UNION STAR METALS LTD - Proxy Solicitation & Information Statement 2015

Promesa Ltd

ACN 124 541 466

To be renamed Thred Limited, subject to Shareholder approval.

Notice of General Meeting

10:00am (WST)

16 October 2015

At the offices of BDO Australia 38 Station Street Subiaco, Western Australia

This Notice of Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on +61 8 9389 5885.

Important notices	2
Time and place of Meeting and how to vote	3
Business of the General Meeting	5
Explanatory Statement	13
Part 1 – Overview of the Thred Acquisition	13
Part 2 – Explanation of the Proposed Resolutions	26
Annexure A Pro-forma Statement of Financial Position	50
Annexure B Terms of Performance Shares	52
Annexure C Terms of Armada Capital Options	55
Annexure D Valuation of Related Party Securities	58
Annexure E Noteholders	60
Annexure F Independent Expert’s Report	61

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Important notices

General

This Notice of Meeting is dated 11 September 2015.

Shareholders should read this document in its entirety before making a decision as to how to vote on the Resolutions.

Purpose of this document

The main purpose of this document is to explain the terms of a proposed change of activities of Promesa through the Thred Acquisition, and the manner in which that transaction will be implemented (if approved), and to provide such information as is prescribed or otherwise material to the decision of Shareholders whether or not to approve the Resolutions to give effect to these matters.

Preparation of and responsibility for this document

This document has been prepared by Promesa and its Board of Directors and Promesa and those Directors are responsible for this document.

The ASX does not take any responsibility for the contents of this Notice of Meeting, and the fact that ASX may re-admit the securities of Promesa to quotation on its official list is not to be taken in any way as an indication of the merits of Promesa.

Defined terms and glossary

Capitalised terms and certain abbreviations used in this document have the defined meanings set out in the Glossary on page 47.

Investment decisions

This document does not take into account the individual investment objectives, financial situation or particular needs of any Shareholder or any other person. Shareholders should seek professional advice from a licensed financial adviser, accountant, stockbroker, lawyer or other appropriate adviser.

Enquiries

Shareholders are requested to contact the Company Secretary on +61 8 9389 5885 if they have any queries in respect of the matters set out in this Notice of Meeting or the accompanying Explanatory Statement.

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Time and place of Meeting and how to vote

Time and place of Meeting

Notice is given that the General Meeting will be held at 10:00am WST on 16 October 2015 at the offices of BDO Australia, 38 Station Street, Subiaco, Western Australia.

Your vote is important

The business of the General Meeting affects your shareholding and your vote is important.

The Explanatory Statement provides additional information on matters to be considered at the General Meeting. The Explanatory Statement and Proxy Form each form part of this Notice of Meeting.

Voting eligibility

The Directors have determined pursuant to regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the General Meeting are those who are registered Shareholders at 5:00pm WST on 14 October 2015.

Voting in person

To vote in person, attend the General Meeting at the time, place and date set out above.

Voting by proxy

In accordance with section 249L of the Corporations Act, members are advised that:

(a) each member has a right to appoint a proxy;
(b) the proxy need not be a member of Promesa; and
(c) a member who is entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the member appoints two proxies and the appointment does not specify the proportion or number of the member's votes, then in accordance with section 249X(3) of the Corporations Act, each proxy may exercise one-half of the votes.

To vote by proxy, please complete and sign the enclosed Proxy Form and return by the time and in accordance with the instructions set out on the Proxy Form.

Sections 250BB and 250BC of the Corporations Act apply to voting by proxy. Shareholders and their proxies should be aware of these sections, as they will apply to this Meeting. Broadly, the sections mean that:

(a) if proxy holders vote, they must cast all directed proxies as directed; and
(b) any directed proxies which are not voted will automatically default to the Chair, who must vote the proxies as directed.

Further details on these legislative requirements are set out below.

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Proxy vote if appointment specifies way to vote

An appointment of a proxy may specify the way the proxy is to vote on a particular resolution and, if it does:

(a) the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed); and
(b) if the proxy has 2 or more appointments that specify different ways to vote on the resolution – the proxy must not vote on a show of hands; and
(c) if the proxy is the chair of the meeting at which the resolution is voted on the proxy must vote on a poll, and must vote that way (i.e. as directed); and
(d) if the proxy is not the chair the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed).

Transfer of non-chair proxy to chair in certain circumstances

If:

(a) an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a meeting of the Company's members; and
(b) the appointed proxy is not the chair of the meeting; and
(c) at the meeting, a poll is duly demanded on the resolution; and
(d) either of the following applies:
(i) the proxy is not recorded as attending the meeting;
(ii) the proxy does not vote on the resolution,

the chair of the meeting is taken, before voting on the resolution closes, to have been appointed as the proxy for the purposes of voting on the resolution at the meeting.

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Business of the General Meeting

Resolution 1 – Change to nature and scale of activities

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

“That, subject to the passing of each other Acquisition Resolution, for the purpose of ASX Listing Rule 11.1.2 and for all other purposes, approval is given for the Company to make a significant change to the nature and scale of its activities as set out in the Explanatory Statement including, without limitation, through the Thred Acquisition.”

Voting exclusion statement

The Company will disregard any votes cast on this Resolution by any person (and their associates) who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed.

However, the Company need not disregard a vote if:

(a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or
(b) it is cast by a 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 – Consolidation of capital

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

“That, subject to the passing of each other Acquisition Resolution, pursuant to section 254H of the Corporations Act and for all other purposes, the issued capital of the Company be consolidated on the basis that every 5 Shares be consolidated into 1 Share and every 5 Options be consolidated into 1 Option and, where this Consolidation results in a fraction of a Share or Option being held, the Company be authorised to round that fraction down to the nearest whole number.”

Resolution 3 – Creation of a new class of Securities (Performance Shares)

To consider and, if thought fit, to pass with or without amendment, the following Resolution as a special resolution :

“That, subject to the passing of each other Acquisition Resolution, for the purpose of clause 2.4 of the Constitution and ASX Listing Rule 6.2 and for all other purposes, the Company is authorised to create and issue a new class of shares, being Performance Shares, on the terms and conditions set out in the Explanatory Statement.”

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Resolution 4 – Issue of Consideration Securities to Key Idea and increase in relevant interest

To consider and, if thought fit, to pass with or without amendment, the following Resolution as an ordinary resolution :

"That, subject to the passing of each other Acquisition Resolution, for the purpose of section 611 (item 7) of the Corporations Act and for all other purposes, approval is given for:

(a) the Directors to issue 250,000,000 Shares (on a post-Consolidation basis); and
(b) the Directors to issue 140,000,000 Performance Shares,

(together, the Consideration Securities ) to Key Idea (or its nominee) and the acquisition of a Relevant Interest in the Consideration Securities by Key Idea (or its nominee). "

Independent Expert’s Report

The Independent Expert has prepared an Independent Expert's Report relating to the approval required for the purpose of section 611 (item 7) of the Corporations Act and concluded that the Thred Acquisition is fair and reasonable to the Company's Shareholders. The Independent Expert's Report is set out in Annexure F to this Notice. Shareholders should carefully read the Independent Expert's Report as it provides information which the Directors believe to be material to shareholders in deciding whether or not to pass this Resolution.

Voting exclusion statement

The Company will disregard any votes cast on this Resolution by Key Idea (and its associates) and any person (and their associates) who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed.

However, the Company need not disregard a vote if:

(a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or
(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

Resolution 5 – Issue of Securities to a related party, Armada Capital

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

"That, subject to the passing of each other Acquisition Resolution, for the purpose of ASX Listing Rule 10.11 and Chapter 2E of the Corporations Act and for all other purposes, approval is given for the Directors to issue:

(a) 100,000,000 Options; and
(b) up to 12,500,000 Shares and up to 7,000,000 Performance Shares in satisfaction of a success fee equal to 5% (by number) of the Consideration Securities,

(on a post-Consolidation basis) to Armada Capital (or its nominee(s)) on the terms and conditions set out in the Explanatory Statement.”

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Voting exclusion statement

The Company will disregard any votes cast on this Resolution by Armada Capital (and its associates) and any person (and their associates) who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed.

However, the Company need not disregard a vote if:

(a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or
(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

Voting prohibition statement

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:
(i) a member of the Key Management Personnel; or
(ii) a Closely Related Party of such a member; and
(b) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

(c) the proxy is the Chair; and
(d) the appointment expressly authorises the Chair to exercise the proxy even though this Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

Resolution 6 – Issue of Shares to Dean Bannister

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

"That, subject to the passing of each other Acquisition Resolution, for the purpose of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to issue up to 6,250,000 Shares (on a post-Consolidation basis) in satisfaction of a success fee equal to 2.5% (by number) of the Consideration Shares, to Dean Bannister (or his nominee(s)) on the terms and conditions set out in the Explanatory Statement.”

Voting exclusion statement

The Company will disregard any votes cast on this Resolution by Dean Bannister (and his associates) and any person (and their associates) who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed.

However, the Company need not disregard a vote if:

(a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or
(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

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Resolution 7 – Capital Raising

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

"That, subject to the passing of each other Acquisition Resolution, for the purpose of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to issue up to 200,000,000 Shares (on a post-Consolidation basis) at a minimum issue price of $0.05 per Share to raise up to $10,000,000 on the terms and conditions set out in the Explanatory Statement."

Voting exclusion statement

The Company will disregard any votes cast on this Resolution by any person (and their associates) who may participate in the proposed issue or any person (and their associates) who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed.

However, the Company need not disregard a vote if:

(a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or
(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

Resolution 8 – Election of Director, David Whitaker

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

"That, subject to the passing of each other Acquisition Resolution and the successful completion of the Thred Acquisition, for the purpose of clause 13.4 of the Constitution and for all other purposes, David Whitaker who, being eligible and having consented to act, be elected as a director of the Company on and from the date of completion of the Thred Acquisition."

Resolution 9 – Election of Director, Christopher Jones

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

"That, subject to the passing of each other Acquisition Resolution and the successful completion of the Thred Acquisition, for the purpose of clause 13.4 of the Constitution and for all other purposes, Christopher Jones who, being eligible and having consented to act, be elected as a director of the Company on and from the date of completion of the Thred Acquisition."

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Resolution 10 – Election of Director, Christopher Adams

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

"That, subject to the passing of each other Acquisition Resolution and the successful completion of the Thred Acquisition, for the purpose of clause 13.4 of the Constitution and for all other purposes, Christopher Adams who, being eligible and having consented to act, be elected as a director of the Company on and from the date of completion of the Thred Acquisition."

Resolution 11 – Change of Company name

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as a special resolution:

"That, subject to the passing of each other Acquisition Resolution and completion of the Acquisition, for the purposes of sections 157(1)(a) and 136(2) of the Corporations Act and for all other purposes, approval is given for the name of the Company to be changed to “Thred Limited” with effect from completion of the Acquisition, and for all references to the Company's name in the Constitution to be replaced with Thred Australia Limited."

Resolution 12 – Issue of Shares under Series A Convertible Loans

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

"That, subject to the passing of each other Acquisition Resolution, for the purpose of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to issue such number of Shares (on a post-Consolidation basis) to the lenders under the Series A Convertible Loans (or their respective nominees) as is calculated in accordance with the formula set out in the Explanatory Statement, and otherwise on the terms and conditions set out in the Explanatory Statement.

Voting exclusion statement

However, the Company need not disregard a vote if:

(a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or
(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

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Resolution 13 – Issue of Shares under Series B Convertible Loans

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

"That, subject to the passing of each other Acquisition Resolution, for the purpose of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to issue such number of Shares (on a post-Consolidation basis) to the lenders under the Series B Convertible Loans (or their respective nominees) as is calculated in accordance with the formula set out in the Explanatory Statement, and otherwise on the terms and conditions set out in the Explanatory Statement.

Voting exclusion statement

However, the Company need not disregard a vote if:

(a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or
(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

Resolution 14 – Issue of Shares under Series A Convertible Loan to a related party

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

"That, subject to the passing of each other Acquisition Resolution, for the purpose of ASX Listing Rule 10.11 and for all other purposes, approval is given for the Directors to issue such number of Shares (on a post-Consolidation basis) to Supaval (or its nominee) as is calculated in accordance with the formula set out in the Explanatory Statement, and otherwise on the terms and conditions set out in the Explanatory Statement.”

Voting exclusion statement

The Company will disregard any votes cast on this Resolution by Supaval (and its nominee) (and their associates) and any person (and their associates) who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed.

However, the Company need not disregard a vote if:

(a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or
(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

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Resolution 15 – Issue of Shares to Noteholders

To consider and, if thought fit, to pass with or without amendment, the following Resolution as an ordinary resolution :

"That, for the purpose of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to issue such number of Shares (on a post-Consolidation basis) to the Noteholders (or their respective nominees) as is calculated in accordance with the formula set out in the Explanatory Statement, and otherwise on the terms and conditions set out in the Explanatory Statement."

Voting exclusion statement

However, the Company need not disregard a vote if:

(a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or
(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

Resolution 16 – Issue of Shares to a related party, Simon Nominees

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

"That, subject to the passing of Resolution 15, for the purpose of ASX Listing Rule 10.11 and for all other purposes, approval is given for the Directors to issue such number of Shares (on a post-Consolidation basis) to Simon Nominees (or its nominee) as is calculated in accordance with the formula set out in the Explanatory Statement, and otherwise on the terms and conditions set out in the Explanatory Statement.”

Voting exclusion statement

The Company will disregard any votes cast on this Resolution by Simon Nominees (and its nominee) (and their associates) and any person (and their associates) who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed.

However, the Company need not disregard a vote if:

(a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or
(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

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Resolution 17 – Ratification of prior issue of Shares

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as an ordinary resolution :

"That, for the purpose of ASX Listing Rule 7.4 and for all other purposes, the issue of 96,103,117 Shares (on a pre-Consolidation basis) on the terms and conditions set out in the Explanatory Statement be and is hereby ratified."

Voting exclusion statement

The Company will disregard any votes cast on this Resolution by any person (and their associates) who participated in the issue.

However, the Company need not disregard a vote if:

(a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form; or
(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the Proxy Form to vote as the proxy decides.

Dated: 11 September 2015.

By order of the Board

Damon Noel Sweeny Company Secretary

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Explanatory Statement

This Explanatory Statement has been prepared to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions which are the subject of the business of the Meeting.

The main purpose of the Meeting is to seek from Shareholders the approvals required for a change to the nature and scale of the Company’s activities and the various approvals arising from the Thred Acquisition.

Part 1 – Overview of the Thred Acquisition

1. Current operations and background to Promesa

Promesa Ltd is a Perth based public company listed on the official list of ASX (ASX Code: PRA).

The Company is currently a precious and base metals explorer with a portfolio of mineral prospects. The Company has six projects at early discovery state in Peru, including three projects in La Libertad, two projects in Ancash and one project in the Huancavelica Department.

Recently, the Company’s Directors have been mindful of the state of the Australian share market and the financing difficulties in the global junior resources sector, as identified in the Half-Year Financial Report for the period ended 31 December 2014. It has become clear that current market conditions make it very difficult to raise funds to explore the exploration projects which the Company holds. The Board has therefore assessed a number of opportunities to enhance Shareholder value. The evaluation of opportunities has culminated in the announcement on 13 April 2015 of the proposed Thred Acquisition.

As set out in the announcement, the Company also intends to dispose of its mineral tenements and exploration businesses following completion of the Thred Acquisition. The Directors will continue to explore the mechanisms by which this disposal might be effected in the best interests of Shareholders, whether by way of asset or share sale, demerger or otherwise.

2. Change to the nature and scale of activities

The Thred Acquisition involves a significant change to the nature of the Company's main business activity from exploring for minerals to the development and provision of messaging platforms and apps to users internationally.

Furthermore, the Thred Acquisition involves a significant change to the size of the Company's business operations.

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3. Information on Thredit’s business

Thredit’s business is the development of the Thred App.

Thred is unified social messaging which has been conceived, designed and built by Key Idea and the Thredit team. Work began on design and development of the Thred App in 2013 in response to internal communications challenges encountered by Key Idea.

Thred is a next-generation meta-social & media sharing application which overlays more than 140 global social media platforms, allowing instant access to all social media friends, followers and contacts in a simple unified way, with the potential to connect billions of social media users.

At its heart, Thred is a web and app-based messaging platform specialising in crossplatform communication protocols. Thredit has developed several proprietary engines and systems that unify and centralise user contacts and social groups whilst simultaneously providing a centralised communication hub.

Thred’s core system is a private messaging and content sharing platform enabling individual and group messaging across all social media, re-making the messaging experience and building bridges between social groups.

Thredit has also developed machine learning engines and a neural network that learns users’ preferences, with the intention of providing a more targeted and satisfying messaging and sharing experience. Any content (for example, documents, links, video, spreadsheets, Powerpoints, etcetera) can be easily shared, commented on (both across a Thred group or privately within the group), archived, searched and outputted for later review or furthering of the conversation.

Thred's platform is the core of a suite of products that are being developed by Thredit for the mobile market. This core suite of products is expected to be officially launched in late 2015 with additional features and modules released after launch.

The Thred App is not just a new messaging app or a new form of social media; rather, it is a solution to the challenges we all face in today's connected and information-rich world. These challenges include:

how we manage the range of our diverse profiles and groups across multiple social platforms; and
how to easily create and manage a private group discussion with friends from networks such as Twitter, Facebook, Weibo and LinkedIn at the same time as using SMS and email addresses – uniquely allowing a two-way communication stream between them all and the creation of a private messaging group made up of people across multiple platforms and social media.

By developing and marketing the Thred platform, the goal is not to compete with existing messaging apps or social networks, but instead to reshape the way we all use the range of services available to create more meaningful and valuable connections between people.

Thredit will follow the successful strategies used by other messaging services by focusing on user acquisition and engagement primarily at launch, Thred has the potential to generate revenue through several key avenues as follows:

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In-App commerce : Thredit intends to permit third party apps to provide integrated services within the Thred App to its users, such as such as booking services, content partnerships, event ticketing and product sales. Thredit hopes to negotiate referral or affiliate commissions with these app providers.
Enterprise messaging version : Thredit intends to offer an enterprise version of the Thred App that will provide additional features and functionality, such as improved security, enhanced message encryption, superior group management and office integration. Subscribers will be able to pay a “per seat” fee or yearly subscription fee for use of the enterprise version.
Brand integrations : Thredit intends to create opportunities for brand integrations enabling users to opt-in to one-to-one and/or one-to-many communications with brands of their choosing. Brands will have the opportunity to purchase these integrations from Thredit on a per campaign basis.
Upgrade options : Thredit will offer a number of paid 'upgrade' options within the Thred App that users will be able to opt into to access additional features and functionality. These may include features such as improved security, message encryption, superior group management and office integration. The cost of these upgrade options will vary according to the function and feature type.
Data mining: Thred inherently collects and collates data that allows predictive trending and other forms of analysis to be performed. This analysis will be made available after launch as a SaaS (software as a service) system that can be subscribed to by companies or individuals and charged for on a “user pays” basis.

4. Financial information on Thredit

As at the period ended 31 March 2015, Thredit had HKD 1 in total assets and HKD 50,000 in total liabilities. Thredit’s sole asset is intangible, being a software application to enhance communication between people, acquired from Key Idea, a related party of Thredit. The value does not necessarily represent the fair value of the Thred App, nor the cash expended on its development by Key Idea. The liabilities relate to accrued auditor’s expenses of HKD 50,000. As at the date of this Notice of Meeting, 1 Australian Dollar equals approximately 5.54 Hong Kong Dollars.

Thredit’s ultimate holding company, Key Idea, has confirmed in writing its intention to provide continuing financial support to Thredit until completion of the Thred Acquisition occurs.

5. Key terms of the Thred Acquisition

On or about 12 April 2015, the Company entered in to a Binding Heads of Agreement ( Agreement ) with Key Idea to acquire all the issued share capital of Thredit for the following consideration:

the issue to Key Idea of 250,000,000 Shares (on a post-Consolidation basis); and
the issue to Key Idea of 140,000,000 Performance Shares,

(together, the Consideration Securities ).

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The Agreement contains warranties and indemnities in favour of Promesa consistent with usual market practice.

The principal outstanding conditions precedent to completion of the Thred Acquisition are:

the Acquisition Resolutions being passed at the Meeting;
Promesa undertaking the Capital Raising and receiving valid applications for at least $5,000,000 under the Capital Raising;
Promesa undertaking a consolidation of its issued capital on a ratio of 1 for 5 (as determined by the Board in its absolute discretion) ( Consolidation ); and
the conditional approval by ASX to reinstate Promesa’s securities to trading on ASX (after Promesa re-complies with Chapters 1 and 2 of the ASX Listing Rules) and those conditions being to the reasonable satisfaction of Promesa and Key Idea.

These conditions must be satisfied or waived by Promesa by no later than 7 November 2015.

6. Independent Expert’s Report

The Independent Expert has prepared an Independent Expert’s Report on whether in its opinion the proposed Thred Acquisition is fair and reasonable to the Company’s Shareholders and concluded that the Thred Acquisition is fair and reasonable .

The Independent Expert’s Report is set out in Annexure F to this Notice. Shareholders should carefully read the Independent Expert’s Report as it provides information which the Directors believe to be material to Shareholders in deciding whether or not to approve the proposed Thred Acquisition.

7. Board and management changes

On completion of the Thred Acquisition the Company proposes to appoint to the Board:

Mr David Whitaker as Managing Director;
Mr Christopher Jones as Non-Executive Director; and
Mr Christopher Adams as Non-Executive Director.
Mr Tim Wise will resign as a Director at that time.

Mr Sean Davidson will be appointed as Chief Technology Officer of Thredit and will assume responsibility for the delivery of Thred.

The Board will continue to assess its needs at both a board and management level as the new business progresses and when a decision is made in relation to the Company’s mineral tenements and exploration businesses.

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8. Re-compliance with Chapters 1 and 2 of the ASX Listing Rules

ASX has notified the Company that the significant change to the nature and scale of the Company's main business activity arising from the Thred Acquisition will require recompliance with ASX's admission requirements in chapters 1 and 2 of the ASX Listing Rules.

ASX has indicated that it will suspend trading in the Company’s securities before trading starts on the date of the General Meeting. Then, if Shareholders approve the change to the nature and scale of activities of the Company and the other Acquisition Resolutions, trading in the Company's securities will be immediately suspended until re-compliance with the admission requirements is achieved.

9. Pro-forma capital structure

The effect of the issue of the Consideration Securities on the Company’s capital structure is set out in the following table:

Table 9.1	Shares1	Options1,2	Performance Shares1
Current issued capital	96,103,117	12,245,834	Nil
Consideration Securities	250,000,000	Nil	140,000,000
Total issued capital following issue of the Consideration Securities assuming none of the current issued Options are exercised3	346,103,117	12,245,834	140,000,000
Total issued capital following issue of the Consideration Securities assuming all current issued Options are exercised3	358,348,951	Nil	140,000,000

Notes:

All numbers in the above table are stated on a post-Consolidation basis, ignoring the treatment of fractional entitlements under the Consolidation.
In respect of the Options:
5,412,500 unquoted Options exercisable at $0.25 each, expiring 10 December 2015; and
6,833,334 unquoted Options exercisable at $0.25 each, expiring 27 February 2016.
As the last sale on the ASX trading day immediately preceding the date of this Notice was $0.008, the Options are not "in the money" (taking account of the Consolidation).

The Company’s capital structure following completion of the Thred Acquisition and the equity issues contemplated under this Notice of Meeting is set out in the following table:

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Table 9.2	Table 9.2
Shares	Number1
Shares currently on issue	96,103,117
Consideration Shares to be issued to Key Idea in consideration for the Thred Acquisition (Resolution 4)	250,000,000
Maximum number of Shares to be issued pursuant to the Offer at $0.05 each (including oversubscriptions) (Resolution 7)	200,000,000
Maximum number of Shares to be issued at a deemed issue price of $0.025 each upon conversion of Series A Convertible Loans4 (Resolutions 12 and 14)	20,000,000
Maximum number of Shares to be issued at a deemed issue price of $0.04 each upon conversion of Series B Convertible Loans4 (Resolution 13)	12,500,000
Maximum number of Shares to be issued to Armada Capital at a deemed issue price of $0.05 each in satisfaction of a 5% success fee in connection with the Thred Acquisition3 (Resolution 5)	12,500,000
Maximum number of Shares to be issued to Dean Bannister at a deemed issue price of $0.05 each in satisfaction of a 2.5% success fee in connection with the Thred Acquisition3 (Resolution 6)	6,250,000
Total Shares on completion of the Thred Acquisition and the Offer	597,353,117
Convertible Notes	Number1
Convertible Notes (issued by the Company between 27 February 2015 and 13 May 2015) convertible into Shares at $0.005 per Share on or before 31 December 2015 (Resolutions 15 and 16)	200,000,000
Total Convertible Notes on completion of the Thred Acquisition	200,000,000
Performance Shares	Number1
Performance Shares to be issued to Key Idea in consideration for the Thred Acquisition (Resolution 4)	140,000,000
Performance Shares to be issued to Armada Capital in satisfaction of a 5% success fee in connection with the Thred Acquisition3 (Resolution 5)	7,000,000
Total Performance Shares on completion of the Thred Acquisition	147,000,000
Options	Number1
Unquoted Options exercisable at $0.25 each on or before 10 December 20152	5,412,500
Unquoted Options exercisable at $0.25 each on or before 27 February 20162	6,833,334
Unquoted Options to be issued to Armada Capital exercisable at $0.0625 each on or before 30 May 2017 (Resolution 5)	100,000,000
Total Options on completion of the Thred Acquisition	112,245,834
Total issued Shares	Number1
Total issued Shares on re-instatement to ASX (undiluted)2	597,353,117
Total issued Shares on re-instatement to ASX assuming all of the current issued Options are exercised before reinstatement2	609,598,951

Notes:

All numbers and amounts in the above table are stated on a post-Consolidation basis, ignoring the treatment of fractional entitlements under the Consolidation.

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As the last sale on the ASX trading day immediately preceding the date of this Notice was $0.008, the Options are not "in the money" (taking account of the Consolidation) and it is therefore unlikely that they will be exercised before the Company’s reinstatement to trading on ASX. Assumes no Convertible Notes are converted prior to reinstatement. If all of the Convertible Notes are converted by the Noteholders, an additional 200 million Shares (on a post-Consolidation basis) will be issued (disregarding Shares which may be issued in satisfaction of accrued interest).
Calculated by reference to the number of Consideration Securities issued as consideration for the Thred Acquisition.
Disregarding Shares to be issued in satisfaction of accrued interest.

10. Indicative timetable

An indicative timetable for re-compliance with the admission requirements is set out in the following table:

Event	Date1
Consolidation announced and Notice of Meeting dispatched	16 September 2015
Lodge Prospectus with ASIC and ASX	30 September 2015
Opening of offer under the Prospectus	1 October 2015
Application for admission to ASX (Appendix 1A)	7 October 2015
Suspension from trading (pre-market open)	16 October 2015
General Meeting ASX notified that Shareholders have approved the Consolidation.	16 October 2015
Last day for trading in pre-Consolidation securities.2	19 October 2015
Trading in post-Consolidation securities on a deferred settlement basis starts.2	20 October 2015
Record date for the Consolidation. Last day to register transfers on a pre-Consolidation basis. Close of offer under the Prospectus	22 October 2015
First day to notify securityholders of the number of securities held before and after the Consolidation. First day to register securities on a post-Consolidation basis and first day for issue of holding statements.	23 October 2015
Consolidation issue date (securityholders’ holdings updated to reflect the effect of the Consolidation). Deferred settlement market ends.2	27 October 2015
Completion of Thred Acquisition and issue of Shares under the Prospectus	30 October 2015
Expected date for re-quotation of the Company’s securities on ASX	13 November 2015

Notes:

The above dates are indicative only and are subject to change without notice.
In accordance with ASX policy, ASX will suspend trading in the Company’s securities before trading starts on the date of the General Meeting. Then, if Shareholders approve the change to the nature and scale of activities of the Company and the other Acquisition Resolutions, trading in the Company's securities will be immediately suspended until re-compliance with the admission requirements is achieved.

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11. Pro-forma statement of financial position

Set out in Annexure A is a pro-forma consolidated statement of financial position of the Company taking into account the Thred Acquisition. The pro-forma statement of financial position illustrates the effect of the Thred Acquisition, the Capital Raising and the other issues of Securities contemplated by this Notice of Meeting as if they had occurred on 1 January 2015.

12. Advantages and disadvantages of the Thred Acquisition

This section sets out the key advantages and disadvantages of the Thred Acquisition. In addition to the advantages and disadvantages set out below, your Directors refer you to the Independent Expert’s Report which is included with this Notice of Meeting. The Directors believe the advantages of the proposed transactions substantially outweigh the disadvantages.

Advantages

More certain return to Shareholder value creation: The Directors have been mindful of the state of the Australian share market and the financing difficulties in the global junior resources sector. As a result, they have sought good investment opportunities. In the current share market environment there is greater likelihood of restoring Shareholder value by progressing the Thred Acquisition than if Promesa were simply to remain a junior mineral explorer listed on ASX.
Increased investor interest and market liquidity: Until recently, transactions in Promesa Shares on ASX have been sparse. More recently, this has changed and is mostly related to the 12 April 2015 announcement of the proposed acquisition of Thredit. It is not unreasonable to anticipate improved liquidity going forward following completion of the Thred Acquisition. Furthermore, a larger market capitalisation and enhanced Shareholder base resulting from the Thred Acquisition and Capital Raising may provide a more liquid market for the Company’s Shares than currently exists.
No cash payment for an existing growing business with track record: The proposed Thred Acquisition does not require the payment of cash consideration. Furthermore, part of the share based payments to Key Idea includes Performance Shares that are linked to financial hurdles. The Performance Shares have hurdles that must be achieved for conversion to ordinary Shares and relate to milestones regarding the Thred App. The milestones apply for certain periods following the date of completion of the Capital Raising, including 90 days, 180 days and 360 days. They involve target triggers in relation to the launch, downloading and updating of the Thred App.
New skill and experience for the Board: The appointment of the Proposed Directors will add skill and experience to the Board to assist with the Company’s growth.
Improved ability to raise funding: Shareholders may be exposed to further debt and equity funding opportunities that the Company did not have before the Thred Acquisition. The Company’s ability to raise funds and attract expertise will likely be improved.

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New investment potential: The Thred Acquisition may encourage new investors in the Company as the Company will be pursuing a new strategic direction. This improvement in the attractiveness of an investment in the Company may lead to an increased liquidity of Shares and greater trading depth than currently experienced by Shareholders.

Disadvantages

Issue of new securities pursuant to the Resolutions will dilute existing Shareholders: Assuming the Capital Raising is fully subscribed, the Thred Acquisition and the passing of the Acquisition Resolutions will result in Shareholders’ interests in the Company being diluted by approximately 88.78%. Consequently, the current shareholders' influence over the Company’s affairs (including the composition of the Board and the acquisition and disposal of assets) will be reduced.
Change of business focus and with a move away from mineral exploration focus: It is very likely that the Company will, following completion of the Thred Acquisition, move away from mineral exploration and focus on information technology infrastructure and the social media environment. This may be seen as a disadvantage to some Shareholders who were seeking, via the Company, a "pure" mineral exploration investment.
Transaction and Capital Raising costs: The proposed Thred Acquisition has required Promesa to engage a number of advisers, lawyers and experts to facilitate and report on the proposal. This work includes preparation of the Notice of Meeting, the Independent Expert’s Report and a prospectus to ensure compliance with ASX Listing Rules and other statutory requirements and approvals.
New risk profile: The Company and its Shareholders will be exposed to risks associated with Thredit and its business, including (but not limited to) those set out in paragraph 13 below.
Change to largest shareholder: Following the issue of the Consideration Securities to Key Idea (an entity controlled by Proposed Director, David Whitaker), Key Idea will become the largest Shareholder in the Company. In this scenario, Key Idea may have the ability to significantly influence or control the Company.

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13. Risks

Specific risk factors

No operating track record: Thredit is a recently established company and has no operational track record, with a number of its key personnel only recently appointed to management. Execution of Thredit’s business plan may take longer to achieve than planned and the costs of doing so may be higher than budgeted. As Thredit is at an early stage of development, there are significant uncertainties associated with forecasting future revenues and expenses. The Acquisition must therefore be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development.
Intellectual property: Whilst Thredit will seek to protect innovative features and processes that it creates during the development of its applications, Thredit’s intellectual property rights are currently unregistered and therefore do not attract the benefit of formal patent protection.
Country risk: The Company’s operations will primarily be conducted in Hong Kong. Accordingly, the Company is exposed to a range of multi-jurisdictional risks such as risks relating to labour practices, environmental matters, difficulty in enforcing contracts, changes to or uncertainty in the relevant legal and regulatory regime (including in relation to taxation and foreign investment and practices of government and regulatory authorities) and other issues in foreign jurisdictions in which the Company operates.
Privacy : Thredit, the Thred App and platform will be launched globally and as such will be subject to privacy laws that may differ in each specific jurisdiction in which Thredit operates. If a breach of privacy occurs, it may expose Thredit and/or the Company to litigation or regulatory enquiry.
Potential changes in API's: Platforms, apps and systems change aspects of their APIs regularly and for many different reasons. If Thredit is unable to respond to a change in an API in an appropriate manner, Thred users may experience some reduced cross-platform functionality regarding interaction with that platform, app or system.
Currency risk : The Company is seeking to raise funds under the Capital Raising in Australian dollars. Whilst in the short term, it is anticipated that this will have a limited impact on the Company’s costs of doing business, in the medium to longer term it is likely that the majority of Thredit’s revenue will be in US dollars or other local currencies. As such, the Company may be adversely affected by changes in exchange rates relative to the Australian dollar.
Competitors : The mobile applications market and specifically the messaging and social applications markets are highly competitive. Thredit faces competition from a wide range of application publishers from established well known publishers to startups looking to break into the market. Thredit cannot control or influence its competitors’ actions and activities. The actions by competitors may impact the adoption, revenue and/or profitability of Thredit and therefore the Company’s financial condition. A key risk for Thredit in a competitive environment such as this is that it may not achieve the user adoption or adequate engagement from users over existing or yet to be launched competitors. Although Thredit will look to overcome these challenges through consistent product iteration and testing, it is

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nonetheless vulnerable to unforeseen innovations, discoverability challenges and/or market saturation.

Technology: Thredit will seek to remain abreast of key technological innovations affecting the social media and messaging markets. However, the rapid growth of both of these markets creates an environment where unforeseen changes can happen quickly, making it difficult for Thredit to adapt its offering fast enough to cope with these changes. There is a risk that Thredit will be unable to acquire new users or retain existing users should Thredit’s applications become less desirable vis-à-vis the competition in the marketplace.
Security: Thredit could suffer unauthorised infiltration by hackers disrupting service to users, stealing user data or otherwise affecting the Company’s operations. Such actions could compromise user data or otherwise damage goodwill, resulting in changes in user behaviour and overall dissatisfaction.
Third party reliance: To some extent Thredit relies on third parties for key aspects of its operations. This is a risk of third parties restricting access to their APIs or no longer being capable of providing the services that they currently offer. Thredit’s strategy is to spread reliance on third parties across a number of parties. In addition, the Board anticipates that as adoption of Thredit’s applications grows, reliance on third parties will decrease.
Personnel: Thredit is reliant on the expertise and talent of its personnel. The loss of key personnel could have an adverse impact on the operations of the organisation. In addition, there is risk that development staff who have been involved in the development of the applications could be lost and in turn their knowledge of the product and business could be lost as well. Thredit seeks to mitigate this risk by maintaining good relations with personnel and suppliers. In addition Thredit maintains employment and services contracts with respect to confidentiality and ownership of intellectual property.
Market: The mobile applications industry and specifically the messaging apps and social networks apps industries are still relatively undeveloped in spite of the number of applications with large user bases. As such, the revenue models vary greatly and the market size and potential is still uncertain. In this market with diverse but relatively new revenue streams Thredit may not be able to establish a meaningful position prior to its competitors for key transactions taking place within the applications. It will be Thredit’s responsibility to develop effective solutions prompting users to engage with and/or execute transactions from or within its applications. There is also a risk that competitors could launch substantially similar applications as Thredit and as such the speed to get to market is of high importance. Thredit will seek to mitigate this risk through its development processes and user testing processes.
Additional requirements for capital: The Company’s capital requirements are influenced by numerous factors. Depending on the rate of user growth, the ability to generate revenue and other factors, the Company may require financing in addition to the amounts raised under the Offer. Any additional equity financing may dilute shareholdings and debt financing, if available, may place restrictions on operating and financing activities. If the Company cannot acquire additional financing then it may be forced to alter its plan of operations.
Risk of high volume of sales in Securities: If the transaction is successfully completed, the Company will have issued a significant number of Shares to various

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parties. Some of the parties that apply for Shares may not wish to hold those Shares and may wish to sell them on the ASX (subject to applicable escrow period). There is a risk that an increase in the amount of people wanting to sell Shares may adversely impact the prices of the Company’s securities. There can be no assurance that there will be, or continue to be, an active market for Shares or that the price of the Shares will increase.

General risk factors

Economic conditions: Thredit’s performance is likely to be affected by changes in economic conditions. Profitability of the business may be affected by some or all of the factors listed below:
(a) future demand for social media networks;
(b) the level of spending on mobile phone apps by users globally;
(c) general financial issues which may affect policies, exchange rates, inflation and interest rates;
(d) deterioration in economic conditions, possibly leading to reductions in consumer spending and other potential revenues which could be expected to have a corresponding adverse impact on the Company's operating and financial performance;
(e) the strength of the equity and share markets in Australia and throughout the world;
(f) financial failure or default by any entity with which Thredit may become involved in a contractual relationship;
(g) industrial disputes in Australia and overseas;
(h) changes in investor sentiment toward particular market sectors;
(i) the demand for, and supply of, capital; and
(j) terrorism or other hostilities.
Government policies and legislation : Social media may be affected by changes to government policies and legislation, including those relating to privacy, and taxation.
Insurance : The Company, wherever practicable and economically advisable, utilises insurance to mitigate business risks. Such insurance may not always be available or particular risks may fall outside the scope of insurance cover. In addition, there remains the risk that an insurer defaults in the payment of a legitimate claim by the Company.
Litigation : Litigation brought by third parties including but not limited to customers, partners, suppliers, business partners or employees could negatively impact the business in the case where the impact of such litigation is greater than or outside the scope of the Company's insurance.
Other general risks : Other general risks associated with investment in the Company may include:

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(a) fluctuation of the price at which the Company's shares trade due to market factors; and
(b) price volatility of the Company's shares in response to factors such as:
(i) additions or departures of key personnel;
(ii) litigation and legislative change;
(iii) press newspaper or other media reports; and
(iv) actual or anticipated variations in the Company's operating results.

14. Future direction for the Company if the change to nature and scale of activities is not approved

If the Acquisition Resolutions are not passed, the Thred Acquisition and the Capital Raising will not proceed. In this circumstance the Company will continue with its present activities and the evaluation of potential opportunities that might meet criteria capable of adding significant Shareholder value.

15. Directors’ recommendation

The Directors consider that the proposed change to the nature and scale of activities of the Company arising from the Thred Acquisition has the potential to add significant Shareholder value for the Company’s Shareholders.

Accordingly, the Directors recommend the Thred Acquisition, and that Shareholders vote in favour of the Acquisition Resolutions.

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Part 2 – Explanation of the Proposed Resolutions

Resolution 1 – Change to nature and scale of activities

Background

ASX Listing Rule 11.1 provides that if an entity proposes to make a significant change, either directly or indirectly, to the nature or scale of its activities, it must provide full details to ASX as soon as practicable. Further, the following rules apply in relation to the proposed change:

(a) The entity must give ASX information regarding the change and its effect on future potential earnings, and any information that ASX asks for;
(b) If ASX requires, the entity must get the approval of holders of its ordinary securities; and
(c) If ASX requires, the entity must meet the requirements in chapters 1 and 2 of the ASX Listing Rules as if the entity were applying for admission to the official list.

The acquisition by the Company of all the issued share capital of Thredit involves a significant change to the nature of the Company's main business activity from exploring for minerals to the provision of security, monitoring and risk management services. Furthermore, the Thred Acquisition involves a significant change to the size of the Company's business operations.

Given these circumstances, ASX has exercised its discretion to require the significant change to the nature and scale of the Company's main business activity to be approved by the Company's Shareholders under ASX Listing Rule 11.1.2. Further, ASX has notified the Company that the significant change to the nature and scale of the Company's main business activity will require recompliance with ASX's admission requirements in chapters 1 and 2 of the ASX Listing Rules.

If Resolution 1 is passed the Company will have complied with the ASX requirement to obtain Shareholder approval for the significant change to the nature and scale of its activities. Conversely if Resolution 1 is not passed the Company will not be allowed to change the nature and scale of its activities as proposed in this Explanatory Statement and the Thred Acquisition will not proceed.

Directors’ recommendation

The passing of Resolution 1 is conditional upon, and subject to, each other Acquisition Resolution being approved by Shareholders. Accordingly, if you intend to vote in favour of Resolution 1, you should also vote in favour of each other Acquisition Resolution.

The Directors recommend Shareholders vote in favour of this Resolution.

Resolution 2 – Consolidation of capital

Background

Resolution 2 seeks Shareholder approval to consolidate the number of Shares and Options on issue on a 1 for 5 basis ( Consolidation ).

The purpose of the Consolidation is to implement a more appropriate capital structure for the Company going forward and to seek to comply with relevant ASX Listing Rules (as amended by

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waivers received from the ASX) as part of the re-quotation of the Shares on the ASX, should Shareholder approval be obtained for the Acquisition Resolutions.

The Directors intend to implement the Consolidation prior to completion of the Thred Acquisition and prior to the proposed issue of Shares pursuant to the Capital Raising, the proposed issue of Shares to Noteholders, Series A Convertible Loan lenders and Series B Convertible Loan lenders and the proposed issue of the Securities contemplated by Resolutions 5 and 6. However, the Consolidation will only occur if Shareholders approve the Acquisition Resolutions.

Corporations Act and ASX Listing Rules requirements

Section 254H of the Corporations Act provides that a Company may, by resolution passed in a general meeting, convert all or any of its shares into a larger or smaller number.

The ASX Listing Rules also require that the number of options on issue be consolidated in the same ratio as the ordinary shares and the exercise price of options be amended in inverse proportion to that ratio. Similarly, the number or the conversion price (or both) of convertible securities (other than options) must be reorganised so that the holders of the convertible securities do not receive a benefit that holders of ordinary securities do not receive.

Fractional entitlements

Not all Shareholders and holders of Options will hold a number of Shares or Options which can be evenly divided by 5. Where a fractional entitlement occurs, the Company will round the fraction down to the nearest whole number.

Taxation

It is not considered that any taxation implications will arise for Shareholders or holders of Options from the Consolidation. However, Shareholders and holders of Options are advised to seek their own tax advice on the effect of the Consolidation. The Company, the Directors and the proposed Directors and their advisers do not accept any responsibility for the individual taxation implications arising from the Consolidation or the other proposed Resolutions.

Holding statements

From the date of the Consolidation, all holding statements for previously quoted Shares will cease to have any effect, except as evidence of an entitlement to a certain number of Shares on a postConsolidation basis.

After the Consolidation becomes effective, the Company will arrange for new holding statements for Shares proposed to be quoted to be issued to holders of those Shares.

It is the responsibility of each Shareholder to check the number of Shares held prior to subsequent disposal.

Effect on capital structure

The estimated effect which the Consolidation will have on the capital structure of the Company is set out below:

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Shares	Pre- Consolidation Number	Post- Consolidation Number4
Shares currently on issue	480,515,585	96,103,117
Consideration Shares to be issued to Key Idea	-	250,000,000
Maximum number of Shares to be issued pursuant to the Capital Raising	-	200,000,000
Maximum number of Shares to be issued at a deemed issue price of $0.025 per Share upon conversion of Series A Convertible Loans3	-	20,000,000
Maximum number of Shares to be issued at a deemed issue price of $0.04 per Share upon conversion of Series B Convertible Loans3	-	12,500,000
Maximum number of Shares to be issued to Armada Capital at a deemed issue price of $0.05 each in satisfaction of a 5% success fee in connection with the Thred Acquisition2	-	12,500,000
Maximum number of Shares to be issued to Dean Bannister at a deemed issue price of $0.05 each in satisfaction of a 2.5% success fee in connection with the Thred Acquisition2	-	6,250,000
TOTAL:	480,515,585	597,353,117
Convertible Notes
Convertible Notes (issued by the Company between 27 February 2015 and 13 May 2015) convertible into Shares at $0.001 per Share on or before 31 December 2015	1,000,000,000	-
Convertible Notes (issued by the Company between 27 February 2015 and 13 May 2015) convertible into Shares at $0.005 per Share on or before 31 December 2015	-	200,000,000
TOTAL:	1,000,000,000	200,000,000
Options	Pre- Consolidation Number	Post- Consolidation Number4
Unquoted Options exercisable at $0.05 each on or before 10 December 20151	27,062,500	-
Unquoted Options exercisable at $0.05 each on or before 27 February 20161	34,166,667	-
Unquoted Options exercisable at $0.25 each on or before 10 December 20151	-	5,412,500
Unquoted Options exercisable at $0.25 each on or before 27 February 20161	-	6,833,334
Options to be issued to Armada Capital exercisable at $0.0625 each on or before 30 May 2017	-	100,000,000
TOTAL:	61,229,167	112,245,834

Notes:

As the last sale on the ASX trading day immediately preceding the date of this Notice was $0.008, the Options are not "in the money" (taking account of the Consolidation) and it is therefore unlikely that they will be exercised before the Company’s re-instatement to trading on ASX.
Calculated by reference to the number of Consideration Securities issued as consideration for the Thred Acquisition.
Disregarding Shares to be issued in satisfaction of accrued interest.
Post-Consolidation figures ignore treatment of fractional entitlements.

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Indicative timetable

If the Acquisition Resolutions are passed, the Consolidation is proposed to take effect in accordance with the indicative timetable set out in Part 1, paragraph 10 of the Explanatory Statement.

Directors’ recommendation

The passing of Resolution 2 is conditional upon, and subject to, each other Acquisition Resolution being approved by Shareholders. Accordingly, if you intend to vote in favour of Resolution 2, you should also vote in favour of each other Acquisition Resolution.

The Directors recommend Shareholders vote in favour of this Resolution.

Resolution 3 – Creation of a new class of Securities (Performance Shares)

Background

The Binding Heads of Agreement entered into with Key Idea provide for the acquisition by the Company of all the issued share capital of Thredit for the following consideration:

(a) the issue to Key Idea of 250 million Shares (on a post-Consolidation basis); and
(b) the issue to Key Idea of 140 million Performance Shares.

The purpose of Resolution 3 is to seek approval from shareholders for the creation and issue of the Performance Shares, being a new class of securities having different rights to the existing Shares.

Section 246C(5) of the Corporations Act

Section 246C(5) of the Corporations Act provides that if a company with one class of shares issues new shares, the issue is taken to vary the rights attached to the shares already on issue if the rights attaching to the new shares are not the same as the rights attached to shares already issued and those rights are not provided for in the company's constitution or a notice, document or resolution that is lodged with ASIC.

Further, section 246B of the Corporations Act and the Constitution provide that the rights attached to shares in a class of shares may be varied only by special resolution of the Company and either:

(a) by special resolution passed at a meeting of the members holding shares in the class; or
(b) with the written consent of members with at least 75% of the votes in the class.
Full terms of the Performance Shares are set out in Annexure B to this Notice.

Directors’ recommendation

The passing of Resolution 3 is conditional upon, and subject to, each other Acquisition Resolution being approved by Shareholders. Accordingly, if you intend to vote in favour of Resolution 3, you should also vote in favour of each other Acquisition Resolution.

The Directors recommend Shareholders vote in favour of this Resolution.

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Resolution 4 – Issue of Consideration Securities to Key Idea and increase in relevant interest

Background

Resolution 4 seeks approval by Shareholders for:

(a) the issue of the Consideration Securities (on a post-Consolidation basis) to Key Idea (or its nominee) in consideration for the Acquisition; and
(b) the acquisition by Key Idea of a relevant interest in the Company’s voting shares which would otherwise be prohibited by section 606(1) of the Corporations Act.

Assuming Key Idea does not acquire a relevant interest in Shares prior to the issue of the Consideration Securities and assuming the Company’s capital structure doesn’t change (other than by virtue of the Shares the subject of the Acquisition Resolutions being issued, Key Idea’s voting power in the Company will increase from 0% up to approximately 50.27% as a result of the issue of the Consideration Securities (subject to rounding following the Consolidation and assuming only the minimum of $5 million is raised under the Capital Raising). If the Capital Raising is fully oversubscribed to raise $10 million, then Key Idea’s voting power would increase from 0% up to 41.85%.

Pursuant to ASX Listing Rule 7.2 (exception 16), Shareholder approval pursuant to ASX Listing Rule 7.1 is not required where approval is being obtained pursuant to section 611 (item 7) of the Corporations Act. Accordingly, if Resolution 4 is passed, the issue of the Consideration Securities will be made without using the Company’s 15% annual placement capacity and the Company will retain the flexibility to issue equity securities in the future up to the 15% annual placement capacity set out in ASX Listing Rule 7.1.

Although Key Idea is controlled by Mr David Whitaker (a Proposed Director and a related party of the Company pursuant to section 228(6) of the Corporations Act), approval pursuant to Listing Rule 10.11 is not required because Mr Whitaker is only a related party of the Company by reason of the Thred Acquisition (which is the reason for the proposed issue of Securities to Key Idea).

The Corporations Act and ASIC Regulatory Guide 74 set out a number of regulatory requirements which must be satisfied. These are summarised below:

Section 606 of the Corporations Act – statutory prohibition

Pursuant to Section 606(1) of the Corporations Act, a person must not acquire a relevant interest in issued voting shares in 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 company increases:

(a) from 20% or below to more than 20%; or
(b) from a starting point above 20% and below 90%.

Voting power and relevant interests

The voting power of a person in a body corporate 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.

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A person (second person) will be an “associate” of the other person (first person) if:

(a) the first person is a body corporate and the second person is:
(b) a body corporate the first person controls;
(c) a body corporate that controls the first person; or
(d) a body corporate that is controlled by an entity that controls the first person;
(e) the second person has entered or proposes to enter into a relevant agreement with the first person for the purpose of controlling or influencing the composition of the Company’s board or the conduct of the Company’s affairs; or
(f) the second person is a person with whom the first person is acting or proposed to act, in concert in relation to the Company’s affairs.

Section 608(1) of the Corporations Act provides that a person has a relevant interest in securities if they:

(a) are the holder of the securities;
(b) have the power to exercise, or control the exercise of, a right to vote attached to the securities; or
(c) have power to dispose of, or control the exercise of a power to dispose of, the securities.

It does not matter how remote the relevant interest is or how it arises. If two or more people can jointly exercise one of these powers, each of them is taken to have that power.

Section 608(3) of the Corporations Act provides that a person has the relevant interests in any securities held by a body corporate in which the person’s voting power is above 20%.

Upon issue of the Consideration Shares, Key Idea’s shareholding and voting power will increase from 0% to:

(a) up to 50.27% if only the minimum subscription of $5 million under the Capital Raising is achieved; or
(b) 41.85% if the maximum subscription of $10 million under the Capital Raising is achieved.

Section 611 Item 7 of the Corporations Act – Exemption from Section 606

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), including acquisitions approved previously by a resolution passed at a general meeting of the company in which the acquisition is made (Section 611 Item 7).

For the exemption in Section 611 Item 7 to apply, Shareholders must be given all information known to the person proposing to make the acquisition or their associates, or known to the Company, that was material to the decision on how to vote on the resolution. The ASIC has indicated what additional information should be provided to shareholders in these circumstances.

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For the purposes of the Corporations Act and Regulatory Guide 74 the following information is disclosed in relation to the acquisition of a relevant interest in the Company by Key Idea. Shareholders are also referred to the Independent Expert’s Report prepared by the Independent Expert which forms part of this Explanatory Statement at Annexure F.

The figures in the following section assume that:

(a) all of the Consideration Shares have been issued and no additional securities are issued; and
(b) Key Idea does not acquire any securities other than those referred to in Resolution 4.

Prescribed Information:

(a) The identity of the person proposing to make the acquisition of the relevant interest and their associates: Key Idea will acquire the relevant interest in the Shares. Key Idea’s only associate is David Whitaker, a Proposed Director.
(b) The maximum extent of the increase in the person’s voting power in the Company that would result from the acquisition of the relevant interest: 41.85% (assuming the Capital Raising is fully oversubscribed to raise $10 million) or 50.27% (assuming the Capital Raising raises the minimum subscription of $5 million).
(c) The voting power that person would have as a result of the acquisition of the relevant interest (assuming the minimum subscription is raised under the Capital Raising): 50.27%
(d) The voting power that person would have as a result of the acquisition of the relevant interest (assuming the maximum subscription is raised under the Capital Raising): 41.85%
(e) The maximum extent of the increase in the voting power of each of Key Idea’s associates that would result from the acquisition of the relevant interest: 50.27% (assuming the minimum subscription is raised under the Capital Raising) or 41.85% (assuming the maximum subscription is raised under the Capital Raising).
(f) The voting power that each of Key Idea’s associates would have as a result of the acquisition of the relevant interest: 50.27% (assuming the minimum subscription is raised under the Capital Raising) or 41.85% (assuming the maximum subscription is raised under the Capital Raising).
(g) Key Idea has informed the Company that Key Idea:
intends to change the Company’s business in the manner described in Part 1, Section 2 of this Explanatory Statement;
does not presently intend to inject further capital into the Company;
does not propose to change the Company’s employment arrangements;
does not intend to transfer any property between the Company and Key Idea nor any person associated with Key Idea;
does not intend to redeploy any of the Company’s fixed assets; and
has no current intention to change the Company’s existing policies in relation to financial matters or dividends.

These intentions are based on information concerning the Company, its business and the business environment which is known to Key Idea at the date of this Notice of Meeting. These present intentions may change as new information becomes available, as circumstances change or in light of all material information, facts and circumstances

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necessary to assess the operational, commercial, taxation and financial implications of those decisions at the relevant time.

Directors’ recommendation

The passing of Resolution 4 is conditional upon, and subject to, each other Acquisition Resolution being approved by Shareholders. Accordingly, if you intend to vote in favour of Resolution 4, you should also vote in favour of each other Acquisition Resolution.

The Directors recommend Shareholders vote in favour of this Resolution.

Resolution 5 – Issue of Securities to a related party, Armada Capital

Resolution 5 seeks Shareholder approval under ASX Listing Rule 10.11 and Chapter 2E of the Corporations Act for the issue of:

(a) 100,000,000 Options (on a post-Consolidation basis) exercisable at $0.0625 each within 3 years from their date of issue to Armada Capital, a related party of the Company; and
(b) up to 12,500,000 Shares and up to 7,000,000 Performance Shares to Armada Capital in satisfaction of a success fee equal to 5% (by number) of the Consideration Securities,

(together, the Related Party Securities ) ( Related Party Placement ).

ASX Listing Rule 10.11

ASX Listing Rule 10.11 also requires shareholder approval to be obtained where an entity issues, or agrees to issue, securities to a related party, or a person whose relationship with the entity or a related party is, in ASX’s opinion, such that approval should be obtained unless an exception in ASX Listing Rule 10.12 applies.

As the Related Party Placement involves the issue of Securities to a related party of the Company, Shareholder approval pursuant to ASX Listing Rule 10.11 is required unless an exception applies. It is the view of the Directors that the exceptions set out in ASX Listing Rule 10.12 do not apply in the current circumstances.

Chapter 2E of the Corporations Act

Pursuant to and in accordance with the requirements of section 219 of the Corporations Act and ASX Listing Rule 10.13, the following information is provided in relation to the proposed Related Party Placement:

(a) The related party is Armada Capital and it is a related party by virtue of being an entity controlled by a relative of Ananda Kathiravelu, a Director.
(b) The maximum number of Related Party Securities (being the nature of the financial benefit being provided) to be granted to Armada Capital (on a post-Consolidation basis) is as follows:
(i) 100,000,000 Options;
(ii) 12,500,000 Shares; and
(iii) 7,000,000 Performance Shares.

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(c) The Related Party Securities will be issued to Armada Capital no later than 1 month after the date of the Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules) and it is anticipated the Related Party Options will be issued on one date.
(d) The Related Party Securities will be issued for nil cash consideration, accordingly no funds will be raised.
(e) The Options will be issued on the terms set out in Annexure C to this Notice;
(f) The Shares will be fully paid, ordinary shares and will be issued at a deemed issue price of $0.05 per Share, or $625,000 in total.
(g) The Performance Shares will be issued on the terms set out in Annexure B to this Notice.
(h) The value of the Related Party Securities and the pricing methodology is set out in Annexure D.
(i) As at the date of this Notice, Armada Capital does not hold any Securities. However, Armada Capital’s associates (which include Mr Kathiravelu), have a relevant interest in 1,543,336 Shares.
(j) The remuneration and emoluments from the Company to Armada Capital and Ananda Kathiravelu for the previous financial year and the proposed remuneration and emoluments for the current financial year are set out below:

Related Party	Current Financial Year	Financial Year Ended 30 June 2015
Armada Capital	Nil1	$113,993
Ananda Kathiravelu	$131,400 (incl. $11,400 superannuation)	$131,400 (incl. $11,400 superannuation)

Note 1: Pursuant to the terms of Armada Capital’s mandate with the Company which relates to provision of services in connection with the Thred Acquisition and the Capital Raising, Armada Capital is entitled to receive a management fee equal to 1% of all funds raised by the Company as a result of the Thred Acquisition and the Capital Raising ( Management Fee ) and a placement fee equal to 5% of all funds raised by the Company from parties introduced by Armada Capital ( Placement Fee ). As at the date of this Notice, the sum of those fees are unknown, however, assuming the Capital Raising is fully subscribed to raise $10 million, the maximum potential Management Fee is $100,000 and the maximum potential Placement Fee is $500,000.

(k) If the Related Party Securities are issued, exercised and converted, a total of 119,500,000 Shares would be issued. This will increase the number of Shares on issue from 96,103,117 (on a post-Consolidation basis) to 844,353,117 (on a post-Consolidation basis) assuming that no other convertible securities currently on issue are converted or exercised and no Securities other than those contemplated by the Acquisition Resolution are issued, converted and exercised, with the effect that the shareholding of existing Shareholders would be diluted by 14.15%.
(l) The market price for Shares during the term of the Options forming part of the Related Party Securities would normally determine whether or not the Options are exercised. If, at any time any of the Options are exercised and the Shares are trading on ASX at a price that is higher than the exercise price of the Options, there may be a perceived cost to the Company.

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(m) The trading history of the Shares on ASX in the 12 months before the date of this Notice is set out below:

	Price	Date
Highest	$0.033	30 July 2014
Lowest	$0.002	2 April 2015
Last	$0.008	10 September 2015

(n) The primary purpose of the grant of the Related Party Securities to Armada Capital is to remunerate Armada Capital for services provided to the Company in connection with the Thred Acquisition.
(o) The grant of the Options and Performance Shares will align Mr Kathiravelu’s interests with those of Shareholders.
(p) The grant of the Related Party Securities is a reasonable and appropriate method to provide cost effective remuneration to Armada Capital in consideration for services provided to the Company in connection with the Thred Acquisition as the non-cash form of this benefit will allow the Company to spend a greater proportion of its cash reserves on its operations than it would if alternative cash forms of remuneration were given to the Armada Capital.
(q) The Directors (other than Mr Kathiravelu) do not anticipate that there are any significant opportunity costs to the Company or benefits foregone by the Company in granting the Related Party Securities upon the terms proposed.
(r) With the exception of Mr Kathiravelu, no other Director has a personal interest in the outcome of Resolution 5.
(s) The Board is not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass Resolution 5.

Approval pursuant to ASX Listing Rule 7.1 is not required in order to issue the Related Party Options to the Related Parties as approval is being obtained under ASX Listing Rule 10.11. Accordingly, the issue of Related Party Options to the Related Parties will not be included in the 15% calculation of the Company’s annual placement capacity pursuant to ASX Listing Rule 7.1.The passing of Resolution 5 is conditional upon, and subject to, each other Acquisition Resolution being approved by Shareholders. Accordingly, if you intend to vote in favour of Resolution 5, you should also vote in favour of each other Acquisition Resolution.

Directors’ recommendation

Ananda Kathiravelu declines to make a recommendation to Shareholders in relation to Resolution 5 due to his material personal interest in the outcome of the Resolution.

The Directors (other than Mr Kathiravelu) recommend Shareholders vote in favour of this Resolution. In forming their recommendations, each Director considered Mr Kathiravelu’s experience, the current market price of Shares as well as the exercise price, expiry date and conversion terms of the Related Party Securities.

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Resolution 6 – Issue of Shares to Dean Bannister

Background

Resolution 6 seeks Shareholder approval under ASX listing Rule 7.1 for the issue of up to 6,250,000 Shares (on a post-Consolidation basis) to Mr Dean Bannister in satisfaction of a 2.5% success fee for introducing the Thred Acquisition to the Company ( Placement ).

ASX Listing Rule 7.1

ASX Listing Rule 7.1 sets out the basic prohibition on an entity issuing or agreeing to issue equity securities in any 12 month period which amount to more than 15% of its ordinary securities. An issue in excess of the 15% limit can be made with the approval of holders of ordinary securities.

The following additional information is provided pursuant to the requirements of ASX Listing Rule 7.3.

(a) The Company will issue a maximum of 6,250,000 Shares (on a post-Consolidation basis) pursuant to the Placement (being equal to 2.5% of the number of Consideration Shares being issued to Key Idea).
(b) The Shares will be issued no later than 3 months after the date of the Meeting or such later date as permitted by ASX. It is intended that all Shares issued under the Prospectus will be issued on the same date;
(c) The Shares will be issued to Mr Dean Bannister, or his nominee.
(d) The Shares will be issued on the same terms as the Company's existing issued fully paid ordinary shares.
(e) The Shares will be issued for a deemed issue price of $0.05 per Share in satisfaction of fees payable to Mr Bannister in connection with introducing the Thred Acquisition to the Company. Accordingly, no funds will be raised from the issue of the Shares.
(f) A voting exclusion statement is included in the Notice.

Directors’ recommendation

The passing of Resolution 6 is conditional upon, and subject to, each other Acquisition Resolution being approved by Shareholders. Accordingly, if you intend to vote in favour of Resolution 6, you should also vote in favour of each other Acquisition Resolution.

The Directors recommend Shareholders vote in favour of this Resolution.

Resolution 7 – Capital Raising

Background

Resolution 7 seeks approval by Shareholders under ASX listing Rule 7.1 for the issue of up to 200,000,000 Shares (on a post-Consolidation basis) at a minimum issue price of $0.05 per Share to raise a minimum of $5,000,000 and up to $10,000,000.

The Company proposes to undertake the Capital Raising in conjunction with the Thred Acquisition, under the Prospectus, to satisfy ASX listing Rule 1.1 condition 3 and re-comply with ASX’s admission requirements.

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The Company intends to issue the Prospectus on or about 30 September 2015.

If Resolution 7 is passed, it will permit the Directors to complete the Capital Raising no later than 3 months after the date of the Meeting (or such longer period as allowed by ASX) without impacting on the Company's 15% placement limit under ASX Listing Rule 7.1.

ASX Listing Rule 7.1

The following additional information is provided pursuant to the requirements of ASX Listing Rule 7.3.

(a) The Company will issue a maximum of 200,000,000 Shares (on a post-Consolidation basis) pursuant to the Capital Raising.
(b) The Shares will be issued no later than 3 months after the date of the Meeting or such later date as permitted by ASX. It is intended that all Shares issued under the Prospectus will be issued on the same date.
(c) The issue price will be a minimum of $0.05 per Share.
(d) The Shares will be issued to successful applicants under the Prospectus who are not related parties of the Company.
(e) The Shares will be issued on the same terms as the Company's existing issued fully paid ordinary shares.

(f) The funds raised under the Prospectus are intended to be used for the following purposes:

Activity	Minimum Subscription $	Minimum Subscription $	Maximum Subscription $	Maximum Subscription $
	Year 1	Year 2	Year 1	Year 2
Expenses of the Offer	567,076	Nil	867,076	Nil
Customer acquisition costs – sales and marketing	1,616,700	1,077,800	2,694,500	2,694,500
Development and engineering	705,600	470,400	1,176,000	1,176,000
Working capital	312,424	250,000	891,924	500,000
Subtotal:	3,201,800	1,798,200	5,629,500	4,370,500
Total:	-	5,000,000	-	10,000,000

Further details on the use of funds will be provided in the Prospectus.

(g) A voting exclusion statement is included in the Notice.

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Directors’ recommendation

The passing of Resolution 7 is conditional upon, and subject to, each other Acquisition Resolution being approved by Shareholders. Accordingly, if you intend to vote in favour of Resolution 7, you should also vote in favour of each other Acquisition Resolution.

The Directors recommend Shareholders vote in favour of this Resolution.

Resolutions 8 – 10 – Election of Directors

Background

Clause 13.4 of the Constitution allows the Directors at any time to appoint a person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors, but so that the total number of Directors does not at any time exceed the maximum number specified by the Constitution.

Pursuant to clause 13.4 of the Constitution and ASX Listing Rule 14.4, any Director so appointed holds office only until the next following general meeting and is then eligible for re-election but shall not be taken into account in determining the Directors who are to retire by rotation (if any) at that meeting.

David Whitaker, Christopher Jones and Christopher Adams are proposed to be appointed as Directors upon completion of the Thred Acquisition, and seek election from Shareholders.

Details of proposed Directors

The qualifications and experience of the proposed Directors are set out below:

David Whitaker

David Whitaker is a high-tech entrepreneur with extensive expertise in building high growth digital businesses. After 17 years in IT & digital recruitment, David has founded and built businesses spanning mobile applications to group buying to digital agencies. His ability to rapidly coordinate teams for high growth and establish strategic partnerships for early startup companies has made him a highly sought after resource for companies expanding into the Asian market. David has provided strategic counsel to brands such as SAB Miller, Yahoo and Macquarie Bank. Originally from Australia, David has lived in Hong Kong for 10 years.

Christopher Jones

Chris Jones is one of Australia’s leading experts in app marketing and user acquisition. Chris has consulted to hundreds of app marketers and developers, including Microsoft, Cheetah Mobile, Visual Supply Co and many others. Chris’s background spans both large brands and startups. He has held management roles with Boost Mobile, Mattel & Virgin Mobile Australia as well as several Australian based startups. A graduate of The Kellogg School of Management at Northwestern University, Chris resides in Sydney and is passionate about mobile, soccer and his wife and 3 children.

Christopher Adams

Chris Adams is an internationally recognised digital strategist, social media pioneer, adviser and technology executive with over twenty years’ experience in accelerating businesses. In 2006, Chris was asked by Facebook, then a fledgling social media network, to integrate video onto its platform. This was a pivotal moment in Facebook’s consolidation of its brand and user interface. He also played a key role for Facebook in both the creation and production of the acclaimed reality TV series “Facebook Diaries”.

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Chris served as Senior Vice President of Business Development and Chief Vision Officer for Participant Media and was involved in its first slate of movies. He assisted Comcast Cable & Interactive to secure sponsorship for its video on demand platform and led entertainment business development for both Amazon and Lycos and until recently, he served as CEO and Executive Director of video streaming and syndication company, Spondo.com.

Chris is on the Advisory Boards of companies Manalto, (ASX Code: MTL), Spiral Toys (OTCBB: STOY) VoiceByte and Impact Academy. He is also an award-winning children’s author, with his next book narrated by Hugh Jackman scheduled for publication in early 2016, with the proceeds benefiting The Global Poverty Project and World Vision Australia.

Directors’ recommendation

The passing of Resolutions 8 to 10 (inclusive) is conditional upon, and subject to, each other Acquisition Resolution being approved by Shareholders. Accordingly, if you intend to vote in favour of Resolution 8 and/or 9 and/or 10, you should also vote in favour of each other Acquisition Resolution.

The Directors recommend Shareholders vote in favour of these Resolutions.

Resolution 11 – Change of Company name

Background

In accordance with section 157(1)(a) of the Corporations Act, the Company submits to Shareholders for consideration and adoption by way of a special resolution for the name of the Company to be changed to Thredit Australia Limited.

The Company also seeks approval under section 136(2) of the Corporations Act, to the Constitution being updated to reflect the change of name.

Directors’ recommendation

The passing of Resolution 11 is conditional upon, and subject to, each other Acquisition Resolution being approved by Shareholders. Accordingly, if you intend to vote in favour of Resolution 11, you should also vote in favour of each other Acquisition Resolution.

The Directors recommend Shareholders vote in favour of this Resolution.

Resolutions 12 – 14 – Issue of Shares under Series A Convertible Loans and Series B Convertible Loans

Background

Resolutions 12, 13 and 14 seek approval by Shareholders for the issue of Shares (on a postConsolidation basis) to the lenders (or their respective nominees) under the Series A Convertible Loans and the Series B Convertible Loans (together, the Loan Conversion Shares ), for the purposes of ASX Listing Rule 7.1. Supaval (a related party of the Company) has advanced the sum of $50,000 to Thredit under a Series A Convertible Loan. Shareholder approval is therefore sought for the issue of Loan Conversion Shares to Supaval (or its nominee) for the purposes of ASX Listing Rule 10.11.

Thredit has entered into secured convertible loan agreements in respect of $500,000 in secured convertible loans attracting interest at the rate of 8% per annum (and 12% on overdue amounts)

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which, subject to receipt of Shareholder approval under Resolution 12, will convert together with accrued interest into Shares in the Company at a price of $0.025 per Share (on a post-Consolidation basis) at completion of the Thred Acquisition ( Series A Convertible Loans ). Thredit also proposes entering into additional secured convertible loan agreements in respect of $500,000 in secured convertible loans attracting interest at the rate of 8% per annum (and 12% on overdue amounts) which, subject to receipt of Shareholder approval under Resolution 13, will convert together with accrued interest into Shares in the Company at a price of $0.04 per Share (on a post-Consolidation basis) at completion of the Thred Acquisition ( Series B Convertible Loans ) (the Series A Convertible Loans and the Series B Convertible Loans together, the Loans ).

Interest is payable in arrears on a monthly basis but may be capitalised at the discretion of the Company. The terms of the Loans provide that, on the re-quotation of the Company’s Shares on the ASX, the Loans will automatically convert into Shares in Promesa, subject to Shareholders approving the issue of such Shares.

ASX Listing Rule 7.1

ASX Listing Rule 10.11

As the proposed issue of Loan Conversion Shares to Supaval involves the issue of securities to a related party of the Company, Shareholder approval pursuant to ASX Listing Rule 10.11 is required unless an exception applies. It is the view of the Directors that the exceptions set out in ASX Listing Rule 10.12 do not apply in the current circumstances.

The following additional information is provided pursuant to the requirements of ASX Listing Rule 7.3 and Listing Rule 10.13:

(a) Loan Conversion Shares will be issued to third party lenders, of whom only 1 is a related party of the Company, being Supaval. Supaval is a related party of the Company for the purposes of section 228(4) of the Corporations Act (being an entity controlled by a parent of Director, Ananda Kathiravelu).
(b) In respect of the Series A Convertible Loans, the Company will issue such number of fully paid ordinary Shares (on a post-Consolidation basis) as is calculated in accordance with the following formula:

==> picture [35 x 27] intentionally omitted <==

where:

‘ A ’ equals the aggregate amount of principal, interest and other monies payable to the lenders in respect of the Series A Convertible Loans.

If this formula results in an entitlement to a number of Shares which includes a fraction of a Share, the fraction will be rounded downward.

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By way of example: Assuming the outstanding balance of all Series A Convertible Loans is converted at completion of the Acquisition (and assuming completion occurs on 29 September 2015), the maximum number of Shares the lenders would be issued is 20,454,575 Shares.

(c) In respect of the Series B Convertible Loans, the Company will issue such number of Shares (on a post-Consolidation basis) as is calculated in accordance with the following formula:

==> picture [30 x 28] intentionally omitted <==

where:

‘ A ’ equals the aggregate amount of principal, interest and other monies payable to the lenders in respect of the Series B Convertible Loans.

If this formula results in an entitlement to a number of Shares which includes a fraction of a Share, the fraction will be rounded downward.

By way of example: Assuming the outstanding balance of all Series B Convertible Loans is converted at completion of the Acquisition (and assuming completion occurs on 29 September 2015), the maximum number of Shares the lenders would be issued is 12,675,342 Shares.

(d) The Loan Conversion Shares (other than the Loan Conversion Shares to be issued to Supaval) will be issued no later than three months after the date of the Meeting or such later date as permitted by ASX. It is intended that all Shares will be issued on the same date.
(e) The Loan Conversion Shares to be issued to Supaval will be issued no later than 1 month after the date of the Meeting or such later date as permitted by ASX. It is intended that all Shares will be issued on the same date.
(f)
The Shares issued upon conversion of the:
(i) Series A Convertible Loans will be issued for a deemed issue price of $0.025 per Share in satisfaction of the outstanding amount under the Series A Convertible Loans at the time of the Company’s reinstatement to trading on ASX; and
(ii) Series B Convertible Loans will be issued for a deemed issue price of $0.04 per Share in satisfaction of the outstanding amount under the Series B Convertible Loans at the time of the Company’s reinstatement to trading on ASX,

accordingly, no funds will be raised from the issue of the Loan Conversion Shares. The funds raised by Thredit under the Series A Loans and the Series B Loans will be applied towards working capital and, following completion of the Acquisition, towards the expenses of the Thred Acquisition and the Capital Raising.

(g) The Loan Conversion Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares.
(h) A voting exclusion statement is included in the Notice of Meeting.

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Chapter 2E of the Corporations Act

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

(a) obtain the approval of the public company’s members in the manner set out in sections 217 to 227 of the Corporations Act; and
(b) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in sections 210 to 216 of the Corporations Act.

The issue of Series A loan conversion Shares to Superval will constitute giving a financial benefit and Supaval is a related party of the Company.

The Directors (other than Mr Kathiravelu who has a material personal interest in Resolution 14) consider that Shareholder approval pursuant to Chapter 2E of the Corporations Act is not required in respect of the issue of the Loan Conversion Shares because the Shares will be issued to Supaval on the same terms as Shares issued to non-related party lenders under the Series A Convertible Loans and, as such, the giving of the financial benefit is on arm’s length terms.

Directors’ recommendation

The Directors recommend Shareholders vote in favour of Resolution 13. The Directors (other than Mr Kathiravelu, who has a material person interest in the outcome of Resolutions 12 and 14, recommend Shareholders vote in favour of Resolutions 12 and 14).

The passing of Resolutions 12, 13 and 14 is conditional upon, and subject to, each other Acquisition Resolution being approved by Shareholders. Accordingly, if you intend to vote in favour of Resolution 12 and/or 13 and/or 14, you should also vote in favour of each other Acquisition Resolution.

Resolutions 15 and 16 – Issue of Shares to Noteholders

Background

The Company has issued an aggregate principal amount of $975,000 of Convertible Notes to unrelated Noteholders. The Convertible Notes were issued between 27 February 2015 and 13 May 2015 and bear interest at a rate of 1% per month (accruing daily). The Convertible Notes are only convertible into Shares if Shareholders approve the conversion and must be redeemed or converted by no later than 31 December 2015 or such later date as may be agreed between the Noteholders and the Company.

Resolution 15 seeks approval by Shareholders for the issue of Shares (on a post-Consolidation basis) to the Noteholders (or their respective nominees), for the purposes of ASX Listing Rule 7.1 ( Noteholder Placement ).

The Company has also issued $25,000 of Convertible Notes to a related party, Simon Nominees on the same terms as the Convertible Notes issued to unrelated Noteholders ( Related Party Notes ).

Resolution 16 seeks Shareholder approval for the issue of Shares (on a post-Consolidation basis) upon conversion of the Related Party Notes to Simon Nominees ( Related Party Noteholder Placement ).

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The funds raised from the Noteholder Placement and the issue of the Related Party Notes have been applied towards working capital.

Subject to Shareholder approval, the Convertible Notes and Related Party Notes (together with any accrued but unpaid interest) are convertible into Shares in whole or in part on or before 31 December 2015 ( Redemption Date ), to the extent they have not been redeemed by the Company. To the extent the Convertible Notes and Related Party Notes have not been (or are unable to be) converted into Shares, the Company must repay the outstanding amount under those notes (including all accrued interest) on the Redemption Date.

ASX Listing Rule 7.1

The following additional information is provided pursuant to the requirements of ASX Listing Rule 7.3:

(a) The Company will issue such number of fully paid, ordinary Shares (on a postConsolidation basis) as is calculated in accordance with the following formula:

==> picture [35 x 28] intentionally omitted <==

where:

‘ A ’ equals the aggregate amount of principal, interest and other monies payable to the unrelated Noteholders in respect of the Convertible Notes.

If this formula results in an entitlement to a number of Shares which includes a fraction of a Share, the fraction will be rounded down.

By way of example: Assuming the outstanding balance of all Convertible Notes is converted at completion of the Acquisition (and assuming completion occurs on 29 September 2015), the maximum number of Shares the noteholders would be issued is 211,554,686 Shares.

(a) The Shares under the Noteholder Placement will be issued to the unrelated Noteholders.
(b) The Shares will be issued no later than three months after the date of the Meeting or such later date as permitted by ASX. It is intended that the Shares will be issued progressively.
(c) The Shares will be issued for a deemed issue price of $0.005 per Share in satisfaction of the outstanding amount under the Convertible Notes at the time of conversion. Accordingly, no funds will be raised from the issue of the Shares.
(d) The Shares will be issued on the same terms as the Company’s existing issued fully paid ordinary shares.
(e) A voting exclusion statement is included in the Notice of Meeting.

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Chapter 2E of the Corporations Act

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

(a) obtain the approval of the public company’s members in the manner set out in sections 217 to 227 of the Corporations Act; and
(b) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in sections 210 to 216 of the Corporations Act.

The Related Party Noteholder Placement will result in the issue of Shares which constitutes giving a financial benefit and Simon Nominees is a related party of the Company by virtue of being an entity controlled by a Director (Mr Majteles).

The Directors (other than Mr Majteles who has a material personal interest in the Resolution) consider that Shareholder approval pursuant to Chapter 2E of the Corporations Act is not required in respect of the Related Party Noteholder Placement because the Shares will be issued to Simon Nominees on the same terms as Shares issued to non-related party participants in the Noteholder Placement and, as such, the giving of the financial benefit is on arm’s length terms.

ASX Listing Rule 10.11

As the Related Party Noteholder Placement involves the issue of Shares to a related party of the Company, Shareholder approval pursuant to ASX Listing Rule 10.11 is required unless an exception applies. It is the view of the Directors that the exceptions set out in ASX Listing Rule 10.12 do not apply in the current circumstances.

Pursuant to and in accordance with ASX Listing Rule 10.13, the following information is provided in relation to the Related Party Noteholder Placement:

(a) The Shares under the Related Party Noteholder Placement will be allotted and issued to Simon Nominees (or its nominee).
(b) The number of Shares to be issued is such number of Shares (on a post-Consolidation basis) as is calculated in accordance with the following formula.

==> picture [35 x 28] intentionally omitted <==

where: ‘ A ’ equals the aggregate amount of principal, interest and other monies payable to Simon Nominees in respect of the Related Party Notes. If this formula results in an entitlement to a number of Shares which includes a fraction of a Share, the fraction will be rounded down.

By way of example: Simon Nominees has subscribed for $25,000 in Related Party Notes. Assuming Simon Nominees elects to convert the outstanding balance of its Related Party Notes at completion of the Acquisition (and assuming completion occurs on 29 September

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2015), the maximum number of Shares Simon Nominees would be issued is 5,280,646 Shares.

(c) The Shares will be issued no later than 1 month after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur progressively.
(d) The Shares will be issued for a deemed issue price of $0.005 per Share in satisfaction of the outstanding amount under the Related Party Notes at the time of conversion. Accordingly, no funds will be raised from the issue of the Shares.
(e) The Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares.
(f) The funds raised will be used for the same purposes as all other funds raised under the Noteholder Placement as set out above.

Directors’ recommendation

The passing of Resolution 16 is conditional upon, and subject to, Resolution 15 being approved by Shareholders. Accordingly, if you intend to vote in favour of Resolution 16, you should also vote in favour of Resolution 15.

The Directors (other than Hersh Solomon Majteles, who has a material personal interest in the outcome of Resolutions 15 and 16) recommend Shareholders vote in favour of those Resolutions.

Resolution 17 – Ratification of prior issue of Shares

Background

On 24 April 2015, the Company issued a total of 96,103,117 Shares to sophisticated investors (as described in section 708 of the Corporations Act). 57,661,870 of those Shares were issued pursuant to the Company’s placement capacity under ASX Listing Rule 7.1, and the remaining 38,441,247 were issued pursuant to the Company’s additional placement capacity under ASX Listing Rule 7.1A.

Resolution 17 seeks Shareholder ratification pursuant to ASX Listing Rule 7.4 for the issue of those Shares.

ASX Listing Rule 7.1 broadly provides that a company must not, subject to specified exceptions, issue or agree to issue more equity securities during any 12 month period than the amount which represents 15% of the number of fully paid ordinary securities on issue at the commencement of that 12 month period.

ASX Listing Rule 7.1A broadly provides that, subject to receipt of the approval of holders of ordinary securities by special resolution at a company’s annual general meeting and to satisfaction of certain other conditions, the company may issue further equity securities up to an amount which represents 10% of the number of fully paid ordinary securities on issue 12 months before the date of issue.

ASX Listing Rule 7.4 sets out an exception to ASX Listing Rule 7.1 and 7.1A. ASX Listing Rule 7.4 provides that where a company in general meeting ratifies a previous issue of securities made pursuant to ASX Listing Rule 7.1 or 7.1A, and provided that the previous issue did not breach ASX Listing Rule 7.1, that issue will be deemed to have been made with shareholder approval for the purposes of ASX Listing Rule 7.1 or 7.1A, as applicable.

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By ratifying the prior issues of Shares made on 24 April 2015, the Company will:

(a) retain the flexibility to issue equity securities in the future up to the 15% annual placement capacity set out in ASX Listing Rule 7.1 without the requirement to obtain prior Shareholder approval; and
(b) in the event that the Acquisition Resolutions are not passed, retain the additional 10% capacity under ASX Listing Rule 7.1A. In accordance with ASX Listing Rule 7.1A.1(b), the Company’s capacity under ASX Listing Rule 7.1A will cease to be available on the date that the Acquisition Resolutions are passed

Technical information required by ASX Listing Rule 7.5

Pursuant to and in accordance with ASX Listing Rule 7.5, the following information is provided in relation to Resolution 17:

(a) 57,661,870 Shares were issued (pre-Consolidation) at $0.003 per Share pursuant to the Company’s placement capacity under ASX Listing Rule 7.1.
(b) 38,441,247 Shares were issued (pre-Consolidation) at $0.006 per Share pursuant to the Company’s placement capacity under ASX Listing Rule 7.1A.
(c) The Shares issued were all fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares.
(d) The Shares were issued to a number of sophisticated investors (as described in section 708 of the Corporations Act), none of whom is a related party of the Company.
(e) The funds raised were used to fund transaction costs in relation to the Thred Acquisition and the Capital Raising and to provide additional working capital.
(f) A voting exclusion statement is included in the Notice.

Directors’ recommendation

The Directors recommend Shareholders vote in favour of this Resolution.

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Glossary

In this document the following definitions apply:

$	means Australian dollars.
Armada Capital	means Armada Capital Pty Ltd ACN 112 297 953 (an entity controlled by
	Director, Ananda Kathiravelu).
Armada Capital	means the Options proposed to be issued to Armada Capital as
Options	contemplated by Resolution 5 and valued as set out in Annexure D.
Acquisition	means each of Resolutions 1 to 14 (inclusive).
Resolution
API	means ‘application programming interface’, a set of routines, protocols,
	and tools for building software applications.
ASIC	means the Australian Securities and Investments Commission.
ASX	means ASX Limited ACN 008 624 691 or, as the context requires, the
	Australian Securities Exchange operated by ASX Limited.
ASX Listing Rules	means the Listing Rules of ASX.
Board	means the current board of directors of the Company.
Business Day	means a day other than a Saturday, Sunday or public holiday in Western
	Australia.
Capital Raising	means the capital raising the subject of Resolution 7.
Closely Related Party	of a member of the Key Management Personnel means:
	(a) a spouse or child of the member;
	(b) a child of the member’s spouse;
	(c) a dependent of the member or the member’s spouse;
	(d) anyone else who is one of the member’s family and may be
	expected to influence the member, or be influenced by the
	member, in the member’s dealing with the entity;
	(e) a company the member controls; or
	(f) a person prescribed by the Corporations Regulations 2001
	(Cth).
CompanyorPromesa	means Promesa Ltd ACN 124 541 466.
Consideration	means the Consideration Shares and 140,000,000 Performance Shares.
Securities
Consideration Shares	means 250,000,000 Shares (on a post-Consolidation basis).
Consolidation	means the consolidation of every 5 Shares into 1 Share and every 5
	Options into 1 Option as contemplated by Resolution 2.

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Constitution	means the Company’s constitution.
Convertible Notes	means notes issued by the Company in an aggregate principal amount of
	$1 million as detailed in Annexure E, which notes are convertible into
	Shares in the circumstances described in Part 2 of the Explanatory
	Statement under the heading ‘Resolutions 15 and 16’ on page 42.
Corporations Act	means the_Corporations Act 2001_(Cth).
Directors	means the current directors of the Company.
Explanatory	means the explanatory statement accompanying this Notice.
Statement
General Meetingor	means the meeting convened by this Notice.
Meeting
HKD	means Hong Kong dollars.
Independent Expert	means BDO Corporate Finance (WA) Pty Ltd ACN 124 031 045.
Independent Expert’s	means a report prepared by the Independent Expert, a copy of which is
Report	set out in Annexure F.
Key Idea	means Key Idea Holdings Ltd (a company incorporated in the British
	Virgin Islands and controlled by Proposed Director, David Whitaker).
Key Management	has the same meaning as in the accounting standards issued by the
Personnel	Australian Accounting Standards Board and means those persons having
	authority and responsibility for planning, directing and controlling the
	Company’s activities, or if the Company is part of a consolidated entity, of
	the consolidated entity, directly or indirectly, including any director
	(whether executive or otherwise) of the Company, or if the Company is
	part of a consolidated entity, of an entity within the consolidated group.
Noteholders	means the holders of Convertible Notes.
NoticeorNotice of	means this notice of general meeting including the Explanatory
Meeting	Statement and the Proxy Form.
Option	means an option to subscribe for a Share.
Performance Shares	means shares issued on the terms and conditions set out in Annexure B.
Proposed Directors	means Mr David Whitaker, Mr Christopher Jones and Mr Christopher
	Adams.
Prospectus	means the prospectus to be issued by the Company in relation to the
	Capital Raising.
Proxy Form	means the proxy form accompanying this Notice.
Related Party	means those Shares, Options and Performance Shares proposed to be
Securities	issued to Armada Capital pursuant to Resolution 5.

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Resolutions	means the resolutions to be considered by Shareholders at the General
	Meeting, as set out in this Notice of Meeting.
Sale Agreement	means the binding heads of agreement between the Company, Key Idea
	and Thredit relating to the purchase by the Company of the entire issued
	share capital of Thredit.
Securities	means Shares and/or Options and/or Performance Shares and/or
	Convertible Notes, as the context requires.
Series A Convertible	the secured convertible loan agreements entered into by Thredit with
Loans	various lenders in respect of the loans convertible into Shares at a
	deemed issue price of $0.025 per Share, as discussed further under
	‘Resolutions 12 - 14’ in Part 2 of the Explanatory Statement.
Series B Convertible	the secured convertible loan agreements to be entered into by Thredit
Loans	with various lenders in respect of the loans convertible into Shares at a
	deemed issue price of $0.04 per Share, as discussed further under
	‘Resolutions 12 - 14’ in Part 2 of the Explanatory Statement.
Share	means a fully paid ordinary share in the capital of the Company.
Shareholder	means a registered holder of one or more Shares.
Simon Nominees	means Simon Nominees Pty Ltd ACN 008 813 483 (an entity controlled
	by Director, Hersh Solomon Majteles).
Supaval	means Supaval Pty Ltd ACN 154 194 091 as trustee for the Supaval
	Superannuation Fund.
Thred ApporThred	means a messaging platform and mobile app.
Thredit	means Thredit Limited (a company incorporated in Hong Kong with
	registered number 2215042).
Thred Acquisition	means the acquisition by the Company of all the issued capital of Thredit.
Thredit Vendors	means the vendors of shares in Thredit to the Company pursuant to the
	Sale Agreement.
WST	means Australian Western Standard Time.

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Annexure A Pro-forma Statement of Financial Position

	Promesa Reviewed for the half year ended Thredit Audited for the period ended Subsequent events Pro forma adjustments Pro forma after Offer 31-Dec-14 31-Mar-15 $5 million $10 million $5 million $10 million
	$ $ $ $ $ $ $
CURRENT ASSETS
Cash and cash equivalents	1,883 - 2,365,192 4,441,937 9,136,937 6,809,012 11,504,012
Trade and other receivables	19,119 - - - - 19,119 19,119
Other current assets	18,466 - - - - 18,466 18,466
TOTAL CURRENT ASSETS	39,468 - 2,365,192 4,441,937 9,136,937 6,846,597 11,541,597

NON CURRENT ASSETS
Exploration expenditure	5,805,839 - - (5,805,839) (5,805,839) - -
Financial assets	276,343 - - - - 276,343 276,343
Plant and equipment	190,483 - - - - 190,483 190,483
Intangible asset	- - - - - - -
Other assets	15,840 - 125,000 (125,000) (125,000) 15,840 15,840
TOTAL NON CURRENT ASSETS	6,288,505 - 125,000 (5,930,839) (5,930,839) 482,666 482,666
TOTAL ASSETS	6,327,973 - 2,490,192 (1,488,902) 3,206,098 7,329,263 12,024,263

CURRENT LIABILITIES
Trade and other payables	1,064,808 8,480 - - - 1,073,288 1,073,288
Provisions	68,501 - - - - 68,501 68,501
Borrowings	- - 2,125,000 (2,125,000) (2,125,000) - -
TOTAL CURRENT LIABILITIES	1,133,309 8,480 2,125,000 (2,125,000) (2,125,000) 1,141,789 1,141,789
TOTAL LIABILITIES	1,133,309 8,480 2,125,000 (2,125,000) (2,125,000) 1,141,789 1,141,789
NET ASSETS	5,194,664 (8,480) 365,192 636,098 5,331,098 6,187,474 10,882,474
EQUITY
Issued capital	13,085,781 - 365,192 (4,389,496) 305,504 9,061,477 13,756,477
Foreign currency translation reserve	(300,528) - - 300,528 300,528 - -
Option reserves	578,036 - - 1,329,723 1,329,723 1,907,759 1,907,759
Accumulated losses	(8,168,625) (8,480) - 3,395,343 3,395,343 (4,781,762) (4,781,762)
TOTAL EQUITY	5,194,664 (8,480) 365,192 636,098 5,331,098 6,187,474 10,882,474

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Subsequent events and pro forma adjustments

The Pro Forma Statement of Financial Position incorporates the following transactions and events:

During March 2015, the Company raised $1 million via the issue of Convertible Notes. These notes may convert to Shares at an issue price of $0.005 each, subject to Shareholder approval.
During April 2015, the Company raised $365,192 (after costs) via a placement to sophisticated investors.
During April 2015, the Company paid an Option Facilitation Fee of $125,000 to Thredit under the terms of the Thred Acquisition.
Thredit raised a total of $500,000 via the issue of the Series A Convertible Loans and intends to raise a further $500,000 through the issue of the Series B Convertible Loans.
The issue of 100 million Shares at an issue price of $0.05 each to raise $5 million based on the minimum subscription or the issue of 200 million Shares at an issue price of $0.05 each to raise $10 million based on the maximum subscription before costs, pursuant to the Prospectus.
Costs of the Capital Raising are estimated to be $558,063 based on the minimum subscription or $863,063 based on the maximum subscription, which are to be offset against contributed equity.
The issue of the 250 million Consideration Shares and 140 million Performance Shares in consideration for the acquisition of a 100% interest in Thredit.
The Company has indicated that it intends to dispose of its mineral tenements and exploration assets following completion of the Thred Acquisition. The Directors intend to continue to explore mechanisms by which this disposal might be effected, whether by way of asset or share sale, demerger or otherwise. As the Company has indicated that following the Thred Acquisition it will no longer be pursuing exploration activities on its tenements and intends to dispose of all its mineral tenements and exploration assets, we have impaired the carrying value of these exploration assets to nil.
The issue of the following securities to Armada as consideration for assisting with the Acquisition;
100 million Armada Options exercisable at $0.0625 each and expiry date of 30 May 2017. These have been valued using the Black Scholes model;
12.5 million Armada Shares which have a deemed issue price of $0.05 each; and
7 million Armada Performance Shares.
The issue of 6.25 million Shares to Mr Dean Bannister which have a deemed issue price of $0.05 per Share in satisfaction of a success fee upon completion of the Thred Acquisition.
The issue of 20 million Shares upon conversion of the Series A Convertible Loans at a conversion price of $0.025 per Share.
The issue of 12.5 million Shares upon conversion of the Series B Convertible Loans at a conversion price of $0.04 per Share.
The issue of 200 million Shares upon conversion of the Convertible Notes.

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Annexure B Terms of Performance Shares

Part 1: Terms

(a)

Performance Shares

Each Performance Share is a share in the capital of the Company.

(b)

General meetings

The Performance Shares shall confer on the holder ( Holder ) the right to receive notices of general meetings and financial reports and accounts of the Company that are circulated to Shareholders. Holders have the right to attend general meetings of the Company.

(c)

No voting rights

The Performance Shares do not entitle the Holder to vote on any resolutions proposed at a general meeting of the Company, subject to any voting rights under the Corporations Act or the ASX Listing Rules where such rights cannot be excluded by these terms.

(d)

No dividend rights

The Performance Shares do not entitle the Holder to any dividends.

(e) No rights on winding up

Upon winding up of the Company, the Performance Shares may not participate in the surplus profits or assets of the Company.

(f)

Transfer of Performance Shares

A Performance Share is not transferable.

(g) Reorganisation of capital

If the issued capital of the Company is reconstructed, all rights of a Holder will be changed to the extent necessary to comply with the ASX Listing Rules at the time of reorganisation provided that, subject to compliance with the ASX Listing Rules, following such reorganisation the economic and other rights of the Holder are not diminished or terminated.

(h) Application to ASX

The Performance Shares will not be quoted on ASX. Upon conversion of the Performance Shares into Shares in accordance with these terms, the Company must within seven (7) days after the conversion, apply for and use its best endeavours to obtain the official quotation on ASX of the Shares arising from the conversion.

(i) Participation in entitlements and bonus issues

Subject always to the rights under item (g), holders of Performance Shares will not be entitled to participate in new issues of capital offered to holders of Shares such as bonus issues and entitlement issues.

(j)

Amendments required by ASX

Page | 52

The terms of the Performance Shares may be amended as necessary by the Board in order to comply with the ASX Listing Rules, or any directions of ASX regarding the terms provided that, subject to compliance with the ASX Listing Rules, following such amendment, the economic and other rights of the Holder are not diminished or terminate.

(k) No other rights

The Performance Shares give the Holders no rights other than those expressly provided by these terms and those provided at law where such rights at law cannot be excluded by these terms.

Part 2: Conversion of the Performance Shares

(a) Milestones

The Performance Shares will convert upon satisfaction of the following milestones:

(i) 31.5 million Performance Shares shall convert upon the launch of the Thred App (with defined functionality including message centre, Thred creation, link and image sharing, social profile collaboration and micro-Threds) within a period of 90 days from the date of completion of the Capital Raising ( Milestone 1 );
(ii) 42 million Performance Shares shall convert upon 250,000 downloads of the Thred App being completed within a period of 90 days from satisfaction of Milestone 1;
(iii) 42 million Performance Shares shall convert upon the Company updating the Thred App to incorporate an artificial intelligence ( AI ) engine within a period 180 days from completion of the Capital Raising (with the AI engine having minimum functionality consistent with the following):
(A) the AI engine learns the preferences of users and their message partners;
(B) the AI engine then predictively suggests matches when users are creating new Threds;
(C) suggested matches will include potential recipients who, through their own choices, have been profiled as having similar interests as the Thred creator; and
(D) the AI engine will suggest recipients only from the users’ own connected social groups; and
(iv) 31.5 million Performance Shares shall convert upon 1 million downloads of the Thred App being completed within a period of 360 days from the date of completion of the Capital Raising,

(each referred to as a Milestone ).

(b) Conversion of Performance Shares

In the event a Milestone is satisfied, the Performance Shares held by the Holder will convert into an equal number of Shares.

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(c) No conversion if Milestone not achieved

Any Performance Share not converted into a Share within the earlier of:

(i) the period referred to in respect of the relevant Milestone; or
(ii) 2 years from the issue of the Performance Share,

will lapse.

(d) After conversion

The Shares issued on conversion of the Performance Shares will, as and from 5:00pm (WST) on the date of issue, rank equally with and confer rights identical with all other Shares then on issue and application will be made by the Company to ASX for official quotation of the Shares issued upon conversion.

(e) Conversion procedure

The Company will issue the Holder with a new holding statement for the Shares as soon as practicable following the conversion of the Performance Shares into Shares.

(f) Ranking of Shares

The Shares into which the Performance Shares will convert will rank pari passu in all respects with the Shares on issue at the date of conversion.

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Annexure C Terms of Armada Capital Options

The terms of the Options to be issued to Armada Capital (or its nominee) as contemplated in Resolution 5 are as follows:

(a) Entitlement

Subject to paragraph (m), each Option entitles the holder to subscribe for one Share upon exercise of the Option.

(b) Exercise Price and Expiry Date

Subject to paragraphs (j) and (l), the amount payable upon exercise of each Option will be $0.0625 ( Exercise Price ).

(c) Expiry Date

Each Option will expire at 5:00pm (WST) on 30 May 2017 ( Expiry Date ). An Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.

(d)

Exercise Period

The Options are exercisable at any time on or prior to the Expiry Date ( Exercise Period ).

(e) Notice of Exercise

The Options may be exercised during the Exercise Period by notice in writing to the Company in the manner specified on the Option certificate ( Notice of Exercise ) and payment of the Exercise Price for each Option being exercised in Australian currency by electronic funds transfer or other means of payment acceptable to the Company.

(f) Exercise Date

A Notice of Exercise is only effective on and from the later of the date of receipt of the Notice of Exercise and the date of receipt of the payment of the Exercise Price for each Option being exercised in cleared funds ( Exercise Date ).

(g) Timing of issue of Shares on exercise

Within 15 Business Days after the later of the following:
(i) the Exercise Date; and
(ii) when excluded information in respect to the Company (as defined in section 708A(7) of the Corporations Act) (if any) ceases to be excluded information,

but in any case no later than 20 Business Days after the Exercise Date, the Company will:

(iii) allot and issue the number of Shares required under these terms and conditions in respect of the number of Options specified in the Notice of Exercise and for which cleared funds have been received by the Company;
(iv) if required, give ASX a notice that complies with section 708A(5)(e) of the Corporations Act, or, if the Company is unable to issue such a notice, lodge with

Page | 55

ASIC a prospectus prepared in accordance with the Corporations Act and do all such things necessary to satisfy section 708A(11) of the Corporations Act to ensure that an offer for sale of the Shares does not require disclosure to investors; and

(v) if admitted to the official list of ASX at the time, apply for official quotation on ASX of Shares issued pursuant to the exercise of the Options.

If a notice delivered under (g)(iv) for any reason is not effective to ensure that an offer for sale of the Shares does not require disclosure to investors, the Company must no later than 20 Business Days after becoming aware of such notice being ineffective, lodge with ASIC a prospectus prepared in accordance with the Corporations Act and do all such things necessary to satisfy section 708A(11) of the Corporations Act to ensure that an offer for sale of the Shares does not require disclosure to investors.

(h) Shares issued on exercise

Shares issued on exercise of the Options rank equally with the then issued shares of the Company.

(i) Quotation of Shares issued on exercise

If admitted to the official list of ASX at the time, application will be made by the Company to ASX for quotation of the Shares issued upon the exercise of the Options.

(j) Reconstruction of capital

If at any time the issued capital of the Company is reconstructed, all rights of an Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

(k) Participation in new issues

There are no participation rights or entitlements inherent in the Options and holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options without exercising the Options.

(l) Adjustment for rights issue

In the event the Company proceeds with a pro rata issue (except a bonus issue) of securities to Shareholders after the date of issue of the Options, the Exercise Price will be reduced in accordance with the formula set out in ASX Listing Rule 6.22.2.

(m) Adjustment for bonus issues of Shares

If the Company makes a bonus issue of Shares or other securities to existing Shareholders (other than an issue in lieu or in satisfaction of dividends or by way of dividend reinvestment):

(i) the number of Shares which must be issued on the exercise of an Option will be increased by the number of Shares which the Optionholder would have received if the Optionholder had exercised the Option before the record date for the bonus issue; and
(ii) no change will be made to the Exercise Price.

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(n) Unquoted

The Company will not apply for quotation of the Options on ASX.

(o) Transferability

The Options are transferable subject to any restriction or escrow arrangements imposed by ASX or under applicable Australian securities laws.

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Annexure D Valuation of Related Party Securities

Options

Using the Black & Scholes option model and based on the assumptions set out below, the Armada Capital Options were ascribed the following value:

Options Using the Black & Scholes option model and based on the assumptions set out below, the Armada Capital Options were ascribed the following value:	Options Using the Black & Scholes option model and based on the assumptions set out below, the Armada Capital Options were ascribed the following value:

Assumptions:
Valuation date	23 September 2015
Market price of Shares	$0.05 (assumed post-Consolidation based on the issue price of Shares under the Capital Raising)
Exercise price	$0.0625
Expiry date (length of time from issue)	1.7 years (30 May 2017)
Risk free interest rate	1.85%
Volatility (discount)	88.33%
Indicative value per Armada Capital Option	$0.01908
Total value of Armada Capital Options	$1,907,759

Note: The valuation noted above is not necessarily the market price that the Armada Capital Options could be traded at and is not automatically the market price for taxation purposes.

Performance Shares

The Performances Shares proposed to be issued to Armada Capital pursuant to Resolution 5 are subject to the following milestones:

(a) 31.5 million Performance Shares shall convert into Shares upon the launch of the Thred App (with defined functionality including message centre, Thred creation, link and image sharing, social profile collaboration and micro-Threds) within a period of 90 days from the date of completion of the Capital Raising ( Milestone 1 );
(b) 42 million Performance Shares shall convert into Shares upon 250,000 downloads of the Thred App being completed within a period of 90 days from satisfaction of Milestone 1;
(c) 42 million Performance Shares shall convert into Shares upon the Company updating the Thred App to incorporate an artificial intelligence (AI) engine within a period 180 days from completion of the Capital Raising (with the AI engine having minimum functionality consistent with the following):
(A) the AI engine learns the preferences of users and their message partners;
(B) the AI engine then predictively suggests matches when users are creating new Threds;

Page | 58

(C) suggested matches will include potential recipients who, through their own choices, have been profiled as having similar interests as the Thred creator; and
(D) the AI engine will suggest recipients only from the users’ own connected social groups; and
(d) 31.5 million Performance Shares shall convert into Shares upon 1 million downloads of the Thred App being completed within a period of 360 days from the date of completion of the Capital Raising,

(each referred to as a Milestone ).

The Directors have been unable to ascribe a value to the Performance Shares due to material uncertainty as to whether the Milestones will be achieved.

At page 39 of the Independent Expert’s Report, the Independent Expert states that there is limited available information and certainty around the Company’s future performance and Thredit’s ability to achieve the Milestones. The Independent Expert was therefore unable to ascribe a value to the Performance Shares. Shareholders are strongly urged to consider the Independent Expert’s Report (included in Annexure F of this Notice) in detail.

Notwithstanding the above, for the benefit of Shareholders in determining whether to approve the proposed issue of Performance Shares to Armada Capital, the following table demonstrates the potential value of the Performance Shares assuming 4 different probabilities of the Milestones being met (0%, 33.33%, 66.67% and 100% respectively):

Probability	No. of Performance Shares to convert	Spot price	Total value of Performance Shares
0%	-	$0.05	Nil
33.33%	2,333,100	$0.05	$116,655
66.67%	4,666,900	$0.05	$233,345
100%	7,000,000	$0.05	$350,000

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Annexure E Noteholders

Noteholder	Issue of Convertible Notes	Issue of Convertible Notes
	Convertible Notes held*	Amount paid
Cameron Paul Shepherd	3,000	$3,000
Carrissa Pty Ltd	30,000	$30,000
Gregory Phillip Gaunt	10,000	$10,000
Joseph Evangelista	5,000	$5,000
LSAF - Holdings Pty Ltd	100,000	$100,000
Monti Minerals Pty Ltd	50,000	$50,000
Mr Graham Brian Eintracht & Mrs Beverley Faye Eintracht	6,000	$6,000
Profit & Resources Management Pty Ltd	20,000	$20,000
Lenelia Pty Ltd	20,000	$20,000
Jon Lea Julia Gleeson	15,000	$15,000
Traditional Securities Group Pty Ltd	20,000	$20,000
Celtic Capital Pty Ltd	110,000	$110,000
Mr Andrew Peterfreund	20,000	$20,000
RJ Wade Pty Ltd	10,000	$10,000
Agens Pty Ltd	40,000	$40,000
JDK Nominees Pty Ltd	100,000	$100,000
Mr Bin Liu	20,000	$20,000
Cave Glen Pty Ltd	50,000	$50,000
Mr John Charles Vassallo & Mr Sean James Vassallo	10,000	$10,000
Simon Nominees Pty Ltd	25,000	$25,000
Slade Technologies Pty Ltd	20,000	$20,000
Chifley Portfolios Pty Ltd	75,000	$75,000
LTL Capital Pty Ltd	50,000	$50,000
Mr Rohan Charles Edmondson & Mrs Fionnuala Catherine Edmondson	5,000	$5,000
Queensland Mm Pty Ltd	50,000	$50,000
Sophie Louise Moore	25,000	$25,000
Dean Anthony De Largie	33,250	$33,250
Desmond De Largie	1,750	$1,750
Mr John Charles Vassallo & Mr Sean James Vassallo	30,000	$30,000
Marshall Brian Nathanson	35,000	$35,000
Durka Durka Trust	11,000	$11,000
TOTAL	1,000,000	$1,000,000

Note: *Figures are stated on a pre-Consolidation basis.

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Annexure F Independent Expert’s Report

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PROMESA LIMITED Independent Expert’s Report 28 July 2015

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Financial Services Guide

28 July 2015

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 (‘ we ’ or ‘ us ’ or ‘ ours ’ as appropriate) has been engaged by Promesa Limited (‘ Promesa ‘) to provide an independent expert’s report on the proposal to acquire the entire issued capital of Thredit Ltd (‘ Thredit ’). You will be provided with a copy of our report as a retail client because you are a shareholder of Promesa.

Financial Services Guide

In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide (‘ FSG ’). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as financial services licensees.

This FSG includes information about:

Who we are and how we can be contacted;
The services we are authorised to provide under our Australian Financial Services Licence, Licence No. 316158;
Remuneration that we and/or our staff and any associates receive in connection with the general financial product advice;
Any relevant associations or relationships we have; and
Our internal and external complaints handling procedures and how you may access them.

Information about us

BDO Corporate Finance (WA) Pty Ltd is a member firm of the BDO network in Australia, a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International). The financial product advice in our report is provided by BDO Corporate Finance (WA) Pty Ltd and not by BDO or its related entities. BDO and its related entities provide services primarily in the areas of audit, tax, consulting and financial advisory services.

We do not have any formal associations or relationships with any entities that are issuers of financial products. However, you should note that we and BDO (and its related entities) might from time to time provide professional services to financial product issuers in the ordinary course of business.

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We hold an Australian Financial Services Licence that authorises us to provide general financial product advice for securities to retail and wholesale clients.

When we provide the authorised financial services we are engaged to provide expert reports in connection with the financial product of another person. Our reports indicate who has engaged us and the nature of the report we have been engaged to provide. When we provide the authorised services we are not acting for you.

General Financial Product Advice

We only provide general financial product advice, not personal financial product advice. Our report does not take into account your personal objectives, financial situation or needs. You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice.

BDO CORPORATE FINANCE (WA) PTY LTD

Financial Services Guide

Page 2

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Fees, commissions and other benefits that we may receive

We charge fees for providing reports, including this report. These fees are negotiated and agreed with the person who engages us to provide the report. Fees are agreed on an hourly basis or as a fixed amount depending on the terms of the agreement. The fee payable to BDO Corporate Finance (WA) Pty Ltd for this engagement is approximately $28,000.

Except for the fees referred to above, neither BDO, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report.

Remuneration or other benefits received by our employees

All our employees receive a salary. Our employees are eligible for bonuses based on overall productivity but not directly in connection with any engagement for the provision of a report. We have received a fee of $28,000 for our professional services in providing this report. That fee is not linked in any way with our opinion as expressed in this report.

Referrals

We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide.

Complaints resolution

Internal complaints resolution process

As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing addressed to The Complaints Officer, BDO Corporate Finance (WA) Pty Ltd, PO Box 700 West Perth WA 6872.

When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 15 days and investigate the issues raised. As soon as practical, and not more than 45 days after receiving the written complaint, we will advise the complainant in writing of our determination.

Referral to External Dispute Resolution Scheme

A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service (‘ FOS ’). FOS is an independent organisation that has been established to provide free advice and assistance to consumers to help in resolving complaints relating to the financial service industry. FOS will be able to advise you as to whether or not they can be of assistance in this matter. Our FOS Membership Number is 12561. Further details about FOS are available at the FOS website www.fos.org.au or by contacting them directly via the details set out below.

Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Toll free: 1300 78 08 08 Facsimile: (03) 9613 6399 Email: [email protected]

Contact details

You may contact us using the details set out on page 1 of the accompanying report.

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1.	Introduction	1
2.	Summary and Opinion	1
3.	Scope of the Report	4
4.	Outline of the Transaction	5
5.	Profile of Promesa Limited	10
6.	Profile of Thredit Limited	16
7.	Economic analysis	19
8.	Industry analysis	20
9.	Valuation approach adopted	23
10.	Valuation of Promesa prior to the Transaction	25
11.	Valuation of Promesa following the Transaction	35
12.	Is the Transaction fair?	39
13.	Is the Transaction reasonable?	40
14.	Conclusion	46
15.	Sources of information	46
16.	Independence	46
17.	Qualifications	47
18.	Disclaimers and consents	47

Appendix 1 – Glossary and copyright notice

Appendix 2 – Valuation Methodologies

Appendix 3 - Independent Valuation Report prepared by Agricola

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28 July 2015

The Directors Promesa Limited Suite 8, 55 Hampton Road Nedlands, WA, 6009

Dear Directors

INDEPENDENT EXPERT’S REPORT

1. Introduction

On 13 April 2015, Promesa Limited (‘ Promesa ’ or ‘ the Company ’) announced it had entered into a Heads of Agreement (‘ HOA ’) with Key Holdings Ltd (‘ Key ’) which grants the Company an option to purchase 100% of the issued capital of Thredit Ltd (‘ Thredit ’). Through this acquisition, Promesa will indirectly acquire Thredit’s subsidiaries including Thred Innovations Ltd (‘ TIL ’). The Company announced the exercise of this option on 7 May 2015, subject to relevant approvals and the sale or disposal of the Company’s mineral assets.

2. Summary and Opinion

2.1. Purpose of the report

The directors of Promesa have requested that BDO Corporate Finance (WA) Pty Ltd (‘ BDO ’) prepare an independent expert’s report (‘ our Report ’) to express an opinion as to whether or not the proposal to issue 250 million ordinary shares and 140 million performance shares as consideration for the acquisition of the entire issued capital of Thredit (‘ the Transaction ’) is fair and reasonable to the non-associated shareholders of Promesa (‘ Shareholders ’).

Our Report is prepared pursuant to section 611 of the Corporations Act 2001 (‘ Act ’) and is to be included in the Notice of Meeting for Promesa in order to assist the Shareholders in their decision whether to approve the Transaction.

2.2. Approach

Our Report has been prepared having regard to Australian Securities and Investments Commission (‘ ASIC Regulatory Guide 74 ‘Acquisitions Approved by Members’ ( ‘RG 74’ ), Regulatory Guide 111 ‘Content of Expert’s Reports’ (‘ RG 111 ’) and Regulatory Guide 112 ‘Independence of Experts’ (‘ RG 112 ’).

In arriving at our opinion, we have assessed the terms of the Transaction as outlined in the body of this report. We have considered:

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 AFS Licence No 316158 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Corporate Finance (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

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How the value of a Promesa share prior to the Transaction on a control basis compares to the value of a Promesa share following the Transaction on a minority basis;
The likelihood of a superior alternative offer being available to Promesa;
Other factors which we consider to be relevant to the Shareholders in their assessment of the Transaction; and
The position of Shareholders should the Transaction not proceed.

2.3. Opinion

We have considered the terms of the Transaction as outlined in the body of this report and have concluded that the Transaction is fair and reasonable to Shareholders.

2.4. Fairness

In section 12 we determined that the value of a share in Promesa prior to the Transaction on a control basis compares to the value of a Promesa share following the Transaction on a minority basis, as detailed below.

	Ref	Low cents	Preferred cents	High cents
Value of a Promesa share prior to the Transaction on a control basis	10.3	Nil	Nil	Nil
Value of a Promesa share following the Transaction on a minority basis	11.2	0.573	0.586	1.019

Source: BDO analysis

The above valuation ranges are graphically presented below:

Valuation Summary

Value of a Promesa share prior to the Transaction on a control basis Value of a Promesa share following the Transaction on a minority basis

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

0.000 0.200 0.400 0.600 0.800 1.000 1.200
Value (cents)
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The above pricing indicates that, in the absence of any other relevant information the Transaction is fair for Shareholders.

2.5. Reasonableness

We have considered the analysis in section 13 of this report, in terms of both

advantages and disadvantages of the Transaction; and
other considerations, including the position of Shareholders if the Transaction does not proceed and the consequences of not approving the Transaction.

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In our opinion, the position of Shareholders if the Transaction is approved is more advantageous than the position if the Transaction is not approved. Accordingly, in the absence of any other relevant information we believe that the Transaction is reasonable for Shareholders.

The respective advantages and disadvantages considered are summarised below:

ADVANTAGES AND DISADVANTAGES	ADVANTAGES AND DISADVANTAGES
Section	Advantages	Section	Disadvantages
13.4	The Transaction is fair	13.5	Dilution of existing Shareholders’ interests
13.4	Shareholders of Promesa will own shares in a company with a greater potential to generate a return for Shareholders	13.5	Exposure to the development stage risks associated with Thredit
13.4	Liquidity of Promesa’s shares may increase	13.5	Change in the nature and scale of Promesa’s activities may not align with Shareholders’ investment objectives
13.4	Changing the nature and scale of Promesa could attract new investors
13.4	The Transaction provides the Company with a cash injection
13.4	Experienced management team and Board of Directors
13.4	Performance Rights provide an incentive to increase Promesa’s value
13.4	Alignment of Key’s interests to Shareholders’ interests

Other key matters we have considered include:

Section	Description
13.1	Alternative proposals
13.2	Practical level of control
13.3	Consequences of not approving the Transaction

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3. Scope of the Report

3.1. Purpose of the Report

Section 606 of the Act expressly prohibits the acquisition of shares by a party if that acquisition will result in that person (or someone else) holding an interest in 20% or more of the issued shares of a public company, unless a full takeover offer is made to all shareholders. If the Transaction is approved, Key will obtain a relevant interest in the Company of up to 50.27% (assuming the $1 million of Promesa convertible notes are not converted and the 140 million Performance Rights issued to Key do not vest).

Section 611 permits such an acquisition if the shareholders of that entity have agreed to the issue of such shares. This agreement must be by resolution passed at a general meeting at which no votes are cast in favour of the resolution by any party who is associated with the party acquiring the shares, or by the party acquiring the shares. Section 611 states that shareholders of the company must be given all information that is material to the decision on how to vote at the meeting.

RG 74 states that the obligation to supply shareholders with all information that is material can be satisfied by the non-associated directors of Promesa, by either:

undertaking a detailed examination of the Transaction themselves, if they consider that they have sufficient expertise; or
by commissioning an Independent Expert's Report.

The directors of Promesa have commissioned this Independent Expert's Report to satisfy this obligation.

3.2. Regulatory guidance

Neither the Listing Rules nor the Act defines the meaning of ‘fair and reasonable’. In determining whether the Transaction is fair and reasonable, we have had regard to the views expressed by ASIC in RG 111. This regulatory guide provides guidance as to what matters an independent expert should consider to assist security holders to make informed decisions about transactions.

This regulatory guide suggests that where the transaction is a control transaction, the expert should focus on the substance of the control transaction rather than the legal mechanism to affect it. RG 111 suggests that where a transaction is a control transaction, it should be analysed on a basis consistent with a takeover bid.

In our opinion, the Transaction is a control transaction as defined by RG 111 and we have therefore assessed the Transaction as a control transaction to consider whether, in our opinion, it is fair and reasonable to Shareholders.

3.3. Adopted basis of evaluation

RG 111 states that a transaction is fair if the value of the offer price or consideration is greater than the value of the securities subject of the offer. This comparison should be made assuming a knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm’s length. When considering the value of the securities subject of the offer in a control transaction the expert should consider this value inclusive of a control premium. Further to this, RG 111 states that a transaction is reasonable if it is fair. It might also be reasonable if despite being ‘not fair’ the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher bid.

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Having regard to the above, BDO has completed this comparison in two parts:

A comparison between the value of a Promesa share prior to the Transaction on a control basis and the value of a Promesa share following the Transaction on a minority basis (fairness – see Section 12 ‘Is the Transaction Fair?’); and
An investigation into other significant factors to which Shareholders might give consideration, prior to approving the resolution, after reference to the value derived above (reasonableness – see Section 13 ‘Is the Transaction Reasonable?’).

This assignment is a Valuation Engagement as defined by Accounting Professional & Ethical Standards Board professional standard APES 225 ‘Valuation Services’ (‘ APES 225 ’).

A Valuation Engagement is defined by APES 225 as follows:

‘an Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Valuer is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Valuer at that time.’

This Valuation Engagement has been undertaken in accordance with the requirements set out in APES 225.

4. Outline of the Transaction

On 13 April 2015, the Company announced it had entered into a HOA with Key which detailed an option to acquire the entire issued capital of Thredit. As consideration for the acquisition Promesa will issue to Key the following securities:

250 million ordinary shares (on a post-consolidation basis) in Promesa (‘ Consideration Shares’ ); and
140 million performance shares (on a post-consolidation basis) which vest on achievement of the following milestones:
31.5 million performance shares which convert to ordinary shares on the launch of the Thred mobile phone app (with functionality including message centre, Thred creation, link and image sharing, social profile collaboration and micro-threds), within a period of 90 days from the date of completion of the Capital Raising (‘ Milestone 1 ’);
42 million performance shares which convert to ordinary shares upon 250,000 downloads of the Thred mobile phone app being completed within a period of 90 days from the completion of Milestone 1 (‘ Milestone 2 ’);
42 million performance shares which convert to ordinary shares upon the Company updating the Thred mobile phone app to incorporate an artificial intelligence ( ‘AI’ ) engine within a period of 180 days from the completion of the Capital Raising with the AI engine having minimum functionality consistent with the following:
- the AI engine learns the preferences of the users and their message partners;
- the AI engine then predictively suggests matches when the users are creating new threds;
- suggested matches will include potential recipients who, through their own choices, have been profiled as having similar interests as the thred creator; and

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the AI engine will suggest recipients only from the users own connected social groups (‘ Milestone 3 ’).
31.5 million performance shares which convert to ordinary shares upon one million downloads of the Thred mobile phone app being completed within a period of 360 days from the completion of the Capital Raising (‘ Milestone 4 ’).

Note: the milestone figures above include the additional 7 million performance rights issued to Armada Capital Limited (‘ Armada ’) as part of the Transaction (see Armada Performance Shares below).

The above performance shares have been collectively referred to as the ‘ Performance Shares ’. The Performance Shares will lapse on the period referred to in respect of the relevant Milestone or two years from the issue of the Performance Shares.

In conjunction with the Transaction, Promesa will seek shareholder approval to consolidate the capital of Promesa on a 1 for 5 basis.

As consideration for assisting with the Transaction, the Company will issue to Armada:

100 million unlisted options (on a post-consolidation basis) exercisable at $0.0625 each and expiry date of 30 May 2017 (‘ Armada Options’ ); and
up to 12.5 million ordinary shares (‘ Armada Shares ’) and up to 7 million performance shares ( ‘Armada Performance Shares ’)(both on a post-consolidation basis) in satisfaction of a success fee equal to 5% (by number) of the Consideration Shares. The Armada Performance Shares will vest on the same terms as the 140 million Performance Shares issued to Key.

Additionally, the Company will issue to Mr Dean Bannister (‘ Bannister ’), up to 6.25 million ordinary shares (on a post-consolidation basis) in satisfaction of a success fee equal to 2.5% (by number) of the Consideration Shares (‘ Bannister Shares ’).

Promesa will also settle the following two classes of convertible note facilities of Thredit by issuing ordinary shares:

Thredit’s $500,000 secured convertible loan with an interest rate of 8% per annum (12% on overdue amounts) which, subject to shareholder approval, will convert together with accrued interest into Promesa shares at a conversion price of $0.025 per share (on a post-consolidation basis) (‘ Series A Convertible Notes ’); and
Thredit’s $500,000 secured convertible loan with an interest rate of 8% per annum (12% on overdue amounts) which, subject to shareholder approval, will convert together with accrued interest into Promesa shares at a conversion price of $0.04 per share (on a post-consolidation basis) (‘ Series B Convertible Notes ’).

Promesa also has $1 million of convertible notes on issue which convert with an accrued interest rate of 1% per month to Promesa shares, subject to shareholder approval, at a conversion price of $0.005 per share (on a post-consolidation basis) (‘ Promesa Convertible Loans ’). We note that $25,000 of these Promesa Convertible Loans have been issued to a related party, Simon Nominees Pty Ltd ( ‘Simon’ ). Resolution 16 relates to the issue of shares to Simon as per the conversion of the Promesa Convertible Loans.

Promesa has also paid a $125,000 option facilitation fee to Key.

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Set out below are the conditions precedent to the Transaction, which must be completed by 30 September 2015:

Promesa obtaining all necessary shareholder approval and regulatory approvals required for the acquisition, including Australian Securities Exchange (‘ ASX ’) approval for the readmission of the Company to the official list of ASX in connection with its proposed change in the nature and scale of its activities;
Promesa to complete a capital raising between $5 million and $10 million (‘ Capital Raising’ ) at an issue price of $0.05 per share; and
All tenements currently held or applied for by Promesa will be sold or disposed following the completion of the Transaction.

Proposed Capital Structure

We have presented the proposed capital structure of Promesa following the Transaction on an undiluted and fully diluted basis assuming that the Capital Raising is either subscribed to the minimum condition or fully subscribed.

Minimum Subscription to Capital Raising

The proposed capital structure of Promesa following the completion of the Transaction on an undiluted basis and assuming the Capital Raising only reaches the minimum subscription condition is set out below.

We note that as at the date of our Report, Key does not have a relevant interest in Promesa but following issue of the Consideration Shares will increase its relevant interest in Promesa to 50.27%. In these circumstances, the Shareholders will be diluted from 100% to 19.32%.

Capital structure of Promesa on	Existing		Cap. Raising	Con Note	Other
an undiluted basis	S'holders	Key	S'holders	S'Holders	S'Holders	Total
Note:				1	2
Issued Shares at date of this Report	480,515,581	-	-	-	-	480,515,581
Consolidation of capital ratio (5:1)	5	-	-	-	-	-
Issued Shares after consolidation	96,103,117	-	-	-	-	96,103,117
% holdings at the date of this Report	100.00%	0.00%	0.00%	0.00%	0.00%	100%
Issue of Consideration Shares	-	250,000,000	-	-	-	250,000,000
Shares issued under Capital Raising	-	-	100,000,000	-	-	100,000,000
Shares issued for Convertible Notes	-	-	-	32,500,000	-	32,500,000
Issue of shares to Other S'holders	-	-	-	-	18,750,000	18,750,000
Issued Shares following Transaction	96,103,117	250,000,000	100,000,000	32,500,000	18,750,000	497,353,117
% holdings following the Transaction	19.32%	50.27%	20.11%	6.53%	3.77%	100%

Source: BDO Analysis

In our analysis of the proposed capital structure, we have grouped the convertible note holders and the other shareholders. Further details of these shareholder groups are detailed below under notes 1 and 2.

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Note 1 – Convertible Note Shareholders

As part of the Transaction, Promesa will satisfy various classes of Thredit convertible notes by issuing shares in Promesa. In particular, the following shares will be issued to the convertible note holders of the Series A Convertible Notes and Series B Convertible Notes.

Shares issued for Convertible Notes	Principal	Conversion
Class	($)	Price	Shares issued
Series A Convertible Notes	500,000	0.025	20,000,000
Series B Convertible Notes	500,000	0.04	12,500,000
			32,500,000

Source: BDO Analysis

We note that the convertible notes will convert into shares inclusive of accrued interest, however given the varying dates on which the convertible note agreements were entered into for each of the respective holders of the different classes, we have determined to assess the proposed capital structure without adjusting for accrued interest. We note that if interest is included, it is likely that both Key and Shareholders will be marginally diluted further.

Note 2 – Other Shareholders

Armada and Bannister will be issued various securities for assisting in the Transaction. As such, on an undiluted basis, 18.75 million ordinary shares will be collectively issued, as follows:

12.5 million ordinary shares issued to Armada; and
6.25 million ordinary shares issued to Bannister.

As at the date of our Report, there are 61,229,167 unlisted options (pre-consolidation) issued in Promesa. Given the exercise price of these options after the capital consolidation, they are presently out-of-themoney and are unlikely to be exercised as part of the Transaction. Additionally, as part of the Transaction, Armada will be issued 100 million options which based on the issue price of the Capital Raising will also be out-of-the-money, and unlikely to be exercised as part of the Transaction.

The table below presents Key’s maximum possible relevant interest in Promesa, assuming a minimum level of subscription to the Capital Raising, assuming that all of the Performance Shares vest, and assuming that the remaining unlisted options held by other shareholders are not exercised regardless of whether they are in-the-money or not. As detailed in the table, the maximum relevant interest that Key may obtain following the Transaction on these assumptions is 60.53%, and the maximum dilution Shareholders may face is from 100% to 14.91%.

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Capital structure of Promesa on	Existing		Cap. Raising	Con note	Other
an diluted basis	S'holders	Key	S'holders	S'Holders	S'Holders	Total
Note:				*	3
Issued Shares at date of Report	480,515,581	-	-	-	-	480,515,581
Consolidation of capital (5:1)	5	-	-	-	-	5
Issued Shares post consolidation	96,103,117	-	-	-	-	96,103,117
% holdings at date of this Report	100.00%	0.00%	0.00%	0.00%	0.00%	100%
Issue of Consideration Shares	-	250,000,000	-	-	-	250,000,000
Vesting of Performance Shares	-	140,000,000	-	-	-	140,000,000
Shares issued per Capital Raising	-	-	100,000,000	-	-	100,000,000
Shares issued for Con. Notes	-	-	-	32,500,000	-	32,500,000
Issue of shares to Other S'holders	-	-	-	-	25,750,000	25,750,000
Issued Shares post Transaction	96,103,117	390,000,000	100,000,000	32,500,000	25,750,000	644,353,117
% holdings post Transaction	14.91%	60.53%	15.52%	5.04%	4.00%	100%

Source: BDO Analysis * Note 1 from above also relates to this table

Note 3 – Other Shareholders

In this scenario, Armada will be issued an additional 7 million shares on the vesting of the Armada Performance Shares (as we have assumed that all Performance Shares have vested). This means that the total shares issued to the Other Shareholders will increase to 25.75 million ordinary shares.

Maximum Subscription to Capital Raising

The proposed capital structure of Promesa on an undiluted basis following completion of the Transaction and assuming a maximum subscription to the Capital Raising is set out below. As above, Key does not have a relevant interest in Promesa before the Transaction however following the issue of Consideration Shares, Key’s relevant interest will increase to 41.85%. We note this is the minimum relevant interest Key will acquire in Promesa assuming that no other shares are issued. If the Transaction proceeds assuming a maximum subscription to the Capital Raising, Shareholders will be diluted from 100% down to 16.09%.

Capital structure of Promesa on	Existing		Cap. Raising	*Con note	*Other
an undiluted basis	S'holders	Key	S'holders	S'Holders	S'Holders	Total
Issued Shares at date of Report	480,515,581	-	-	-	-	480,515,581
Consolidation of capital (5:1)	5	-	-	-	-	-
Issued Shares post consolidation	96,103,117	-	-	-	-	96,103,117
% holdings at date of this Report	100.00%	0.00%	0.00%	0.00%	0.00%	100%
Issue of Consideration Shares	-	250,000,000	-	-	-	250,000,000
Shares issued per Capital Raising	-	-	200,000,000	-	-	200,000,000
Shares issued for Con. Notes	-	-	-	32,500,000	-	32,500,000
Issue of shares to Other S'holders	-	-	-	-	18,750,000	18,750,000
Issued Shares post Transaction	96,103,117	250,000,000	200,000,000	32,500,000	18,750,000	597,353,117
% holdings post Transaction	16.09%	41.85%	33.48%	5.44%	3.14%	100%
Source:BDO Analysis

Notes 1 and 2 from above also relate to this table.

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As noted above, there are presently 61,229,167 unlisted options (pre-consolidation) issued in Promesa. These options are presently out of the money and are unlikely to be exercised post the Transaction. Additionally, Armada will be issued 100 million options as part of the Transaction which are out of the money based on the issue price of the Capital Raising and are unlikely to be exercised as part of the Transaction.

The table below presents Key’s maximum possible relevant interest in Promesa, assuming the Capital Raising is fully subscribed and assuming that all of the Performance Shares issued to Key and Armada vest. Additionally we assume the remaining unlisted options held by all other shareholders are not exercised regardless of whether they are in-the-money or not. As detailed in the table, the maximum relevant interest that Key may obtain following the Transaction on these assumptions is 52.39%, and the maximum dilution Shareholders may face is from 100% to 12.91%.

Capital structure of Promesa on	Existing		Cap. Raising	*Con Note	*Other
an diluted basis	S'holders	Key	S'holders	S'Holders	S'Holders	Total
Issued Shares as date of Report	480,515,581	-	-	-	-	480,515,581
Consolidation of capital (5:1)	5	-	-	-	-	5
Issued Shares post consolidation	96,103,117	-	-	-	-	96,103,117
% holdings at date of Report	100.00%	0.00%	0.00%	0.00%	0.00%	100%
Issue of Consideration Shares	-	250,000,000	-	-	-	250,000,000
Performance rights vesting shares	-	140,000,000	-	-	-	140,000,000
Shares issued per Capital Raising	-	-	200,000,000	-	-	200,000,000
Shares issued for Con. Notes	-	-	-	32,500,000	-	32,500,000
Issue of shares to Other S'holders	-	-	-	-	25,750,000	25,750,000
Issued Shares post Transaction	96,103,117	390,000,000	200,000,000	32,500,000	25,750,000	744,353,117
% holdings post the Transaction	12.91%	52.39%	26.87%	4.37%	3.46%	100%

Source: BDO Analysis * Notes 1 and 3 from above also relate to this table.

5. Profile of Promesa Limited

5.1. History and Overview

Promesa was incorporated on 22 March 2007 as an unlisted public company with an initial objective of becoming an oil and gas producer. It was subsequently listed onto the ASX on 11 November 2009 with the same mandate. In January 2011, Promesa changed its main activity away from oil and gas and into base metals with exploration projects in Peru. Promesa has its head office located in Western Australia.

Promesa’s current board members and senior management are:

Mr Solomon Majteles – Non-Executive Chairman;
Mr Ananda Kathiravelu – Executive Director;
Mr Timothy Wise – Non-Executive Director; and
Mr Damon Sweeny – Company Secretary.

Promesa currently has six exploration projects all located in Peru. The names of these projects are:

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Alumbre Project;
Olleros Project;
Genex Concessions;
Yarpun Project;
Huajarapampa Project; and
Quinual Project.

Collectively these projects result in an exploration footprint of approximately 5,600 hectares with Promesa’s main project being the Alumbre Project. Promesa has also been actively evaluating potential new projects to complement existing activities.

5.2. Projects

Set out below is a brief description of the Company’s projects.

Alumbre Project

The Alumbre concession is located 70km southeast of the major city of Trujillio in the north of Peru. This project is a Cu-Mo-Au porphyry system covering an area of approximately 986 hectares and adjoins Promesa’s other regional concessions. Promesa holds ownership of the Alumbre concession via outright ownership and through an option to purchase agreement with Minera Fabricio S.A.C.

In 2013, Promesa submitted an environmental impact assessment to the Peruvian Ministry of Energy and Mines. This application was approved in late 2013 and enabled Promesa to begin implementing a three stage diamond drill program in 2014.

Olleros Project

The Olleros concession is located in the central Andes of Peru and covers an area of approximately 1,900 hectares. The surrounding concessions are held by Barrick Gold Corporation Limited (‘ Barrick ’) and as such, the Olleros Project is in the same geological, structural and metallogenic corridor as Barrick’s Pierina Gold mine.

Genex Concessions

The Genex concession is currently under application and covers an area of approximately 600 hectares and neighbours the Olleros concession and the surrounding concessions held by Anglo American, Peñoles and Magistral.

Yarpun Project

The Yarpun concession is located in central Peru in the Ancash Department and covers an area of approximately 100 hectares. No historical geophysics or drilling has been completed on the project.

Huajoropampa Project

The Huajoropampa concession is also located in central Peru in the Ancash Department. The concession covers an area of approximately 1,000 hectares. No historical geophysics or drilling has been completed on the project.

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Quinual Project

The Quinual concession is located in the Western Cordilera of the northern Peruvian Andes approximately 71km to the southeast of Trujillo. The concession is prospective for gold, copper and molybdenum and covers an area of 1,000 hectares.

Further information about the Company’s projects can be found in Appendix 3.

5.3. Historical Balance Sheet

	Reviewed as at Audited as at Audited as at
Statement of Financial Position	31-Dec-14 30-Jun-14 30-Jun-13
	$ $ $
CURRENT ASSETS
Cash and cash equivalents	1,883 272,307 312,931
Trade and other receivables	19,119 53,061 65,538
Other assets	18,466 10,588 83,322
TOTAL CURRENT ASSETS	39,468 335,956 461,791
NON-CURRENT ASSETS
Property, plant and equipment	190,483 194,162 226,193
Financial assets	276,343 300 2,000
Exploration and evaluation expenditure	5,805,839 4,915,917 3,329,138
Other assets	15,840 15,840 15,840
TOTAL NON-CURRENT ASSETS	6,288,505 5,126,219 3,573,171
TOTAL ASSETS	6,327,973 5,462,175 4,034,962

CURRENT LIABILITIES
Trade and other payables	1,064,808 539,669 498,747
Provisions	68,501 52,560 33,571
TOTAL CURRENT LIABILITIES	1,133,309 592,229 532,318
TOTAL LIABILITIES	1,133,309 592,229 532,318
NET ASSETS	5,194,664 4,869,946 3,502,644

EQUITY
Issued capital	13,085,781 11,058,926 9,084,552
Foreign currency translation reserve	(300,528) (61,765) (64,253)
Option reserve	578,036 640,531 574,690
Accumulated losses	(8,168,625) (6,767,746) (6,092,345)
TOTAL EQUITY	5,194,664 4,869,946 3,502,644

Source: Promesa’s audited financial statements for the year ended 30 June 2013 and 30 June 2014 and reviewed financial statements for the half year ended 31 December 2014.

We note that for the half year ended 31 December 2014, Promesa’s auditor expressed an emphasis of matter regarding Promesa’s ability to continue as a going concern.

We also note the following in relation to the financial position of Promesa:

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The non-current financial assets held for sale are financial instruments which are recognised at cost. The majority of this figure relates to the Equity Swap Agreement between the Company and Lanstead Capital L.P. ( ‘Lanstead’ ) which was announced to the ASX on 14 November 2014. As at 31 December 2014, financial assets held for sale increased to $0.28 million due to the equity swap agreement.

A breakdown of Promesa’s financial assets is below:

Financial assets	$
Australian listed shares	2,000
Provision for diminishment	(1,700)
Lanstead Equity Swap	682,568
Unrealised loss on Equity Swap	(406,525)
TOTAL	276,343

The issued capital of Promesa has increased by $2.02 million (net of transaction costs) over the period from 30 June 2014 to 31 December 2014. The most significant capital raisings included an issue of 27,400,000 ordinary shares pursuant to the share purchase plan which raised $685,000 and the issue of 76,650,000 ordinary shares at an issue price of $0.011 per share to institutional investors for consideration of $843,150. The placement of 76,650,000 ordinary shares to institutional investor forms the equity swap agreement.
Exploration expenditure is classified as a non-current asset and expenditure is capitalised to the extent that it is expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Between 30 June 2014 and 31 December 2014, exploration expenditure increased as a result of capitalised costs of $0.83 million which was partially offset by an exchange rate adjustment on conversion from Peruvian Neuvo Sol to Australian Dollars.
Option reserves decreased to $0.58 million as a result of the expiry of options.

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5.4. Historical Statement of Comprehensive Income

	Reviewed for the Audited for the Audited for the
Statement of Comprehensive Income	half year ended year ended year ended
	31-Dec-14 30-Jun-14 30-Jun-13
	$ $ $
Revenue
Other income	1,458 4,782 26,745
Expenses
Administration expenses	(189,401) (70,443) (74,837)
Amortisation and depreciation	(2,800) (29,933) -
Consultancy costs	(105,353) (67,517) (479,598)
Employee benefit expense	(221,889) (287,339) (415,666)
Exploration expenditure impairment	- (182,753) (5,591,908)
Exploration expenditure written off	- (129,333) -
Provision for doubtful debts	(44,500) - -
Impairment of other assets	(81,892) - -
Financial administration and compliance	(280,725) (362,196) (168,109)
Interest expense	- (3,962) -
Legal expense	(8,453) (6,706) (12,411)
Travel and accommodation expense	(71,600) (16,184) (126,459)
Unrealised loss on financial asset	(406,525) (1,700) -
Other expense	(63,440) (3,729) (2,631)
Loss from continuing operations before tax	(1,475,120) (1,157,013) (6,844,874)
Income tax expense	- -
Loss from continuing operations after tax	(1,475,120) (1,157,013) (6,844,874)
Foreign currency translation differences	(238,763) 2,488 (5,105)
Total comprehensive loss for the year	(1,713,883) (1,154,525) (6,849,979)

Source: Promesa’s audited financial statements for the year ended 30 June 2013 and 30 June 2014 and reviewed financial statements for the half year ended 31 December 2014.

We note the following in relation to the financial performance of Promesa:

Administration expenses for Promesa have increased over the half year ended 31 December 2014, in comparison to the year ended 30 June 2014 from $70,443 to $189,401. This increase is a result of Promesa remaining active in evaluating potential new projects to complement existing exploration activity within Peru.
Unrealised financial losses on financial assets have increased from $1,700 for the year ended 30 June 2014 to $406,525 for the half year ended 31 December 2014. The large increase can be attributed to the Equity Swap Agreement which the Company entered into with Lanstead on 14 November 2014. Promesa has reduced the value of this asset due to the Company’s falling share price.

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5.5. Capital Structure

The share structure of Promesa at 30 June 2015 is outlined below:

	Number
Total ordinary shares on issue	480,515,581
Top 20 shareholders	206,481,222
Top 20 shareholders - % of shares on issue	42.97%

Source: Share registry information

The range of shares held in Promesa at 30 June 2015 is as follows:

	Number of Ordinary	Percentage of
Name	Shares Held	Issued Shares (%)
Citicorp Nominees Pty Limited	59,825,287	12.45%
HSBC Custody Nominees (Australia) Ltd	33,356,624	6.94%
Grupo Pegasus SA	19,000,000	3.95%
Invia Custodian Pty Ltd	9,000,086	1.87%
Subtotal	121,181,997	25.22%
Others	359,333,584	74.78%
Total ordinary shares on Issue	480,515,581	100.00%

Source: Share registry information

The ordinary shares held by the most significant shareholders at 30 June 2015 are detailed below:

	Number of	Number of	Percentage of
Range of Shares Held	Ordinary Shareholders	Ordinary Shares	Issued Shares (%)
1 - 1,000	9,791	29	0.00%
1,001 - 5,000	161,189	48	0.03%
5,001 - 10,000	671,980	77	0.14%
10,001 - 100,000	17,328,749	372	3.61%
100,001 - and over	462,343,872	400	96.22%
TOTAL	480,515,581	926	100.00%

Source: Share registry information

Promesa has the following company options on issue at 30 June 2015:

Terms	Number of Options
Options exercisable at $0.05 on or before 10-Dec-15	27,062,500
Options exercisable at $0.05 on or before 27-Feb-16	34,166,667
Total options on issue	61,229,167
Source:Option registry information

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6. Profile of Thredit Limited

6.1. History and Overview

Thredit was incorporated on the 24 March 2015 and was established to further the development of the Thred Mobile app. Thredit is an unlisted company registered in Hong Kong S.A.R. and is involved in developing mobile platform applications. Thredit’s key business venture is the development of the metasocial and unified social messaging application named Thred which was initially developed by Key and acquired by Thredit in March 2015.

Thred is a messaging and media sharing mobile platform application which enables individuals and groups to access over 140 different social media platforms via the Thred application. The goal of Thred is not to compete with existing social media applications and networks but instead to remake the way these existing services are used by individuals and groups.

On 1 July 2015, Thredit advised that alpha stage development testing of the mobile application Thred was complete, and that the beta stage development of the application will now commence.

Thredit’s current board member and senior management include:

Mr David Whitaker – Chief Executive Officer and Director;
Mr Jens Nielsen – Chief Technology Officer; and
Mr Chris Jones – Chief Marketing Officer.

Thredit is presently wholly owned by Key. In turn, Key is owned by two shareholders, namely Mr David Whitaker and Ms Krista Victorio. Their respective holdings in Key are illustrated by the diagram below.

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Source: Thredit management

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6.2. Historical Balance Sheet

	Audited as at
Statement of Financial Position	31-Mar-15
	HKD$
NON-CURRENT ASSETS
Intangible asset	1
TOTAL NON-CURRENT ASSETS	1
TOTAL ASSETS	1

CURRENT LIABILITIES
Accruals	50,000
TOTAL CURRENT LIABILITIES	50,000
TOTAL LIABILITIES	50,000
NET ASSETS	(49,999)

EQUITY
Share capital	1
Accumulated losses	(50,000)
TOTAL EQUITY	(49,999)

Source: Thredit’s audited financial statements for the period ending 31 March 2015

We note for the period ending 31 March 2015, Thredit’s auditor expressed an emphasis of matter regarding Thredit’s ability to continue as a going concern and that its ultimate holding company, Key, had confirmed in writing its intention to provide continuing financial support to Thredit.

We note the following in relation to the financial position of Thredit:

Thredit’s auditor explains that the intangible asset of HKD$1 at 31 March 2015 represents a software to enhance communication between people acquired from related company. The HKD$1 value does not necessarily represent the fair value of the Thred app or the cash expended on its development by Key;
Additionally, Thredit is unable to prepare a reliable estimation of the future cash flow since the date of acquisition and assess the recoverable amounts of the intangible asset at 31 March 2015. Thredit has advised that it is probable that future economic benefits attributable to the asset will flow to the entity upon the launch of the software to the market; and
The accruals of HKD$50,000 relate to accrued auditor’s expenses of HKD$50,000.

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6.3. Historical Statement of Comprehensive Income

	Audited for the
Statement of Comprehensive Income	period from 24-Mar-15
	to 31-Mar-15
	HKD$
Revenue	-
Expenses
Administration expenses	(50,000)
Loss from continuing operations before tax	(50,000)
Income tax expense	-
Loss from continuing operations after tax	(50,000)
Other comprehensive income	-
Total comprehensive loss for the period	(50,000)

Source: Thredit’s audited financial statements for the period from 24 March 2015 to 31 March 2015

We note the administrative expenses of Thredit during the period from 24 March 2015 to 31 March 2015 relates to auditor’s remuneration of HKD$50,000.

7. Economic analysis

In the section below we have addressed the key economic indicators in Australia and where appropriate set out our assessment of the implications for Promesa.

Interest rates

The effects of the US Federal Reserve’s quantitative easing continue to keep global long-term borrowing rates down, with some major sovereigns reaching historical lows over recent months. Despite some risk spreads widening slightly, the overall financing costs for creditworthy borrowers remains very low. The RBA has maintained the cash rate at historical lows in order to stimulate the economy through a period of poor commodity prices.

Financial conditions are very accommodative globally with long term borrowing rates for several major sovereigns at all-time lows. Financing costs for credit worthy borrowers remain remarkably low.

Credit growth

Historically low interest rates have contributed to moderate credit growth overall. Lending to business has been stronger of late with the housing market recording steady growth. In other asset markets, prices for equities and commercial property have risen, partially as a result of declining long-term interest rates.

Promesa may be positively affected by an overall increase in Australian equities as investors seek investments returning higher yields than long term interest rates can provide.

The Australian dollar

The Australian dollar has weakened significantly against the rising US dollar, though less so against a basket of currencies. Despite remaining above most estimates of its fundamental value, a further depreciation of the Australian dollar is both likely and necessary, given the significant decline in key commodity prices.

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The weak Australian dollar is likely to attract additional foreign investment in Australian assets. Promesa may benefit from the increased capital flow and resultant demand for Australian equities.

Economic growth

Information available for the Australian economy suggests growth has continued over the last six months, albeit at a below-trend pace. Trends in household demand have improved in addition to stronger employment growth. Looking ahead, private demand is likely to be hindered by reduced business capital expenditure in both the mining and non-mining sectors. Public spending is also scheduled to be subdued. The economy is therefore likely to be operating with a degree of spare capacity for some time yet. Inflation is expected to remain consistent with targets over the next one to two years, despite lower exchange rates.

Commodity prices

Commodity prices have declined over the past year, in some cases sharply. Oil and iron ore in particular have fallen significantly. These trends can be attributed to a combination of lower growth in demand and increased supply. Low energy prices will act to strengthen global output and temporarily lower CPI inflation rates.

Source: www.rba.gov.au Statement by Glenn Stevens, Governor: Monetary Policy Decision 5 May 2015 and 2 June 2015.

8. Industry analysis

8.1 Overview

The mobile application development industry provides users with applications for smart phones and other mobile devices to provide a variety of functions dependent on user needs. Globally, this industry is experiencing rapid growth predominantly due to the low barriers to entry and the increasing market penetration of smart phone users. Given the ease of entering the industry, the mobile application development industry has a low level of market concentration and high levels of competition.

The primary activities of this industry revolve around providing users with mobile based applications for any specific purpose, with the key groupings being for gaming, entertainment, productivity and lifestyle.

8.2 Products and markets

Products

The main groupings of products offered by this industry include:

Gaming applications – widely popular as a convenient and low-cost alternative to traditional gaming consoles.
Entertainment applications – providing playback, editing and dedicated sharing capabilities across photos, videos and music.
Tool and productivity applications – particularly popular with smart phone users enabling them to access emails, calendars, note-taking, and cloud file sharing and organisation software.
Lifestyle and social networking applications – these include online shopping and other consumer focused applications as well as social networks applications.

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Other applications – broadly includes all other applications, of which there has been increasing popularity of applications created to provide digital store fronts for traditionally brick and mortar stores.

Major markets

The main markets that demand mobile platform application developers are:

Individuals – The key market for mobile application developers are the general users of smart mobile devices.

Government agencies - Federal and state governments form another key market who commonly commission application developers to design and develop applications which generate conversation and awareness on matters of public interest which fall within their specific care and jurisdiction.

Online businesses – Online businesses commonly commission application developers to ensure their customers can access their business across all potential mediums.

Other businesses – Even where a business does not have an existing online presence, mobile applications can still be utilised by either their customers or employees. For example, it is not uncommon for large enterprises to utilise mobile applications to increase productivity and efficiency within its business.

8.3 Demand determinants

Demand for mobile platform applications is primarily derived from the adoption of such technologies by the community at large, as a result, the key demand determinants include:

Smart device usage – as adoption of smart mobile devices grows and cellular infrastructure improves and becomes most cost effective for consumers, users of smart devices will inevitably be able to enjoy the new functionalities and features which mobile applications can provide. As a result, this forms a key demand determinant.

Market saturation of an application – the more people using a particular mobile application the more beneficial that application can be to those users. In effect, the demand for mobile applications can be swayed by popularity as opposed to functionality. As a result, ensuring mobile applications have sufficient market exposure and consumer loyalty can have significant influence on demand.

Pricing – Mobile applications are predominantly consumer products and therefore affordability remains a significant determinant. Applications can generally fall into one of three categories namely, free to download with advertisements, free to download with in-app purchases and once-off payment for download.

8.4 Cost structure

Cost structure benchmarks faced by industry participants can vary depending on the size and structure of the business, however in comparison to cost structure benchmarks of all industries within the sector, there are some notable differences.

Profits – industry profits margins have been increasing, and are generally greater than the sector average, this is due to the nature of the industry and the increasing market penetration of smart phones.

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Wages – are commonly the most significant portion of the industry cost structure given that application development involves highly skilled and specialised labour. This generally includes software engineers, IT specialists and other technical support personnel.
Royalties – form another significant cost given that the majority of applications are sold via an application store host such as those provided by Apple and Google.
Purchases – generally includes the acquisition of development kits to enable developers to establish their product on a particular mobile operating system. As a result, although this cost has historically been comparatively smaller against the sector, the increasing number of different mobile operating systems has necessitated the requirement for application developers to purchase more development kits to ensure their products have coverage across all types of mobile operating systems. As a result, this cost is expected to increase.
Other – commonly includes insurance, utilities, advertising, and repairs and maintenance of computer equipment. In aggregate these expenses generally form a substantial portion of the cost structure but are expected to remain stable over the near future.

8.5 Current performance

The relative ease of entering the industry has resulted in an increase in participation and employment within the industry. Since the global financial crisis, although both consumer and business spending has reduced and affected the global software sector, mobile application development has continued to grow given the low costs associated with developing these comparatively simple programs. These influences have led to increases in the supply of mobile application developers.

As an example, the Australian mobile application developers industry has grown at a compound annual rate of 27.5% over the five years to 2014-15, and the industry revenue has expanded by 9.1% in 2014-15.

On the demand side, the increasing penetration of smart phone devices which is presently at 29% of all mobile devices connected globally, and the continuing development of cellular network advances for mobile devices, has resulted in increased demand for mobile applications and as such the developers.

Specifically in relation to social networking and their respective mobile applications we note that in the United States, the industry for social networking sites generated revenues of approximately $11.2 billion in 2015. From 2010 to 2015, the industry’s revenue has observed an annual growth rate of 25.4%, and is projected to continue growing by approximately 19.5% from 2015 through to 2020. Additionally, a study in the United Stated observed that the use of multiple social networking applications, as opposed to just one, is increasing. The study demonstrated that in 2014, 52% of online adults used two or more social media sites or applications. This represented a significant increase over the 42% of online adults in 2013.

8.6 Industry outlook

The key driver for this growth is expected to be the increased usage of smart devices, and the continuing development and expansion of higher-generation cellular networks such as 4G or Long-Term Evolution ( ‘LTE ’).

Globally, it is expected that by 2019 more than half of all devices connected to mobile networks will be smart devices. This represents a compound annual rate of 9% over the four years to 2019. It is also expected that by 2019, a greater portion of mobile devices will be connected to a higher-generation

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cellular network such as 4G or LTE. It is however recognised that the growth rate itself will decrease over time as the market for developers’ beings to saturate.

For Australia specifically, the industry is forecasted to grow at a compound annual rate of 7.1% over the five years through 2019-20.

Source: IBIS World, Cisco and Pew Research Centre

9. Valuation approach adopted

There are a number of methodologies which can be used to value a business or the shares in a company. The principal methodologies which can be used are as follows:

Capitalisation of future maintainable earnings (‘ FME ’)
Discounted cash flow (‘ DCF ’)
Quoted market price basis (‘ QMP ’)
Net asset value (‘ NAV ’)
Market based assessment

A summary of each of these methodologies is outlined in Appendix 2.

9.1 Valuation of a Promesa share Pre-Transaction

Different methodologies are appropriate in valuing particular companies, based on the individual circumstances of that company and available information. In our assessment of the value of Promesa shares we have chosen to employ the following methodologies:

NAV approach as our primary method; and
QMP approach as our secondary method.

We have chosen these methodologies for the following reasons:

there is a lack of reliable long term forecasts available for a DCF approach to be undertaken as the Company does not currently have any producing assets and no revenue or cash flows are currently generated by these assets or are likely to in the near future; and
the Company is not currently generating any income nor are there any historical earnings that could be used to represent future earnings. As such, the FME approach is not appropriate.
In accordance with Promesa’s audited full year financial report to 30 June 2014 and half year review to 31 December 2014, there exists a material uncertainty, which may cast significant doubt as to whether the Company will continue as a going concern unless additional funding is raised to exploit and develop its current projects. We therefore consider the NAV methodology to be an appropriate valuation approach to undertake.
The QMP method is a relevant methodology to consider as Promesa’s shares are listed on the ASX. This means that there is a regulated and observable market where Promesa’s shares can be traded. However, in order for QMP to be considered appropriate, the Company’s shares should be liquid and the market should be fully informed of the Company’s activities.

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9.2 Valuation of a Promesa share Post-Transaction

In our assessment of the value of a Promesa share following the Transaction (‘ Post-Transaction ’), we have adopted the sum-of-parts approach, which estimates the market value of a company by separately valuing each asset and liability of the company. The value of each asset may be determined using different methods. The Post-Transaction value of Promesa consists of the following components:

Pre-Transaction value of Promesa;
Adjustments to the value of Promesa following the Transaction;
Value of Thredit using a NAV approach; and
Value adjustment on account of the Capital Raising.

We have chosen the NAV approach in valuing Thredit for the following reasons:

Thredit’s shares are not listed on the ASX and hence, there is no regulated and observable market where Thredit’s shares are traded. Accordingly, we cannot value the shares of Thredit based on the QMP basis.
Thredit does not have reliable long term forecasts and as such we have insufficient reasonable grounds for a DCF approach to be undertaken. As such, we have not elected to use the DCF valuation approach.
The FME approach is most commonly applicable to profitable businesses with relatively steady growth histories and forecasts. However, we are unable to use this approach with regard to the valuation of Thredit, as it has yet to make any revenues from operations. This implies that we do not have a reasonable basis to assess future maintainable earnings of Thredit.
The NAV methodology has therefore, been considered as an appropriate valuation approach to undertake. However, we note that asset based methods ignore the possibility that Thredit’s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as goodwill and intellectual property rights. This is particularly important in the case of Thredit given its early stage of development and growth potential.

We therefore conclude the most appropriate methodology to value Thredit is the NAV methodology.

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10. Valuation of Promesa prior to the Transaction

10.1. Net Asset Valuation of Promesa

The value of Promesa’s assets on a going concern basis is reflected in our valuation below:

NAV prior to the Transaction Notes	Low Preferred High
	31-Dec-14 value value value
	$ $ $ $
CURRENT ASSETS
Cash and cash equivalents 1	1,883 5,764 5,764 5,764
Trade and other receivables	19,119 19,119 19,119 19,119
Other assets	18,466 18,466 18,466 18,466
TOTAL CURRENT ASSETS	39,468 43,349 43,349 43,349

NON-CURRENT ASSETS
Property, plant and equipment	190,483 190,483 190,483 190,483
Financial assets	276,343 276,343 276,343 276,343
Exploration expenditure 2	5,805,839 170,000 200,000 230,000
Other assets	15,840 15,840 15,840 15,840
TOTAL NON-CURRENT ASSETS	6,288,505 652,666 682,666 712,666
TOTAL ASSETS	6,327,973 696,015 726,015 756,015

CURRENT LIABILITIES
Trade and other payables	1,064,808 1,064,808 1,064,808 1,064,808
Provisions	68,501 68,501 68,501 68,501
Convertible Loan 3	0 1,000,000 1,000,000 1,000,000
TOTAL CURRENT LIABILITIES	1,133,309 2,133,309 2,133,309 2,133,309
TOTAL LIABILITIES	1,133,309 2,133,309 2,133,309 2,133,309
NET ASSETS	5,194,664 (1,437,294) (1,407,294) (1,377,294)
Shares on issue (number) 4	384,412,464 480,515,581 480,515,581 480,515,581
Value per share ($)	0.0135 (0.002991) (0.002929) (0.002866)

Shares on issue after 1 for 5 capital consolidation	96,103,117 96,103,117 96,103,117
Value per share ($)	(0.014956) (0.014644) (0.014331)
Value per share (cents)	(1.496) (1.464) (1.433)

Source: BDO analysis

Other than the adjustments we have made below, we have been advised that there has not been a significant change in the net assets of Promesa since 31 December 2014. The table above indicates a net asset deficiency for the value of Promesa share on a low, preferred and high basis. Effectively this means that our value of a Promesa share using the NAV approach is nil.

In arriving at this valuation, we have made the following adjustments.

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Note 1: Cash and cash equivalents

Cash and cash equivalents have increased since 31 December 2014 as a result of cash movements as detailed below:

Cash and cash equivalents adjustments	$
Balance as at 31-Dec-14	1,883
Cash movements as per Mar-15 quarterly	8,000
Net cash raised from sophisticated share placements	365,192
Net cash raised from convertible note	625,500
Other net inflows	95,448
Less: Option facilitation fee to Thredit	(125,000)
Less: Cash expenditure – exploration	(693,730)
Less: Cash expenditures - administration	(271,529)
Adjusted cash and cash equivalents value	5,764

Source: BDO analysis

We have adjusted Promesa’s cash balance to reflect the net increase in cash during the March 2015 quarter. Promesa also raised $1 million via a convertible note issue on 25 February 2015. Refer to note 3 for further details of the convertible note. The net cash convertible note figure above is net of costs relating to the raising and less operating expenses from the March 2015 quarter.

Promesa also raised $365,192 after expenses in a placement to sophisticated investors to help with the funding of the Thredit Option Facilitation Fee. The Company paid a $125,000 fee to Thredit to establish the Option Facilitation agreement. Under the terms of the Option Facilitation agreement, Promesa can purchase 100% of the issued capital in Thredit for the consideration mentioned in Section 4 above. We have adjusted the cash balance to reflect this transaction.

Note 2: Valuation of Promesa’s mineral assets

We instructed Agricola Mining Consultants Pty Ltd ( ‘Agricola’ ) to provide an independent market valuation of the exploration assets held by Promesa in accordance with the Valmin Code and the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves ( ‘JORC Code’ ). Agricola’s report is included in Appendix 3 to this report.

Agricola considered a number of different valuation methods when valuing the exploration assets of Promesa. The DCF method is not considered to be appropriate given there is no pre-feasibility or feasibility study available and no associated JORC compliant ore reserves. The Geoscientific Factor method (potential for further discoveries) and Past Expenditure methods are appropriate for exploration ground that is not advanced enough to estimate mineral resources. A comparison of similar transactions over adjacent ground may be appropriate but in the absence of such information the only viable method is to compare the sale of other deposits on a 'dollar per unit' basis for the mineral resource estimated in accordance with the JORC Code.

As such, Agricola applied the Kilburn Geoscience Rating ( ‘Geo-factor rating’ ) to value the Company’s Peruvian exploration projects. This method is based on the opinions of prospectivity in the region. The Geo-factor Rating method systematically assesses four key technical attributes of a tenement to arrive at a series of factors that are multiplied together to produce a prospectivity rating. The Basic Acquisition Cost ( ‘BAC’ ) is the important input to the method and it is calculated by summing the application fees,

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annual rent, work required to facilitate granting (e.g. native title, environment etc.) and statutory expenditure for a period of 12 months. This is usually expressed as average expenditure per square kilometre. Equity and grant status are also taken into account. Each factor then multiplied serially to the BAC. The ‘Base Value’ is multiplied by the prospectivity rating to establish the overall technical value of each mineral property.

We consider the Geo-Factor rating method to be appropriate given the early development stage of Promesa’s exploration assets.

The range of values for each of Promesa’s exploration assets as calculated by Agricola is set out below:

Promesa Limited	Low value Preferred value High value
Mineral Asset Valuation	$ $ $
Alumbre	60,000 70,000 80,000
Quinval	30,000 30,000 40,000
Huajoropampa	30,000 30,000 40,000
Yarpun	10,000 10,000 10,000
Olieros	40,000 50,000 60,000
Genex	- - -
Total	170,000 200,000 230,000

Source: Agricola

The table above indicates a range of values for the Company’s exploration assets of between $0.17 million and $0.23 million, with a preferred value of $0.20 million. The full version of Agricola’s Independent Valuation Report is attached in Appendix 3.

Note 3: Promesa Convertible Loans

Promesa has entered into a convertible loan facility to raise up to $1 million (previously defined as ‘Promesa Convertible Loans’). The Promesa Convertible Loans convert with an accrued interest rate of 1% per month to Promesa shares, subject to shareholder approval, at a conversion price of $0.005 per share (on a post-consolidation basis).

We have adjusted the value of Promesa before the Transaction to reflect the outstanding liability. The convertible note will be repaid in cash or extinguished by way of the conversion facility post the Transaction.

Note 4: Shares on issue

We have adjusted the number of shares on issue to take into account the share placements which have occurred following 31 December 2014. We have summarised the adjusted shares on issue in the table below:

	Shares of issue		Number
	Number of shares as at 31-Dec-14		384,412,464
	Issue of shares at $0.003 per share		57,661,870
	Issue of shares at$0.006per share		38,441,247
	Adjusted shares on issue		480,515,581
	Source:BDO Analysis

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10.2. Quoted Market Prices for Promesa’s Securities

To provide a comparison to the valuation of a Promesa share in Section 10.1, we have also assessed the quoted market price for a Promesa share.

The quoted market value of a company’s shares is reflective of a minority interest. A minority interest is an interest in a company that is not significant enough for the holder to have an individual influence in the operations and value of that company.

RG 111.11 suggests that when considering the value of a company’s shares for the purposes of approval under Item 7 of s611 the expert should consider a premium for control. An acquirer could be expected to pay a premium for control due to the advantages they will receive should they obtain 100% control of another company. These advantages include the following:

control over decision making and strategic direction;
access to underlying cash flows;
control over dividend policies; and
access to potential tax losses.

Whilst Key will not be obtaining 100% of Promesa, RG 111 states that the expert should calculate the value of a target’s shares as if 100% control were being obtained. RG 111.13 states that the expert can then consider an acquirer’s practical level of control when considering reasonableness. Reasonableness has been considered in Section 13.

Therefore, our calculation of the quoted market price of a Promesa share including a premium for control has been prepared in two parts. The first part is to calculate the quoted market price on a minority interest basis. The second part is to add a premium for control to the minority interest value to arrive at a quoted market price value that includes a premium for control.

Minority interest value

Our analysis of the quoted market price of a Promesa share is based on the pricing prior to the announcement of the Transaction. This is because the value of a Promesa share after the announcement may include the effects of any change in value as a result of the Transaction. However, we have considered the value of a Promesa share following the announcement when we have considered reasonableness in Section 13.

Information on the Transaction was announced to the market on 13 April 2015. Therefore, the following chart provides a summary of the share price movement over the 12 months to 10 April 2015 which was the last trading day prior to the announcement.

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Promesa share price and trading volume history

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

0.040 18.0
0.035 16.0
0.030 14.0
12.0
0.025
10.0
0.020
8.0
0.015
6.0
0.010 4.0
0.005 2.0
0.000 -
Volume Closing share price
Share Price ($)
Volume (millions)
----- End of picture text -----

Source: Bloomberg

The daily price of Promesa’s shares from 11 April 2014 to 10 April 2015 has ranged from a low of $0.002 on 6 April 2015 to a high of $0.049 on 8 May 2014.

There appears to be significant unexplained spikes in trading volumes, for example on 9 July 2014 and 3 March 2015, there were approximately 4.16 million and 3.78 million Promesa shares traded on the ASX. Our analysis of Promesa’s announcement over the twelve months to 10 April 2015 indicates that there was not any material information released to the market on or around this day.

During this period a number of announcements were made to the market. The key announcements are set out below:

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Date	Announcement	Closing Share Price Following Announcement	Closing Share Price Three Days After Announcement	Closing Share Price Three Days After Announcement	Closing Share Price Three Days After Announcement
		$ (movement)	$ (movement)
09/03/2015	Capital Raising	0.002  0.0%	0.002		0.0%
17/02/2015	Response to ASX Appendix 5BQuery	0.004  0.0%	0.005		25.0%
02/02/2015	QuarterlyCashflow Report	0.004  0.0%	0.004		0.0%
02/02/2015	QuarterlyActivities Report	0.004  0.0%	0.004		0.0%
23/01/2015	DrillingResults ALDD14008 from Alumbre Project	0.006  0.0%	0.005		16.7%
08/01/2015	DrillingResults from Alumbre Project	0.007  0.0%	0.006		14.3%
28/11/2014	Airborne Geophysics Programme Commences at Promesa Projects	0.010  0.0%	0.009		10.0%
14/11/2014	KeyInstitutional Capital Raising	0.015  0.0%	0.013		13.3%
31/10/2014	QuarterlyActivities Report	0.015  0.0%	0.014		6.7%
31/10/2014	QuarterlyCashflow Report	0.015  0.0%	0.014		6.7%
22/10/2014	Final Hole Intersects Best Alteration to Date	0.017  0.0%	0.015		11.8%
14/10/2014	Encouraging Mineralisation and Alteration Continues - Alumbre	0.021  17%	0.017		19%
03/10/2014	Potential for Multiple PorphyryCentre at Alumbre	0.021  0%	0.020		5%
18/09/2014	EncouragingMolybdenum Mineralisation Extends Drillhole	0.023  0%	0.023		0%
05/09/2014	Promesa to Ramp Up Exploration & Stage 2 Drilling Update	0.029  4%	0.026		10%
28/08/2014	Encouraging Drill Core Observations Begin Stage 2 At Alumbre	0.029  4%	0.028		3%
20/08/2014	DrillingCommences at Alumbre Project	0.029  0%	0.028		3%
13/08/2014	Drillingto Commence at Alumbre	0.027  8%	0.028		4%
01/08/2014	QuarterlyActivities Report	0.027  7%	0.027		0%
01/08/2014	QuarterlyCashflow Report	0.027  7%	0.027		0%
30/07/2014	Magnetic Susceptibility Readings Confirm Copper Association	0.030  3%	0.027		10%
23/07/2014	Approval to Commence Stage 2 Drilling	0.027  0%	0.032		19%
10/07/2014	Best Geochemical and Magnetic Targets Yet To Be Drill Tested	0.027  4%	0.025		7%
01/07/2014	Significant Copper Results	0.026  8%	0.028		8%
12/06/2014	Promesa Plans Stage 2 DrillingProgram	0.027  4%	0.025		7%
20/05/2014	PRA Increases to 100% Ownershipof AdjoiningConcession	0.024  4%	0.029		21%
08/05/2014	Extensive Mineralisation Identified in 400m of Fifth Hole	0.037  0%	0.029		22%

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01/05/2014	Drill Core Indicates Discovery of Large Cu Porphyry System	0.030  15%	0.030  15%	0.037		23%
29/04/2014	Drill Core Indicates Discoveryof Large Copper Ore Body	0.033  50%		0.031		6%
28/04/2014	QuarterlyActivities and Cash Flow Report	0.022  0%		0.030		36%
14/04/2014	Chalcopyrite Mineralisation Intersected	0.020 	5%	0.022		10%

On 29 April 2014, Promesa announced an update in relation to the commencement of its drilling at the Alumbre Project. In particular, it disclosed that a large zone of mineralisation had been intersected in one of the drill holes which included fine grained copper and molybdenum mineralisation. As expected on the day of the announcement the Company’s share price increased by 50% to $0.033.

On 1 May 2014, the Company replaced its prior announcement dated 29 April 2014 and updated it to reflect that the drill core interpretation indicated a potentially large copper porphyry system as opposed to an ore body. No other new information was announced. The share price increased by 15 % to $0.030 and continued to increase in the three days after the announcement, with share price closing at $0.037, representing a 23% increase.

On 8 May 2014, Promesa announced it had successfully drilled their fifth hole in their stage 1 drilling program. The announcement confirmed potential prospectively of a porphyry system. Notwithstanding this announcement, Promesa’s share price remained unchanged on the announcement day, and subsequently decreased by 22% over the subsequently three days to $0.029.

On 20 May 2014, Promesa announced that it had successfully renegotiated and improved the terms of its farm-in agreement with Minera Fabricio S.A.C. the vendor of a specific concession within the Alumbre Project. Unexpectedly on the day of this announcement, Promesa’s share price decreased by 4% but over the subsequent three trading days increased by 21% to $0.029.

On 23 July 2014, the Company announced that it had received approval from the Ministry of Mines and Energy in Peru for their amended stage 2 drilling program for the Alumbre Project. On the back of this announcement, the share price of Promesa rose by 19% to $0.032 over the subsequent three days of trade.

On 14 October 2014, Promesa provided an update on its progress for stage 2 of drilling at the Alumbre Project and confirmed that the results appeared consistent with a mineralised porphyry system. On the day of the announcement, Promesa’s share price increased by 17% to close at $0.021, but subsequently decreased by 19% over the next three days to close at $0.017.

On 8 January 2015, the Company announced drill hole results for the Alumbre Project. The share price remained unchanged on the day of the announcement, but subsequently fell by 14% over the next three days to close at $0.006.

On 23 January 2015, Promesa announced further drill hole results for the Alumbre Project. The share price remained unchanged on the day of the announcement, but over the subsequent three days, fell by 17% to close at $0.005.

On 17 February 2015, Promesa provided a letter responding to ASX’s query letter and confirmed the directors of Promesa considered they had sufficient funding capacity to continue operations. As a result of this announcement, although the share price did not change on the day of the announcement, three days subsequent to the announcement the share price of Promesa had increased by 25%, resulting in a closing price of $0.005.

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To provide further analysis of the market prices for a Promesa share, we have also considered the volume weighted average market price for 10, 30, 60 and 90 day periods to 10 April 2015.

Share Price per unit	10-Apr-15	10 Days	30 Days	60 Days	90 Days
Closing price	$0.006
Volume weighted average price (VWAP)		$0.003	$0.003	$0.003	$0.004

Source: Bloomberg, BDO analysis

The above weighted average prices are prior to the date of the announcement of the Transaction, to avoid the influence of any increase in price of Promesa’s shares that has occurred since the Transaction was announced.

An analysis of the volume of trading in Promesa shares for the 12 months to 10 April 2015 is set out below:

Trading days	Share price	Share price	Cumulative volume	As a % of
	low	high	traded	Issued capital
1 Day	$0.006	$0.006	-	0.00%
10 Days	$0.002	$0.006	16,861,199	4.39%
30 Days	$0.002	$0.006	30,343,974	7.89%
60 Days	$0.002	$0.006	34,250,082	8.91%
90 Days	$0.002	$0.009	41,408,096	10.77%
180 Days	$0.002	$0.032	95,795,512	27.83%
1 Year	$0.002	$0.049	214,064,963	69.31%

Source: Bloomberg, BDO analysis

This table indicates that Promesa’s shares display a moderate level of liquidity, with 69.31% of the Company’s current issued capital being traded in a 12 month period. For the quoted market price methodology to be reliable there needs to be a ‘deep’ market in the shares. RG 111.69 indicates that a ‘deep’ market should reflect a liquid and active market. We consider the following characteristics to be representative of a deep market:

Regular trading in a company’s securities;
Approximately 1% of a company’s securities are traded on a weekly basis;
The spread of a company’s shares must not be so great that a single minority trade can significantly affect the market capitalisation of a company; and
There are no significant but unexplained movements in share price.

A company’s shares should meet all of the above criteria to be considered ‘deep’, however, failure of a company’s securities to exhibit all of the above characteristics does not necessarily mean that the value of its shares cannot be considered relevant.

In the case of Promesa, we do not consider there to be a deep market for Promesa’s shares noting that only 27.83% of Promesa’s current issued capital traded on the ASX over the 180 trading days prior to the announcement of the Transaction and there are some unexplained movements in the share price of Promesa.

Our assessment is that a range of values for Promesa shares based on market pricing, after disregarding post announcement pricing, is between 0.3 cents and 0.4 cents. We note that Promesa’s share price increased from a close of $0.003 on the 7 April 2015 to $0.006 on the 8 April 2015. We note that a parcel

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of 100,000 Promesa shares traded at $0.006 on the close of the market on the 8 April 2015. We have excluded this closing price from our QMP analysis due to the immaterial value of the trade.

Control Premium

We have reviewed the control premiums paid by acquirers of companies listed on the ASX. We have summarised our findings below:

Year	Number of Transactions	Average Deal Value (AU$m)	Average Control Premium (%)
2014	34	493.91	31.40
2013	39	194.10	47.97
2012	55	329.89	36.46
2011	70	733.44	49.91
2010	70	730.89	37.93
2009	65	317.39	44.63
2008	43	753.31	39.47
2007	84	1008.24	21.79
2006	96	647.74	22.95
	Mean	578.77	36.95
	Median	647.74	37.93

Source: Bloomberg and BDO Analysis

The mean and median figures above are calculated based on the average deal value and control premium for each respective year. To ensure our data is not skewed we have also calculated the mean and median of the entire data set comprising control transactions from 2006 onwards, as set out below.

Entire Data Set Metrics		Average Deal Value (AU$m)	Average Control Premium (%)
	Mean	621.43	35.48
	Median	84.90	28.79

Source: Bloomberg and BDO Analysis

In arriving at an appropriate control premium to apply we note that observed control premiums can vary due to the:

Nature and magnitude of non-operating assets;
Nature and magnitude of discretionary expenses;
Perceived quality of existing management;
Nature and magnitude of business opportunities not currently being exploited;
Ability to integrate the acquiree into the acquirer’s business;
Level of pre-announcement speculation of the transaction;
Level of liquidity in the trade of the acquiree’s securities.

The table above indicates the long term average control premiums paid by acquirers of all companies on the ASX is approximately 35.5%.

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In assessing the sample of transactions which were included in the table, we’ve noted transactions within the list which appear to be extreme outliers. These outliers include 30 transactions where the announced control premium was in excess of 100% and 47 transactions where the acquirer obtained a controlling interest at a discount (i.e. less than 0%). In a sample where there are extreme outliers, the median often represents a superior measure of central tendency compared to the mean.

In the case of Promesa, if the Transaction is approved, Key has the potential to increase its holding to a range between 41.85% and 60.53%, assuming no further shares are issued. As a result, Key should be expected to pay a control premium. In determining the premium for control to be paid by Key we have taken into account the above analysis including the nature of the Transaction. We believe an appropriate control premium to apply to our valuation is between 20% and 25%.

Quoted market price including control premium

Applying a control premium to Promesa’s quoted market share price results in the following quoted market price value including a premium for control:

	Low	Midpoint	High
	Cents	Cents	Cents
Quoted market price value	0.30	0.35	0.40
Control premium	20%	23%	25%
Quoted market price valuation including a premium for control	0.36	0.43	0.50

Source: BDO analysis

Therefore, our valuation of a Promesa share based on the quoted market price method and including a premium for control is between 0.36 cents and 0.50 cents, with a midpoint value of 0.43 cents.

10.3. Assessment of Promesa’s Value

The results of the valuations performed are summarised in the table below:

	Low	Preferred	High
	cents	cents	cents
Net assets value (Section 10.1)	Nil	Nil	Nil
ASX market prices (Section 10.2)	0.36	0.43	0.50

Source: BDO analysis

Our valuation of a Promesa share under the QMP methodology (including a premium for control) is significantly higher than our valuation under the NAV methodology. The differences between the valuations obtained under the NAV and QMP approaches can be explained by the following:

The NAV value is lower than the QMP value range, which is not uncommon for exploration companies, which often trade at a premium to their net asset values. This is because investors anticipate some potential upside of ‘blue-sky’ prospects for the company, which are factors into the share price in advance of any such value being warranted. We note that the intention to

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relinquish the exploration assets was only announced as part of the announcement of the Transaction.

Our NAV methodology includes an independent valuation report of Promesa’s mineral assets performed by Agricola. Agricola has relied on a combination of valuation methods which reflect the potential value of Promesa’s mineral assets.
Under RG 111.69(d), the QMP methodology is considered appropriate when a liquid and active market exists for the securities. From our analysis of the QMP of a Promesa share, we note that there is not a deep market for the Company’s shares with only 27.8% of the Company’s share capital being traded in the six months trading period. Additionally, there are numerous unexplained trading volume spikes which has resulted in irregular trading over the period.

For the reasons described above, we conclude that the value obtained under the NAV approach is the most appropriate methodology and as such consider the value of a Promesa share to be nil as the Company has a net asset deficiency.

11. Valuation of Promesa following the Transaction

When assessing non-cash consideration in control transactions, RG 111.31 suggests that a comparison should be made between the value of the securities being offered (allowing for a minority discount) and the value of the target entity’s securities, assuming 100% of the securities are available for sale. This comparison reflects the fact that:

the acquirer is obtaining or increasing control of the target; and
the security holders in the target will be receiving scrip constituting minority interests in the combined entity.

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11.1 Net Asset Value of Thredit pre the Transaction

	Audited as at Preferred
NAV of Thredit Notes	31-Mar-15 Value
	HKD$ AU$
CURRENT ASSETS
Cash and cash equivalents 1	- 1,000,000
TOTAL CURRENT ASSETS	- 1,000,000
NON-CURRENT ASSETS
Intangible asset 2	1 -
TOTAL NON-CURRENT ASSETS	1 -
TOTAL ASSETS	1 1,000,000

CURRENT LIABILITIES
Borrowings 1	- 1,000,000
Accruals 3	50,000 8,352
TOTAL CURRENT LIABILITIES	50,000 1,008,352
TOTAL LIABILITIES	50,000 1,008,352
NET ASSETS	(49,999) (8,352)

Source: BDO analysis

We have been advised that there has not been a significant change in the net assets of Thredit since 31 March 2015 apart from the adjustments discussed below.

Note 1: Cash and cash equivalents

We have adjusted the value of Thredit to reflect the Series A Convertible Notes and Series B Convertible Notes that Thredit entered into after 31 March 2015. Collectively the convertible notes inject $1 million in cash. We subsequently increased borrowings to reflect the convertible note liability. These convertible notes will covert to Promesa shares post transaction.

Note 2: Intangible asset

The HKD$1 value of Thredit’s intangible asset is not reflective of the fair value of the Thred app or the cash expended on its development by Key. We have removed this value from our NAV of Thredit as we believe the future economic benefits of the Thred app cannot be valued at this early stage of development. We understand that Thredit will revalue the intangible asset once the software is launched to consumers.

Note 3: Accruals

We note our valuation of Thredit assumes an exchange rate of AU$1 : HKD$ 5.986, which is based on the average exchange rate observed over the one month up to 30 June 2015.

11.2 Value of Promesa following the Transaction

The value of Promesa following the Transaction is reflected in our valuation below:

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NAV following the Transaction	Notes	Low value	Preferred value	High value
		$	$	$
NAV of Promesa prior to the Transaction	Ref 10.1	(1,437,294)	(1,407,294)	(1,377,294)
Adjustments to NAV of Promesa	1	1,000,000	1,000,000	1,000,000
NAV of Thredit	Ref 11.1	(8,352)	(8,352)	(8,352)
Adjustments to NAV of Thredit	2	1,000,000	1,000,000	1,000,000
Net cash raised from Capital Raising	3	4,441,937	4,441,937	9,136,937
Value of Promesa following the transaction		4,996,291	5,026,291	9,751,291
Discount for minority interest	4	20%	19%	17%
Value of Promesa following the transaction		3,997,033	4,086,416	8,126,076
(minority interest basis)
Number of shares on issue post Transaction	5	697,353,117	697,353,117	797,353,117
Value per share ($)		0.005732	0.005860	0.010191
Value per share (cents)		0.573	0.586	1.019

Source: BDO analysis

Note 1: Adjustments to the NAV of Promesa following the Transaction

As previously detailed in section 10.1 of our Report, Promesa recently entered into a secured convertible loan agreement with various holders pursuant to which $1 million in cash was raised. Prior to the Transaction, the conversion feature of the loan is subject to Shareholder approval. Subsequent to the Transaction it is likely the liability associated with the Promesa Convertible Loans will be extinguished by the issue of shares largely due to the short repayment period of the loan post the Transaction. As such, we have assumed the Promesa Convertible Loans will convert to shares post the Transaction.

We have made the corresponding increase in shares in note 5 below and have adjusted the net assets of Promesa to remove the $1 million liability.

Additionally, we note that Promesa has determined to either sell or relinquish its mineral assets. We have not adjusted our value to remove the mineral assets of Promesa on the basis that we consider that Promesa is likely to be able to sell these assets at the market values which have been provided by Agricola.

Note 2: Adjustments to the NAV of Thredit following the Transaction

As per note 1 above, we have also adjusted the net assets of Thredit to reflect the conversion of its convertible notes to Promesa shares. Promesa has advised that the Thredit convertible notes will convert to ordinary Promesa shares immediately upon settlement of the Transaction. $500,000 of the Thredit convertible notes will convert at a post consolidation price of $0.025 and the remaining $500,000 will convert at $0.04. As such, we believe these notes will also be extinguished by the issue of Promesa shares. We have adjusted the number of shares on issue post the Transaction to reflect this conversion.

Note 3: Cash raised from the Capital Raising

We have included a value adjustment to the Post-Transaction value of Promesa to take into account the funds raised (net of costs) from the Capital Raising. The net cash proceeds from the Capital Raising are as detailed in the table below.

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Cash raised from Capital Raising	Minimum Subscription Full Subscription
Number of shares to be issued	100,000,000 200,000,000
Issue price of shares ($)	0.05 0.05
Cash raised from Capital Raising ($)	5,000,000 10,000,000
Less: costs to the offer ($)	(558,063) (863,063)
Net cash proceeds from Capital Raising ($)	4,441,937 9,136,937
Source:BDO analysis

We have valued the Company post the Transaction on a fully subscribed basis (representing the Full Subscription scenario) and on a minimum subscription basis (representing the Minimum Subscription scenario).

We note the Capital Raising may reach a subscription level anywhere in between these two scenarios however, based on the information presently available as at the date of our Report, we consider that we do not have sufficient reasonable grounds to assume the Capital Raising will be fully subscribed. As such, for the purposes of our low and preferred valuations, we have assumed that the minimum Capital Raising of $5 million will be subscribed. Our high valuation is based on a fully subscribed Capital Raising to demonstrate the potential value of Promesa should the Capital Raising be fully subscribed.

Note 4: Application of minority discount

The net asset value of a Promesa share following the Transaction is reflective of a controlling interest. This suggests that the acquirer obtains an interest in the Company which allows them to have an individual influence in the operations and value of that company. Therefore, if the Transaction is approved, Shareholders may become minority interest shareholders in Promesa as Key may hold a controlling interest. As such, Shareholders interests will not be considered significant enough to have an individual influence in the operations and value of the Company.

We have therefore adjusted our valuation of a Promesa share following the Transaction, to reflect a minority interest holding. A minority interest discount is the inverse of a premium for control and is calculated using the formula 1- (1÷ (1 + control premium)). As discussed in section 10.2, we consider an appropriate control premium for Promesa to be in the range of 20% to 25%, giving a minority interest discount in the range of 17% to 20%.

Note 5: Shares on issue Post-Transaction

A summary of the share movements is detailed below:

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Shares on issue following the Transaction		Minimum		Maximum
Current number of shares on issue prior to the Transaction		480,515,581
Conversion ratio (5:1)		5
Current number of shares on issue post consolidation		96,103,117
Issue of Consideration Shares		250,000,000
Shares issued to Armada Capital		12,500,000
Shares issued to Dean Banister		6,250,000
Issue of Shares on conversion of Series A Convertible Notes		20,000,000
Issue of Shares on conversion of Series B Convertible Notes		12,500,000
Issue of Shares on conversion of Promesa Convertible Notes		200,000,000
Shares issued in Capital Raising		100,000,000 200,000,000
Total shares on issue following the Transaction		697,353,117 797,353,117

Source: BDO analysis

We have valued the Company post the Transaction on a fully subscribed basis (representing the maximum Subscription scenario) and on a minimum subscription basis (representing the Minimum Subscription scenario). We have used the minimum subscription scenario in our low and preferred valuations as we do not have sufficient reasonable grounds to assume the Capital Raising will be fully subscribed based on the information presently available at the date of our Report. We applied the maximum subscription scenario to our high valuation.

We have not determined the value on a fully diluted basis. At present, there is limited available information and certainty around the future performance and ability of Promesa to achieve the following performance shares milestones and option conditions:

vesting of 140 million Performance Shares to Key;
vesting of 7 million Armada Performance Shares issued to Armada;
exercise of 100 million Armada Options issued to Armada; and
exercise of any other options as outlined in section 5 of our Report.

We consider this is appropriate given that, as at the date of our Report and after taking into account the issue price of the Capital Raising, the Armada Options and all other outstanding options are all out-of-themoney.

12. Is the Transaction fair?

The value of a Promesa share prior to the Transaction on a controlling interest basis is compared to the value of a Promesa share following completion of the Transaction on a minority interest basis below:

	Ref	Low cents	Preferred cents	High cents
Value of a Promesa share prior to the Transaction on a control basis	10.1	Nil	Nil	Nil
Value of a Promesa share following the Transaction on a minority basis	11.2	0.573	0.586	1.019

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We note from the table above that the value of a Promesa share following the Transaction on a minority basis is higher than the value of a Promesa share prior to the Transaction on a control basis. Therefore, we consider that the Transaction is fair.

13. Is the Transaction reasonable?

13.1 Alternative Proposal

We are unaware of any alternative proposal that might offer the Shareholders of Promesa a premium over the value ascribed to, resulting from the Transaction.

In particular we have been advised that Promesa has investigated other opportunities to invest in information technology businesses, however, these efforts had not yielded any alternative targets of a suitable nature.

13.2 Practical Level of Control

If the Transaction is approved then Key will have an initial relevant interest ranging between 41.85% to 60.53% in Promesa (assuming that the Promesa Convertible Loans are not converted). In addition to this and as part of the Transaction, Promesa’s existing board will predominantly be replaced.

When shareholders are required to approve an issue that relates to a company there are two types of approval levels. These are general resolutions and special resolutions. A general resolution requires 50% of shares to be voted in favour to approve a matter and a special resolution required 75% of shares on issue to be voted in favour to approve a matter. Key will not be able to pass special resolutions but can block special resolutions and potentially pass general resolutions depending on the capital raising scenario if the Transaction is approved.

Promesa’s Board currently comprises of three directors. As part of the Transaction, Mr Timothy Wise will cease as a director, and three new directors will be appointed to the Board. The new board will consist of:

Mr Solomon Majteles (existing Non-Executive Chairman of Promesa);
Mr Ananda Kathiravelu (existing Executive Director of Promesa);
Mr David Whitaker (proposed director and current director of Key);
Mr Chris Jones (proposed director from Thredit); and
Mr Chris Adams (proposed director).

This means that the proposed directors associated with Key and Thredit will make up the majority of the Board. Additionally, assuming the issue of shares on the vesting of the Performance Shares, Key will have a maximum relevant interest ranging between 52.39% to 60.53% (assuming that the Promesa Convertible Loans are not converted). In this case, if the Transaction is approved Key will be able to block general and special resolutions and pass general resolutions.

Key’s control of Promesa following the Transaction will be significant when compared to all other shareholders. However, with an initial shareholding of between 41.85% to 60.53% in Promesa (assuming that the Promesa Convertible Loans are not converted) and the majority of the Board, (including the directors of Thredit) Key will not have 100% control at the shareholder and Board levels. Therefore in our opinion, while Key will be able to significantly influence the activities of Promesa, it will not be able to exercise similar level of control as if it held 100% of Promesa.

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13.3 Consequences of not Approving the Transaction

Consequences

If the Transaction is not approved, Promesa will retain its existing operations. As such, the Directors of Promesa would need to consider funding alternatives to further develop its exploration assets and continue as a going concern.

Potential decline in share price

We have analysed movements in Promesa’s share price after the Transaction was announced. A graph of Promesa’s share price after the announcement is set out below.

Promesa share price and trading volume history

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

0.016 80.0
0.014 70.0
0.012 60.0
Date of Announcement
0.010 50.0
0.008 40.0
0.006 30.0
0.004 20.0
0.002 10.0
0.000 -
Volume Closing share price
Share Price ($)
Volume (millions)
----- End of picture text -----

Source: Bloomberg

As illustrated by the graph above, following the announcement on 13 April 2015 there has been an increase in both share price and volume of shares traded. Specifically, the VWAP from 13 April 2015 to 30 June 2015 is approximately 1.509 cents. We note this is significantly higher than our quoted market price range of 0.3 to 0.4 cents (before applying a control premium) as assessed in section 10.2. Given the above, it is likely the Transaction is not approved by Shareholders then Promesa’s share price may decline back to pre-announcement level.

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13.4 Advantages of Approving the Transaction

We have considered the following advantages when assessing whether the Transaction is reasonable.

Advantage	Description
The Transaction is fair	As set out in Section 12, the Transaction is fair. RG 111 states that an offer is
	reasonable if it is fair.
Shareholders of Promesa will	Promesa is presently a company involved in mining exploration. As such, if the
own shares in a company with a	Transaction is approved, the Company will need to seek approval to change the
greater potential to generate a	nature and scale of it activities.
return for Shareholders	If the Transaction is approved by Shareholders, Promesa will acquire a business
	operating in the mobile application development industry with potential grow and
	derive revenues in the future. If Thred is successfully commercialised, the
	Company’s shares will have the potential for capital growth, and additionally
	subject to the discretion of directors of the Company at that time, Shareholders
	may also benefit from the payment of dividends.
Liquidity of Promesa’s shares	We have analysed the trading of Promesa’s shares in the twelve-month period to 10
may increase	April 2015 and note that over this period, only 69% of the Company’s issued capital
	had been traded. This is a moderate level of liquidity and makes it difficult for
	Shareholders who wish to buy or sell shares in the Company.
	Noting the increased liquidity in Promesa’s shares following the announcement of
	the Transaction, as well as the increased number of shares which will be on issue
	following the Transaction, we consider it is likely that the level of liquidity for
	Promesa’s shares will increase if the Transaction is approved. We note that
	increased liquidity will benefit Shareholders as it will improve their ability to trade
	Promesa shares.
Changing the nature and scale	Changing the business operations of Promesa could attract new investors who are
of Promesa could attract new	more specifically interested in technology based investments, this additional
investors	interest may also allow the Company to more readily raise additional working
	capital when required.
The Transaction provides the	We note that for the year ended 30 June 2014 and the half year ended 31
Company with a cash injection	December 2014, the Company’s auditor issued an emphasis of matter outlining the
	existence of material uncertainty in relation to the Company’s ability to continue as
	a going concern if it is unable to seek additional funding.
	As a result of the Capital Raising, the Company will receive a cash injection of
	between $5m and $10m (before costs). These funds are likely to provide Promesa
	with sufficient funding for business development and working capital requirements
	for the near term future.
Experienced management team	If the Transaction is approved, Promesa’s Board will be restructured such that the

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and Board of Directors

proposed Board of Promesa will comprise of:

 Mr Solomon Majteles;

Mr. Majteles graduated in law from the University of Western Australia and has been in private legal practice since 1972. He has over 35 years’ experience in business, corporate, property and commercial law and practise. He is a Fellow of the Australian Institute of Company Directors, a member of the Property Council of Australia and has been a member of the Law Society/REIWA General Conditions for Sale of Land Permanent Committee since 1990. Mr. Majteles has been a director of various private and ASX listed companies for more than 25 years and is currently non-executive chairman of ASX listed company Metals Australia Limited and a nonexecutive director of ASX listed Power Resources Limited, Prime Minerals Limited and Blaze International Limited.

 Mr Ananda Kathiravelu;

Mr. Kathiravelu is an experienced corporate adviser who has worked in the financial services funds management and stockbroking industries for over 20 years. He is a Director of Armada Capital Limited, Chairman of Potash Minerals Ltd and NonExecutive Director of Radar Iron Ltd. His areas of expertise include corporate advice, capital raising and mergers and acquisitions.

Mr David Whitaker;

Mr. Whitaker is a technology entrepreneur with experience in developing digital businesses. He has founded and built companies ranging from mobile applications to group buying to digital agencies. Mr. Whitaker’s ability to rapidly grow teams for fast progression and establish strategic partnerships for early startup companies has made him a sought after specialist for companies expanding into the Asian market. He has provided strategic counsel to brands such as SAB Miller, Yahoo and Macquarie Bank.

 Mr Chris Jones; and

Mr. Jones is one of Australia’s leading experts in app marketing and user acquisition. Mr. Jones has consulted to hundreds of app marketers and developers including Microsoft, Cheetah Mobile, Visual Supply Co and many others. He has experience in both large brands and startups and has held management roles with Boost Mobile, Mattel & Virgin Mobile Australia plus several Australian based startups. Mr. Jones is a graduate of The Kellogg School of Management at Northwestern University.

 Mr Chris Adams:

Mr. Adams is an internationally recognised digital strategist, social media pioneer, advisor and technology executive with over 20 years’ experience in accelerating businesses. He was responsible for integrating video onto Facebook’s platform back in 2006 and also played a key role for Facebook in the creation and production of the acclaimed reality TV series ‘Facebook Diaries’.

Mr. Adams served as Senior Vice President of Business Development and Chief Vision

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Officer for Participant Media and was involved in its first slate of movies including: An Inconvenient Truth, Syriana, Charlie Wilson’s War, North Country, Good Night, And Good Luck and Kite Runner. He assisted Comcast Cable & Interactive to secure sponsorship for its VOD platform and led entertainment business development for both Amazon and Lycos and until recently, he served as CEO and Executive Director of video streaming and syndication company Spondo.com.

He is on the Advisory Boards of companies Manalto, (ASX Code: MTL), Spiral Toys (OTCBB:STOY) VoiceByte and Impact Academy. He is also an award-winning children’s author, with his next book narrated by Hugh Jackman scheduled for publication in early 2016, with the proceeds benefiting The Global Poverty Project and World Vision Australia.

We consider the skill set of each member will provide the Company with the opportunity to operate in the mobile application development space and generate positive returns for Shareholders.

Performance Rights provide an incentive to increase Promesa’s value

The following milestones will need to be accomplished in order for 140 million Performance Rights issued to Key and 7 million Performance Rights issued to Armada to be exercised:

31.5 million performance shares which convert to ordinary shares on the launch of the Thred mobile phone app (with functionality including message centre, Thred creation, link and image sharing, social profile collaboration and micro-threds), within a period of 90 days from the date of completion of the Capital Raising;
42 million performance shares which convert to ordinary shares upon 250,000 downloads of the Thred mobile phone app being completed within a period of 90 days from the completion of Milestone 1;
42 million performance shares which convert to ordinary shares upon the Company updating the Thred mobile phone app to incorporate an artificial intelligence (‘AI’) engine within a period of 180 days from the completion of the Capital Raising with the AI engine having minimum functionality consistent with the following:
the AI engine learns the preferences of the users and their message partners;
the AI engine then predictively suggests matches when the users are creating new threds;
suggested matches will include potential recipients who, through their own choices, have been profiled as having similar interests as the thred creator; and
the AI engine will suggest recipients only from the users own connected social groups.
31.5 million performance shares which convert to ordinary shares upon one

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	million downloads of the Thred mobile phone app being completed within
	a period of 360 days from the completion of the Capital Raising.
	The structure of the consideration with the issue of Performance Shares provides an
	incentive for Key to meet the milestones listed above. This is beneficial for
	Shareholders noting that, if the milestones are achieved, although Shareholders will
	be further diluted, Shareholders are likely to benefit from the capital growth
	associated with the successful operations of the Company.
Alignment of Key’s interests to	As part of the consideration of the Transaction, Key will receive 250 million shares
Shareholders’ interests	in Promesa. Subject to the subscription levels of the Capital Raising, Key will have a
	relevant interest of between 41.85% and 60.53% of the issued capital in Promesa
	following the Transaction (assuming the Promesa Convertible Loans do not convert).
	We consider that given Key will hold a sizeable investment in the Company it will
	be in the best interests of Key to aid in growing the Company and earning a return
	of its investment. In our view, this means that the interests of Key are aligned to
	those of Shareholders.

13.5 Disadvantages of Approving the Transaction

If the Transaction is approved, in our opinion, the potential disadvantages to Shareholders include those listed in the table below:

Disadvantage	Description
Dilution of existing	As set out in section 4, if the Transaction is approved, Shareholders’ interests in
Shareholders’ interests	Promesa may be diluted in the worst case from 100% to 12.91% (assuming the
	Promesa Convertible Loans do not convert). We note this assumes the Capital
	Raising is fully subscribed, and the Performance Shares and Armada Performance
	Shares have vested.
	This dilution will significantly reduce the capacity for Shareholders’ to influence
	the operations of the Company.
Exposure to the development	If the Transaction is approved, the Company will acquire Thredit and its existing
stage risks associated with	operations and therefore change the nature of the Company’s activities. Thredit
Thredit	operates in a different sector to that of Promesa. This means that Shareholders will
	be exposed to the sector and business risk profile that Thredit operates in.
	We note that Thredit has only just recently completed alpha stage development,
	and is now in beta stage development. Nonetheless there is no certainty around the
	potential use and commerciality of the mobile application. This means that there
	are significant risks associated with the acquisition of Thredit.

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Change in the nature and scale Promesa currently holds exploration tenements. If the Transaction is approved, the of Promesa’s activities may not nature and scale of its activities will change to consist of Thredit’s business. This align with Shareholders’ change may not be consistent with the objectives and risk profiles of the investment objectives Shareholders.

14. Conclusion

We have considered the terms of the Transaction as outlined in the body of this report and have concluded that the Transaction is fair and reasonable to the Shareholders.

In particular, the Transaction is fair because the value of a Promesa share following completion of the Transaction on a minority interest basis is greater than a Promesa share prior to completion of the Transaction on a controlling interest basis.

15. Sources of information

This report has been based on the following information:

Draft Notice of General Meeting and Explanatory Statement on or about the date of this report;
Audited financial statements of Promesa for the years ended 30 June 2014 and 30 June 2013 and reviewed financial statements for the half year ended 31 December 2014;
Audited financial statements of Thredit for the financial period from 24 March 2015 to 31 March 2015;
Independent Valuation Report of Promesa’s mineral assets performed by Agricola dated on or about the date of this report;
Share registry information;
Information in the public domain; and
Discussions with Directors and Management of Promesa and Thredit.

16. Independence

BDO Corporate Finance (WA) Pty Ltd is entitled to receive a fee of $28,000 (excluding GST and reimbursement of out of pocket expenses). The fee is not contingent on the conclusion, content or future use of this Report. Except for this fee, BDO Corporate Finance (WA) Pty Ltd has not received and will not receive any pecuniary or other benefit whether direct or indirect in connection with the preparation of our report.

BDO Corporate Finance (WA) Pty Ltd has been indemnified by Promesa in respect of any claim arising from BDO Corporate Finance (WA) Pty Ltd's reliance on information provided by the Promesa, including the nonprovision of material information, in relation to the preparation of our report.

Prior to accepting this engagement BDO Corporate Finance (WA) Pty Ltd has considered its independence with respect to Thredit and Promesa and any of their respective associates with reference to ASIC Regulatory Guide 112 ‘Independence of Experts’. In BDO Corporate Finance (WA) Pty Ltd’s opinion it is independent of Thredit and Promesa and their respective associates.

Neither the two signatories to this report nor BDO Corporate Finance (WA) Pty Ltd, have had within the past two years any professional relationship with Promesa, or their associates, other than in connection with the preparation of this report.

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A draft of this report was provided to Promesa and its advisors for confirmation of the factual accuracy of its contents. No significant changes were made to this report as a result of this review.

BDO is the brand name for the BDO International network and for each of the BDO Member firms.

BDO (Australia) Ltd, an Australian company limited by guarantee, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of Independent Member Firms. BDO in Australia, is a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International).

17. Qualifications

BDO Corporate Finance (WA) Pty Ltd has extensive experience in the provision of corporate finance advice, particularly in respect of takeovers, mergers and acquisitions.

BDO Corporate Finance (WA) Pty Ltd holds an Australian Financial Services Licence issued by the Australian Securities and Investment Commission for giving expert reports pursuant to the Listing rules of the ASX and the Corporations Act.

The persons specifically involved in preparing and reviewing this report were Sherif Andrawes and Adam Myers of BDO Corporate Finance (WA) Pty Ltd. They have significant experience in the preparation of independent expert reports, valuations and mergers and acquisitions advice across a wide range of industries in Australia and were supported by other BDO staff.

Sherif Andrawes is a Fellow of the Institute of Chartered Accountants in England & Wales and a Member of the Institute of Chartered Accountants in Australia. He has over twenty five years experience working in the audit and corporate finance fields with BDO and its predecessor firms in London and Perth. He has been responsible for over 250 public company independent expert’s reports under the Corporations Act or ASX Listing Rules and is a CA BV Specialist. These experts’ reports cover a wide range of industries in Australia with a focus on companies in the natural resources sector. Sherif Andrawes is the Chairman of BDO in Western Australia, Corporate Finance Practice Group Leader of BDO in Western Australia and the Natural Resources Leader for BDO in Australia.

Adam Myers is a member of the Australian Institute of Chartered Accountants. Adam’s career spans 18 years in the Audit and Assurance and Corporate Finance areas. Adam has considerable experience in the preparation of independent expert reports and valuations in general for companies in a wide number of industry sectors.

18. Disclaimers and consents

This report has been prepared at the request of Promesa for inclusion in the Explanatory Memorandum which will be sent to all Promesa Shareholders. Promesa engaged BDO Corporate Finance (WA) Pty Ltd to prepare an independent expert's report to consider if the Transaction is fair and reasonable to Shareholders.

BDO Corporate Finance (WA) Pty Ltd hereby consents to this report accompanying the above Explanatory Memorandum. Apart from such use, neither the whole nor any part of this report, nor any reference thereto may be included in or with, or attached to any document, circular resolution, statement or letter without the prior written consent of BDO Corporate Finance (WA) Pty Ltd.

BDO Corporate Finance (WA) Pty Ltd takes no responsibility for the contents of the Explanatory Memorandum other than this report.

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We have no reason to believe that any of the information or explanations supplied to us are false or that material information has been withheld. It is not the role of BDO Corporate Finance (WA) Pty Ltd acting as an independent expert to perform any due diligence procedures on behalf of the Company. The Directors of the Company are responsible for conducting appropriate due diligence. BDO Corporate Finance (WA) Pty Ltd provides no warranty as to the adequacy, effectiveness or completeness of the due diligence process.

The opinion of BDO Corporate Finance (WA) Pty Ltd is based on the market, economic and other conditions prevailing at the date of this report. Such conditions can change significantly over short periods of time.

With respect to taxation implications it is recommended that individual Shareholders obtain their own taxation advice, in respect of the Transaction, tailored to their own particular circumstances. Furthermore, the advice provided in this report does not constitute legal or taxation advice to the Shareholders of Promesa, or any other party.

BDO Corporate Finance (WA) Pty Ltd has also considered and relied upon independent valuations for mineral assets held by Promesa.

The valuer engaged for the mineral asset valuation, Agricola, possess the appropriate qualifications and experience in the industry to make such assessments. The approaches adopted and assumptions made in arriving at their valuation is appropriate for this report. We have received consent from the valuer for the use of their valuation report in the preparation of this report and to append a copy of their report to this report.

The statements and opinions included in this report are given in good faith and in the belief that they are not false, misleading or incomplete.

The terms of this engagement are such that BDO Corporate Finance (WA) Pty Ltd has no obligation to update this report for events occurring subsequent to the date of this report.

Yours faithfully

BDO CORPORATE FINANCE (WA) PTY LTD

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Sherif Andrawes Director

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Adam Myers

Director

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A endix 1 – Glossar of Terms pp y

Reference	Definition

Agricola	Agricola Mining Consultants Pty Ltd

AI	Artificial intelligence

APES 225	Accounting Professional & Ethical Standards Board professional standard APES 225 ‘Valuation Services’

Armada	Armada Capital Limited

Armada Options	100 million options issued to Armada as part of the Transaction

Armada Performance Shares	7 million performance shares to be issued to Armada

Armada Shares	12.5 million ordinary shares to be issued to Armada

ASIC	Australian Securities and Investments Commission

ASX	Australian Securities Exchange

BAC	Basic Acquisition Cost

Bannister	Mr Dean Bannister

Bannister Shares	6.25 million ordinary shares to be issued to Bannister

Barrick	Barrick Gold Corporation Limited

BDO	BDO Corporate Finance (WA) Pty Ltd

Capital Raising	Promesa completing a minimum capital raising of $5 million at a price of $0.02 per share

Consideration Shares	250 million shares issued by Promesa to Key for the entire issued capital of Thredit

DCF	Discounted Future Cash Flows

EBIT	Earnings before interest and tax

EBITDA	Earnings before interest, tax, depreciation and amortisation

FME	Future Maintainable Earnings

Geo-factor rating	Kilburn Geoscience Rating

HOA	Heads of Agreement

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JORC Code	The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves

Key	Key Holdings Limited

Lanstead	Lanstead Capital L.P.

LTE	Long-Term Evolution

Milestone 1	31.5 million performance shares which convert to ordinary shares on the launch of the Thred mobile phone app (with functionality including message centre, Thred creation, link and image sharing, social profile collaboration and micro-threds), within a period of 90 days from the date of completion of the Capital Raising

Milestone 2	42 million performance shares which convert to ordinary shares upon 250,000 downloads of the Thred mobile phone app being completed within a period of 90 days from the completion of Milestone 1

Milestone 3	42 million performance shares which convert to ordinary shares upon the Company updating the Thred mobile phone app to incorporate an artificial intelligence (‘AI’) engine within a period of 180 days from the completion of the Capital Raising with the AI engine having minimum functionality consistent with the following:  the AI engine learns the preferences of the users and their message partners;  the AI engine then predictively suggests matches when the users are creating new threds;  suggested matches will include potential recipients who, through their own choices, have been profiled as having similar interests as the thred creator; and  the AI engine will suggest recipients only from the users own connected social groups.

Milestone 4	31.5 million performance shares which convert to ordinary shares upon one million downloads of the Thred mobile phone app being completed within a period of 360 days from the completion of the Capital Raising

NAV	Net Asset Value

Oban	Oban S.A.C.

Our Report	This Independent Expert’s Report prepared by BDO

Performance shares	Collectively refers to the performance shares issued to Key

Promesa	Promesa Limited

Promesa Convertible Loans	Promesa’s $1,000,000 convertible loan with an interest rate of 1% per month which, subject to shareholder approval, will convert together with accrued interest into Promesa shares at a conversion price of $0.005 per share (on a post-consolidation basis)

RG 111	Content of expert reports (March 2011)

RG 112	Independence of experts (March 2011)

RG 74	Acquisitions Approved by Members

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Series A Convertible Notes	Thredit’s $500,000 secured convertible loan with an interest rate of 8% per annum (12% on overdue amounts) which, subject to shareholder approval, will convert together with accrued interest into Promesa shares at a conversion price of $0.025 per share (on a post- consolidation basis)

Series B Convertible Notes	Thredit’s $500,000 secured convertible loan with an interest rate of 8% per annum (12% on overdue amounts) which, subject to shareholder approval, will convert together with accrued interest into Promesa shares at a conversion price of $0.04 per share (on a post- consolidation basis)

Shareholders	Shareholders of Promesa not associated with Key

Simon	Simon Nominees

The Act	The Corporations Act

The Company	Promesa Limited

The Transaction	The proposal to issue 250 million shares and 140 million performance rights in Promesa to the vendors of Key

Thredit	Thredit Limited

TIL	Thred Innovations Limited

Valmin Code	The Code of Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports

Valuation Engagement	An Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Valuer is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Valuer at that time.

VWAP	Volume Weighted Average Price

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All rights reserved. No part of this publication may be reproduced, published, distributed, displayed, copied or stored for public or private use in any information retrieval system, or transmitted in any form by any mechanical, photographic or electronic process, including electronically or digitally on the Internet or World Wide Web, or over any network, or local area network, without written permission of the author. No part of this publication may be modified, changed or exploited in any way used for derivative work or offered for sale without the express written permission of the author.

For permission requests, write to BDO Corporate Finance (WA) Pty Ltd, at the address below:

The Directors

BDO Corporate Finance (WA) Pty Ltd

38 Station Street SUBIACO, WA 6008 Australia

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A endix 2 – Valuation Methodolo ies pp g

Methodologies commonly used for valuing assets and businesses are as follows:

1 Net asset value (‘NAV’) Asset based methods estimate the market value of an entity’s securities based on the realisable value of its identifiable net assets. Asset based methods include:

Orderly realisation of assets method
Liquidation of assets method
Net assets on a going concern method

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to entity holders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the entity is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the entity may not be contemplated, these methods in their strictest form may not be appropriate. The net assets on a going concern method estimates the market values of the net assets of an entity but does not take into account any realisation costs.

Net assets on a going concern basis are usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. All assets and liabilities of the entity are valued at market value under this alternative and this combined market value forms the basis for the entity’s valuation.

Often the FME and DCF methodologies are used in valuing assets forming part of the overall Net assets on a going concern basis. This is particularly so for exploration and mining companies where investments are in finite life producing assets or prospective exploration areas.

These asset based methods ignore the possibility that the entity’s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as management, intellectual property and goodwill. Asset based methods are appropriate when an entity is not making an adequate return on its assets, a significant proportion of the entity’s assets are liquid or for asset holding companies.

2 Quoted Market Price Basis (‘QMP’) A valuation approach that can be used in conjunction with (or as a replacement for) other valuation methods is the quoted market price of listed securities. Where there is a ready market for securities such as the ASX, through which shares are traded, recent prices at which shares are bought and sold can be taken as the market value per share. Such market value includes all factors and influences that impact upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume trading, creating a ‘deep’ market in that security.

3 Capitalisation of future maintainable earnings (‘FME’) This method places a value on the business by estimating the likely FME, capitalised at an appropriate rate which reflects business outlook, business risk, investor expectations, future growth prospects and other entity specific factors. This approach relies on the availability and analysis of comparable market data.

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The FME approach is the most commonly applied valuation technique and is particularly applicable to profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure requirements and non-finite lives.

The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings before interest and tax (‘ EBIT ’) or earnings before interest, tax, depreciation and amortisation (‘ EBITDA ’). The capitalisation rate or ‘earnings multiple’ is adjusted to reflect which base is being used for FME.

4 Discounted future cash flows (‘DCF’)

The DCF methodology is based on the generally accepted theory that the value of an asset or business depends on its future net cash flows, discounted to their present value at an appropriate discount rate (often called the weighted average cost of capital). This discount rate represents an opportunity cost of capital reflecting the expected rate of return which investors can obtain from investments having equivalent risks.

Considerable judgement is required to estimate the future cash flows which must be able to be reliably estimated for a sufficiently long period to make this valuation methodology appropriate.

A terminal value for the asset or business is calculated at the end of the future cash flow period and this is also discounted to its present value using the appropriate discount rate.

DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are in a start-up phase, or experience irregular cash flows.

5 Market Based Assessment

The market based approach seeks to arrive at a value for a business by reference to comparable transactions involving the sale of similar businesses. This is based on the premise that companies with similar characteristics, such as operating in similar industries, command similar values. In performing this analysis it is important to acknowledge the differences between the comparable companies being analysed and the company that is being valued and then to reflect these differences in the valuation.

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Appendix 3 – Independent Valuation Re ort b A ricola p y g

==> picture [137 x 135] intentionally omitted <==

Malcolm
Castle Agricola
Mining
Consultants
Pty
Ltd P.O.
Box
473,
South
Perth,
WA
6951 Mobile:
61
(4)
1234
7511 Email:
[email protected] ABN:
84
274
218
871

22
July
2015

The
Directors Promesa
Limited Level
28,
140
St
George’s
Terrace, Perth,
WA,
6000

Dear
Sirs,

**Re: INDEPENDENT

VALUATION
OF
MINERAL
PROPERTIES
in
PERU
HELD
BY**

**PROMESA

LIMITED**

We
have
been
commissioned
to
provide
a
Mineral
Asset
Valuation
Report
(“Report”)
on
the
Mineral Assets
in
Peru
held
by
Promesa
Limited
(the
“Company”).
This
report
serves
to
comment
on
the geological
setting
and
exploration
results
on
the
properties
and
presents
a
technical
and
market valuation
for
the
exploration
assets
based
on
the
information
in
this
Report.

The
status
of
the
tenements
has
been
verified
by
me
pursuant
to
paragraph
67
of
the
VALMIN
Code by
reference
to
a
Tenure
Verification
Letter
dated
8
June
2015
prepared
by
Estudio
Egusquiza,
an independent
legal
firm
based
in
Lima,
Peru.
The
Company
provided
updates
to
the
current
tenement situation
in
July
2015.
The
present
status
of
the
tenements
in
Peru
is
based
on
information
made available
by
the
Company
and
released
to
the
ASX
as
part
of
its
reporting
requirements.
The
Report has
been
prepared
on
the
assumption
that
the
tenements
are
lawfully
accessible
for
evaluation.

_**Scope

of
the
Valuation
Report**_

Agricola
Mining
Consultants
Pty
Ltd
(“Agricola”)
prepared
this
Report.
In
the
preparation
of
the Report,
Agricola
utilised
information
relating
to
operational
methods
and
expectations
provided
to them
by
various
sources.
Where
possible,
Agricola
has
verified
this
information
from
independent sources.
This
Repot
has
been
prepared
for
the
purpose
of
providing
information
to
shareholders
but Directors
of
Agricola
accept
no
liability
for
any
losses
arising
from
reliance
upon
the
information presented
in
this
Report.

This
mineral
asset
valuation
endeavours
to
ascertain
the
unencumbered
price
which
a
willing
but
not anxious
vendor
could
reasonably
expect
to
obtain
and
a
hypothetical
willing
but
not
too
anxious purchaser
could
reasonably
expect
to
have
to
pay
for
the
property
if
the
vendor
and
the
purchaser had
got
together
and
agreed
on
a
price
in
friendly
negotiation.

This
is
commonly
known
as
the Spencer
test after
the
Australian
High
Court
decision
upon
which these
principles
are
based
and
to
which
the
Courts
have
used
in
their
determinations
of
market value
of
a
property.
In
attributing
the
price
that
would
be
paid
to
the
hypothetical
vendor
by
the hypothetical
purchaser
it
is
assumed
that
the
property
will
be
put
to
its
“highest
and
best
use”.

The
findings
of
the
valuation
report
include
an
assessment
of
the
technical
value
(i.e.
the
value implied
by
a
consideration
of
the
technical
attributes
of
the
asset)
and
a
market
value
(which considers
the
influences
of
external
market
forces
and
risk).

Applying
the Spencer
test may
not
be
confined
to
a
technical
valuation
exercise
but
may
involve
a consideration
of
market
factors.
In
a
highly
speculative
market
during
‘boom’
conditions
or
a depressed
market
during
‘bust’
conditions
the
hypothetical
purchaser
may
expect
to
pay
a
premium or
receive
a
discount
commensurate
with
the
current
market
for
mineral
properties.

The
main
requirements
of
the Valuation
Report are:

-‐
Prepared
in
accordance
with
the
VALMIN
code.
-‐
Experience
and
qualifications
of
key
personnel
to
be
set
out
-‐
Details
of
valuation
methodologies
-‐
Reasoning
for
the
selection
of
the
valuation
approach
adopted
-‐
Details
of
the
valuation
calculations
-‐
Conclusion
on
value
as
a
range
with
a
preferred
value

DECLARATIONS

_**Relevant

codes
and
guidelines**_

This
report
has
been
prepared
as
a
technical
assessment
and
valuation
in
accordance
with
the Code for
Technical
Assessment
and
Valuation
of
Mineral
and
Petroleum
Assets
and
Securities
for Independent
Expert
Reports
(the
“VALMIN
Code”,
2005) ,
which
is
binding
upon
Members
of
the Australasian
Institute
of
Mining
and
Metallurgy
(“AusIMM”)
and
the
Australian
Institute
of Geoscientists
(“AIG”),
as
well
as
the
rules
and
guidelines
issued
by
the
Australian
Securities
and Investments
Commission
(“ASIC”)
and
the
ASX
Limited
(“ASX”)
which
pertain
to
Independent
Expert Reports
( Regulatory
Guides
RG111
and
RG112,
March
2011 ).

Where
mineral
resources
have
been
referred
to
in
this
report,
the
information
was
prepared
and first
disclosed
under
the ”Australasian
Code
for
Reporting
of
Exploration
Results,
Mineral
Resources and
Ore
Reserves
(“JORC
Code”), prepared
by
the
Joint
Ore
Reserves
Committee
of
the
AusIMM,
the AIG
and
the
Minerals
Council
of
Australia
2012.
Some
of
the
information
has
not
been
updated
since the
estimation
date
to
comply
with
the
JORC
Code
2012
on
the
basis
that
the
information
has
not materially
changed
since
it
was
last
reported.

Page
|
2

Under
the
definition
provided
by
the
VALMIN
Code,
two
of
the
properties
are
classified
as
‘advanced exploration
areas’
with
identified
mineral
resources,
which
is
inherently
speculative
in
nature.
The properties
are
considered
to
be
sufficiently
prospective,
subject
to
varying
degrees
of
risk,
to warrant
further
exploration
and
development
of
its
economic
potential.

_**Sources

of
Information**_

The
statements
and
opinion
contained
in
this
report
are
given
in
good
faith
and
this
review
is
based on
information
provided
by
the
title
holders,
along
with
technical
reports
by
consultants,
previous tenements
holders
and
other
relevant
published
and
unpublished
data
for
the
area.
I
have endeavoured,
by
making
all
reasonable
enquiries,
to
confirm
the
authenticity,
accuracy
and completeness
of
the
technical
data
upon
which
this
report
is
based.
A
final
draft
of
this
report
was provided
to
the
Company,
along
with
a
written
request
to
identify
any
material
errors
or
omissions prior
to
lodgement.

In
compiling
this
report,
I
did
not
carry
out
a
site
visit
to
any
of
the
Company’s
Project
areas.
Based on
my
professional
knowledge,
experience,
previous
visits
to
the
general
area
and
the
availability
of extensive
databases,
an
earlier
Independent
Geologist’s
Report
for
the
Company
by
Agricola
and technical
reports
made
available
by
various
Government
Agencies,
I
consider
that
sufficient
current information
was
available
to
allow
an
informed
appraisal
to
be
made
without
such
a
visit.

The
independent
valuation
report
has
been
compiled
based
on
information
available
up
to
and including
the
date
of
this
report.
Consent
has
been
given
for
the
distribution
of
this
report
in
the form
and
context
in
which
it
appears.
I
have
no
reason
to
doubt
the
authenticity
or
substance
of
the information
provided.

_**Qualifications

and
Experience**_

The
person
responsible
for
the
preparation
of
this
report
is:

Malcolm
Castle,
B.Sc.(Hons),
GCertAppFin
(Sec
Inst),
MAusIMM

Malcolm
Castle has
over
45
years’
experience
in
exploration
geology
and
property evaluation,
working
for
major
companies
for
20
years
as
an
exploration
geologist.
He established
a
consulting
company
over
25
years
ago
and
specialises
in
exploration management,
technical
Audit,
due
diligence
and
property
valuation
at
all
stages
of development.
He
has
wide
experience
in
a
number
of
commodities
including
uranium,
gold, base
metals,
iron
ore
and
mineral
sands.
He
has
been
responsible
for
project
discovery through
to
feasibility
study
in
Australia,
Fiji,
Southern
Africa
and
Indonesia
and
technical Audits
in
many
countries.
He
has
completed
numerous
Independent
Geologist’s
Reports
and mineral
asset
valuations
over
the
last
decade
as
part
of
his
consulting
business.

Mr
Castle
is
a
qualified
and
competent
witness
in
a
court
or
tribunal
capable
of
supporting his
valuation
reports
or
to
give
evidence
of
his
opinion
of
market
value
issues.

Mr
Castle
completed
studies
in
Applied
Geology
with
the
University
of
New
South
Wales
in 1965
and
has
been
awarded
a
B.Sc.(Hons)
degree.
He
has
completed
postgraduate
studies

Page
|
3

with
the
Securities
Institute
of
Australia
in
2001
and
has
been
awarded
a
Graduate Certificate
in
Applied
Finance
and
Investment
in
2004.

_**Competent

Persons
Statement**_

The
information
in
this
report
that
relates
to
Exploration
Results
and
Mineral
Resources
of the
Company
has
been
reviewed
by
Malcolm
Castle
who
is
a
member
of
the
Australasian Institute
of
Mining
and
Metallurgy.
Mr
Castle
has
sufficient
experience
which
is
relevant
to the
style
of
mineralisation
and
type
of
deposit
under
consideration
and
to
the
activity
which they
are
undertaking
to
qualify
as
an
Expert
and
Competent
Person
as
defined
under
the VALMIN
Code
and
in
the
2004
and
2012
Edition
of
the
‘Australasian
Code
for
Reporting
of Exploration
Results,
Mineral
Resources
and
Ore
Reserves.
Mr
Castle
consents
to
the inclusion
in
this
report
of
the
matters
based
on
the
information
in
the
form
and
context
in which
they
appear.

Independence

I
am
not,
nor
intend
to
be
a
director,
officer
or
other
direct
employee
of
the
Company
and
have
no material
interest
in
the
Projects
or
the
Company.
The
relationship
with
the
Company
is
solely
one
of professional
association
between
client
and
independent
consultant.
The
review
work
and
this report
are
prepared
in
return
for
professional
fees
based
upon
agreed
commercial
rates
of
$6,000 plus
GST
and
the
payment
of
these
fees
is
in
no
way
contingent
on
the
results
of
this
Report.

**Valuation

Opinion**

The
Market
Value
is
estimated
for
100%
equity
in
the
Projects

Based
on
an
assessment
of
the
factors
involved
the
estimate
of
the
market
value
of
the
Projects
in Peru
held
by
Promesa
Limited
is
in
the
range
of A$0.17 million to A$0.23 million with a preferred value of A$0.20 million.

This
valuation
is
effective
on
22
June
2015.

The
Company
has
an
Option
to
Purchase
100%
of
the
Aurifera
Chorobal
Concession
in
the
Alumbre Project.
A
payment
of
US$460,000
is
required
prior
to
April
14,
2018
for
a
total
of
US$500,000.
The concession
covers
approximately
8.0km[2] of
the
total
9.9km[2] .
This
decision
will
be
influenced
by future
exploration
results.

Yours
faithfully

==> picture [194 x 57] intentionally omitted <==

Malcolm
Castle

B.Sc.(Hons)
MAusIMM,

Page
|
4

GCertAppFin
(Sec
Inst)

Page
|
5

**TENEMENT

SCHEDULE**

Project	Holder	Location	Ha	Status
Alumbre	Peru Mineral A.A.C	La Libertad, Peru	985.82	Granted
Quinual	PEGOSO S.A.C.	Huancavelica, Peru	1,000.00	Granted
Huajoropampa	PEGOSO S.A.C.	Huajoropampa, Peru	1,000.00	Granted
Yarpun	PEGOSO S.A.C.	Ancash, Peru	100.00	Granted
Olleros	PEGOSO S.A.C.	Ancash, Peru	1,900.00	Granted
Genex Total	Peru Mineral S.A.C	Ancash, Peru	600.00 5628.82	Application

The
Alumbre
Project
(Peru
Minerals
SAC)
Concessions
are
Gaya
104
(100%
Peru
Minerals)
and Aurifera
Chorobal
(Option
to
Purchase
100%).
The
Company
has
an
option
to
purchase
the
second concession.
A
payment
of
US$460,000
is
required
prior
to
April
14,
2018
for
a
total
of
US$500,000.

The
Generative
Exploration
(Genex)
tenement
is
under
Application.
There
are
10
other
applicants
for the
same
concession
area
lodged
on
the
same
day
as
the
Company’s
application
and
will
be auctioned
sometime
in
the
future.

The
status
of
the
tenements
has
been
verified
by
me,
pursuant
to
paragraph
67
of
the
Valmin
Code by
reference
to
a
Tenure
Verification
letter
dated
8
June
2015
prepared
by
Estudio
Egusquiza,
an independent
legal
firm
based
in
Lima,
Peru.
The
Company
provided
updates
on
the
current tenement
situation
in
July
2015.
The
tenements
are
believed
to
be
in
good
standing
at
the
date
of this
valuation
as
represented
by
the
Company.
Some
future
events
such
as
the
grant
(or
otherwise) of
expenditure
exemptions
and
plaint
action
may
impact
of
the
valuation
and
may
give
grounds
for
a reassessment.

**PROJECT

REVIEW**

Promesa
is
a
Perth
based
ASX
listed
Company,
with
a
portfolio
of
exploration
properties
in
Peru focused
on
precious
and
base
metal
commodities.
Peru
is
one
of
the
world’s
most
attractive
areas
to explore
for
massive
size,
low
cost
gold
and
base
metal
deposits.
The
Company’s
exploration
program is
seeking
large
tonnage
and
low
cost
mineral
deposits.

Page
|
6

==> picture [356 x 365] intentionally omitted <==

**Alumbre

Project**

The
project
is
located
70km
southeast
of
the
major
city
of
Trujillo,
in
the
north
of
Peru
and
is serviced
by
the
nearby
Pan
Americana
Highway
with
good
infrastructure
to
the
project
area.
The area
comprises
2
concessions
covering
approximately
986
Ha
(9.9
square
kilometres).

The
concessions
are
located
in
a
regional
corridor
of
world
class
gold
and
copper
mines,
with characteristics
similar
to
El
Galeno,
Conga
and
Tantahuatay..
The
Alumbre
Project
is
a
potential
Au-‐ Cu-‐Mo
porphyry
and
epithermal
Au
mineralisation
system.
The
area
has
both

high
sulphidation mineralisation
at
Alumbre
and
outcropping
low
sulphidation
epithermal
vein
mineralisation
located on
the
boundary.

Newmont
Mining
Corporation
carried
out
regional
exploration
in
the
area
and
explored
the concessions
in
1994.
Between
1995
and
1998
Savage
Resources
Limited
(“Savage”)
(Pasminco Limited
acquired
Savage
in
1999)
undertook
a
significant
exploration
program,
which
included stream
sediment
and
rock
chip
sampling,
geological
mapping,
geophysical
studies
and
drill
program.

In
early
2013
results
of
a
22
kilometre
induced
polarisation
(IP)
geophysics
program
at
Alumbre produced
a
strong
chargeability
anomaly
extending
from
near
surface
to
below
the
modelled
600m depth.
The
IP
anomaly
identified
by
Promesa
is
located
approximately
500m
southeast
of
Savage

Page
|
7

Resources
drill
hole
CJK-‐1
which
returned
110m
at
0.12g/t
Au
(including
8m
at
0.50g/t
Au).

The
IP
anomaly
is
approximately
700m
wide
and
1500m
long
with
a
large
chargeable
volume
and
is open
at
depth.
The
chargeability
anomaly
has
a
size
and
intensity
commensurate
with
what
would be
expected
from
a
medium
to
large
sized
mineralised
porphyry
system.

Following
the
geophysics
program,
a
detailed
geological
mapping
and
geochemical
sampling program
was
undertaken
and
completed
during
April
2013.
Detailed
mapping
on
the
concessions has
shown
several
intrusive
units
partially
overlain
by
volcanic
tuffs.

The
Company
completed
nine
diamond
core
drilling
program
for
a
total
of
4,380m.
Five
drillholes were
completed
initially
with
a
further
four
drillholes
following
positive
assay
results
and
geological observations
during
the
first
round
of
drilling. Drill results show generally continuous low grade copper mineralization with a general increase in copper grades at elevations of 600m to 700m in most drillholes.

==> picture [362 x 72] intentionally omitted <==

Maximum,
minimum
and
average
gold
copper
and
molybdenum
values
from
ALDD14009

**Quinual

Project**

The
Quinual
concession
is
located
in
the
Western
Cordillera
of
the
northern
Peruvian
Andes
and about
71
km
to
the
southeast
of
Trujillo,
in
the
department
of Huancavelica.
The
area
comprises
1 concession
covering
approximately
1000
Ha
(10.0
square
kilometres).

There
is
potential
for
a
high-‐sulphidation
epithermal
Au-‐Ag
deposit
related
to
Cu-‐Au-‐Mo
porphyry mineralisation
at
depth.
The
alteration
covers
a
large
epithermal
hydrothermal
centre
area
of
2.5
x 1.0km.

Field
samples
show
high
values
in
As
(30,200
ppm),
Sb
(1849
ppm),
Hg
(22
ppm)
and
outlier
values
of Au
(63ppb),
Ag
(14
ppm),
Cu
(186ppm)
and
Mo
(181
ppm).
Deep
geophysics
program
has
recently been
completed
which
outlines
the
potential
porphyry
deposit
on
the
concession.

**Huajoropampa

Project**

The
Huajoropampa
concession
is
located
in
central
Peru,
in
the
Huancavelica
Department.
The concession
is
1000Ha
(10.0
square
kilometres)
at
an
altitude
of
4000m
ASL
and
is
305km
from
Lima. The
earliest
documented
work
on
the
Huajoropampa
area
was
by
Pasminco
in
2001
and
Teck
2007-‐ 09.

Pasminco
focused
on
the
Santa
Rita
occurrence
2
km
SE
of
the
concession
and
collected approximately
40
samples.
Teck
executed
greenfield
surface
geological
studies
within
the
regional area
and
several
junior
exploration
companies
have
undertaken
small
scale
sampling
within
the project
area.
No
historical
geophysics
or
drilling
has
been
completed
on
the
Project.

Page
|
8

The
Project
is
largely
covered
by
Quaternary
Sediments
which
overlie
Cretaceous
Jumasha Formation
shelf

limestones.

Lead
–
zinc
mineralization
occurs
in
breccias,
skarn
replacement
and within
structures.
Skarn-‐type
polymetallic
Pb-‐Zn_Ag
mineralization
occurs
within
an
area
of
1.0
x
2.0 km
hosted
by
dolomite
breccias
and
vein
structures.

The
project
is
similar
to
Santa
Rita
located
in Huancavelica,
Peru

(7.4g/t
Ag,
13%
Pb
and
9%
Zn).
The
alteration
minerals
are
barite,
calcite
and garnet.
The
sulphide
minerals
are
galena,
sphalerite
and
various
Ag
sulphosalts.
The
Huajoropampa prospect
is
adjacent
to
a
Minera
IRL
concession.

Sampling
by
the
Company
returned
0.02%
Zn
and
0.05%
Pb.
Outside
of
the
concession,
grades
up
to 1%
Zn
and
1%
Pb
have
been
returned
in
samples
collected
by
the
Company.

**Yarpun

Project**

The
Yarpun
concession
is
located
in
central
Peru,
in
the
Ancash
Department.
The
Company announced
on
12th
April
2012
that
it
had
entered
into
an
option
agreement
to
acquire
the
Yarpun Concession
with
an
area
of
100
Ha
(1.0
square
kilometres).
The
Option
to
Purchase
Agreement
was exercised
in
June
2013.
No
historical
geophysics
or
drilling
has
been
completed
on
the
project.

Zn-‐Pb-‐Ag
and
Au
mineralisation,
and
iron
oxide
quartz
veins
with
Au-‐Ag
mineralisation
have
been noted.
The
veins
are
up
to
300
meters
in
length
with
a
width
of
up
to
3m.
The
project
is
a
small strategic
holding
adjacent
to
BHP
Billiton’s
concessions.
Field
samples
show
high
values
in
As
(30,200 ppm),
Sb
(1849
ppm),
Hg
(22
ppm)
and
outlier
values
of
Au
(63ppb),
Ag
(14
ppm),
Cu
(186ppm)
and Mo
(181
ppm),
which
are
all
significant
pathfinder
minerals.

**Olleros

Project**

The
Olleros
concessions
are
located
in
the
central
Andes
of
Peru
near
Huaraz
and
Recuay
in
the Ancash
Department.
Work
conducted
included
geochemical,
geophysical
and
diamond
drilling
by several
mining
companies
including
Barrick,
IRL
Peru,
Teck
and
Meridian.
The
Olleros
Project comprises
3
concessions
covering
1900
Ha
(19
square
kilometres)
and
includes
several
alteration zones
in
an
area
of
12
x
6
km.

Olleros
is
in
the
same
geological,
structural
and
metallogenic
corridor
as
Barrick’s
Pierina
Gold
Mine, which
is
a
low
cost,
multimillion
ounce
production
operation.
The
alteration
zones
demonstrate potential
for
epithermal
and
porphyry
occurrences
hosted
by
Calipuy
Group
pyroclastic
rocks
and dacitic
porphyry
of
Tertiary
age
that
are
prospective
hosts
of
epithermal
Au-‐Ag
and
porphyry
Cu deposits.

**Generative

Exploration**

The
area
comprises
1
concession
covering
approximately
600
Ha
(6.0
square
kilometres)
and
is located
160
km
north
of
the
Olleros
Project
in
Ancash.
It
is
surrounded
by
the
concessions
of
Anglo American,
Peñoles
and
Magistral.

Page
|
9

**VALUATION

ASSESSMENT**

The
projects
in
Peru
are
classed
as
exploration
projects.
Several
methods
of
valuation
are
available for
such
projects
where
a
Mineral
Resource
has
not
yet
been
estimated
in
accordance
with
the
JORC code.
These
include
the
use
of
valuations
based
on
past
exploration
expenditure
and
valuations based
on
perceived
prospectivity.

Exploration
projects
can
be
extremely
variable
and
the
use
of
comparable
transactions
is
unlikely
to produce
a
statistical
spread
of
values
for
“similar”
projects.
This
method
can
be
used
where
a Mineral
Resource
has
been
estimated.
The Prospectivity
Exploration
Multiplier
(PEM) is
based
on past
expenditure
while
the
Kilburn
Geoscience
Rating (Geo-‐factor
Rating) is
based
on
opinions
of
the prospectivity
hence
tenements
can
have
marked
variation
in
value
between
the
methods.

The
‘Geo-‐factor
Rating’
method
of
valuation
for
exploration
tenements
is
the
preferred
valuation method
for
the
Company’s
current
tenements
as
it
focuses
on
the
future
prospectivity
of
the
area.

The
Geo-‐factor
Rating
method
systematically
assesses
four
key
technical
attributes
of
a
tenement
to arrive
at
a
series
of
factors
that
are
multiplied
together
to
produce
a
prospectivity
rating.
The
Basic Acquisition
Cost
(BAC)
is
the
important
input
to
the
method
and
it
is
calculated
by
summing
the application
fees,
annual
rent,
work
required
to
facilitate
granting
(e.g.
native
title,
environment
etc) and
statutory
expenditure
for
a
period
of
12
months.
This
is
usually
expressed
as
average expenditure
per
square
kilometre.
Equity
and
grant
status
are
also
taken
into
account.
Each
factor then
multiplied
serially
to
the
BAC.
The
‘Base
Value’
is
multiplied
by
the
prospectivity
rating
to establish
the
overall
technical
value
of
each
mineral
property.

GEO-‐FACTOR

RATING
METHOD
–
EXPLORATION
POTENTIAL

**BASE

VALUE**

This
represents
the
exploration
cost
for
the
current
period
of
the
tenements.
The
current
Base Acquisition
Cost
(BAC)
for
exploration
projects
or
tenements
at
a
similar
stage
is
the
average expenditure
for
the
first
year
of
the
licence
tenure.
This
is
considered
to
be
a BAC
of
AU$400
to AU$450
per
square
kilometre.

The
BAC
was
originally
based
on
calculations
of
exploration
expenditures
and
other
costs
for Western
Australia.
Agricola’s
experience
has
confirmed
this
range
to
be
appropriate
for
other
parts of
the
world
where
exploration
or
valuations
have
been
carried
out.

Many
overseas
jurisdictions
such
as
Peru
do
not
specify
a
minimum
expenditure
commitment
but require
that
sufficient
work
be
completed
in
the
first
year
to
allow
granting
of
the
tenement
into
the second
year.
This
usually
requires
preparation
of
a
report
with
results
of
exploration
carried
out.
For example
with
a
grass
roots
portfolio
the
size
of
Promesa's
in
the
first
year
the
expenditure
(BAC) would
be
$140,000
to
$160,000
which
is
appropriate
for
early
work
of
desktop
studies,
field
visits rock
chip
sampling
and
general
research.
Agricola
believes
an
Australian
company
would
consider this
reasonable
for
the
first
phase
of
work
in
any
country.

Page
|
10

A
company
may
well
choose
to
spend
more
than
that
and
budgets
of
$0.5
to
$1.0
million
are
not uncommon
but
these
budgets
are
usually
based
on
significant
previous
encouragement
such
as scout
drilling,
aeromagnetic
targets
etc.
The
BAC
is
designed
for
grass
roots
projects
where
no
earlier work
is
available
and
only
regional
selection
information
is
available.

Where
the
Company
in
earlier
work
programs
has
received
encouragement
from
earlier
work
then that
aspect
is
addressed
in
the
geofactors,
which
tend
to
upgrade
the
BAC
based
on
earlier
results and
perceived
prospectivity.

The
assessment
of
value
is
based
on
the
equity
and
status
at
November
2012
for
the
various tenements
as
shown
in
the
following
table.

Base
Value
=
[Area][Grant
Factor][Equity]*[Base
Acquisition
Cost]

PROMESA LIMITED	Tenement Factors

Project Equity Km2 Status Grant
Peru Exploration Tenements
Alumbre 100% 9.86 Granted 100%
Quinual 100% 10.00 Granted 100%
Huajoropampa 100% 10.00 Granted 100%
Yarpun 100% 1.00 Granted 100%
Olleros 100% 19.99 Granted 100%
Genex 100% 6.00 Application 10%

**Prospectivity

Assessment
Factors**

An
assessment
of
the
prospectivity
of
tenements
was
carried
out.
This
includes
a
consideration
of

Regional
mineralisation,
old
and
current
workings
and
the
validity
of
conceptual
models.
Local
mineralisation
within
the
tenements
and
the
application
of
conceptual
models
within the
tenements.
Identified
anomalies
warranting
follow
up
within
the
tenements.
The
proportion
of
structural
and
lithological
settings
within
the
tenements
and
difficulty encountered
by
cover
rocks
and
other
factors.

	Rating	Address - Off Property	Mineralisation - On Property	Anomalies	Geology
Low	0.5	Very little chance of mineralisation, Concept unsuitable to environment	Very little chance of mineralisation, Concept unsuitable to environment	Extensive previous exploration with poor results - no encouragement	Unfavourable lithology over >75% of the tenement
Average	1	Indications of Prospectivity, Concept validated	Indications of Prospectivity, Concept validated	Extensive previous exploration with encouraging results - regional	Deep alluvium Covered favourable geology (40-

Page
|
11

				targets	50%)
	2	Significant RC drilling leading to advance project status	RAB &/or RC Drilling with encouraging intercepts reported	Several well defined surface targets with some RAB drilling	Exposed favourable lithology (60- 70%)
High	3	Resource areas identified	Advanced Resource definition drilling - early stage	Several significant subeconomic targets - no indication of volume	Highly prospective geology (80 - 100%)

Assessments
in
each
category
are
based
on
a
set
scale
(see
above
and
Appendix
1)
and
are multiplied
together
to
arrive
at
a
“prospectivity
index.

Prospectivity
Index
=
[Off
Site
Factor][On
Site
Factor][Anomaly
Factor]*[Geology
Factor]

PROMESA LIMITED	ProspectivityFactors
Project Off Site On Site Anomaly Geology
Low High Low High Low High Low High
Peru Exploration Tenements
Alumbre 2.20 2.30 2.20 2.30 2.25 2.35 2.00 2.10
Quinual 2.20 2.30 1.50 1.60 1.50 1.60 2.00 2.10
Huajoropampa 2.20 2.30 1.50 1.60 1.50 1.60 2.00 2.10
Yarpun 2.20 2.30 1.50 1.60 1.25 1.35 2.00 2.10
Olleros 2.20 2.30 1.50 1.60 1.25 1.35 2.00 2.10
Genex 2.20 2.30 1.50 1.60 1.25 1.35 2.00 2.10

TECHNICAL

VALUE

An
estimate
of
technical
value
has
been
compiled
for
the
tenements
based
on
the
base
acquisition cost,
area,
grant
status,
equity
and
ratings
for
prospectivity.

Technical
Value
=
[Base
Value]*[Prospectivity
Index]

PROMESA LIMITED	PROMESA LIMITED
Project	*Technical Value, A$M*
	Low	High	Preferred
Alumbre	0.09	0.12	0.10
Quinual	0.04	0.06	0.05
Huajoropampa	0.04	0.06	0.05
Yarpun	0.01	0.01	0.01
Olleros	0.06	0.09	0.08
Genex	0.00	0.00	0.00
TOTAL	0.24	0.33	0.29

Page
|
12

The
valuation
for
the
Projects
is
not
date
specific
and
applies
through
a
range
of
years
depending
on the
exploration
carried
out
and
the
results
received.

**Comparison

with
Yardstick
(Rule
of
Thumb)
Method**

Agricola
considered
a
yardstick
(Rule-‐of-‐Thumb
method)
is
based
upon
conversion
of
comparable sales
data
to
a
unit
area
(per
km[2] or
per
ha).
A
significant
database
of
prior
valuations
has
been compiled
over
the
past
few
years
of
exploration
projects
at
the
exploration
stage
(where
mineral resources
have
not
yet
been
estimated.
This
includes
valuations
carried
out
by
the
‘Prospectivity Enhancement
Multiplier’
(PEM)
method,
the
geo
Factor
Method
and,
in
some
cases
actual
sales.

It
is
probably
the
most
difficult
comparative
tool
to
justify.
This
Method
has
found
greater acceptance
in
North
America,
where
tenement
sizes
appear
to
be
smaller
and
where
there
are
many more
transactions
forming
a
deep
and
liquid
market
than
elsewhere.
In
addition,
dealing
in tenements
is
not
discouraged
by
the
mining
legislation,
especially
in
the
US
with
its
historic
focus
on property
rights.
It
is
used
in
Canada
and
Australia,
though
to
a
much
lesser
extent.

The
comparison
of
yardstick
and
Geo
Factor
methods
below
is
considered
to
an
adjustment
of
the main
valuation
and
is
displayed
as
the
technical
value
per
square
kilometre.
Prior
expenditures
for the
tenements
in
Peru
are
not
available
in
any
meaningful
form
as
much
of
the
work
was
carried
out by
prior
explorers
and
would
need
to
be
taken
into
account
to
use
the
PEM
method
effectively.
The mix
of
tenements
has
changed
significantly
to
produce
the
current
tenement
schedule,
which
adds
a complication
to
ascribing
historical
expenditure
to
particular
tenements
or
projects.

On
this
basis
the
PEM
method
was
not
considered
appropriate
as
a
comparative
valuation
method as
set
out
in
Regulatory Guide 111: Content of expert reports (RG 111) at RG 111.65 which considers that "an expert should, where possible, use more than one valuation methodology. We consider that this reduces the risk that the expert's opinion is distorted by its choice of methodology. We also consider that an expert should compare the figures derived from using the different methodologies and comment of any differences."

Agricola
considers
that
the
expectation
of
future
gain
is
the
main
driver
for
mineral
asset
valuation of
exploration
projects
as
it
endeavours
to
ascertain
the
unencumbered
price
which
a
willing
but
not anxious
vendor
could
reasonably
expect
to
obtain
and
a
hypothetical
willing
but
not
too
anxious purchaser
could
reasonably
expect
to
have
to
pay
for
the
property
if
the
vendor
and
the
purchaser had
got
together
and
agreed
on
a
price
in
friendly
negotiation
(the
Spencer
Test).
The
Geo
Factor rating
method
addresses
this
expectation
and,
in
the
absence
of
past
exploration
expenditure
that can
be
related
to
individual
projects,
is
the
only
viable
method
available.

A
review
of
technical
value
(which
is
not
influenced
by
market
conditions)
of
exploration
areas carried
out
by
Agricola
over
the
last
few
years
suggests
that
ground
without
resources
can
be categorized
as
a
matter
of
convenience
into
four
groups:

Advanced
exploration
areas
located
in
a
well
mineralised
area
near
existing
mineral
deposits with
significant
potential
attract
values
well
above
$2000
per
square
kilometre

Page
|
13

Exploration
areas
along
strike
or
structurally
related
to
estimated
mineral
resources.
Such areas
attract
values
in
the
range
$1200
to
$2000
per
square
kilometre.
Exploration
areas
in
known
mineral
fields.
Such
areas
attract
values
in
the
range
of
$700
to $1300
per
square
kilometre.
Exploration
areas
in
green
fields
or
early
exploration
domains
remote
from
mineral resources.
Such
areas
attract
values
in
the
range
of
$400
to
$800
per
square
kilometre.

Yardstick
Value
=
Technical
Value/project
Area

PROMESA LIMITED		$ per square km	$ per square km
	km2	Low	High
Alumbre	9.86	8,720	11,760
Quinual	10.00	4,000	5,600
Huajoropampa	10.00	4,000	5,600
Yarpun	1.00	5,000	5,000
Olleros	19.00	3,310	4,680
Genex	6.00	330	500
TOTAL	56.29	4,290	5,900

Based
on
the
values
estimated
in
this
report,
the
Projects
fall
in
the
ranges
shown
in
the
table,
which are
considered
to
be
reasonable
based
on
the
high
prospectivity
of
the
Peruvian
Cordillera.

MARKET
VALUE

In
arriving
at
a
fair
market
value
for
a
particular
exploration
tenement,
I
have
considered
the
current market
for
exploration
properties
in
Australia
and
overseas.
It
is
considered
appropriate
to
apply
a significant
discount
to
the
technical
value
of
the
exploration
potential
of
the
tenements.

Country
factors
and
current
market
for
exploration
properties
have
been
considered
for
Peru. Assessment
of
Country
Risk
and
the
Business
Climate
has
been
provided
by
a
specialist
firm
(source: www.coface.com).
The
rating
for
Peru
is
‘A4’
for
country
risk
and
‘B’
for
business
climate,
which
are considered
to
be
low
to
moderate.
This
rating
will
affect
the
market
factor
in
assessing
market
value.

Peru’s
strengths
include:
Strong
growth
potential;
Member
of
the
Pacific
Alliance;
Mineral,
energy, agricultural
and
halieutic
resources;
Low
level
of
public
debt
and
balanced
budget;
Independent central
bank
and
healthy
banking
sector;
and
Tourist
appeal.
Weaknesses
include:
Dependence
on raw
materials
and
Chinese
demand;
Vulnerability
to
climate
and
seismic
events;
Regional
disparities (poverty
in
the
Andean
and
Amazonian
regions);
Shortcomings
in
infrastructure,
company
credit, healthcare
and
education;
Scale
of
coca
growing
and
cocaine
production;
and
huge
grey
sector
(60% of
employment),
not
favourable
to
training.

The
current
market
value
for
mineral
projects
in
Peru
is
considered
to
be
depressed
and
a
market discount
factor
of 30 %
has
been
applied
to
the
technical
value.
The
Generative
Exploration
project has
been
marked
down
significantly
because
of
the
competing
applications.

Page
|
14

Market
Value
=
[Technical
Value]*[Adjusted
Market
Factor]

PROMESA LIMITED	PROMESA LIMITED	Market Value,	Market Value,	A$M
	Market Factor	Low	High	Preferred
Alumbre	70%	0.06	0.08	0.07
Quinual	70%	0.03	0.04	0.03
Huajoropampa	70%	0.03	0.04	0.03
Yarpun	70%	0.01	0.01	0.01
Olleros	70%	0.04	0.06	0.05
Genex	20%	0.00	0.00	0.00
TOTAL		0.17	0.23	0.20

**VALUATION

OPINION**

The
Market
Value
is
estimated
for
100%
equity
in
the
Projects

Based
on
an
assessment
of
the
factors
involved
the
estimate
of
the
market
value
of
the
Projects
in Peru
held
by
Promesa
Limited
is
in
the
range
of
A$0.17 million to A$0.23 million with a preferred value of A$0.20 million.

_**This

valuation
is
effective
on
22
June
2015.**_

Page
|
15

==> picture [55 x 55] intentionally omitted <==

**MINERAL

ASSETS
VALUATION
FOR
EXPLORATION
TENEMENTS**

M.
Castle
–
Updated
25
May
2015

Agricola
Mining
Consultants
Pty
Ltd
(“Agricola”)
has
prepared
these
notes
as
background
to
the Independent
Valuation
Report.
The
appendix
is
general
in
nature
and
references
to
Western Australia
are
an
example
of
exploration
expenditures.
They
are
appropriate
for
other
states
and other
countries
based
on
Agricola’s
experience
in
many
areas
of
Australia
and
elsewhere.
Parts
of these
notes
may
be
repeated
for
clarity
in
the
main
report.

**TABLE

OF
CONTENTS**

MINERAL
ASSETS
VALUATION
FOR
EXPLORATION
TENEMENTS
...................................................................
16 The
Meaning
of
Value
–
Scope
of
the
Report
...................................................................................................
17 Judicial
interpretation
..................................................................................................................................
18 Regulatory
Authorities
.....................................................................................................................................
19 The
VALMIN
Code,
2005
..............................................................................................................................
19 Regulatory
Guides
RG111
and
RG112,
March
2011
....................................................................................
21 The
JORC
Code,
2012
...................................................................................................................................
22 VALUATION
METHODOLOGY
FOR
EXPLORATION
TENEMENTS
.....................................................................
22 Fair
Market
Value
of
Mineral
Assets
................................................................................................................
22 Contemporaneous
transactions
in
the
asset
...............................................................................................
25 DCF
value
.....................................................................................................................................................
26 Contemporaneous
transactions
in
comparable
assets
................................................................................
26 Potential
for
Further
Discoveries
.................................................................................................................
26 Past
Expenditure
..........................................................................................................................................
27 Yardstick
(Rule
of
Thumb)
Method
..............................................................................................................
27 Share
market
trading
in
companies
holding
comparable
exploration
interests
..........................................
27 Valuation
of
Development
Projects
by
Discounted
Cash
Flow
Methods
..........................................................
28 Valuation
of
Resources
by
Comparable
Transactions
......................................................................................
30

Page
|
16

Mergers
and
Acquisitions
Activity
...............................................................................................................
32 Sensitivity
to
Metal
Price
.............................................................................................................................
33 Geoscience
Factor
Method
..............................................................................................................................
34 Area
..............................................................................................................................................................
35 Basic
Acquisition
Cost
..................................................................................................................................
36 Tenement
Status
..........................................................................................................................................
37 Equity
...........................................................................................................................................................
38 Geoscience
Factors
......................................................................................................................................
38 Prospectivity
Enhancement
Multiplier
(“PEM”)
...............................................................................................
39 Yardstick
(Rule
of
Thumb)
Method
..................................................................................................................
40 Adjustments
to
the
Technical
Value
–
Market
Value
.......................................................................................
41 GLOSSARY
OF
TERMS
..................................................................................................................................
42 VALUATION
REFERENCES
.............................................................................................................................
47

THE
MEANING
OF
VALUE
–
SCOPE
OF
THE
REPORT

A
Mineral
asset
valuation
should
endeavour
to
ascertain
the
price
that
a
willing
but
not
anxious vendor
could
reasonably
expect
to
obtain
and
a
hypothetical
willing
but
not
too
anxious
purchaser could
reasonably
expect
to
have
to
pay
for
the
property
if
the
vendor
and
the
purchaser
had
got together
and
agreed
on
a
price
in
friendly
negotiation.

The
test
for
determining
the
market
value
is
based
on
the
consideration
of
a
hypothetical negotiation,
namely,
what
is
the
price
that
a
willing
but
not
anxious
purchaser
would
have
to
offer
to induce
a
willing
but
not
anxious
vendor
to
sell
the
property
rather
than
the
price
which
an
anxious vendor
would
obtain
upon
a
forced
sale.
This
is
the
price
that
a
hypothetical
prudent
purchaser would
entertain,
if
he
desired
to
purchase
it
for
the
most
advantageous
purpose
for
which
the property
was
adapted.

This
test
contemplates
a
prudent
purchaser
who
has
informed
himself
or
herself
of
all
of
the relevant
attributes
and
advantages
that
the
property
enjoyed
which
means
not
just
being conversant
with
the
property
in
its
existing
state
but
also
any
profitable
uses
to
which
it
might
be put.
This
embodies
the
concept
of
the
highest
and
best
use
of
the
property.

Page
|
17

JUDICIAL

INTERPRETATION

The
High
Court
cast
light
on
the
ordinary
meaning
of
'market
value'
in
1907
in Spencer v. The Commonwealth of Australia.
In
this
case,
the
Commonwealth
had
compulsorily
acquired
land
for
a fort
at
North
Fremantle
in
Western
Australia.

In
discussing
the
concept
of
market
value,
Griffith
CJ
commented
(page
432)
that:

…
the
test
of
value
of
land
is
to
be
determined,
not
by
inquiring
what
price
a
man
desiring
to
sell could
have
obtained
for
it
on
a
given
day,
i.e.
whether
there
was,
in
fact,
on
that
day
a
willing
buyer, but
by
inquiring:
What
would
a
man
desiring
to
buy
the
land
have
had
to
pay
for
it
on
that
day
to
a vendor
willing
to
sell
it
for
a
fair
price
but
not
desirous
to
sell?

Isaacs
J
subsequently
expanded
on
the
concept
(page
441):

…
to
arrive
at
the
value
of
the
land
at
that
date,
we
have
…
to
suppose
it
sold
then,
not
by
means
of
a forced
sale,
but
by
voluntary
bargaining
between
the
plaintiff
and
a
purchaser
willing
to
trade,
but neither
of
them
so
anxious
to
do
so
that
he
would
overlook
any
ordinary
business
consideration.
We must
further
suppose
both
to
be
perfectly
acquainted
with
the
land
and
cognisant
of
all circumstances
which
might
affect
its
value,
either
advantageously
or
prejudicially,
including
its situation,
character,
quality,
proximity
to
conveniences
or
inconveniences,
its
surrounding
features, the
then
present
demand
for
land,
and
the
likelihood
as
then
appearing
to
persons
best
capable
of forming
an
opinion,
of
a
rise
or
fall
for
what
reasons
so
ever
in
the
amount
which
one
would otherwise
be
willing
to
fix
as
to
the
value
of
the
property.

In
this
case,
the
High
Court
recognised
the
principles
of:

the
willing
but
not
anxious
vendor
and
purchaser
a
hypothetical
market
the
parties
being
fully
informed
of
the
advantages
and
disadvantages
associated
with
the asset
being
valued
(in
the
specific
case,
land)
both
parties
being
aware
of
current
market
conditions.

This
is
commonly
known
as
the Spencer
test after
the
High
Court
decision
upon
which
these principles
are
based
and
to
which
the
Courts
have
used
in
their
determinations
of
market
value
or property.
( Spencer
v
Commonwealth (1907)
5
CLR
418
at
432
per
Griffiths
CJ
and
441
per
Isaacs
J.).

Although
the Spencer
test is
based
on
both
a
hypothetical
vendor
and
a
hypothetical
purchaser
and therefore
the
market
value
from
either
hypothetical
party’s
point
of
view
should
be
the
same,
in some
cases
emphasis
has
been
placed
on
what
would
be
the
best
price
which
the
vendor
could
hope to
obtain.

The
question
as
of
“special
value”
of
particular
property
has
often
been
raised
in
cases.
However
in reality
this
is
only
part
of
the Spencer test
that
in
attributing
the
price
that
would
be
paid
to
the hypothetical
vendor
by
the
hypothetical
purchaser
it
is
to
be
assumed
that
the
property
will
be
put to
its
“highest
and
best
use”.

Page
|
18

The Spencer
test has
been
applied
in
stamp
duty
cases
in
determining
the
value
of
the
dutiable property.

These
principles
apply
equally
to
mineral
assets

REGULATORY

AUTHORITIES

Mineral
asset
valuations
are
prepared
in
accordance
with
the Code
for
Technical
Assessment
and Valuation
of
Mineral
and
Petroleum
Assets
and
Securities
for
Independent
Expert
Reports
(the “VALMIN
Code”,
2005) ,
which
is
binding
upon
Members
of
the
Australasian
Institute
of
Mining
and Metallurgy
(“AusIMM”)
and
the
Australian
Institute
of
Geoscientists
(“AIG”),
as
well
as
the
rules
and guidelines
issued
by
the
Australian
Securities
and
Investments
Commission
(“ASIC”)
and
the
ASX Limited
(“ASX”)
which
pertain
to
Independent
Expert
Reports
( Regulatory
Guides
RG111,
2011
and RG112,
2011 ).

Where
mineral
resources
have
been
referred
to
in
this
report,
the
classifications
are
consistent
with the ”Australasian
Code
for
Reporting
of
Exploration
Results,
Mineral
Resources
and
Ore
Reserves (“JORC
Code”), prepared
by
the
Joint
Ore
Reserves
Committee
of
the
AusIMM,
the
AIG
and
the Minerals
Council
of
Australia,
effective
2012.

THE
VALMIN
CODE,
2005

The
main
requirements
of
the Valuation
Report are

-‐
Prepared
in
accordance
with
the
VALMIN
code.
-‐
Details
of
valuation
methodologies
-‐
Reasoning
for
the
selection
of
the
valuation
approach
adopted
-‐
Details
of
the
valuation
calculations
-‐
Conclusion
on
value
-‐
Experience
and
qualifications
of
key
personnel
to
be
set
out

Transparency -‐
The
report
needs
to
explain
how
the
valuation
was
done
and
the
assumptions
used
in calculating
the
value.
The
objective
is
to
provide
sufficient
information
that
other
people
can
come up
with
the
same
answer.
Transparency
and
Transparent
means
that
the
Material
data
and information
used
in
(or
excluded
from)
the
Valuation
of
a
Mineral
Property,
the
assumptions,
the Valuation
approaches
and
methods,
and
the
Valuation
itself
must
be
set
out
clearly
in
the
Valuation Report,
along
with
the
rationale
for
the
choices
and
conclusions
of
the
Qualified
Valuer.

Page
|
19

Materiality -‐
This
means
the
valuer
has
to
ensure
that
all
important
data
that
could
have
a
significant impact
on
the
valuation
is
included
in
the
report.
Materiality
and
Material
refer
to
data
or information
which
contribute
to
the
determination
of
the
Mineral
Property
value,
such
that
the inclusion
or
omission
of
such
data
or
information
might
result
in
the
reader
of
a
Valuation
Report coming
to
a
substantially
different
conclusion
as
to
the
value
of
the
Mineral
Property.
Material
data and
information
are
those,
which
would
reasonably
be
required
to
make
an
informed
assessment
of the
value
of
the
subject
Mineral
Property.

Competence
-‐ The
valuer
must
be
competent
at
doing
valuations.
The
person
needs
to
be
an
expert in
the
particular
exploration
target
being
evaluated.
Typically
the
person
needs
at
least
5
years’ experience
in
that
commodity. For
Example :

_**Competent

Persons
Statement**_

The
information
in
this
report
that
relates
to
Exploration
Results
and
Mineral
Resources
of the
Company
has
been
reviewed
by
Malcolm
Castle
who
is
a
member
of
the
Australasian Institute
of
Mining
and
Metallurgy.
Mr
Castle
has
sufficient
experience
which
is
relevant
to the
style
of
mineralisation
and
type
of
deposit
under
consideration
and
to
the
activity
which they
are
undertaking
to
qualify
as
an
Expert
and
Competent
Person
as
defined
under
the VALMIN
Code
and
in
the
2012
Edition
of
the
‘Australasian
Code
for
Reporting
of
Exploration Results,
Mineral
Resources
and
Ore
Reserves.
Mr
Castle
consents
to
the
inclusion
in
this report
of
the
matters
based
on
the
information
in
the
form
and
context
in
which
they appear.

Independence
-‐ The
valuer
must
act
in
a
professional
manner
and
not
favour
the
buyer
or
the
seller. In
other
words
the
price
must
be
set
at
a
“fair
market
value”.
To
achieve
independence,
the
valuer must
not
receive
any
special
benefit
from
doing
the
study.
This
subject
is
addressed
fully
in
RG112 (112.42).
Independence
or
Independent
means
that,
other
than
professional
fees
and
disbursements received
or
to
be
received
in
connection
with
the
Valuation
concerned,
the
Qualified
Valuer
or Qualified
Person
(as
the
case
requires)
has
no
pecuniary
or
beneficial
(present
or
contingent) interest
in
any
of
the
Mineral
Properties
being
valued,
nor
has
any
association
with
the Commissioning
Entity
or
any
holder(s)
of
any
rights
in
Mineral
Properties
which
are
the
subject
of the
Valuation,
which
is
likely
to
create
an
apprehension
of
bias.
The
concepts
of
“Independence”
and “Independent”
are
questions
of
fact.
For
example,
where
a
Qualified
Valuer’s
fees
depend
in
whole or
in
part
on
an
understanding
or
arrangement
that
an
incentive
will
be
paid
based
on
a
certain value
being
obtained,
such
Qualified
Valuer
is
not
Independent.

Reasonablenes
-‐ in
reference
to
the
Valuation
of
a
Mineral
Property,
while
not
specifically mentioned
in
VALMIN,
2005,
is
a
requirement
in
other
jurisdictions.
It
means
that
other appropriately
qualified
and
experienced
valuers
with
access
to
the
same
information
would
value the
property
at
approximately
the
same
range.
A
Reasonableness
test
serves
to
identify
Valuations, which
may
be
out
of
step
with
industry
standards
and
industry
norms.
It
is
not
sufficient
for
a Qualified
Valuer
to
determine
that
he
or
she
personally
believes
the
value
determined
is
appropriate without
satisfying
an
objective
standard
of
proof

Page
|
20

Methodology
-‐ The
decisions
as
to
the
valuation
methodology
or
methodologies
to
be
used
and
the content
of
the
Report
are
solely
the
responsibility
of
the
Expert
or
Specialist
whose
decisions
must not
be
influenced
by
the
Commissioning
Entity.
The
Expert
or
Specialist
must
state
the
reasons
for selecting
each
methodology
used
in
the
Report.
Methods
chosen
must
be
rational
and
logical
and
be based
upon
reasonable
grounds.

The
Expert
or
Specialist
should
make
use
of
valuation
methods
suitable
to
the
Mineral
or
Petroleum Assets
under
consideration.
Selection
of
the
appropriate
valuation
method
will
depend
on,
inter
alia:

(a)
the
purpose
of
the
Valuation;
(b)
the
development
status
of
the
Mineral
or
Petroleum
Assets;
(c)
the
amount
and
reliability
of
relevant
information;
(d)
the
risks
involved
in
the
venture;
and
(e)
the
relevant
market
conditions
for
commodities.

The
Expert
or
Specialist
should
choose,
discuss
and
disclose
the
selected
valuation
method(s) appropriate
to
the
Mineral
Assets
under
consideration
in
the
Report,
stating
the
reasons
why
the particular
valuation
methods
have
been
selected
in
relation
to
those
factors
and
to
the
adequacy
of available
data.
It
may
also
be
desirable
to
discuss
why
a
particular
valuation
method
has
not
been used.
The
disclosure
should
give
a
sufficient
account
of
the
valuation
methods
used
so
that
another Expert
could
understand
the
procedure
used
and
assess
the
Valuation.
Should
more
than
one valuation
method
be
used
and
different
valuations
result,
the
Expert
or
Specialist
should
comment on
the
reasons
for
selecting
the
Value
adopted.

REGULATORY
GUIDES
RG111
AND
RG112,
MARCH
2011

It
is
not
the
Australian
Securities
and
Investment
Commission
–
ASIC’s
role
or
intention
to
limit
the expert’s
exercise
of
skill
and
judgment
in
selecting
the
most
appropriate
method
or
methods
of valuation.
However,
it
is
appropriate
for
the
expert
to
consider:

(a) the
discounted
cash
flow
method;
(b) the
amount
which
an
alternative
acquirer
might
be
willing
to
offer
if
all
the
securities
in
the target
company
were
available
for
purchase;

ASIC
does
not
suggest
that
this
list
is
exhaustive
or
that
the
expert
should
use
all
of
the
methods
of valuation
listed
above.
The
expert
should
justify
the
choices
of
valuation
method
and
give
a sufficient
account
of
the
method
used
to
enable
another
expert
to
replicate
the
procedure
and assess
the
valuation.
It
may
be
appropriate
for
the
expert
to
compare
the
values
derived
by
more than
one
method
and
to
comment
on
any
differences.

The
complex
valuations
in
an
expert’s
report
necessarily
contain
significant
uncertainties.
Because
of this
an
expert
who
gives
a
single
point
value
will
usually
be
implying
spurious
accuracy
to
his
or
her valuation.
An
expert
should,
however,
give
as
narrow
a
range
of
values
as
possible.
An
expert
report

Page
|
21

becomes
meaningless
if
the
range
of
values
is
too
wide.
An
expert
should
indicate
the
most
probable point
within
the
range
of
values
if
it
is
feasible
to
do
so.

The
expert
should
carry
out
sufficient
enquiries
or
examinations
to
establish
reasonable
grounds
for believing
that
any
profit
forecasts,
cash
flow
forecasts
and
unaudited
profit
figures
that
are
used
in the
expert’s
report,
and
have
been
prepared
on
a
reasonable
basis.
If
there
are
material
variations
in method
or
presentation
the
expert
should
adjust
for
or
comment
on
them
in
the
report.

The
expert
should
discuss
the
implications
to
his
or
her
valuation
if:

(a) the
current
market
value
of
the
subject
of
the
report
is
likely
to
change
because
of
market volatility
(for
example,
boom
or
depression);
or
(b) the
current
market
value
differs
materially
from
that
derived
by
the
chosen
method.

THE
JORC
CODE,
2012

The
Australasian
Code
for
Reporting
of
Exploration
Results,
Mineral
Resources
and
Ore
Reserves (‘the
JORC
Code’)
is
a
professional
code
of
practice
that
sets
minimum
standards
for
Public
Reporting of
minerals
Exploration
Results,
Mineral
Resources
and
Ore
Reserves.

The
JORC
Code
provides
a
mandatory
system
for
the
classification
of
minerals
Exploration
Results, Mineral
Resources
and
Ore
Reserves
according
to
the
levels
of
confidence
in
geological
knowledge and
technical
and
economic
considerations
in
Public
Reports.

The
JORC
Code
was
first
published
in
1989,
with
the
most
recent
revision
being
published
late
in 2012.
Since
1989
and
1992
respectively,
it
has
been
incorporated
in
the
Listing
Rules
of
the Australian
and
New
Zealand
Stock
Exchanges,
making
compliance
mandatory
for
listing
public companies
in
Australia
and
New
Zealand.

The
current
edition
of
the
JORC
Code
was
published
in
2012
and
after
a
transition
period
the
2012 Edition
came
into
mandatory
operation
from
1
December
2013.

Changes
to
the
JORC
Code
2012

Table
1
reporting
on
an
‘if
not,
why
not?’
basis
–
Clauses
2,
5,
19,
27,
35
and
the introduction
of
Table
Competent
Person
Attributions
–
Clause
9
Exploration
Targets
–
Clause
17
Pre-‐Feasibility
required
for
Ore
Reserves
–
Clause
29
Technical
Studies
definitions
–
Clause
37-‐40
Annual
Reporting
–
Clause
15
Metal
Equivalents
–
Clause
50
In
situ values
–
Clause
51
Additional
guidance
on
reporting
in
Table
1

VALUATION
METHODOLOGY
FOR
EXPLORATION
TENEMENTS

FAIR
MARKET
VALUE
OF
MINERAL
ASSETS

Page
|
22

Mineral
assets
include,
but
are
not
limited
to,
mining
and
exploration
tenements
held
or
acquired
in connection
with
the
exploration,
the
development
of,
and
the
production
from
those
tenements together
with
all
plant,
equipment
and
infrastructure
owned
or
acquired
for
the
development, extraction
and
processing
of
minerals
in
connection
with
those
tenements.

raction and processing of minerals in connection with those tenements.	raction and processing of minerals in connection with those tenements.
Mineral assets classification
Exploration areas	Mineralisation may or may not have been identified, but where a mineral resource has not been defined. Available information includes exploration results such as outcrop sampling, assays of drill hole intersections, geochemical results and geophysical survey results. Valuation Methods: *Geoscience* *Factor, Prospectivity* Enhancement Multiplier, Yardstick(Rule of Thumb).
Advanced exploration areas	Mineral resources have been identified and their extent estimated (possibly incompletely). This includes properties at the early stage of assessment. Available information includes estimates of Exploration Targets, Inferred Resources, Indicated Resources, Measured Resources in accordance with the JORC Code 2012 and the exploration results from the surrounding area or prospect used to compile the estimates. Additional value for exploration potential in the immediate area is not considered to be warranted. Valuation Methods:*Comparable Transactions*. Yardstick (Rule of Thumb)
Pre-development projects	A positive development decision has not yet been made. This includes properties where a development decision has been negative, properties on care and maintenance and properties held on retention titles. Available information includes Mineral Resource estimates in accordance with the JORC Code and a scoping study. If a recent and valid Pre Feasibility Study has been prepared an Ore Reserve may have been estimated with due regard to modifying factors. Valuation Methods: Comparable Transactions,*Discounted Cash* *Flow* (if Ore Reserves have been estimated)
Development projects	Committed to production, but which, are not yet commissioned or not initially operating at design levels. Available information includes a Feasibility Study with supporting technical studies. Valuation Methods:*Discounted Cash Flow*.
Operating Mines	Mineral properties, particularly mines and processing plants, which have been fully commissioned and are in production. Valuation Methods:*Discounted Cash Flow*.

Agricola’s
preferred
valuation
method
is
shown
in
bold
type.

The
value
of
a
mineral
asset
usually
consists
of
two
components,

The
underlying
or
Technical
Value
(or
stand
alone
value)
which
is
an
assessment
of
a
mineral asset’s
future
net
economic
benefit
under
a
set
of
appropriate
assumptions,
excluding
any premium
or
discount
for
market,
strategic
or
other
considerations.

Page
|
23

The
Market
Component,
which
is
a
premium
relating
to
market,
strategic
or
other considerations
which,
depending
on
circumstances
at
the
time,
can
be
either
positive, negative
or
zero.

When
the
technical
and
market
components
of
value
are
combined
the
resulting
value
is
referred
to as
the
market
value.
A
consideration
of
country
risk
should
also
be
taken
into
account
for
overseas projects.

The
value
of
mineral
assets
is
time
and
circumstance
specific.
The
asset
value
and
the
market premium
(or
discount)
changes,
sometimes
significantly,
as
overall
market
conditions,
commodity prices,
exchange
rates,
political
and
country
risk
change.

Valuation
is
based
on
a
calculation
in
which
the
geological
prospectivity,
commodity
markets, financial
markets,
stock
markets
and
mineral
property
markets
are
assessed
independently.

Valuation
of
exploration
properties
is
exceptionally
subjective.
If
an
economic
resource
is subsequently
identified
then
a
new
valuation
will
be
dramatically
higher,
or
possibly
lower. Alternatively
if
expenditure
of
further
exploration
dollars
is
unsuccessful
then
it
is
likely
to
decrease the
value
of
the
tenements.
There
are
a
number
of
generally
accepted
procedures
for
establishing the
value
of
exploration
properties
and,
where
relevant,
the
use
of
more
than
one
such
method
to enable
a
balanced
analysis
and
a
check
on
the
result
has
been
undertaken.
The
value
will
always
be presented
as
a
range
with
the
preferred
value
identified.
The
preferred
value
need
not
be
the median
value,
and
will
be
determined
by
the
Independent
Valuer
based
on
his
experience.

The
Independent
Valuer,
when
determining
a
value
for
a
mineral
asset,
must
assess
a
range
of technical
issues
prior
to
selection
of
a
valuation
methodology.
Often
this
will
require
seeking
advice from
a
specialist
in
specific
areas.
The
key
issues
are:

geological
setting
and
style
of
mineralisation
level
of
knowledge
of
the
geometry
of
mineralisation
in
the
district
results
of
exploration
including
geological
mapping,
costeaning
and
drilling
of interpretation
of
geochemical
anomalies
parameters
used
to
identify
geophysical
and
remote
sensing
data
anomalies
location
and
style
of
mineralisation
identified
on
adjacent
properties
appropriate
geological
models
mining
history,
including
mining
methods
location
and
accessibility
of
infrastructure
milling
and
metallurgical
characteristics
of
the
mineralisation

In
addition
to
these
technical
issues
the
Independent
Expert
needs
to
make
a
judgement
about
the market
demand
for
the
type
of
property,
commodity
markets,
financial
markets
and
stock
markets. The
technical
value
of
a
property
should
not
be
adjusted
by
a
“market
factor”
unless
there
is
a marked
discrepancy
between
the
technical
value
and
the
market
value.
When
this
is
done
the
factor should
be
clearly
identified.

Page
|
24

Where
there
are
identified
Ore
Reserves
it
is
appropriate
to
use
financial
analysis
methods
to estimate
the
net
present
value
(“NPV”)
of
the
properties.
This
technique
(the
DCF
Method)
has deficiencies,
which
include
assessment
of
only
a
very
narrow
area
of
risk,
namely
the
time
value
of money
given
the
real
discount
rate,
and
the
underlying
assumption
that
a
static
approach
is applicable
to
investment
decision
making,
which
is
clearly
not
the
case.

When
assessing
value
of
exploration
properties
with
no
identified
Ore
Reserves
it
is
inappropriate
to prepare
any
form
of
financial
analysis
to
determine
the
net
present
value.
The
valuation
of exploration
tenements
or
licences,
particularly
those
without
identified
resources,
is
highly subjective
and
a
number
of
methods
are
appropriate
to
give
a
guide
as
discussed
below.

All
of
these
valuation
methods
are
relatively
independent
of
the
location
of
the
mineral
property. Consequently
the
valuer
will
make
allowance
for
access
to
infrastructure
etc
when
choosing
a preferred
value.
It
is
observed
that
the
Prospectivity
Exploration
Multiplier
(“PEM”)
is
heavily
based on
the
expenditure;
while
the
Geoscience
Factor
is
more
heavily
based
on
opinions
of
the prospectivity
hence
tenements
can
have
marked
variation
in
value
between
the
methods.
If
the Geoscience
Factor
assessment
is
high
and
the
PEM
is
low
it
indicates
effective
well
focused exploration,
if
the
Geoscience
Factor
is
low
and
the
PEM
high
it
suggests
that
the
tenement
is considered
to
have
lower
prospectivity.

Truly
Comparable
Transactions
are
rare
for
early
stage
properties
without
defined
drill
targets.
This is
natural
in
a
recession,
as
companies
focus
on
brownfields
exploration.
Inflated
prices
paid
for property
in
fashionable
areas
should
not
be
discounted
because
they
reflect
the
true
market
value of
a
property
at
the
transaction
date.
If
however,
the
market
sentiment
is
not
so
buoyant
then adjustments
must
be
made.

Methodologies
commonly
used
for
the
valuation
of
early
stage
or
exploration
assets
in
order
of
the evidentiary
value
provided
by
each
include:

CONTEMPORANEOUS
TRANSACTIONS
IN
THE
ASSET

Where
a
transaction
has
taken
place
around
the
valuation
date
in
the
mineral
asset
in
question,
this provides
the
best
evidence
of
value.
This
may
occur
when
a
body
of
mineralisation
or
confined geological
domain
is
split
by
a
tenement
boundary
and
one
part
is
sold.

If
a
property
in
the
recent
past
was
the
subject
of
an
arms-‐length
transaction,
for
either
cash
or shares
(i.e.
from
a
company
whose
principal
asset
was
the
mineral
property)
then
this
forms
the most
realistic
starting
point,
provided
that
the
deal
is
still
relevant
in
today’s
market.
Complicating matters
is
the
knowledge
that
properties
rarely
change
hands
for
cash,
except
for
liquidation purposes,
estate
sales,
or
as
raw
exploration
property
when
sold
by
an
individual
prospector,
or entrepreneur.

Any
underlying
royalty
or
net
profits
interests
or
rights
held
by
the
original
vendor
of
the
claims should
be
deducted
from
the
resultant
property
value
before
determination
of
the
company’s interest.
Also,
reductions
in
value
should
be
made
where
environmental,
legal
or
political sensitivities
could
seriously
retard
the
development
of
exploration
properties.

Page
|
25

It
should
be
noted
again
that
exploration
is
cyclical,
and
in
periods
of
low
metal
prices
there
is
often no
market,
or
a
market
at
very
low
prices,
for
ordinary
exploration
acreage
(inventory
property) unless
it
is
combined
with
a
significant
mineral
deposit,
or
with
other
incentives.

DCF
VALUE

Where
a
financial
model
has
been
prepared
which
considers
the
exploration
results
to
date,
the costs
involved
in
taking
the
project
to
production
and
the
probability-‐weighted
returns
expected from
the
project,
in
the
absence
of
a
contemporaneous
transaction
in
the
actual
exploration interest,
this
provides
the
best
evidence
as
to
the
value
of
the
exploration
interest.
This
method requires
that
a
reasonable
estimate
can
be
made
of
expected
cash
flows.
In
accordance
with
the JORC
Code
2012,
the
estimation
of
an
Ore
Reserve
must
be
based
on
a
Pre
Feasibility
Study
or
a Feasibility
Study.
The
DCF
Method,
therefore,
is
only
possible
then
these
studies
are
available
and
an Ore
Reserve
has
been
estimated. (DCF
Method
–
see
below)

CONTEMPORANEOUS
TRANSACTIONS
IN
COMPARABLE
ASSETS

Where
a
transaction
has
taken
place
recently
in
an
Asset
of
similar
prospectivity
in
a
similar
or comparable
mineral
market,
this
provides
evidence
of
value
in
the
absence
of
an
actual
transaction or
a
financial
model
for
the
exploration
interest.
The
comparison
is
typically
made
on
the
basis
of
a value
per
unit
of
contained
resource. (Comparable
Transactions
Method
–
see
below)

POTENTIAL
FOR
FURTHER
DISCOVERIES

The
Geoscience
Factor
method
provides
the
most
appropriate
approach
to
utilise
in
the
technical valuation
of
the exploration
potential of
mineral
properties
on
which
there
are
no
defined
resources. Kilburn,
a
Canadian
mining
engineer
was
concerned
about
the
haphazard
way
in
which
exploration tenements
were
valued.
He
proposed
an
approach
that
essentially
requires
the
valuer
to
justify
the key
aspects
of
the
valuation
process
in
a
systematic
and
defendable
manner.
The
valuer
must
specify the
key
aspects
of
the
valuation
process
and
must
specify
and
rank
aspects
that
enhance
or downgrade
the
intrinsic
value
of
each
property.
The
intrinsic
value
is
the
base
acquisition
cost (“BAC”),
which
is
the
average
cost
incurred
to
acquire
a
base
unit
area
of
mineral
tenement
and
to meet
all
statutory
expenditure
commitments
for
a
period
of
12
months.
Different
practitioners
use slightly
differing
approaches
to
calculate
the
BAC
and
its
use
with
respect
to
different
tenement types.

The
Geoscience
Factor
method
systematically
assesses
and
grades
four
key
technical
attributes
of
a tenement
to
arrive
at
a
series
of
multiplier
factors.
The
multipliers
are
then
applied
serially
to
the BAC
of
each
tenement
with
the
values
being
multiplied
together
to
establish
the
overall
technical value
of
each
mineral
property.
A
fifth
factor,
the
market
factor,
is
then
multiplied
by
the
technical value
to
arrive
at
the
fair
market
value.

Page
|
26

PAST
EXPENDITURE

Where
the
other
methods
cannot
be
used,
a
valuer
could
also
consider previous
exploration expenditure ,
and
apply
a
multiple
to
this
based
on
its
effectiveness
and
the
valuer’s
judgment
as
to the
prospectivity
of
the
project
based
on
the
results
as
at
the
valuation
date.
The
application
of
this method
is
very
subjective,
and
is
best
used
for
very
early
stage
exploration
interests
without resources
or
significant
drilling
results. (Prospectivity
Enhancement
Method
–
see
below)

YARDSTICK
(RULE
OF
THUMB)
METHOD

SHARE
MARKET
TRADING
IN
COMPANIES
HOLDING
COMPARABLE
EXPLORATION INTERESTS

Where
information
on
the
exploration
tenements
is
not
directly
observable,
valuers
sometimes consider
the
recent
share
market
trading
in
companies
holding
comparable
exploration
interests. This
method
may
require
the
valuer
to
apportion
the
value
of
the
company
between
its
various assets,
to
determine
the
proportion
of
the
enterprise
value
of
the
company
that
should
be attributed
to
the
comparable
exploration
interest.
Once
the
valuer
has
estimated
the
proportion
of the
market
capitalization
or
enterprise
value
of
the
company
that
should
be
attributed
to
the comparable
exploration
interest,
the
value
per
unit
of
contained
resource
or
the
value
per
km[2] of tenement
approaches
can
be
applied.
This
typically
provides
weak
evidence
of
the
value
of
specific exploration
interests
due
to
the
difficulty
in
apportioning
the
enterprise
value
of
a
listed
company
to specific
exploration
interests,
and
the
likelihood
that
the
share
price
may
include
other
‘noise’ unrelated
to
the
exploration
interest.

Market
Capitalisation
(MCap)
and
Enterprise
Value
(EV:
Mcap
+
Debt
–
Cash)
are
often
used
in comparable
transaction
valuations,
often
quoted
as
EV
per
unit
of
Resource
or
reserve.
These measures
say nothing about
the
technical
value
of
individual
mineral
assets
and
are
usually influenced
by
many
commercial
and
emotional
factors
both
within
and
external
to
the
Company.

It
is
fair
to
assume
that
a
company’s
share
price
is
a
reflection
of
the
market
value
of
the
company and
this
is
strongly
influenced
by
the
market
value
of
mineral
assets
in
the
light
of
current
market

Page
|
27

conditions.
If
a
‘willing
but
not
anxious
buyer’
were
to
make
an
offer
for
the
company
based
on share
price,
appropriate
due
diligence
has
been
completed
and
the
offer
may
also
include
a premium
for
control.

MCap
per
unit
and
EV
per
unit
for
peer
group
companies
may
be
a
satisfactory
measure
of ‘reasonableness’
of
the
market
value
of
the
bundle
of
assets
and
should
be
viewed
in
that
light
and not
as
a
direct
measure
of
technical
value.

VALUATION

OF
DEVELOPMENT
PROJECTS
BY
DISCOUNTED
CASH
FLOW
METHODS

Agricola
believes
that
the
Discounted
Cash
Flow/Net
Present
Value
method
should
never
be
applied to
the
valuation
of
a
Mineral
Property
that
is
only
at
an
exploration
stage,
based
on
the
hypothetical cash
flows
from
a
postulated
exploitation
scenario.
Valuers
tend
to
consider
before
or
after
tax values
only
in
the
context
of
the
DCF/NPV
Method,
with
a
general
preference
for
determinations
of after-‐tax
value.

Of
course,
some
owners
can
use
tax
losses
and
structure
their
affairs
to
minimise
the
impact
of corporate
taxes,
but
others
cannot
do
so.
Hence,
it
should
be
clearly
stated
on
what
taxation
basis the
fair
market
value
is
determined.
This
is
another
reason
why
care
must
be
taken
when
using project
sales
data
as
a
comparable
basis
for
assessing
value.
The
‘comparable’
projects
may
be
in different
places
subject
to
different
taxation
regimes,
in
any
event.

**Discounted

cash
flow
analysis**

A
discounted
cash
flow
(“DCF”)
analysis
determines
the
Technical
Value
of
a
project
by approximating
the
value
if
it
were
developed
under
the
prevailing
economic
conditions.

Once
a
Mineral
Resource
has
been
assessed
for
mining
by
considering
revenues
and
operating
costs, the
economically
viable
component
of
the
resource
becomes
the
Ore
Reserve.
When
this
is scheduled
for
mining,
and
the
capital
costs
and
tax
regime
are
considered,
the
net
present
value (“NPV”)
of
the
project
is
established
by
discounting
future
annual
cash
flows
using
an
appropriate discount
rate.

The
resulting
’classical’
NPV
has
several
recognised
deficiencies
linked
to
the
fact
that
the
approach assumes
a
static
approach
to
investment
decision
making,
however
the
NPV
represents
a fundamental
approach
to
valuing
a
proposed
or
on-‐going
mining
operation
and
is
widely
used
within the
mining
industry.

In
terms
of
cash
flow
analysis,
the
DCF
valuation
technique
is
the
most
commonly
used
valuation tool.
The
technique
has
specific
strengths
over
the
methods
considered
in
the
market
and
cost approaches.
These
include
its
ability
to
consider
the
effects
of
royalties,
leases,
taxation
and
financial gearing
on
the
resulting
cash
flow.
In
addition,
the
beneficial
impact
of
unredeemed
capital balances,
assessed
losses,
depreciation
and
amortization
on
free
cash
flows
can
also
be
modelled.

Compiling
cash
flows
on
resources
categorized
as
inferred,
or
those
with
even
less
geoscientific confidence
(which
in
some
cases
are
referred
to
as
inventory),
is
prohibited
by
some
international

Page
|
28

codes.
It
is
only
under
exceptional
circumstances
that
many
securities
exchanges
will
accept
such cash
flows
and
the
effect
of
cash
flow
contributions
from
inferred
resources
on
project
performance should
be
demonstrated
separately
from
those
derived
from
other
resource
and
reserve
categories.

The
DCF
method
is
used
to
produce
numerous
quantitative
results.
On
its
own
and
as
an
investment tool,
it
is
based
on
the
principle
that
for
any
initial
investment,
the
investor
will
look
to
the
future cash
flows
of
that
entity
to
provide
a
minimum
return.
This
return
will
be
at
least
a
predetermined return
over
the
investor’s
hurdle
rate
for
that
investment.
The
hurdle
rate
represents
the
minimum return
of
a
project,
below
which
the
decision
to
invest
or
develop
a
new
project
will
be
negative,
and above
which
the
project
will
be
developed.
The
hurdle
rate
should
always
be
greater
than
the
cost
of capital
for
the
investor.

For
a
mining
project,
in
a
macroeconomic
environment
that
is
sufficiently
favourable
and
stable
for this
method
to
be
applied,
the
critical
input
data
will
generally
be
incorporated
in
a
life
of
mine (LoM)
plan.
The
LoM
plan,
such
as
that
accompanying
a
pre-‐feasibility,
feasibility
or
a
bankable feasibility
study,
will
include:

➤ reserve
and
resource
estimates
in
accordance
with
the
JORC
Code

➤ forecast
mining
schedules
of
tonnage
on
a
daily,
monthly
or
annual
basis

➤ forecast
grade
profiles
and
associated
recoveries
from
a
processing
facility.
This,
together
with
the tonnage
profile,
allows
the
valuer
to
calculate
the
volume
of
saleable
product

➤ estimated
working
costs,
preferably
unitized
to
either
an
amount
per
tonne
mined
or
milled
or
an amount
per
unit
of
metal
or
product
sold

➤ forecast
capital
expenditure
profiles
over
the
life
of
the
operation,
including
ongoing
or sustainable
capital
expenditure
amounts
and

➤ rehabilitation
liabilities
or
trust
fund
contributions,
retrenchment
costs,
plant
metal
lock-‐up
and any
other
specific
factor
that
will
impact
on
costs
or
revenue.

Changes
in
working
capital
balances
are
generally
calculated
based
on
historical
balance
ratios, applied
to
forecast
revenues
and
working
costs.
They
impact
on
short
term
cash
flows
and
therefore must
be
modelled
into
the
cash
flows.
Naturally,
any
working
capital
locked
up
during
the
life
of
the operation
will
be
released
at
the
end
of
this
life.

Once
the
economic
inputs
have
been
assumed,
the
DCF
can
be
determined.
This
is
often
stated
as EBITDA
(Earnings
before
Interest,
Taxation,
Depreciation
and
Amortisation)
and
is
frequently
taken as
the
technical
value
of
the
project,
subject
to
a
consideration
of
sensitivity
to
the
assumptions.

The
resultant
cash
flow
is
then
used
to
derive
the
net
present
value
(NPV)
of
the
operation
at
a predetermined
discount
rate
or
a
range
of
discount
rates.
The
derived
NPV,
on
which
the
return
on investment
can
be
calculated,
is
used
as
a
proxy
for
the
operation’s
implicit
value.
This
is
often compared
with
the
value
or
returns
the
market
attributes
to
the
operation,
if
it
is
a
listed
entity,
or compared
with
other
investment
opportunities
in
order
to
optimize
investment
or
development

Page
|
29

schedules.

In
any
cash
flow
determination,
the
impact
of
inflation
on
the
final
result
cannot
be
overstated.
One only
has
to
consider
the
effect
of
taxation
as
applied
to
real
taxable
income
as
opposed
to
being levied
against
nominal
taxable
income.
Converting
the
final
cash
flows
to
real
money
terms,
the values
derived
from
two
similar
cash
flows
will
be
quite
different.
The
unredeemed
capital
balance will
last
longer
in
the
real
terms
case,
incorrectly
enhancing
the
value
of
the
same
project.
The
real cash
flow
lines
in
Table
X
must
be
compared
to
recognize
the
impact
of
taxation
on
real
and
nominal cash
flows.

As
a
result
of
the
difficulty
in
obtaining
agreement
on
appropriate
inflation
forecasts
to
use
in
the specific
valuation
of
a
project,
valuers
often
exclude
a
forecast
on
inflation
rates.
This
in
itself
may
be construed
as
an
inflation
assumption,
in
that
inflation
is
taken
to
be
zero
per
cent
per
year.
However, this
reflects
an
ideal
world,
which
is
unrealistic.

The
resulting
’classical’
NPV
has
several
recognised
deficiencies
linked
to
the
fact
that
the
approach assumes
a
static
approach
to
investment
decision
making,
assumption
into
the
future
which
cannot be
verified
with
any
confidence
and
limited
mine
life.
However
the
NPV
represents
a
fundamental approach
to
valuing
a
proposed
or
on-‐going
mining
operation
and
is
widely
used
within
the
mining industry.

As
example
of
the
shortcomings
of
the
DCF
Method
a
conceptual
cash
flow
was
modeled
and
NPV estimated
at
8%
over
different
time
periods
with
the
following
outcome
over
100
years:

==> picture [579 x 230] intentionally omitted <==

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

110%
100%
90%
80%
70%
60%
50%
0
20
40
60
80
100
----- End of picture text -----

Percent
of
maximum NPV
from
10
to
100
years.

The
estimated
NPV
reached
a
maximum
value
in
60
years
and
no
amount
of
future
income
adds
to this
value.

VALUATION
OF
RESOURCES
BY
COMPARABLE
TRANSACTIONS

Page
|
30

When
only
a
resource
or
defined
body
of
mineralisation
has
been
outlined
and
its
economic
viability has
still
to
be
established
(i.e.
there
is
no
ore
reserve)
then
a Comparable
Transactions approach
is usually
applied,
often
stated
as
a
percentage
of
metal
value.
This
can
be
applied
to
Mineral
Resource estimates
and
Exploration
Targets
in
accordance
with
the
JORC
code
with
appropriate
discounts
for risk
in
the
different
Mineral
Resource
categories
and
operational
factors
to
differentiate
between deposits.

Agricola
Mining
Consultants
prefers
the
comparable
transactions
approach
where
mineral
resources have
been
estimated.
The
DCF
method
is
inappropriate
because
there
is
no
Pre
Feasiblity
or Feasibility
Study
available
and
no
Ore
Reserves
has
been
(or
can
be)
estimated
under
the
JORC
Code. The
Geoscientific
Factor
method
(potential
for
further
discoveries)
and
Past
Expenditure
methods are
appropriate
for
exploration
ground
that
is
not
advanced
enough
to
estimate
mineral
resources. The
contemporaneous
transactions
over
adjacent
ground
may
be
appropriate
but
the
absence
of such
information
the
only
viable
method
(in
Agricola’s
opinion)
is
to
compare
the
sale
of
other deposits
on
a
'dollar
per
unit'
basis
for
the
mineral
resource
estimated
in
accordance
with
the
JORC Code.
Agricola
is
not
aware
of
a
method
to
cross
check
the
valuation
for
the
technical
value
(as apposed
to
the
Market
value)
under
these
circumstances
except
by
comparison
with
earlier valuations.

With
metal
projects
the
Comparable
Transactions
method
requires
allocating
a
dollar
value
to resource
tonnes
or
ounces
in
the
ground.

The
dollar
value
must
take
into
account
a
number
of aspects
of
the
resources
including:

The
confidence
in
the
resource
estimation
(the
JORC
Category)
The
quality
of
the
resource
(grade
and
recovery
characteristics)
Possible
extensions
of
the
resource
in
adjacent
areas
Exploration
potential
for
other
mineralisation
within
the
tenements
Presence
and
condition
of
a
treatment
plant
within
the
project
Proximity
of
infrastructure,
development
and
capital
expenditure
aspects

This
approach
can
be
taken
with
metals
or
bulk
commodities
sold
on
the
spot
market
and
where current
price
can
be
estimated
with
appropriate
adjustments
for
impurities
if
required.
Value
is estimated
as
a
percentage
of
contained
value
once
appropriate
discounts
for
uncertainty
relating
to resource
categorisation
are
taken
into
account.

ation are taken into account.
Resource Category Discounts
Measured Resource	80%
Indicated Resource	70%
Inferred Resource	60%
Exploration Target	45%

An
example
of
appropriate
discounts
for
operational
factors
is
included
below
but
these
must
be considered
on
a
case-‐by-‐case
basis.

Operations
Factors Base
Metals Iron
Ore Coal Gold Rare
Earths

Page
|
31

Recovery	75%	75%	70%	95%	60%
Mining	75%	90%	75%	90%	100%
Processing	80%	70%	70%	95%	50%
Rail Port	80% 80%	90% 90%	70% 50%	95% 100%	75% 90%
Capex	80%	70%	75%	90%	50%
Marketing	75%	80%	75%	100%	75%
Total OperatingDiscount	17%	21%	7%	69%	7%

MERGERS
AND
ACQUISITIONS
ACTIVITY

A
recent
review
of
Mergers
and
Acquisitions
over
the
last
eight
years
covering
the
mining
boom,
the GFC
and
the
recovery
phase
of
the
Mining
Market
indicates
the
price
paid
for
gold
assets.

Merger and Acquisitions Activity (CAD)	Merger and Acquisitions Activity (CAD)	Merger and Acquisitions Activity (CAD)
	2006	2007	2008	2009	2010	2011	2012	2013	2014
Gold Price	$709	$778	$920	$1,154	$1,277	$1,590	$1,665	$1,488	$1,303
Producing Assets*	$74	$94	$115	$89	$207	$202	$200	$121	$120
Percent of Price	10.40%	12.10%	12.50%	7.70%	16.20%	12.70%	12.00%	8.10%	9.20%
Exploration Assets*	$54	$28	$31	$29	$71	$90	$47	$23	$17
Percent of Price	7.60%	3.60%	3.40%	2.50%	5.60%	5.70%	2.80%	1.50%	1.30%
*Estimated price paid per ounce of gold in the ground, updated					December	31, 2014
Source: http://www.ibkcapital.com/capital-market-highlights/merger-acquisition-activity/

The
information
is
based
on
Canadian
experience
and
closely
replicates
values
reported
in
Australia and
similar
metal
markets
elsewhere.
The
‘Apparent
Acquisition
Cost’
(“AAC”)
for
gold
projects
lies in
the
range
of
1.5%
to
7.6%
of
the
gold
price
at
the
time.
The
data
set
does
not
differentiate between
resource
categories
or
variations
in
deposits
type
and
individual
assessment.
It
is
implicit that
this
has
been
taken
into
account
with
risk
related
discounts.
Information
on
sales
internationally has
shown
a
pattern
for
AAC.
For
the
purpose
of
valuation
the
Average
Acquisition
Cost
for
the lower,
preferred
and
higher
value
is
selected
at
the
25[th] ,
50[th] and
75[th] percentiles
of
the
spread
of values.

AAC Percentiles 2006 - 2014 - Exploration Assets	AAC Percentiles 2006 - 2014 - Exploration Assets	AAC Percentiles 2006 - 2014 - Exploration Assets
Percentile		10% 25% 50% 75% 90%
AAC		1.5% 2.5% 3.4% 5.6% 6.1%
AAC Percentiles 2006 - 2014 - Producing Assets
Percentile	10% 25% 50% 75% 90%

Page
|
32

AAC

8.0% 9.2% 12.0% 12.5% 13.4%

The
AAC
method
percentiles
are
derived
from
Canadian
Merger
and
Acquisitions
activity
in
the
gold industry.
The
original
database
provided
$/ounce
values
for
producing
and
non-‐producing
asset sales
for
a
period
of
years
and
Agricola
has
recalculated
this
as
a
percentage
of
metal
value
so
it
can be
related
to
current
metal
prices
in
other
metals.
The
quoted
prices
are
based
on
enterprise
value (EV
-‐
Market
Capitalisation
plus
debt
minus
cash)
so
they
cannot
be
directly
compared
to
technical value.
A
“top-‐down”
approach
is
often
taken
to
determine
technical
vale
(for
example
for
stamp duty
assessment)
where
company
specific
elements
such
as
cash,
debt,
goodwill,
database
value
etc ate
deducted
from
the
EV.
Agricola
prefers
a
“bottom-‐up”
approach
in
this
Report
where
discount factors
for
resource
category
and
operating
factors
are
assessed
for
each
deposit.

This,
of
course,
is
a
subjective
decision
and
AAC
percentiles
are
used
in
conjunction
with
the resource
category
discounts
and
operational
factors
to
"normalise'
the
rates
for
gold
acquisitions
to other
metals.
In
the
absence
of
a
useful
database
of
project
sales
for
other
metals
this
is
considered to
be
a
reasonable
proxy
for
sales
in
most
metal
projects
(the
combination
of
AAC,
discounts
and Operational
factors).
Mineral
asset
sales
are
related
to
the
current
mineral
price
(or
contained
value) which
is
provided
by
the
M
&
A
database
over
the
period
2006
-‐
2013
through
a
period
of
boom
and bust
and
the
valuation
method
is
realistic
when
adjusted
by
factors
that
relate
specifically
to
the metal
involved
and
more
specifically
to
the
individual
deposits.

SENSITIVITY
TO
METAL
PRICE

Valuation
of
mineral
resources
is
estimated
at
a
specific
date
as
stated
in
the
report
and
metal
prices are
estimated
from
current
information
available
at
that
time.
Metal
markets
may
be
quite
volatile from
time
to
time
and
it
is
appropriate
to
consider
the
effect
of
variations
in
metal
price
(which
may change
on
a
daily
basis).

The
two
charts
below
represent
the
Commodity
Matal
Price
index
and
the
Commodity
Price
Index over
the
last
decade.
Both
charts
show
a
marked
decline
in
2008/09
(GFC)
and
a
similar
decline
in recent
years.

Page
|
33

==> picture [389 x 182] intentionally omitted <==

==> picture [388 x 214] intentionally omitted <==

There
is
an
obvious
need
for
reassessment
of
value
if
there
is
a
significant
change
in
metal/oxide prices.

GEOSCIENCE
FACTOR
METHOD

The
Geoscience
Factor
method
attempts
to
convert
a
series
of
scientific
opinions
about
a
subject property
into
a
numeric
evaluation
system.
The
success
of
this
method
relies
on
the
selection
of multiplying
factors
that
reflect
the
tenement's
prospectivity.

Agricola
Mining
Consultants
prefers
the
Geoscientific
Factor
method
(potential
for
further discoveries)
for
exploration
ground
that
is
not
advanced
enough
to
estimate
mineral
resources.
The contemporaneous
transactions
over
adjacent
ground
may
be
appropriate
but
the
absence
of
such information
the
only
viable
method
(in
Agricola’s
opinion)
is
to
compare
the
sale
of
other
deposits on
a
'dollar
per
unit'
basis
for
the
mineral
resource
estimated
in
accordance
with
the
JORC
Code. Agricola
uses
Past
Expenditure
and
yardstick
(Rule
of
Thumb)
methods
as
an
appropriate
way
of cross
checking
the
reasonableness
of
the
valuation.

Page
|
34

The
Geoscience
Factor
method
is
essentially
a
technique
to
define
a
value
based
on
geological prospectivity.
The
method
appraises
a
variety
of
mineral
property
characteristics:

location
with
respect
to
any
off-‐property
mineral
occurrence
of
value,
or
favourable geological,
geochemical
or
geophysical
anomalies;
location
and
nature
of
any
mineralisation,
geochemical,
geological
or
geophysical
anomaly within
the
property
and
the
tenor
(grade)
of
any
mineralisation
known
to
exist
on
the property
being
valued;
geophysical
and/or
geochemical
targets
and
the
number
and
relative
position
of
anomalies on
the
property
being
valued;
geological
patterns
and
models
appropriate
to
the
property
being
valued.

It
is
recognised
that
application
of
this
method
can
be
highly
subjective,
and
that
it
relies
almost exclusively
on
the
geoscience
ratings
adopted
by
the
valuer.
As
such,
it
is
good
practice
for
valuers using
this
method
to
provide
sufficient
discussion
supporting
their
selection
of
the
various multiplying
factors
to
allow
another
suitably
qualified
geoscientist
to
assess
the
appropriateness
of the
factors
selected.

The
successful
application
of
this
method
depends
on
the
selection
of
appropriate
multipliers
that reflect
the
tenement
prospectivity.
Furthermore,
there
is
the
expectation
that
the
outcome
reflects the
market’s
perception
of
value,
hence
the
application
of
the
market
factor.
Agricola
Mining Consultants
prefers
the
Geoscience
Factor
approach
because
it
endeavours
to
implement
a
system that
is
systematic
and
defendable.
It
also
takes
account
of
the
key
factors
that
can
be
reasonably considered
to
impact
on
the
exploration
potential.
The
keystone
of
the
method
is
the
BAC,
which provides
a
standard
base
from
which
to
commence
a
valuation.
The
acquisition
and
holding
costs
of a
tenement
for
one
year
provides
a
reasonable,
and
importantly,
consistent
starting
point. Presumably
when
a
tenement
is
pegged
for
the
first
time
by
an
explorer
the
tenement
has
been judged
to
be
worth
at
least
the
acquisition
and
holding
cost.

It
may
be
argued
that
on
occasions
an
EL
may
be
converted
to
a
ML
expediently
for
strategic
reasons rather
than
based
on
exploration
success,
and
hence
it
is
unreasonable
to
value
such
a
ML
starting
at a
relatively
high
BAC
compared
to
that
of
an
EL.

It
has
also
been
argued
that
the
method
is
a
valuation-‐by-‐numbers
approach.
In
Agricola’s
opinion, the
strength
of
the
method
is
that
it
reveals
to
the
public,
in
the
most
open
way
possible,
just
how
a tenement’s
value
was
systematically
determined.
It
is
an
approach
that
lays
out
the
subjective judgements
made
by
the
valuer.

AREA

The
area
of
a
tenement
is
usually
stated
in
terms
of
square
kilometres
as
a
matter
of
convenience and
cosistency.
A
graticular
boundary
(or
block)
system
was
introduced
for
exploration
licences
in mid
1991
in
W.A.
and
a
block
is
defined
as
one
minute
of
latitude
by
one
minute
of
longitude.
The

Page
|
35

square
kilometres
contained
within
a
block
varies
from
place
to
place.
For
instance,
at
Kunnanurra (Latitude
15
deg.
S)
one
block
equals
3.31
square
kilometres,
at
Mt
Isa
(Latitude
20
deg.
S)
one
block equals
3.22
square
kilometres.
at
Carnarvon
or
Bundaberg
(Latitude
25
deg.
S)
one
block
equals
3.11 square
kilometres
and
at
Albany
or
Adelaide
(Latitude
35
deg.
S)
one
block
equals
2.81
square kilometres.

Prospecting
Licences
and
Mining
Leases
are
granted
in
Hectares
(100
hectares
equals
one
square kilometre.

BASIC
ACQUISITION
COST

The
Basic
Acquisition
Cost
(“BAC”)
is
the
important
input
to
the
Geoscience
Factor
Method
and
it
is estimated
by
summing
the
annual
rent,
statutory
expenditure
for
a
period
of
12
months
and administration
fees
for
a
first
stage
exploration
tenement
such
as
an
Exploration
Licence(the
first year
holding
cost).

The
notes
are
general
in
nature
and
references
to
Western
Australia
are
an
example
of
exploration expenditures.
they
are
appropriate
for
other
states
and
other
countries
based
on
Agricola’s experience
in
many
areas
of
Australia
and
elsewhere.

The
current
holding
cost
for
exploration
projects
is
considered
to
be
the
average
expenditure
for
the first
year
of
the
licence
tenure.
Exploration
Licences
in
Western
Australia,
for
example,
attract
a minimum
annual
expenditure
for
the
first
three
years
of
$300
per
square
kilometre
per
year
with
a minimum
of
$20,000
and
annual
rent
of
$46.80.
A
15%
administration
fee
is
taken
into
account
to imply
a
holding
cost
of
$400
per
square
kilometre.
A
similar
approach
based
on
expenditure commitments
could
be
taken
for
Prospecting
Licences
and
Mining
Leases
(effective
1
July
2014).
The Benchmark
minimum
expenditure
for
Exploration
Licences
in
the
Northern
Territory
is
$10,000
plus $150
per
block.

Many
overseas
jurisdictions
do
not
specify
a
minimum
expenditure
commitment
but
require
that sufficient
work
be
completed
in
the
first
year
to
allow
granting
of
the
tenement
into
the
second year.
This
usually
requires
preparation
of
a
report
with
results
of
exploration
carried
out.

For example
with
a
grass
roots
portfolio
500
square
kilometres
in
the
first
year
the
expenditure
(BAC) would
be
$200,000
to
$225,000
which
is
appropriate
for
early
work
of
desktop
studies,
field
visits rock
chip
sampling
and
general
research.
Agricola
believes
an
Australian
company
would
consider this
reasonable
for
the
first
phase
of
work
in
any
country.

Page
|
36

In
Western
Australia
(from
February
2006),
an
application
for
a
Mining
Lease
required
either
a mining
proposal
or
a
statement
describing
when
mining
is
likely
to
commence;
the
most
likely method
of
mining;
and
the
location,
and
the
area,
of
land
that
is
likely
to
be
required
for
the operation
of
plant,
machinery
and
equipment
and
for
other
activities
associated
with
those
mining operations.
A
mineralisation
report
is
also
required
that
has
been
prepared
by
a
qualified
person.

The
mineralisation
report
must
be
completed
by
a
qualified
person
and
shall
contain
information
of sufficient
standard
and
detail
to
substantiate,
to
the
satisfaction
of
the
Director
Geological
Survey, that
significant
mineralisation
exists
within
the
ground
applied
for.
A
‘qualified
person’
means
a person
who
is
a
member
of
the
Australasian
Institute
of
Mining
and
Metallurgy
(AusIMM)
or
the Australian
Institute
of
Geoscientists
(AIG).
Significant
mineralisation
means
a
deposit
of
minerals located
during
exploration
activities
and
that
there
is
a
reasonable
expectation
that
those
minerals will
be
extracted
by
mining
operations.

The
implication
of
the
mineralisation
report
suggests
that
Mining
leases
should
be
valued
on
the body
of
significant
mineralisation
(usually
a
Mineral
Resource
estimated
in
accordance
with
the
JORC Code)
and
not
on
the
basis
of
prospectivity.
The
preferred
method
for
valuing
resources
is
by comparable
transactions
(Market
Based).

The
Mineral
Resources
are
assumed
to
encapsulate
all
the
value
for
the
tenements
or
prospects
on which
they
occur
and
the
exploration
results
considered
for
the
estimate.
A
separate
value
for exploration
potential
for
this
tenement
is
not
considered
warranted.

It
is
recognised
that
further
exploration
potential
may
exist
within
the
tenement
boundaries
but when
a
mineral
resource
has
already
been
estimated
in
accordance
with
the
JORC
Code
a hypothetical
willing
but
not
too
anxious
purchaser
would
be
unlikely
to
consider
additional
value
for surrounding
untested
ground.
The
possibility
of
undrilled
extensions
to
mineral
resources
may
be considered
in
the
market
factor
assessment.

Mining
Leases
granted
prior
to
2006
and
Prospecting
Licences
may
not
have
a
mineralisation
report available
and
may
cover
old
workings
or
simply
an
expedient
or
strategic
method
of
securing
ground at
the
expiry
of
an
Exploration
Licence
rather
than
based
on
exploration
success.
While
these Licences
carry
all
the
obligations
set
out
in
the
Mining
Act,
from
a
valuation
point
of
view
they
are equivalent
to
Exploration
Licences
and
it
is
unreasonable
to
value
such
these
MLs
(or
PLs)
starting
at a
relatively
high
holding
cost
compared
to
that
of
an
EL
where
only
exploration
results
are
available. These
tenements
should
be
considered
on
the
basis
of
a BAC
of
$400
to
$450 .
To
value
these
areas at
the
higher
levels
may
not
be
considered
to
be
reasonable
under
the
VALMIN
Code.

TENEMENT
STATUS

Uncertainty
may
exist
where
a
tenement
is
in
the
application
stage.
Competing
applications
may
be present
where
a
ballot
is
required
to
determine
the
successful
applicant
or
Native
Title
issues
and

Page
|
37

negotiations
may
add
to
the
risk
of
timely
grant.
Other
issues
may
also
be
present
such
as
state parks
or
forestry
and
wildlife
reserves,
competing
land
use
and
compensation
agreements.
There
is an
inherent
risk
that
the
tenement
may
not
be
granted
and
this
needs
to
be
recognised
in
the
base value
assessment.
A
‘grant
factor’
of
zero
may
be
applied
where
there
is
no
realistic
chance
of approval
(e.g.
sacred
sites)
and
where
no
significant
impediments
are
known
the
factor
may
increase to
about
60%
to
reflect
delays
and
compliance
with
regulations.

EQUITY

The
equity
a
Company
may
hold
in
a
tenement
through
joint
venture
arrangements
or
royalty commitments
may
be
addressed
in
assessing
base
Value
but
it
is
often
considered
at
the
end
of
a valuations
report.

GEOSCIENCE

FACTORS

The
multipliers
or
ratings
and
the
criteria
for
rating
selection
across
these
four
factors
are summarised
in
the
following
table.

The
selection
of
factors
from
the
table
must
be
tempered
with
an
eye
to
the
reasonableness
of
the outcome
and
an
awareness
of
the
inherent
exploration
risks
in
achieving
progress
to
the
next
level. Some
exploration
licences
are
overly
large
and
may
cover
several
domains
of
prospective
(or
entirely unprospective)
ground
and
this
should
be
recognised
in
the
Geology
Factor.
A
conservative
approach is
considered
mandatory.

Estimate
of
project
value
is
carried
out
on
a
tenement-‐by-‐tenement
basis
and
uses
four
calculations as
shown
below.
The
value
estimate
is
shown
as
a
range
with
a
preferred
value.

Base
Value
=
[Area][Grant
Factor][Equity]*[Base
Acquisition
Cost]

Prospectivity
Index
=
[Off
Site
Factor][On
Site
Factor][Anomaly
Factor]*[Geology
Factor]

Technical
Value
=
[Base
Value]*[Prospectivity
Index]

Market
Value
=
[Technical
Value]*[Market
Premium/Discount
Factor]

GEO-FACTOR RATING CRITERIA -GUIDELINES	GEO-FACTOR RATING CRITERIA -GUIDELINES	GEO-FACTOR RATING CRITERIA -GUIDELINES	GEO-FACTOR RATING CRITERIA -GUIDELINES

	Rating	Address - Off Property	Mineralisation - On Property	Anomalies	Geology
Low	0.5	Very little chance of mineralisation, Concept unsuitable to environment	Very little chance of mineralisation, Concept unsuitable to environment	Extensive previous exploration with poor results - no encouragement	Unfavourable lithology over >75% of the tenement
	0.75				Unfavourable lithology over >50% of the tenement
Average	1	Indications of	Indications of	Extensive previous	Deep alluvium

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|
38

		Prospectivity, Concept validated	Prospectivity, Concept validated	exploration with encouraging results - regional targets	Covered favourable geology (40- 50%)
	1.5	RAB Drilling with some scattered results	Exploratory sampling with encouragement, Concept validated	Several early stage targets outlined from geochemistry and geophysics	Shallow alluvium Covered favourable geology (50- 60%)
	2	Significant RC drilling leading to advance project status	RAB &/or RC Drilling with encouraging intercepts reported	Several well defined surface targets with some RAB drilling	Exposed favourable lithology (60- 70%)
	2.5	Grid drilling with encouraging results on adjacent sections	Diamond Drilling after RC with encouragement	Several well defined surface targets with encouraging drillingresults	Strongly favourable lithology (70- 80%)
High	3	Resource areas identified	Advanced Resource definition drilling - early stage	Several significant subeconomic targets - no indication of volume	Highly prospective geology (80 - 100%)
	3.5	Along strike or adjacent to known mineralisation at Pre-Feasibility Stage	Resource areas identified	Subeconomic targets of possible significant volume - early stage drilling

PROSPECTIVITY
ENHANCEMENT
MULTIPLIER
(“PEM”)

Various
valuation
methods
exist
which
make
reference
to
historical
exploration
expenditure.
One such
method
is
based
on
a
'multiple
of
historical
exploration
expenditure'.
Successful
application
of this
method
relies
on
the
valuer
assessing
the
extent
to
which
past
exploration
expenditure
is
likely to
lead
to
a
target
resource
being
discovered,
as
well
as
working
out
the
appropriate
multiple
to apply
to
such
expenditure.

Another
such
method
is
the
'appraised
value
method'.
When
adopting
this
approach,
the
valuer should
only
account
for
meaningful
past
exploration
expenditure
plus
warranted
future expenditures.
Warranted
future
expenditures
reflect
a
reasonable
and
justifiable
exploration
budget to
test
the
identified
potential
of
the
target.

_**PEM

Factors
Used
in
this
valuation
method**_

PEM Range	Criteria
0.2 – 0.5	Exploration (past and present) has downgraded the tenement prospectivity, no mineralisation identified

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|
39

0.5 – 1.0	Exploration potential has been maintained (rather than enhanced) by past and present activityfrom regional mapping
1.0 – 1.3	Exploration has maintained, or slightly enhanced (but not downgraded) the prospectivity
1.3 – 1.5	Exploration has considerably increased the prospectivity (geological mapping, geochemical orgeophysical)
1.5 – 2.0	Scout Drilling has identified interesting intersections of mineralisation
2.0 – 2.5	Detailed Drilling has defined targets with potential economic interest.
2.5 – 3.0	A resource has been defined at Inferred Resource Status, no feasibility study has been completed
3.0 – 4.0	Indicated Resources have been identified that are likely to form the basis of a prefeasibilitystudy
4.0 – 5.0	Indicated and Measured Resources have been identified and economic parameters are available for assessment.

When
historical
expenditure
approaches
are
adopted,
it
is
good
practice
for
valuers
to
provide
full transparency
in
relation
to
all
historical
exploration
expenditure
on
the
subject
property,
details
of those
expenditures
selected
for
use
in
the
method
(including
details
in
relation
to
warranted
future expenditures),
and
justification
for
any
multiples
applied.

Past
expenditure
on
a
tenement
and/or
future
committed
exploration
expenditure
can
establish
a base
value
from
which
the
effectiveness
of
exploration
can
be
assessed.
Where
exploration
has produced
documented
results,
a
PEM
can
be
derived
which
takes
into
account
the
valuer’s
judgment of
the
prospectivity
of
the
tenement
and
the
value
of
the
database.

Future
committed
exploration
expenditure
is
discounted
to
60%
by
some
valuers
to
reflect
the uncertainty
of
results
and
the
possible
variations
in
exploration
programmes
caused
by
future undefined
events.
Expenditure
estimates
for
tenements
under
application
are
often
discounted
to 60%
of
the
estimated
value
by
some
valuers
to
reflect
uncertainty
in
the
future
granting
of
the tenement.
The
PEM
Factors
are
defined
in
the
table.

YARDSTICK

(RULE
OF
THUMB)
METHOD

A
Rule-‐of-‐Thumb
method
sometimes
used
for
valuing
Mineral
Assets
without
identified
Resources
is based
upon
conversion
of
comparable
sales
data
to
a
unit
area
(per
km[2] or
per
ha).
It
is
probably
the most
difficult
comparative
tool
to
justify.
This
Method
has
found
greater
acceptance
in
North America,
where
tenement
sizes
appear
to
be
smaller
and
where
there
are
many
more
transactions forming
a
deep
and
liquid
market
than
elsewhere.
In
addition,
dealing
in
tenements
is
not discouraged
by
the
mining
legislation,
especially
in
the
US
with
its
historic
focus
on
property
rights.
It is
used
in
Canada
and
Australia,
though
to
a
much
lesser
extent.

In
Australia,
many
State
jurisdictions
grant
large
exploration
tenements
(say
300km2
maximum)
on
a graticular
block
system.
This
means
a
tenement
is
usually
larger
than
geometrically
necessary
to

Page
|
40

cover
the
specific
geologically
prospective
terrane.
Also,
most
jurisdictions
here
require
periodic significant
reductions
in
the
tenement’s
size,
so
it
is
common
to
apply
for
more
area
than
is
actually needed
to
provide
for
this
obligatory
reduction.
The
sale
of
exploration
tenements
to
third
parties
is discouraged
(although
sales,
particularly
if
interests,
certainly
occur)
because
the
basis
of
grant
is that
the
applicants
will
carry
out
the
granted
tenement’s
exploration
obligations
themselves.
The State
sees
itself
as
the
centralised,
timely
distributor
of
exploration
rights,
not
the
free
market.

That
said,
some
valuers
still
attempt
to
use
this
Rule-‐of-‐Thumb
(based
upon
area)
in
Australia
with an
emphasis
on
market
value.
A
review
of
technical
value
(which
is
not
influenced
by
market conditions)
of
exploration
areas
carried
out
by
Agricola
over
the
last
few
years
suggests
that
ground without
resources
can
be
categorized
as
a
matter
of
convenience
into
four
groups:

Advanced
exploration
areas
located
in
a
well
mineralised
area
near
existing
mineral
deposits with
significant
potential
attract
values
well
above
$2000
per
square
kilometre
Exploration
areas
along
strike
or
structurally
related
to
estimated
mineral
resources.
Such areas
attract
values
in
the
range
$1200
to
$2000
per
square
kilometre.
Exploration
areas
in
known
mineral
fields.
Such
areas
attract
values
in
the
range
of
$700
to $1300
per
square
kilometre.
Exploration
areas
in
green
fields
or
early
exploration
domains
remote
from
mineral resources.
Such
areas
attract
values
in
the
range
of
$400
to
$800
per
square
kilometre.

ADJUSTMENTS

TO
THE
TECHNICAL
VALUE
–
MARKET
VALUE

Mineral
Assets
are
often
bought
and
sold
at
a
price
that
is
different
than
their
technical
value
or stand-‐alone
value.
To
the
extent
that
it
exists,
the
amount
of
the
transacted
value
differs
from
the technical
value
is
often
described
as
the
'acquisition
premium
or
discount'.

The
concept
of
market
value
implies
the
construction
of
a
hypothetical
transaction
between
willing, knowledgeable,
but
not
anxious
buyers
and
sellers.
Therefore,
when
assessing
the
market
value
of resource
projects,
it
is
likely
that
valuers
will
consider
whether
it
is
appropriate
to
make
an adjustment
to
the
technical
value
of
the
project
to
reflect
any
observed
'acquisition
premium
or discount',
or
other
adjustments.
Such
adjustments
can
either
be
implicit
or
explicit
in
the
valuation method
chosen.
However,
care
should
be
taken
not
to
treat
as
acquisition
premium
or
discount something
that
is
properly
part
of
technical
value,
such
as
where
assumed
forward
values
for commodity
prices
are
reflected
in
the
technical
value.

Particularly
when
valuing
early
stage
exploration
and
development
projects
the
technical
value
may be
assessed
for
a
project
with
reference
to
parameters
that
may
be
above
or
below
those
present
in the
financial
markets
as
at
the
valuation
date.
Consequently,
when
applying
these
exploration valuation
methods,
it
may
be
appropriate
to
reflect
a
series
of
high
level
adjustments
to
the technical
value
to
account
for
differences
in
market
conditions
relative
to
those
embedded
within the
method
itself.

However,
other
valuation
methods
(particularly
the
DCF
valuation
method)
are
able
to
explicitly reflect
a
series
of
parameters
that
may
apply
to
future
financial
market
expectations.
This
is particularly
the
case
if
valuers
adopt
commodity
price,
exchange
rate,
inflation
rate,
and
discount

Page
|
41

rate
parameters
which
are
forecast
with
reasonable
confidence,
and
resource
to
reserve
conversion, cost
structure
and
capital
expenditure
parameters
which
are
consistent
with
the
expectations
in
the market.
Doing
so
will
limit
the
need
to
make
further
adjustments
to
the
resulting
stand
alone
value to
account
for
such
factors
as
'market
considerations'.

To
the
extent
that
valuers
choose
to
apply
further
adjustments
to
their
assessed
stand
alone
value,
it is
good
practice
to
clearly
identify
how
they
have
applied
the
adjustments
are
applied,
and
the rationale
for
doing
so.

**GLOSSARY

OF
TERMS**

‘Minerals
Industry’ (also
Extractive
Industry)
–
Defined
as
encompassing
those
engaged
in
exploring for,
extracting,
processing
and
marketing ‘Minerals’ .
‘Price’ –
The
amount
paid
for
a
good
or
service
and
it
is
a
historical
fact.
It
has
no
real
relationship with
‘Value’,
because
of
the
financial
motives,
capabilities
or
special
interests
of
the
purchaser; and
the
state
of
the
market
at
the
time.
Personal
Property –
Covers
all
items
other
than ‘Real
Estate’ and
may
be
tangible
(like
a
chattel
or goods)
or
intangible
(like
a
patent
or
debt).
It
has
a
moveable
character.
‘Real
Property’ –
A
non-‐physical,
legal
concept
and
it
includes
all
the
rights,
interests
and
benefits related
to
the
ownership
of ‘Real
Estate’ and
normally
recorded
in
a
formal
document
(eg,
deed or
lease).
The
rights
are
to
sell,
lease,
enter,
bequeath,
gift,
etc.
There
may
be
absolute
single
or partial
ownership
(subject
to
limitations
imposed
by
Government,
like
taxation,
planning
powers, appropriation,
etc).
These
rights
may
be
affected
by
restrictive
covenants
or
easements
affecting title;
or
by
security
or
financial
interests,
say
conveyed
by
mortgages.
‘Real
Estate’ –
A
physical
concept,
including
land
and
all
things
that
are
a
natural
part
of
the
land
(eg, trees
and
Minerals).
In
addition
it
includes
all
things
effectively
permanently
attached
by
people (eg,
buildings,
site
improvements,
and
permanent
physical
attachments,
like
cooling
systems
and lifts)
on,
above
or
below
the
ground.

VALUATION AND VALUE

‘Value’ (also
Valuation
which
is
the
result
of
determining
‘Value’)
-‐
The
estimated
likely
future
‘Price’ of
a
good
or
service
at
a
specific
time,
but
it
depends
upon
the
particular
qualified
type
of
value (eg
‘Market
Value’,
‘Salvage
Value’,
‘Scrap
Value’,
‘Special
Value’,
etc).
There
is
also
a
particular value
for
tax
and
rating,
or
insurance
purposes.
‘Market
Value’ (IVS
Definition)
–
The
result
of
an
objective
Valuation
of
specific
identified
ownership rights
to
a
specific
asset
as
at
a
given
date.
It
is
the
value
in
exchange
not ‘Value-‐in-‐Use’ set
by
the market
place.
It
is
the “estimated
amount
for
which
a
property
should
exchanged
on
the
date
of valuation
between
a
willing
buyer
and
a
willing
seller
in
an
arm’s
length
transaction
after
proper marketing
wherein
the
parties
had
acted
knowledgeably,
prudently,
and
without
compulsion” .
‘Fair
Value’ (IVS
definition)
–
An
accountancy
term
used
for
values
envisaged
to
be
derived
under any and all conditions,
not
just
those
prevailing
in
an
open
market
for
the
normal
orderly
disposal of
assets.
Being
a
transaction
price
it
reflects
both
existing
and
alternative
uses,
too.
It
is
also
a legal
term
for
values
involved
in
dispute
settlements
which
may
not
also
meet
the
strict ‘Market Value’ definition.
Commonly,
it
reflects
the
service
potential
of
an
asset
ie,
value
derived
by DCF/NPV
analysis,
not
merely
the
result
of
comparable
sales
analysis.
It
is
still
the “amount
for which
an
asset
could
be
exchanged,
or
a
liability
settled,
between
knowledgeable
willing
parties
in an
arm’s
length
transaction” .

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|
42

‘Highest-‐and-‐Best-‐Use’ –
for
physical
property,
it
is
the
reasonably
probable
and
legal
use
of property,
which
is
physically
possible,
appropriately
supported
and
financially
feasible,
that
results in
the highest value.
In
the
case
of
personal
property,
it
is
the
same
with
the
additional qualification
that
the
highest
value
must
be
in
the
appropriate
market
place,
consistent
with
the purpose
of
the
appraisal.
It
may
be,
in
volatile
markets,
the
holding
for
a
future
use.
‘Value-‐in-‐Use’ –
in
contrast
to
‘ Highest-‐and-‐Best-‐Use ’,
it
is
the
specific
value
of
a
specific
tangible asset
that
has
a
specific
use
to
a
specific
user.
It
is
not
market-‐related.
The
focus
is
on
the
value that
a
specific
property
contributes
to
the
enterprise
of
which
it
is
a
part
(being
part
of
a ‘Going Concern
Valuation’ ).
It
measures
the
contributory
value
of
a
specified
asset(s)
used
within
that specific
enterprise,
although
it
is
not
the ‘Market
Value' for
that
individual
asset.
It
is
the
Value-‐ to-‐the-‐Owner/Entity/Business
in
accountancy
terms
and
may
be
the
lower
of
net
current replacement
cost
and
its
recoverable
amount.
It
is
also
the
net
present
value
of
the
expected future
net
cash
flows
from
the
continued
use
of
that
asset,
plus
its
disposal
value
at
the
end
of
its useful
life
( ‘Scrap
Value’ ).
At
the ‘Valuation
Date’ ,
there
must
be
recognition
of
its
existing
use
by a
particular
user.
This
is
in
contrast
to
the
alternative
reasonable
use
to
which
an
asset
might
be put
by
unspecified
owner(s).
‘Going
Concern
Value’ –
A
business
valuation
concept
rather
than
one
relating
to
individual
property valuation.
It
is
the
value
of
an
operating
business/enterprise
(ie
one
that
is
expected
to
continue operating)
as a whole and
it
includes
goodwill,
special
rights,
unique
patents
or
licences,
special reserves,
etc.
Apportionment
of
this
total
value
may
be
made
to
constituent
parts,
but
none
of these
components
constitute
a
basis
for ‘Market
Value’ .
‘Forced
Sale
Value’
(Liquidated
Value) –
The
amount
reasonably
expected
to
be
received
from
the sale
of
an
asset
within
a
short
time
frame
for
completion
that
is
too
short
to
meet
the
‘Market Value’
definition.
This
definition
requires
a
reasonable
marketing
time,
having
taken
into
account the
asset’s
nature,
location
and
the
state
of
the
market).
Usually
it
also
involves
an
unwilling
seller and
buyers
who
have
knowledge
to
the
disadvantage
of
the
seller.
'Market
Capitalization'
-‐ The
total
dollar
market
value
of
all
of
a
company's
outstanding
shares. Market
capitalization
is
calculated
by
multiplying
a
company's
shares
outstanding
by
the
current market
price
of
one
share.
The
investment
community
uses
this
figure
to
determine
a
company's size,
as
opposed
to
sales
or
total
asset
figures.
Frequently
referred
to
as
"market
Cap"
or
MCap
'Enterprise
Value
-‐
EV'
-‐ A
measure
of
a
company's
value,
often
used
as
an
alternative
to straightforward
market
capitalization.
Enterprise
value
is
calculated
as
market
cap
plus
debt, minority
interest
and
preferred
shares,
minus
total
cash
and
cash
equivalents.
In
the
event
of
a buyout,
an
acquirer
would
have
to
take
on
the
company's
debt,
but
would
pocket
its
cash.
EV differs
significantly
from
simple
market
capitalization
in
several
ways,
and
many
consider
it
to
be
a more
accurate
representation
of
a
firm's
value.
‘Market
Premium’
-‐ A
control
premium
is
an
amount
that
a
buyer
is
usually
willing
to
pay
over
the current
market
price
of
a
publicly
traded
company
in
order
to
acquire
a
controlling
share
in
that company.
The
reason
the
buyer
of
a
controlling
interest
is
willing
to
offer
a
premium
over
the price
currently
established
by
other
market
participants
is
the
additional
prerogatives
of
control, including
electing
the
company
directors,
firing
and
hiring
key
employees,
declaring
and distributing
dividends,
divesting
or
acquiring
additional
business
assets,
and
entering
into
merger and
acquisition
transactions.
The
opposite
of
control
premium
is
the
minority
discount.
‘ Investment
Value’
(Worth) –
this
is
the
value
of
a
specific
asset
to
a
specific
investor(s)
for identified
investment
objectives
or
criteria.
It
may
be
higher
or
lower
than
‘Market
Value’
and
is associated
with
‘Special
Value’.
‘ Property-‐with-‐Trading-‐Potential‘ –
refers
to
the
valuation
of
specialised
property
(eg,
hotel,
petrol station,
restaurant,
etc)
that
is
sold
on
an
operating
or
going
concern
basis.
It
recognises
that

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|
43

assets
other
than
land
and
buildings
are
to
be
included
in
the
‘Market
Value’
and
it
is
often difficult
to
separate
the
component
values
for
land
and
property.

‘Special
Value’ –
An
extraordinary
premium
over
and
above
the
‘Market
Value’,
related
to
the specific
circumstances
that
a
particular
prospective
owner
or
user
of
the
property
attributes
to the
asset.
It
may
be
a
physical,
functional
or
economic
aspect
or
interest
that
attracts
this premium.
It
is
associated
with
elements
of
‘Going
Concern
Value’
or
‘Investment
Value’
since
it also
represents
synergistic
benefits.
In
a
strict
sense
it
could
apply
to
very
specialised
or
special purpose
assets
which
are
rarely
sold
on
the
open
market,
except
as
part
of
a
business,
because their
utility
is
restricted
to
particular
users.
In
some
circumstances,
it
may
be
the
lower
value
given by
‘Value
–in–Use’.
‘Salvage
Value’ –
The
expected
value
of
an
asset
at
the
end
of
its
economic
life
(ie,
being
valued
for salvage
disposal
purposes
rather
than
for
its
originally
intended
purpose).
Hence,
it
is
the
value
of property,
excluding
land,
as
if
disposed
of
for
the
materials
it
contains,
rather
than
for
its continued
use,
without
special
repairs
or
adaptation.
‘Scrap
Value’
(Residual
Value) –
The
remaining
value
(usually
a
net
value
after
disposal
costs)
of
a wasting
asset
at
the
end
of
a
prescribed
or
predictable
period
of
time
(usually
the
end
of
its effective
life)
that
was
ascertained
upon
acquisition.
‘Valuation
Date’ -‐
Means
the
reference
date
to
which
a
Valuation
applies.
Depending
on
the circumstances,
it
could
be
different
to
the
date
of
completion
or
signing
of
the
Valuation
Report
or the
cut-‐off
date
of
the
available
data
(VALMIN
Code,).
‘Valuer’ (also
Valuer
[Canada]
or
Appraiser
[USA])
–
Either
the
‘Expert’
or
‘Specialist’
(Qualified Person
in
Canada)
who
is
the
natural
person
responsible
for
the
Valuation
to
determine
the
‘Fair Market
Value’
after
consideration
of
the
technical
assessment
of
the
‘Mineral
Asset’
and
other relevant
issues.
They
must
have
demonstrable
‘Competence’
(and
‘Independence’,
when required).

JORC CODE

‘Competent
Person
-‐ A
‘Competent
Person’
is
a
minerals
industry
professional
who
is
a
Member
or Fellow
of
The
Australasian
Institute
of
Mining
and
Metallurgy,
or
of
the
Australian
Institute
of Geoscientists,
or
of
a
‘Recognised
Professional
Organisation’
(RPO),
as
included
in
a
list
available on
the
JORC
and
ASX
websites.
These
organisations
have
enforceable
disciplinary
processes including
the
powers
to
suspend
or
expel
a
member.
A
Competent
Person
must
have
a
minimum of
five
years
relevant
experience
in
the
style
of
mineralisation
or
type
of
deposit
under consideration
and
in
the
activity
which
that
person
is
undertaking.
If
the
Competent
Person
is preparing
documentation
on
Exploration
Results,
the
relevant
experience
must
be
in
exploration. If
the
Competent
Person
is
estimating,
or
supervising
the
estimation
of
Mineral
Resources,
the relevant
experience
must
be
in
the
estimation,
assessment
and
evaluation
of
Mineral
Resources.
If the
Competent
Person
is
estimating,
or
supervising
the
estimation
of
Ore
Reserves,
the
relevant experience
must
be
in
the
estimation,
assessment,
evaluation
and
economic
extraction
of
Ore Reserves.
( JORC
2012 )
‘Independent/Independence’ –
Means
that
the
person(s)
making
the
Valuation
have
no
‘ Material’ pecuniary
or
beneficial
(present
or
contingent)
interest
in
any
of
the ‘Mineral
Assets’ being assessed
or
valued,
other
than
professional
fees
and
reimbursement
of
disbursements
paid
in connection
with
the
assessment
or
Valuation
concerned;
or
any
association
with
the commissioning
entity,
or
with
the
owners
or
promoters
(or
parties
associated
with
them)
likely
to create
an
apprehension
of
bias.
Hence,
they
must
have
no
beneficial
interest
in
the
outcome
of the
transaction
or
purpose
of
the
technical
assessment/Valuation
of
the ‘Mineral
Asset’ (VALMIN Code).
ASIC
RG112,
which
deals
with
the
Independence
of
Expert
Reports,
provides
more
detail
on

Page
|
44

this
concept.
( JORC
2012 )

‘Exploration
results’
-‐ Exploration
Results
include
data
and
information
generated
by
mineral exploration
programmes
that
might
be
of
use
to
investors
but
which
do
not
form
part
of
a declaration
of
Mineral
Resources
or
Ore
Reserves.
The
reporting
of
such
information
is
common
in the
early
stages
of
exploration
when
the
quantity
of
data
available
is
generally
not
sufficient
to allow
any
reasonable
estimates
of
Mineral
Resources.
Examples
of
Exploration
Results
include results
of
outcrop
sampling,
assays
of
drill
hole
intersections,
geochemical
results
and
geophysical survey
results. (JORC
2012)
‘Exploration
Target’
-‐ An
Exploration
Target
is
a
statement
or
estimate
of
the
exploration
potential of
a
mineral
deposit
in
a
defined
geological
setting
where
the
statement
or
estimate,
quoted
as
a range
of
tonnes
and
a
range
of
grade
(or
quality),
relates
to
mineralisation
for
which
there
has been
insufficient
exploration
to
estimate
a
Mineral
Resource.
Any
such
information
relating
to
an Exploration
Target
must
be
expressed
so
that
it
cannot
be
misrepresented
or
misconstrued
as
an estimate
of
a
Mineral
Resource
or
Ore
Reserve.
The
terms
Resource
or
Reserve
must
not
be
used in
this
context.
( JORC
2012 )
‘Inferred
Mineral
Resource’
-‐ An
‘Inferred
Mineral
Resource’
is
that
part
of
a
Mineral
Resource
for which
quantity
and
grade
(or
quality)
are
estimated
on
the
basis
of
limited
geological
evidence and
sampling.
Geological
evidence
is
sufficient
to
imply
but
not
verify
geological
and
grade
(or quality)
continuity.
It
is
based
on
exploration,
sampling
and
testing
information
gathered
through appropriate
techniques
from
locations
such
as
outcrops,
trenches,
pits,
workings
and
drill
holes. An
Inferred
Mineral
Resource
has
a
lower
level
of
confidence
than
that
applying
to
an
Indicated Mineral
Resource
and
must
not
be
converted
to
an
Ore
Reserve.
It
is
reasonably
expected
that the
majority
of
Inferred
Mineral
Resources
could
be
upgraded
to
Indicated
Mineral
Resources with
continued
exploration . ( JORC
2012 )
‘Indicated
Mineral
Resource’
-‐ An
‘Indicated
Mineral
Resource’
is
that
part
of
a
Mineral
Resource
for which
quantity,
grade
(or
quality),
densities,
shape
and
physical
characteristics
are
estimated
with sufficient
confidence
to
allow
the
application
of
Modifying
Factors
in
sufficient
detail
to
support mine
planning
and
evaluation
of
the
economic
viability
of
the
deposit.
Geological
evidence
is derived
from
adequately
detailed
and
reliable
exploration,
sampling
and
testing
gathered
through appropriate
techniques
from
locations
such
as
outcrops,
trenches,
pits,
workings
and
drill
holes, and
is
sufficient
to
assume
geological
and
grade
(or
quality)
continuity
between
points
of observation
where
data
and
samples
are
gathered.
An
Indicated
Mineral
Resource
has
a
lower level
of
confidence
than
that
applying
to
a
Measured
Mineral
Resource
and
may
only
be converted
to
a
Probable
Ore
Reserve.
( JORC
2012 )
‘Measured
Mineral
Resource’
-‐ A
‘Measured
Mineral
Resource’
is
that
part
of
a
Mineral
Resource
for which
quantity,
grade
(or
quality),
densities,
shape,
and
physical
characteristics
are
estimated
with confidence
sufficient
to
allow
the
application
of
Modifying
Factors
to
support
detailed
mine planning
and
final
evaluation
of
the
economic
viability
of
the
deposit.
Geological
evidence
is derived
from
detailed
and
reliable
exploration,
sampling
and
testing
gathered
through appropriate
techniques
from
locations
such
as
outcrops,
trenches,
pits,
workings
and
drill
holes, and
is
sufficient
to
confirm
geological
and
grade
(or
quality)
continuity
between
points
of observation
where
data
and
samples
are
gathered.
A
Measured
Mineral
Resource
has
a
higher level
of
confidence
than
that
applying
to
either
an
Indicated
Mineral
Resource
or
an
Inferred Mineral
Resource.
It
may
be
converted
to
a
Proved
Ore
Reserve
or
under
certain
circumstances
to a
Probable
Ore
Reserve.
( JORC
2012 )
‘Modifying
Factors’
-‐ are
considerations
used
to
convert
Mineral
Resources
to
Ore
Reserves.
These include,
but
are
not
restricted
to,
mining,
processing,
metallurgical,
infrastructure,
economic, marketing,
legal,
environmental,
social
and
governmental
factors . ( JORC
2012 )

Page
|
45

‘Scoping
Study’
-‐ A
Scoping
Study
is
an
order
of
magnitude
technical
and
economic
study
of
the potential
viability
of
Mineral
Resources.
It
includes
appropriate
assessments
of
realistically assumed
Modifying
Factors
together
with
any
other
relevant
operational
factors
that
are necessary
to
demonstrate
at
the
time
of
reporting
that
progress
to
a
Pre-‐Feasibility
Study
can
be reasonably
justified.
A
Scoping
Study
must
not
be
used
as
the
basis
for
estimation
of
Ore
Reserves. ( JORC
2012 )
‘Pre
Feasibility
Study’ -‐
A
Preliminary
Feasibility
Study
(Pre-‐Feasibility
Study)
is
a
comprehensive study
of
a
range
of
options
for
the
technical
and
economic
viability
of
a
mineral
project
that
has advanced
to
a
stage
where
a
preferred
mining
method,
in
the
case
of
underground
mining,
or
the pit
configuration,
in
the
case
of
an
open
pit,
is
established
and
an
effective
method
of
mineral processing
is
determined.
It
includes
a
financial
analysis
based
on
reasonable
assumptions
on
the Modifying
Factors
and
the
evaluation
of
any
other
relevant
factors
which
are
sufficient
for
a Competent
Person,
acting
reasonably,
to
determine
if
all
or
part
of
the
Mineral
Resources
may
be converted
to
an
Ore
Reserve
at
the
time
of
reporting.
A
Pre-‐
Feasibility
Study
is
at
a
lower confidence
level
than
a
Feasibility
Study.
( JORC
2012 )
‘Feasibility
Study’
-‐ A
Feasibility
Study
is
a
comprehensive
technical
and
economic
study
of
the selected
development
option
for
a
mineral
project
that
includes
appropriately
detailed assessments
of
applicable
Modifying
Factors
together
with
any
other
relevant
operational
factors and
detailed
financial
analysis
that
are
necessary
to
demonstrate
at
the
time
of
reporting
that extraction
is
reasonably
justified
(economically
mineable).
The
results
of
the
study
may
reasonably serve
as
the
basis
for
a
final
decision
by
a
proponent
or
financial
institution
to
proceed
with,
or finance,
the
development
of
the
project.
The
confidence
level
of
the
study
will
be
higher
than
that of
a
Pre-‐
Feasibility
Study.
( JORC
2012 )

VALMIN CODE

‘Mineral(s)’ –
Any
naturally
occurring
material
found
in
or
on
the
Earth’s
crust,
that
is
useful
to and/or
has
a
value
placed
on
it
by
mankind.
The
term
specifically
includes
coal,
shale
and materials
used
in
building
and
construction,
but
excludes
crude
oil
and
natural
gas
( VALMIN
Code ).
‘Mineral
Asset(s) ’
(Resource
Assets
or
Mineral
Properties)
-‐
All
property
including,
but
not
limited
to ‘Real
Property’,
intellectual
property,
mining
and
exploration
tenements
held
or
acquired
in connection
with
the
exploration,
the
development
of
and
the
production
from
those
tenements; together
with
all
plant,
equipment
and
infrastructure
owned
or
acquired
for
the
development, extraction
and
processing
of
Minerals
in
connection
with
those
tenements.
Most
can
be
classified as
‘Exploration
Areas’,
‘Advanced
Exploration
Areas’,
‘Pre-‐Development
Projects’,
‘Development Projects’
or
‘Operating
Mines’
(VALMIN
Code).
‘ Operating
Mines’ –
Mineral
Properties,
particularly
mines
and
processing
plants,
which
have
been fully
commissioned
and
are
in
production
(VALMIN
Code).
‘ Development
Projects’ –
Mineral
Properties
which
have
been
committed
to
production,
but
which are
not
yet
commissioned
or
not
operating
at
design
levels
(VALMIN
Code).
‘Advanced
Exploration
Areas’ and
‘Pre-‐development
Projects’ –
Mineral
Properties
where
Mineral Resources
have
been
identified
and
their
extent
estimated
(possibly
incompletely)
but
where
a positive
development
decision
has
not
been
made.
Mineral
Properties
at
the
early
assessment stage,
those
for
which
a
development
decision
has
been
negative,
those
on
care
and
maintenance and
those
held
on
retention
titles
are
all
included
in
this
category
if
Mineral
Resources
have
been identified.
This
is
even
if
no
further
valuation
or
technical
assessment
work,
delineation
or advanced
exploration
is
being
undertaken
(VALMIN
Code).
‘ Exploration
Areas’ –
Mineral
Properties
where
mineralisation
may
or
may
not
have
been
identified, but
where
a
Mineral
Resource
has
not
been
identified
(VALMIN
Code).

Page
|
46

‘ Fair
Market
Value’ (Market
Value
or
Value)
–
The
object
and
result
of
the
Valuation.
It
is
the estimated
amount
of
money
(or
the
cash
equivalent
of
some
other
consideration)
for
which
the ‘Mineral
Asset’
should
change
hands
on
the
‘Valuation
Date’.
It
must
be
between
a
willing
buyer and
a
willing
seller
in
an
‘arm’s
length’
transaction
in
which
each
party
has
acted
knowledgeably, prudently
and
without
compulsion.
It
is
usually
comprised
of
two
components,
the
underlying
or ‘Technical
Value’
and
a
premium
or
discount,
relating
to
market,
strategic
or
other
considerations (VALMIN
Code,).
‘Technical
Value’
– An
assessment
of
a ‘Mineral
Asset’s’ future
net
economic
benefit
at
the ‘Valuation
Date’ under
a
set
of
assumptions
deemed
most
appropriate
by
the ‘Valuer’ ,
excluding any
premium
or
discount
to
account
for
market,
strategic
or
other
considerations
( VALMIN
Code ,).
‘Expert’ –
Means
a ‘Competent’
( and ‘Independent’, where
relevant)
natural
person
who
prepares and
has
overall
responsibility
for
the
Valuation
Report.
He/she
must
have
at
least
10
years
of relevant
‘ Minerals
Industry’ experience,
using
a
relevant ‘Specialist’ for
specific
tasks
in
which he/she
is
not ‘Competent’ .
An ‘Expert’ must
be
a
corporate
member
of
an
appropriate, recognised
professional
association
having
an
enforceable
Code
of
Ethics,
or
explain
why
not ( VALMIN
Code ).
‘Specialist’
– Means
a ‘Competent’
( and ‘Independent’, where
relevant)
natural
person
who
is retained
by
the
‘Expert’
to
provide
subsidiary
reports
(or
sections
of
the
Valuation
Report)
on matters
on
which
the
‘Expert’
is
not
personally
expert.
He/she
must
have
at
least
5
years
of suitable
and
preferably
recent
‘ Minerals
Industry’ experience
relevant
to
the
subject
matter
on which
he/she
contributes.
A ‘Specialist’ must
be
corporate
member
of
appropriate,
recognised professional
association
having
an
enforceable
Code
of
Ethics,
or
explain
why
not
( VALMIN
Code ).
‘Material/Materiality’
-‐ with
respect
to
the
contents
and
conclusions
of
a
relevant
Report,
it
means data
and
information
of
such
importance
that
the
inclusion
or
omission
of
the
data
or
information concerned
might
result
in
a
reader
of
the
Report
reaching
a
different
conclusion
than
might otherwise
be
the
case. ‘Material’ data
(or
information)
is
that
which
would
reasonably
be required
in
order
to
make
an
informed
assessment
of
the
subject
of
the
Report.
The
Australian Society
of
Accountants’
Standard
AAS5
indicates
that ‘Material’ data
(or
information)
is
such
that the
omission
or
inclusion
of
it
could
lead
to
changes
in
total
value
of
greater
than
10%
(between 5%
and
10%
it
is
discretionary).
Also
the
Supreme
Court
of
New
South
Wales
has
stated
that something
is ‘Material’ if
it
is
significant
in
formulating
a
decision
about
whether
or
not
to
make an
investment
or
accept
an
offer
( VALMIN
Code ).
‘Transparent/Transparency’ -‐
as
applied
to
a
valuation
it
means,
as
in
the
Concise
Oxford
Dictionary, “ easily
seen
through,
of
motive,
quality,
etc”. It
applies
to
the
factual
information
used,
the assumptions
made
and
the
methodologies
applied,
all
of
which
must
be
made
plain
in
the
Report ( VALMIN
Code ).
‘Competence’ –
it
means
having
relevant
expertise,
qualifications
and
experience
(technical
or commercial),
as
well
as,
by
implication,
the
professional
reputation
so
as
to
give
authority
to statements
made
in
relation
to
particular
matters.
( VALMIN
Code ).

**VALUATION

REFERENCES**

ASIC,
2011,
“Regulatory
Guideline
111
–
Content
of
Expert’s
Reports”,
March
2011

ASIC,
2011,
“Regulatory
Guideline
112
–
Independence
of
Experts”,
March
2011

Page
|
47

AusIMM,
(2012),
“Australasian
Code
for
Reporting
of
Mineral
Resources
and
Ore
Reserves
(JORC Code),
prepared
by
the
Joint
Ore
Reserves
Committee
(JORC)
of
the
AusIMM,
the
Australian
Institute of
Geoscientists
(AIG)
and
the
Minerals
Council
of
Australia
(MCA)”,
(The
JORC
Code)
effective December
2013.

AusIMM.
(2005),
“Code
for
the
Technical
Assessment
and
Valuation
of
Mineral
and
Petroleum
Assets and
Securities
for
Independent
Expert
Reports
(the
VALMIN
Code)”
2005
Edition.

AusIMM,
(1998),
“Valmin
94
–
Mineral
Valuation
Methodologies”.

Australian
Taxation
Office,
2014,
“MRRT
Starting
Base
–
Valuations”

Barnett,
D
W
and
Sorentino,
C,
1994.
Discounted
cash
flow
methods
and
the
capital
asset
pricing model,
in
Proceedings
Mineral
Valuation
Methodologies
1994
(VALMIN
‘94)
pp
17-‐35
(The Australasian
Institute
of
Mining
and
Metallurgy:
Melbourne).

Baurens,
S.,
2010,
“Valuation
of
Metals
and
Mining
Companies”
Basinvest,
7
Nov
2010

CANADIAN
INSTITUTE
OF
MINING,
METALLURGY
AND
PETROLEUM,
(2014),
“CIM
Standards
on Mineral
Resources
and
Reserves-‐Definitions
and
Guidelines”.
Prepared
by
the
CIM
Standing Committee
On
Reserve
Definitions.
Adopted
by
CIM
Council
August
20,
2000.

CIM,
(2003)
–
“Standards
and
Guidelines
for
Valuation
of
Mineral
Properties.
Final
Version,
February 2003”
Special
Committee
of
the
Canadian
Institute
of
Mining,
Metallurgy
and
Petroleum
on Valuation
of
Mineral
Properties
(CIMVAL).

Edmonds,
J,
2013,
“Resource
Capital
Fund
III
LP
v
Commissioner
of
Taxation
[2013]
FCA
363,
Federal Court
of
Australia,
26
April
2013

Goulevitch
J
and
Eupene
G
S;
1994;
Geoscience
rating
for
valuation
of
exploration
properties
– applicability
of
the
Kilburn
Method
in
Australia
and
examples
of
its
use;
Proceedings
of
VALMIN
94; pages
175
to
189;
The
Australasian
Institute
of
Mining
and
Metallurgy,
Carlton,
Australia.

Kilburn,
LC,
1990,
“Valuation
of
Mineral
Properties
which
do
not
contain
Exploitable
Reserves”
CIM Bulletin,
August
1990.

Jessup,
A.
2013,
“Application
of
Stamp
Duty
to
Mineral
and
Petroleum
Transactions”
AMPLA
Limited Thirty-‐Seventh
National
Conference,
Piper
Alderman,
October
2013

Lilford,
E
&
Minnitt,
R,
2002,
“Methodologies
in
the
Valuation
of
Mineral
Rights”
Journal
SAIMM October
2002

Lilford,
E
&
Minnitt,
R,
2005,
“A
Comparative
Study
of
Valuation
Methodologies
for
Mineral Developments”
Journal
SAIMM
January
2005

Lord,
D.
2014,
“How
Right
is
your
Valuation?”,
SRK
Consulting,
AusIMM
June
2014

Rudenno,
V.,
(1998),
“The
Mining
Valuation
Handbook”.

Page
|
48

Rudenno,
V.,
(2009),
“The
Mining
Valuation
Handbook”
3[rd] Edition. Rudenno,
V.,
(2012),
“The
Mining
Valuation
Handbook”
4[th] Edition. Sorentino,
C,
2000,
“Valuation
Methodology
for
VALMIN”,
MICA,
The
Codes
Forum Spencer
v.
Commonwealth
5
CLR
418,
1907

Page
|
49

FOR ALL ENQUIRIES CALL: +61 8 9389 5885 ALL CORRESPONDENCE TO: Company Secretary

ACN 124 541 466

General Meeting Proxy form

Your Address

This is your address as it appears on the company’s share register. If this is incorrect, please mark the box with an ‘X’ and make the correction on the form. Securityholders sponsored by a broker should advise your broker of any changes. Please note, you cannot change ownership of your securities using this form.

STEP 1 - Appointment of Proxy

I/We being a member/s of Promesa Limited and entitled to attend and vote hereby appoint

the Chairman of the Meeting

(mark with an ‘X’)

==> picture [116 x 41] intentionally omitted <==

If you are not appointing the Chairman of the Meeting as your proxy please write here the full name of the individual or body corporate (excluding the registered Securityholder) you are appointing as your proxy.

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy at the General Meeting of Promesa Limited to be held at the office of BDO Australia, 38 Station Street, Subiaco, Western Australia on 16 October 2015 at 10:00 am ( WST ) and at any adjournment of that meeting, to act on my/our behalf and to vote in accordance with the following directions or if no directions have been given, as the proxy sees fit. The Chairman will vote all undirected proxies in favour of all Resolutions.

If you mark the abstain box for a particular item, you are directing your proxy not to vote on that item on a show of hands or on a poll and that your Shares are not to be counted in computing the required majority on a poll.

If two proxies are being appointed, the proportion of voting rights this proxy represents is ____%

STEP 2 - Voting directions to your Proxy – please mark  to indicate your directions

STEP 2 - Voting directions to your Proxy – please markto indicate your directions	STEP 2 - Voting directions to your Proxy – please markto indicate your directions
Ordinary Business		For	Against	Abstain
Resolution 1	Change to nature and scale of activities			
Resolution 2	Consolidation of capital			
Resolution 3	Creation of a new class of Securities (Performance Shares)			
Resolution 4	Issue of Consideration Securities to Key Idea Holdings and increase in relevant interest			
Resolution 5	Issue of Securities to a related party, Armada Capital			
Resolution 6	Issue of Shares to Dean Bannister			
Resolution 7	Capital Raising			
Resolution 8	Election of Director, David Whitaker			
Resolution 9	Election of Director, Christopher Jones			
Resolution 10	Election of Director, Christopher Adams			
Resolution 11	Change of Company name			
Resolution 12	Issue of Shares under Series A Convertible Loans			
Resolution 13	Issue of Shares under Series B Convertible Loans			
Resolution 14	Issue of Shares under Series A Convertible Loan to a related party			
Resolution 15	Issue of Shares to Noteholders			
Resolution 16	Issue of Shares to a related party, Simon Nominees			
Resolution 17	Ratification of prior issue of Shares			

STEP 3 - Please sign here

This section must be signed in accordance with the instructions overleaf to enable your directions to be implemented.

Individual or Securityholder 1 Securityholder 2 Securityholder 3 Sole Director and Sole Company Secretary Director Director/Company Secretary

Contact Daytime Telephone

Contact Name

Date

YOUR VOTE IS IMPORTANT. FOR YOUR VOTE TO BE EFFECTIVE IT MUST BE RECORDED BEFORE 10:00am (WST), 14 OCTOBER 2015

TO VOTE BY COMPLETING THE PROXY FORM

STEP 1 Appointment of Proxy

Indicate here who you want to appoint as your Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box. If you wish to appoint someone other than the Chairman of the Meeting as your proxy please write the full name of that individual or body corporate. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a security holder of the company. Do not write the name of the issuer company or the registered securityholder in the space.

Proxy which is a Body Corporate

Where a body corporate is appointed as your proxy, the representative of that body corporate attending the meeting must have provided an ‘Appointment of Corporate Representative’ prior to admission. An Appointment of Corporate Representative form can be obtained from the company’s securities registry.

Appointment of a Second Proxy

You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the company’s securities registry or you may copy this form.

To appoint a second proxy you must:

(a) complete two Proxy Forms. On each Proxy Form state the percentage of your voting rights or the number of securities applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded. (b) return both forms together in the same envelope.

STEP 2 Voting Directions to your Proxy

You can tell your Proxy how to vote.

To direct your proxy how to vote, place a mark in one of the boxes opposite each item of business. All your securities will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of securities you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given item, your proxy may vote as he or she chooses. If you mark more than one box on an item your vote on that item will be invalid.

STEP 3 Sign the Form

The form must be signed as follows:

Individual : This form is to be signed by the securityholder.

Joint Holding : where the holding is in more than one name, all the securityholders must sign.

Power of Attorney : to sign under a Power of Attorney, you must have already lodged it with the registry. Alternatively, attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies : this form must be signed by a Director jointly with either another Director or a Company Secretary. Where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. Please indicate the office held by signing in the appropriate place .

STEP 4 Lodgement of a Proxy

This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below not later than 48 hours before the commencement of the meeting ( 10:00 am (WST) on 14 October 2015 ). Any Proxy Form received after that time will not be valid for the scheduled meeting.

Proxies may be lodged:

BY MAIL - PO Box 1156, Nedlands, WA 6909

BY FAX - +61 8 9262 3723 IN PERSON - 110 Stirling Highway, Nedlands, WA 6009.

Attending the Meeting

If you wish to attend the meeting please bring this form with you to assist registration.

AI assistant

UNION STAR METALS LTD — Proxy Solicitation & Information Statement 2015

65987_rns_2015-09-14_38c9735b-2ec1-46bf-be56-18b6400715bb.pdf

Promesa Ltd

Notice of General Meeting

Table of contents

Important notices

General

Purpose of this document

Preparation of and responsibility for this document

Defined terms and glossary

Investment decisions

Enquiries

Time and place of Meeting and how to vote

Time and place of Meeting

Your vote is important

Voting eligibility

Voting in person

Voting by proxy

Proxy vote if appointment specifies way to vote

Transfer of non-chair proxy to chair in certain circumstances

Resolution 1 – Change to nature and scale of activities

Voting exclusion statement

Resolution 2 – Consolidation of capital

Resolution 3 – Creation of a new class of Securities (Performance Shares)

Resolution 4 – Issue of Consideration Securities to Key Idea and increase in relevant interest

Independent Expert’s Report

Voting exclusion statement

Resolution 5 – Issue of Securities to a related party, Armada Capital

Voting exclusion statement

Voting prohibition statement

Resolution 6 – Issue of Shares to Dean Bannister

Voting exclusion statement

Resolution 7 – Capital Raising

Voting exclusion statement

Resolution 8 – Election of Director, David Whitaker

Resolution 9 – Election of Director, Christopher Jones

Resolution 10 – Election of Director, Christopher Adams

Resolution 11 – Change of Company name

Resolution 12 – Issue of Shares under Series A Convertible Loans

Voting exclusion statement

Resolution 13 – Issue of Shares under Series B Convertible Loans

Voting exclusion statement

Resolution 14 – Issue of Shares under Series A Convertible Loan to a related party

Voting exclusion statement

Resolution 15 – Issue of Shares to Noteholders

Voting exclusion statement

Resolution 16 – Issue of Shares to a related party, Simon Nominees

Voting exclusion statement

Resolution 17 – Ratification of prior issue of Shares

Voting exclusion statement

Dated: 11 September 2015.

By order of the Board

Explanatory Statement

Part 1 – Overview of the Thred Acquisition

1. Current operations and background to Promesa

2. Change to the nature and scale of activities

4. Financial information on Thredit

5. Key terms of the Thred Acquisition

(together, the Consideration Securities ).

6. Independent Expert’s Report

7.

Board and management changes

8. Re-compliance with Chapters 1 and 2 of the ASX Listing Rules

9. Pro-forma capital structure

Notes:

Notes:

10. Indicative timetable

Notes:

11. Pro-forma statement of financial position

12. Advantages and disadvantages of the Thred Acquisition

Advantages

Disadvantages

Specific risk factors

General risk factors

14. Future direction for the Company if the change to nature and scale of activities is not approved

15. Directors’ recommendation

Accordingly, the Directors recommend the Thred Acquisition, and that Shareholders vote in favour of the Acquisition Resolutions.

Resolution 1 – Change to nature and scale of activities

Background

UNION STAR METALS LTD Proxy Solicitation & Information Statement 2015