support the Transaction or that they support a competing proposal), unless:
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the independent expert concludes that the share issue is not fair and reasonable to catalpa shareholders (provided the reasons for that conclusion do not include the existence of a competing proposal); or
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catalpa is entitled to terminate the Transaction implementation deed due to (amongst other circumstances) a failure of a scheme condition or a material breach of the Transaction implementation deed (other than a breach of warranty) by conquest or newcrest;
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a catalpa fee Trigger event occurs;
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following the public announcement of a competing proposal, catalpa shareholders do not approve the share issue resolution;
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a scheme condition is not satisfied because of a material non-compliance by catalpa with any of its obligations under the Transaction implementation deed;
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catalpa materially breaches its obligations under the exclusivity provisions summarised in section 9.1(a)(3) of this explanatory memorandum above; or
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conquest or newcrest is entitled to terminate the Transaction implementation deed and gives the appropriate termination notice pursuant to the terms of the deed.
conquest must pay $1.6 million to each of catalpa and newcrest in the equivalent circumstances as well as if any interested director has not procured the acceptance of a minority options offer.
on 12 september 2011, conquest, catalpa and newcrest entered into a deed under which they formalised their agreement to certain matters in relation to the operation of the Transaction implementation deed. These matters are of a technical nature and are not material in the context of the Transaction (however, note the waiver referred to in section 9.2 of this explanatory memorandum). They include changes to the mechanics of the majority options offers and minority options offers.
(b) Asset Sale Agreement
catalpa, mt rawdon operations (a wholly owned subsidiary of catalpa), lion mining (also a wholly owned subsidiary of catalpa) and newcrest will enter into the asset sale agreement as soon as practicable after the satisfaction or waiver of the last of the scheme conditions. under the terms of the asset sale agreement, members of the newcrest group must sell, and catalpa’s wholly owned subsidiaries must buy, the newcrest assets. mt rawdon operations will be the purchaser of the mt rawdon assets and lion mining will be the purchaser of the cracow assets. The date for completion under the asset sale agreement is the implementation date.
if the Transaction implementation deed is terminated prior to the implementation date, the asset sale agreement will automatically terminate.
on and from the implementation date, mt rawdon operations and lion mining will accept and assume responsibility for all liabilities (whenever arising) of the relevant vendors of the newcrest assets (being lgl mount rawdon operations pty limited in relation to the mt rawdon assets and newcrest operations limited in relation to the cracow assets) in relation to the mt rawdon assets and the cracow assets, and lion mining will also accept responsibility for all liabilities (whenever arising) of newcrest in its capacity as manager of the cracow gold mining and exploration joint ventures. catalpa will indemnify the vendors of the newcrest assets in relation to the liabilities that are assumed by mt rawdon operations and lion mining and will also guarantee the obligations of mt rawdon operations and lion mining.
at least 10 days before the implementation date, mt rawdon operations and lion mining (as applicable) will make or procure an offer of employment to each employee of the newcrest group working at the mt rawdon and cracow projects The offers of employment must be on terms and conditions substantially similar to and considered on an overall basis no less favourable than the employees’ existing employment arrangements.
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(c) Subscription Deed
catalpa and newcrest will enter into the subscription deed as soon as practicable after the satisfaction or waiver of the last of the scheme conditions. under the terms of the subscription deed, subject to the newcrest group members satisfying their obligations under the asset sale agreement, catalpa will issue and allot the subscription shares to newcrest (or its nominees) and apply for quotation on the asX of the subscription shares. The date for completion under the asset sale agreement is the implementation date.
if the Transaction implementation deed is terminated prior to the implementation date, the subscription deed will automatically terminate.
for as long as the newcrest group holds:
-
(1) at least 25% of the ordinary shares of evolution mining, newcrest may nominate the greater of two directors and one quarter of the total number of directors on the board of evolution mining, rounded up to the nearest whole number; or
-
(2) between 15% and 25% of the ordinary shares of evolution mining, newcrest may nominate one director to the board of evolution mining.
The directors nominated by newcrest may report information concerning evolution mining to the newcrest group on a confidential basis (subject to any confidentiality obligations of evolution mining to third parties and otherwise to the extent permitted by law). catalpa will use its best endeavours to procure the election and re-election of the directors nominated by newcrest.
(d) Agreements relating to the Rights Offer
as referred to in section 9.2(r) of this explanatory memorandum, one of the scheme conditions is that catalpa enters an underwriting agreement in relation to the rights offer by the second court date. The material terms of the underwriting agreement will be included in the offer documents for the rights offer.
in addition, under the Transaction implementation deed, newcrest has agreed that it will not take up its entitlements under the rights offer. as announced by catalpa and conquest on 19 July 2011, catalpa entered commitment letters with two institutional investors (blackrock and baker steel) under which those investors committed to take up most of newcrest’s entitlements, being a total of $50 million worth of new evolution mining shares based on the offer price.[107] The investors will pay the greater of the offer price and the price determined in the institutional bookbuild for their new shares in evolution mining.
blackrock’s and baker steel’s commitments are subject to:
-
an institutional bookbuild price cap of 15% or more than evolution mining’s closing share price on the trading day immediately prior to the launch of the rights offer;
-
an underwriting agreement being entered into in relation to the rights offer and that agreement not being terminated;
-
shares being issued pursuant to the rights offer prior to 31 december 2011; and
-
in the case of baker steel only, its funds under management not having fallen by more than 33.3% from the level as at 19 July 2011 when measured on the day immediately prior to the launch of the rights offer.
blackrock and baker steel will be paid a commitment fee equal to 1% of their dollar commitment.
9.2 Scheme Conditions
The scheme is subject to a number of conditions precedent that are set out in full in clause 3.1 of the Transaction implementation deed. a summary of the key conditions is set out below.
The asset sale agreement and subscription deed will only be executed if all of the scheme conditions are satisfied or (if applicable) waived. Therefore, if any of the scheme conditions (which include catalpa shareholder approval of the share issue resolution) are not satisfied or waived by agreement prior to the prescribed deadline, the Transaction will not proceed.
(a) FIRB approval
before 8.00am on the second court date, newcrest must receive firb approval for the acquisition of catalpa shares pursuant to the share issue and catalpa must receive firb approval for its merger with conquest and its acquisition of the newcrest assets. newcrest applied for firb approval on 15 august 2011 and catalpa applied for firb approval on 16 august 2011.
107 newcrest’s entitlements under the rights offer will be in respect of approximately $57 million of the total $150 million proposed to be raised, based on newcrest’s interest in evolution mining on a fully diluted value basis immediately following implementation of the Transaction (being a 38% interest).
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(b) Ministerial consents and approvals
before 8.00am on the second court date, the minister responsible for administering the mineral resources act 1989 (qld) must approve the assignment to catalpa of the tenements and applications forming part of the newcrest assets, and the minister responsible for administering the land act 1994 (qld) must provide all necessary consents and approvals in relation to the transfer to catalpa of the crown leases forming part of the newcrest assets, and such consents and approvals:
-
(1) must not be withdrawn or revoked; and
-
(2) must either be given unconditionally or subject to conditions satisfactory to conquest, catalpa and newcrest (acting reasonably and in good faith).
(c) ASIC and ASX consents and approvals
before 5.00pm on the business day before the second court date, asic and the asX must provide such consents and approvals, and must do such other acts, as any of conquest, catalpa or newcrest (acting reasonably and in good faith) considers reasonably necessary or desirable to implement the Transaction, and such consents, approvals and acts:
-
(1) must not be withdrawn or revoked; and
-
(2) must either be given or done unconditionally or subject to conditions satisfactory to conquest, catalpa and/or newcrest (as the case may be) acting reasonably and in good faith.
(d) Regulatory approvals
before 5.00pm on the business day before the second court date, any regulatory approvals which any of conquest, catalpa or newcrest (acting reasonably and in good faith) considers reasonably necessary or desirable to implement the Transaction must be obtained, and such approvals:
-
(1) must not be withdrawn or revoked; and
-
(2) must either be given unconditionally or subject to conditions satisfactory to conquest, catalpa and/or newcrest (as the case may be) acting reasonably and in good faith.
(e) Conquest Board recommendation
The conquest board must, in the scheme booklet, unanimously state that it considers the scheme to be in the best interests of conquest shareholders and must recommend that conquest shareholders vote in favour of the scheme, in the absence of a superior proposal.
(f) Catalpa Board recommendation
The catalpa board must, in this explanatory memorandum, unanimously state that it considers the Transaction to be in the best interests of catalpa shareholders and must recommend that catalpa shareholders vote in favour of the share issue resolution, in the absence of a superior proposal.
(g) Approval of the Scheme
conquest shareholders and the court must approve the scheme.
(h) Approval of the Share Issue
catalpa shareholders must approve the share issue resolution.
(i) No restraints
as at 8.00am on the second court date, there must not be in effect any material legal restraint or prohibition preventing any aspect of the Transaction.
(j) New Catalpa Shares
by 8.00am on the second court date, the asX must approve the quotation of the new catalpa shares on the asX.
(k) Macquarie consent
before 5.00pm on the business day before the second court date, macquarie’s consent to the Transaction must be obtained under certain agreements to which conquest group members and catalpa group member are, respectively, a party, and such consent:
-
(1) must not be withdrawn or revoked;
-
(2) must either be given unconditionally or subject to conditions satisfactory to conquest, catalpa and/or newcrest (as the case may be) acting reasonably and in good faith.
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(l) No material adverse change
There must not be a conquest material adverse change, catalpa material adverse change or newcrest material adverse change before 8.00am on the second court date, and such a change must not become known before that time to:
-
conquest, in the case of a catalpa material adverse change or newcrest material adverse change;
-
catalpa, in the case of a conquest material adverse change or newcrest material adverse change; or
-
newcrest, in the case of a conquest material adverse change or catalpa material adverse change.
(m) No prescribed occurrence
There must not be a conquest prescribed occurrence or catalpa prescribed occurrence before 8.00am on the second court date.
(n) Independent Expert’s opinion — Conquest
The independent expert must conclude that the scheme is in the best interests of conquest shareholders.
(o) Independent Expert’s opinion — Catalpa
The independent expert must conclude that the share issue is fair and reasonable to the catalpa shareholders (other than newcrest and its associates).
(p) Cancellation of Non-dilution Rights
before 5.00pm on the business day before the second court date, the interested directors must agree to the cancellation of their non-dilution rights for nil consideration, subject to the scheme becoming effective.
(q) Index decline
before 8.00am on the second court date, the s&p/asX 300 index must not close below 85% of its level as at the close of trading on the announcement date for a period of 5 or more consecutive trading days.
(r) underwriting Agreement
before 8.00am on the second court date, catalpa must execute an underwriting agreement with one or more underwriters on terms which are acceptable to conquest and newcrest (acting reasonably) and, immediately before 8.00am on the second court date, that agreement must not have been terminated and there must not be any circumstances in existence which would entitle an underwriter to terminate that agreement.
(s) Aggregate market capitalisation
before 8.00am on the second court date, the aggregate market capitalisation of catalpa and conquest must not drop below 80% of its level as at the close of trading on the announcement date for a period of 3 or more consecutive trading days.
(t) Minority Options
before 5.00pm on the business day before the second court date, each interested director must procure the acceptance of the minority options offers and conquest shareholders must approve the cancellation of the minority options and the issue of the minority options consideration. each of the minority options offers have been accepted as at the date of this explanatory memorandum.
The catalpa directors are not aware of any reason why any of the scheme conditions still requiring satisfaction will not be satisfied by the relevant date.
in this regard, pursuant to a deed entered into between catalpa, conquest and newcrest (as referred to in section 9.1(a) of this explanatory memorandum), the parties agreed that, in the event the independent expert concludes that the Transaction (or any component of it) is not fair but is reasonable (either in the report prepared by the independent expert for catalpa or conquest), they will waive any rights they may have in respect of the non-fulfilment of the relevant scheme conditions above.
9.3 Independent Expert’s Report
The independent expert’s report is designed to assist all catalpa shareholders in reaching their voting decision.
grant samuel has provided the independent expert’s report and has provided an opinion that it believes the Transaction is in the best interests of catalpa shareholders, in the absence of a superior proposal.
grant samuel has also concluded that the Transaction is not “fair” but is reasonable, in the absence of a superior proposal. grant samuel has concluded that the Transaction is not “fair”, on the basis that pursuant to asic policy, the Transaction must be assessed as a control transaction (essentially, a takeover by newcrest) due to the fact that newcrest will have an interest in evolution mining of more than 20% following implementation.
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based on market conditions at the time of its valuations, grant samuel believes the trading price of shares in evolution mining is unlikely to equate to the full underlying value of shares in a stand-alone catalpa. whilst this has led grant samuel to conclude that the Transaction is not “fair”, grant samuel is of the view that the underlying value attributable to catalpa shareholders will increase as a result of the Transaction (from $2.03 to $2.25 per share to $2.12 to $2.38 per share), and catalpa shareholders will retain the prospect of realising this increased underlying value through a subsequent change of control transaction for evolution mining. for this, and other reasons, grant samuel has concluded that catalpa shareholders will be better off if the Transaction is implemented than if it is not.
it is recommended that all catalpa shareholders read the independent expert’s report in full.
The independent expert’s report is set out in annexure a.
9.4 Competent person statement
The information in this explanatory memorandum that relates to the exploration results, mineral resources or ore reserves listed in the table below is based on work compiled by the person whose name appears in the same row, who is employed on a full-time basis by the employer named in that row and is a member of the institute named in that row. each person named in the table below has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he or she has undertaken to qualify as a competent person. each person named in the table below consents to the inclusion in this explanatory memorandum of the matters based on his or her information in the form and context in which they appear.
however, none of these persons accepts responsibility for information relating to the aggregate mineral resources or ore reserves of evolution mining following implementation of the Transaction, except to the extent that information is:
-
in the case of the employees of catalpa, hellman and schofield pty ltd and coffey mining, consistent with the relevant information in section 4 of this explanatory memorandum; and
-
in the case of the employees of conquest, australian mine design and development pty limited and amc consultants pty ltd, consistent with the relevant information in section 5 of this explanatory memorandum;
-
in the case of the employees of newcrest, consistent with the relevant information in section 6 of this explanatory memorandum.
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==> picture [481 x 31] intentionally omitted <==
----- Start of picture text -----
NAME OF
RESuLT/RESOuRCE/RESERVE COMPETENT PERSON EMPLOyER INSTITuTE
----- End of picture text -----
| australian mine design | |||
|---|---|---|---|
| and development pty | australasian institute of | ||
| mt carlton ore reserves | John wyche | limited | mining and metallurgy |
| mt carlton mineral resources | australian institute | ||
| and mt carlton exploration results | david hewitt | conquest | of geoscientists |
| australasian institute of | |||
| pajingo mineral resources | sonia konopa | amc consultants pty ltd | mining and metallurgy |
| australasian institute of | |||
| pajingo ore reserves | Tim benfeld | conquest | mining and metallurgy |
| australian institute | |||
| Twin hills mineral resources | peter brown | conquest | of geosciences |
| australian institute | |||
| pajingo exploration results | brentan grant | conquest | of geoscientists |
| reported edna may underground | |||
| mineral resource and catalpa ore | australian institute | ||
| reserves stockpiles | John winterbottom | catalpa | of geoscientists |
| catalpa mineral resources | |||
| (other than cracow mineral | hellman and schofeld | australian institute | |
| resource) | nicolas Johnson | pty ltd | of geoscientists |
| catalpa ore reserves | australasian institute | ||
| (other than cracow ore reserve) | harry warries | coffey mining pty ltd | of mining and metallurgy |
| australasian institute | |||
| cracow mineral resource | craig irvine | newcrest | of mining and metallurgy |
| australasian institute | |||
| cracow ore reserve | Justin woodward | newcrest | of mining and metallurgy |
| australasian institute of | |||
| mt rawdon mineral resources | Tim murphy | newcrest | mining and metallurgy |
| australasian institute of | |||
| mt rawdon ore reserves | nick spicer | newcrest | mining and metallurgy |
| cracow and mt rawdon | australasian institute of | ||
| exploration results | colin moorhead | newcrest | mining and metallurgy |
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9.5 Material changes in financial position
except as disclosed in this explanatory memorandum, including section 4.7(c) of this explanatory memorandum, as at the date of this explanatory memorandum, no catalpa director is aware of any material changes to the financial position of catalpa since 31 december 2010, being the end date of the half year period the subject of the reviewed financial statements released by catalpa to the asX on 9 march 2011.
9.6 Interests of Catalpa Directors
other than as set out below, the catalpa directors do not have any material personal interest in the outcome of the resolutions other than their interests arising solely in their capacity as catalpa shareholders.
as at the date of this explanatory memorandum, the catalpa directors had the following relevant interests in catalpa shares:
==> picture [481 x 21] intentionally omitted <==
----- Start of picture text -----
CATALPA DIRECTOR CLASS OF ShARE NuMBER
----- End of picture text -----
| peter maloney | ordinary | 1,379,579 |
|---|---|---|
| bruce mcfadzean | ordinary | 171,619 |
| murray pollock | ordinary | 1,839,492 |
| graham freestone | ordinary | 58,245 |
| John rowe | ordinary | 95,695 |
| barry sullivan | ordinary | 111,005 |
as at the date of this explanatory memorandum, the catalpa directors had the following relevant interests in catalpa options:
==> picture [481 x 21] intentionally omitted <==
----- Start of picture text -----
CATALPA DIRECTOR EXERCISE PRICE EXERCISE DATE NuMBER
----- End of picture text -----
| peter maloney | n/a | n/a | nil |
|---|---|---|---|
| bruce mcfadzean | $1.10 | 31 october 2011 | 15,682 |
| $0.867 | 23 december 2013 | 227,273 | |
| $1.087 | 23 december 2013 | 227,274 | |
| $1.307 | 23 december 2013 | 227,273 | |
| $1.527 | 23 december 2013 | 227,272 | |
| $1.69 | 30 June 2015 | 360,000 | |
| graham freestone | n/a | n/a | nil |
| murray pollock | $1.10 | 31 october 2011 | 210,643 |
| $0.867 | 23 december 2013 | 22,728 | |
| $1.087 | 23 december 2013 | 22,728 | |
| $1.307 | 23 december 2013 | 22,728 | |
| $1.527 | 23 december 2013 | 22,727 | |
| John rowe | $0.867 | 23 december 2013 | 45,456 |
| $1.087 | 23 december 2013 | 45,455 | |
| $1.307 | 23 december 2013 | 45,455 | |
| $1.527 | 23 december 2013 | 45,454 | |
| barry sullivan | $1.307 | 23 december 2013 | 22,728 |
| $1.527 | 23 december 2013 | 22,730 |
bruce mcfadzean also holds 160,000 catalpa performance rights which will vest upon implementation of the Transaction.
as at the date of this explanatory memorandum, no newcrest securities or conquest securities are held by or on behalf of a catalpa director.
EXPLANATORY MEMORANDUM
93
9.7 Share Issue Resolution background information
(a) Regulatory requirements
pursuant to section 606(1) of the corporations act, a person must not acquire a relevant interest in issued voting shares of a listed company if the person acquiring the interest does so through a transaction in relation to securities entered into by, or on behalf of, the person and because of the transaction, that person’s or someone else’s voting power in the listed company increases:
-
from 20% or below to more than 20%; or
-
from a starting point that is above 20% and below 90%.
The voting power of a person in a company is determined in accordance with section 610 of the corporations act. The calculation of a person’s voting power in a company involves determining the voting shares in the company in which the person and the person’s associates have a relevant interest.
a person has a relevant interest in securities if they:
-
are the holder of the securities;
-
have power to exercise, or control the exercise of, a right to vote attached to the securities; or
-
have power to dispose of, or control the exercise of a power to dispose of, the securities.
section 611 of the corporations act provides that certain acquisitions of relevant interests in a company’s voting shares are exempt from the takeovers prohibition in section 606(1), including acquisitions approved previously by a resolution passed at a general meeting of the company in which the acquisition is made (item 7 of section 611 of the corporations act).
under the share issue, newcrest’s voting power in catalpa will increase from below 20% to more than 20%. as a result, catalpa shareholder approval under item 7 of section 611 of the corporations act is required for the share issue.
(b) Application of Listing Rule 7.1
listing rule 7.1 provides that a company must not, subject to certain exceptions, issue during any 12 month period any equity securities or other securities with rights of conversion to equity (such as an option) if the number of those securities exceeds 15% of the total ordinary securities on issue at the commencement of that 12 month period.
one circumstance where an issue is not taken into account in the calculation of this 15% threshold is where the issue has the prior approval of shareholders in a general meeting pursuant to item 7 of section 611 of the corporations act (see listing rule 7.2, exception 16).
approval under item 7 of section 611 of the corporations act is being sought for the proposed share issue and accordingly, if obtained, the listing rule exception will apply in relation to that issue.
(c) Approval threshold
To be approved, the share issue resolution requires more than 50% of the votes cast at the meeting by catalpa shareholders entitled to vote on the share issue resolution to be cast in favour of the share issue resolution. The voting exclusion statement for the share issue resolution is set out in section 9.7(e) of this explanatory memorandum.
(d) Specific information required by item 7 section 611 of the Corporations Act, ASIC Regulatory Guide 74
as described in paragraph (a) above, section 611 of the corporations act provides that certain acquisitions of relevant interests in a company’s voting shares are exempt from the prohibition in section 606(1) of the corporations act, including acquisitions approved previously by a resolution passed at a general meeting of the company in which the acquisition is made (item 7 of section 611 of the corporations act).
The information set out below is required to be provided to catalpa shareholders under the corporations act and asic regulatory guide 74 in respect of obtaining approval for the share issue under item 7 of section 611 of the corporations act. catalpa shareholders are also referred to the independent expert’s report prepared by grant samuel annexed to this explanatory memorandum.
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(1) Details of Newcrest
background information on the newcrest group is set out in section 6 of this explanatory memorandum.
(2) Identity of persons who will acquire a Relevant Interest in the Catalpa Shares to be allotted under the Share Issue and the extent of their Relevant Interest
newcrest (or its nominees) will acquire catalpa shares pursuant to the share issue.
as at the date of this explanatory memorandum, neither newcrest nor any of the newcrest associates have a relevant interest in any catalpa shares.
on the implementation date, newcrest will acquire a relevant interest in the subscription shares.
details of the following are set out in section 7.6 of this explanatory memorandum:
-
the maximum extent of the increase in newcrest and each newcrest associate’s voting power that would result from the share issue; and
-
the voting power that newcrest and each newcrest associate would have as a result of the share issue.
(3) Intentions of Newcrest in relation to Evolution Mining
The intentions of newcrest in relation to evolution mining are set out in section 7.8 of this explanatory memorandum.
(4) Capital structure of Evolution Mining
The proposed capital structure of evolution mining is set out in section 7.6 of this explanatory memorandum.
(5) Board of directors of Evolution Mining
The proposed composition of the board of evolution mining is set out in section 7.2 of this explanatory memorandum.
(6) Terms of Subscription Shares to be issued
The subscription shares will rank pari passu with the existing catalpa shares.
(7) Rationale for the Transaction (including the Share Issue)
an explanation of the rationale for the Transaction is set out in section 2 of this explanatory memorandum.
(8) Timing
if catalpa shareholders approve the resolutions and assuming all other relevant conditions are satisfied or waived, the asset purchase and share issue is to take place on the proposed implementation date for the scheme being 2 november 2011. This date is indicative only and may be varied as circumstances change. more details in relation to the timing of the Transaction are set out in the key dates section at the front of this explanatory memorandum.
(9) Interests and Recommendations of Catalpa Directors
The catalpa directors’ interests are set out in section 9.6 of this explanatory memorandum.
The recommendation of the catalpa directors in relation to the resolutions is set out in section 1.3 of this explanatory memorandum.
(10) Proposed contracts conditional upon, or directly or indirectly dependent on, Catalpa Shareholders’ agreement to the Share Issue
details of the Transaction implementation deed, asset sale agreement, subscription deed, underwriting agreement and shareholder commitments are set out in section 9.1 of this explanatory memorandum.
(e) Voting exclusion statement
in accordance with item 7 of section 611 of the corporations act, catalpa will disregard any votes cast on the share issue resolution by newcrest or any of its associates.
however catalpa need not disregard a vote if:
-
(1) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or
-
(2) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.
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9.8 Change of Name Resolution background information
(a) Background
The change of name resolution seeks approval from catalpa shareholders to change the name of catalpa to ‘evolution mining limited’ with effect from implementation of the Transaction.
The catalpa directors consider that the proposed new name aligns with the identity of evolution mining.
(b) Regulatory requirement and approval threshold
section 157 of the corporations act requires that in order for a company to change its name, it must pass a special resolution at a general meeting of shareholders.
accordingly, to be approved, the change of name resolution requires at least 75% of the votes cast at the meeting by catalpa shareholders entitled to vote on the change of name resolution to be cast in favour of the change of name resolution.
The catalpa directors unanimously recommend that catalpa shareholders vote in favour of the change of name resolution..
9.9 Majority Options Resolution background information
(a) Background
under the Transaction implementation deed, catalpa is required to make offers to acquire:
-
35,489,734 conquest options that are currently on issue; and
-
2,259,392 conquest options that are due and issuable to conquest directors upon and subject to conquest shareholder approval that will be sought at the conquest general meeting,
(together the majority options) in exchange for catalpa options on terms agreed between catalpa, newcrest and conquest in the Transaction implementation deed (the majority options offers). That is, the majority options (which are conquest options) will be replaced with catalpa options to seek to ensure that, following implementation of the Transaction, conquest will be a wholly owned subsidiary of catalpa.
The bulk of the majority options are (or, in the case of the conquest options that are due and issuable, will be) held by Trinity management pty ltd ( trinity ) (as trustee of the option share trust established in connection with conquest’s directors and employees share option plan) on behalf of a range of conquest directors and employees. There are also 2,000,000 options exercisable at $0.93 per option and expiring on 26 february 2013 and 5,500,000 options exercisable at $0.60 per option and expiring on 19 october 2012, which were not issued under conquest’s directors and employees share option plan and, accordingly, are not subject to the option share trust.
for those majority options held by Trinity on behalf of persons who will be employed by evolution mining after the implementation date (including Jake klein), catalpa will issue catalpa options under, and subject to the terms of, the catalpa employee share option and performance rights plan, approved by catalpa shareholders on 23 november 2010.
The catalpa employee share option and performance rights plan is, generally speaking, only open to employees of catalpa group members. James askew will be a non-executive director and will therefore be ineligible to participate in that plan. however, catalpa’s employees and contractors option plan, approved by catalpa shareholders on 27 november 2008, is also open to non-executive directors. accordingly, catalpa will issue catalpa options for the benefit of James askew under, and subject to the terms of, the catalpa employees and contractors option plan.
The offer of catalpa options under the employee option plans will only be made if the offerees remain employees of (or, in the case of James askew, a director of) evolution mining at the implementation date.
consistent with the intention that the majority options offers are to replace the existing conquest options with like catalpa options, the majority options offers by catalpa under the employee option plans will involve the catalpa board exercising certain discretions under those plans in order to ensure that the catalpa options issued pursuant to the majority options offers are on substantially the same terms as the majority options. in particular the catalpa options will not lapse upon the holder ceasing to be an employee or director (as the case may be) of evolution mining and instead will remain exercisable until their expiry date.
The remainder of the majority options (being those not held by persons who will be employees or directors of evolution mining) will be replaced by catalpa options on standard option terms, including standard asX reorganisation provisions, equivalent to the terms on which those majority options are currently held.
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The majority options offers will be made on the business day after the implementation date, and only if the scheme has been implemented and conquest shareholders have approved the cancellation of the majority options the subject of the majority options offers at the conquest general meeting. accordingly, the catalpa options that will be issued pursuant to the majority options offers will be options to be issued shares in evolution mining. if the majority options offers are accepted, catalpa options will be issued within 11 business days of the implementation date.
The number of catalpa options offered pursuant to the majority options offers was calculated by adjusting the number of majority options and their exercise price to account for the exchange ratio under the scheme, with the expiry date remaining unchanged. The underlying principle was to provide catalpa options of value substantially equivalent to the majority options.
catalpa shareholder approval is not required for the issue of the majority options to conquest employees and directors who will not be appointed as directors of evolution mining.
The majority options resolutions seek approval from catalpa shareholders for the issue, subject to the terms of the majority options offers, of catalpa options to certain of the current conquest directors who will become directors of evolution mining, pursuant to the majority options offers.
Those conquest directors are Jake klein and James askew who will receive the following catalpa options in exchange for their majority options:
Mr Jake Klein
==> picture [481 x 235] intentionally omitted <==
----- Start of picture text -----
NuMBER OF CATALPA OPTIONS EXERCISE PRICE EXPIRy DATE
600,000 $3.10 26 february 2013
582,141 $1.51 25 november 2016
6,290 $1.82 25 november 2016
1,560,450 $1.84 25 november 2016
505,291 $1.86 25 november 2016
15,172 $1.90 25 november 2016
634,672 $1.92 25 november 2016
454,645 $1.97 25 november 2016
346,865 $2.11 25 november 2016
221,645 $2.11 5 years after the catalpa options are granted
350,264 $2.45 5 years after the catalpa options are granted
TOTAL: 5,277,435
----- End of picture text -----
Mr James Askew
| NuMBER OF CATALPA OPTIONS | EXERCISE PRICE | EXPIRy DATE |
|---|---|---|
| 53,902 $1.51 25 november 2015 |
||
| 582 $1.82 25 november 2015 |
||
| 200,042 $1.84 25 november 2015 |
||
| 46,786 $1.86 25 november 2015 |
||
| 1,405 $1.90 25 november 2015 |
||
| 58,766 $1.92 25 november 2015 |
||
| 42,097 $1.97 25 november 2015 |
||
| 32,117 $2.11 25 november 2015 |
||
| 20,523 $2.11 5 years after the catalpa options are granted |
||
| 32,432 $2.45 5 years after the catalpa options are granted |
TOTAL: 488,652
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(b) Regulatory requirement and approval threshold
in accordance with the Transaction implementation deed, Jake klein and James askew will be appointed to the board of evolution mining as soon as practicable after the effective date. This is prior to the date on which they will be issued with the relevant number of catalpa options pursuant to the majority options offers (being not more than 11 business days after the implementation date), meaning messrs klein and askew will be directors of catalpa (and therefore will each be a related party of catalpa) at the time they are issued with the catalpa options. in addition, section 228(6) of the corporations act provides that a person is a related party of catalpa if catalpa has reasonable grounds to believe they are likely to become a related party in the future.
The catalpa directors consider that given:
-
the majority options offers are being made to simply replace existing conquest options;
-
the pricing of the catalpa options to be issued to the majority options offers is a function of adjusting the exercise price and number of options for the exchange ratio (as discussed in section 9.9(a) of this explanatory memorandum); and
-
the majority options offers made to messrs klein and askew are on the same terms as the other majority options offers that are made to other directors, employees and contractors of conquest,
the majority options offers are on arm’s length terms. accordingly, approval is not being sought under chapter 2e of the corporations act.
however, catalpa shareholder approval is being sought for the purposes of listing rule 10.14 and for all other purposes for the issue of the catalpa options to Jake klein and James askew, as those issues will constitute the issue of equity securities to a director under an employee incentive scheme and they therefore require the approval of catalpa shareholders.
To be approved, each majority options resolution requires that more than 50% of the votes cast at the meeting by catalpa shareholders entitled to vote on the resolution are cast in favour of that resolution.
(c) Voting exclusion statement
for the purposes of the majority options resolution (Jake klein), in accordance with listing rule 10.14, catalpa will disregard any votes cast on that resolution by Jake klein or any of his associates.
for the purposes of the majority options resolution (James askew), in accordance with listing rule 10.14, catalpa will disregard any votes cast on that resolution by James askew or any of his associates.
however catalpa need not disregard a vote if:
-
(1) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or
-
(2) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.
(d) Application of Listing Rule 7.1
listing rule 7.1 provides that a company must not, subject to certain exceptions, issue during any 12 month period any equity securities or other securities with rights of conversion to equity (such as an option) if the number of those securities exceeds 15% of the total ordinary securities on issue at the commencement of that 12 month period.
circumstances where an issue is not taken into account in the calculation of this 15% threshold is where the issue has been made under an approved employee incentive scheme (see listing rule 7.2, exception 9), which approval was received for catalpa’s employee share option and performance right plan for the purposes of listing rule 7.2 on 23 november 2010 and for catalpa’s employees and contractors option plan for the purposes of the relevant exception on 27 november 2008.
(e) Disclosure pursuant to Listing Rule 10.15
for the purposes of listing rule 10.15, the following disclosures are made in relation to the majority options resolution (Jake klein):
-
(1) The person receiving the catalpa options is Jake klein;
-
(2) The maximum number of catalpa options to be issued to Jake klein is 5,277,435;
-
(3) The offer to be issued the catalpa options will be made on the business day after the implementation date (which is currently scheduled to be 2 november 2011 and which will be approximately 20 days after the meeting) and, if that offer is accepted by mr klein, the catalpa options will be issued within a further 10 business days;
-
(4) Jake klein is not currently a director of catalpa. however, at the time that the catalpa options will be issued, Jake klein will be a director. also, Jake klein is considered a related party of catalpa under section 228(6) of the corporations act as it is intended that he will become a director of catalpa following the effective date;
-
(5) since the catalpa employee share option and performance rights plan was approved by catalpa shareholders on 23 november 2010, catalpa has issued to bruce mcfadzean 360,000 catalpa options (with an exercise price of $1.69) and 160,000 catalpa performance rights for nil consideration (each issue was also approved by catalpa shareholders
CATALPA RESOURCES
98
on 23 november 2010). no other securities have been issued by catalpa to persons referred to in listing rule 10.14 under the catalpa employee share option and performance rights plan;
-
(6) The persons referred to in listing rule 10.14 who are entitled to participate in the catalpa employee share option and performance rights plan are Jake klein (after he is appointed as a director of catalpa) and bruce mcfadzean;
-
(7) The catalpa options will be issued to replace the conquest options currently on issue and held by, or on behalf of, Jake klein. The number of catalpa options to be issued is set out in section 9.9(a) of this explanatory memorandum;
-
(8) The voting exclusion statement is set out in section 9.9(c) of this explanatory memorandum; and
-
(9) The catalpa options will be issued to replace the conquest options currently on issue and held by, or on behalf of Jake klein. as a result, no funds will be raised by the issue of the catalpa options. however, the total amount of funds that will be raised if the catalpa options are exercised is $10,762,300.56.
for the purposes of listing rule 10.15, the following disclosures are made in relation to the majority options resolution (James askew):
-
(1) The person receiving the catalpa options is James askew;
-
(2) The maximum number of catalpa options to be issued to James askew is 488,652;
-
(3) The offer to issue the catalpa options will be made on the business day after the implementation date (which is currently scheduled to be 2 november 2011 and which will be approximately 20 days after the meeting) and, if that offer is accepted by mr askew, the catalpa options will be issued within a further 10 business days;
-
(4) James askew is not currently a director of catalpa. however, at the time that the catalpa options are issued, James askew will be a director of catalpa. also, James askew is considered to be a related party of catalpa under section 228(6) of the corporations act as it is intended that he will become a director of catalpa;
-
(5) since the catalpa employees and contractors option plan was approved by catalpa shareholders on 27 november 2008, catalpa has issued (for nil consideration):
-
10,000,000 options to bruce mcfadzean expiring on 23 december 2013 – 2,500,000 with an exercise price of $0.08, 2,500,000 with an exercise price of $0.10, 2,500,000 with an exercise price of $0.12 and 2,500,000 with an exercise price of $0.14. following the consolidation of catalpa’s share capital in connection with catalpa’s merger with lion selection limited, these became 909,092 options – 227,273 with an exercise price of $0.867, 227,273 with an exercise price of $1.087, 227,273 with an exercise price of $1.307 and 227,273 with an exercise price of $1.527;
-
2,000,000 options to mr John rowe expiring on 23 december 2013 – 500,000 with an exercise price of $0.08, 500,000 with an exercise price of $0.10, 500,000 with an exercise price of $0.12 and 500,000 with an exercise price of $0.14. following the consolidation of catalpa’s share capital in connection with catalpa’s merger with lion selection limited, these became 181,816 options – 45,454 with an exercise price of $0.867, 45,454 with an exercise price of $1.087, 45,454 with an exercise price of $1.307 and 45,454 with an exercise price of $1.527; and
-
1,000,000 options to each of mr murray pollock, mr barry sullivan and mr nigel Johnson expiring on 23 december 2013. for each – 250,000 with an exercise price of $0.08, 250,000 with an exercise price of $0.10, 250,000 with an exercise price of $0.12 and 250,000 with an exercise price of $0.14. following the consolidation of catalpa’s share capital in connection with catalpa’s merger with lion selection limited, each director’s 1,000,000 options became 90,912 options – 22,728 with an exercise price of $0.867, 22,728 with an exercise price of $1.087, 22,728 with an exercise price of $1.307 and 22,728 with an exercise price of $1.527.
no other securities have been issued by catalpa to persons referred to in listing rule 10.14 under the catalpa employees and contractors option plan;
-
(6) The persons referred to in listing rule 10.14 who are entitled to participate in the catalpa employees and contractors option plan are Jake klein and James askew (after they are appointed as directors of evolution mining) and bruce mcfadzean, peter maloney, John rowe, barry sullivan and murray pollock;
-
(7) The catalpa options will be issued to replace the conquest options currently on issue and held by a trustee for the benefit of James askew. The number of catalpa options to be issued is set out in section 9.9(a) of this explanatory memorandum;
-
(8) The voting exclusion statement is set out in section 9.9(c) of this explanatory memorandum; and
-
(9) The catalpa options will be issued to replace the conquest options currently on issue and held by, or on behalf of James askew. as a result, no funds will be raised by the issue of the catalpa options. however, the total amount of funds that will be raised if the catalpa options are exercised is $926,510.61.
(f) Recommendation
The catalpa directors unanimously recommend that catalpa shareholders vote in favour of the majority options resolutions.
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99
10 glossary
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TERM MEANING
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| Announcement Date | 15 June 2011, being the day on which the Transaction implementation deed was executed. |
|---|---|
| ASIC | the australian securities & investments commission. |
| Asset Purchase | the purchase by catalpa’s wholly owned subsidiaries of the newcrest assets (being mt rawdon |
| operations in relation to the mt rawdon assets and lion mining in relation to the cracow assets) pursuant | |
| to the asset sale agreement. | |
| Asset Sale Agreement | the asset sale agreement to be entered into between catalpa, mt rawdon operations, lion mining, |
| newcrest, newcrest operations limited and lgl mount rawdon operations pty limited if the scheme | |
| conditions are satisfed or (if applicable) waived. | |
| Associate | has the meaning set out in section 12 of the corporations act as if section 12(1) of the corporations act |
| included a reference to this explanatory memorandum. | |
| ASX | asX limited acn 008 624 691 or, where the context requires, the fnancial market operated by it on which |
| catalpa shares are quoted. | |
| Attachment | an attachment to this explanatory memorandum. |
| Australian Accounting | the approved accounting standards issued by the australian accounting standards board. |
| Standards | |
| Baker Steel | baker steel capital managers llp. |
| BlackRock | blackrock investment management (uk) limited. |
| Business Day | any day that banks are open for business in each of perth, melbourne and sydney. |
| Catalpa | catalpa resources limited acn 084 669 036. |
| Catalpa Board | the board of directors of catalpa from time to time. |
| Catalpa Director | a director of catalpa. |
| Catalpa Disclosure | collectively: |
| Materials | 1 all documentation: |
| — referred to in the Transaction implementation deed, the asset sale agreement and the | |
| subscription deed; and | |
| — contained in the data room established by catalpa in connection with the Transaction and listed in | |
| any index for that data room provided to conquest, newcrest or their representatives (up to and | |
| including 10.00am on the day immediately preceding the announcement date); | |
| 2 all information (including answers) made available to conquest, newcrest or their representatives as |
|
| part of the question and answer process conducted in connection with catalpa’s data room; and | |
| 3 all information available by searching records open to public inspection in australia prior to the |
|
| announcement date. | |
| Catalpa Employees and | The catalpa employees and contractors option plan approved by catalpa shareholders at catalpa’s annual |
| Contractors Option Plan | general meeting held on 27 november 2008. |
| Catalpa Employee Share | The catalpa employee share option and performance rights plan approved by catalpa shareholders at |
| Option and Performance | catalpa’s annual general meeting held on 23 november 2010. |
| Rights Plan | |
| Catalpa Fee | a competing proposal of any kind is announced prior to expiry of the exclusivity period and within one year |
| Trigger Event | of the date of such announcement, the relevant Third party or an associate of that Third party: |
| 1 completes a competing proposal with respect to the catalpa group; or |
|
| 2 (without limiting paragraph 1 of this defnition) acquires a relevant interest in at least 50% of |
|
| catalpa shares. | |
| Catalpa Group | catalpa and each of its subsidiaries andcatalpa group Membermeans catalpa or one of its subsidiaries. |
| Catalpa Information | all information included in this explanatory memorandum and any updates to that information prepared |
| by or on behalf of catalpa, other than the conquest information, the newcrest information, the evolution | |
| mining information and the cracow information (and any information solely derived from, or prepared solely | |
| in reliance on, the conquest information, the newcrest information, the evolution mining information or the | |
| cracow information) and also does not include the independent expert’s report (including the Technical | |
| specialist’s report) and the investigating accountant’s report (or any information solely derived from, or | |
| prepared solely in reliance on, information in either of those reports). |
CATALPA RESOURCES
100
10 glossary conTinued
| Catalpa Material Adverse | any event, occurrence or matter that individually or when aggregated with all such events, occurrences | any event, occurrence or matter that individually or when aggregated with all such events, occurrences |
|---|---|---|
| Change | or matters: | |
| 1 | diminishes, or is reasonably likely to diminish, (whether now or in the future) the consolidated net assets | |
| of the catalpa group by an amount equal to $35 million or more; or | ||
| 2 | has the result that the catalpa group is unable to carry on its business in substantially the same | |
| manner as carried on as at the announcement date, | ||
| other than an event, occurrence or matter: | ||
| 3 | required to be undertaken or procured by the catalpa group pursuant to the Transaction documents; | |
| 4 | to the extent fairly disclosed in the catalpa disclosure materials; | |
| 5 | to the extent known to newcrest and conquest prior to the announcement date (which does not | |
| include knowledge of the risk of an event, occurrence or matter happening); | ||
| 6 | arising as a result of any generally applicable change in law or governmental policy; or | |
| 7 | arising from changes in economic or business conditions (including commodity prices and exchange | |
| rates) which impact on catalpa and its competitors in substantially the same manner. | ||
| Catalpa Option | an option over an unissued catalpa share. | |
| Catalpa Performance | the | 1,119,000 unquoted rights issued under the catalpa employee share option and performance rights |
| Rights | plan, each of which, on exercise, entitles the holder to be issued a catalpa share. | |
| Catalpa Prescribed | other than as: | |
| Occurrence | 1 | required by a Transaction document; |
| 2 | agreed to in writing by conquest and newcrest; | |
| 3 | fairly disclosed in the catalpa disclosure materials; or | |
| 4 | fairly disclosed by catalpa in an announcement made to the asX, or a document lodged with asic, | |
| before the announcement date, | ||
| the | occurrence of any of the following: | |
| 5 | catalpa converting all or any of its shares into a larger or smaller number of shares; | |
| 6 | catalpa resolving to reduce its share capital in any way or reclassifying, combining, splitting or | |
| redeeming or repurchasing directly or indirectly any of its shares; | ||
| 7 | catalpa: | |
| — entering into a buy-back agreement; or | ||
| — resolving to approve the terms of a buy-back agreement under the corporations act; | ||
| 8 | catalpa declaring, paying or distributing any dividend, bonus or other share of its profts or assets or | |
| returning or agreeing to return any capital to its members; | ||
| 9 | a catalpa group member issuing shares (other than as a result of the exercise of the catalpa options | |
| or the vesting of the catalpa performance rights), or granting an option over its shares, or agreeing to | ||
| make such an issue or grant such an option other than to a catalpa group member; | ||
| 10 | a catalpa group member issuing or agreeing to issue securities convertible into shares, including | |
| pursuant to a dividend reinvestment plan; | ||
| 11 | a catalpa group member making any change to its constitution; | |
| 12 | a catalpa group member disposing, or agreeing to dispose, of, or surrendering, relinquishing or failing | |
| to renew: |
-
the whole, or a substantial part, of its business or property; or
-
all or any part of, or interest in, any mining or exploration licence, lease, tenement or application;
-
13 a catalpa group member: — acquiring, leasing or disposing of;
-
agreeing to acquire, lease or dispose of; or
-
offering, proposing, announcing a bid or tendering for, any business, assets, entity or undertaking, the value of which exceeds $5 million;
-
14 a catalpa group member entering into a contract or commitment restraining a catalpa group member from competing with any person or conducting activities in any market;
-
15 a catalpa group member creating, or agreeing to create, any mortgage, charge, lien or other encumbrance over the whole, or a substantial part, of its business or property other than a lien which arises by operation of law or legislation securing an obligation that is not yet due;
-
16 a catalpa group member:
-
entering into any contract or commitment (including in respect of financial indebtedness) requiring payments by the catalpa group in excess of $5 million other than any tax payment required by law or instalment or any repayment required under any facility agreement in effect as at the announcement date and which has been provided in the catalpa disclosure materials;
-
(without limiting the foregoing) agreeing to incur capital expenditure from the announcement date of more than $5 million;
-
— waiving any material third party default where the financial impact on the catalpa group will be in excess of $1 million; or
EXPLANATORY MEMORANDUM
101
-
accepting as a compromise of a matter less than the full compensation due to a catalpa group member where the compromise is more than $1 million;
-
17 a catalpa group member providing financial accommodation other than to members of the catalpa group (irrespective of what form of financial indebtedness that accommodation takes) in excess of $1 million;
-
18 a catalpa group member entering into any agreement, arrangement or transaction with respect to derivative instruments (including, but not limited to, swaps, futures contracts, forward commitments, commodity derivatives or options) or similar instruments other than under catalpa’s existing finance facilities in effect at the announcement date and as disclosed in the catalpa disclosure materials;
-
19 a catalpa group member resolving that it be wound up or the making of an application or order for the winding up or dissolution of a catalpa group member other than where the application or order (as the case may be) is set aside within 14 days;
-
20 a liquidator or provisional liquidator of a catalpa group member being appointed;
-
21 a court making an order for the winding up of a catalpa group member;
-
22 an administrator of a catalpa group member being appointed under the corporations act;
-
23 a catalpa group member ceases, or threatens to cease to, carry on the business conducted by the catalpa group as at the announcement date;
-
24 a catalpa group member is or becomes unable to pay its debts when they fall due within the meaning of the corporations act or is otherwise presumed to be insolvent under the corporations act unless that member has, or has access to, committed financial support from its parent entity such that it is able to pay its debts;
-
25 a catalpa group member executing a deed of company arrangement;
-
26 a receiver, or a receiver and manager, being appointed in relation to the whole, or a substantial part, of the property of a catalpa group member;
-
27 a catalpa group member entering into or resolving to enter into a transaction with any related party of catalpa (other than a related party which is a catalpa group member) as defined in section 228 of the corporations act;
-
28 catalpa or any of its subsidiaries being deregistered as a company or otherwise dissolved;
-
29 a catalpa group member entering into or materially amending any employment, consulting, severance or similar agreement or arrangement with officers, directors, other executives or employees of catalpa or a catalpa group member, accelerating or otherwise materially increasing compensation or benefits for any of the above, in each case other than pursuant to: — contractual arrangements in effect on the announcement date and which have been disclosed in writing to conquest and newcrest prior to the announcement date;
-
— catalpa’s policies and guidelines in effect on the announcement date and which have been disclosed in writing to conquest and newcrest prior to the announcement date,
-
provided that the aggregate of all increases in compensation or benefits is no greater than $2 million;
-
30 a catalpa group member paying any of its directors or employees a termination or retention payment, other than in accordance with contractual arrangements in effect on the announcement date and which have been disclosed in writing to conquest and newcrest prior to the announcement date;
-
31 a catalpa group member entering into any enterprise bargaining agreement other than in the ordinary course of business or pursuant to contractual arrangements in effect on the announcement date and which have been disclosed in writing to conquest and newcrest prior to the announcement date;
-
32 a catalpa group member changing any accounting policy applied by them to report their financial position other than any change in policy required by a change in accounting standards;
-
33 a catalpa group member doing anything that would result in a change in the catalpa consolidated group or mec group (as those terms are defined in the Income Tax Assessment Act 1997 (cth)); or
-
34 notice of any material investigation, prosecution, arbitration, litigation or dispute threatened against a catalpa group member which could reasonably be expected to give rise to a liability for the catalpa group in excess of $1 million ( Material Proceedings ) and for the avoidance of doubt which is not frivolous or vexatious, or circumstances arising which could reasonably be expected to give rise to any material proceedings, other than in relation to matters where the liability or likely liability for the catalpa group has been fully and fairly disclosed in the catalpa disclosure materials. for the avoidance of doubt, material proceedings do not include any liability relating to an investigation, prosecution, arbitration, litigation or dispute to the extent that an insurer has agreed to cover the liability under an insurance policy maintained by a catalpa group member.
| Catalpa Register | the register of members of catalpa from time to time. |
|---|---|
| Catalpa Registry | link market services limited. |
| Catalpa Share | a fully paid ordinary share in the capital of catalpa. |
| Catalpa Shareholder | a person shown in the catalpa register as holding one or more catalpa shares. |
| Change of Name | the resolution to approve the change of the company name of catalpa to ’evolution mining limited’ with |
| Resolution | effect from implementation of the Transaction to be voted on by catalpa shareholders at the meeting. |
CATALPA RESOURCES
102
10 glossary conTinued
| Competent Person | has the meaning in the Jorc code. |
|---|---|
| Competing Proposal | an expression of interest, proposal, offer, transaction or arrangement pursuant to which a Third party |
| will, if the expression of interest, proposal, offer, transaction or arrangement is entered into or completed | |
| substantially in accordance with its terms: | |
| 1 acquire (whether directly or indirectly) or become the holder of, or otherwise acquire, have a right to |
|
| acquire or have an economic interest in all or a substantial part of the assets or business of the catalpa | |
| group or the conquest group (as the context requires); | |
| 2 acquire a relevant interest in, become the holder of, or otherwise acquire, have a right to acquire or |
|
| have an economic interest in 15% or more of all issued catalpa shares or all issued conquest shares | |
| (as the context requires); | |
| 3 acquire control (as determined in accordance with section 50aa of the corporations act) of catalpa or |
|
| conquest (as the context requires); | |
| 4 otherwise acquire or merge with catalpa or conquest (as the context requires); or |
|
| 5 would require a party to abandon, or otherwise fail to proceed with, the Transaction, |
|
| whether by way of takeover offer, scheme of arrangement, shareholder approved acquisition, capital | |
| reduction, buy back, sale or purchase of shares or assets, joint venture, dual-listed company structure (or | |
| other synthetic merger), or other transaction or arrangement. | |
| Conquest | conquest mining limited acn 009 232 277. |
| Conquest Board | the board of directors of conquest from time to time. |
| Conquest Director | a director of conquest. |
| Conquest Disclosure | collectively: |
| Materials | 1 all documentation: |
| — referred to in the Transaction implementation deed, the asset sale agreement and the | |
| subscription deed; and | |
| — contained in the data room established by conquest in connection with the Transaction and listed | |
| in any index for that data room provided to catalpa, newcrest or their representatives (up to and | |
| including 10.00am on the day immediately preceding the announcement date); | |
| 2 all information (including answers) made available to newcrest, catalpa or their representatives as part |
|
| of the question and answer process conducted in connection with conquest’s data room; and | |
| 3 all information available by searching records open to public inspection in australia prior to the |
|
| announcement date. | |
| Conquest General | the meeting of conquest shareholders at which the following resolutions will be voted on: |
| Meeting | 1 the resolutions relating to the grant to the interested directors (or their nominees) of conquest options |
| in relation to their non-dilution rights; | |
| 2 the resolution relating to the cancellation of the majority options; and |
|
| 3 the resolution relating to the cancellation of the minority options and the issue of the minority options |
|
| consideration to the interested directors. | |
| Conquest Group | conquest and each of its subsidiaries andconquest group Membermeans conquest or one of |
| its subsidiaries. | |
| Conquest Information | all information regarding conquest, the conquest group and the conquest shares provided by or on behalf |
| of conquest for inclusion in this explanatory memorandum other than the evolution mining information (and | |
| any information solely derived from, or prepared solely in reliance on, such information), and any updates | |
| to that information prepared by or on behalf of conquest, and includes all of the information in section 5 of | |
| this explanatory memorandum. |
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103
| Conquest Material | any event, occurrence or matter that individually or when aggregated with all such events, occurrences | any event, occurrence or matter that individually or when aggregated with all such events, occurrences |
|---|---|---|
| Adverse Change | or matters: | |
| 1 | diminishes, or is reasonably likely to diminish, (whether now or in the future) the consolidated net assets | |
| of the conquest group by an amount equal to $35 million or more; or | ||
| 2 | has the result that the conquest group is unable to carry on its business in substantially the same | |
| manner as carried on as at the announcement date, | ||
| other than an event, occurrence or matter: | ||
| 3 | required to be undertaken or procured by the conquest group pursuant to the Transaction | |
| documents; | ||
| 4 | to the extent fairly disclosed in the conquest disclosure materials; | |
| 5 | to the extent known to newcrest and catalpa prior to the announcement date (which does not include | |
| knowledge of the risk of an event, occurrence or matter happening); | ||
| 6 | arising as a result of any generally applicable change in law or governmental policy; or | |
| 7 | arising from changes in economic or business conditions (including commodity prices and exchange | |
| rates) which impact on conquest and its competitors in substantially the same manner. | ||
| Conquest Option | an option over an unissued conquest share. | |
| Conquest Prescribed | other than as: | |
| Occurrence | 1 | required by the Transaction documents; |
| 2 | agreed to in writing by catalpa and newcrest; | |
| 3 | fairly disclosed in the conquest disclosure materials; or | |
| 4 | fairly disclosed by conquest in an announcement made to the asX, or a document lodged with asic, | |
| before the announcement date, | ||
| the occurrence of any of the following: | ||
| 5 | conquest converting all or any of its shares into a larger or smaller number of shares; | |
| 6 | a conquest group member resolving to reduce its share capital in any way; | |
| 7 | a conquest group member: | |
| — entering into a buy-back agreement, except as announced to the asX prior to the announcement | ||
| date; or | ||
| — resolving to approve the terms of a buy-back agreement under the corporations act; | ||
| 8 | other than in connection with the granting to the interested directors (or their nominees) of any | |
| conquest options in relation to their non-dilution rights subject to the approval of the conquest | ||
| shareholders at the conquest general meeting, a conquest group member issuing shares, or granting | ||
| an option over its shares, or agreeing to make such an issue or grant such an option other than to a | ||
| conquest group member; | ||
| 9 | other than in connection with the granting to the interested directors (or their nominees) of any | |
| conquest options in relation to their non-dilution rights subject to the approval of the conquest | ||
| shareholders at the conquest general meeting, a conquest group member issuing or agreeing to | ||
| issue securities convertible into shares; | ||
| 10 | a conquest group member disposing, or agreeing to dispose, of, or surrendering, relinquishing or | |
| failing to renew: | ||
| — the whole, or a substantial part, of its business or property; or | ||
| — all or any part of, or interest in, any mining or exploration licence, lease, tenement or application; | ||
| 11 | a conquest group member creating, or agreeing to create, any mortgage, charge, lien or other | |
| encumbrance over the whole, or a substantial part, of its business or property other than a lien which | ||
| arises by operation of law or legislation securing an obligation that is not yet due; | ||
| 12 | a conquest group member resolving that it be wound up or the making of an application or order for | |
| the winding up or dissolution of a conquest group member other than where the application or order | ||
| (as the case may be) is set aside within 14 days; | ||
| 13 | a liquidator or provisional liquidator of a conquest group member being appointed; | |
| 14 | a court making an order for the winding up of a conquest group member; | |
| 15 | an administrator of a conquest group member being appointed under the corporations act; | |
| 16 | a conquest group member executing a deed of company arrangement; or | |
| 17 | a receiver, or a receiver and manager, being appointed in relation to the whole, or a substantial part, of | |
| the property of a conquest group member; |
CATALPA RESOURCES
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10 glossary conTinued
-
18 a conquest group member reclassifying, combining, splitting or redeeming or repurchasing directly or indirectly any of its shares;
-
19 conquest declaring, paying or distributing any dividend, bonus or other share of its profits or assets or returning or agreeing to return any capital to its members;
-
20 a conquest group member making any change to its constitution;
-
21 a conquest group member:
-
acquiring, leasing or disposing of;
-
agreeing to acquire, lease or dispose of; or
-
offering, proposing, announcing a bid or tendering for,
- any business, assets, entity or undertaking, the value of which exceeds $5 million;
-
22 a conquest group member entering into a contract or commitment restraining a conquest group member from competing with any person or conducting activities in any market;
-
23 a conquest group member:
-
entering into any contract or commitment (including in respect of financial indebtedness) requiring payments by the conquest group in excess of $5 million other than the proposed financing arrangements for the development of conquest’s mt carlton gold-silver-copper-project as described in the documents contained in the “mt carlton financing” folder in conquest’s data room, any tax payment required by law or instalment, any repayment required under any facility agreement in effect as at the announcement date;
-
(without limiting the foregoing) agreeing to incur capital expenditure from the announcement date of more than $5 million;
-
waiving any material third party default where the financial impact on the conquest group will be in excess of $1 million; or
-
accepting as a compromise of a matter less than the full compensation due to a conquest group member where the compromise is more than $1 million;
-
24 a conquest group member providing financial accommodation other than to members of the conquest group (irrespective of what form of financial indebtedness that accommodation takes) in excess of $1 million;
-
25 a conquest group member entering into any agreement, arrangement or transaction with respect to derivative instruments (including, but not limited to, swaps, futures contracts, forward commitments, commodity derivatives or options) or similar instruments other than the revolver and term finance facility rolls under conquest’s existing finance facilities in effect as at the announcement date;
-
26 a conquest group member ceases, or threatens to cease to, carry on the business conducted by the conquest group as at the announcement date;
-
27 a conquest group member is or becomes unable to pay its debts when they fall due within the meaning of the corporations act or is otherwise presumed to be insolvent under the corporations act unless that member has, or has access to, committed financial support from its parent entity such that it is able to pay its debts;
-
28 a conquest group member entering into or resolving to enter into a transaction with any related party of conquest (other than a related party which is a conquest group member) as defined in section 228 of the corporations act;
-
29 conquest or any of its subsidiaries being deregistered as a company or otherwise dissolved;
-
30 a conquest group member entering into or materially amending any employment, consulting, severance or similar agreement or arrangement with officers, directors, other executives or employees of conquest or a conquest group member, accelerating or otherwise materially increasing compensation or benefits for any of the above, in each case other than pursuant to:
-
contractual arrangements in effect on the announcement date and which have been disclosed in writing to catalpa and newcrest prior to that date; or
-
conquest’s policies and guidelines in effect on the announcement date and which have been disclosed in writing to catalpa and newcrest prior to the announcement date,
- provided that the aggregate of all increases in compensation or benefits is no greater than $2 million (taken in aggregate with any payments falling within the scope of second bullet point of this definition);
-
31 a conquest group member entering into any enterprise bargaining agreement other than in the ordinary course of business or pursuant to contractual arrangements in effect on the announcement date and which have been disclosed in writing to catalpa and newcrest prior to that date;
-
32 a conquest group member changing any accounting policy applied by them to report their financial position other than any change in policy required by a change in accounting standards;
-
33 a conquest group member doing anything that would result in a change in the conquest consolidated group or mec group (as those terms are defined in section 995-1 of the Income Tax Assessment Act 1997 (cth));
EXPLANATORY MEMORANDUM
105
| 34 notice of any material investigation, prosecution, arbitration, litigation or dispute threatened against a | |
|---|---|
| conquest group member which could reasonably be expected to give rise to a liability for the conquest | |
| group in excess of $1 million (Material Proceedings) and for the avoidance of doubt which is not frivolous | |
| or vexatious, or circumstances arising which could reasonably be expected to give rise to any material | |
| proceedings, other than in relation to matters where the liability or likely liability for the conquest group has | |
| been fully and fairly disclosed to the asX prior to the announcement date. for the avoidance of doubt, | |
| material proceedings do not include any liability relating to an investigation, prosecution, arbitration, litigation | |
| or dispute to the extent that an insurer has agreed to cover the liability under an insurance policy maintained | |
| by a conquest group member; or | |
| 35 a conquest group member paying any of its directors or employees a termination or retention | |
| payment, other than in accordance with contractual arrangements in effect on the announcement date | |
| and which have been disclosed in writing to catalpa and newcrest prior to the announcement date, | |
| except where the quantum of such payments, taken in aggregate with any increases in compensation | |
| or benefts falling within the scope of paragraph 30 of this defnition is no greater than $2 million. | |
| Conquest Register | the register of members of conquest from time to time. |
| Conquest Share | a fully paid ordinary share in the capital of conquest. |
| Conquest Shareholder | a person shown in the conquest register as holding one or more conquest shares. |
| Corporations Act | the_Corporations Act 2001_(cth) (as modifed from time to time). |
| Corporations | the_Corporations Regulations 2001_(cth) (as modifed from time to time). |
| Regulations | |
| Court | the federal court of australia. |
| Cracow Assets | the assets of the gold mining and exploration joint ventures at cracow in which newcrest (through its |
| wholly owned subsidiary newcrest operations limited) holds a 70% interest and catalpa (through its | |
| wholly owned subsidiaries lion mining pty ltd, sedgold pty ltd and fernyside pty ltd) holds a 30% | |
| interest, as at the implementation date. | |
| Cracow Goldfeld | has the meaning given in section 6.3(a) of this explanatory memorandum. |
| Cracow Information | the information in section 6 of this explanatory memorandum that relates to the cracow assets (and any |
| information solely derived from, or prepared solely in reliance on, such information) and any updates to that | |
| information provided by or on behalf of catalpa or newcrest. | |
| Cy | calendar year. |
| Deloitte | deloitte Touche Tohmatsu abn 74 490 121 060. |
| Effective | the coming into effect, under section 411(10) of the corporations act, of the order of the court made under |
| section 411(4)(b) in relation to the scheme. | |
| Effective Date | the date on which the scheme becomes effective. |
| Evolution Mining | the name of catalpa following implementation of the Transaction, assuming that catalpa shareholders |
| approve the change of name resolution. | |
| Evolution Mining | all of the information in section 7 of this explanatory memorandum (other than the catalpa information, |
| Information | the conquest information, the newcrest information and the cracow information) and all statements in this |
| explanatory memorandum regarding the intentions of evolution mining or the shared intentions of conquest | |
| and catalpa. | |
| Exclusivity Period | the period from the announcement date to the earlier of the date on which the Transaction implementation |
| deed is terminated and the effective date. | |
| Explanatory | this explanatory memorandum, prepared by catalpa and sent to catalpa shareholders in respect of |
| Memorandum | the resolutions. |
| Explanatory | a supplement to this explanatory memorandum which includes full versions of the independent |
| Memorandum | expert’s report (incorporating the full version of the Technical specialist’s report) and the Transaction |
| Supplement | implementation deed released to the asX by catalpa on the announcement date. |
| Exploration Results | has the meaning given in the Jorc code. |
| Fiduciary Exception | has the meaning given in section 9.1(a)(3) of this explanatory memorandum. |
| Financial Indebtedness | any debt or other monetary liability (whether actual or contingent) in respect of moneys borrowed or raised |
| or any fnancial accommodation. |
CATALPA RESOURCES
106
10 glossary conTinued
| FIRB | the foreign investment review board. |
|---|---|
| Fully Diluted | the basis for calculating newcrest’s interest in evolution mining following the issue of the subscription |
| Value Basis | shares as set out more fully in section 7.6(c) of this explanatory memorandum, under which the total |
| number of shares in evolution mining is based on the assumption that all catalpa options (including those | |
| issued pursuant to the majority options offer) are exercised and the number of catalpa shares issued as a | |
| result is calculated based on the value of the catalpa options (using a black scholes valuation) divided by | |
| the fve day vwap of catalpa shares ending on the trading day before the implementation date. | |
| Fy | fnancial year ending 30 June. |
| Grant Samuel | grant samuel & associates pty limited acn 050 036 372. |
| Implementation Date | the ffth business day after the scheme record date or such other day as conquest, catalpa and |
| newcrest agree. | |
| Independent Expert | grant samuel. |
| Independent Expert’s | the report by the independent expert dated 12 september 2011, a concise version of which is included at |
| Report | attachment a and a full version of which is included in the explanatory memorandum supplement. |
| Indicated Mineral | has the meaning given in the Jorc code andindicated resourcehas the same meaning. |
| Resource | |
| Inferred Mineral | has the meaning given in the Jorc code andinferred resourcehas the same meaning. |
| Resource | |
| Interested Directors | collectively, Jake klein, James askew and nicholas curtis. |
| Investigating Accountant | deloitte. |
| Investigating | the report by the investigating accountant dated 12 september 2011 and included at attachment b. |
| Accountant’s Report | |
| JORC Code | the december 2004 edition of the ‘australasian code for reporting of exploration results, mineral |
| resources and ore reserves’. | |
| Last Trading Day | 6 september 2011. |
| Lion Mining | lion mining pty ltd (acn 000 697 183), a wholly owned subsidiary of catalpa, and the purchaser of the |
| cracow assets under the asset sale agreement. | |
| Listing Rules | the offcial listing rules of the asX. |
| Macquarie | macquarie bank limited acn 008 583 542. |
| Macquarie Facilities | the following fnance facilities which macquarie has offered to make available to conquest to fnance the |
| development of the mt carlton project: | |
| 1 $50 million project fnance facility; |
|
| 2 $40 million bridge fnance facility; and |
|
| 3 $10 million performance bond facility, |
|
| as more particularly described in section 5.3(b)(2) of this explanatory memorandum. | |
| Majority Optionholder | a benefcial holder of one or more majority options. |
EXPLANATORY MEMORANDUM
107
| Majority Options | collectively, the following conquest options: | collectively, the following conquest options: |
|---|---|---|
| 1 | 2,000,000 conquest options exercisable at $0.93 per option and expiring on 26 february 2013; | |
| 2 | 5,500,000 conquest options exercisable at $0.60 per option and expiring on 19 october 2012; | |
| 3 | 1,684,302 conquest options exercisable at $0.558 per option and expiring on 25 november 2016; | |
| 4 | 20,968 conquest options exercisable at $0.546 per option and expiring on 25 november 2016; | |
| 5 | 50,574 conquest options exercisable at $0.569 per option and expiring on 25 november 2016; | |
| 6 | 1,515,484 conquest options exercisable at $0.592 per option and expiring on 25 november 2016; | |
| 7 | 2,115,572 conquest options exercisable at $0.575 per option and expiring on 25 november 2016; | |
| 8 | 1,156,217 conquest options exercisable at $0.633 per option and expiring on 25 november 2016; | |
| 9 | 5,201,501 conquest options exercisable at $0.546 per option and expiring on 25 november 2016; | |
| 10 | 1,940,470 conquest options exercisable at $0.453 per option and expiring on 25 november 2016; | |
| 11 | 311,908 conquest options exercisable at $0.558 per option and expiring on 25 november 2015; | |
| 12 | 3,882 conquest options exercisable at $0.546 per option and expiring on 25 november 2015; | |
| 13 | 9,366 conquest options exercisable at $0.569 per option and expiring on 25 november 2015; | |
| 14 | 280,646 conquest options exercisable at $0.592 per option and expiring on 25 november 2015; | |
| 15 | 391,772 conquest options exercisable at $0.575 per option and expiring on 25 november 2015; | |
| 16 | 214,114 conquest options exercisable at $0.633 per option and expiring on 25 november 2015; | |
| 17 | 1,333,612 conquest options exercisable at $0.552 per option and expiring on 25 november 2015; | |
| 18 | 359,346 conquest options exercisable at $0.453 per option and expiring on 25 november 2015; | |
| 19 | 4,050,000 conquest options exercisable (subject to vesting conditions) at $0.38 per option and | |
| expiring on 1 June 2015; | ||
| 20 | 1,050,000 conquest options exercisable (subject to vesting conditions) at $0.42 per option and | |
| expiring on 6 october 2015; | ||
| 21 | 2,000,000 conquest options exercisable (subject to vesting conditions) at $0.552 per option and | |
| expiring on 25 november 2016; | ||
| 22 | 2,450,000 conquest options exercisable (subject to vesting conditions) at $0.64 per option and | |
| expiring on 26 november 2015; | ||
| 23 | 1,850,000 conquest options exercisable (subject to vesting conditions) at $0.565 per option and | |
| expiring on 1 april 2016; | ||
| 24 | 738,816 conquest options exercisable at $0.633 per option and expiring 5 years after they are | |
| granted, provided that any options which have not vested by 5pm on 8 march 2015 will expire 6 years | ||
| after those options are granted (due and issuable to conquest directors upon and subject to conquest | ||
| shareholder approval); | ||
| 25 | 1,167,548 conquest options exercisable at $0.736 per option and expiring 5 years after they are | |
| granted, provided that any options which have not vested by 5pm on 8 march 2015 will expire 6 years | ||
| after those options are granted (due and issuable to conquest directors upon and subject to conquest | ||
| shareholder approval); | ||
| 26 | 136,818 conquest options exercisable at $0.633 per option and expiring 5 years after they are granted | |
| (due and issuable to conquest directors upon and subject to conquest shareholder approval); and | ||
| 27 | 216,210 conquest options exercisable at $0.736 per option and expiring 5 years after they are | |
| granted (due and issuable to conquest directors upon and subject to conquest shareholder approval). | ||
| Majority Options Offer | an offer made to the majority optionholder or the trustee on behalf of the majority optionholder (as applicable) | |
| for | all of his or her majority options pursuant to clause 4.7 of the Transaction implementation deed. | |
| Majority Options | the | resolution to approve, for the purposes of listing rule 10.14 and for all other purposes, the issue of |
| Resolution (Jake Klein) | catalpa options to Jake klein (who will, at the time of the issue, be the executive chairman of evolution | |
| mining) under the catalpa employee share option and performance rights plan, to replace his majority | ||
| options, pursuant to the majority options offers. | ||
| Majority Options | the | resolution to approve, for the purposes of listing rule 10.14 and for all other purposes, the issue of |
| Resolution | catalpa options to James askew (who will, at the time of the issue, be a non-executive director of evolution | |
| (James Askew) | mining) under the catalpa employees and contractors option plan, in exchange for his majority options, | |
| pursuant to the majority options offers. |
CATALPA RESOURCES
108
10 glossary conTinued
| Majority Options | the: |
|---|---|
| Resolutions | 1 majority options resolution (Jake klein); and |
| 2 majority options resolution (James askew). |
|
| Measured Mineral | has the meaning given in the Jorc code andMeasured resourcehas the same meaning. |
| Resource | |
| Meeting | the meeting of catalpa shareholders at which the resolutions will be voted on. |
| Mineral Resource | has the meaning given in the Jorc code. |
| Minority Options | collectively, the: |
| 1 following conquest options held by Jake klein: |
|
| — 13,500,000 conquest options exercisable (subject to vesting conditions) at $0.28 per option and | |
| expiring on 1 June 2015; and | |
| — 13,500,000 conquest options exercisable (subject to vesting conditions) at $0.32 per option and | |
| expiring on 1 June 2016; | |
| 2 the following conquest options held by James askew: |
|
| — 1,250,000 conquest options exercisable at $0.28 per option and expiring on 1 June 2015; and | |
| — 1,250,000 conquest options exercisable at $0.32 per option and expiring on 1 June 2016; and | |
| 3 the following conquest options held by nicholas curtis: |
|
| — 1,250,000 conquest options exercisable at $0.28 per option and expiring on 1 June 2015; and | |
| — 1,250,000 conquest options exercisable at $0.32 per option and expiring on 1 June 2016. | |
| Minority Options | collectively: |
| Consideration | 1 in relation to the minority options held by Jake klein, 15,267,489 conquest shares; and |
| 2 in relation to the minority options held by each of James askew and nicholas curtis, 1,413,656 |
|
| conquest shares. | |
| Minority Options Offer | an offer made to an interested director for all of his minority options pursuant to clause 4.8 of the |
| Transaction implementation deed. | |
| Mt Rawdon Assets | the assets of the gold mining and exploration project at mt rawdon in which newcrest (through its |
| wholly owned subsidiary lgl mount rawdon operations pty limited) holds a 100% interest, as at the | |
| implementation date. | |
| Mt Rawdon Operations | mt rawdon operations pty ltd (acn 152 727 663), a wholly owned subsidiary of catalpa, and the |
| purchaser of the mt rawdon assets under the asset sale agreement. | |
| New Catalpa Share | a catalpa share issued as scheme consideration or a subscription share. |
| Newcrest | newcrest mining limited acn 005 683 625. |
| Newcrest Assets | collectively, newcrest’s 70% interest in the cracow assets and its 100% interest in the mt rawdon assets. |
EXPLANATORY MEMORANDUM 109
Newcrest Associates
-
1 newcrest operations ltd;
-
2 australmin holdings ltd;
-
3 cadia holdings pty ltd;
-
4 contango agricultural co. pty ltd;
-
5 horskar pty limited;
-
6 newcrest exploration holdings pty ltd;
-
7 newcrest finance pty ltd;
-
8 newcrest international pty ltd;
-
9 newcrest services pty ltd;
-
10 newcrest Technology pty ltd;
-
11 newgen pty ltd;
-
12 sulawesi investments pty ltd;
-
13 newcrest singapore (Tandai) pte ltd;
-
14 lihir australian holdings pty ltd;
-
15 lgl services australia pty ltd;
-
16 niugini mining australia pty ltd;
-
17 lgl ballarat operations pty ltd;
18 new resource pty ltd;
- 19 berringa resources pty ltd;
20 ballarat west goldfields pty ltd;
21 lgl mount rawdon operations pty ltd;
22 lgl mount rawdon property holdings pty ltd;
23 lgl cdi investments pty ltd;
24 lgl cdi exploration pty ltd;
25 600 holdings inc;
26 newcrest resources inc;
27 newmont pty ltd;
28 newroyal resources inc; 29 newcrest mining bc ltd;
30 newcrest singapore holdings pte ltd;
31 newcrest insurance pte ltd;
32 newcrest fiji holdings 1 pte ltd;
33 newcrest fiji holdings 2 pte ltd; 34 newcrest fiji exploration holdings 1 pte ltd; 35 newcrest fiji exploration holdings 2 pte ltd; 36 pT nusa halmahera minerals; 37 pT puncakbaru Jayatama; 38 newcrest chile holdings 1; 39 newcrest chile holdings 2; 40 newcrest peru holdings 1; 41 newcrest peru holdings 2; 42 minera newcrest chile srl; 43 minera newcrest peru sac; 44 newcrest (fiji) ltd; 45 newcrest png 1 ltd; 46 newcrest png 2 ltd; 47 newcrest png 3 ltd; 48 newcrest png exploration ltd; 49 lihir gold limited; 50 niugini mining limited; 51 lihir management company limited; 52 lgl png holdings limited; 53 lgl mines ci sa; 54 lgl resources ci sa; 55 lgl exploration ci sa; 56 lgl development ci sa; and 57 lgl holdings ci sa.
CATALPA RESOURCES
110
10 glossary conTinued
| Newcrest Disclosure | collectively: |
|---|---|
| Materials | 1 all documentation: |
| — referred to in the Transaction implementation deed, the asset sale agreement and the | |
| subscription deed; and | |
| — contained in the data room established by newcrest in connection with the Transaction and listed | |
| in any index for that data room provided to conquest, catalpa or their representatives (up to and | |
| including 10.00am on the day immediately preceding the announcement date); | |
| 2 all information (including answers) made available to conquest, catalpa or their representatives as part |
|
| of the question and answer process conducted in connection with newcrest’s data room; and | |
| 3 all information available by searching records open to public inspection in australia prior to the |
|
| announcement date. | |
| Newcrest Group | newcrest and each of its subsidiaries andnewcrest group Membermeans newcrest or one of |
| its subsidiaries. | |
| Newcrest Information | all information contained in sections 6 (other than the cracow information) and 7.8 of this explanatory |
| memorandum, and any updates to that information provided by or on behalf of newcrest (and any | |
| information solely derived from, or prepared solely in reliance on, such information). | |
| Newcrest Material | any event, occurrence or matter that individually or when aggregated with all such events, occurrences or matters: |
| Adverse Change | 1 diminishes, or is reasonably likely to diminish, (whether now or in the future) the consolidated net assets |
| of the businesses related to the newcrest assets by an amount equal to $35 million or more; or | |
| 2 has the result that the businesses related to the newcrest assets are unable to be carried on in |
|
| substantially the same manner as carried on as at the announcement date, | |
| other than an event, cocurence or matter: | |
| 3 required to be undertaken or procured by newcrest in relation to the businesses related to the |
|
| newcrest assets pursuant to the Transaction documents; | |
| 4 to the extent fairly disclosed in the newcrest disclosure materials; |
|
| 5 to the extent known to catalpa and conquest prior to the announcement date (which does not include |
|
| knowledge of the risk of an event, occurrence or matter happening); | |
| 6 arising as a result of any generally applicable change in law or governmental policy; or |
|
| 7 arising from changes in economic or business conditions (including commodity prices and exchange |
|
| rates) which impact on newcrest and its competitors in substantially the same manner. | |
| Non-dilution Rights | collectively, the rights held by the interested directors to be issued conquest options in the event of certain |
| future issues of conquest shares. | |
| Notice of Meeting | the notice in relation to the meeting, as set out as attachment c. |
| Ore Reserve | has the meaning given in the Jorc code. |
| Probable Reserve | has the meaning given in the Jorc code. |
| Proved Reserve | has the meaning given in the Jorc code. |
| Proxy Form | the proxy form for the meeting accompanying this explanatory memorandum. |
| Relevant Interest | has the meaning given in the corporations act. |
| Resolutions | collectively: |
| 1 the share issue resolution; |
|
| 2 the change of name resolution; and |
|
| 3 the majority options resolutions. |
|
| Rights Offer | a renounceable entitlement offer for the issue of new shares by evolution mining to raise approximately |
| $150 million made on a pro-rata basis to all shareholders in evolution mining on a date that is after the | |
| implementation date (which may include an accelerated institutional offer). | |
| Scheme | a scheme of arrangement made under section 411 of the corporations act to be voted on by conquest |
| shareholders at the scheme meeting. | |
| Scheme Booklet | the scheme document, prepared by conquest and sent to conquest shareholders in respect of |
| the scheme. | |
| Scheme Conditions | the conditions to which the scheme is subject, being the conditions set out in clause 3.1 of the Transaction |
| implementation deed and summarised in section 9.2 of this explanatory memorandum. | |
| Scheme Consideration | the consideration to be provided by catalpa for the conquest shares held by the conquest shareholders |
| as at the scheme record date pursuant to the scheme, being 0.3 new catalpa shares for each | |
| scheme share. |
EXPLANATORY MEMORANDUM
111
| Scheme Meeting | the meeting of conquest shareholders at which the resolution in relation to the scheme (as set out in the |
|---|---|
| notice of scheme meeting attached to the scheme booklet) will be voted on, convened pursuant to orders | |
| of the court, and includes any adjournment of that meeting. | |
| Scheme Record Date | 5.00pm on the ffth business day after the effective date. |
| Second Court Date | the frst day on which an application made to the court for an order under section 411(4)(b) of the |
| corporations act approving the scheme is heard. | |
| SGG | shandong guoda gold co. limited. |
| Share Issue | the issue of the subscription shares. |
| Share Issue Resolution | the resolution to approve the share issue to be voted on by catalpa shareholders at the meeting. |
| Subscription Deed | the subscription deed to be entered into between catalpa and newcrest if the scheme conditions are |
| satisfed or (if applicable) waived. | |
| Subscription Shares | the catalpa shares to be issued and allotted to newcrest (or its nominees) by catalpa as consideration for |
| the newcrest assets pursuant to the subscription deed. | |
| Subsidiary | has the meaning given in the corporations act. |
| Superior Proposal | 1 with respect to conquest — a publicly announced bona fde competing proposal which the conquest |
| board, acting in good faith, and after taking advice from conquest’s legal advisor and fnancial advisor, | |
| determines is: | |
| — reasonably capable of being completed on a timely basis; and | |
| — more favourable to conquest shareholders than the Transaction, taking into account all aspects | |
| of the competing proposal including its terms (such as the consideration proposed to be offered | |
| under the transaction, any conditions to which the transaction would be subject and the likelihood | |
| of those conditions being satisfed) and the identity of the proponent; and | |
| 2 with respect to catalpa — a publicly announced bona fde competing proposal which the catalpa |
|
| board, acting in good faith, and after taking advice from catalpa’s legal advisor and fnancial advisor, | |
| determines is: | |
| — reasonably capable of being completed on a timely basis; and | |
| — more favourable to catalpa shareholders than the Transaction taking into account all aspects of | |
| the competing proposal including its terms (such as the consideration proposed to be offered | |
| under the transaction, any conditions to which the transaction would be subject and the likelihood | |
| of those conditions being satisfed) and the identity of the proponent. | |
| Technical Specialist’s | the report by amc consultants pty ltd dated 12 september 2011, a concise version of which is attached |
| Report | to the independent expert’s report included at attachment a and a full copy of which is included in the |
| explanatory memorandum supplement. | |
| TERP | the theoretical market price for evolution mining shares immediately following the rights offer assuming the |
| rights offer is fully subscribed, based on the vwap of a share in evolution mining on the last day of trading | |
| before the launch of the rights offer. | |
| TERP Shortfall | the amount (if any) by which the Theoretical excessive discount value exceeds the proceeds which |
| newcrest or its relevant subsidiaries receives as a result of the sale or renunciation of their entitlements | |
| under the rights offer. |
CATALPA RESOURCES
112
10 glossary conTinued
| Theoretical Excessive | ((a — b) – (c x 15%)) x d, where |
|---|---|
| Discount Value | a is Terp; |
| bis the price at which evolution mining shares are offered under the rights offer; | |
| cis Terp as if the price at which evolution mining shares were to be issued under the | |
| rights offer was 85% of Terp and assuming the rights offer was fully subscribed; and | |
| dis the number of evolution mining shares to which newcrest and its subsidiaries are entitled to | |
| subscribe under the rights offer. | |
| Third Party | 1 a person other than a conquest group member, a catalpa group member and their respective |
| associates; or | |
| 2 a consortium, partnership, limited partnership, syndicate or group in which no conquest group |
|
| member or catalpa group member has agreed in writing to be a participant. | |
| Transaction | collectively: |
| 1 the acquisition of all the conquest shares held by the conquest shareholders as at the scheme |
|
| record date by catalpa pursuant to the scheme; | |
| 2 the asset purchase; and |
|
| 3 the share issue. |
|
| Transaction Documents | collectively: |
| 1 the Transaction implementation deed; |
|
| 2 the asset sale agreement; |
|
| 3 the subscription deed; |
|
| 4 the scheme; |
|
| 5 the deed poll to be executed by catalpa, a copy of which is attached to the scheme booklet; |
|
| 6 the Transitional services agreement; and |
|
| 7 such other documents that are agreed by conquest, catalpa and newcrest in writing to be considered |
|
| “Transaction documents” for the purposes of the Transaction implementation deed. | |
| Transaction | the transaction implementation deed entered into between conquest, catalpa and newcrest on the |
| Implementation Deed | announcement date. |
| Transitional Services | the transitional services agreement to be entered into between one or more catalpa group members on |
| Agreement | the one part and one or more newcrest group members on the other part if the scheme conditions are |
| satisfed or (if applicable) waived, pursuant to which newcrest will provide, or procure the provision of, | |
| administrative transitional services with respect to the newcrest assets on arm’s length terms for a period | |
| not exceeding 6 months. | |
| underwriter | an entity appointed to underwrite the rights offer that is acceptable to newcrest and conquest (each |
| acting reasonably). | |
| underwriting Agreement | an agreement pursuant to which the underwriter(s) agree to fully underwrite the rights offer, on terms and |
| conditions (including as to termination rights) which generally are customary or usual for an agreement of its | |
| kind and on the following specifc terms and conditions: | |
| 1 the obligations of the underwriter(s) are conditional upon the scheme becoming effective; and |
|
| 2 the price at which evolution mining shares are to be issued under the rights offer is not less than 80% |
|
| of Terp per evolution mining share. | |
| Voting Power | has the meaning given to it in the corporations act. |
| VWAP | volume weighted average price. |
EXPLANATORY MEMORANDUM
113
aTTachmenT a — concise version of The independenT eXperT’s reporT
==> picture [96 x 93] intentionally omitted <==
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EXPLANATORY MEMORANDUM 161
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EXPLANATORY MEMORANDUM 163
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
This report is a concise version of a technical specialists report prepared by AMC Consultants Pty Ltd (AMC) for Grant Samuel and Associates Pty Ltd (Grant Samuel) on the mineral assets of Catalpa Resources Limited (Catalpa) and Conquest Mining Limited (Conquest), and certain mineral assets of Newcrest Mining Limited (Newcrest). The mineral assets of Catalpa and Conquest are the subject of a binding transaction agreement by Catalpa and Conquest (the Merged Entity) announced on 15 June 2011. In a separate and interconditional transaction, the Merged Entity will concurrently purchase Newcrest’s interests in the Cracow and Mt Rawdon gold mines. The full version of AMC’s report has been provided to Grant Samuel and is available to Shareholders on request.
AMC’s report covers the following mines, projects and exploration interests:
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The Edna May Gold Mine, 100% owned by Catalpa, located in the eastern part of the Central Wheat Belt of Western Australia, approximately 300 km east of Perth.
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The Pajingo Gold Mine, 100% owned by Conquest, located 53 km south of Charters Towers in north Queensland.
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The Mt Rawdon Gold Mine, 100% owned by Newcrest, situated in southeast Queensland, approximately 80 km southwest of Bundaberg and 300 km north-northwest of Brisbane.
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The Cracow Gold Mine, owned 70% by Newcrest and 30% by Catalpa, located approximately 100 km south of Biloela in southeast Queensland.
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The Mt Carlton Project, 100% owned by Conquest, located 150 km south of Townsville in the Charters Towers Mining Region of north Queensland.
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Exploration interests of the Merged Entity and the Mt Rawdon and Cracow gold mines.
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
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This report presents AMC’s assessment of the quality and reasonableness of the mineral resource and ore reserve estimates prepared by Catalpa, Conquest and Newcrest.
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 each company’s 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[1] Code in respect to the mineral resource and ore reserve estimates presented in the report, except for the mineral resource estimate for Pajingo. 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.
This report provides summary information from the schedules of prospective production, capital and operating costs, and modelling scenarios prepared by AMC for use by Grant Samuel as a basis for valuing the mineral assets. AMC has modelled two scenarios for each operation and project with the exception of Mt Rawdon Gold Mine for which a single scenario has been modelled.
The 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. Case 2 scenarios include more aggressive expectation of conversion of resources and exploration targets to reserves. AMC considers its Case 2 scenarios to be optimistic, but not unreasonable, given favourable conditions.
The modelling scenarios are based on ore reserve and mineral resource estimates reported at 30 June 2011. Where the estimates have been reported at a prior date, AMC has estimated the depletion of reserves and resources by mining to 30 June 2011. 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. Totals shown in tables do not necessarily equal the sum of the components due to rounding adjustments.
EDNA MAY GOLD MINE
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. Catalpa has a 100% interest in the mine and the surrounding tenements covering 20 km to 30 km of strike of the Westonia greenstone belt.
Catalpa acquired the Edna May Project in 1994 and in 2004 completed a feasibility study, but did not develop the project due to the low gold price at the time. In December 2008, Catalpa completed an updated feasibility study. The study envisaged ore being processed at an initial rate of 2.8 Mtpa, increasing to 3.2 Mtpa after two years using a refurbished and upgraded
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).
EXPLANATORY MEMORANDUM 165
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process plant. Open pit mining and plant construction commenced in late 2009, with first gold produced in April 2010. Based on current ore reserves, Edna May is expected to have a mine life of more than nine years at an annual production rate in excess of 100,000 ounces of gold recovered.
Mineral Resources and Ore Reserves
Mineral Resource and Ore Reserve estimates for Edna May Gold Mine reported at 30 June 2011 are shown in the following tables. The Edna May Gold Mine includes the following resource areas: Edna May & Golden Point; Greenfinch; Edna May Underground; and the Stockpile.
The Edna May & 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. Ore reserves for the Edna May and Greenfinch open pits are based on a cut-off grade of 0.4 g/t Au estimated using a gold price of $1,250/oz.
Edna May Gold Mine Mineral Resource at 30 June 2011
| Mineral Resource Locations |
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 Resource | 20.6 | 1.0 | 20.6 | 1.1 | 10.9 | 1.1 | 52.1 | 1.1 |
Edna May Gold Mine 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 |
In AMC’s opinion, the Edna May Mineral Resource and Ore Reserve estimates have been prepared using appropriate methods by a Competent Person, and have been classified and reported in accordance with the JORC Code.
Key observations
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The Edna May plant was commissioned in April/May 2010 and has achieved a slow ramp up. Actual ore processed is 17% below budget, and gold production is 32% below budget. The low 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. Plant throughput finally achieved design levels in May 2011.
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Actual mining performance for the 2011 financial year 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.
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Historical underground mining has occurred at the Edna May deposit. As a result, voids or loosely filled stopes and other openings are encountered in the pit. 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 operation.
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Catalpa has identified tungsten as scheelite in tailings from the Edna May processing plant, and has been conducting studies for plant modification that might lead to recovery of a tungsten-bearing concentrate, and concomitant enhanced gold recovery.
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Catalpa has completed a scoping study on underground mining below the Edna May open pit, and is adopting a phased approach to the evaluation of this option.
Edna May Modelling Scenarios
AMC’s Case 1 modelling scenario is based on the December 2010 open pit ore reserve, less AMC’s adjustment for estimated depletion to June 2011[2] , plus a portion of the current underground mineral resource that AMC believes may be recovered by underground mining.
AMC’s Case 2 modelling scenario adds material to the Case 1 mining inventory to reflect the potential for mining a greater portion of the Edna May and Greenfinch open pit resource, and mining additional open pit 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.
The mining inventories used in the two cases are shown in the following table.
Case 1 and Case 2 Mining Inventories for Edna May
| Source | Case 1 | Case 2 | ||||
|---|---|---|---|---|---|---|
| Tonnes (Mt) |
Au (g/t) |
Au (Moz) |
Tonnes (Mt) |
Au (g/t) |
Au (Moz) |
|
| 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 |
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.
2 The 30 June 2011 Ore Reserve Estimate had not been completed prior to AMC preparing its modelling scenarios.
EXPLANATORY MEMORANDUM 167
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Capital expenditure for Case 2 includes the additional cost of constructing the tungsten recovery plant. Sustaining capital costs have been included in both cases. These costs include $2M every three years for expansion of the tailings storage facility. AMC considers that the exploration budget is adequate for the envisaged discovery and resource conversion assumed in Case 2.
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.
PAJINGO GOLD MINE
Pajingo Gold Mine (Pajingo) is located 53 km south of Charters Towers in north Queensland. Conquest has a 100% interest in the mine and associated tenements.
Underground mining of gold bearing epithermal quartz veins commenced at Pajingo in 1996. In addition to underground mining, a number of small open pits have also been mined. 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 recommenced open cut mining and is actively seeking to delineate additional open cut resources to better utilise processing capacity.
Mineral Resources and Ore Reserves
Mineral Resources and Ore Reserves for Pajingo at 30 June 2011 are reported in the following tables. The mineral resources are inclusive of ore reserves and are reported at a 1.0 g/t Au cutoff for underground resources and 0.65 g/t Au for open pit resources. 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.
Pajingo Mineral Resource at 30 June 2011
| Measured | Measured | Measured | Indicated | Indicated | Indicated | Inferred | Inferred | Total | Total | |||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Vein | Tonnes | Au (g/t) |
Au | Tonnes | Au | Au | Tonnes | Au | Au | Tonnes | Au | Au |
| (kt) | (koz) | (kt) | (g/t) | (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 |
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Pajingo Ore Reserve at 30 June 2011
| Vein | 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 Au) | |||||||||
| 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 | 164 | 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 Au) | |||||||||
| 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 |
In AMC’s opinion, the Pajingo Mineral Resource and Ore Reserve estimates have been prepared using appropriate methods by a Competent Person, and have been classified and reported in accordance with the JORC Code.
Mine Planning Inventory
Long-term production planning for Pajingo is based on a mine planning inventory in excess of 3 Mt. The mine planning inventory prepared by PGM includes ore reserves and non-reserve material. Estimates of non-reserve material are derived from:
-
Extensions to existing lodes where there is reasonable expectation, based on historical performance, that inferred resources and in some cases unclassified material will ultimately be converted to reserves. It includes both open pit and underground material.
-
Remnants from previously mined underground areas, which may not have been economic or practical to mine at that time.
-
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.
Key Observations
-
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.
-
Pajingo has been predominantly an underground mine in recent years, but with a renewed focus on supplementing underground production with production from small open pits.
-
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 program to redress these issues and return the mine to a sound operational
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basis with reasonable future ore supplies. 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 main challenge at Pajingo is the need to replace ore reserves at a sufficient rate to meet its long-term production plan. This is typical of this type of epithermal vein gold operation. The mine has substantial inferred resources and many prospective targets .An aggressive exploration and infill drilling programme is required to constantly replace depleted ore reserves.
Pajingo Modelling Scenarios
AMC’s 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. A small amount of material is included from assumed exploration success in Year 5.
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 to the other pits.
The mining inventories used in the two cases are shown in the following table.
Case 1 and Case 2 Mining Inventories for Pajingo
| Case 1 | Case 2 | |||||
|---|---|---|---|---|---|---|
| Source | 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 - Open pits |
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.
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 has been included for both cases.
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MT RAWDON GOLD MINE
Mt Rawdon open cut gold mine is situated in southeast Queensland, approximately 80 km southwest of Bundaberg and 300 km north-northwest of Brisbane. The mine is 100% owned by Newcrest.
Construction of the Mt Rawdon project commenced in early 2000 followed by commissioning in January 2001. Based on the current life-of-mine plan, the mine is scheduled to cease production in 2018 with milling of low-grade stockpiles continuing into the first half of 2020.
Mineral Resources and Ore Reserves
Mineral Resources and Ore Reserves for Mt Rawdon as reported by Newcrest at 30 June 2011 are shown in the following tables. The estimates are based on a resource model prepared by Newcrest in October 2010.
The resources within the pit have been reported at a cut-off grade of 0.38 g/t Au. Classification of resources is based on drillhole spacing and the number of samples used to estimate the block. The measured resource is all stockpiled material.
Ore reserves reported are based on a cut-off grade of 0.4 g/t Au. The ore reserves are 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 0.2 Mt of stockpile material which is classified as Proved. All in-situ reserve is classified as Probable.
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 |
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 |
In AMC’s opinion, the Mt Rawdon Mineral Resource and Ore Reserve estimates have been prepared using appropriate methods by a Competent Person, and have been classified and reported in accordance with the JORC Code.
Key Observations
-
Mt Rawdon uses conventional drill, blast and haul mining techniques and conventional gold ore processing technology.
-
Potential exists to increase the resources and reserves at depth and down plunge to the south and southwest of the main pit. The mineralisation is currently open at depth. The
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stripping ratio, average gold grade and the need to relocate major infrastructure pose the most significant issues to the viability of mining at greater depth.
-
Exploration potential in the region is considered to be low.
-
The mining rate is generally limited to a total material movement rate of 20 Mtpa, and the processing rate to 3.6 Mtpa. Substantial capital investment would be needed to remove these constraints.
Mt Rawdon Modelling Scenario
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 minor changes to metal recoveries and costs. Gold recoveries over the life of the plan average approximately 90%.
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.
CRACOW GOLD MINE
The Cracow Gold Mine (CGM) is located in the Cracow Goldfield, approximately 1.5 km west-northwest of the town of Cracow and some 100 km south of Biloela in southeast Queensland. It is operated by the Cracow Joint Venture between Newcrest (70%) and Catalpa (30%). Newcrest manages the joint venture.
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. 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 veins are mined by underground methods.
Mineral Resources and Ore Reserves
Mineral Resource and Ore Reserve estimates for CGM reported by Newcrest at 30 June 2011 are shown in the following tables.
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CGM Mineral Resource at 30 June 2011
| Measured | Measured | Indicated | Indicated | Inferred | Inferred | Total | Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Deposit | 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 |
CGM Ore Reserve at 30 June 2011
| Category | Proved | Proved | Probable | Probable | Total | Total | |||
|---|---|---|---|---|---|---|---|---|---|
| Ore Shoot | Tonnes (kt) |
Au (g/t) |
Au (koz) |
Tonnes (kt) |
Au (g/t) |
Au (koz) |
Tonnes (kt) |
Au (g/t) |
Au (koz) |
| Royal Crown Klondyke North Sovereign Kilkenny Tipperary Roses Pride Phoenix Stockpiles |
44 41 -91 45 --9 6 |
10.6 7.3 -6.1 9.8 --13.2 5.0 |
15 9 -18 14 --4 1 |
-3 30 48 231 325 76 128 - |
-17.8 5.2 5.0 5.9 5.6 9.0 10.6 - |
-2 5 8 44 59 22 43 - |
44 44 30 138 276 325 76 137 6 |
10.6 8.0 5.2 5.7 6.5 5.6 9.0 10.8 5.0 |
15 11 5 25 58 59 22 47 1 |
| Total | 236 | 8.1 | 61 | 840 | 6.8 | 182 | 1,075 | 7.0 | 244 |
Mineral resources are reported at a cut-off grade of 2.5 g/t Au based on a US$1,000/oz gold price and an exchange rate of A$1.00 = US$0.80. Silver is not taken into consideration and fixed mining costs are not included in the cut-off grade calculation.
Ore reserves are reported at 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 and an exchange rate of A$1.00 = US$0.80
In AMC’s opinion, the CGM Mineral Resource and Ore Reserve estimates have been prepared using appropriate methods by a Competent Person, and have been classified and reported in accordance with the JORC Code.
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Mine Planning Inventory
Long-term production planning at CGM uses a mine planning inventory comprising ore reserves and non-reserve material. The inventory, which totalled approximately 2.8 Mt at 31 March 2011, 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 mine planning inventory and is of the opinion that it forms a reasonable basis for long-term production planning.
In addition to the mine planning inventory, CGM has a large low grade stockpile (IO Dumps) containing an estimated 800 kt of material grading approximately 1.0 g/t Au. A parcel of this material was recently treated to assess its potential for future recovery with promising results.
There is also potential for a cutback of the old Golden Plateau open pit that could be included in the mining inventory.
Key Observations
-
CGM is a modern, mechanised underground mine using standard mobile equipment. The narrow orebodies and small stope sizes, typically only 5-10 kt each result in relatively high operational costs. In AMC’s opinion, the mine is currently running very efficiently and there are few opportunities to achieve significant cost reductions.
-
The processing plant is a typical small gold operation employing conventional processing technology. Mined gold grades have decreased steadily in recent years and no new highgrade ore shoots have been discovered. Consequently, the mine has increased the production rate to maintain gold output. The upgraded mill has a nominal capacity of 550 ktpa, with potential to treat up to 600 ktpa. In AMC’s opinion, the underground mine will have difficulty in achieving a production rate greater than 550 ktpa and any additional mill feed will need to be sourced from low-grade dumps and/or an open pit cutback.
-
The main challenge is the need to replace ore reserves at a sufficient rate to meet its long-term production plan. This situation is fairly typical of this type of epithermal narrow vein gold mine. However, the mine has substantial inferred resources and some prospective targets; and an aggressive exploration and infill drilling programme is required to constantly replace depleted ore reserves.
CGM Modelling Scenarios
AMC’s Case 1 production plan is based on the 30 June 2011 ore reserve plus a significant quantity of non-reserve material. AMC’s estimate of non-reserve material includes low-grade material recovered from the IO Dumps. 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 life-of-mine plan for CGM. AMC considers the plan grade of 6.0 g/t for years 2013 to 2016 to be unrealistic, given the current mine planning inventory and lack of recent exploration success.
AMC’s 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 the expectation of some 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.
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The mining inventories used in both cases are shown in the following table.
Case 1 and Case 2 Mining Inventories for CGM
| 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 Non-reserve material - Open Pit Non-reserve material - LG Dumps |
1.08 1.63 – 0.25 |
7.0 4.7 – 1.0 |
0.24 0.25 – 0.01 |
1.08 2.49 0.24 0.35 |
7.0 5.1 1.7 1.0 |
0.24 0.41 0.01 0.01 |
| Total | 2.95 | 5.3 | 0.50 | 4.15 | 5.1 | 0.68 |
AMC has estimated a reduction in gold recovery from 92% at a throughput of 550 ktpa to 90% at 600 ktpa. AMC has estimated 70% gold recovery for 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 2011-2012 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.
MT CARLTON GOLD PROJECT
The Mt Carlton gold-silver-copper project is located 150 km south of Townsville and 80 km southwest of Bowen within the Charters Towers Mining Region of north Queensland. The Mt Carlton project is 100% owned by Conquest.
Conquest discovered Mt Carlton in 2006 and completed a Definitive Feasibility Study (DFS) 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.
Mineral Resources and Ore Reserves
The Mineral Resource and Ore Reserve estimates at 30 June 2011 and 15 December 2010 respectively as published by Conquest and released to the Australian Securities Exchange (ASX) on 9 August 2011 are summarised in the following tables. When developing the resource and reserve estimates for the V2 and A39 deposits, net metal value calculations were used to define the ore. The resource estimate is reported at a cut-off of $20/t and the reserve estimate is reported at a cut-off value of $25/t.
The V2 pit has a waste to ore stripping ratio of 3.9:1 and the A39 Pit has a waste to ore stripping ratio of 11.9:1.
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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 |
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 | 0.47 | – | 553 | 0.64 | – | 8.3 | 3 |
| Probable | 0.0003 | – | 352 | 0.41 | – | 0.004 | 0 |
| Total Reserve | 0.47 | – | 552 | 0.64 | – | 8.3 | 3 |
In AMC’s opinion, the Mt Carlton Mineral Resource and Ore Reserve estimates have been prepared using appropriate methods by a Competent Person, and have been classified and reported in accordance with the JORC Code.
Key Observations
-
Conquest proposes mining the V2 and A39 deposits by conventional open pit methods using a mining contractor. AMC believe the mining and support equipment proposed is appropriate for the degree of selectivity required to mine the pits.
-
Conquest’s 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.
-
Conquest proposes 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.
-
Marketing efforts have resulted in a sales agreement for V2 material. Payment for gold and other metals in concentrate reduces if the concentrate gold grade falls below 40 g/t.
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Maintaining concentrate grades above 40 g/t Au will therefore be important to the success of the project.
- 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. A significant proportion of the waste rock generated by the mine will be potentially acid forming (PAF). The EM Plan recommends that this material be encapsulated within a waste rock storage facility as quickly as possible after being mined.
Mt Carlton Modelling Scenarios
AMC has prepared two modelling scenarios for Mt Carlton. The scenarios are based on the production and cost schedule prepared by Conquest as part of the DFSOS. 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, therefore no non-reserve material has 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. 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 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.
The mining inventories used in both cases are shown in the following table.
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.
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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 in 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.
EXPLORATION PROJECTS
Most of the exploration projects valued by AMC are largely at a pre-mineral resource stage and methods for valuing such projects are subjective. AMC’s approach is to use as many methods as are relevant to a particular project, and to choose from the indicated values a range which it considers appropriate. Limited, if any, use is made of share market indicators given the volatility of markets for speculative exploration. The values accordingly are Technical Values as defined by the Valmin Code[3] .
The methods considered by AMC include:
-
The past expenditure method.
-
Actual transactions for the project being reviewed or, more frequently, recent comparable transactions applicable to projects considered to have similarities with that under review.
-
Yardstick values derived from comparable transactions, where there are mineral resources or mineralisation potential that can be reasonably quantified.
Exploration Values
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.
3 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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CONQUEST MINING & CATALPA RESOURCES Project Fort Knox
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- Newcrest’s exploration assets associated with the Mt Rawdon and Cracow mines.
To avoid double counting, AMC has not valued exploration targets or mineralisation that has been included in its modelling scenarios provided to Grant Samuel.
The exploration properties covered by this valuation are owned by three different companies and AMC elected to use a similar approach to ensure consistency and relativity between the assets. To do this, AMC assessed the valuation methods appropriate to each asset and generated a Yardstick Value, represented in dollars per square kilometre, to estimate the exploration value of each asset. These values 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 up to $10,000 per km[2] for exploration properties deemed to have relatively high prospectivity.
The various exploration projects together with the value ranges assigned to them are summarised in the following table. AMC’s preferred values are the rounded average of the ranges shown. AMC values the overall exploration projects at $19.35M.
Summary of Exploration Values
| Summary Exploration Valuations ($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 |
Yours sincerely
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M Dorricott FAusIMM (CP) Principal Mining Engineer
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M Thomas MAusIMM (CP) Director
EXPLANATORY MEMORANDUM 179
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Deloitte Touche Tohmatsu ABN 74 490 121 060
Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia
Private & Confidential
DX: 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (8) 9365 7001 www.deloitte.com.au
The Directors Catalpa Resources Limited Level 1, 9 Havelock Street West Perth, WA 6005
The Directors Conquest Mining Limited Suite 7, 282 Oxford Street Bondi Junction, NSW 2022
12 September 2011
Dear Directors
Investigating Accountants’ Report on Historical and Pro Forma Financial Information
We have prepared this Investigating Accountants’ Report (the Report ) on certain historical and pro forma financial information in respect of Catalpa Resources Limited and its controlled entities ( Catalpa ) and Conquest Mining Limited and its controlled entities ( Conquest ) and certain assets of Newcrest Mining Limited ( Newcrest ) as discussed below, for inclusion in:
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- the scheme booklet ( Scheme Booklet ) to be issued by Conquest in connection with the proposed acquisition of Conquest by Catalpa via scheme of arrangement ( Scheme ); and
the explanatory memorandum ( EM ) to be issued by Catalpa in connection with the proposed acquisition by Catalpa of Newcrest’s 70% interest in the Cracow Project and 100% interest in the Mt Rawdon Project (the Newcrest Assets ) in exchange for shares in Catalpa (the Asset Purchase and Share Issue respectively).
It is intended that shortly following implementation of the Scheme and completion of the Asset Purchase and Share Issue, Catalpa will conduct a pro rata renounceable entitlement offer to raise approximately $150 million (before issue costs) (the Rights Offer ). The Scheme, Asset Purchase, Share Issue and Rights Offer together constitute the Transaction .
Expressions defined in the Scheme Booklet and the EM have the same meaning in this Report.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
CATALPA RESOURCES
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Page 2
Scope
You have requested Deloitte Touche Tohmatsu to prepare this Report covering the following financial information:
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(i) Summary consolidated statement of financial position for each of Catalpa, Conquest, and the Newcrest Assets as at 31 December 2010 as set out in Section 6.8 of the Scheme Booklet and in Section 7.9 of the EM (the Historical Financial Information ); and
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(ii) Summary pro forma consolidated statement of financial position of Catalpa (post-acquisition of Conquest, and the Newcrest Assets) as at 31 December 2010 including all pro forma adjustments described in Section 6.8 (d) of the Scheme Booklet and Section 7.9(d) of the EM (the Pro Forma Consolidated Statement of Financial Position ).
(Collectively the Historical and Pro Forma Financial Information )
The Historical Financial Information set out in Section 6.8 of the Scheme Booklet and Section 7.9 of the EM has been extracted from the reviewed half-year financial statements of Catalpa and Conquest and unaudited management accounts pertaining to the Newcrest Assets. The half-year financial statements were reviewed by Deloitte Touche Tohmatsu and KPMG respectively who issued unqualified review conclusions on them. The Newcrest Assets are held by subsidiaries of Newcrest Mining Limited which was reviewed to a group materiality level by Ernst & Young. The Pro Forma Consolidated Statement of Financial Position incorporates such pro forma transactions and adjustments as the Directors of Catalpa and Conquest considered necessary to present the Pro Forma Consolidated Statement of Financial Position on a basis consistent with the financial position of the combined entity after the Transaction.
This Report has been prepared for inclusion in the Scheme Booklet and the EM. We disclaim any assumption of responsibility for any reliance on this Report or on the Historical and Pro Forma Financial Information to which this Report relates for any purpose other than that for which it was prepared.
The directors of Catalpa and Conquest are jointly responsible for the preparation of the Historical and Pro Forma Financial Information including the determination of the pro forma adjustments, except that the directors of Catalpa are responsible for the information regarding Catalpa, the directors of Conquest are responsible for the information regarding Conquest and the directors of Newcrest are responsible for the information regarding the Newcrest Assets provided to Catalpa and Conquest to prepare the Historical and Pro Forma Financial Information.
The Historical and Pro Forma Financial Information is presented in summarised form in that it does not include all of the disclosures required by Australian Accounting Standards applicable to annual financial reports prepared in accordance with the Corporations Act 2001.
Scope of review of Historical and Pro Forma Financial Information
We have conducted our review of the Historical and Pro Forma Financial Information in accordance with Australian Standard on Review Engagements ASRE 2405 “Review of Historical Financial Information Other than a Financial Report”. We made such inquiries and performed such procedures as we, in our professional judgement, considered reasonable in the circumstances including:
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A review of work papers, accounting records and other documentation;
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A review of the pro forma adjustments made to the Historical Financial Information;
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A review of the assumptions (which include the pro forma adjustments) used to compile the Pro Forma Consolidated Statement of Financial Position;
EXPLANATORY MEMORANDUM 181
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A comparison of consistency in application of the recognition and measurement principles under the Australian Accounting Standards and the accounting policies adopted by Catalpa; and
Enquiry of directors, management and others.
These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion on the Historical and Pro Forma Financial Information.
Review Statement on Historical and Pro Forma Financial Information
Based on our review, which is not an audit, nothing has come to our attention which causes us to believe that the Historical and Pro Forma Financial Information as set out in Section 6.8 of the Scheme Booklet and Section 7.9 of the EM is not presented fairly in accordance with the basis of preparation as disclosed in Section 6.8(b) of the Scheme Booklet and Section 7.9(b) of the EM, including the pro forma adjustments described in Section 6.8(d) of the Scheme Booklet and Section 7.9(d) of the EM, and the accounting policies adopted by Catalpa as disclosed in the Catalpa consolidated financial statements for the year ended 30 June 2010.
Subsequent events
Apart from the matters dealt with in this Report, and having regard for the scope of our Report, nothing has come to our attention that would cause us to believe that matters arising after 31 December 2010, other than as dealt with in this Report, would require comment on, or adjustment to, the information referred to in our Report, or that would cause such information to be misleading or deceptive.
Independence and disclosure of interest
Deloitte Touche Tohmatsu does not have any interest in the outcome of the Transaction other than the preparation of this Report for which normal professional fees will be received. Deloitte is the independent auditor of Catalpa.
Yours faithfully
DELOITTE TOUCHE TOHMATSU
Chris Nicoloff
Partner Chartered Accountants
CATALPA RESOURCES
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acn 084 669 036
NOTICE OF MEETING
Date of Meeting
14 october 2011
Time of Meeting
10:00am (perth time)
Place of Meeting
The rydges perth level 1, corner hay and king streets perth, western australia
EXPLANATORY MEMORANDUM 183
imporTanT noTices
What you Should Do
STEP ONE
Read the Notice of Meeting and the Explanatory Memorandum
This is an important document. you should read all of the notice of meeting before deciding whether or not to vote in favour of any of the resolutions. if you do not understand any of it, or are not sure what to do, please consult your legal or financial adviser immediately.
This notice of meeting is annexed to an explanatory memorandum. also annexed to the explanatory memorandum is an independent expert’s report. The explanatory memorandum and its annexures have been prepared to assist catalpa shareholders in determining whether or not to vote in favour of the resolutions set out in this notice of meeting.
The explanatory memorandum and its annexures are intended to be read in conjunction with this notice of meeting.
STEP TWO
Vote
if you are unable to attend the meeting in person, you should complete the proxy form and ensure that it (and any power of attorney under which it is signed) is received by catalpa’s share registry at an address given below not later than 10am (perth time) on 12 october 2011. proxy forms received after that time will be invalid.
online: The proxy form can be lodged online by visiting www.linkmarketservices.com.au. select ‘investor login’ and enter catalpa resources limited or the asX code (cah) in the issuer name field, your security reference number (srn) or holder identification number (hin) (which is shown on the front of your proxy form), postcode and security code which is shown on the screen and click ‘login’. select the ‘voting’ tab and then follow the prompts. you will be taken to have signed your proxy form if you lodge it in accordance with the instructions given on the website. by mail: catalpa resources limited c/o link market services limited locked bag a14 sydney souTh nsw 1235 by hand: link market services limited level 12, 680 george street sydney nsw 2000 by fax: (02) 9287 0309
for details on how to complete the proxy form, please refer to the instructions in this notice of meeting and on the proxy form.
The catalpa board recommends that you vote ‘for’ each of the resolutions by completing the enclosed proxy form.
DEFINITIONS
capitalised terms referred to in this notice of meeting have the same meaning as they are given in the explanatory memorandum accompanying this notice of meeting.
QuESTIONS
if you have any questions about any matter contained in this document, please contact the catalpa shareholder information line on 1300 383 678 (within australia) or +61 3 9415 4312 (outside australia) at any time between 9:00am and 5:00pm (sydney time), monday to friday.
KEy DATES
deadline for lodgement of proxy forms 10am (perth time) on 12 october 2011 date and time for determining eligibility to vote 5pm (perth time) on 12 october 2011 date of meeting 10am (perth time) on 14 october 2011
CATALPA RESOURCES
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noTice of meeTing
caTalpa resources limiTed
acn 084 669 036
Notice is hereby given that an Extraordinary General Meeting of members of Catalpa Resources Limited ACN 084 669 036 (“Catalpa” or “the Company”) will be held at the Rydges Perth, Level 1, Corner hay and King Streets, Perth, Western Australia on 14 October 2011 at 10:00am (Perth time).
AGENDA
SPECIAL BuSINESS
Resolution 1 — Approval of the Share Issue
To consider and, if thought fit, pass the following as an ordinary resolution:
“That, for the purposes of item 7 of section 611 of the corporations act and for all other purposes, approval is given for the company to allot and issue to newcrest (or its nominees) up to that number of ordinary shares in the capital of the company as is necessary to give newcrest an interest of 38% in the company following the implementation of the scheme and the asset purchase (calculated on a fully diluted value basis) as determined in accordance with the formula set out section 7.5(b) of the explanatory memorandum accompanying this notice of meeting in exchange for the newcrest assets, on the terms and conditions set out in the explanatory memorandum accompanying this notice of meeting.”
voting exclusion statement: in accordance with item 7 of section 611 of the corporations act, the company will disregard any votes cast on resolution 1 by newcrest, and any of its associates.
notwithstanding this exclusion, the company will not disregard a vote if:
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(a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or
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(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.
Resolution 2 — Approval of change of name of Catalpa to Evolution Mining Limited
To consider and, if thought fit, to pass the following as a special resolution:
“That, for the purposes of section 157 of the corporations act, with effect from the implementation of the Transaction, the name of the company is changed from catalpa resources limited to ‘evolution mining limited’.”
Resolution 3 — Approval of Majority Options Offers to Jake Klein
To consider and, if thought fit, to pass the following as an ordinary resolution:
“That, for the purposes of listing rule 10.14 and for all other purposes, approval is given for the company to, from the implementation date, grant 5,277,435 catalpa options to Jake klein and for the issue to Jake klein of catalpa shares on exercise of the catalpa options, on the terms and conditions set out in the explanatory memorandum accompanying this notice of meeting.”
Voting exclusion statement: for the purposes of listing rule 10.14, the company will disregard any votes cast on resolution 3 by Jake klein or any of his associates. however the company need not disregard a vote if:
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(a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or
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(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.
Resolution 4 – Approval of Majority Options Offers to James Askew
To consider and, if thought fit, to pass the following as an ordinary resolution:
“That, for the purposes of listing rule 10.14 and for all other purposes, approval is given for the company to grant 488,652 catalpa options to James askew and for the issue to James askew of catalpa shares on exercise of the catalpa options, on the terms and conditions set out in the explanatory memorandum accompanying this notice of meeting.”
Voting exclusion statement: for the purposes of listing rule 10.14, the company will disregard any votes cast on resolution 4 by James askew or any of his associates. however the company need not disregard a vote if:
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(a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or
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(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.
EXPLANATORY MEMORANDUM 185
enTiTlemenT To voTe
it has been determined that under regulation 7.11.37 of the corporations regulations, for the purposes of the meeting, catalpa shares will be taken to be held by the persons who are the registered holders at 5pm (perth time) on 12 october 2011. accordingly, share transfers registered after that time will be disregarded in determining entitlements to attend and vote at the meeting.
PROXIES
a catalpa shareholder entitled to attend and to vote at the meeting is entitled to appoint a proxy to attend and to vote instead of the catalpa shareholder. The proxy need not be a catalpa shareholder and can be an individual or a body corporate.
if a catalpa shareholder appoints a body corporate as a proxy, that body corporate will need to ensure that it:
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appoints an individual as its corporate representative to exercise its powers at the meeting, in accordance with section 250d of the corporations act; and
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provides satisfactory evidence of the appointment of its corporate representative prior to commencement of the meeting.
if such evidence is not received before the meeting, then the body corporate (through its representative) will not be permitted to act as a proxy.
catalpa shareholders are entitled to appoint up to two individuals to act as proxies to attend and vote on their behalf. where more than one proxy is appointed, each proxy must be appointed to represent a specified proportion of the catalpa shareholder’s voting rights.
a proxy must be signed by the catalpa shareholder or his/her attorney duly authorised in writing or, if the catalpa shareholder is a corporation, under its common seal or under the hand of an authorised officer or attorney. The proxy form and the power of attorney or other authority (if any) under which the proxy form is signed, or a copy or facsimile which appears on its face to be an authentic copy of that proxy, power or authority, must be returned to catalpa’s share registry at an address given below by no later than 10am (perth time) on 12 october 2011:
online: The proxy form can be lodged online by visiting www.linkmarketservices.com.au. select ‘investor login’ and enter catalpa resources limited or the asX code (cah) in the issuer name field, your security reference number (srn) or holder identification number (hin) (which is shown on the front of your proxy form), postcode and security code which is shown on the screen and click ‘login’. select the ‘voting’ tab and then follow the prompts. you will be taken to have signed your proxy form if you lodge it in accordance with the instructions given on the website. by mail: catalpa resources limited c/o link market services limited locked bag a14 sydney souTh nsw 1235 by hand: link market services limited level 12, 680 george street sydney nsw 2000 by fax: (02) 9287 0309
a proxy form accompanies this notice of meeting.
if the catalpa shares are registered in the name of more than one person, all such catalpa shareholders must sign the proxy form.
To be valid, a proxy form and the power of attorney under which it is signed or proof thereof must be to the satisfaction of the catalpa directors.
by order of The caTalpa board
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dated 13 september 2011 Erik Palmbachs company secretary
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