NORTHERN STAR RESOURCES LTD — Capital/Financing Update 2012

Feb 23, 2012

23 February 2012

Farlee Walker Adviser, Listings (Perth) ASX Compliance Pty Ltd Level 8, Exchange Plaza 2 The Esplanade Perth WA 6000

By Fax: 9221 2020

Dear Ms Walker

Letter from ASX dated 22 February 2012 ("ASX Letter")

We refer to the ASX Letter and respond to the questions raised, as follows:

$1.$ The Placement was negotiated over a number of weeks prior to the request for a trading halt issued by the Company to ASX on 17 February 2012. During a board discussion by telephone on Thursday 16 February 2012 about 5pm, the Board were divided in their view that the placement should proceed at the price proposed by the brokers. This was the same meeting at which the update response to rumour was also discussed by the Board (refer to paragraph 2 below).

One view was expressed that the proposed placement price was too low, and there were other views that negotiations had moved too far along the commercial tracks to allow the Company to withdraw without a massive blow to its reputation in the institutional investment community because the VWAP based negotiations were industry standard and represented a reasonable discount consistent with comparable placements conducted in recent times by other companies in a similar market. There was still the possibility that the Company could seek to set a higher placement price, in the mind of one Board member. The Company's legal adviser Hilary Macdonald was present by phone during these discussions.

NST's Chairman Chris Rowe telephoned John Poynton of Azure Capital Ltd later that day to advise him that the Company were not yet in a position to give the go ahead to proceed with the Placement bookbuild and that effectively the Company still reserved the right to withdraw.

At approximately 9am on the morning of 17 February 2012 the Board unanimously agreed in a subsequent Board meeting that the placement proposal including the proposed placement price should proceed. The Board had come to the unanimous view that notwithstanding that the Company may legally be able to "walk away", the Board recognised that at that point, it was commercially bound to proceed with the placement. Again the Company's legal adviser Hilary Macdonald was present and discussion followed about the course of action that should now follow, given that time was required for the placement bookbuild to occur. The legal advice was that under Listing Rule 3.1, the Company no longer had the benefit of all three of the carve-outs and was therefore obliged to disclose the

placement to the market immediately or request a trading halt in order to be able to manage its continuous disclosure obligations.

Written advice from the Company's legal adviser confirmed this within an hour of the discussion being held, and subsequently the trading halt request was sent to ASX. A copy of the legal advice and the email establishing the time the advice was sent to the Company, attached, corroborates the sequence of events and the deliberations made at the meeting on 17 February 2012.

The Placement was considered to be material to the Company during the negotiations. The three exceptions to Listing Rule 3.1A applied up to the point during the Board meeting on 17 February when the Board recognised that commercial negotiations for the Placement were then complete – the Placement would proceed, there was no longer an incomplete proposal or negotiation and the disclosure obligation under Listing Rule 3.1 was triggered.

Until about 9am on 17 February 2012 there was no concluded commercially binding negotiation on the $\overline{2}$ . part of the Company. Prior to that time the Board were not unanimous and regarded the placement price as still being subject to some movement should the Company insist upon it.

The price query response issued by the Company on 15 February 2012 was issued in the firm belief that confidentiality surrounding the placement negotiations had been maintained. (The Board considers that is still the case today. The Board has every confidence in its Placement manager Azure Capital Ltd and the confidential manner in which placement discussions were conducted with potential investors.) The Board therefore had no information to disclose to the market that did not have the benefit of the exceptions in Listing Rule 3.1A – each of the exceptions applied and at no time were the Board aware that one or more of the three exceptions no longer applied such that an obligation to disclose the Placement would be triggered, until the board meeting around 9am on 17 February 2012.

The update response to rumour issued by the Company on 17 February occurred as a consequence of the Company's Managing Director Bill Beament receiving some comments at a social function on the evening of 15 February 2012 to the effect that NST were currently in talks with another ASX listed company regarding a possible merger. NST had been in confidential talks with another ASX listed company about a possible merger during the last months of 2011 and the first three weeks of January 2012, but those talks had been terminated in the last week of January 2012. The rumour was therefore not based on current facts. Bill and none of the other Board members were aware of this rumour circulating until Bill became aware of it late on 15 February 2012. Bill telephoned the Company's legal adviser Hilary Macdonald the next morning, 16 February 2012, to discuss how the Company should proceed. Hilary's advice was that Listing Rule 3.1 and in particular Guidance Note 8 required an announcement by the Company to correct the rumour. She advised that no response would normally be the appropriate response to pure speculation and rumours, but where the Company's share price moved possibly in reference to the rumour, the Company was obliged to make an announcement to keep the market informed and ensure no false market occurred. Hilary suggested that the Company should consult with James Rowe at ASX to discuss the rumour and consult over the wording of the announcement. The Company's Chairman Chris Rowe consulted James Rowe during 16 February 2012 for a discussion about how to respond to the specific rumour, and the update response was then prepared, approved by James Rowe, and issued by the Company.

The reference in the announcement to "negotiations of a corporate nature" was intended to apply to the merger rumour, in the sense of a corporate restructure/reorganisation/merger/takeover/scheme of arrangement. The Company can however see now that ASX may consider that a placement could be described as being of "a corporate nature", but at the time the response to the rumour was prepared, the description was intended to refer to a corporate restructuring/merger, not to a capital raising which is not a corporate reorganisation. The possible misuse of these words "of a corporate nature" is regretted.

The Company emerged from trading halt and announced the Placement on 21 February 2012 once the bookbuild had closed and identities of the allottees were known, after the market closed on 20

February 2012. The Placement has not yet been completed; allotment of the shares is expected to occur on 24 February 2012.

An announcement or a trading halt were not considered by the Company to be necessary $3.$ $3.1^{\circ}$ because the Board firmly believed that all three exceptions to Listing Rule 3.1A co-existed in relation to the Placement negotiations, with the result that no obligation to disclose and no reason to call a trading halt, existed in relation to the Placement. There was therefore no requirement to disclose the Placement in the price response query and response to rumour query. The Board had absolute confidence in the conduct of the Placement negotiations managed by Azure Capital Ltd. When Bill reported the rumour circulating to the Board on 16 February concerning the terminated and no longer relevant merger discussions, the Board concluded that the price movements were due to that rumour.

The Placement was not announced earlier than 21 February 2012 because it was not $3.2:$ required to be announced before that date. The Company requested a trading halt on the morning of 17 February 2012 as soon as the Placement became a completed negotiation, no longer incomplete because the Board resolved that it would not seek to change the placement price, and that it would proceed with the Placement at the proposed price and give authority to the brokers to commence the bookbuild. It was expected that the bookbuild would take about 48 hours.

• The Placement was considered to be material to the Company. Listing Rule 3.1A applied such that $4.$ disclosure under Listing Rule 3.1 was not required. As soon as all three exceptions under Listing Rule 3.1A no longer co-existed, the Company requested a trading halt in order to manage its obligations to disclose under Listing Rule 3.1 and at the same time, allow the bookbuild to take place.
• 1. The resource upgrade information is considered to be material to the Company for all purposes including Listing Rule 3.1.
• $6.$ The likely timing of availability of the resource upgrade information was discussed during the Board meeting on Friday 17 February 2012 at which the Company's legal adviser Hilary Macdonald was present by phone. The position prior to calling the trading halt was that the technical information was expected to become available during the course of the day, and it was expected that the Board (and in particular the technical director Michael Fotios) would probably be able to review it such that release of the information in a suitable form for release to the market may be possible on Monday 20 February 2012. The Board were aware that the timing was likely to be such that the Placement announcement and the resource upgrade announcement would probably be available for release in close proximity to one another. The timing was not contrived but entirely dependent on the brokers concluding the bookbuild process, and independently, the Company's technical senior managers finalising the resource upgrade announcement, coincidentally on the same day, Monday 20 February 2012.

Preliminary resource upgrade information was presented to the Board by the Company's Bernie Sostak during Friday 17 February 2012 at noon. The Board agreed that it was incomplete and required more work to ensure it was in an appropriate form for release to the market. It was signed off by the competent person at about 5pm on Monday 20 February 2012 and it was considered by the Board to be in a form suitable for release at about 9.45pm on Monday 20 February 2012. It was lodged overnight with ASX and released to the market at about 6.30am on Tuesday 21 February 2012.

$7.$ $7.1:$ The resource upgrade was announced as soon as it was required to be announced under Listing Rule 3.1. Prior to the time of the announcement, all three of the carve outs in Listing Rule 3.1A applied - when it was first provided to the Board it was incomplete and required more work. It was announced as soon as it was completed and signed off by the competent person.

The resource upgrade was announced as soon as it was required to be announced under $7.2:$ Listing Rule 3.1. The three Listing Rule 3.1A exceptions all co-existed up to the point of announcement of the resource upgrade information.

• $8.$ The resource upgrade information is considered to be material to the Company.
• $9.$ The Company confirms its continuing compliance with Listing Rule 3.1.

We understand that this response may be released in this form to the market. Yours sincerely

$\widetilde{\mathbb{H}}$

Chris Rowe Chairman

From:	Bill Beament
To:	Hilary Macdonald
Subject:	NST: trading halt notice for review
Date:	Friday, 17 February 2012 9:24:29 AM
Attachments:	northern star halt.docx

Hi Hilary,

We are just confirming with placing parties prior to calling halt. Could you please review attached draft.

Thanks Karen

17 February 2012

Manager Companies ASX Ltd 2 The Esplanade Perth WA 6000

Attn: James Rowe

FOR PUBLIC RELEASE

Dear James,

Trading Halt Notice ("Notice") Northern Star Resources Ltd ("NST")

Northern Star Resources Ltd ("NST") requests its securities be placed in a trading halt immediately pending an announcement regarding a capital raising.

The share placement, details of which are currently being finalised, will form part of Northern Star's strategy to achieve further substantial growth through a combination of exploration and acquisition.

Northern Star, which has no bank debt and \$41.7m in cash and bullion as at 31 December, 2011, will have greater flexibility to pursue this two-pronged strategy following the successful completion of the capital raising.

This will include enabling Northern Star to capitalise on the significant number of growth opportunities currently being presented to the Company.

For the purposes of Listing Rule 17.1, NST provides the following information:

• NST requests that the trading halt continues until an announcement is made by the $a)$ NST presently anticipates this announcement will be made prior to Company. commencement of trading on Tuesday, 21 February 2012.
• NST is not aware of any reason why the trading halt should not be granted $b)$

Yours faithfully, for NORTHERN STAR RESOURCES LTD

Bill Beament Managing Director

From:	Hilary Macdonald
To:	"Bill Beament"; "Chris Rowe"; "Michael Fotios"; "Peter Farris"
Cc:	"Karen Brown"
Subject:	RE: trading halt notice for review
Date:	Friday, 17 February 2012 9:58:00 AM
Attachments:	120217-1 Letter to NST.pdf

This request is fine. Written advice is attached as requested following our phone call this morning.

$\mathbf T$

Hilary Macdonald

• $+ 61 (0) 414 715 902 / +61 (8) 9389 1102$
• $\mathbf E$ hilary@macdonaldlegal.com.au

Corporate & Resources Lawyer

• Suite 23, 18 Stirling Highway, Nedlands, WA 6009, Australia $\mathbf A$
• W www.macdonaldlegal.com.au

From: Bill Beament [mailto:bill@nsrltd.com] Sent: Friday, 17 February 2012 9:20 AM To: Hilary Macdonald Subject: NST: trading halt notice for review

Hi Hilary,

We are just confirming with placing parties prior to calling halt. Could you please review attached draft.

Thanks

Karen

Friday, 17 February 2012

The Directors Northern Star Resources Limited 24 Mumford Place Balcatta WA 6021

Dear Sirs

Continuous Disclosure obligations under the ASX Listing Rules

I understand that NST has been conducting negotiations through brokers for the placement of NST shares and in addition, facilitating the acquisition of NST shares from an NST substantial shareholder Investmet Ltd. You have requested written confirmation of my verbal advice this morning in relation to the timing of disclosure of this information to the market.

Listing Rule 3.1 says:

Once an entity is or becomes aware of any information concerning it that a reasonable person would $"3.1"$ expect to have a material effect on the price or value of the entity's securities, the entity must immediately tell ASX that information.

Exception to rule 3.1

• Listing rule 3.1 does not apply to particular information while all of the following are satisfied. $3.1A$
• 3.1A.1 A reasonable person would not expect the information to be disclosed [and]
• 3.1A.2 The information is confidential and ASX has not formed the view that the information has ceased to be confidential landl
• 3.1A.3 One or more of the following applies.
• It would be a breach of a law to disclose the information.
• The information concerns an incomplete proposal or negotiation.
• . The information comprises matters of supposition or is insufficiently definite to warrant disclosure.
• . The information is generated for the internal management purposes of the entity.
• The information is a trade secret."

I understand that the NST Board resolved to proceed with the negotiated placement (with the price agreed) at a board meeting yesterday. Comments made yesterday by some of the board members were to the effect that NST could and would consider withdrawing from the agreed placement on the basis that the price was no longer acceptable to the NST board. I haven't seen the placement documents so I cannot advise NST on the extent to which NST are legally bound to proceed with the issue of the shares for the price agreed as at yesterday's board meeting. What I can advise is that if the Board now considers that the placement negotiations are complete, such that commercially NST is bound to proceed with the placement at the agreed price (regardless of whether there is still a legal ability to walk away from the placement), then this is sufficient to trigger the application of listing rule 3.1. The fact that the NST Board now regards NST as commercially bound to proceed with the placement as a completed negotiation/proposal is information that a reasonable person would expect to have a material effect on the price or value of NST securities and therefore NST is

Hilary Macdonald Corporate & Resources Lawyer

T	$+61(0)$ 414 715 902 / + 61 (8) 9389 1102
E.	hilary@macdonaldlegal.com.au
$\mathbf{A}$	Suite 23, 18 Stirling Highway, Nedlands, WA 6009, Australia
W	www.macdonaldlegal.com.au

required by Listing Rule 3.1 to disclose that information to the market immediately. The exceptions do not apply any more because the NST Board considers NST is commercially bound to proceed with the placement.

However, NST was not in a position to make an immediate announcement about the information as at 9 am this morning, which is roughly when the NST Board recognised/agreed that commercially the placement negotiations are in fact complete (ie. the Board accepting that any walk away now may still be legally possible under the placement documents but that commercially it would be extremely detrimental to NST and its shareholders, in terms of future credibility in dealing with institutional investors). The information cannot be released immediately because the bookbuild process is scheduled to take place over the next 48 hours. If trading were to occur in circumstances where an announcement is not yet possible because the bookbuild process has vet to be completed, but that information exists which is required to be immediately released to the market under listing rule 3.1, the market is not reasonably informed. In these circumstances in order to manage its continuous disclosure obligations it is appropriate for NST to request a trading halt to allow NST to conclude the bookbuild process and make an announcement once it has been completed whether it's later today, or on Monday.

ASX keeps interruptions to trading to a minimum and agrees to trading halt requests where there is a material risk that the market as a whole is not reasonably informed or there is a material risk that trading in NST shares might result in an unfair or disorderly market.

It is creating an unfair market to allow trading to continue while the bookbuild process is being conducted, or to allow trading to continue while some players in the market have the information that the Board has resolved to proceed with the placement at the agreed price/volume. Accordingly I expect ASX will agree to the trading halt request.

Yours sincerely

HAny Macdarald

Hilary Macdonald Corporate & Resources Lawyer

Hilary Macdonald Corporate & Resources Lawyer

$\bar{\rm T}$ $\mathbf{E}% _{0}$ $\mathbf{A}$ W +61 (0) 414 715 902 / + 61 (8) 9389 1102

hilary@macdonaldlegal.com.au

Suite 23, 18 Stirling Highway, Nedlands, WA 6009, Australia

www.macdonaldlegal.com.au

ASX Compliance Pty Limited ABN 26 087 780 489 Level 8 Exchange Plaza 2 The Esplanade PERTH WA 6000

GPO Box D187 PERTH WA 6840

Telephone 61 8 9224 0000 Facsimile 61 8 9221 2020 www.asx.com.au

22 February 2012

Ms Karen Brown Northern Star Resources Limited 65 Burswood Road Burswood WA 6100

By Email: kazbrown@edward129.com

Dear Karen

Northern Star Resources Limited (the "Company")

We refer to:

• the recent change in the price of the Company's securities from a low of \$0.96 on Tuesday 14 February 2012 to an intra-day high of \$1.11 on Wednesday 15 February 2012;
• the price query letter from ASX dated 15 February 2012;
• the Company's response to the price query letter dated 15 February 2012;
• the Company's announcement released to the ASX on Friday 17 February 2012 at 9:41 am (EST) entitled "Update to Northern Star Resources' response to ASX query" (the "Update");
• the trading halt request by the Company dated 17 February 2012 and released to the market at 12:46 pm (EST) on 17 February 2012;
• the Company's announcement released to ASX 21 February 2012 at 9:17am (EST) titled "NST amasses approx \$80m cash for growth after raising \$45m" (the "Placement") (the "Placement Announcement"); and
• the Company's announcement released to ASX on 21 February 2012 at 9:33 am (EST) titled "Paulsens Project resource soars 41% to 318,000oz " (the "Resource Upgrade") (the "Resource Upgrade Announcement").

The Update stated, amongst other things, that:

The Company is not currently in any negotiations of a corporate nature.

The Placement Announcement stated, amongst other things, that:

Northern Star Resources (ASX: NST) is pleased to advise that it has raised \$45.0 million (before costs) through a placement of 50.0 million shares at \$0.90 per share ("Placement"). The Placement has been managed by Azure Capital Limited and is being made predominantly to a number of large London-based clients of Morgan Stanley Smith Barney. These institutional clients are some of Europe's leading active asset managers.

and

Northern Star aims to lift production at Paulsens to 100,000ozpa by the end of 2012 (see today's separate ASX announcement). It is also undertaking studies and accelerated exploration at Ashburton with a view to establishing a stand-alone 100,000ozpa operation.

The Resource Upgrade Announcement stated, amongst other things, that:

…. the JORC compliant resource estimate for its flagship Paulsens Project has increased 41 per cent to 318,000oz…

The \$35 million surplus cashflow forecast comes after allowing for \$15 million in capital expenditure associated with the production increase.

Northern Star currently has cash and bullion of \$38.4 million. When combined with the proceeds of the \$45 million share placement (see today's separate ASX announcement), the Company has a cash of ~\$80 million to fund its plans for rapid growth through aggressive exploration, production and acquisitions.

and

"Thanks to strong production, tight cost control and the high gold price, Paulsens is extremely profitable, enabling the Company to bank money at a substantial rate. This cash generation is also underpinning an aggressive exploration program which is paying dividends in spades, as this resource upgrade shows."

We wish to draw your attention to the definition of "aware" in chapter 19 of the listing rules which states that:

"an entity becomes aware of information if a director or executive officer (in the case of a trust, director or executive officer of the responsible entity or management company) has, or ought reasonably to have, come into possession of the information in the course of the performance of their duties as a director or executive officer of that entity"

Further, we wish to draw your attention to listing rule 3.1 which requires an entity to give ASX immediately any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity's securities. The exceptions to this requirement are set out in listing rule 3.1A.

Paragraph 18 of Guidance Note 8 states:

"Once a director or executive officer becomes aware of information, he or she must immediately consider whether that information should be given to ASX. An entity cannot delay giving information to ASX pending formal sign-off or adoption by the board, for example."

Please note that for disclosure not to be required under listing rule 3.1, all of the exceptions under listing rule 3.1A must apply:

• "3.1A.1 A reasonable person would not expect the information to be disclosed.
• 3.1A.2 The information is confidential and ASX has not formed the view that the information has ceased to be confidential.

3.1A.3 One or more of the following applies.

• It would be a breach of a law to disclose the information.
• The information concerns an incomplete proposal or negotiation.
• The information comprises matters of supposition or is insufficiently definite to warrant disclosure.
• The information is generated for the internal management purposes of the entity.
• The information is a trade secret."

We would like to draw your attention to ASX's policy position on the concept of "confidentiality" which is detailed in paragraphs 34 to 40 of Guidance Note 8. In particular, paragraphs 34 and 35 of the Guidance Note state that:

"'Confidential' in this context has the sense of 'secret'. Loss of confidentiality may be indicated by otherwise unexplained changes to the price of the entity's securities, or by reference to the information in the media or analysts' reports".

Having regard to the Placement Announcement, the Resource Upgrade Announcement, the above definitions, listing rule 3.1 and Guidance Note 8 - Continuous Disclosure, we ask that you answer the following questions in a format suitable for release to the market in accordance with listing rule 18.7A:

The Placement

• 1. Does the Company consider the Placement to be material to the Company pursuant to listing rule 3.1?
• 1. When did the Company become aware the Placement was going to be undertaken? With regard to the timing of the price query response, the Update and the Placement Announcement, please include details of when the Company initiated external negotiations and completed the Placement.
• 1. If the answer to question 1 is "yes" and the Company became aware of the Placement prior to issuing the price query response, the Update and/or the release of the Placement Announcement, please advise the following:
• 3.1. Why the Company did not make an announcement at an earlier time or request a trading halt at an earlier time?
• 3.2. Why was the Placement not announced to the market at that earlier time? Please comment specifically on the application of listing rule 3.1.
• 1. If the answer to question 1 is "no", please advise the basis on which the Company does not consider the Placement to be material.

The Resource Upgrade

1. Does the Company consider the Resource Upgrade to be material to the Company pursuant to listing rule 3.1?

2. 1. When did the Company become aware of the Resource Upgrade? With regard to the trading halt request and the Resource Upgrade Announcement, please include details of when the Company was provided with information relating to the Resource Upgrade and when the Resource Upgrade was signed off by a Competent Person.
3. 1. If the answer to question 6 is "yes" and the Company became aware of the Resource Update prior to the release of the Resource Upgrade Announcement, please advise the following:
4. 7.1. Why the Company did not make an announcement at an earlier time or request a trading halt at an earlier time?
5. 7.2. Why was the Resource Upgrade not announced to the market at that earlier time? Please comment specifically on the application of listing rule 3.1.
6. 1. If the answer to question 6 is "no", please advise the basis on which the Company does not consider the Resource Upgrade to be material.
7. 1. Please confirm that the Company is in compliance with listing rule 3.1.

Your responsibility under listing rule 3.1 is not confined to, or necessarily satisfied by, answering the questions set out in this letter.

Please note the ASX reserves its right under listing rule 18.7 to release this letter and the Company's response to the market. Accordingly the Company's response should address each question separately and be in a format suitable for release to the market.

If the information requested by this letter is information required to be given to ASX under listing rule 3.1 your obligation is to disclose the information immediately. Unless the information is required immediately under listing rule 3.1, a response is requested as soon as possible and, in any event, not later than 5:00pm (WST) tomorrow, being Thursday 23 February 2012.

Your response should be sent to ASX by facsimile on facsimile number (08) 9221 2020. It should not be sent to the Company Announcements Office.

If you have any queries regarding any of the above, please contact me on +61 8 9224 0035.

Yours sincerely,

[sent electronically without signature]

Farlee Walker Adviser, Listings (Perth)