GOLDEN CROSS RESOURCES LTD — Proxy Solicitation & Information Statement 2014

Feb 18, 2014

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GOLDEN CROSS RESOURCES LTD

ABN 65 063 075 178

22 Edgeworth David Ave Hornsby NSW 2077 Phone (02) 9472 3500 Fax (02) 9482 8488

19 February 2014

HQ Mining letter to GCR shareholders

We attach a letter dated 18 February 2014 from HQ Mining Resources Holding Pty Ltd to Golden Cross shareholders.

We are reviewing the HQ Mining letter and will make a statement about it shortly.

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HQ Mining Resources Holding Pty Ltd

18 February 2014

Dear Shareholders

HQ recommends that GCR shareholders:

• VOTE AGAINST the share placement proposal by Heron Resources Limited (Heron); and

• VOTE IN FAVOUR of the pro-rata rights issue proposal from HQ Mining Resources Holding Pty Ltd (HQ),

at the extraordinary general meeting on Thursday 27 February 2014 ( the EGM).

It is important that you VOTE AGAINST the share placement proposal by Heron, because if the Heron proposal is passed, the chairman will not be putting the pro-rata rights issue proposal from HQ to the EGM.

HQ has offered to:

• take up its entitlement under a pro-rata rights offer by GCR to issue 680,000,000 ordinary shares (or such lesser amount determined by Golden Cross Resources Limited ( GCR ), but not less than 375,970,579 shares) at an issue price of $0.005 per share, which would raise up to A$3,400,000 for GCR; and

• underwrite, on an exclusive basis and for no cost to GCR any remaining shortfall under the rights offer, but only after all GCR shareholders who wish to do so have subscribed for additional shares (in excess of the rights entitlement) that are not taken up by other shareholders, up to their respective pro-rata share of any shortfall,

(the HQ Proposal ).

On the other hand, Heron has offered, subject to satisfaction of certain conditions, to subscribe for 375,970,579 GCR shares at $0.005 per share to raise $1,879,853 representing 19.9% in the enlarged share capital of GCR (the Heron Proposal ).

Heron has recently sent to GCR shareholders a letter setting out a number of reasons on why, in its view, GCR shareholders should support the Heron proposal and reject the HQ proposal ( Heron Letter ). Many of the statements in the Heron Letter are incorrect or misleading, and may result in GCR shareholders voting in a manner contrary to their best interests if left uncorrected. The following table sets out HQ’s corrections and clarifications to those assertions

Heron’s assertion	Correction/clarification
This certainty of immediate	Heron’s assertion that there would be a delay in GCR
timing contrasts with the	shareholders receiving their consideration under the HQ
extended timetable likely to	Proposal due to “shareholder approval” or “other regulatory
extend to or beyond mid	requirements” is legally incorrect and without basis.
April 2014 associated with
the receipt of proceeds	The HQ Proposal does not require any shareholder approval
from any underwriting of a	under either the ASX Listing Rules or the Corporations Act:

page 1

Heron’s assertion	Correction/clarification	Correction/clarification
further rights issue from HQ	•	No shareholder approval is required for “placement
which, because of HQ’s		capacity” purposes under ASX Listing Rules
existing shareholding in		7.1/7.1A, since the HQ Proposal fall under the
Golden Cross, may require		exceptions in ASX Listing Rule 7.2.
shareholder approval or	•	No shareholder approval is required for “persons in
may be delayed to meet		position of influence” purposes under ASX Listing
other regulatory		Rule 10.11, since HQ is not a related party of GCR
requirements.		and, even if it was, the HQ Proposal falls under the
		exceptions in ASX Listing Rule 10.12.
Page 1, 1st item, 2nd paragraph	•	No shareholder approval is required under Chapter 6 of the Corporations Act (in particular, item 7 of
		section 611) since the HQ Proposal is covered by
		section 611.

There are fewer conditions This statement is misleading and does not consider the attached to the Heron substantive effect of the conditions attaching to each Offer, and they are almost proposal. wholly within the control or influence of the Golden The HQ Proposal is conditional on the Heron Proposal not Cross board. being approved at the EGM and not proceeding. Further, the HQ Proposal is conditional on none of the events in Page 2, 3rd item paragraph (a)-(h) of section 652C(1), or in paragraph (a)-(e) of section 652C(2) of the Corporations Act, occurring. Each of these conditions go to the value of the shares to be offered for subscription, and do not pose a risk to the HQ Proposal proceeding as they are matters within the control of GCR.

On the other hand, the Heron Proposal contains conditions such as no material adverse change, no change to board and senior management composition, appointment of a Heron representative to the GCR board, no suspension from trading, no regulatory actions and no court orders, which are conditions above and beyond the conditions that are attached to the HQ Proposal. Some of these conditions are not within the control of GCR and/or limit its operational flexibility.

A comparison of the conditionality of both proposals shows that the HQ Proposal enjoys higher execution certainty for GCR, and maximises the likelihood that the capitalisation of GCR will proceed according to plan.

There are no significant There is no basis to assert that there would be “months of costs to Golden Cross in delays” associated with the implementation of the HQ accepting the Heron Offer, Proposal, particularly given that no shareholder approvals which contrasts with the are required for the HQ Proposal to proceed (see above). months of delays and costs likely under the HQ Mining In addition, HQ has offered to underwrite the pro-rata rights Competing Proposal. offer in its proposal for no cost to GCR.

Page 3, 1st item, 1st paragraph

page 2

Heron’s assertion	Correction/clarification
Introduces an Aligned	Heron’s operations in recent years focus on exploring and
Strategic Shareholder with	selling off mining assets, rather than from building and
significant experience in	operating successful mines. Hence, Heron is unlikely to be
exploration and	an aligned strategic shareholder with relevant experience to
development	help GCR to transform itself from a predominantly
	exploration company into a mining company.
Page 3, 2nd item
	The Heron Proposal specifically contemplates that GCR will
	spend more than three quarters of the money Heron intends
	to put up (ie $1.45 million out of $1.88 million) into the
	exploration of Copper Hill, leaving little of that money for
	GCR’s other business. On the other hand, the HQ Proposal
	offers GCR a significantly greater amount of funding (at
	GCR’s discretion), with no limitations as to its deployment.
	Heron’s drilling exploration programme for Cooper Hill is high
	risk and may not locate substantial mineralisation.
	There is also the prospect that Heron will indirectly benefit
	from GCR’s exploration of Copper Hill. Heron’s 3,500 km2
	early stage exploration portfolio is in close proximity to
	GCR’s more advanced Copper Hill project. It is likely that
	any good results from GCR’s Copper Hill exploration will
	have a positive effect on Heron’s exploration portfolio,
	potentially increasing the value of its asset portfolio. On the
	other hand, if GCR’s Copper Hill results are poor, this will
	likely assist Heron with information as to whether (and how)
	to conduct similar exploration on its nearby exploration
	portfolio. Heron does not propose to compensate GCR for
	indirect benefits that it alone will enjoy if the Heron Proposal
	proceeds, nor is it likely that GCR would similarly benefit
	from Heron’s activities in its portfolio of exploration assets.
Given Heron’s strong	It is unclear, given Heron’s performance to date, how the
balance sheet with $38.6	involvement of Heron (both at the shareholder and board
million in cash and $5	levels) would bring tangible benefits for GCR’s projects and
million in listed investments	how it would create value for GCR shareholders.
as at 30 September 2013,
Heron has the capacity to	Heron has not yet successfully built and run a mining
provide financial support to	operation. Its operating results for the 2013 and 2012
Golden Cross.	financial years were respectively losses of $10.48 million and
	$5.36 million (equivalent to a loss of nearly $0.04 per share
Page 3, 2nd item, last	in 2013 and a loss of approximately $0.023 per share in
paragraph	2012). In addition, the share price of Heron has fallen by
	approximately 25-30% since the beginning of 2013.
	Further, given that many of Heron’s projects are in close
	proximity to GCR’s assets, it is unclear how Heron would
	address potential conflicts of interest (if they arise) between
	GCR’s projects and Heron’s wholly owned assets.
Heron approached Golden	The scrip-based merger between Heron and GCR proposed,
Cross in March 2013 on a	proposed by Heron in March 2013, was not supported by a

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Heron’s assertion	Correction/clarification
non-binding, indicative and	majority of GCR directors, including directors independent of
confidential basis to	HQ. This determination was not made because any of those
consider a potential scrip-	directors were under HQ’s influence, as Heron asserts.
based merger between the	Rather, the directors considered that the commercial terms
companies. Feedback from	proposed by Heron would not be attractive to GCR
Golden Cross was that the	shareholders and were not in the best interests of GCR. HQ
board under HQ Mining’s	understands that Heron then was proposing approximately
influence was not	$2,000,000 for 50% of GCR or Copper Hill.
supportive, and follow-up
preliminary soundings on	Like the current Heron Proposal, Heron’s 2013 proposals
potential farm-ins to Golden	were an attempt by it to obtain an influential stake in GCR
Cross projects failed to	and its assets without offering existing GCR shareholders
proceed.	with a price premium.
Page 4, 2nd item, 1st
paragraph
Despite being involved in	It is factually incorrect for Heron to state that in the 1 for 2
the rights issue structuring	rights issue which took place in October 2013, HQ declined
through their board	to support GCR through taking up their rights, declined to
representation, HQ Mining	provide a public statement of support, and declined to
declined to support the	provide any form of underwriting to GCR.
Company through taking up
their rights, declined to	HQ has always remained committed to GCR but was unable
provide a public statement	to participate in that rights issue due to matters beyond its
of support, and declined to	control. At the time, HQ sought an extension of the rights
provide any form of	issue timetable to permit it to participate, but an extension
underwriting to the	was not permitted under the ASX Listing Rules. HQ was
Company at that time.	therefore unable to participate.
Page 4, 3rd item, 2nd
paragraph
This lack of support by HQ	It is both incorrect and misleading to state that the scaling
Mining has seen Golden	back of GCR’s exploration activities was driven by a lack of
Cross’ previously	support by HQ. GCR has scaled back on exploration in order
aggressive and successful	to focus on the Copper Hill project and to transform itself
exploration scaled right	from a predominantly exploration company into a mining
back.	company.
Page 4, 4th item, 3rd	Further, HQ has always been supportive of GCR by giving its
paragraph	executives the autonomy to manage GCR’s day-to-day
	operations.
HQ Mining is now offering a	Contrary to Heron’s assertion, HQ has always been clear in
new rights issue of	its proposal to GCR, that it is proposing to take up its
uncertain size to issue	entitlement under, and underwrite, a pro-rata rights offer by
somewhere between 375.9	GCR to issue 680,000,000 ordinary shares (or such lesser
million and 680 million	amount determined by GCR, but not less than 375,970,579
shares… The uncertainty in	shares) at an issue price of $0.005 per share, which would
the potential outcomes of	raise up to $3,400,000 for GCR.
the Competing Offer do not
allow Golden Cross	Rather than creating uncertainty for GCR shareholders, the

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Heron’s assertion	Correction/clarification
shareholders to fully	structure of the HQ Proposal provides GCR with the flexibility
quantify their expenditure	to choose the amount that it wishes to raise, based on
exposure, level of dilution,	GCR’s business needs and capital requirements, whilst
or even to understand HQ	avoiding the dilution effect on all existing GCR shareholders
Mining’s work program	inherent in the Heron Proposal. GCR shareholders are in
priorities.	turn given the flexibility to choose whether or not to
	subscribe for their rights (or oversubscribe, if they wish),
Page 5, 1st item, 1st	secure in the knowledge that even if they do not outlay any
paragraph	money, GCR will obtain all the capital that it requires.
HQ Mining’s Competing	This ignores the fact that under the HQ Proposal, GCR
Proposal is likely to result in	shareholders can take up further shares (in addition to their
effective control of Golden	rights entitlement) proportionate to their current holdings in
Cross passing to HQ	GCR and, if they wish, to effectively co-underwrite the rights
Mining without a premium	offer with HQ. This is a significant mitigant to any potential
being paid	control effect of the proposal and allows GCR shareholders
	to avoid being diluted by the HQ Proposal.
Page 5, 2nd item
	By contrast, under the Heron Proposal, all GCR
	shareholders will be diluted by the 19.9% placement to
	Heron, and GCR shareholders will not receive any direct or
	indirect compensation for this dilution.
There are likely regulatory	There is no basis to assert that there would likely be
impediments to HQ Mining	“regulatory impediments” to the HQ Proposal – no
underwriting any proposed	shareholder approvals are required for the proposal to
rights issue.	proceed. Equally, there is no basis to assert that there would
	be a “significant delay of receipt of funds” associated with the
HQ Mining’s Competing	HQ Proposal.
Proposal will significantly
delay receipt of funds by
Golden Cross, and may
well require a further
shareholder vote to
approve.
Page 5, 3rd & 4th items
HQ Mining only provided an	Heron’s statement has no basis in fact. Heron first made its
alternative to Heron’s offer	proposal to GCR in November 2013, when no other proposal
when it became clear that it	existed. Having had its proposal rejected by the GCR board,
would otherwise lose	it then adopted “bear hug” tactics in its letter of 16 December
influence within the	2013, in an attempt to coerce the GCR board into
Company.	capitulating to its demands. For reasons including various
	deficiencies in the Heron Proposal, HQ formed the view that
Page 6, 1st item, 1st	the Heron Proposal was not in the interests of GCR and
paragraph	subsequently provided its own proposal to better satisfy
	GCR’s capital requirements on terms more favourable to all
	shareholders.
	Shareholders will also note that HQ’s proposal is dated 23
	December 2013, while Heron’s proposal was provided on 8
	January 2014 – see the annexures to the notice of meeting

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Heron’s assertion	Correction/clarification
	for the EGM.
Following the withdrawal of	Since GCR’s 2012 Annual General Meeting, the GCR board
the re-election resolution	has engaged in the search for new directors with appropriate
for founding and	expertise and experience. However, the GCR board
outstanding Golden Cross	(including directors not connected with HQ) decided that in
director Mr David Timms	the best interests of GCR, the appointment of a further
immediately prior to the	director would be postponed, given GCR’s plans at the time
2012 Annual General	for a rights issue and its expansion of the Copper Hill project.
Meeting, Golden Cross has
failed to appoint a
replacement, with the
consequence being that
HQ Mining’s influence on
the board has increased.
Page 6, 2nd item, 1st
paragraph
As a result, given her	HQ refutes this assertion. Ms Qian was first elected as a
presence on the board is	director at the annual general meeting on 29 November 2010
now at the behest of HQ	by GCR shareholders other than HQ, due to the skills and
Mining, Heron considers	expertise that she brought to the board. Ms Qian is not a
that Ms Qian’s	director of HQ, is not a shareholder or employee of HQ, nor
independence may now	does any other basis exist for her independence to be called
have been compromised.	into question.
Page 6, 2nd item, 2nd &3rd	HQ has historically supported the re-election of Ms Qian, Mr
paragraphs	Steve Gemell and Mr Kim Stanton-Cook as directors. If
	Heron’s assertion is correct, then Mr Gemell’s and Mr
	Stanton-Cook’s independence might, like Ms Qian’s, have
	been compromised too.
In the view of Heron, proper	Heron’s opinion has no legal or other basis. Proper corporate
corporate governance	governance and the law requires that all directors (including
should require the HQ	HQ’s nominee directors) vote in the best interests of the
Mining nominees on the	company as a whole, as the HQ nominee directors have
Golden Cross board to	done. None of the GCR directors (including the HQ nominee
conflict themselves out of	directors) have a “material personal interest” in either
voting on the Heron Offer.	proposal, such that would require them to exclude
	themselves from deliberation and voting.
Page 6, 3rd item, 3rd
paragraph	What would constitute improper corporate governance would
	be for any of the directors to shy away from protecting the
	interests of all GCR shareholders simply because a
	proponent of a transaction seeks to apply pressure to them
	by making unsupportable assertions like those made by
	Heron.
	The HQ nominee directors determined that the Heron
	Proposal was not in the best interests of GCR and voted
	against it. This is what the law demands of them.

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Shareholders will be asked to consider two capital raising proposals available to GCR and to vote at the EGM on each of the Heron Proposal and, only if the Heron Proposal is not approved, the HQ Proposal. The two proposals are set out in the annexures to the notice of meeting for the EGM. HQ urges shareholders to vote in favour of the HQ Proposal for the following reasons:

Reasons to VOTE IN FAVOUR of the HQ Proposal include

The HQ Proposal	The HQ Proposal would raise up to $3,400,000 for GCR.
provides significant	GCR would have the flexibility to choose the amount that it
additional funding and	wishes to raise, based on its capital requirements. The
flexibility as to the	Heron Proposal would not raise sufficient funds to fully meet
amount of capital to be	GCR’s business needs, whereas the HQ Proposal would
raised	provide GCR with significant additional funding (with the sum
	being chosen by GCR) to enable it to progress its major
	projects for the benefit of all shareholders.
The HQ Proposal is less	The HQ Proposal is subject to far fewer conditions than the
conditional and therefore	Heron Proposal (many of which limit GCR’s operational
more likely to proceed	flexibility or are outside GCR’s control – for example, the
	conditions relating to a “material adverse change”). The HQ
	Proposal therefore provides GCR with greater certainty that
	it will be successfully capitalised, while maximising GCR’s
	operational flexibility while the capitalisation is being
	implemented.
The HQ Proposal avoids	The HQ Proposal contemplates a rights offer, which will
dilution of existing	provide all existing shareholders an opportunity to take up
shareholders	further shares in GCR proportionate to their current holdings.
	In addition, if they wish, all existing shareholders will be able
	to effectively co-underwrite the rights offer on a pro-rata
	basis. This structure provides existing shareholders with the
	maximum opportunity to avoid dilution of their existing
	interest in GCR. On the other hand, the Heron Proposal will
	result in the sale of a 19.9% stake in GCR to an external
	party, resulting in all existing shareholders having their
	interest in GCR materially diluted at no premium to the
	market price of GCR shares as at the date of the Heron
	Proposal.
The HQ Proposal	HQ and its associated entities have been long term strategic
continues the	supporters of GCR. The HQ Proposal will continue the
commitment of GCR’s	alignment of the interests of GCR, HQ and other
long term strategic	shareholders, and will allow HQ and its associated entities to
supporter	continue to contribute their technical and industry expertise
	for the benefit of GCR’s projects and development.
It is unclear how Heron’s	The Heron Proposal contains no clear indication of the form,
placement creates value	timing or extent to which Heron will assist with progressing
or how conflicts of	the exploration and development of Copper Hill. In fact, there
interest would be	is no certainty that the involvement of Heron (at either the
managed	shareholder or board levels of GCR) would bring tangible
	benefits for GCR’s projects or create value for the existing
	shareholders. Furthermore, Heron has not made any

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indication of how it would deal with conflicts of interest that may well arise for it or the director that it places on the GCR board, arising from the proximity between the two companies’ projects and their operation in the same market.

The HQ Proposal does not require changes to existing strategy or operations

The HQ Proposal does not require changes to GCR’s board nor does it contain any limitations on how GCR deploys the funds raised. On the other hand, the Heron Proposal will not proceed unless GCR’s board composition is changed, potentially affecting the ability of GCR to continue with its existing plans and strategies.

Heron’s placement deprives existing shareholders of a premium

The Heron Proposal contemplates the issue of a strategic 19.9% stake in GCR to an external party for zero premium to the market price of GCR’s shares as at the date the Heron Proposal was announced (and a significant preceding period). Allotment of a new strategic stake in GCR should command a significant premium to market price, reflecting the benefits and influence it carries, including the right to unilaterally block future transactions that would otherwise deliver value to existing shareholders.

For all the reasons set out above, HQ again urges all GCR shareholders to:

• VOTE AGAINST the Heron Proposal; and

• VOTE IN FAVOUR of the HQ Proposal,

at the extraordinary general meeting on Thursday 27 February 2014.

It is important that shareholders VOTE AGAINST the Heron Proposal at the EGM, because if the Heron Proposal is passed, the chairman will not be putting the HQ Proposal to the EGM.

Kind regards

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Yan Li

Managing Director of HQ Mining Resources Holding Pty Ltd

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