TIDMBGL
RNS Number : 0773H
Bullabulling Gold Limited
14 May 2014
TARGET'S STATEMENT
In response to the takeover bid made by
Norton Gold Fields Limited
ABN 23 112 287 797
For all the ordinary shares in
Bullabulling Gold Limited
ABN 50 153 234 532
The directors of Bullabulling Gold Limited unanimously recommend
that you
REJECT
the INADEQUATE and OPPORTUNISTIC Norton Offer
This is an important document and requires your immediate
attention. The full version of this Target's Statement is available
at www.bullabullinggold.com.
If you are in any doubt about how to deal with this document,
you should
contact your broker, financial adviser or legal adviser
immediately.
Important notices
Nature of this document
This document is a Target's Statement issued by Bullabulling
Gold Limited ABN 50 153 234 532 (Bullabulling) under Part 6.5
Division 3 of the Corporations Act in response to the off-market
takeover bid made by Norton Gold Fields Limited ABN 23 112 287 797
(Norton) for all the ordinary shares in Bullabulling.
A copy of this Target's Statement was lodged with ASIC and given
to ASX on 14 May 2014. Neither ASIC nor ASX nor any of their
respective officers take any responsibility for the content of this
Target's Statement.
Bullabulling shareholder information
Further information relating to Norton's Offer can be obtained
from Bullabulling's website at www.bullabullinggold.com.
Defined terms
A number of defined terms are used in this Target's Statement.
These terms are explained in section 9 of this Target's Statement.
In addition, unless the contrary intention appears or the context
requires otherwise, words and phrases used in the Corporations Act
have the same meaning and interpretation as in the Corporations
Act.
No account of personal circumstances
This Target's Statement does not take into account your
individual objectives, financial situation or particular needs. It
does not contain personal advice. Your directors encourage you to
seek independent financial and taxation advice before making a
decision as to whether or not to accept the Offer.
Disclaimer as to forward looking statements
Some of the statements appearing in this Target's Statement
(including in the Independent Expert's Report) may be in the nature
of forward looking statements. You should be aware that such
statements are only predictions and are subject to inherent risks
and uncertainties. Those risks and uncertainties include factors
and risks specific to the industry in which Bullabulling operates
as well as general economic conditions, prevailing exchange rates
and interest rates and conditions in the financial markets. Actual
events or results may differ materially from the events or results
expressed or implied in any forward looking statement. None of
Bullabulling, Bullabulling's officers and employees, any persons
named in this Target's Statement with their consent or any person
involved in the preparation of this Target's Statement, makes any
representation or warranty (express or implied) as to the accuracy
or likelihood of fulfilment of any forward looking statement, or
any events or results expressed or implied in any forward looking
statement, except to the extent required by law. You are cautioned
not to place undue reliance on any forward looking statement. The
forward looking statements in this Target's Statement (including in
the Independent Expert's Report) reflect views held only as at the
date of this Target's Statement.
Disclaimer as to information
The information on Norton and Norton securities contained in
this Target's Statement has been prepared by Bullabulling using
publicly available information. The information in the Target's
Statement concerning Norton and its assets and liabilities,
financial position and performance, profits and losses and
prospects, have not been independently verified by Bullabulling.
Accordingly, Bullabulling does not, subject to the Corporations
Act, make any representation or warranty, express or implied, as to
the accuracy or completeness of such information.
Foreign jurisdictions
The release, publication or distribution of this Target's
Statement in jurisdictions other than Australia may be restricted
by law or regulation in such other jurisdictions and persons who
come into possession of it should seek advice on and observe any
such restrictions. Any failure to comply with such restrictions may
constitute a violation of applicable laws or regulations. This
Target's Statement has been prepared in accordance with Australian
law and the information contained in this Target's Statement may
not be the same as that which would have been disclosed if this
Target's Statement had been prepared in accordance with the laws
and regulations outside Australia.
Maps and diagrams
Any diagrams, charts, maps, graphs and tables appearing in this
Target's Statement are illustrative only and may not be drawn to
scale. Unless stated otherwise, all data contained in diagrams,
charts, maps, graphs and tables is based on information available
at the date of this Target's Statement.
JORC Code
The information in this Target's Statement that relates to the
Exploration Results, Mineral Resources or Ore Reserves was prepared
and first disclosed under the JORC Code 2004. It has not been
updated since to comply with the JORC Code 2012 on the basis that
the information has not materially changed since it was last
reported. All material assumptions and technical parameters
underpinning the estimates of Mineral Resources continue to apply
and have not materially changed.
Privacy
Bullabulling has collected your information from the
Bullabulling register of shareholders for the purpose of providing
you with this Target's Statement. The type of information
Bullabulling has collected about you includes your name, contact
details and information on your shareholding in Bullabulling.
Without this information, Bullabulling would be hindered in its
ability to issue this Target's Statement. The Corporations Act
requires the name and address of shareholders to be held in a
public register. Your information may be disclosed on a
confidential basis to Bullabulling's related bodies corporate and
external service providers (such as the share registry of
Bullabulling and print and mail service providers) and may be
required to be disclosed to regulators such as ASIC. If you would
like details of information about you held by Bullabulling, please
contact Computershare Investor Services Pty Limited at the address
shown below:
Level 2, Reserve Bank Building, 45 St Georges Terrace, Perth,
Western Australia, 6000
Phone (within Australia): 1300 850 505
Phone (international): +61 8 9323 2000
Holders of Bullabulling Shares located in the United Kingdom
should contact Computershare Investor Services PLC at the address
shown below:
The Pavillions
Bridgewater Road
Bristol BS99 6ZZ
United Kingdom
Phone +44 870 702 0003
The registered address of Bullabulling is Level 2, 55 Carrington
Street, Nedlands, Western Australia 6009.
Why you should REJECT the Offer
1 The Independent Expert has concluded that the Refer
Offer is NEITHER fair NOR reasonable to page
Your directors' recommendation is supported 2
by the Independent Expert
================================================== =========
2 The Offer does not fairly reflect the value Refer
of the Bullabulling Gold Project to page
Your directors urge you not to let Norton profit 3
to your detriment - the Offer fails to recognise
the value that has already been demonstrated
for the Bullabulling Gold Project
================================================== =========
3 Accepting the opportunistic Offer will remove Refer
your exposure to any potential increase in value to page
that the Bullabulling Gold Project offers 5
Your directors urge you not to sell to Norton
at a price that does not, in the opinion of
your directors, reflect the medium and long
term potential upside that Bullabulling offers
you
================================================== =========
4 Your directors believe this may be Norton's Refer
first move to page
Accepting the current opportunistic Offer means 6
you will be unable to benefit from any separate
takeover offer Norton may make in the future
================================================== =========
To REJECT the Offer, you should DO NOTHING and TAKE NO ACTION in
relation to all documents sent to you by Norton
Contents of this Target's Statement
Chairman's Letter 1
1 Why you should REJECT the Offer
2 Frequently asked questions
3 Directors' recommendation
4 Important matters for Bullabulling shareholders to consider
5 Your choices as a Bullabulling shareholder
6 Key features of Norton's Offer
7 Information relating to your directors
8 Additional information
9 Glossary and interpretation
10 Authorisation
Attachment 1
Independent Expert's Report
Key dates
Date of Norton's Offer 2 May 2014
=============================== =========================
Date of this Target's Statement 14 May 2014
=============================== =========================
Close of Norton's Offer Period 5.00pm AWST / 10.00am BST
(unless extended or withdrawn) on 2 June 2014
=============================== =========================
14 May 2014 ASX Code: BAB, AIM Code: BGL
Dear Shareholders
On 17 April 2014, Norton Gold Fields Limited announced a
conditional, unsolicited offer to acquire all of the shares in
Bullabulling Gold Limited for $0.07 (approximately GBP0.039) cash
for every Bullabulling Share on issue at that date. The Offer
became unconditional on 5 May 2014.
For the reasons set out on the following pages, your directors
have concluded that the Offer is INADEQUATE and OPPORTUNISTIC and
unanimously recommend that all Bullabulling shareholders REJECT
Norton's Offer by TAKING NO ACTION.
Your directors do not intend to accept the Offer for shares that
they own or control.
Bullabulling is progressing well with the evaluation and
development of the 100% owned Bullabulling Gold Project, which is a
significant Australian prospect and hosts an independently assessed
Mineral Resources of 3.75 million ounces of gold (estimated in
accordance with the JORC Code 2004) and is expected to produce
approximately 175,000 ounces per year.
In making their recommendation to shareholders, your directors
are conscious that additional funding will be required in the near
term to complete the Definitive Feasibility Study. Assessment of
funding options was well under way when the Norton bid was lodged.
The board is continuing to assess the appropriate funding
alternatives, having regard to the fact that the Offer has been
made, and will have careful regard to the interests of existing
Bullabulling shareholders in making any decisions.
Your directors consider that the Offer does not reflect the
inherent value of Bullabulling and is designed to secure early
control of the Bullabulling Gold Project and capture value that the
Board believes is rightly yours.
Your directors' recommendation is supported by the conclusion of
the Independent Expert, BDO Corporate Finance (WA) Pty Ltd, that
the Norton Offer is NEITHER FAIR NOR REASONABLE. The Independent
Expert has valued a Bullabulling Share at between $0.111 and $0.161
with a preferred value of $0.146 which represents a 109% premium to
the Norton Offer price of $0.07.
It is noted in the Technical Review and Valuation annexed to the
Independent Expert's Report that a "[D]iscounted Cash Flow method
was not deemed appropriate for the valuation due to no Ore Reserves
defined by the Pre-Feasibility Study". The Independent Expert goes
on to note in its report that "upon completion of the DFS it is
expected that a maiden reserve is likely to be announced. Following
the completion of the DFS it would be possible to undertake a
discounted cash flow valuation of the project incorporating the
effects of the modifying factors applied in the DFS which may
result in a higher value per share than that derived under the net
asset value".
Bullabulling has received strong messages of support from many
of its shareholders since the Offer was announced, and at the date
of this Target's Statement holders of 41.8% of Bullabulling's
Shares have indicated that they DO NOT intend to accept the
Offer.
We also note that as at the date of this Target's Statement, the
Bullabulling Share price continues to trade at or above the Offer
price on both ASX and AIM.
To REJECT the Offer, simply do nothing and disregard all
communications and correspondence from Norton.
This Target's Statement contains the directors' formal response
to Norton's Offer. I encourage you to carefully read all the
information contained in this Target's Statement and seek
independent advice.
Yours sincerely
Peter Mansell
Chairman
1 Why you should REJECT the Offer
1.1 The Independent Expert has concluded that the Offer is NEITHER FAIR NOR REASONABLE
Bullabulling has engaged BDO Corporate Finance (WA) Pty Ltd as
an Independent Expert to prepare an Independent Expert Report in
relation to the Offer. A full copy of the Independent Expert's
Report accompanies this Target's Statement as Attachment 1. You are
encouraged to read this report in its entirety.
In section 2.3 of the Independent Expert's Report, the
Independent Expert states the following opinion:
"We have considered the terms of the Offer as outlined in the
body of this report and have concluded that, in the absence of a
superior offer, the Offer is neither fair nor reasonable to
Shareholders"
The Independent Expert came to the following conclusions in
respect of the Offer:
-- The value of a Bullabulling Share is in the range of $0.111
and $0.161 with a preferred value of $0.146 as compared to the
Norton Offer price of $0.07 and therefore the Offer is NOT
FAIR.
-- The position of Bullabulling shareholders if the Offer is
rejected is more advantageous than the position if the Offer is
accepted. Accordingly, in the absence of any other relevant
information, the Offer is NOT REASONABLE.
Based on the above conclusions, the Independent Expert's
preferred value of a Bullabulling Share is 109% above the Offer
price.
The Independent Expert has also highlighted the following
disadvantage of the Offer:
"As the DFS is not due to be completed until early 2015, the
current quoted market price of a Bullabulling share, and the net
asset value that was determined in section 10.1, do not reflect any
impact of the announcement of the findings of the completed DFS. If
the findings of the DFS are favourable, and demonstrate economic
viability of an initial gold reserve, then it may be expected that
the value of the Bullabulling Gold Project, and therefore the
trading price of Bullabulling shares will increase...If
shareholders accept the Offer then they...would not be able to
benefit from any increase in the value of Bullabulling in the
future."
The Independent Expert has concluded that the Offer is NEITHER
FAIR NOR REASONABLE. The Independent Expert's valuation range for a
Bullabulling Share of $0.111 to $0.161, with a preferred value of
$0.146, supports the directors' view that the Offer is inadequate
and undervalues your Bullabulling Shares.
For full details, including the advantages of the Offer
identified by the Independent Expert, Bullabulling shareholders
should read the Independent Expert's Report in Attachment 1 in
full.
1.2 The Offer does not fairly reflect the value of the Bullabulling Gold Project
In the opinion of your directors, the Offer fails to recognise
the potential of the Bullabulling Gold Project. The Offer implies a
value of approximately $21 million.
As shown below, the Bullabulling Gold Project contains one of
Australia's largest undeveloped gold Mineral Resources and is
located 60km from Kalgoorlie, in one of Australia's premier
goldfields.
Mineral Resources - ASX Listed Australian Gold
Exploration/Development Companies
A full chart comparing the enterprise value to resource base
multiple for a selection ASX Listed Australian Gold
Exploration/Development Companies can be found in the full Target's
Statement available at www.bullabullinggold.com.
Whilst Bullabulling's directors consider the companies set out
in that chart are at a comparable stage of progression to
Bullabulling, they believe that the Bullabulling Gold Project has a
number of critical advantages over several of its peer group's
projects including scale, anticipated conversion of Indicated
Mineral Resources to Ore Reserves and cost structure:
Scale and anticipated cost structure
-- The Bullabulling Gold Project contains one of Australia's
single largest known undeveloped gold deposits.
-- Independently assessed Mineral Resources of 3.75 million
ounces of gold with an average grade of 1.02 g/t (estimated in
accordance with the JORC Code 2004).
-- All Mineral Resources are situated on granted Mining Leases
and the majority are amenable to bulk tonnage open pit mining and
conventional CIL processing.
-- Engineering studies have demonstrated the potential to
develop an open pit mining and processing operation that could
produce an average of 175,000 ounces of gold per annum from the
Bullabulling deposit over an initial mine life of 13 years.
-- Bullabulling has estimated all-in cash costs of US$930 per
ounce of gold and Bullabulling shareholders should note that
optimisation work with potential to further reduce cash costs is
ongoing.
Infrastructure
Significant infrastructure is in place adjacent to the
Bullabulling Gold Project:
-- A sealed highway
-- 220kV power transmission line
-- Potable water pipeline and borefield
-- Skilled labour and mining service providers
Stable environment for development
-- Low sovereign risk in a pro-mining jurisdiction, which is an
important consideration when evaluating project financing.
The Definitive Feasibility Study, which is scheduled for
completion in the first quarter of 2015, is expected to reveal
further improvement in the Bullabulling Gold Project's development
plan and economics.
The Offer fails to recognise both the value that has already
been demonstrated for the Bullabulling Gold Project, and
Bullabulling's unrealised potential.
1.3 Accepting the opportunistic Offer will remove your exposure
to any potential increase in value that the Bullabulling Gold
Project offers
Your directors believe the Offer is opportunistic and timed to
capture value that will otherwise flow to Bullabulling shareholders
in the medium and long term.
In the past 12 months, Bullabulling has completed a number of
developments to enhance the understanding and value of the
Bullabulling Gold Project, including:
-- implemented targeted infill drilling programs which have
increased Mineral Resources by 9.5 million tonnes to 114 million
tonnes and contained gold by 250,000 ounces to 3.75 million ounces,
with a 2% increase in average Mineral Resource grade;
-- extended mine life by 2.5 years to 13 years;
-- increased forecast mine production by 15.6 million tonnes to
94.7 million tonnes;
-- re-optimised the project reducing C1 costs from US$1,196/oz
to US$843/oz and reduced all-in cash costs to US$930/oz;
-- carried out metallurgical test-work that has identified
potential to further reduce production costs and increase gold
recovery; and
-- capital expenditure expectations have reduced from initial
prefeasibility study estimates.
On this basis, it is in Norton's interest to buy as many
Bullabulling Shares as possible at the cheapest possible price
before any increase in the value of the Bullabulling Gold
Project.
Your directors consider this increase in the value of the
Bullabulling Gold Project is likely to occur as the Company moves
closer to the release of the maiden Ore Reserve and completion of
the Definitive Feasibility Study.
If Norton acquires your Bullabulling Shares now, it will deny
you the opportunity to participate in any value accretion that may
occur in the future.
Your directors believe that the Company has a well-developed
strategy to create value for its shareholders. In particular, your
directors believe that you should consider the following
developments which are scheduled to occur throughout the next
several months, in the lead-up to completion of the Definitive
Feasibility Study during the first quarter of 2015:
-- completion of a metallurgical test-work program, the
preliminary stages of which have demonstrated potential for reduced
operating costs and increased gold recovery through the
nanofiltration of process water;
-- implementation of an infill drilling programme to upgrade the
classification of Inferred Mineral Resource, which comprises
approximately 15.7% of forecast production tonnage, to Indicated
Mineral Resource. Your directors' expectations regarding the
conversion to Indicated Mineral Resource are supported by the
technical expert that completed the Technical Review and Valuation
annexed to the Independent Expert's Report, who note that given the
"width and continuity of mineralisation" it is "highly likely that
infill drilling would convert all the Inferred material within the
current pit design to Indicated" in the main pit (Bacchus and
Phoenix);
-- implementation of an infill drilling programme will also
enable the completion of an initial Ore Reserve estimate for the
Bullabulling Gold Project;
Following completion of the Definitive Feasibility Study, which
is expected to identify further cost efficiencies, Bullabulling
intends to finalise the financing arrangements for the Bullabulling
Gold Project (subject to the results of the Definitive Feasibility
Study).
Although completion of these developments is subject to risk,
markets and uncertainties and cannot be guaranteed, your directors
believe that the potential rewards substantially outweigh the
potential risks.
Your directors believe that operational enhancements to the
Bullabulling Gold Project should result in further value accretion
for shareholders in the short to medium term. Your directors
consider that Norton has recognised this and has timed its bid
accordingly for its own benefit, including the release of a maiden
Ore Reserve and completion of the Definitive Feasibility Study.
1.4 Your directors believe this may be Norton's first move
Your directors believe that Norton's unsolicited, inadequate and
opportunistic Offer may be just the first step in Norton's plan to
take control of Bullabulling to secure the Bullabulling Gold
Project.
Norton has indicated it recognises Bullabulling as a
continuation of its strategy to pursue growth opportunities, in
particular as an adjunct to its current core operations in Western
Australia. However, this unrealised potential, including operating
synergies between the Bullabulling Gold Project and Norton's
current core operations, will not be fully available to Norton
unless it acquires 100% control of Bullabulling.
Given that the Offer is not subject to a minimum acceptance
condition, your directors believe that if Norton fails to acquire
100% of Bullabulling in its first attempt (ie under the Offer),
which is a potential outcome given as at the date of this Target's
Statement holders of 41.8% of Bullabulling's Shares have indicated
that they do not intend to accept the Offer, it is possible that
Norton may return in the future with a separate, follow-on offer in
order to acquire 100%. If your directors' views regarding the
potential enhancements to the value and economics of the
Bullabulling Gold Project are realised, it is possible that any
follow-on offer by Norton would be at a higher price than the
current Offer.
Bullabulling shareholders should note that the directors are not
aware of any specific intention on the part of Norton to make any
follow-on offer should it not acquire 100% of Bullabulling (or
sufficient relevant interests in Shares to allow it to proceed to
compulsory acquisition) under the Offer, and there can be no
guarantee as to what action Norton might take in these
circumstances. Further, even if Norton does make a follow-on offer,
this offer may be at a lower price than the current Offer.
However, if you do accept the current Offer, you will not be
able to benefit from any separate takeover offers that Norton may
make in the future.
Your directors urge you not to sell to Norton at a price that
does not, in the opinion of your directors, reflect the medium and
long term potential upside that Bullabulling offers you.
2 Frequently asked questions
This section answers some commonly asked questions about the
Offer. It is not intended to address all relevant issues for
Bullabulling shareholders. This section should be read together
with all other parts of this Target's Statement.
Question Answer
=============================== ==========================================================
Who is making the Offer? Norton Gold Fields Limited, a public
company incorporated in Australia
and listed on ASX (ASX:NGF). Norton
is 82.43% owned by Zijin Mining
Group Co Ltd.
=============================== ==========================================================
What will I receive Norton is offering $0.07 cash for
for my Bullabulling each Bullabulling Share you hold.
Shares under the Offer?
=============================== ==========================================================
What choices do I have As a Bullabulling shareholder,
as a Bullabulling shareholder? you have the following choices
in respect of your Shares:
* reject the Offer by doing nothing;
* sell your Bullabulling Shares on ASX or AIM (unless
you have previously accepted the Offer); or
* accept the Offer.
There are several implications
in relation to each of the above
choices. A summary of these implications
is set out in section 5 of this
Target's Statement.
=============================== ==========================================================
Can I accept the Offer No. You cannot accept the Offer
for some, but not all, for part of your Bullabulling Shares.
of my Bullabulling You can only accept the Offer for
Shares? all of your Bullabulling Shares.
=============================== ==========================================================
What are the directors Each director recommends that you
of Bullabulling recommending? reject the Offer. In order to do
so you should do nothing and not
respond to any correspondence from
Norton.
=============================== ==========================================================
What do the directors Each Bullabulling director and
and management intend member of management who has a
to do with their Shares? relevant interest in Bullabulling
Shares intends to reject the Offer
in relation to those Shares.
=============================== ==========================================================
What are the consequences If you accept the Offer, you will
of accepting the Offer give up your right to sell your
now? Bullabulling Shares on ASX or AIM
or otherwise deal with your Shares
while the Offer remains open.
If the share price trades above
the Offer price you will have lost
your ability to sell your Shares
on ASX or AIM at that higher price.
=============================== ==========================================================
What happens if Norton If Norton increases its Offer price
increases its Offer during the Bid Period, all Bullabulling
price under the current shareholders will be entitled to
Offer? the benefit of any increase in
the Offer price (including those
Bullabulling shareholders who have
already accepted the Offer prior
to the increase).
As at the date of this Target's
Statement, Norton has not made
any statement regarding its intention
to increase the Offer price. However,
Norton has not made a 'last and
final' statement as to whether
it will increase the Offer price.
=============================== ==========================================================
If I accept the Offer, If you accept the Offer, you will
can I withdraw my acceptance? not be able to trade your Bullabulling
Shares on ASX or AIM or withdraw
your acceptance.
=============================== ==========================================================
When does the Offer The Offer is presently scheduled
close? to close at 5.00pm AWST / 10.00am
BST on 2 June 2014, but the Offer
Period can be extended in certain
circumstances.
See section 6.5 of this Target's
Statement for details of the circumstances
in which the Offer Period can be
extended.
=============================== ==========================================================
Is the Offer conditional? The Offer became unconditional
on 5 May 2014.
See section 6.2 of this Target's
Statement for further details.
=============================== ==========================================================
When will I receive As the Offer is unconditional,
my cash payment as if you accept the Offer and your
consideration if I Bullabulling Shares are quoted
accept the Offer? on ASX, you will be sent your cash
payment as consideration from Norton
within 14 days.
If you accepted the Offer prior
to the Offer becoming unconditional,
then you will receive your consideration
within 14 days of 5 May 2014.
Additional time may be required
for Norton to issue consideration
to holders of Bullabulling Shares
held through Depository Interests
quoted on AIM. Norton has not provided
any further information on when
it expects to issue consideration
to holders of Bullabulling Shares
held through Depository Interests
quoted on AIM.
See section 6.9 of this Target's
Statement for further details on
when you will be sent your consideration.
=============================== ==========================================================
Does the Offer extend The Offer is only for Bullabulling
to Bullabulling Options? Shares. Norton has stated in its
Bidder's Statement that it proposes
to have discussions with the holders
of Bullabulling Options with respect
to the cancellation of those Bullabulling
Options.
Norton has not provided any further
information on these discussions
to Bullabulling or disclosed the
terms of any agreement that will
be reached or is proposed to be
reached with the holders of Bullabulling
Options.
=============================== ==========================================================
What are the tax implications A general outline of the tax implications
of accepting the Offer? of accepting the Offer is set out
in section 18 of the Bidder's Statement.
As that section is a general outline
only, Bullabulling shareholders
are encouraged to seek their own
specific professional advice on
the taxation implications applicable
to their circumstances.
=============================== ==========================================================
1
3 Directors' recommendation
3.1 Directors of Bullabulling
As at the date of this Target's Statement, the directors of
Bullabulling are:
Peter Mansell, Non-Executive Chairman
Ronald Beevor, Non-Executive Director
Brett Lambert, Managing Director
3.2 Management
As at the date of this Target's Statement, the management of
Bullabulling are:
David McArthur, Chief Financial Officer
Mark Braghieri, General Manager (Development)
3.3 Directors' recommendations
After taking into account each of the matters in this Target's
Statement (including the Independent Expert's Report) and in the
Bidder's Statement, each of your directors recommends that you
REJECT the Offer for the reasons set out in section 1 of this
Target's Statement.
In considering whether to accept the Offer, your directors
encourage you to:
-- read the whole of this Target's Statement (including the
Independent Expert's Report) and the Bidder's Statement;
-- have regard to your individual risk profile, portfolio
strategy, tax position and financial circumstances;
-- consider the alternatives noted in section 5 of this Target's Statement; and
-- obtain financial advice on the Offer from your broker or
financial adviser, and obtain taxation advice on the effect of
accepting the Offer.
3.4 Intentions of your directors and management in relation to the Offer
Each Bullabulling director and member of management who has a
relevant interest in Bullabulling Shares intends to reject the
Offer in relation to those Shares.
Details of the relevant interests of each Bullabulling director
and member of management in Bullabulling Shares are set out in
section 7 of this Target's Statement.
4 Important matters for Bullabulling shareholders to consider
4.1 The Norton Offer
Norton announced its intention to make its takeover bid for
Bullabulling on 17 April 2014. A copy of Norton's announcement can
be found at www.nortongoldfields.com.au. A summary of the Offer is
contained in section 6 of this Target's Statement.
The Offer is open for acceptance until 5.00pm AWST/ 10.00am BST
on 2 June 2014, unless it is extended or withdrawn (sections 6.5
and 6.6 of this Target's Statement describe the circumstances in
which Norton can extend or withdraw the Offer).
4.2 Background information on Bullabulling and the Bullabulling Gold Project
Bullabulling is a mining and exploration company headquartered
in Perth, Western Australia. It is dual-listed on ASX and AIM.
Bullabulling is the 100% owner of a large previously producing mine
called 'Bullabulling'.
The Bullabulling Gold Project is located in the Eastern
Goldfields of Western Australia, approximately 60km from the city
of Kalgoorlie, Boulder, one of Australia's premier gold mining
centres. Bullabulling has successfully delineated a significant
Mineral Resource of 3.75 million ounces.
The Bullabulling Gold Project contains one of Australia's
largest undeveloped gold Mineral Resources. All Mineral Resources
are situated on granted Mining Leases in close proximity to
infrastructure, and with the majority amenable to bulk tonnage open
pit mining and conventional CIL processing. The Company is
conducting a Definitive Feasibility Study into the development of a
large scale, low cost mining operation at the site which is
scheduled for completion during the first quarter of 2015. Your
directors expect that the Definitive Feasibility Study will reveal
further improvement in the Bullabulling Gold Project's development
plan and economics.
4.3 Background information on Norton and Zijin
Norton is an Australian domestic gold producer headquartered in
Perth, Western Australia. Norton is listed on the ASX. Norton has a
number of Mineral Resources and Mining Reserves located on
tenements within the Eastern Goldfields of Western Australia.
Norton owns and operates the Paddington Mill where it processes
gold mineralisation from a number of sources.
As at 17 April 2014, Zijin owned 82.43% of Norton through its
wholly owned subsidiaries Jinyu (H.K.) International Mining Company
Limited and Luminous Gold Limited. Zijin is a large-scale,
state-owned mining group with headquarters located in Shanghai
County, Fujian Province, China. It is the largest gold producer and
second largest copper producer in China.
For further information on Norton and Zijin, see section 4 of
the Bidder's Statement.
4.4 Funding
The Bidder's Statement suggests that Bullabulling faces
'significant funding challenges', and that, if shareholders accept
the Offer, they will 'remove their exposure to these major
financing risks and the likely continued dilution in the value of
their shareholdings'. Your directors consider that this statement
is misleading and in their opinion, does not justify you
relinquishing the potential rewards which flow from successful
project development at a totally inadequate price.
The risk profile relied on heavily in the Bidder's Statement as
a reason to accept the Offer is a profile typical of exploration
companies such as Bullabulling. Typical of companies at this stage
of development, Bullabulling manages its capital and operating
expenditure tightly to minimise any call on shareholders and then
seeks shareholder support for incremental capital amounts to
advance the next stage of development. Investors in exploration
companies recognise this profile more as a leverage opportunity
because of the potential upside if exploration proves successful
and a mine is established.
The Bidder clearly recognises the leverage opportunity in
Bullabulling and is trying to acquire it opportunistically for its
benefit.
Your directors are conscious that some additional funding will
be required in the near term to complete the Definitive Feasibility
Study. Assessment of funding options was well under way when the
Norton bid was lodged. The board is continuing to assess
appropriate funding alternatives, having regard to the fact that
the Offer has been made: at the date of this Target's Statement, no
final decision has been taken. Your directors will have careful
regard to the potential dilutionary impact on existing Bullabulling
shareholders in assessing the structure and scale of any funding
for the purpose of completing the Definitive Feasibility Study.
It is also noted in the Bidder's Statement that, as per the
Company's announcement to ASX on 7 February 2013, significant
capital expenditure is required to develop the Bullabulling Gold
Project. Your directors also consider that it is misleading to
describe this as a risk associated with being a Bullabulling
shareholder (as has been done in the Bidder's Statement).
Your directors have had preliminary discussions with a number of
financiers in relation to the funding that will be required to
develop the Bullabulling Gold Project. The Company does not intend
to materially advance these discussions until the Definitive
Feasibility Study has been completed and the value proposition of
the Bullabulling Gold Project enhanced, such that the Company will
have a range of funding alternatives available to it (from a range
of funding sources).
4.5 Financial information on Bullabulling
As at 31 March 2014, Bullabulling's cash and deposits totalled
approximately $3,050,000.
Bullabulling's Quarterly Cash Flow Report for the period from 1
January 2014 to 31 March 2014 was released on 30 April 2014. The
report can be accessed online via www.bullabullinggold.com.
Bullabulling's Annual Report for the year ending 31 December
2013 was released on 24 March 2014. The report can be accessed
online via www.bullabullinggold.com.
4.6 Risk factors
Bullabulling is currently exposed to a number of risks that
Bullabulling shareholders should be aware of, both of a general
nature and more specific to the mining industry. A brief outline of
these risks is set out below, which should be considered in
conjunction with Bullabulling's ongoing disclosure under the ASX
Listing Rules.
Your directors consider that the current Board and management
team's detailed knowledge of the Bullabulling Gold Project, and the
gold industry more generally, put it in the best position to manage
these risks going forward and maximise the return to shareholders
from the Bullabulling Gold Project.
(a) General risks for all gold mining companies
The occurrence of one or more of the scenarios set out below
could have a material adverse on the future performance of
Bullabulling or return on an investment in Bullabulling. The
Company has considered the probability of the industry specific
risks above eventuating and concluded that the Bullabulling Gold
Project has overall positive prospects.
(1) Macroeconomic conditions: Macroeconomic conditions, both
domestic and global, may affect Bullabulling's financial
performance (such as inflation, interest rates, government policy,
employment and industrial disruption).
(2) Market conditions: As Bullabulling is a listed company, its
share price is subject to the numerous influences that may affect
both the trends in the share market and the share prices of
individual companies.
(3) Changes in legislation and government regulation: Government
legislation and policy, both within Australia and internationally,
including changes to the taxation system.
(4) Commodity price volatility and exchange rate risks: Any
revenue derived by Bullabulling from the Bullabulling Gold Project
will be subject to commodity price and exchange rate risks (as its
revenues are likely to be denominated in US$ while its expenditure
will be largely denominated in A$), both which are affected by
factors beyond the control of Bullabulling.
Whilst the above factors are outside the control of Bullabulling
and may result in material adverse impacts on its business and
operating results, the Board and management believe they have the
skills to manage these risks if and when they arise.
(b) Specific risks to Bullabulling
(1) Exploration risks:Mineral exploration and development are
speculative undertakings, as such if a viable deposit is
identified, there is no assurance that it can be commercially
developed.
(2) Development and infrastructure risk: Bullabulling may
encounter unforeseen difficulties in developing the infrastructure
(including the commission of mine or mines) necessary to commence
mining production.
(3) Liquidity and future financings:The development of the
Bullabulling Gold Project depends upon Bullabulling's ability to
obtain financing.
4.7 Minority ownership consequences
The Offer does not extend to Shares issued after 18 April 2014.
If any Shares are issued after this date (including the Shares
described in the 2014 AGM Notice that the Company intends to issue
pending receipt of shareholder approval at its upcoming annual
general meeting), the holders of these Shares will not be able to
accept the Offer in respect of those Shares.
As such, Norton will not be able to acquire 100% of Bullabulling
if any further Shares are issued after 18 April 2014 (unless Norton
obtains ASIC relief to the extend the Offer to these shares). It
also means that, in conjunction with the fact that as at the date
of this Target's Statement holders of 41.8% of Bullabulling's
Shares have indicated that they do not intend to accept the Offer,
it may be difficult for Norton to acquire more than 90% of the
Bullabulling Shares.
If Norton acquires more than 50% but less than 90% of the
Bullabulling Shares then Norton will acquire a majority
shareholding in Bullabulling.
Accordingly, shareholders who do not accept the Offer will
become minority shareholders in Bullabulling. This has a number of
possible implications, including:
-- Norton will be in a position to cast the majority of votes at
a general meeting of Bullabulling, enabling it (amongst other
things) to control the composition of Bullabulling's Board; and
-- Norton may (through its control of the Board) initiate the
acquisition, buy-back or cancellation by Bullabulling of the
outstanding Shares that Norton does not control (as set out in
section 7.4 of the Bidder's Statement).
4.8 Compulsory acquisition
Norton has indicated in section 7.3 of its Bidder's Statement
that if it satisfies the required thresholds it intends to
compulsorily acquire any outstanding Bullabulling Shares.
Norton will be entitled to compulsorily acquire any Bullabulling
Shares in respect of which it has not received an acceptance of its
Offer on the same terms as the Offer if, during or at the end of
the Offer Period:
-- Norton and its associates have a relevant interest in at
least 90% (by number) of the Bullabulling Shares; and
-- Norton and its associates have acquired at least 75% (by
number) of the Bullabulling Shares that Norton offered to acquire
(excluding Bullabulling Shares in which Norton or their associates
had a relevant interest at the date of the Offer and also excluding
Bullabulling Shares issued to an associate of Norton during the
Offer Period).
If this threshold is met, Norton will have one month after the
end of the Offer Period within which to give compulsory acquisition
notices to Bullabulling shareholders who have not accepted the
Offer, thereby commencing the compulsory acquisition process.
4.9 Risks of accepting the Offer
(a) Unconditional Offer
On 5 May 2014 Norton declared the Offer unconditional. If you
accept the Offer, you will not be able to trade your Bullabulling
Shares on ASX or AIM or withdraw your acceptance.
(b) Possibility of a superior proposal emerging
You may consider that a third party may emerge with a superior
proposal. If you accept the Offer, you will not be able to accept
your Shares into any superior proposal such that you will not be
able to obtain any potential benefit associated with that superior
proposal (if any). Your directors are not currently aware of any
superior proposal.
(c) No interest in equity upside
If you accept the Offer, you will lose your interest and
exposure in the future profits and dividends (if any) associated
with Bullabulling and the Bullabulling Gold Project.
4.10 Bullabulling Share price absent the Offer
While there are many factors that influence the market price of
Bullabulling Shares, your directors anticipate that, following the
close of the Offer, the market price of Bullabulling Shares may
fall if Norton's Offer fails (and there is no alternative to the
Offer), if Norton acquires more than 50% (but less than 90%) of the
Bullabulling Shares or if the takeover is otherwise
unsuccessful.
5 Your choices as a Bullabulling shareholder
Your directors recommend that you REJECT the Offer.
However, as a Bullabulling shareholder you have 3 choices
currently available to you:
(a) Reject the Offer
Shareholders who wish to reject the Offer should do nothing.
Shareholders should note that if Norton and its associates have
a relevant interest in at least 90% of the Shares during or at the
end of the Offer Period, Norton will be entitled to compulsorily
acquire the Shares that it does not already own. See section 4.8 of
this Target's Statement for further details.
(b) Sell your Shares on market
During the Offer Period, Bullabulling shareholders who have not
already accepted the Offer can still sell their shares on market
for cash, on either ASX or AIM.
On 13 May 2014 Bullabulling's share price closed at $0.07 on ASX
and on 12 May 2014 closed at GBP0.04 on AIM (approximately $0.072).
This in line with Norton's Offer price of $0.07 per Bullabulling
Share.
The latest price for Bullabulling Shares quoted on ASX may be
obtained from the ASX website www.asx.com.au. The latest price of
Depository Interests quoted on AIM may be obtained from the AIM
website www.londonstockexchange.com.
Shareholders who sell their Shares on market may be liable for
CGT on the sale and may incur a brokerage charge.
Bullabulling shareholders who wish to sell their Shares on
market should contact their broker for information on how to effect
that sale.
(c) Accept the Offer
Bullabulling shareholders may elect to accept the Offer. Details
of the consideration that will be received by Bullabulling
shareholders who accept the Offer are set out in section 6.1 of
this Target's Statement and in section 8.4 of the Bidder's
Statement.
6 Key features of Norton's Offer
6.1 Consideration payable to shareholders who accept the Offer
The consideration being offered by Norton is $0.07 for each
Bullabulling Share that you hold.
The Offer is only for Bullabulling Shares, it does not extend to
Bullabulling Options. Norton has stated in its Bidder's Statement
that it proposes to have discussions with the holders of
Bullabulling Options with respect to the cancellation of those
Bullabulling Options.
Norton has not provided any further information on these
discussions to Bullabulling or disclosed the terms of any agreement
that will be reached or is proposed to be reached with the holders
of Bullabulling Options.
6.2 Unconditional
On 5 May 2014 Norton declared the Offer unconditional. If you
accept the Offer, you will not be able to trade your Bullabulling
Shares on ASX or AIM or withdraw your acceptance.
6.3 Notice of Status of Conditions
Section 9.6 of the Bidder's Statement indicates that Norton will
give a Notice of Status of Conditions to ASX and Bullabulling on 26
May 2014.
Norton is required to set out in its Notice of Status of
Conditions:
-- whether the Offer is free of any or all of the conditions;
-- whether, so far as Norton knows, any of the conditions have been fulfilled; and
-- Norton's voting power in Bullabulling as at the date of the notice.
On 5 May 2014 Norton declared the Offer unconditional.
If the Offer Period is extended by a period before the time by
which the Notice of Status of Conditions is to be given, the date
for giving the Notice of Status of Conditions will be taken to be
postponed for the same period. In the event of such an extension,
Norton is required, as soon as practicable after the extension, to
give a notice to ASX and Bullabulling that states the new date for
the giving of the Notice of Status of Conditions.
6.4 Offer Period
Unless Norton's Offer is extended or withdrawn, it is open for
acceptance from 2 May 2014 until 5.00pm AWST / 10.00am BST on 2
June 2014.
The circumstances in which Norton may extend or withdraw its
Offer are set out in section 6.5 and section 6.6 respectively of
this Target's Statement.
6.5 Extension of the Offer Period
As the Offer is unconditional, Norton may extend the Offer
Period at any time before the end of the Offer Period.
In addition, there will be an automatic extension of the Offer
Period if, within the last 7 days of the Offer Period:
-- Norton improves the consideration offered under the Offer; or
-- Norton's voting power in Bullabulling increases to more than 50%.
If either of these 2 events occurs, the Offer Period is
automatically extended so that it ends 14 days after the relevant
event occurs.
6.6 Withdrawal of Offer
Norton may not withdraw the Offer if you have already accepted
it. Before you accept the Offer, Norton may withdraw the Offer with
the written consent of ASIC and subject to the conditions (if any)
specified in such consent.
6.7 Effect of acceptance
The effect of acceptance of the Offer is set out in section 13
of the Bidder's Statement. Bullabulling shareholders should read
these provisions in full to understand the effect that acceptance
will have on their ability to exercise the Rights attaching to
their Shares and the representations and warranties which they give
by accepting the Offer.
6.8 Your ability to withdraw your acceptance
As the Offer is unconditional, you are not able to withdraw your
acceptance of the Offer.
6.9 When you will receive your consideration if you accept the Offer
As the Offer is unconditional, Norton has indicated that if your
Bullabulling Shares are quoted on ASX (meaning that you hold those
shares directly), you will be issued your consideration on or
before the later of:
-- 14 days after 5 May 2014; and
-- 14 days after the date you accept the Offer.
Norton has not provided a specific timetable for issuing
consideration to holders of Bullabulling Shares held through
Depository Interests quoted on AIM, noting that additional time may
be required for issuing consideration to those shareholders (in
addition to the timetable set out above). Norton has not provided
any further information on when it expects to issue consideration
to holders of Bullabulling Shares held through Depository Interests
quoted on AIM.
However, there are certain exceptions to the above timetable for
the issuing of consideration. Full details of when you will be
issued your consideration are set out in section 14.4 of the
Bidder's Statement.
6.10 Effect of an improvement in consideration on shareholders
who have already accepted the Offer
If Norton improves the consideration offered under its bid, all
Bullabulling shareholders, whether or not they have accepted the
Offer before that improvement in consideration, will be entitled to
the benefit of that improved consideration.
7 Information relating to your directors
7.1 Interests and dealings in Bullabulling securities
(a) Interests in Bullabulling Shares and Options
As at the date of this Target's Statement, your directors had
the following relevant interests in Shares and Options:
Director Number of Bullabulling Number of Bullabulling
Shares Options
------------- ---------------------- ----------------------
Peter Mansell 1,625,000 Nil
------------- ---------------------- ----------------------
Brett Lambert Nil Nil*
------------- ---------------------- ----------------------
Ronald Beevor 709,552 Nil
------------- ---------------------- ----------------------
Total 2,334,552 Nil
------------- ---------------------- ----------------------
* Brett Lambert has 2,000,000 Options which have not yet vested.
See section 8.1 of this Target's Statement for details regarding
the vesting conditions of these Options.
As at the date of this Target's Statement, your management had
the following relevant interests in Shares and Options:
Management Number of Bullabulling Number of Bullabulling
Shares Options
------------------------ ---------------------- ----------------------
David McArthur (Chief 1,445,585 Nil
Financial Officer)
------------------------ ---------------------- ----------------------
Mark Braghieri (General 850,223 500,000**
Manager Development)
------------------------ ---------------------- ----------------------
Total 2,295,808 500,000
------------------------ ---------------------- ----------------------
** Mark Braghieri has a further 1,000,000 Options which have not
yet vested.
(b) Dealings in Bullabulling Shares and Options
No director of Bullabulling has acquired or disposed of a
relevant interest in any Shares or Options in the 4 month period
ending on the date immediately before the date of this Target's
Statement.
As set out in the 2014 AGM Notice, the Company intends to issue
the following Shares and Options to directors pending receipt of
shareholder approval at its upcoming annual general meeting:
Director Number of Bullabulling Number of Bullabulling
Shares Options
-------------- ---------------------- ----------------------
Peter Mansell 864,710 Nil
-------------- ---------------------- ----------------------
Brett Lambert 2,859,756 2,000,000
-------------- ---------------------- ----------------------
Ronald Beevor 468,384 Nil
-------------- ---------------------- ----------------------
As set out in the 2014 AGM Notice:
-- the issue of Shares to Peter Mansell and Ronald Beevor are
pursuant to a previously disclosed arrangement under which Messrs
Mansell and Beevor agreed to accept partial equity settlement of
their outstanding non-executive director's fees (in the amounts of
$45,000 owed to Mr Mansell and $24,376 owed to Mr Beevor); and
-- the issue of Shares to Brett Lambert is pursuant to a share
subscription agreement, under which Mr Lambert is to pay a total of
$117,250 cash to subscribe for 2,859,756 Shares at the prevailing
market price at the time that subscription agreement was entered
into ($0.041 per Share).
Further details regarding the circumstances giving rise to the
issue of these Shares and Options are set out in the 2014 AGM
Notice.
7.2 Interests and dealings in Norton securities
(a) Interests in Norton securities
As at the date immediately before the date of this Target's
Statement, no Bullabulling director had a relevant interest in any
Norton securities.
(b) Dealings in Norton securities
No director of Bullabulling acquired or disposed of a relevant
interest in any Norton securities in the 4 month period ending on
the date immediately before the date of this Target's
Statement.
7.3 Benefits and agreements
(a) Benefits in connection with retirement from office
As a result of the Offer, no person has been or will be given
any benefit (other than a benefit which can be given without
shareholder approval under the Corporations Act) in connection with
the retirement of that person, or someone else, from a board or
managerial office of Bullabulling or related body corporate of
Bullabulling.
(b) Agreements connected with or conditional on the Offer
There are no agreements made between any director of
Bullabulling and any other person in connection with, or
conditional upon, the outcome of the Offer other than in their
capacity as a holder of Shares or Options.
(c) Benefits from Norton
None of the directors of Bullabulling have agreed to receive, or
is entitled to receive, any benefit from Norton which is
conditional on, or is related to, the Offer, other than in their
capacity as a holder of Shares or Options.
(d) Interests of directors in contracts with Norton
None of the directors of Bullabulling has any interest in any
contract entered into by Norton.
8 Additional information
8.1 Effect of the takeover on Bullabulling's material contracts
Bullabulling has identified 2 material contracts to which
Bullabulling is a party as containing change of control provisions
which may be triggered as a result of, or as a result of
acceptances of, the Offer. A summary of these contracts and the
relevant change of control provisions is set out below:
-- In accordance with an Executive Services Agreement between
Bullabulling and Mark Braghieri (General Manager (Development))
dated 19 November 2012 (Braghieri ESA), 1,000,000 Options will vest
on a change of control occurring. If a takeover bid for the Shares
is declared unconditional (which has occurred) and the bidder has
acquired a relevant interest in at least 50.1% of the Shares, or if
a person or group of associated persons becomes entitled to
sufficient Shares to give it or them the ability, in general
meeting, to replace a majority of the Board, it will constitute a
change of control for the purposes of the Braghieri ESA.
-- In accordance with an Executive Services Agreement between
Bullabulling and Brett Lambert (Managing Director) dated 10 May
2012 (Lambert ESA), 3,000,000 Options were to vest on a change of
control occurring. 1,000,000 of these Options expired on 1 May 2014
without the vesting criteria being met. If a takeover bid for the
Shares is declared unconditional (which has occurred) and the
bidder has acquired a relevant interest in at least 50.1% of the
Shares, or if a person or group of associated persons becomes
entitled to sufficient Shares to give it or them the ability, in
general meeting, to replace a majority of the Board, it will
constitute a change of control for the purposes of the Lambert
ESA.
8.2 Material litigation
Bullabulling does not believe that it is involved in any
litigation or dispute which is material in the context of
Bullabulling and its subsidiaries taken as a whole.
8.3 Issued capital
As at the date of this Target's Statement, Bullabulling's issued
capital consisted of:
(a) Number and class of all securities quoted on ASX
Number Class
=========== ==========================
344,035,585 Fully paid ordinary shares
=========== ==========================
As at 28 April 2014, there were 176,589,621 Bullabulling Shares
quoted as Depository Interests on AIM.
As set out in the 2014 AGM Notice, the Company intends to issue
up to an additional 8,192,850 Shares following the receipt of
shareholder approval at its upcoming annual general meeting.
(b) Number and class of all securities not quoted on ASX
As at the date of this Target's Statement, Bullabulling has
12,592,621 unquoted Options on issue, the details of which are set
out below.
Expiry Date Number Exercise price
================== ========= ==============
06 October 2014 500,000 $0.1036
================== ========= ==============
28 October 2014 387,621 $0.2090
================== ========= ==============
26 November 2014 500,000 $0.1020
================== ========= ==============
23 April 2015 3,425,000 $0.1184
================== ========= ==============
01 May 2015* 1,000,000 $0.3160
================== ========= ==============
30 June 2015 1,150,000 $0.1480
================== ========= ==============
20 November 2015 3,630,000 $0.5922
================== ========= ==============
26 November 2015* 500,000 $0.1260
================== ========= ==============
01 May 2016* 1,000,000 $0.3680
================== ========= ==============
26 November 2016* 500,000 $0.1490
================== ========= ==============
* Unvested.
As set out in the 2014 AGM Notice, the Company intends to issue
a further 2,000,000 Options pending receipt of shareholder approval
at its upcoming annual general meeting.
The Company notes that Norton has not disclosed its specific
intentions with respect to Bullabulling's 12,592,621 Options.
Norton's Bidder Statement states that it proposes to have
discussions with the holders of Bullabulling Options with respect
to the cancellation of those Bullabulling Options. As at the date
of this Target Statement, Norton has not provided any further
details of the arrangements it has entered into, or proposes to
enter into, with respect to the holders of Bullabulling
Options.
8.4 Substantial holders
As at the date of this Target's Statement, based on the
substantial shareholding notices provided to Bullabulling, the
substantial shareholders of Bullabulling are:
Name of substantial Person's votes Voting power (%)
holder
========================= ============== ================
Baker Steel Capital
Managers LLP (clients
of and associated
or connected parties) 35,846,324 10.50%
========================= ============== ================
Resolute Mining Limited
and each of its related
bodies corporate 20,250,000 5.93%
========================= ============== ================
8.5 Effect of Offer on Bullabulling's employee incentive schemes
and securities issued under those schemes
To provide long term incentives to key management personnel,
Bullabulling has issued Bullabulling Options to eligible persons
under the BAB Employee Incentive Option Plan, dated 4 April 2012
(as amended from time to time) and adopted by Bullabulling
shareholders at an annual general meeting of shareholders held on
13 June 2012 (Option Plan).
Bullabulling has issued a total of 1,500,000 unlisted
Bullabulling Options under the Option Plan. Those unlisted
Bullabulling Options and their relevant vesting dates are as
follows:
Quantity Exercise Price Expiry Date Vesting Period
======== ============== =========== ==============
26 November
500,000 $0.102 2014 1 January 2013
======== ============== =========== ==============
26 November
500,000* $0.126 2015 1 January 2014
======== ============== =========== ==============
26 November
500,000* $0.149 2016 1 January 2015
======== ============== =========== ==============
* Unvested
As set out in the 2014 AGM Notice, the Company is seeking
shareholder approval for an employee share plan, which will be
implemented by the Company following its annual general meeting
(provided the plan is approved by shareholders).
8.6 Consents
Herbert Smith Freehills has given, and has not withdrawn before
the date of this Target's Statement, its written consent to be
named in this Target's Statement as Bullabulling's Australian legal
adviser in the form and context in which it is so named.
Gresham Advisory Partners Limited has given, and has not
withdrawn before the date of this Target's Statement, its written
consent to be named in this Target's Statement as Bullabulling's
Australian financial adviser in the form and context in which it is
so named.
Computershare Investor Services Pty Limited and Computershare
Investor Services PLC have each given, and has not withdrawn before
the date of this Target's Statement, its written consent to be
named in this Target's Statement as Bullabulling's Australian or
United Kingdom share registry (as applicable) in the form and
context in which it is so named.
BDO Corporate Finance (WA) Pty Ltd has given, and not withdrawn
before the lodgement of this Target's Statement with ASIC, its
written consent to be named in this Target's Statement in the form
and context it is so named and to the inclusion of its Independent
Expert's Report as an attachment to this Target's Statement.
RungePincockMinarco Limited has given, and not withdrawn before
the lodgement of this Target's Statement with ASIC, its written
consent to be named in this Target's Statement in the form and
context it is so named and to the inclusion of its technical report
in the Independent Expert's Report included as an attachment to
this Target's Statement.
As permitted by ASIC Class Order 01/1543 this Target's Statement
contains statements which are made, or based on statements made, in
documents lodged by Norton with ASIC or given to ASX, or announced
on the Company Announcements Platform of ASX, by Norton. Pursuant
to the Class Order, the consent of Norton is not required for the
inclusion of such statements in this Target's Statement. Any
Bullabulling shareholder who would like to receive a copy of any of
those documents may obtain a copy (free of charge) during the Offer
Period from the Company's registered address of Level 2, 55
Carrington Street, Nedlands, Western Australia 6009.
As permitted by ASIC Class Order 03/635, this Target's Statement
may include or be accompanied by certain statements:
-- fairly representing a statement by an official person; or
-- from a public official document or a published book, journal
or comparable publication.
8.7 Continuous disclosure
Bullabulling is a disclosing entity under the Corporations Act
and is subject to regular reporting and disclosure obligations
under the Corporations Act and the ASX Listing Rules. These
obligations require Bullabulling to notify ASX of information about
specified matters and events as they occur for the purpose of
making that information available to the market. In particular,
Bullabulling has an obligation (subject to limited exceptions) to
notify ASX immediately on becoming aware of any information which a
reasonable person would expect to have a material effect on the
price or value of Bullabulling Shares.
Copies of the documents filed with ASX may be obtained from the
ASX website at www.asx.com.au or from Bullabulling's website at
www.bullabullinggold.com.
In addition, Bullabulling will make copies of the following
documents available for inspection at Bullabulling's offices which
are located at Level 2, 55 Carrington Street, Nedlands, Western
Australia, (between 9.00am and 5.00pm on Business Days):
1 Annual Report 2013, lodged with ASX on 24 March 2014; and
2 any continuous disclosure document lodged by Bullabulling with
ASX between the lodgement of its Annual Report 2013 and the date of
this Target's Statement.
Copies of documents lodged with ASIC in relation to Bullabulling
may be obtained from, or inspected at, an ASIC office.
8.8 ASIC declarations and Listing Rule waivers
Bullabulling has not been granted any modifications or
exemptions by ASIC from the Corporations Act in connection with the
Offer. Nor has Bullabulling been granted any waivers from ASX or
AIM in relation to the Offer.
8.9 JORC Code reporting of Bullabulling's Mineral Resources and Ore Reserves
The information in this Target's Statement that relates to
exploration results, Mineral Resources or ore reserves is based on
information compiled by Mr Trevor Pilcher, who is a Member of The
Australasian Institute of Mining and Metallurgy.
Mr Trevor Pilcher is a full time employee of Bullabulling. Mr
Trevor Pilcher has sufficient experience which is relevant to the
style of mineralisation and type of deposit under consideration and
to the activity which he is undertaking to qualify as a Competent
Person as defined in the JORC Code 2012. Mr Trevor Pilcher consents
to the inclusion in this Target's Statement of the matter based on
his information in the form and context in which it appears.
The information in this Target Statement which relates to
Exploration Results, Mineral Resources or Ore Reserves as prepared
and first disclosed under the JORC Code 2004. It has not been
updated since to comply with the JORC Code 2012 on the basis that
the information has not materially changed since it was last
reported. All material assumptions and technical parameters
underpinning the estimates of Mineral Resources continue to apply
and have not materially changed.
8.10 No other material information
This Target's Statement is required to include all the
information that Bullabulling shareholders and their professional
advisers would reasonably require to make an informed assessment
whether to accept the Offer, but:
-- only to the extent to which it is reasonable for investors
and their professional advisers to expect to find this information
in this Target's Statement; and
-- only if the information is known to any director of Bullabulling.
The directors of Bullabulling are of the opinion that the
information that Bullabulling shareholders and their professional
advisers would reasonably require to make an informed assessment
whether to accept the Offer is:
-- the information contained in the Bidder's Statement (to the
extent that the information is not inconsistent or superseded by
information in this Target's Statement);
-- the information contained in Bullabulling's releases to ASX,
and in the documents lodged by Bullabulling with ASIC before the
date of this Target's Statement; and
-- the information contained in this Target's Statement
(including the information contained in the Independent Expert's
Report).
The directors of Bullabulling have assumed, for the purposes of
preparing this Target's Statement, that the information in the
Bidder's Statement is accurate (unless they have expressly
indicated otherwise in this Target's Statement). However, the
directors of Bullabulling do not take any responsibility for the
contents of the Bidder's Statement and are not to be taken as
endorsing, in any way, any or all statements contained in it.
In deciding what information should be included in this Target's
Statement, the directors of Bullabulling have had regard to:
-- the nature of Bullabulling Shares;
-- the matters that shareholders may reasonably be expected to know;
-- the fact that certain matters may reasonably be expected to
be known to shareholders' professional advisers; and
-- the time available to Bullabulling to prepare this Target's Statement.
9 Glossary and interpretation
9.1 Glossary
The meanings of the terms used in this Target's Statement are
set out below.
Term Meaning
================================== ==============================================
$, A$ or AUD Australian dollar.
================================== ==============================================
GBP or GBP Pound sterling.
================================== ==============================================
2014 AGM Notice the Company's Notice of Annual General
Meeting dated 24 April 2014.
================================== ==============================================
AIM the market operated by London Stock
Exchange Group plc known as 'AIM'.
================================== ==============================================
ASIC Australian Securities and Investments
Commission.
================================== ==============================================
ASX ASX Limited or the market operated
by it (as applicable).
================================== ==============================================
ASX Listing Rules the listing rules of the ASX.
================================== ==============================================
AWST Australian Western Standard Time.
================================== ==============================================
Bidder or Norton Norton Gold Fields Limited ABN 23 112
287 797.
================================== ==============================================
Bidder's Statement the bidder's statement of Norton dated
17 April 2014.
================================== ==============================================
Board or Bullabulling the board of directors of Bullabulling.
Board
================================== ==============================================
BST British Summer Time.
================================== ==============================================
Bullabulling Bullabulling Gold Limited ABN 50 153
or Company 234 532.
================================== ==============================================
Bullabulling has the meaning given in section 22
Group of the Bidder's Statement.
================================== ==============================================
Bullabulling an option to acquire an unissued Bullabulling
Option or Option Share.
================================== ==============================================
Bullabulling the gold mining development owned and
Gold Project operated by the Company located approximately
60km from Kalgoorlie, Western Australia.
================================== ==============================================
Bullabulling a fully paid ordinary share in Bullabulling.
Share or Share
================================== ==============================================
Business Day a day on which banks are open for business
in Perth excluding a Saturday, Sunday
or public holiday.
================================== ==============================================
CGT capital gains tax.
================================== ==============================================
CHESS Holding a number of Shares which are registered
on Bullabulling's share register being
a register administered by ASX Settlement
Pty Limited and which records uncertificated
holdings of Shares.
================================== ==============================================
CIL carbon in leach.
================================== ==============================================
Corporations the Corporations Act 2001 (Cth) (as
Act modified or varied by ASIC).
================================== ==============================================
Definitive Feasibility a definitive feasibility study in respect
Study of the Bullabulling Gold Project.
================================== ==============================================
Depository Interests the depositary interests representing
Shares issued by the UK Depositary
subject to the terms and conditions
of a deed between the UK Depositary
and Bullabulling dated 27 February
2012 executed by the UK Depositary
and Bullabulling Gold Limited.
================================== ==============================================
Encumbrance has the meaning given in section 22
of the Bidder's Statement.
================================== ==============================================
Exploration Results has the meaning given in the JORC Code
2012 or JORC Code 2004 (as applicable).
================================== ==============================================
BDO Corporate Finance (WA) Pty Ltd
Independent Expert ACN 124 031 045.
================================== ==============================================
Independent Expert's the independent expert's report prepared
Report by BDO Corporate Finance (WA) Pty Ltd
and dated 13 May 2014 which is contained
in Attachment 1 to this Target's Statement.
================================== ==============================================
Indicated Mineral has the meaning given in the JORC Code
Resource 2012 or JORC Code 2004 (as applicable).
================================== ==============================================
Inferred Mineral has the meaning given in the JORC Code
Resource 2012 or JORC Code 2004 (as applicable).
================================== ==============================================
JORC Code 2004 the 2004 edition of the 'Australasian
Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves'
prepared by the JORC Reserves Committee
of The Australasian Institute of Mining
and Metallurgy, Australian Institute
of Geoscientists and Minerals Council
of Australia.
================================== ==============================================
JORC Code 2012 the 2012 edition of the 'Australasian
Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves'
prepared by the JORC Reserves Committee
of The Australasian Institute of Mining
and Metallurgy, Australian Institute
of Geoscientists and Minerals Council
of Australia.
================================== ==============================================
Ore Reserve has the meaning given in the JORC Code
2012 or JORC Code 2004 (as applicable).
================================== ==============================================
Notice of Status Norton's notice disclosing the status
of Conditions of the conditions to the Offer which
is required to be given by section
630(3) of the Corporations Act.
================================== ==============================================
Offer or Norton's the offer by Norton for the Bullabulling
Offer Shares, the details of which are set
out in section 8 of the Bidder's Statement.
================================== ==============================================
Offer Period the period during which the Offer will
remain open for acceptance in accordance
with section 10 of the Bidder's Statement.
================================== ==============================================
Option Plan the BAB Employee Incentive Option Plan,
dated 4 April 2012 (as amended from
time to time) and adopted by Bullabulling
shareholders at an annual general meeting
of shareholders held on 13 June 2012.
================================== ==============================================
Public Authority has the meaning given in section 22
of the Bidder's Statement.
================================== ==============================================
Rights has the meaning given in section 22
of the Bidder's Statement.
================================== ==============================================
Target's Statement this document (including the attachments),
being the statement of Bullabulling
under Part 6.5 Division 3 of the Corporations
Act.
================================== ==============================================
UK Depository Computershare Investor Services PLC.
================================== ==============================================
US$ United States dollar.
================================== ==============================================
Zijin Zijin Mining Group Co. Limited, a company
incorporated in the People's Republic
of China.
================================== ==============================================
9.2 Interpretation
In this Target's Statement:
(a) Other words and phrases have the same meaning (if any) given
to them in the Corporations Act.
(b) Words of any gender include all genders.
(c) Words importing the singular include the plural and vice versa.
(d) An expression importing a person includes any company,
partnership, joint venture, association, corporation or other body
corporate and vice versa.
(e) A reference to a section, clause, attachment and schedule is
a reference to a section of, clause of and an attachment and
schedule to this Target's Statement as relevant.
(f) A reference to any legislation includes all delegated
legislation made under it and amendments, consolidations,
replacements or re--enactments of any of them.
(g) Headings and bold type are for convenience only and do not
affect the interpretation of this Target's Statement.
(h) A reference to time is a reference to AWST.
(i) A reference to dollars, $, A$, AUD, cents, c and currency is
a reference to the lawful currency of the Commonwealth of
Australia.
10 Authorisation
This Target's Statement has been approved by a resolution passed
by the directors of Bullabulling. All Bullabulling directors voted
in favour of that resolution.
Signed for and on behalf of Bullabulling:
date 14 May 2014
-------------------------------
sign
here
-------------------------------
print Peter Mansell
name
-------------------------------
position Chairman
-------------------------------
Attachment 1
Independent Expert's Report
Bullabulling Gold Limited
Independent Expert's Report
13 May 2014
Financial Services Guide
13 May 2014
BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 ('we' or
'us' or 'ours' as appropriate) has been engaged by Bullabulling
Gold Limited ('Bullabulling') to provide an independent expert's
report on the all cash takeover bid for Bullabulling made by Norton
Gold Fields Limited. You will be provided with a copy of our report
as a retail client because you are a shareholder of
Bullabulling.
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.
Financial services we are licensed to provide
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.
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 $42,000.
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.
Other Assignments
BDO Taxation (WA) Pty Ltd has provided Bullabulling with
taxation services, including taxation compliance services, tax
advice on substitute accounting and acquisition, tax advice on
employee share schemes and research & development, preparation
and lodgement of research & development tax incentive, and tax
effect accounting services. Related fees in the last two years
totalled $74,585.
BDO Audit and Assurance (WA) Pty Ltd is the appointed Auditor of
Bullabulling. We do not consider that this impacts on our
independence in accordance with the requirements of Regulatory
Guide 112 'Independence of Experts'. We have completed a conflict
search of BDO affiliated organisations within Australia. This
conflict search incorporates all Partners, Directors and Managers
of BDO affiliated organisations. We are not aware of any
circumstances that, in our view, would constitute a conflict of
interest or would impair our ability to provide objective
assistance in this matter. Related fees in the last two years
totalled $120,189.
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 from Bullabulling 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: info@fos.org.au
Contact details
You may contact us using the details set out on page 1 of the
accompanying report.
TABLE OF CONTENTS
1. Introduction
2. Summary and opinion
3. Scope of the Report
4. Outline of the Offer
5. Profile of Bullabulling
6. Profile of Norton
7. Economic analysis
8. Industry analysis
9. Valuation approach adopted
10. Valuation of Bullabulling
11. Valuation of consideration
12. Is the Offer fair?
13. Is the Offer reasonable?
14. Conclusion
15. Sources of information
16. Independence
17. Qualifications
18. Disclaimers and consents
Appendix 1 - Glossary
Appendix 2 - Valuation Methodologies
Appendix 3 - Independent Valuation Report prepared by
RungePincockMinarco
13 May 2014
The Directors
Bullabulling Gold Limited
Level 2, 55 Carrington Street
Nedlands, WA 6009
Dear Directors
INDEPENDENT EXPERT'S REPORT
1. Introduction
On 17 April 2014, Norton Gold Fields Limited ('Norton')
announced an all cash takeover offer for all the shares in
Bullabulling Gold Limited ('Bullabulling' or 'the Company'). Norton
is offering the shareholders of Bullabulling $0.07 per share ('the
Offer').
2. Summary and opinion
2.1 Purpose of the report
The directors of Bullabulling 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 Offer
is fair and reasonable to the non associated shareholders of
Bullabulling ('Shareholders').
Although there is no legal requirement for an independent
expert's report pursuant to section 640 of the Corporations Act
2001 ('the Act') (as Norton neither has common directors with
Bullabulling nor holds 30% of Bullabulling's voting shares), the
directors of Bullabulling have requested that BDO prepare this
report as if it were an independent expert's report pursuant to
section 640, and to provide an opinion on whether the offer is fair
and reasonable to Bullabulling shareholders.
2.2 Approach
Our Report has been prepared having regard to Australian
Securities and Investments Commission ('ASIC') 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
Offer as outlined in the body of this report. We have
considered:
-- How the value of a Bullabulling share prior to the Offer
compares to the value of the consideration offered by Norton for
each Bullabulling share;
-- The likelihood of a superior alternative offer being available to Bullabulling;
-- Other factors which we consider to be relevant to the
Shareholders in their assessment of the Offer; and
-- The position of Shareholders should the Offer not be
successful or be only partly successful.
2.3 Opinion
We have considered the terms of the Offer as outlined in the
body of this report and have concluded that, in the absence of a
superior offer, the Offer is neither fair nor reasonable to
Shareholders.
In particular we note the following:
-- The Offer is for cash consideration only, as the Offer is not
fair no premium for control is being paid.
-- Bullabulling is currently undertaking a Definitive
Feasibility Study for the Bullabulling Gold Project (being its
primary asset) which is expected to be completed in quarter one of
2015. Depending on the results of this study, the value of a
Bullabulling share may increase. Please note that we cannot comment
on the likelihood of any particular results of this study.
2.4 Fairness
In section 12 we determined that the Offer consideration
compares to the value of a Bullabulling share, as detailed
below.
Ref Low Preferred High
$ $ $
Value of a Bullabulling share 0.111 0.146 0.161
Value of Offer consideration per Bullabulling share 0.070 0.070 0.070
Source: BDO analysis
The above valuation ranges are graphically presented in the full
Target's Statement available at www.bullabullinggold.com.
The above pricing indicates that, in the absence of any other
relevant information, and a superior offer, the Offer is not 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 accepting or rejecting the Offer; and
-- other considerations, including the practical level of
control of Norton if the Offer is successful and the position of
Shareholders if the Offer is not successful or is only partially
successful.
In our opinion, the position of Shareholders if the Offer is
successful is less advantageous than the position if the Offer is
not sucessful. Accordingly, in the absence of any other relevant
information and/or a superior proposal we believe that the Offer is
not reasonable for Shareholders.
The respective advantages and disadvantages considered of
accepting the Offer are summarised below:
ADVANTAGES AND DISADVANTAGES
Section Advantages Section Disadvantages
13.4 The consideration of cash of $0.07 is a fixed 13.5 The Offer is not fair. RG 111 states that an
and definite amount, and is not subject to the offer is reasonable if it is fair. As set out
inherent risks that will affect the quoted in Section 12, the Offer is not fair.
market price of a Bullabulling share,
13.5 The Company is currently undertaking a
Definitive Feasibility Study ('DFS') of the
Bullabulling
Gold Project, which is scheduled for completion
in the first quarter of 2015.
If Shareholders accept the Offer then they will
no longer hold an interest in the Company
or in the Bullabulling Gold Project. Therefore
Shareholders would not be able to benefit from
any increase in share value that may result
from the completion and announcement of
findings
of the DFS.
The respective advantages and disadvantages considered of not
accepting the Offer are summarised below:
ADVANTAGES AND DISADVANTAGES
Section Advantages Section Disadvantages
13.6 Continued exposure to potential increases in 13.7 Risk of reduced levels of liquidity.
value in the Bullabulling Gold Project Shareholders may become a collective minority
following in a company that is controlled by Norton. It
completion of the DFS is likely that Bullabulling shares traded on
the ASX and AIM would have a reduced level of
liquidity in this scenario.
If the number of remaining shareholders falls
below a certain level then the Company may no
longer be eligible to remain listed on the ASX.
13.7 Continued exposure to the inherent risks of the
Bullabulling Gold Project.
Other key matters we have considered include:
Section Description
13.8 Bullabulling's ability to secure additional funding, taking into consideration expected completion
of the Definitive Feasibility Study in the first quarter of 2015.
13.8 Norton's ability to secure additional funding, in the event that Norton gains control of Bullabulling
but is not able to compulsorily acquire all shares.
13.8 Compulsory acquisition of shares should Norton acquire 90% or more of shares in Bullabulling.
3. Scope of the Report
3.1 Purpose of the Report
Norton has prepared a Bidder's Statement in accordance with
section 636 of the Act. Under section 633 Item 10 of the Act
Bullabulling is required to prepare a Target's Statement in
response to the Bidder's Statement.
Section 640 of the Act requires the Target's Statement to
include an independent expert's report to shareholders if:
-- The bidder's voting power in the target is 30% or more; or
-- The bidder and the target have a common director or directors.
As Norton neither has common directors with Bullabulling nor
holds 30% of Bullabulling's voting shares, there is no requirement
under ASX Listing Rules or Corporations Act Regulations for
Bullabulling to engage an independent expert in relation to the
Offer.
Notwithstanding the above, Bullabulling has engaged BDO to
prepare this report for provision to Shareholders to assist them in
deciding whether to accept or reject the Offer.
3.2 Regulatory guidance
Neither the Listing Rules nor the Corporations Act defines the
meaning of 'fair and reasonable'. In determining whether the Offer
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 Offer is a control transaction as defined by
RG 111 and we have therefore assessed the Offer 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.
Having regard to the above, BDO has completed this comparison in
two parts:
-- A comparison between value of a Bullabulling share prior to
the Offer and the value of the consideration offered by Norton per
Bullabulling share (fairness - see Section 12 'Is the Offer
Fair?'); and
-- An investigation into other significant factors to which
Shareholders might give consideration, prior to accepting the
Offer, after reference to the value derived above (reasonableness -
see Section 13 'Is the Offer 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 Offer
On 17 April 2014, Norton announced an all cash takeover bid for
all of the fully paid ordinary shares in Bullabulling. Norton is
offering Shareholders of Bullabulling:
-- $0.07 per share held in Bullabulling.
The Offer was initially subject to conditions including:
-- The grant of approval by the Australia Foreign Investment
Review Board ('FIRB') to the acquisition of Bullabulling shares
under the Offer;
-- No event or change which may have a material adverse effect
on Bullabulling between announcement date and the end of the Offer
period; and
-- Bullabulling not undertaking any material acquisitions,
disposal or new commitments, between announcement date and the end
of the Offer period.
FIRB approval has been received, and on 5 May 2014 the Offer
became unconditional.
At the date of the announcement, Norton had no relevant interest
in Bullabulling shares, and the voting power of Norton in
Bullabulling was 2.5%, as disclosed in the Bidder's Statement.
Set out below is an overview of the intentions of Norton in
relation to the continuation of the business of, any major changes
to the business of, any redeployment of the fixed assets of, and
the future employment of the current employees of Bullabulling, as
set out in the Bidder's Statement.
Less than 50.1% acceptance by Shareholders
In the case that Norton acquires less than 50.1% of
Bullabulling, Norton will request representation on the board of
directors of Bullabulling that is commensurate with its
shareholding in the Company. Norton also intends to evaluate the
performance, profitability and prospects of Bullabulling based on
the information made available to Norton.
50.1% but less than 90% acceptance by Shareholders
If Norton acquires in excess of 50.1% of Bullabulling shares but
less than 90% of Bullabulling shares, the intentions include:
-- Norton would review the composition of the board of directors
of Bullabulling and request representation on the board that is
commensurate with its shareholding in Bullabulling;
-- Consider and investigate ,subject to Corporations Act, for
the acquisition, buy-out or cancellation of any other marketable
securities in Bullabulling to which Norton (or its associates) are
not entitled to;
-- Support the continuation of Bullabulling's current exploration activities;
-- Conduct a review of the Company's business, assets and
operations to identify the most effective means of exploring and
developing Bullabulling's projects;
-- Upon completion on a review of the business, assets and
operations of Bullabulling, review the future employment of the
current employees of the Company.
The intentions may only be implemented in accordance with the
applicable legal and regulatory requirements and the extent to
which the above intentions are implemented, are to be determined by
the board of directors of Bullabulling.
90% or more acceptances by Shareholders
Should Norton acquire 90% or more of shares in Bullabulling, the
intentions of Norton are set out below:
-- Proceed with the compulsory acquisition of the outstanding
Bullabulling shares in accordance to Chapter 6A of the Corporations
Act;
-- Arrangement for Bullabulling to be removed from the Official List of ASX;
-- Replace all members of the board of directors of Bullabulling with its own nominees;
-- Removal of duplication of tasks via integrating
administrative functions such as finance and accounting, risk
management along with functions involved in overall planning and
control of the combined operations of Norton and Bullabulling;
-- Conduct an immediate review of Bullabulling's administrative
structure and the development plans for the Bullabulling Gold
project with a plan to amalgamate Bullabulling into Norton's
structures.
-- As a result of the review, Norton expects that there may be a
need for the roles of some Bullabulling employees to be changed
along with the need for redundancies.
-- Proceed with the completion of the studies for the
development of the Bullabulling Gold project to identify the
viability of developing the project;
-- Dispose any non-performing assets and contracts of
Bullabulling determined during the operational review.
Optionholders
There are 12,592,621 Bullabulling options on issue at various
exercise prices. The Offer does not extend to these Bullabulling
options. Norton proposes to have discussions with holders of
Bullabulling options with respect to the cancellation of the
Bullabulling Options.
The Offer includes Bullabulling shares that are issued upon
vesting and exercise of any of the Bullabulling options.
5. Profile of Bullabulling
5.1 History
Bullabulling is a dual listed company and incorporated on 15
September 2011. The Company was admitted onto AIM on 16 March 2012,
and officially listed on the ASX on 23 March 2012. Bullabulling is
focussed on the exploration and development of the Bullabulling
Gold Project in the Eastern Goldfields of Western Australia.
The following wholly owned subsidiaries of Bullabulling form
part of the Bullabulling Group:
-- Bullabulling Gold UK Ltd (formerly GGG Resources PLC)
-- Bullabulling Operations Pty Ltd (formerly Auzex Resources Limited)
The Company's current board members comprise of the
following:
-- Mr Peter Mansell, Chairman
-- Mr Ronnie Beevor, Non-executive Director
-- Mr Brett Lambert, Managing Director
Set out below is a brief description of the Company's
Bullabulling Gold Project.
5.2 Bullabulling Gold Project
The Bullabulling Gold Project is located in the Eastern
Goldfields of Western Australia, 60 km west of Kalgoorlie. The
Project covers an area of approximately 131km(2) and is held in a
series of granted mining leases, prospecting and exploration
licenses.
Historically, gold was mined via a near surface open pit in the
1990s and in 1998 production at Bullabulling was ceased due to
falling gold prices. In 2010, Auzex Resources Limited and GGG
Resources PLC acquired the Project with the full intention to
return the mine to full scale commercial production.
During March 2012, Bullabulling acquired both GGG Resources and
Auzex Resources Limited, giving the Company 100% ownership of the
Project.
Within the Bullabulling Gold Project area, the Company has also
identified two large mineralised trends: the north -south striking
Bullabulling Trend and the east-west to northwest-southeast
striking Gibraltar Trend.
Since 2010, the Company has been engaged in exploration drilling
across the two trends, completed a feasibility study which
increased the quantum and categorisation of the resource. During
September 2013, Bullabulling undertook a reverse circulation
drilling program at the Gibraltar Trend. The Company has also
commenced a definitive feasibility study.
In October 2013, the Company undertook a drilling program at its
Bullabulling Gold Project following which a total of 3.76 million
ounces of JORC Mineral Resources were estimated. This comprised
Indicated Resources of 72.4 million tonnes at 0.98 g/t gold (2.28
million ounces) and Inferred Resources of 41.6 million tonnes at
1.11 g/t gold (1.47 million ounces). In 2013, the Company has also
commenced a DFS into the development of a large scale, long life
mine gold project at the Bullabulling Gold Project.
5.3 Historical Balance Sheet
Statement of Financial Position Unaudited as at Audited as at Audited as at
31/03/2014 31/12/2013 31/12/2012
$ $ $
CURRENT ASSETS
Cash and cash equivalents 3,049,061 4,256,808 4,078,830
Other receivables 43,515 38,637 52,508
Prepayments 126,402 66,570 32,768
Current tax asset - - -
TOTAL CURRENT ASSETS 3,218,978 4,362,015 4,164,106
NON-CURRENT ASSETS
Available for sale financial assets 427,778 427,778 427,778
Other receivables 185,000 185,000 1,436,200
Property, plant and equipment 725,565 757,388 770,183
TOTAL NON-CURRENT ASSETS 1,338,343 1,370,166 2,634,161
---------------- -------------- --------------
TOTAL ASSETS 4,557,321 5,732,181 6,798,267
---------------- -------------- --------------
CURRENT LIABILITIES
Trade and other payables (116,650) (155,853) (1,920,328)
Employed benefits (130,510) (412,616) (97,069)
TOTAL CURRENT LIABILITIES (247,160) (568,469) (2,017,397)
NON-CURRENT LIABILITIES
Provision for site restoration (1,353,193) (1,353,193) (470,000)
TOTAL NON-CURRENT LIABILITIES (1,353,193) (1,353,193) (470,000)
TOTAL LIABILITIES (1,600,353) (1,921,662) (2,487,397)
---------------- -------------- --------------
NET ASSETS 2,956,968 3,810,519 4,310,870
---------------- -------------- --------------
EQUITY
Issued capital 68,626,125 68,555,550 66,704,240
Retained profits 419,434 414,061 1,074,760
Accumulated losses (66,088,591) (65,159,092) (63,468,130)
TOTAL UNIT HOLDERS EQUITY 2,956,968 3,810,519 4,310,870
---------------- -------------- --------------
Source: Bullabulling Gold Limited Annual Financial Report for
the years 31 December 2012, 31 December 2013 and Management
accounts to 31 March 2014.
We note that Bullabulling's auditor issued an Emphasis of Matter
paragraph in the audit report in the financial statements for the
year ended 31 December 2013. The auditor outlined the existence of
a material uncertainty relating to the Company's ability to raise
additional funds to accelerate its exploration and development
activities.
Subsequent to the acquisition of GGG Resources Plc on 29 March
2012, the Company changed the presentation currency of Bullabulling
from British pounds to Australian dollars which took effect on 1
January 2012.
We note the following in relation to Bullabulling's Statement of
Financial Position:
-- Between 31 December 2012 and 31 December 2013, cash and cash
equivalents increased by $0.18 million from $4.08 million. The
increase is primarily attributable to the Company receiving $4.63
million in R&D tax incentive refund from the Australian Tax
Office.
-- As at 31 March 2014, cash and cash equivalents has fallen to
$3.05 million, as a result of exploration and evaluation work
relating to the DFS on its Bullabulling Gold Project.
-- Other non-current receivables decreased from $1.44 million as
at 31 December 2012 to $0.19 million as at 31 December 2013. The
decrease is due to the Company's release of an environmental bond
amounting to $1.28 million lodged with the Mining Rehabilitation
Fund. On 1 July 2013, the Department of Mines and Petroleum
established the Mining Rehabilitation Fund. Mining companies'
participation in the fund is optional until 30 June 2014, however
the Company opted for early participation and on 25 September 2013,
the bank retired the bond, releasing $1.28 million back to the
Company.
-- Trade and other payables decreased from $1.92 million to
$0.16 million between 31 December 2012 and 31 December 2013. The
decrease relates to the payment of stamp duty in relation to the
acquisition of GGG Resources Plc and Auzex Resources Limited.
-- The increase in employee benefits between 31 December 2012
and 31 December 2013 is primarily due to salary payments and bonus
accrued for and an increase in the annual leave liability.
-- Provision for site restoration increased from $0.47 million
to $1.35 million between 31 December 2012 and 31 December 2013. The
increase was due to revised estimate by an independent consultant
on the restoration cost of the tenements where drilling occurred in
previous years.
-- Issued capital has increased by $$0.07 million from 31
December 2013 and 31 March 2014. This increase is due to the issue
of 1,786,808 shares at $0.039 per share to key management in
satisfaction of contractual entitlements. A rights issue was
undertaken and completed on 24 April 2013 raising $1.96 million via
the issue of 39.2 million shares.
5.4 Historical Statement of Comprehensive Income
Statement of Comprehensive Income Audited for the Audited for the
year ended 31-Dec-13 year ended 31-Dec-12
$ $
Revenue
Revenue from continuing operations 224,364 459,137
Other income 4,540,799 3,433,383
Expenses
Administrative expenses (2,224,394) (2,605,768)
Finance expense - -
Other expenses (1,618,104) (1,297,847)
Impairment of investment - (376,222)
Auzex Resources Limited pre-acquisition exploration expensed - (32,894,832)
Exploration expenditure (3,502,567) (5,661,081)
Goodwill written off - (701,803)
Changes in fair value on equity instruments measured at fair value
through comprehensive income - (368,149)
Loss from continuing operations before income tax (2,579,902) (40,013,182)
Income tax expense (1,361) -
Loss from continuing operations after income tax (2,581,263) (40,013,182)
Foreign currency translation differences - (1,416,648)
Total comprehensive loss for the year (2,581,263) (41,429,830)
--------------------- ---------------------
Source: Bullabulling Gold Limited Annual Financial Report for
the years ended 31 December 2011, 31 December 2012, 31 December
2013.
We note the following in relation to Bullabulling's Historical
Statement of Profit or Loss and other Comprehensive Income.
-- Revenue from continuing operations mainly comprises of
interest income, with the decrease in revenue between 31 December
2012 and 31 December 2013 arising from a reduction in cash
held.
-- Other income increased by 32.3% from $3.43 million in 2012,
which was primarily made up of a gain on acquisition on investment
of $1.66 million and a gain on disposal of dormant subsidiaries of
$1.44 million, to $4.54 million for the year ended 31 December
2013. The $4.54 million represents a R&D tax incentive refund
from the Australian Tax Office.
-- Other expenses comprise of professional fees, depreciation
and amortisation, foreign exchange loss, gain on disposal of fixed
assets and site restoration expenses.
-- Impairment of investment recorded for the year ended 31
December 2012 relates to the purchase of Auzex Resources Limited
shares on market prior to the acquisition of Auzex Resources
Limited. The Company revalued the investment down to its current
share price, resulting in an impairment of approximately $0.377
million which was expensed through profit and loss.
-- Auzex Resources Limited pre-acquisition exploration of
approximately $32.89 million for the year ended 31 December 2012
relates to exploration work conducted by Auzex Resources Limited
prior to its acquisition which was expensed through profit and
loss.
-- Goodwill written off of approximately $0.70 million for the
year ended 31 December 2012 relates to the acquisition of GGG
Resources Plc and Auzex Resources Limited. The goodwill was deemed
to be unrecoverable due to Bullabulling being a dormant company at
the time of the acquisition.
5.5 Capital structure
The share structure of Bullabulling as at 30 April 2014 is
outlined below:
Number
Total ordinary shares on issue 344,035,585
Top 20 shareholders 274,712,393
Top 20 shareholders - % of shares on issue 79.85%
Source: Bullabulling's Management accounts
The range of shares held in Bullabulling as at 30 April 2014 is
as follows:
No. of Ordinary Shareholders No. of Ordinary Shares %Issued Capital
1-1,000 204 72,443 0.02%
1,001-5,000 523 1,803,316 0.52%
5,001-10,000 305 2,380,367 0.69%
10,001-100,000 724 24,592,047 7.15%
100,001 - and over 157 315,187,412 91.61%
TOTAL 1,913 344,035,585 100.00%
Source:
The ordinary shares held by the most significant shareholders as
at 30 April 2014 are detailed below:
Name Number of Ordinary Shares Held Percentage of Issued Shares (%)
Computershare Clearing Pty Ltd 175,446,170 40.58%
Baker Steel Capital Managers LLP 35,846,324 10.42%
Resolute (Treasury) Pty Ltd 20,250,000 5.89%
National Nominees Limited 15,688,025 4.56%
HSBC Custody Nominees Limited 13,253,275 3.85%
Subtotal 224,637,470 65.29%
Others 119,398,115 34.71%
----------------------------------
Total ordinary shares on Issue 344,035,585 100.00%
Source: Bullabulling's Management accounts
The unquoted options of Bullabulling on issue as at 2 May 2014
are outlined below:
Expiry date Exercise price Cash raised if
Number $ exercised $
6 October 2014 500,000 0.1036 51,800
28 October 2014 387,621 0.2090 81,013
26 November
2014 500,000 0.1020 51,000
23 April 2015 3,425,000 0.1184 405,520
1 May 2015* 1,000,000 0.3160 316,000
30 June 2015 1,150,000 0.1480 170,200
20 November
2015 3,630,000 0.5922 2,149,686
26 November
2015* 500,000 0.1260 63,000
1 May 2016* 1,000,000 0.3680 368,000
26 November
2016* 500,000 0.1490 74,500
Total 12,592,621 3,730,719
=========== ===============
Source:
Bullabulling also intends to issue a further 2,000,000 options,
pending shareholder approval, as set out in the notice to its 2013
Annual General Meeting. Bullabulling is also seeking shareholder
approval for the issue of 21,286,808 shares to various parties for
contractual obligations and future expenditure and a maximum of
4,046,875 shares under an Employee Share plan. Approval is also
being sought for the issue of 2,859,756 shares to Mr Brett
Lambert.
6. Profile of Norton
6.1 History
Norton was incorporated on 21 December 2004 and listed on the
ASX on 16 September 2005. Norton is focussed on the production and
development of gold in Australia. The current board members and
senior management of Norton are:
-- Dr Dianmin Chen, Chief Executive Officer and Managing Director
-- Mr Jinghe Chen, Non-executive Chairman
-- Mr Stephen Phan, Chief Financial Officer
-- Ms Ann Bi, Non-executive Director
-- Ms Xuelin Cai, Non-executive Director
-- Dr Noel Clarence White, Non-executive Director
-- Mr Richard Jones, Company Secretary and General Counsel
On 4 March 2014, the sale of Norton's idle Norton Gold Mine and
related assets to Mantle Mining Corporation Limited was completed
with the consideration being $300,000 plus GST in cash.
On 3 April 2014, Carbine Resources Limited ('Carbine') announced
that it had successfully executed an earn-in agreement with Raging
Bull Mining Pty Ltd ('Raging Bull') to acquire a 100% interest in
the Mount Morgan Mine. Raging Bull is the current holder of an
agreement with Norton to acquire the Mount Morgan Mines Project. In
addition to acquiring the Mount Morgan tenement, Carbine will also
acquire 100% interest in Norton's Many Peaks copper and gold
tenement.
Set out below is a brief description of Norton's Paddington Mill
operations.
6.2 Paddington Mill Operations
The Paddington Mill project was acquired in 2007 and is 100%
owned and operated by Norton. The project is located 35 km north of
Kalgoorlie, covering an area of 718 km (2.) The Paddington Mill
consists of seven project areas including Golden Cities, Ora Banda,
Mount Pleasant, Lady Bountiful, Mulgarrie, Binduli and Carbine.
During 2013, Norton acquired the Bullant and Lady Bountiful
tenements.
The Paddington Mill operation area includes Proven and Probable
Ore Reserves of 19 Mt at 1.75g/t Au containing 1.07 Moz of gold
with Measured, Indicated and Inferred Mineral Resources of 134Mt at
1.61g/t Au containing 6.94Moz of gold.
Current mining projects within the Paddington Mill operations
are principally located in the Mount Pleasant, Ora Banda and
Enterprise project areas, with other major areas of resource
inventory located in the Binduli and Golden cities project
areas.
Currently, Norton's resource development strategy for the
Paddington Mill Project is driven by a life mine plan with a focus
on large, relatively long term, base load open pit deposits along
with the production of high grade underground ore.
Further information on Norton and its operations may be found in
the Bidder's Statement.
6.3 Historical Balance Sheet
Statement of Financial Position Audited Audited Audited
as at as at as at
31-Dec-13 31-Dec-12 30-Jun-12
$'000 $'000 $'000
CURRENT ASSETS
Cash and cash equivalents 38,269 19,018 55,891
Trade and other receivables 10,359 11,098 6,460
Inventories 32,107 21,336 35,900
Other assets - 9,798 4,707
Prepayments 408 2,371 -
TOTAL CURRENT ASSETS 81,143 63,621 107,588
NON-CURRENT ASSETS
Deferred tax assets 14,853 9,978 10,278
Exploration and evaluation assets 60,241 74,801 76,226
Capitalised mining costs 92,596 37,235 34,112
Property, plant and equipment 98,757 29,465 28,112
Other assets 3,675 20,882 19,737
TOTAL NON-CURRENT ASSETS 270,122 172,361 168,465
---------- ---------- ----------
TOTAL ASSETS 351,265 235,982 276,053
---------- ---------- ----------
CURRENT LIABILITIES
Trade and other payables (29,664) (33,592) (32,837)
Borrowings (17,017) (38,000) -
Provisions (6,425) (5,141) (2,425)
Other financial liabilities (175) - (3,738)
Other liability (236) - -
TOTAL CURRENT LIABILITIES (53,517) (76,733) (39,000)
NON-CURRENT LIABILITIES
Financial liabilities - - (40,808)
Borrowings (113,335) (11,568) -
Provisions (26,279) (23,897) (22,231)
Deferred tax liabilities - - (9,926)
Other liabilities (148) - -
TOTAL NON-CURRENT LIABILITIES (139,762) (35,465) (72,965)
TOTAL LIABILITIES (193,279) (112,198) (111,965)
---------- ---------- ----------
NET ASSETS 157,986 123,784 164,088
---------- ---------- ----------
EQUITY
Contributed equity 186,841 176,652 174,252
Reserves 12,041 10,493 10,564
Accumulated losses (40,896) (63,361) (20,728)
TOTAL UNIT HOLDERS EQUITY 157,986 123,784 164,088
---------- ---------- ----------
Source: Norton Goldfields Limited Financial Reports for the year
ended 30 June 2012, 6 months ended 31 December 2013 and year ended
31 December 2012.
Norton's auditor issued an unqualified opinion in the audit
report in the financial statements for the year ended 31 December
2013. We note the following in relation to Norton's Statement of
Financial Position:
-- Cash and cash equivalents increased by 101.22% from $19.02
million at 31 December 2012 to $38.27 million at 31 December 2013.
The increase is primarily due to the payments received from its
Paddington Mill operations.
-- Current other assets as at 31 December 2012 comprises of
deferred settlement receivable in relation to the sale of the
tenement of EPC 1033. The remaining funds of $9.80 million were
received on 14 March 2013.
-- Non-current other assets comprises of security deposits as at
31 December 2013. Included in the security deposits is
approximately $1.99 million and relates to collateralised
guarantees as part of the Western Australia Department of Funds and
Rehabilitation cost. The deposits are released once the Norton has
satisfied its rehabilitation obligations.
-- Current borrowings decreased by 55.2% from 31 December 2012
and 31 December 2013. The decrease is due to the repayment of the
Bridging Term Loan Facility provided by Jinyu (H.K) International
Mining Company Limited.
-- Non-current borrowings increased from $11.57 million as at 31
December 2012 to $113.34 million as at 31 December 2013 due to the
Company securing a US$105 million credit facility through
Industrial and Commercial Bank of China Limited. The credit
facility has a term of 3 years, with an interest rate of Libor plus
2.1%.
6.4 Historical Statement of Comprehensive Income
Statement of Comprehensive Income Audited for the Audited for the Audited for the
year ended 6 months to year ended
31-Dec-13 31-Dec-12 30-Jun-12
$'000 $'000 $'000
Revenue
Revenue 259,677 114,079 245,912
Cost of sales (217,379) (120,662) (201,500)
Finance income 1,548 1,335 4,323
Other income 678 356 637
Expenses
Administration expenses (9,976) (5,148) (9,506)
Impairment of inventory - (11,033) -
Finance expense (16,958) (7,872) (9,284)
Profit/(Loss) from continuing operations before income tax 17,590 (28,945) 30,582
Income tax benefit 4,875 7,802 (11,322)
Profit/(Loss) from continuing operations after income tax 22,465 (21,143) 19,260
Foreign currency translation differences - - -
Total comprehensive profit/(loss) for the year 22,465 (21,143) 19,260
---------------- ---------------- ----------------
Source: Norton Goldfields Limited Financial Report for the year
ended 30 June 2012, 6 months ended 31 December 2013 and year ended
31 December 2012.
We note the following in relation to Norton's Historical
Statement of Profit and Loss and Comprehensive Income:
-- On 1 July 2012, Norton adopted AASB Interpretation 20
Stripping Cost in the Production Phase of a Surface Mine
('Interpretation 20').The earliest period of adoption for the
consolidated financial statements at 31 December 2013 is 1 July
2012. As a result, Norton has restated its statements for the 6
months to 31 December 2012 to reflect the changes due to adoption
of Interpretation 20.
-- The increase in revenue between 30 June 2012 and 31 December
2013 is primarily attributable to the increase in operation revenue
from the sale of gold.
-- Finance expenses during the year ended 31 December 2013 relate to foreign exchange losses.
6.5 Capital structure
The share structure of Norton as at 20 March 2014 is outlined
below:
Number
Total Ordinary Shares on Issue 931,850,665
Top 20 Shareholders 890,829,776
Top 20 Shareholders - % of shares on issue 95.60%
Source: Norton Goldfields Limited Financial Report for the year
ended 31 December 2013 and corporate website
The range of shares held in Norton as at 20 March 2014 is as
follows:
Range of Shares Held No. of Ordinary Shareholders No. of Ordinary Shares %Issued Capital
1 - 1,000 611 191,415 0.02%
1,001 - 5,000 715 2,015,500 0.22%
5,001 - 10,000 320 2,532,911 0.27%
10,001 - 100,000 612 20,108,296 1.39%
100,001 - and over 98 907,002,543 98.09%
--------------------- ----------------------------- ----------------------- ----------------
TOTAL 2,356 931,850,665 100.00%
Source: Norton Goldfields Limited Financial Report for the year
ended 31 December 2013 and corporate website
The ordinary shares held by the most significant shareholders as
at 20 March 2014 are detailed below:
Name No. of Ordinary Shares Held Percentage of Issued Shares (%)
Jinyu (H.K) International Mining Company Limited 701,840,563 75.32
Luminous Gold Limited 66,250,000 7.11
Goldmax Asia Investment Limited 46,319,231 4.97
SHL Pty Ltd 24,300,000 2.61
-------------------------------------------------- ---------------------------- --------------------------------
Total Top 4 838,709,794 90.01
Others 93,140,871 9.99
-------------------------------------------------- ---------------------------- --------------------------------
Total Ordinary Shares on Issue 931,850,665 100.00
Source: Norton Goldfields Limited Financial Report for the year
ended 31 December 2013 and corporate website
As at 31 December 2013, there were 8 million unissued unlisted
options exercisable at $0.241 each on or before 22 August 2017.
These options were held by Director Dr D Chen, The share options
are issued in three tranches, subject to the executive director
remaining an employee of the group. They vest upon VWAP reaching
$0.30 at any time after issuance.
7. Economic analysis
Growth in the global economy was below trend in 2013, but there
are reasonable prospects of a better outcome this year, helped by
firmer conditions in the advanced countries. China's growth appears
to have slowed a little in early 2014 but remains generally in line
with policymakers' objectives. Commodity prices in historical terms
remain high, though some of those important to Australia have
softened further of late.
Financial conditions overall remain very accommodative.
Long-term interest rates and most risk spreads remain low. Equity
and credit markets are well placed to provide adequate funding.
In Australia, the economy grew at a below-trend pace in 2013.
Recent information suggests moderate growth is occurring in
consumer demand and foreshadows a strong expansion in housing
construction. Some indicators of business conditions and confidence
have improved from a year ago and exports are rising. But at the
same time, resources sector investment spending is set to decline
significantly and, at this stage, signs of improvement in
investment intentions in other sectors are only tentative, as firms
wait for more evidence of improved conditions before committing to
expansion plans. Public spending is scheduled to be subdued.
The demand for labour has been weak over the past year and, as a
result, the rate of unemployment has risen somewhat. More recently,
there has been some improvement in indicators for the labour
market, but it will probably be some time yet before unemployment
declines consistently. Growth in wages has declined noticeably and
this has been reflected more clearly in the latest price data,
which show a moderation in growth in prices for non-traded goods
and services. As a result, inflation is consistent with the target.
If domestic costs remain contained, that should continue to be the
case over the next one to two years, even with lower levels of the
exchange rate.
Monetary policy remains accommodative. Interest rates are very
low and savers continue to look for higher returns in response to
low rates on safe instruments. Credit growth has picked up a
little, while dwelling prices have increased significantly over the
past year. The decline in the exchange rate from its highs a year
ago will assist in achieving balanced growth in the economy, but
less so than previously as a result of the rise over the past few
months. The exchange rate remains high by historical standards.
Looking ahead, continued accommodative monetary policy should
provide support to demand, and help growth to strengthen over time.
Inflation is expected to be consistent with the 2-3% target over
the next two years.
Source: www.rba.gov.au Statement by Glenn Stevens, Governor:
Monetary Policy Decision 6 May 2014
8. Industry analysis
Gold is both a commodity and an international store of monetary
value. Once mined, gold continues to exist indefinitely, often
melted down and recycled to produce alternative or replacement
products. This characteristic means that gold demand is supported
by both mine production and gold recycling.
As illustrated in the chart included in the full Target
Statement available at www.bullabullinggold.com, gold mine
production was approximately 2,917 metric tonnes in 2013 and gold
consumption was 4,578 metric tonnes. Demand for gold has
consistently exceeded supply over the last 10 years, and the
escalated level of economic and financial uncertainly during recent
years has caused investors to move capital from risky assets to
gold assets, which are perceived to be a good store of monetary
value. As a result, total gold demand increased by approximately
14% between 2008 and 2013, with demand as a percentage of supply
remaining at over 150% for the same period.
Until the late 1980s, South Africa produced approximately half
of the total gold produced. More recently however, gold production
has become geographically segmented, as shown in the chart below,
with production dominated by China, Australia and the United
States.
Gold prices
The price of gold fluctuates on a daily basis depending on
global demand and supply factors. The softening of gold prices over
the last two years is reflective of the recovery of global economic
conditions. The value of gold peaked at US$1,900 per ounce on 5
September 2011. This peak was largely caused by the debt market
crisis in Europe, but it was also driven by the Standard and Poor's
downgrade of the US credit rating. This sent global stock markets
tumbling and a flood of investors towards safer havens such as
gold. Prices contracted in December 2011 reaching a low of US$1,545
per ounce followed by a recovery in 2012, reaching US$1,790 per
ounce on 4 October 2012 before declining to US$1,675 per ounce at
31 December 2012. Gold prices have declined in 2013 and most
recently was US$1,296 per ounce on 29 April 2014.
According to Bloomberg forecasts and Consensus Economics, gold
prices are forecast to stabilise in the coming years, with the long
term forecast around US$1,290.
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.
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
Bullabulling's shares we have chosen to employ the following
methodologies:
-- Net asset value ('NAV') as a primary methodology;
-- Quoted market price ('QMP') as a secondary methodology.
We have chosen these methodologies for the following
reasons:
-- Bullabulling has not generated a trading income. Therefore
there are no historic profits that could be used to represent
future earnings. This means that the FME valuation approach is not
appropriate;
-- Bullabulling has no reserves declared and therefore the
application of DCF is not possible, Under RG111, it is only
considered appropriate to use a DCF where reserves are present;
-- Bullabulling's most significant asset is the Bullabulling
Gold Project. As such a net asset value method is appropriate, and
we require a specialist valuation of the Project. We instructed
Runge Pincock Minarco Limited ('RungePincockMinarco') to provide an
independent specialist current market valuation of the Bullabulling
Gold Project. RungePincockMinarco'sfull report can be found in
Appendix 3. RungePincockMinarco has applied the Comparable
Transactions method as its primary method in its valuation of the
Bullabulling Gold Project; and
-- Bullabulling is listed on the ASX and the AIM markets. This
provides an indication of the market value where an observable
market for the securities exists.
10. Valuation of Bullabulling
10.1 Net Asset Valuation of Bullabulling
The value of Bullabulling's assets on a going concern basis is
reflected in our valuation below:
Ref Unaudited as at Low valuation Preferred valuation High valuation
31 March 2014 $ $ $
$
CURRENT ASSETS
Cash and cash equivalents 3,049,061 3,049,061 3,049,061 3,049,061
Other receivables 43,515 43,515 43,515 43,515
Prepayments 126,402 126,402 126,402 126,402
TOTAL CURRENT ASSETS 3,049,061 3,049,061 3,049,061 3,049,061
NON-CURRENT ASSETS
Available for sale financial assets a 427,778 427,778 427,778 427,778
Deposits and bonds 185,000 185,000 185,000 185,000
Property, plant and equipment 725,565 725,565 725,565 725,565
Exploration assets b - 34,000,000 46,000,000 51,000,000
================ ============== ==================== ===============
TOTAL NON-CURRENT ASSETS 1,338,343 35,338,343 47,338,343 52,338,343
================ ============== ==================== ===============
TOTAL ASSETS 4,557,321 38,557,321 50,557,321 55,557,321
CURRENT LIABILITIES
Trade and other payables (116,650) (116,650) (116,650) (116,650)
Employed benefits (130,510) (130,510) (130,510) (130,510)
================ ============== ==================== ===============
TOTAL CURRENT LIABILITIES (247,160) (247,160) (247,160) (247,160)
NON-CURRENT LIABILITIES
Provision for site restoration c (1,353,193) - - -
================ ============== ==================== ===============
TOTAL NON-CURRENT LIABILITIES (1,353,193) - - -
================ ============== ==================== ===============
TOTAL LIABILITIES (1,600,353) (247,160) (247,160) (247,160)
NET ASSETS 2,956,968 38,310,161 50,310,161 53,310,161
================ ============== ==================== ===============
Shares on issue 344,035,585 344,035,585 344,035,585
Value of a Bullabulling share $0.111 $0.146 $0.161
============== ==================== ===============
Source: BDO analysis
We have been advised that there has not been a significant
change in the net assets of Bullabulling since 31 March 2014. The
table above indicates the net asset value of a Bullabulling share
is between $0.107 and $0.157.
a) Available for sale financial assets
Available for sale financial assets relate to 1,711,112 shares
in unlisted company Auzex Exploration Limited. Their value has been
assessed based on the most recent placement conducted by Auzex at
$0.25 per share on 7 November 2013.
b) Valuation of Bullabulling's exploration assets
We instructed RungePincockMinarco to provide an independent
market valuation of the exploration assets held by Bullabulling.
RungePincockMinarco has carried out a valuation of the Bullabulling
Gold Project. The Company has interests in additional tenements
that have not been value by RungePincockMinarco, as the value of
these is considered to be immaterial by the Company. The assessed
value of a Bullabulling share therefore excludes any value that may
be attributable to these tenements.
RungePincockMinarco has considered a number of different
valuation methods when valuing the Bullabulling Gold Project.
RungePincockMinarco applied the Comparable Transactions method as
its primary method in valuing the Bullabulling Gold Project. The
comparable transaction method involves calculating a value per
common attribute in a comparable transaction and applying that
value to the subject asset. A common attribute could be the amount
of resource or the size of a tenement. RungePincockMinarco also
utilised the multiples of exploration expenditure ('MEE') method as
a secondary method. We consider these methods to be appropriate
given the pre feasibility stage of development for Bullabulling's
exploration assets.
The value range for the Bullabulling Gold Project as assessed by
RungePincockMinarco is set out below:
Mineral Asset Low Value Preferred Value High Value
$m $m $m
Bullabulling Gold Project 34 46 51
Source:
The table above indicates a range of values between $34 million
and $51 million, with a preferred value of $46 million.
c) Provision for site restoration
The provision for site restoration was determined by the Company
following review and analysis by an independent consultant in May
2013 based on summary tables used in the Annual Environmental
Report submissions to the Department of Mines and Petroleum. We
have discussed the provision with the Independent specialist who
advised that this is incorporated into the market value per note
(b) above and therefore adjustment is required in our valuation to
ensure this is not double counted.
10.2 Quoted market prices for a Bullabulling share
To provide a comparison to the valuation of Bullabulling in
Section 10.1, we have also assessed the quoted market price for a
Bullabulling 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 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 Norton may not obtain 100% of Bullabulling, 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
Bullabulling 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 Bullabulling share
is based on the pricing prior to the announcement of the Offer.
This is because the value of a Bullabulling share after the
announcement may include the affects of any change in value as a
result of the Offer. However, we have considered the value of a
Bullabulling share following the announcement when we have
considered reasonableness in Section 13.
Information on the Offer was announced to the market on 17 April
2014. Therefore, the following chart provides a summary of the
share price movement over the 12 months to 16 April 2014 which was
the last trading day prior to the announcement. Bullabulling is
listed on the ASX and AIM. We have analysed the share price
movement on both the ASX and AIM below.
ASX quoted market price
A graph detailing the Company's ASX quoted market price is
included in the full Target's Statement available at
www.bullabullinggold.com.
The daily price of Bullabulling shares for 12 months prior to 16
April 2014 has ranged from a low of $0.020 on 27 June 2013 to a
high of $0.110 on 27 August 2013. From June 2013 to August 2013 the
share price showed an upward trend peaking at $0.110 during August.
Subsequent to the peak, the share price followed a relatively
consistent downward trend before remaining stable from October
2013. The most significant trading volumes were experienced in the
two months between August 2013 and September 2013. The highest
single day of trading was on 26 August 2013, where 4,847,488 shares
were traded.
During this period a number of announcements were made to the
market. The key announcements are set out below:
Date Announcement Closing Share Price Following Closing Share Price Three Days After
Announcement Announcement
$ (movement) $ (movement)
------------
Diamond
Drilling
Underway at
Bullabulling -
2/04/2014 2 April-14 0.053 4 0.0% 0.051 6 3.8%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Metallurgical
Test-work
Identifies
Potential Cost
12/03/2014 Reductions 0.057 6 5.0% 0.056 6 1.8%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Preliminary
Gibraltar
Mining Study
Completed - 7
7/03/2014 Mar-14 0.057 4 0.0% 0.057 4 0.0%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Dec 2013
Quarterly
Activity and
Cash Flow
Report - 29
29/01/2014 Jan-14 0.040 4 0.0% 0.042 5 5.0%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Sept 2013
Quarterly
Activity and
Cash Flow
Report - 31 10
31/10/2013 13 0.048 6 4.0% 0.043 6 10.4%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Gibraltar
Resource
Estimate
Updated -
25/10/2013 25-Oct-13 0.051 5 2.0% 0.050 6 2.0%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Forecast mine
production
increased to
2.5Moz
15/10/2013 contained gold 0.051 5 13.3% 0.051 4 0.0%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Gibraltar
Project
Drilling
Results
Received -
27/09/2013 27-Sep-13 0.061 4 0.0% 0.055 6 9.8%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Bond Release
Increases
Working
Capital -
25/09/2013 25-Sep-13 0.062 4 0.0% 0.065 5 4.8%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Bullabulling
Resource
Upgrade -
19/09/2013 19-Sep-13 0.064 5 3.2% 0.062 6 3.1%
------------ ---------------- ---------------- ---------------- --------------- ----------------
BAB Drilling
Commences at
Gibraltar -
4/09/2013 04-Sep-13 0.075 5 13.6% 0.075 4 0.0%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Bullabulling
Drilling
Results
Received -
29/08/2013 29-Aug-13 0.070 6 13% 0.066 6 6%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Response to ASX
Price and
26/08/2013 Volume Query 0.098 5 66% 0.070 6 29%
------------ ---------------- ---------------- ---------------- --------------- ----------------
$2.5 Million
Additional
Funding
Received -
20/08/2013 20-Aug-13 0.064 5 28% 0.059 6 8%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Drilling
Recommences at
Bullabulling -
19/08/2013 19-Aug-13 0.050 5 22% 0.058 5 16%
------------ ---------------- ---------------- ---------------- --------------- ----------------
Additional Land
Secured for
Bullabulling
5/08/2013 Development 0.037 6 3% 0.030 6 19%
------------ ---------------- ---------------- ---------------- --------------- ----------------
June 2013
Quarterly
Activity and
Cash Flow
25/07/2013 Report 0.037 4 0% 0.038 5 3%
------------ ---------------- ---------------- ---------------- --------------- ----------------
R&D Tax
Incentives to
Provide
Funding - 4
4/07/2013 July 2013 0.026 5 4% 0.028 5 8%
------------ ---------------- ---------------- ---------------- --------------- ----------------
New
Bullabulling
Mine Plan
Delivers
Substantial
2/07/2013 Savings 0.025 4 0% 0.028 5 12%
------------ ---------------- ---------------- ---------------- --------------- ----------------
BAB Initial DFS
Pit
Optimisation
Results -
14/05/2013 14-May-13 0.038 5 3% 0.047 5 24%
------------ ---------------- ---------------- ---------------- --------------- ----------------
BAB -
Bullabulling
Resource
Upgrade
13/05/2013 13-May-2013 0.037 4 0% 0.047 5 27%
------------ ---------------- ---------------- ---------------- --------------- ----------------
BAB Mar-13
Quarterly
Activity and
Cashflow
Report -
29/04/2013 29-04-13 0.032 6 3% 0.033 5 3%
------------ ---------------- ---------------- ---------------- --------------- ----------------
On 13 May 2013, the Company announced that it had updated its
Mineral Resource estimate for the Bullabulling Gold project to
incorporate results from the recent drilling program. Total project
resources have increased by 3.9 million tonnes at 1.68g/t to 113.2
million tonnes at 1.02g/t, and contained gold increased by 210,500
ounces to 3,715,500 ounces. Bullabulling's share price remained
unchanged on the day of the announcement, however the share price
increased by 27% to $0.047 in the following three days.
On 19 August 2013, the Company announced that drilling at its
Bullabulling Gold Project has recommenced. The drilling program
consists of seven reverse circulation holes. On the day of the
announcement, the share price increased by 22% to $0.050 and
continued to increase by 16% to $0.058 in the following three
days.
On 20 August 2013, Bullabulling announced that it had received
$2.5 million in additional funding from a Research and Development
tax incentive application lodged. The funds received will be
applied to the Definitive Feasible Study for 3.7 million ounces at
the Bullabulling Gold project. The share price increased by 28% to
$0.064 on the day of the announcement, and in the following three
days the share price decreased by 16% to $0.058.
On 26 August 2013, the Company released a response to ASX price
and volume query in which Bullabulling noted that it was unaware of
any unannounced market sensitive information that would explain the
recent trading in its securities. On the day of the announcement,
the share price increased by 66% to $0.098, however it decreased by
29% to $0.070 in the three days subsequent.
On 15 October 2013, Bullabulling released an updated resource
estimate at its Bullabulling Gold project. Ongoing pit optimisation
at the project identified the potential to increase mine production
to 2.5 million ounces of contained gold via the relocation of
public infrastructure at the northern end of the project area. On
the day of the announcement the share price increased by 13.3% to
$0.051.
To provide further analysis of the market prices for a
Bullabulling share, we have also considered the weighted average
market price for 10, 30, 60 and 90 day periods to 16 April 2014 as
traded on the ASX.
16-Apr-14 10 Days 30 Days 60 Days 90 Days
Closing price $0.057
Volume weighted average price (VWAP) $0.052 $0.054 $0.054 $0.051
Source: Bloomberg, BDO analysis
The above weighted average prices are prior to the date of the
announcement of the Offer, to avoid the influence of any increase
in price of Bullabulling shares that has occurred since the Offer
was announced.
An analysis of the volume of trading in Bullabulling shares for
the twelve months to 16 April 2014 as traded on the ASX is set out
below:
Trading days Share price Share price Cumulative volume As a % of
low high traded Issued capital
1 Day $0.055 $0.057 105,604 0.03%
10 Days $0.050 $0.057 1,043,488 0.30%
30 Days $0.050 $0.060 2,794,169 0.81%
60 Days $0.040 $0.065 4,734,077 1.38%
90 Days $0.040 $0.065 6,361,766 1.85%
180 Days $0.030 $0.110 25,753,099 7.49%
1 Year $0.020 $0.110 36,026,070 10.47%
Source: Bloomberg, BDO analysis
AIM quoted market price
A graph detailing the Company's share price performance on AIM
is included in the full Target's Statement available at
www.bullabullinggold.com
Note that the share prices have been translated into Australian
dollars to allow for the ASX and AIM analysis to be comparable.
The weighted average market price for 10, 30, 60 and 90 day
periods to 16 April 2014 as traded on AIM is shown below.
Share Price per unit 16-Apr-14 10 Days 30 Days 60 Days 90 Days
Closing price $0.054
Volume weighted average price (VWAP) $0.052 $0.058 $0.052 $0.049
Source: Bloomberg and BDO Analysis
The above weighted average prices are prior to the date of the
announcement of the Offer, to avoid the influence of any increase
in price of Bullabulling shares that has occurred since the Offer
was announced.
An analysis of the volume of trading in Bullabulling shares for
the twelve months to 16 April 2014 as traded on AIM is set out
below:
Trading days Share price Share price Cumulative volume As a % of
low high traded Issued capital
1 Day $0.054 $0.054 70,443 0.02%
10 Days $0.051 $0.054 632,082 0.18%
30 Days $0.051 $0.069 4,843,075 1.41%
60 Days $0.043 $0.069 15,553,277 4.52%
90 Days $0.042 $0.069 27,301,283 7.94%
180 Days $0.027 $0.082 91,818,887 26.69%
1 Year $0.023 $0.082 134,708,200 39.16%
The above tables indicate that Bullabulling's shares display a
low to moderate level of liquidity, with 10.47% of the Company's
current issued capital being traded on the ASX in a twelve month
period, and 39.2% on AIM. 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 Bullabulling, we do not consider there to be a
deep market for the Company's shares due to the low level of
current issued capital being traded over a weekly basis and in the
twelve months prior to announcement of the Offer, and significant
but unexplained movements in the share price over the trading
period.
Our assessment is that a range of values for Bullabulling shares
based on market pricing, after disregarding post announcement
pricing, is between $0.050 and $0.060. This valuation is on a
minority interest basis.
Control Premium
We have reviewed the control premiums paid by acquirers of both
general mining and gold mining companies listed on the ASX. We have
summarised our findings below:
General mining companies
Year Number of Transactions Average Deal Value Average Control
(AU$m) Premium (%)
2013 13 56.43 55.41
2012 19 135.78 42.67
2011 20 634.68 31.40
2010 23 755.97 45.04
2009 29 86.80 39.23
2008 8 553.76 38.87
Median 344.77 40.95
Mean 370.57 42.10
Source: Bloomberg and BDO Analysis
Gold mining companies
Year Number of Transactions Average Deal Value Average Control
(AU$m) Premium (%)
2013 6 43.10 63.99
2012 7 258.74 34.89
2011 3 150.28 45.43
2010 10 1364.83 56.11
2009 9 169.34 24.94
2008 3 446.27 28.54
Median 214.04 40.16
Mean 405.43 42.32
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 tables above indicate that there has been an increasing
trend of control premium paid by acquirers of both gold and general
mining companies since 2009, in particular in relation to
transaction in 2013. The long term average of announced control
premium paid by acquirers of mining targets in Australia is in
excess of 40%.
Norton has made an offer for all of Bullabulling's shares and as
a result should be expected to pay a control premium. Taking into
account the above analysis, an appropriate control premium to apply
in our valuation of Bullabulling's shares is between 40% and
45%.
Quoted market price including control premium
Applying a control premium to Bullabulling's quoted market share
price results in the following quoted market price value including
a premium for control:
Low Midpoint High
$ $ $
Quoted market price value $0.050 $0.055 $0.060
Control premium 40% 42.5% 45%
Quoted market price valuation including a premium for control $0.070 $0.078 $0.087
Source: BDO analysis
Therefore, our valuation of a Bullabulling share based on the
quoted market price method and including a premium for control is
between $0.070 and $0.087, with a midpoint value of $0.078.
10.3 Assessment of the value of a Bullabulling share
The results of the valuations performed are summarised in the
table below:
Low Preferred High
$ $ $
Net assets value (Section 10.1) 0.111 0.146 0.161
Quoted market price (Section 10.2) 0.070 0.078 0.087
Source: BDO analysis
We consider the net asset value to more accurately reflect the
value of a Bullabulling share due to the NAV incorporating the
potential value in (it's current stage) of the Bullabulling Gold
Project, being the most significant asset of the Company. We note
that upon completion of the DFS it is expected that a maiden
reserve is likely to be announced. Following the completion of the
DFS it would be possible to undertake a discounted cash flow
valuation of the project incorporating the effects of the modifying
factors applied in the DFS which may result in a higher value per
share than that derived under the net asset value here.
The QMP is based on shares that have not been traded deeply on
either the ASX or AIM markets. Therefore we do not consider this to
be the most appropriate value. Whist we recognise that the market
prices in expectations of future results we consider this not to
fully reflect the market value as a small proportion of the
outstanding shares is used to imply the valuation of the Company
when short term volatility can materially impact the valuation.
Based on the results above we consider the value of a
Bullabulling share to be between $0.107 and $0.157, with a
preferred value of $0.142.
11. Valuation of consideration
Norton is offering Shareholders $0.07 per Bullabulling share in
cash.
12. Is the Offer fair?
The value of a Bullabulling share as compared with the value of
the consideration offered per share is compared below:
Ref Low Preferred High
$ $ $
Value of a Bullabulling share on a control basis 0.111 0.146 0.161
Value of consideration 0.070 0.070 0.070
We note from the table above that the value of a Bullabulling
share on a control basis is in excess of the consideration.
Therefore, we consider that the Offer is not fair.
13. Is the Offer reasonable?
13.1 Alternative proposal
We are unaware of any alternative proposal that might offer the
Shareholders of Bullabulling a premium over the Offer
consideration.
If Norton increases the Offer consideration above the currently
offered $0.07 per share, then any Shareholders which have already
accepted the Offer will receive the increased consideration.
13.2 Practical level of control
Under the conditions of the Offer there is no minimum level of
acceptance by Shareholders. Therefore Norton may acquire an
interest of between nil and 100% of the Company.
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.
If Norton acquires more than 25% and up to 50% of Bullabulling
shares it will be able to block special resolutions, but would not
be able to block general resolutions, or pass general or special
resolutions. In the case that Norton acquires 50% or less of
Bullabulling shares, Norton will request representation on the
board that is commensurate with its shareholding in the Company.
Norton's intentions in the scenarios that it attains an interest of
up to 50%, more than 50% and less than 90%, and 90% or more, are
outlined in section 4.
If Norton acquires more than 50% and less than 90% of
Bullabulling shares then Norton would be able to pass general
resolutions and block special resolutions, and may be able to pass
special resolutions (if over 75%). In this scenario Norton's
intentions include to:
-- Review the composition of the board of directors of
Bullabulling and request representation on the board that is
commensurate with its shareholding in Bullabulling; and
-- Consider and investigate, subject to Corporations Act, for
the acquisition, buy-out or cancellation of any other marketable
securities in Bullabulling to which Norton (or its associates) are
not entitled.
Should Norton acquire 90% or more of shares in Bullabulling then
Norton would be able to pass general and special resolutions. In
this scenario Norton's intentions include to:
-- Compulsorily acquire the outstanding Bullabulling shares in
accordance with the Corporations Act;
-- Arrange for Bullabulling to be removed from the Official List of the ASX; and
-- Replace all members of the board of directors of Bullabulling with its own nominees.
Norton's control of Bullabulling following the Offer may be
significant when compared to all other shareholders depending on
the level of acceptance of the Offer by Shareholders. As such,
Norton should be expected to pay a premium for control of
Bullabulling.
13.3 Consequences of not accepting the Offer
Potential decline in share price
We have analysed movements in Bullabulling's share price since
the Offer was announced on 17 April 2014. A graph of Bullabulling's
share price since the announcement on the ASX and AIM is included
in the full Target's Statement available at
www.bullabullinggold.com.
The announcement of the Offer was made to the market after
market close on 17 April 2014. On that day, approximately 0.037
million shares were traded and Bullabulling's share price closed
5.2% lower to $0.054. Since the announcement, [Bullabulling's share
price has traded between $0.065 (22 April) to $0.082 (30 April). On
13 May 2014, the Company's share price closed at $0.072.]
Given the above analysis, it is likely that if the Offer is not
accepted then Bullabulling's share price may decline back to
pre-announcement levels.
13.4 Advantages of accepting the Offer
We have considered the following advantages when assessing
whether the Offer is reasonable.
Advantage Description
Certainty of the cash consideration The cash consideration that has been offered by Norton would
allow Bullabulling Shareholders
to realise cash for their investment without incurring brokers'
fees. No dividends have been
paid on Bullabulling shares to date.
The consideration of cash of $0.07 is a fixed and definite
amount, and is not subject to the
inherent risks that will affect the quoted market price of a
Bullabulling share, including
the risk of fluctuations in value of the Bullabulling Gold
Project in the period up to and
including the announcement of the findings on completion of the
Definitive Feasibility Study
('DFS') (see 13.5 below for further details).
There may be capital gains tax implications for Shareholders,
and Shareholders should consult
with their own tax advisors to determine any individual tax
implications from acceptance of
the Offer.
Removes future risks associated with holding shares The Offer removes the risks that Shareholders bear from
in Bullabulling continuing to hold Bullabulling shares.
These risks include, but are not limited to, the
following:
* Development of projects into cash generating assets;
* Deterioration in market conditions; and
* Future funding.
13.5 Disadvantages of accepting the Offer
If the Offer is accepted, in our opinion, the potential
disadvantages to Shareholders include those listed in the table
below:
Disadvantage Description
The Offer is not fair RG 111 states that an offer is reasonable if it is fair.
As set out in Section 12, the Offer
is not fair.
Inability to benefit from potential upside in If the Offer is accepted, Shareholders will forgo their
Bullabulling Gold Project participation in potential future
profits and capital growth that Bullabulling may be able
to realise.
The Company is currently undertaking a DFS of the
Bullabulling Gold Project, which is scheduled
for completion in the first quarter of 2015.
As the DFS is not due to be completed until early 2015,
the current quoted market price of
a Bullabulling share, and the net asset value that was
determined in section 10.1, do not
reflect any impact of the announcement of the findings of
the completed DFS. If the findings
of the DFS are favourable, and demonstrate economic
viability of an initial gold reserve,
then it may be expected that the value of the
Bullabulling Gold Project, and therefore the
trading price of Bullabulling shares will increase,
either as a direct result of the announcement
or over the course of the months prior to the
announcement as the trading price reflect market
expectations.
If Shareholders accept the Offer then they will no longer
hold an interest in the Company
or in the Bullabulling Gold Project. Therefore
Shareholders would not be able to benefit from
any increase in the value of Bullabulling in the future.
It should be noted that we cannot comment as to the
likelihood of any specific findings that
may or may not result from completion of the DFS,
including the likelihood of an initial gold
reserve being demonstrated.
13.6 Advantages of rejecting the Offer
We have considered the following advantages if the Offer is
rejected.
Advantage Description
Continued exposure to potential increases in value in the If Shareholders reject the Offer they will continue to
Bullabulling Gold Project hold their interests in Bullabulling
and the Bullabulling Gold Project, and will therefore be
able to benefit from any increases
in value that may result from the Bullabulling Gold
Project including the implications of
completion of the DFS.
13.7 Disadvantages of rejecting the Offer
If the Offer is rejected, in our opinion, the potential
disadvantages to Shareholders include those listed in the table
below:
Disadvantage Description
Risk of reduced levels of liquidity If the Offer is accepted by a significant proportion
of Shareholders then there is a risk
that Shareholders that reject the Offer will become a
collective minority shareholder in a
company that is controlled by Norton.
It is likely that Bullabulling shares traded on the
ASX and AIM would have a reduced level
of liquidity in this scenario. As noted in section
10.2, the liquidity of Bullabulling shares
is considered to be low to moderate based on the
current level of trading on the ASX and AIM
markets.
Depending on the level if any acceptance of the Offer
by Shareholders, if the number of remaining
shareholders falls below a certain level then the
Company may no longer be eligible to remain
listed on the ASX. Under the ASX listing requirements
a listed company must have a minimum
of:
* 400 investors @ $2,000; or
* 350 investors @ $2,000 and 25% held by unrelated
parties; or
* 300 investors @ $2,000 and 50% held by unrelated
parties.
Continued exposure to the inherent risks of the If Shareholders reject the Offer then they will not receive
Bullabulling Gold Project the cash consideration of $0.07
per Bullabulling share, and will continue to hold their
interests in the Company and the Bullabulling
Gold Project. They will therefore continue to be exposed to
the inherent risks of the Project;
that no increases in value may result from completion of the
Definitive Feasibility Study.
13.8 Other considerations
Consideration Description
Bullabulling's ability to secure additional funding Additional funding will be required to complete the Definitive
Feasibility Study for the Bullabulling
Gold Project. Following completion of the DFS, assuming that a
decision is made to proceed
to production for the Bullabulling Gold Project, capital
expenditure will be required. Capital
expenditure requirements were estimated in the Prefeasibility
Study of between $297 million
and $333 million as announced in October 2012, and estimates
have since decreased and will
be revised as part of the DFS.
No decision has currently been made by the Company as to the
nature or timing of the funding
that will be required to complete the DFS or for capital
expenditure, although preliminary
discussions have been held with a number of financiers.
Bullabulling had $3.0 million cash
as at 31 March 2014.
Once the DFS has been completed, if this results in an
economically viable gold reserve being
defined, then this is likely to result in an increase in value
of a Bullabulling share, as
is indicated from the analysis performed in section 13.5 above.
In this scenario, the Company
is expected to have an increased ability to source funding for
the capital expenditure required
to develop the Bullabulling Gold Project.
If any such funding is in the form of the issuance of equity,
then this will have the effect
of diluting a Shareholder's interest in the Company.
Norton's ability to secure additional funding As Norton is a larger company than Bullabulling (market
capitalisation of $107 million at
13 May 2014, compared with Bullabulling's market capitalisation
of $24 million), it may be
able to more easily source funding.
In the event that Norton gains control of Bullabulling but is
not able to compulsorily acquire
all shares, any Shareholders that do not accept the Offer may
be able to benefit from funding
sourced by Norton. We note that this may also have a diluting
impact on non-accepting Shareholders'
interests to the extent Shareholders do not participate on a
pro rata basis.
Compulsory acquisition Should Norton acquire 90% or more of shares in Bullabulling,
the intentions of Norton are
to proceed with the compulsory acquisition of the outstanding
Bullabulling shares in accordance
to Chapter 6A of the Corporations Act.
Any Shareholders that form this remaining 10% will receive the
same consideration that has
been offered per share as Shareholders that accept the Offer.
14. Conclusion
We have considered the terms of the Offer as outlined in the
body of this report and have concluded that the Offer is neither
fair nor reasonable to the Shareholders of Bullabulling.
15. Sources of information
This report has been based on the following information:
-- Target Statement on or about the date of this report;
-- The Bidder's Statement as prepared by Norton and announced to the ASX on 17 April 2014;
-- Audited financial statements of Bullabulling for the year
ended 31 December 2012 and 31 December 2013
-- Audited financial statements of Norton for the year ended 30
June 2012, the six months ended 31 December 2012 and the year ended
31 December 2013
-- Unaudited management accounts of Bullabulling for the period ended 31 March 2014;
-- Independent Valuation Report of Bullabulling's mineral assets dated [DATE] performed by RungePincockMinarco;
-- Share registry information;
-- Information in the public domain; and
-- Discussions with Directors and Management of Bullabulling.
16. Independence
BDO Corporate Finance (WA) Pty Ltd is entitled to receive a fee
of $42,000 (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 this report.
BDO Corporate Finance (WA) Pty Ltd has been indemnified by
Bullabulling Gold Limited in respect of any claim arising from BDO
Corporate Finance (WA) Pty Ltd's reliance on information provided
by the Bullabulling Gold Limited, including the non provision of
material information, in relation to the preparation of this
report.
Prior to accepting this engagement BDO Corporate Finance (WA)
Pty Ltd has considered its independence with respect to
Bullabulling Gold Limited and Norton Gold Fields Limited 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 Bullabulling Gold Limited and
Norton Gold Fields Limited and their respective associates.
The provision of our services is not considered a threat to our
independence as auditors under Professional Statement APES 110 -
Professional Independence. The services provided have no material
impact on the financial report of Bullabulling Gold Limited.
A draft of this report was provided to Bullabulling Gold Limited
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. 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 15 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 Bullabulling
Gold Limited for inclusion in the Target's Statement which will be
sent to all Bullabulling Gold Limited Shareholders. Bullabulling
Gold Limited engaged BDO Corporate Finance (WA) Pty Ltd to prepare
an independent expert's report to consider the Offer by Norton Gold
Fields Limited to acquire 100% of the shares in Bullabulling Gold
Limited.
BDO Corporate Finance (WA) Pty Ltd hereby consents to this
report accompanying the above Target's Statement. 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 Target's Statement other than this report.
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 in
relation to Bullabulling Gold Limited and Norton Gold Fields
Limited. 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 Offer, tailored to their own particular
circumstances. Furthermore, the advice provided in this report does
not constitute legal or taxation advice to the Shareholders of
Bullabulling Gold Limited, or any other party.
BDO Corporate Finance (WA) Pty Ltd has also considered and
relied upon independent valuations for the Bullabulling Gold
Project held by Bullabulling Gold Limited.
The valuer engaged for the mineral asset valuation, Runge
Pincock Minarco Limited, 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
Sherif Andrawes Adam Myers
Director Director
Appendix 1 - Glossary of Terms
Reference Definition
The Act The Corporations Act
APES 225 Accounting Professional & Ethical Standards Board professional standard APES 225 'Valuation
Services'
ASIC Australian Securities and Investments Commission
ASX Australian Securities Exchange
BDO BDO Corporate Finance (WA) Pty Ltd
The Company Bullabulling Gold Limited
DCF Discounted Future Cash Flows
DFS Definitive Feasibility Study
FIRB Australia Foreign Investment Review Board
FME Future Maintainable Earnings
JORC Code The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
NAV Net Asset Value
Norton Norton Gold Fields Limited
Our Report This Independent Expert's Report prepared by BDO
RG 111 Content of expert reports (March 2011)
RG 112 Independence of experts (March 2011)
RungePincockMinarco Runge Pincock Minarco Limited
The Project The Bullabulling Gold Project
The Offer The offer by Norton Gold Fields Limited to acquire up 20 100% of the shares in Bullabulling
Gold Limited for cash consideration of $0.07 per Bullabulling share
Shareholders Shareholders of Bullabulling not associated with Norton Gold Fields 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
Appendix 2 - Valuation Methodologies
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.
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.
Bullabulling Gold Project
Independent Technical Valuation
BDO Corporate Finance (WA) Pty Ltd
Job No: ADV-PE-60313
Date: May, 2014
Document Control Sheet
Client
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BDO Corporate Finance (WA) Pty Ltd
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Report Name Date
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Technical Review and Valuation of the Bullabulling 8(th) May, 2014
Gold Project
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Report No. Revision No.
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Authorisations
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Name Position Signature Date
----------------------- ---------------------- ---------- -----------
Prepared J. S. Hinde Resources Development 8(th) May,
By: Manager - metals 2014
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Reviewed P. Mitchell Executive Consultant 8(th) May,
By 2014
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Approved
By
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Distribution
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Organisation Recipient No. Of Hard No. Of Electronic Comment
Copies Copies
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BDO Corporate Finance
(WA) Pty Ltd Sherif Andrawes 1
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IMPORTANT INFORMATION ABOUT THIS DOCUMENT
1. Our Client
This report has been produced by or on behalf of
RungePincockMinarco ("RPM") solely for BDO Corporate Finance (WA)
Pty Ltd, (the Client) for the purpose of its inclusion in the
Independent Expert's Report being prepared by BDO Corporate Finance
(WA)Pty Ltd in relation to the offer by Norton Gold Fields Ltd
("Norton") to acquire 100% of the shares in Bullabulling Gold
Ltd.
2. The Client's Use
The Client's use and disclosure of this report is subject to the
terms and conditions under which RPM prepared the report.
3. Notice to Third Parties
-- RPM prepared this report for the Client and for the Purpose outlined above only.
-- To the extent permitted by law:-
o RPM does not make and expressly disclaims from making any
representation or warranty to you - express or implied - regarding
this report or the conclusions or opinions set out in this report
(including without limitation any representation or warranty
regarding the standard of care used in preparing this report, or
that any forward-looking statements, forecasts, opinions or
projections contained in the report will be achieved, will prove to
be correct or are based on reasonable assumptions).
o RPM expressly disclaims any liability to you and any duty of
care to you.
o RPM does not authorise you to rely on this report. If you
choose to use or rely on all or part of this report, then any loss
or damage you may suffer in so doing is at your sole and exclusive
risk.
4. Inputs, subsequent changes and no duty to update
-- RPM has created this report using data and information
provided by or on behalf of the Client (and Client's agents and
contractors). Unless specifically stated otherwise, RPM has not
independently verified that data and information. RPM accepts no
liability for the accuracy or completeness of that data and
information, even if that data and information has been
incorporated into or relied upon in creating this report (or parts
of it).
-- The conclusions and opinions contained in this report apply
as at the date of the report. Events (including changes to any of
the data and information that RPM used in preparing the report) may
have occurred since that date which may impact on those conclusions
and opinions and make them unreliable. RPM is under no duty to
update the report upon the occurrence of any such event, though it
reserves the right to do so.
5. Mining Unknown Factors
The ability of any person to achieve forward-looking production
and economic targets is dependent on numerous factors that are
beyond RPM's control and that RPM cannot anticipate. These factors
include, but are not limited to, site-specific mining and
geological conditions, management and personnel capabilities,
availability of funding to properly operate and capitalize the
operation, variations in cost elements and market conditions,
developing and operating the mine in an efficient manner,
unforeseen changes in legislation and new industry developments.
Any of these factors may substantially alter the performance of any
mining operation.
Executive Summary
Purpose of Report
This report has been prepared at the request of BDO Corporate
Finance (WA) Pty Ltd ("BDO") who were engaged by Bullabulling Gold
Limited ("BGL") to prepare an Independent Expert's Report for
inclusion with a Target's Statement. The Target's Statement will
address, and BDO's Report will address, the offer by Norton Gold
Fields Limited to acquire 100% of the shares in BGL. This report
sets out RungePincockMinarco's ("RPM") independent review of the
Bullabulling Gold Project held by BGL in the Coolgardie region of
Western Australia.
RPM has conducted its technical review in recognition of the
requirements of the "Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves" (2012) published by
the Joint Ore Reserves Committee ("JORC") of the Australasian
Institute of Mining and Metallurgy, Australian Institute of
Geoscientists and the Minerals Council of Australia (the "JORC
Code") and the Code for the Technical Assessment and Valuation of
Mineral and Petroleum Assets and Securities for Independent Expert
Reports (the Valmin Code, 2005).
This Independent Technical Report has been prepared in
accordance with the relevant requirements of the listing rules of
the ASX and the regulatory guidelines RG111 and RG112 issued by the
Australian Securities and Investments Commission ("ASIC") in
relation to the preparation of independent expert reports.
Summary of Review
BGL wholly owns mining tenements associated with the
Bullabulling Gold Project located 25km west of Coolgardie in
Western Australia. The Bullabulling Project is a large tonnage, low
grade deposit with gold hosted in a series of shallow-dipping,
stacked north-south trending shears, typical of Western Australian
goldfields. Gold mineralisation at Bullabulling is hosted within
laterite 'blankets' typically between 1m to 3m thick, overlying a
larger body of structurally-controlled shear hosted, primary
mineralisation.
RPM conducted a high level review of the Mineral Resources and
associated data for the Bullabulling and Gibraltar deposits. The
total Indicated and Inferred Mineral Resources reported for the
Bullabulling deposit are 109Mt at 1.02g/t for 3.6M oz. A further
5Mt has been reported at the nearby Gibraltar deposit, with a grade
of 1.07g/t Au for 169k oz. RPM was able to replicate these resource
estimates.
A comprehensive Pre-Feasibility Study (PFS) was completed by BGL
in February 2013 based on the development of a 7.5 million tonne
per annum open pit mining operation with a conventional
carbon-in-leach processing facility. Gold production of 1.95
million ounces was forecast over a mine life of 10.5 years. The
mineable ore was estimated at 79.1 million tonnes at 0.87g/t. BGL
completed further mine planning optimisation studies which resulted
in a larger ultimate pit size and increased the in-pit ore estimate
to 95 million tonnes at 0.84g/t.
RPM reviewed the mineralogical and metallurgical testwork
undertaken to support the adoption of a conventional gold
processing flowsheet and the PFS.
RPM concludes from the review that:
-- There are no ownership issues, native title claims or
potential mining restrictions on the tenements other than easements
including the Great Eastern Highway, water pipeline, national fibre
optic communication cable and Goldfields power line. These areas
are accounted for in the Mineral Resources Estimate and in the mine
design;
-- Environmental studies have shown that none of the potential
environmental impacts were considered to be high risk, with mainly
negligible and minor ratings given;
-- The Mineral Resources have been estimated in accordance with the JORC Code (2004);
-- The main mineralised lenses of the larger central
Bullabulling deposit are likely to see significant upgrade in
resource classification with infill drilling. Upgrading the
classification of resources in the smaller Gryphon/Edwards and
Gibraltar deposits (10Mt) may be more difficult due to the presence
of pegmatite intrusions in the former and the use of significant
historical drilling in the latter;
-- The mining studies and mining methods defined are appropriate
for this type and size of gold deposit;
-- The metallurgical testwork undertaken for the PFS was of a
suitable standard and degree of thoroughness for a conventional
carbon-in-leach (CIL) gold process plant, and the development of
capital and operating costs to a suitable level of accuracy;
and,
-- RPM's review of the mining study confirms that 17% of the
contained gold mining inventory based on Inferred Resources. On
this basis RPM concludes that the in-pit ore quantities cannot be
classified as an Ore Reserve under the JORC code. In addition, as
the VALMIN code requires any valuation based on a discounted cash
flow (DCF) approach to be based on Ore Reserves prepared in
accordance with the JORC Code, a DCF assessment cannot be used for
this work. The valuation therefore used a Market-based approach as
a primary valuation method and a Cost-based approach as a secondary
valuation method.
Technical Valuation
RPM initially reviewed the PFS and new mine plan to determine if
the Inferred Resources could be removed from the mine plan to allow
a valuation using a Discounted Cash Flow method. This was not
possible and hence the DCF method was not considered
appropriate.
Alternate valuation methodologies including a market-based
method, using comparable transactions, as the primary valuation
method, and a cross-check performed by a cost-based method, using
multiples of exploration expenditure have been adopted.
The selection of the comparable transactions appropriate to this
valuation was guided by the Bullabulling Gold Project, and included
deposits which are mineable by open cut methods, deposits with
existing Mineral Resources, projects with some level of feasibility
study, non-operating mines transactions, and preference to a
location in Western Australia. A total of fourteen transactions
were defined, twelve in the period 2012 to 2014, and two
transactions from 2010.
Based on the historical transaction prices of similar sized
projects, a range of A$ 34M to A$ 51M has been determined for the
Project with a preferred value of A$ 46M.
The reasonableness of this valuation range was checked using a
multiple of exploration expenditure with adjustments for future
prospectivity and resource classification. The range of values for
the multiples of exploration method range from A$43 M to A$58 M,
and provides confidence in the primary valuation.
RPM therefore estimates a fair market value as at May 2014 that
the Bullabulling Gold Project should change hands in an "arms
length" transaction between a willing buyer and a willing seller,
with each party acting knowledgeably and without compulsion to be
A$ 34 million to A$ 51 million, with a preferred value of A$ 46
million.
Philip Mitchell Steven Hinde
Executive Consultant Resource Development Manager - Metals
Table of Contents
Executive Summary iii
1. Introduction 1
1.1 Purpose of Report and Commissioning Entity. 1
1.2 Nature of Report 1
1.3 Capability and Independence. 1
1.4 Remuneration. 1
1.5 Site Inspections. 1
1.6 Limitations and Exclusions. 2
1.7 Expert and Specialists. 2
1.8 Materiality. 2
1.9 Terms. 2
1.10 Inherent Mining Risks. 2
1.11 References and Glossary of Terms. 3
2. Bullabulling Gold Project 4
2.1 Location, Background and Tenements. 4
2.1.1 Location 4
2.1.2 Background 5
2.1.3 Tenements 5
2.2 Geology and Resources. 8
2.3 Technical Review. 28
3. Valuation 29
3.1 Valuation Methodology. 29
3.1.1 Income Approach 29
3.1.2 Market Approach 29
3.1.3 Cost Approach 30
3.2 RPM's Valuation Approach. 30
3.3 Comparable Transactions Value. 31
3.3.1 Comparable Transactions Approach 31
3.3.2 Comparable Transactions 31
3.3.3 Comparable Transactions Results 34
3.3.4 Comparable Transactions Discussion 38
3.3.5 Comparable Transactions Valuation 38
3.4 Cost Approach Value. 38
3.4.1 Expenditure 39
3.4.2 Adjustment Factors 39
3.4.3 Cost Approach Valuation 40
3.5 Valuation Summary. 40
List of Tables
Table 2.1 - Tenement Details 5
Table 2.2 - Density Values Assigned to the Block Models 15
Table 2.3 - Summary of Mineral Resource Estimates - Bullabulling
16
Table 2.4 - Bullabulling September 2012 Mineral Resource
Estimate (0.5g/t Cut-off) 20
Table 2.5 - Edwards/Gryphon July 2013 Mineral Resource Estimate
(0.5g/t Cut-off) 20
Table 2.6 - Dicksons/Bonecrusher September 2013 Mineral Resource
Estimate (0.5g/t Cut-off) 21
Table 2.7 - Bullabulling Gold Project Mineral Resource Estimate
(0.5g/t Au Cut-off) 21
Table 2.8 - Gibraltar Deposit Mineral Resource Estimate (0.5g/t
Au Cut-off) 21
Table 3.1 - Recent Gold Project Transactions 35
Table 3.2 - Recent Gold Project Transactions Factored by
Resource Type 37
Table 3.3 - Prospectivity Enhancement Multiplier (PEM) (after
Lawrence, 2007) 39
Table 3.4 - Past Exploration and Warranted Future Expenditure
(A$M) 39
Table 3.5 - Prospectivity Enhancement Multiplier 40
Table 3.6 - Resource Adjustment 40
List of Figures
Figure 2.1 - Bullabulling Gold Project Location 4
Figure 2.2 - Bullabulling Gold Project Tenement Locations 6
Figure 2.3 - Domains of Eastern Goldfields Super Terrane
(Swager, 1989) 8
Figure 2.4 - Bullabulling Project Geology, Mines, Mineral
Occurrences & Gold Soil Contours >50ppb 9
Figure 2.5 - Bullabulling Trend (Snowden, 2013) 10
Figure 2.6 - Marker Units MUU and MNA (Plan 380mRL and Long
Section) 12
Figure 2.7 - Edwards/Gryphon Deposit, Model Classification
(Dykes not Shown) 22
Figure 2.8 - Edwards/Gryphon Deposit, Model Classification
(Dykes Shown) 22
Figure 2.9 - Edwards/Gryphon Deposit Oblique View Looking North,
Model Classification 23
Figure 2.10 - BGL Pit Design Across Existing Bacchus and Phoenix
Pits (Cyan Blocks = Mined) 23
Figure 2.11 - Backfill Coded Blocks Within BGL Pit Design 24
Figure 2.12 - Block Model Classification of Mineralised Lodes
Within BGL Pit Design (Bacchus/Phoenix) 24
Figure 2.13 - Block Model Classification - Dicksons/Bonecrusher
25
Figure 2.14 - Section Through BGL Pit Design Showing
Unclassified Material 26
Figure 2.15 - Barren Dyke Intersected Beneath the BGL Pit Design
26
Figure 2.16 - Possible Dyke Extension Through Base of the BGL
Design Pit 27
Figure 3.1 - Gold Project Transactions AUD/oz vs Total Resource
oz 34
Figure 3.2 - Gold Project Transactions AUD/oz vs Total Resource
oz (factored) 36
List of Appendices
Appendix A - Glossary of Terms
Appendix B - References
Appendix C - Experts and Specialists
1. Introduction
1.1 Purpose of Report and Commissioning Entity
BDO Corporate Finance (WA) Pty Ltd (BDO) were engaged by
Bullabulling Gold Limited (BGL) to prepare an Independent Expert's
Report for inclusion with a Target's Statement. The Target's
Statement will address, and BDO's Report will address, the offer by
Norton Gold Fields Limited to acquire 100% of the shares in BGL. It
is understood that RPM's report will form a part of BDO's report
which will provide an opinion to BGL shareholders and as such it
will be a public document.
RPM was requested to provide an independent opinion on the
market valuation of the Bullabulling Gold Project, not including
the other exploration assets held by BGL outside of this project.
RPM has been advised that BDO will rely on and refer to our
valuation in their report, and will append a copy of our report, or
a summary of our report to their report. Our report was to be
prepared in accordance with the 'Code for the Technical Assessment
and Valuation of Mineral and Petroleum Assets and Securities for
Independent Expert Report ("VALMIN Code 2005").
1.2 Nature of Report
RPM understands the purpose of the study is to produce a
valuation of the Client's primary asset. This asset is defined as
the Bullabulling Gold Project, which includes the Bullabulling
deposit and the Gibraltar deposit, and is defined in the tenement
list identified in Section 2.1.3 of this report. Land and external
buildings not directly related to the mine operations shall not be
assessed or valued.
This report has been prepared in accordance with the Code for
Technical Assessment and Valuation of Mineral and Petroleum Assets
and Securities for Independent Experts Reports (VALMIN Code,
2005).
1.3 Capability and Independence
RPM operates as an independent technical consultant providing
independent technical review, resource evaluation, mining
engineering and mine valuation services to the resources and
financial services industry.
This report was prepared on behalf of RPM by the signatory to
this report, assisted by the subject specialists whose
qualifications, experience and contribution to the report are set
out in Appendix C to this report.
None of RPM or its management, staff or sub-consultants who
contributed to this report has any interest in:
-- BGL, or its related parties, or
-- the asset reviewed, or
-- the outcomes that may arise from the valuation.
RPM have provided some services to BDO in the past and to BGL.
RPM conducted a fatal flaw review of the Mineral Resource estimate
and provided mining services to assist with the latter part of the
Pre-Feasibility Study for BGL.
1.4 Remuneration
RPM has been paid, and has agreed to be paid, professional fees
for its preparation of this report to the sum of $46,000.
1.5 Site Inspections
A site inspection of Bullabulling was not considered necessary
as this was carried out by Snowden who undertook the Mineral
Resource estimation for Bullabulling. A critical flaw review of
this resource estimation was undertaken in October 2012 by RPM
personnel with no significant issues found. A site visit was
conducted previously by Joe McDiarmid in 2012 as part of a mining
review in the latter stages of the Pre-Feasibility Study.
1.6 Limitations and Exclusions
This report specifically excludes all aspects of legal issues,
commercial and financing matters, land titles, agreements, and
Native Title excepting such aspects as may directly influence
technical, operational or cost issues and the valuation. RPM has
not undertaken an independent evaluation of gold pricing or
exchange rate forecasts.
RPM has relied on the veracity and accuracy of the data
presented by BGL, supplemented independent enquiry by RPM of the
project and of available public sources. In RPM's opinion, the
information provided by BGL was reasonable and nothing discovered
during the preparation of this report suggested that there was any
significant error or misrepresentation in respect of that
information. Information generated by third parties, consultants or
contractors to BGL has not been independently validated by RPM
through the generation of new work or new data. RPM has relied upon
the accuracy of this information for this report. RPM accepts no
liability for the accuracy or completeness of data and information
provided to it for the purposes of the preparation of this
report
The report has been produced by RPM in good faith using
information that is available to RPM as at the date stated on the
cover page. This report contains estimates and findings that may
materially change in the event that any of the information supplied
is inaccurate or materially changes in any way. This report cannot
be relied upon in any way if the information provided to RPM
changes. RPM is under no obligation to update the information
contained in the report at any time.
1.7 Expert and Specialists
The signatories to this report, Mr. Philip Mitchell, BE
(Mining), Grad Dip (Applied Finance), and Mr. Steven Hinde B.Sc.
Mine Geology, Masters (Mineral & Energy Economics) are Members
of the Australasian Institute of Mining and Metallurgy, and
employees of RungePincockMinarco. Mr. Mitchell and Mr. Hinde have
forty and thirty years' experience in the mining industry with
significant experience in technical reviews, audits and due
diligence assessments of mining assets. They have sufficient
experience which is relevant to the style of mineralization and
types of gold deposits under consideration, and to the activity
they is undertaking, to qualify them as Competent Persons (as
defined in the 2012 Edition of the JORC Code). Both Mr. Mitchell
and Mr. Hinde qualify as Experts under the Valmin Code (2005).
1.8 Materiality
RPM has adopted the Australian Society of Accountants' Standard
AASB 1031 which proposes that "the materiality" of information or
data can be assessed in terms of the extent to which its omission
or inclusion could lead to changes in total value:
-- Equal to or less than five percent - immaterial;
-- Between five and ten percent - discretionary; and
-- Equal to or greater than ten percent - material.
1.9 Terms
All years referred to in the report are Calendar Years unless
otherwise stated and all currency is Australian Dollars ("A$")
unless otherwise stated.
1.10 Inherent Mining Risks
Exploration and mining are carried out in an environment where
not all events are predictable.
The ability of any person to achieve forward-looking production
and economic targets is dependent on numerous factors that are
beyond RPM's control and that RPM cannot anticipate. These factors
include, but are not limited to, site-specific mining and
geological conditions, management and personnel capabilities,
availability of funding to properly operate and capitalize the
operation, variations in cost elements and market conditions,
developing and operating the mine in an efficient manner,
unforeseen changes in legislation and new industry developments.
Any of these factors may substantially alter the performance of any
mining operation.
Whilst an effective management team can identify the known risks
and take measures to manage and mitigate those risks, there is
still the possibility for unexpected and unpredictable events to
occur. It is not possible therefore to totally remove all risks or
state with certainty that an event that may have a material impact
on the operation of a gold mine, will not occur.
1.11 References and Glossary of Terms
A Glossary of Terms is listed in Appendix A and the documents
referred in this report are listed in Appendix B.
2. Bullabulling Gold Project
2.1 Location, Background and Tenements
2.1.1 Location
The Bullabulling gold project is located 25km west of Coolgardie
in Western Australia. The project comprises tenements around the
historic pits (Phoenix, Bacchus and Gibralter) and straddles the
Great Eastern Highway linking Coolgardie to Perth. The tenements to
the north and south of the project area have not been explored
sufficiently to have a material impact on the valuation assessment.
These tenements do not form part of the valuation.
2.1.2 Background
The Bullabulling gold project was acquired by Auzex Resources
Ltd and CCG Resources Plc from Jervois Mining Ltd in 2010 for
approximately A$2M in a 50:50 joint venture. In 2012 the joint
venturers merged to form Bullabulling Gold Limited (BGL).
At the time of purchase the project held Mineral Resources of
9.3Mt @ 1.4 g/t Au for 432k oz of gold which were estimated in
1998.
The project was mined by open cut in the 1990's up to 1998 with
processing by heap leaching and CIL processing of the overlying
lateritic mineralisation, oxidized, transitional and primary ores.
Jervois Mining Ltd acquired the project and produced 14k oz of gold
through a small heap leach operation. BGL has estimated that
historical production in total was 7.9Mt at 1.45 g/t Au for 371k oz
of gold.
The above history was taken from the Bullabulling
Pre-Feasibility document and none of the figures have been
independently verified by RPM.
2.1.3 Tenements
The Bullabulling gold project is defined by the following group
of 20 tenements shown in Table 2.1. The tenement documentation was
provided for review.
Table 2.1 - Tenement Details
Tenement Area Grant Expiry Holder Ownership
Name (Ha) Date Date
----------- ------- ----------- ----------- ---------- ----------
M 15/552 332.55 15/03/1991 20/03/2033 Resolute* 100%
----------- ------- ----------- ----------- ---------- ----------
M 15/282 218.15 22/03/1988 28/03/2030 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
M 15/503 807.40 4/02/1993 7/02/2035 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
M 15/554 601.20 15/03/1991 20/03/2033 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
M 15/1414 9.65 22/10/2002 24/10/2023 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5533 150.00 30/08/2011 29/08/2015 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5538 160.00 4/03/2011 3/03/2015 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5539 190.00 4/03/2011 3/03/2015 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5540 92.00 4/03/2011 3/03/2015 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5541 165.00 4/03/2011 3/03/2015 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5673 114.10 13/08/2012 12/08/2016 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5674 191.80 13/08/2012 12/08/2016 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5758 30.00 13/05/2013 12/05/2017 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
M 15/529 250.75 31/07/1990 2/08/2032 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
M 15/483 133.30 21/11/1989 27/11/2031 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5354 9.60 12/04/2010 11/04/2018 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5355 10.00 12/04/2010 11/04/2018 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5356 189.00 29/09/2010 28/09/2014 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5357 103.00 29/09/2010 28/09/2014 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
P 15/5358 103.00 29/09/2010 28/09/2014 BGL 100%
----------- ------- ----------- ----------- ---------- ----------
Note: Tenement name with M prefix refers to a mining lease and
with a P prefix refers to a prospecting licence.
The purchase of tenement M 15/552 was completed in November
2012, but the transfer of title is pending calculation of Stamp
Duty by WA Office of State Revenue. A Deed of Authorisation from
Resolute was provided to RPM as evidence of ownership of the
tenure.
There are a number of restrictions to the above tenements:
-- GEH, Main Roads WA 60 metres from centreline;
-- Water pipeline part of the GEH easement;
-- Fibre forms part of the easement for the 220KV Goldfields power line; and
-- 220KV goldfields power line easement 30 metres from centreline.
The restrictions are accounted for in the Mineral Resources and
in the mine design with separate open cuts.
A Heritage and Native Title study was undertaken by Kellie Hill
Consulting Pty Ltd (reference letter to BGL dated 24(th) November,
2012) indicating there were currently no registered native title
claim groups affecting any of the tenements. Additional work is
stated to be underway as part of the Definitive Feasibility
Study.
The following royalties exist on the project:
As part of the purchase agreement with Jervois Mining Ltd in
2010 the following royalties exist per ounce depending on the
ounces of gold produced from M 15/1414, M 15/282, M 15/503 and M
15/554:
-- A$30 per ounce for all ounces produced up to 400k oz; and,
-- A$20 per ounce for all ounces produced above 400k oz.
A royalty also exists with Australasian Resources Ltd of A$10
per ounce over all ounces produced over 100k oz from M 15/503.
Franco-Nevada hold a 1% royalty on gold produced at the gold
price obtained for all ounces produced on M 15/282, M 15/552 and M
15/554.
2.2 Geology and Resources
2.2.1 Approach
The RPM approach was to gather all available relevant data and
carry out an independent review at the RPM offices in Perth. Using
Microsoft Access and Excel the database and QAQC data was
interrogated and validated. Using Surpac software the wireframes,
solid interpretations and the block model were reviewed. All
relevant procedures were assessed using recommendations of the 2004
JORC code.
2.2.2 Geology and Mineralisation
The following summary of geology and mineralisation has been
taken from numerous BGL and Snowden reports.
2.2.2.1 Regional Geology
The Bullabulling Project is located on the western edge of the
Coolgardie Domain of the Kalgoorlie Terrane in the Yilgarn Craton
in Western Australia. The Coolgardie Domain is bounded by the
Zuleika Shear and the Ida Fault to the east and west respectively
and contains a greenstone sequence consisting of basalt,
ultramafic, felsic volcanic and sedimentary units intruded by
voluminous granites. The southern part of the Coolgardie Domain is
dominated by the Burra Granite that extends eastwards from the Ida
Fault. Other regional scale structures in the Coolgardie Domain are
the Kunanalling Shear Zone, a NW-striking high strain zone that
passes through the middle of the domain as well as numerous folds
with either NW-SE or E-W striking axial planes and a series of
thrusts that repeat the basalt-ultramafic stratigraphy. The gold
deposits that comprise the Bullabulling gold camp are clustered
around the SW corner of the Bali Monzogranite sandwiched between it
and the Burra Granite and define a trend that broadly follows the
margin of the intrusions. There is a strong correlation of
mineralised structures with a regionally extensive ultramafic
package that occurs at the base of the greenstone package.
2.2.2.2 Local Geology
The Project comprises a series of deposits in a corridor that
extends some 14 km along the south-western corner of the Bali
Monzogranite. The extent of gold deposits is clearly illustrated by
soil geochemical samples, from which distinct trends can be
defined, the North-South Bullabulling trend and the East-West
Gibraltar trend. Gold has been mined in open pits (Bacchus,
Phoenix, Hobbit and Dickson) mainly from the North-South-striking
segment with only one mine, Gibraltar, on the East-West striking
trends.
At Bullabulling there is a combination of primary structurally
controlled deposits hosted by deformed and altered greenstone units
and supergene deposits in weathered greenstone and laterite. There
is a strong correlation of mineralised structures with a regionally
extensive ultramafic package that occurs at the base of the
greenstone package.
At Gibraltar the hangingwall stratigraphy consists of a
metamorphosed ultramafic unit consisting of a tremolite
chlorite+/-antigorite+/-magnetite schist which is a correlative of
the metakomatiite found in the mine sequence of the Bullabulling
deposits. The footwall sequence consists of metamorphosed felsic
rocks which consist largely of quartz-feldspar-biotite gneiss with
intercalated hornblende rich amphibole horizons and
albite-quartz-biotite schists. The footwall protolith rocks are
thought to be felsic volcanics and or quartz feldspar
sandstones.
2.2.2.3 Mineralisation and Alteration
The Archaean basement hosting mineralisation at Bullabulling and
Gibraltar comprises a north south striking sequence of mafic,
ultramafic, felsic volcanics, and intercalated sedimentary rocks
which have been multiply deformed and extensively metamorphosed
from greenschist facies to amphibolite facies metamorphism. The
stratigraphy typically dips at 30deg to 40deg to the west and has
been cut by numerous pegmatite/aplite dykes and sills. Most of the
variation in dip is largely due to folding and to a lesser extent
faulting.
The deposits are defined by two distinct mineralised trends, the
N-S-striking Bullabulling Trend and the E-W- to NW-SE-striking
Gibraltar Trend. The Bullabulling Trend is the main focus and
contains the best exposures and most continuous zones of gold
mineralisation.
Bullabulling Trend
The Bullabulling trend contains gold mineralisation that can be
traced for approximately 9 km along strike.
The Bullabulling Project is a large tonnage low grade deposit
with gold hosted in a series of stacked north-south trending shears
which dip typically to the west at 30deg to 40deg. The mineralised
zones can be up to several hundred metres thick, and extend down
dip for up to 500m. The rocks which host the gold mineralisation
consist almost entirely of a monotonous continuous sequence of
amphibolites which sit on an ultramafic basement. The original host
rocks were a sequence of volcanics, komatiites and dolerites. The
composition of the amphibolite ranges from hornblende-rich to
quartz-rich and it has been extensively sheared.
The structural geology of the Bullabulling trend is
characterised by a network of ductile high strain zones and folds
which broadly parallel the stratigraphy, run the full strike length
of the deposit and are the consequence of multiple deformation
events. These structures have allowed fluid flow into the
amphibolite sequence resulting in the deposition and remobilisation
of gold.
The gold mineralisation at Bullabulling consists of three
styles:
-- Laterite-hosted gold mineralisation, which forms scattered
blankets of mineralisation that are typically between 1 and 3 m
thick with an average grade of about 0.5 g/t Au. The strata
immediately below the laterite is typically depleted of gold, this
zone can extend for up to 40 m.
-- Small pods of non-laterite supergene mineralisation.
Historical mining of these deposits has yielded very small tonnages
of higher grade material, usually in excess of 2 g/t Au.
-- Structurally controlled primary gold mineralisation, which is
hosted within shear zones. These zones are associated with
metasomatic calc/silicate assemblages containing sulphides. The
sulphides are a good indication of mineralisation; however they
often occur as very fine particles that are not evident to the
naked eye. The tenor of the mineralisation typically ranges from
0.1 to 10 g/t Au with an average grade of around 1 g/t Au.
BGL geologists have recognised a well-defined marker unit of
ultamafic schist of tremolite (actinolite)-Mg
chlorite+/-serpentine+/magnetite composition which is considered a
metakomatiite. The unit exhibits a high magnetic susceptibility and
a high background Niton XRF signature (+1000ppm Ni). BGL has
informally named the unit as the Main Ultramafic Unit (MUU). The
MUU can be traced the full length of the Bullabulling Trend.
In addition, BGL have defined an actinolite-rich amphibolite
with a distinctive moderate Niton XRF signature which forms a
moderately well-defined marker unit from Bacchus East to Phoenix
and is assumed to be a high Mg komatiite basalt (Figure 2.6). The
unit has been informally named the Moderate Nickel Amphibolite
(MNA) and varies in thickness from a few metres to tens of metres
and lies 50m to 70m below the MUU.
Multiple stacked lodes exhibit moderate to strong continuity in
the N-S aligned portion of the Bullabulling trend over 5.55 km from
Bacchus to Bonecrusher over a true thickness of 270 m extending 500
m across strike on the widest section. The lower contact of the MNA
delimits the lower bounds of the lode system and the upper contact
of the MUU is proximal to the upper lodes. In the southern
Bullabulling trend which varies from N-S to NW-SE in strike the
lodes are discontinuous occurring above and sub-parallel to the
upper contact of the MUU over a strike extent of 3.5 km.
Gibraltar Trend
The geology of the Gibraltar deposit comprises a hanging wall
ultramafic unit overlying intercalated sequence of amphibolite,
minor ultramafic and felsic schist in the footwall. The ultramafic
comprises a variably serpentised, magnetite-rich tremolite schist.
Amphibolite is similar to rocks found at Bullabulling comprising
amphibolite dominant gradational to felsic dominant banded
amphibole-quartz-feldspar-biotite schist. The footwall felsic
schist is the main host to mineralisation at Gibraltar. The mine
sequence dips grossly at 30deg to 60deg but variations to this
orientation are seen in the Gibraltar pit with sub-horizontal dips
in the west wall which steepen to 65deg in the south west.
The gold mineralisation is focussed in a series of stacked bands
along the contact between the footwall and hanging wall horizons
and is largely confined to a well foliated quartz feldspar biotite
unit. The entire sequence has been intruded by a number of late
stage felsic pegmatite dykes which are not mineralised.
The Bullabulling Gold deposit is located in the well-established
gold mining district of Coolgardie in Western Australia, The
geology outlined above is typical of the area and the mineral
deposition, geology and structure of the project described very
well. The background knowledge of the area has led to a good
understanding of the deposit geology.
2.2.3 Database
2.2.3.1 Drilling
The BGL database includes records for 4,586 historical drill
holes; 48 diamond core and 4,538 reverse circulation (RC) drill
holes. BGL have completed numerous drill programs since 2010 with
the primary focus on upgrading and defining new resources along the
Bullabulling and Gibraltar mineralised trends and for providing
material for metallurgical test work. Drill programs have included
RC, diamond, and air core (AC drilling). Rotary air blast (RAB) and
AC drilling data has been excluded from the resource modelling work
as the sample quality achieved using these methods is in general
terms often poor. Snowden did not complete a database audit but
carried out limited validation checks. BGL took responsibility for
the quality of drill hole information provided for the
estimates.
2.2.4 Survey
2.2.4.1 Drill Hole Collars
Little information exists for historical data with regard to
quality control and assurance practices, down hole survey, drill
company or method. The historical database contains 14,326 survey
records for 4,586 drill holes. Recent drill holes by BGL have been
surveyed by Fugro Spatial Solutions Pty Ltd (Fugro) of Kalgoorlie.
Drill holes have all been located in AMG Zone 51 co-ordinates.
2.2.4.2 Downhole Surveys
Only 105 historical holes have down hole surveys completed using
single shot camera instruments. The remaining holes only had dip
and bearing data for the collar location. Snowden analysed the hole
deviation and concluded that the deviation was insignificant and
that it did not represent a fatal flaw in terms of using the data
for the resource estimate. RPM checked this visually in 2012 using
Surpac software and agreed with Snowden.
BGL surveyed all holes drilled from November 2010 to February
2011 every 30m using a single shot tool. The results proved to be
inconsistent in some cases (probably due to host rocks) and
Gyroscopic surveying was started in February 2011 using Gyro
Australia (Gyro) of Kalgoorlie. A program of re-surveying old BGL
holes was undertaken with the result that all but 13 drill holes
had some form of down hole survey.
The collar locations and down hole survey are considered
suitable for Mineral Resource estimation. BGL have made every
effort to ensure the survey is carried out to industry
standards.
2.2.4.3 Topography
Two recent surveys exist over the Bullabulling Prospect;
-- A detailed survey compiled by Fugro in 2008 which Snowden
note is accurate and covers the bulk of the mineralised trend but
does not cover all the BGL tenements,
-- An aerial survey compiled as part of a tenement scale
magnetics survey in 2011. Snowden note that this surface is known
to have problems with the Z co-ordinates which are on average 5m
too high.
Snowden compiled a topographic surface using a combination of
both surveys with the 2008 Fugro survey covering the bulk of
mineralisation. Areas around the edge of the 2008 survey were
expanded using the 2011 survey after lowering the RL values
globally by 5m. Snowden note that, in terms of the Mineral Resource
estimate, with the exception of two small pods of classified
mineralisation south of 6,565,000mN, the classified resource is all
located beneath the more accurate Fugro survey.
RPM agrees with Snowden in concluding that the impact of the
merged topography surface on the Mineral Resource estimate is
negligible.
2.2.5 Logging, Sampling and Assaying
2.2.5.1 Geological Logging
BGL have adopted industry standard operating procedures and
practices since 2010. All logging is conducted using pre-installed
software on field laptops and geological descriptions use
pre-defined logging codes that include lithology, weathering,
grainsize, and textural descriptions.
2.2.5.2 RC Drilling
1 m RC samples are collected from a cone splitter for logging
and assay with the course reject weighed.
Diamond core is photographed and logged, and half core sampled
by diamond saw on 1 m intervals, with a minimum length of 0.3 m.
Bulk density is estimated from 10cm long samples using the water
displacement method.
Logging and sampling has been carried out to acceptable
standards for Mineral Resource estimation.
2.2.5.3 Geochemical Analyses
Snowden report that the historical gold grades were analysed
using a mixture of analytical preparation methods followed by an
atomic absorption spectroscopy ("AAS") finish. In some instances
more than one method was used. The different methods were flagged
in the drill hole file using field called METHOD. The three methods
used were:
1. Fire Assay and Acid Digest;
2. Acid Digest only; and,
3. Bottle Roll Analysis.
Where two or more results were available for a particular
sample, the result with the lowest METHOD value was used in the
estimate. With the exception of 8 bottle roll results, all of the
other results were derived using the other two methods.
For recent BGL drilling, all sample preparation and analysis was
undertaken at the ALS laboratory in Kalgoorlie. At the laboratory
the samples were oven dried at 80 for 24 hours, then weighed and
pulverised in a LM5 pulveriser. If the primary sample was larger
than 3.4kg it was split prior to pulverising. A 50g charge was
collected and subjected to Fire Assay with an Aqua-Regia digest
finish. The solution was then analysed for gold using AAS.
The sampling, sample preparation and subsequent analysis were
carried out to industry standards and the resultant data is
considered to be acceptable to be used as a basis for Mineral
Resource estimation.
2.2.6 Quality Assurance (QAQC)
No historical QAQC data is available. BGL implemented SOP
documentation at the start of the exploration programmes and these
were reviewed at various stages during the 2010/2011 drill
programmes. Snowden considered the documents to be of good
standard, and RPM agrees after having viewed the documents.
Snowden concluded that the BGL QAQC practices were in line with
industry practice and that whilst some issues had been identified
over the last three years, the results were acceptable from a
Mineral Resource estimate point of view, and BGL had addressed
issues as they became apparent.
BGL have comprehensive SOP in place and continue to monitor QAQC
data on a batch by batch basis with an emphasis on duplicate
sampling. RPM agrees with Snowden in that the results are
acceptable.
2.2.7 Bulk Density
BGL conducted 343 dry bulk density measurements using the water
displacement method. The samples used for these tests were derived
as follows:
-- 213 half and full diamond core samples collected by BGL since November 2010.
-- 56 rock samples collected in the Bacchus and Phoenix pit areas by BGL in 2012.
-- 74 core derived measurements collected by Samantha Gold NL
(Samantha, 1995). Samantha classified their oxidation data using
bands of oxidation similar to those used by Snowden.
No density data was collected for the pegmatite or the laterite.
Snowden elected to assign fixed density values to the model using
the following criteria:
-- Mean values were assigned to the model for the amphibolite/pegmatite strata.
-- BGL provided the density for the laterite based on work by Jervois Mining NL.
-- No density information exists for the back fill material so a
density of 1.8 was applied based on a generic measurement for dry
gravel (Berkman, D.A. - Field geologist"s manual, 1989).
The density values used in the models are summarised in Table
2.2.
Table 2.2 - Density Values Assigned to the Block Models
Material Assigned Bulk Density Number of
----------------------------------
t/m(3) Measurements
---------------------------------- ---------------------- -------------
Fill 1.80 N/A
Laterite 1.80 N/A
Oxidised Amphibolite 1.75 35
Moderately Weathered Amphibolite 2.30 19
Weakly Weathered Amphibolite 2.55 15
Fresh Amphibolite 2.91 159
---------------------------------- ---------------------- -------------
2.2.8 Resources
2.2.8.1 Previous Mineral Resource Estimates
A number of Mineral Resource estimates have been completed at
the Bullabulling Project. In August 2010, CSA Global Pty Ltd (CSA)
was engaged by Auzex to calculate a JORC 2004 compliant estimate
which was based on historic drill data. In the same year, Snowden
Mining Industry Consultants (Snowden) were engaged to advise on
requirements to validate historical drill data, and to improve the
classification of the current Mineral Resources. In August 2011,
Snowden reported a Mineral Resource estimate which incorporated
recent drill holes. A revised estimate was reported by Snowden in
March 2012 incorporating drill results between June 2010 and
December 2011. A further revised estimate was reported by Snowden
in September 2012 incorporating data from a 3,800m drill program
completed in July 2012. Two revised estimates were completed by
Snowden during 2013. The first revision was reported in July 2013
and incorporated the results of a 37 drill hole program conducted
toward the south of the Bullabulling Trend from the Edwards deposit
to the Gryphon deposit. The existing 2012 model was updated south
of 6,564,800mN only. The second revision was reported by Snowden in
September 2013 and included an update to the existing model to the
north of 6,569,000mN as a result of eight new drill holes completed
by BGL designed to delineate extensions to the known mineralisation
from the Dicksons to Bonecrusher deposits.
Snowden completed a Mineral Resource estimate for the Gibraltar
deposit in September 2011 based on historic RC and diamond
drilling. The most recent revised estimate was reported by Snowden
in September 2013 incorporating new drilling completed by BGL.
A summary of the Mineral Resource estimates is shown in Table
2.3.
In October 2012, RPM completed a 'Fatal Flaw Analysis' of the
September 2012 Mineral Resource estimate completed by Snowden. Two
revisions to the 2012 estimate were completed by Snowden during
2013, including an update to the Gibraltar deposit. Since 2010 the
Mineral Resource estimates completed for the Bullabulling Project
have been conducted by well-regarded geological consultant groups
using industry standard estimation techniques. The Mineral Resource
estimates have been reported in compliance with the 2004 Edition of
the 'Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves' prepared by the Joint Ore
Reserves Committee of The Australasian Institute of Mining and
Metallurgy, Australian Geoscientists and Minerals Council of
Australia (The JORC Code 2004). RPM believes that the estimates are
a valid indication of Mineral Resources estimated using data
available at the time.
Table 2.3 - Summary of Mineral Resource Estimates -
Bullabulling
Estimation Date Reporting Cut-off Mineralisation Classification Tonnes Au
Method Reported Au (ppm) Type (Mt) (ppm)
-------------- ---------------- ------------------ --------------- --------------- ------- ------
Bullabulling Trend
-------------------------------------------------------------------------------------------------------
CSA (OK) August 2010 0.7 Amphibolite Inferred 41.52 1.48
-------------- ---------------- ------------------ --------------- --------------- ------- ------
Snowden August 2011 0.5 Laterite Inferred 1.6 0.89
---------------- ------------------
Amphibolite Indicated 21.3 1.01
------------------------------- ------------------ ---------------
(MIK) Inferred 50.9 1.03
-------------------------------- ------------------ --------------- --------------- ------- ------
Snowden March 2012 0.5 Laterite Inferred 1.7 0.90
---------------- ------------------
Amphibolite Indicated 72.1 0.92
------------------------------- ------------------ ---------------
(OK and MIK) Inferred 29 1.08
-------------------------------- ------------------ --------------- --------------- ------- ------
Snowden September 2012 0.5 Laterite Inferred 1.7 0.89
---------------- ------------------
Amphibolite Indicated 71.7 0.96
------------------------------- ------------------ ---------------
(OK and MIK) Inferred 31.1 1.07
-------------------------------- ------------------ --------------- --------------- ------- ------
Snowden September 2013 0.5 Laterite Inferred 1.7 0.89
---------------- ------------------
Amphibolite Indicated 72.4 0.98
------------------------------- ------------------ ---------------
(OK and MIK) Inferred 35 1.12
-------------------------------- ------------------ --------------- --------------- ------- ------
Gibraltar Deposit
-------------------------------------------------------------------------------------------------------
Snowden September 2011 0.5 Amphibolite Inferred 2.8 1.00
---------------- ------------------ --------------- --------------- ------- ------
(MIK)
-------------------------------- ------------------ --------------- --------------- ------- ------
Snowden September 2013 0.5 Amphibolite Inferred 4.9 1.07
---------------- ------------------ --------------- --------------- ------- ------
(MIK)
-------------------------------- ------------------ --------------- --------------- ------- ------
2.2.8.2 Statistical Analysis
The database consists of a combination of data from two distinct
sources, "old" data, relating to data collected prior to the
involvement of BGL, and "newer" data relating to data collected by
BGL.
The "old" data has some issues relating to the lack of specific
data collected and the lack of QAQC associated with the samples,
however BGL have attempted to obviate the issues by post database
checking in various areas. No significant issues arose from this
checking and this, while not actually validating the "old" data
does mitigate the probability of errors.
The "new" data has generally been collected and validated to
acceptable standards.
2.2.8.3 Geological Modelling
The most recent Mineral Resource estimate was completed by
Snowden for the Bullabulling Project in September 2012. During
2013, two further updates were completed at two areas along the
Bullabulling Trend; in July 2013 the model was updated south of
section 6,564,800mN, and in September 2013 the model was updated
north of section 6,569,000mN. In each case, Snowden reported the
updated models as separate entities. BGL combined the models into a
single model covering the entire Bullabulling Trend. RPM completed
a Fatal Flaw review of the September 2012 block model and concluded
that the modelling had been completed to a high standard.
During 2013, a revised estimate was completed by Snowden for the
Gibraltar deposit.
The Snowden Bullabulling models were interpreted based on the
following approach.
-- Enriched laterite layers were interpreted based on a 0.1g/t
Au cut-off and wireframed into solids.
-- Amphibolite hosted mineralisation was interpreted using a
0.1g/t Au cut-off to create separate solid wireframes.
-- Pegmatite dykes were wireframed into solids based on
interpretations of geological logging information.
-- Oxidation was modelled based on surfaces provided by BGL.
-- Snowden observed that there was no lithological or
distinctive statistical trends such as inflexions in log
probability plots which could be used to distinguish mineralised
and un-mineralised strata. This characteristic is largely the
result of the low tenor of the mineralisation. The 0.1g/t Au
threshold was used to delimit mineralised strata from large areas
containing little or no detectable gold.
-- Snowden made note that the amphibolite mineralisation in
particular can be quite variable ranging from stockwork style
mineralisation to stacked, clearly defined mineralisation
lenses.
-- Snowden concluded it was not practical to model every
discrete zone of mineralisation or band of internal waste. The
wireframes were compiled to delineate the main zones of
mineralisation based on volume. The regions outside the mineralised
lodes were also estimated (unconstrained).
-- Domains for rock types were assigned for backfill, laterite,
Amphibolite, and Pegmatite dykes.
The Gibraltar model was interpreted based on the following
approach.
-- The schist hosted mineralisation was interpreted using a
nominal 0.1g/t Au cut-off yielding 9 wireframe solids. The regions
outside the mineralisation wireframes were also estimated
(unconstrained). This approach is similar to that used at the
nearby Bullabulling mineralisation however almost all the
economically significant mineralisation has been delineated using
the wireframe solids.
-- A total of 10 pegmatite dykes were modelled (wireframe
solids) based on a combination of the geological logging (Historic
and BGL) and the gold grades. Unsampled regions were often the
result of visible dyke strata not being sampled although this is
not always the case.
-- Oxidation was modelled using three DTM surfaces and was based
on the BGL geological logging. The historic oxidation logging was
used as a guide only as it was found to be inconsistent.
RPM concludes that the modelling methodology applied to the
Bullabulling and Gibralter deposits is of a high standard and is
suitable and relevant to the type of deposit and the quality and
quantity of data available.
2.2.8.4 Block Modelling
The 3D block models were constructed in Datamine Studio for
Mineral Resource estimation purposes. Snowden compiled a revised
volume model for the Bullabulling Trend in September 2012. In 2013
Snowden reported two revised estimates for Bullabulling; one in the
north at the Dicksons/Bonecrusher deposits north of 6,569,000mN and
the other in the south at the Edwards/Gryphon deposits south of
6,564,800mN. Separate block models were created at each location.
In all cases the parent block size was set to 10m (X), 25m (Y) and
4m (Z) with sub-cells to 2.5m by 6.25m by 1m. Snowden note that the
selected parent cell dimensions were larger than would have been
used if a highly selective mining method was being considered.
The Gibraltar model used a parent block size of 10m (X) by 10m
(Y) by 4m (Z) with sub-cells to 2.5m by 2.5m by 0.5m. BGL requested
that Snowden estimate a small area west of the existing Gibraltar
pit using a 5m by 5m by 2m parent cell size for the purpose of
mining selectivity studies in an area defined by drilling on a 20m
by 20m spacing.
RPM concludes that the block sizes used by Snowden are
appropriate.
2.2.8.5 Variography
Variograms were generated by Snowden to assess the grade
continuity of the mineralisation as inputs to the kriging algorithm
used to interpolate grades. Snowden Visor software was used to
generate and model the variograms.
The laterite mineralisation was assumed to be flat and two
dimensional while the amphibolite mineralisation dips at about 30
to the west and is subject to open folding along the strike of the
deposit. The non-laterite supergene mineralisation is too small and
the data was too sparse to allow it to be treated separately from
the amphibolite.
Snowden compiled variograms to suit the two main styles of
mineralisation using the following approach:
-- Snowden used the "Datamine Unfold" process to address the
impact of the variable dip on the modelling of variograms and the
estimation of grades within the amphibolite. Unfolding improves the
grade estimation process as it transforms the sample coordinates
into their original planar state. This allows variogram analysis
and grade estimation to be carried out using planar coordinates,
which are then converted back to the folded (local) coordinate
system. The unfolding process results in more correctly aligned
samples being available for variogram modelling and grade
estimation than would have been the case if non-planar resource
estimation methods were used.
-- The laterites were modelled using a conventional approach
using the mine grid coordinates and sample values to model the
grade continuity as a function of distance and direction.
In terms of grade estimation at Bullabulling the domains fell
into three general categories:
-- Domains with a CV or 1.5 or less which could be estimated
with ordinary block kriging and no top-cutting.
-- Domains with a CV in excess of 1.5 but where top cutting only
a few values could make the data amenable to ordinary kriging with
no significant loss of contained metal.
-- Strongly skewed domains with multiple statistical populations
where the presence of significant high grade component means that
multiple indicator kriging (MIK) is the preferred grade estimation
method to avoid understating the gold content.
Gold grades were estimated based on amphibolite and laterite
domains.
2.2.8.6 Top-Cuts
The presence of relatively high CV values for gold in some of
the domains required top-cuts to be applied to prevent
overestimation and smearing of the high values. Top-cutting
involved resetting the grades which exceed a top-cut value to the
top-cut value on a domain by domain basis.
Top-cutting is only material to grade estimates compiled using
ordinary kriging and is not relevant for MIK. Both methods were
used to compile the Bullabulling estimate so the top-cuts were
applied to some domains and not to others.
Top-cut values for each relevant domain were defined by an
analysis of log-probability plots and histograms. The impact of the
selected top-cut threshold was assessed based on the CV and the
number of samples that were cut.
2.2.8.7 Grade Estimation
Gold grades were estimated into the Bullabulling and Gibraltar
models using a combination of ordinary kriging (OK) and multiple
indicator kriging (MIK) interpolation techniques. Grades were
estimated into laterite and amphibolite domains. Datamine Studio
was used for the modelling and the POSTIK process in GSLIB suite of
software was used for post-processing from Datamine to enable order
relation corrections to be applied, and to allow the skewed tails
of the gold grade populations to be modelled and used as part of
the estimation process. Where amphibolite domains contained too few
samples to merit estimating the block grades, global means were
assigned to the blocks. The Datamine Unfold process was used to
address the variable dip and strike of the mineralisation.
The search ellipse parameters were derived from the variogram
models. The selection of samples was constrained to a maximum of
seven samples (six at Gryphon/Edwards) from any single drill hole
when estimating each block grade. This constraint was applied to
stop the individual block estimates being based on only a small
number of nearby holes. Barren pegmatite dykes were assigned a
grade of 0.02g/t (0.01g/t at Gibraltar).
Snowden note that as a result of the distribution and density of
the attribute values within each of the domains it was not feasible
to use a single search ellipse for the estimation process, as
within a significant proportion of cells in the mineralised domains
many of the grade fields would not get an estimated value. To
ensure that each cell within the mineralisation domains included a
value the following approach was used:
-- In poorly drilled areas dynamic search volumes were used to
help with the grade interpolation process for the mineralised
domains. A single search pass was used when estimating grades into
the host rocks.
-- For cells located inside the mineralisation wireframes where
grades could not be estimated, mean values were assigned.
RPM is of the opinion that the Mineral Resource modelling
carried out by Snowden is of a high standard and is suitable and
relevant to the type of deposit and the quality and quantity of the
data available. The use of OK interpolation techniques for the
majority of the domains is a sound and acceptable practice and the
use of MIK interpolation techniques in areas where the data in the
domains was significantly skewed, indicating an asymmetric
distribution, is also seen as valid.
2.2.8.8 Mineral Resource Classification
The Bullabulling block model was classified in accordance with
the JORC Code (JORC, 2004). Model blocks were flagged as Indicated,
Inferred or unclassified based on the following guidelines:
-- Results from QAQC analysis.
-- Defined depth of mineralisation.
-- All laterite horizons were flagged as Inferred as the
mineralisation is based on the results from the historical
drilling.
-- Areas of fill or mined areas were marked as unclassified.
-- Indicated Resources (amphibolite) were flagged in the model
using closed wireframe solids. The criteria used were a minimum
drill spacing of 75m along strike and 35m across strike. The down
dip and along strike extents of the Indicated Resource
classification were projected 35m past the last drill hole. In some
areas where there was a significant amount of missing grade data
the material was classified as Inferred Resource.
-- Inferred Resources (amphibolite) were flagged in the model
using simple wireframe solids to delimit mineralisation within
about 50m of the Indicated Resource wireframe solids.
-- In some areas of deeper drilling the Inferred wireframes were
expanded to incorporate the additional data.
-- In areas of wider spaced drilling, Inferred Resources were
defined where two or more consecutive sections had three or more
drill holes delineating the mineralisation. The classification was
projected 50m along strike and down dip from the last drill
hole.
-- Any blocks not flagged as Indicated Resource or Inferred
Resource as defined above were flagged as unclassified.
The Gibraltar model was classified as Inferred Mineral Resource
primarily due to the quality of the data used in the estimate. The
majority of drill holes are historic and have no supporting QAQC.
Snowden was unable to complete a meaningful comparison of the
historic and recent drilling as most of the recent BGL drilling was
located on the edges of the historic drilling. In addition, no
density data has been recorded at the deposit. The assigned values
were based on those adopted at the Bullabulling deposit.
RPM agrees with the Mineral Resource classification assigned to
the Bullabulling block model. The Inferred material is in general
at the down dip extensions of the amphibolite lodes where the
wireframe interpretations have been extended past the last drill
intercepts. The classification of the laterite material is
reflected in the material being largely defined by historical
drilling.
RPM notes that a substantial portion of the material within the
BGL optimised pit design at the Gryphon/Edwards deposits has been
classified as Inferred by Snowden. This material occurs through the
central portion of the pit design where the amphibolite lodes are
defined by wide spaced historical drilling (150m along strike). BGL
have planned a drill program to infill the area with the aim of
upgrading the material to Indicated status. Snowden have reviewed
the planned drill program and have concluded that the program
should produce the desired upgrade taking into account the usual
risks of potential poor grades, pinch-outs, or unexpected dyke
swarms). RPM has viewed the drill locations of the proposed drill
program and agree with Snowden.
2.2.8.9 Reporting
Pit optimisation studies conducted by BGL in 2010 on the
Bullabulling Project indicated marginal operating costs at between
0.3g/t and 0.4g/t gold grades, given the bulk mining approach. BGL
selected a reporting cut-off grade of 0.5g/t Au as a more
conservative threshold.
The Snowden September 2012 Mineral Resource for Bullabulling was
reported in accordance with the JORC code (JORC, 2004) using a
0.5g/t Au cut-off and is shown in Table 2.4.
Table 2.4 - Bullabulling September 2012 Mineral Resource
Estimate (0.5g/t Cut-off)
Mineralisation Classification Tonnes Au
Type Mt g/t
Laterite Inferred 1.7 0.89
---------------- ---------------- ------- -----
Amphibolite Indicated 71.7 0.96
----------------
Inferred 31.1 1.07
--------------------------------- ------- -----
The southern deposits along the Bullabulling Trend (Edwards and
Gryphon) were estimated in July 2013 by Snowden upon completion of
a BGL drilling program through the area to determine continuity of
mineralisation between the two deposits. This Mineral Resource was
reported in accordance with the JORC code (JORC, 2004) using a
0.5g/t Au cut-off and is shown in Table 2.5.
Table 2.5 - Edwards/Gryphon July 2013 Mineral Resource Estimate
(0.5g/t Cut-off)
Mineralisation Classification Tonnes Au
Type Mt g/t
Amphibolite Indicated 2.1 1.60
----------------
Inferred 5.2 1.32
--------------------------------- ------- -----
In September 2013, Snowden estimated a separate model for the
northern deposits along the Bullabulling Trend (Dicksons and
Bonecrusher) following an eight hole drill program completed by
BGL. The Mineral Resource was reported in accordance with the JORC
code (JORC, 2004) using a 0.5g/t Au cut-off and is shown in Table
2.6.
Table 2.6 - Dicksons/Bonecrusher September 2013 Mineral Resource
Estimate (0.5g/t Cut-off)
Mineralisation Classification Tonnes Au
Type Mt g/t
Laterite Inferred 1.5 0.91
---------------- ---------------- ------- -----
Amphibolite Indicated 14.3 0.86
----------------
Inferred 9.5 1.10
--------------------------------- ------- -----
The entire Bullabulling Trend has been reported as a single
model by BGL in their 2014 Annual Report, incorporating the recent
updated models completed in 2013 (Table 2.7).
Table 2.7 - Bullabulling Gold Project Mineral Resource Estimate
(0.5g/t Au Cut-off)
Deposit Classification Tonnes Au Ounces
-----------------------
Mt g/t
-----------------------
Bullabulling Laterite Inferred 1.7 0.89 48,000
----------------------- ---------------- ------- ----- ----------
Bullabulling Primary Indicated 72.4 0.98 2,279,000
-----------------------
Inferred 35.0 1.12 1,257,000
---------------------------------------- ------- ----- ----------
Bullabulling Total Ind + Inf 109.1 1.02 3,584,000
----------------------- ---------------- ------- ----- ----------
The Gibraltar September 2013 Mineral Resource was reported in
accordance with the JORC code (JORC, 2004) using a 0.5g/t Au
cut-off and is shown in Table 2.8.
Table 2.8 - Gibraltar Deposit Mineral Resource Estimate (0.5g/t
Au Cut-off)
Deposit Classification Tonnes Au Ounces
----------- ---------------- --------
Mt g/t
----------- ---------------- ------- ----- --------
Gibraltar Inferred 4.9 1.07 169,000
----------- ---------------- ------- ----- --------
RPM was able to report the same figures as those tabulated above
from the supplied block models. The reporting cut-off is
appropriate for the style of mineralisation and planned bulk mining
operation. The Mineral Resource has been estimated using standard
procedures that can be reasonably applied to this type and style of
orebody. The statistical and geostatistical analyses were carried
out to normal standards and the resulting estimation and
classification strategies were applied in a reasonable manner. It
is RPM's opinion that the resultant Mineral Resource figures are a
reasonable interpretation of the orebody based on the level and
quality of data available.
2.2.9 Geological and Resource Risk
There is a low risk associated with the geology of the
Bullabulling deposit. The mineral deposition, geology and structure
of the project is well understood. The Bullabulling trend contains
gold mineralisation that can be traced for approximately 9 km along
strike. The Bullabulling Project is a large tonnage low grade
deposit with gold hosted in a series of stacked north-south
trending shears which dip typically to the west at 30deg to 40deg.
The mineralised zones can be up to several hundred metres thick,
and extend down dip for up to 500m. The rocks which host the gold
mineralisation consist almost entirely of a monotonous continuous
sequence of amphibolites which sit on an ultramafic basement. Gold
mineralisation at Bullabulling is hosted within laterite 'blankets
typically between 1m to 3m thick, and structurally controlled shear
hosted, primary mineralisation.
There is a low risk associated with the Mineral Resource at
Bullabulling. The current Mineral Resource model defines an
estimate that is appropriate to the quantity and quality of the
data provided. The estimate has been conducted by industry
recognised consultants using appropriate estimation techniques.
RPM note that a substantial portion of the southern area of the
model (Gryphon/Edwards) has material classified as Inferred Mineral
Resource within the BGL optimised pit design. RPM has estimated
this material to be in the order of 2Mt at a grade of 1.6g/t Au
using a 0.5g/t Au cut-off. BGL have designed a drill program to
improve the confidence level across these deposits which are
currently defined by wide spaced historical drilling. There is a
moderate risk that mineralisation through this area may pinch out
or be intersected by barren pegmatite dykes resulting in less
tonnage being converted to the Indicated category. Pegmatite dykes
have been interpreted throughout this deposit area with swarms of
dykes occurring predominantly on the footwall, and within the BGL
pit design to the north
The majority of the material within the BGL Pit design
encompassing the existing Bacchus and Phoenix pits, has been
classified as Indicated Mineral Resource. All barren pegmatites and
backfill material has been unclassified. RPM reports 2.6Mt of
backfill within the existing pit design from the supplied block
model. The Inferred material occurs at the southern end of the pit,
and at the down dip extensions to the main lodes (excluding
laterite material). Given the width and continuity of
mineralisation through this area it is highly likely that infill
drilling would convert all the Inferred material within the current
pit design to Indicated.
The northern most deposits along the Bullabulling Trend are
Dicksons and Bonecrusher.
Almost all the unclassified material within the BGL pit design
is assigned to barren pegmatite dykes with the exception of a small
area in the south where the down dip extent of the primary lodes
has been unclassified.. This area has been classified accordingly
due to the lack of deep infill drilling through this zone.
The continuity of the lodes is strong in this area and pegmatite
dykes less commonly intersected in the north which would lend
confidence to this material being upgraded once confirmatory
drilling is carried out. However, 355m north of this section where
deep drilling has been completed, a pegmatite dyke has been
intersected. A dyke is again intersected further north. RPM
suggests that the dyke may be continuous through this zone but deep
drilling is needed to confirm this. There is the possibility that
if the dyke does indeed continue, then the current Inferred
material at the base of the design pit may be truncated by this
feature.
.
The remainder of the Inferred material within the northern pits
is likely to be upgraded to Indicated upon completion of suitable
infill drill programs as current drilling has not intersected dykes
and lode continuity is good.
2.3 Technical Review
A high level technical review was undertaken for the mining,
processing and environmental areas of the Bullabulling Gold
Project. RPM had previously conducted a site visit on the 7th
September 2012 as part of the Pre-Feasibility Study (PFS) and as
the only material change since has been a recent update to the
Mineral Resource Estimate and new mining study, no further site
inspection was considered necessary.
The Project is currently in an undeveloped or "greenfield's"
state with several small scale historical open pits on the mining
lease from intermittent operations by previous owners between 1995
and 2002. Extensive geological exploration has taken place in
recent years supported by mine planning and metallurgical testwork
with the aim of re-commencing open cut operations.
The Project site has an existing small camp supporting the
current exploration and resource drilling program. The Great
Eastern Highway, the Goldfields Water Pipeline, regional power
lines and the national fibre optic communication cable pass through
the mining title and over the resource. Easements relating to this
infrastructure have been accounted for in the Mineral Resource
Estimate and mine design.
A comprehensive PFS was completed by BGL in February 2013. The
PFS was based on the development of a 7.5 million tonne per annum
open pit mining operation with a conventional carbon-in-leach (CIL)
processing facility. Gold production of 1.95 million ounces was
forecast over a mine life of 10.5 years.
A new mining study, incorporating a pit optimisation and an
updated mine plan, has been completed as part of the ongoing
Definitive Feasibility Study, increasing forecast production to 2.5
million ounces over an extended mine life of 13 years.
In RPM's opinion the PFS and the approach to defining the pit
limits and the resultant final pit designs are reasonable and
conform to industry practise for this type of deposit.
A reasonable quantity of metallurgical testwork has been
conducted on a selection of samples to support the adoption of a
conventional gold processing flowsheet employing primary crushing,
semi-autogenous milling (SAG) and Ball milling followed by CIL and
gold recovery by elution and electrowinning. The metallurgical data
generated provided a reasonable basis for the development of
capital and operating costs as well as revenue projections for the
PFS.
Raw water is to be sourced from 26 borefields with 12 existing
bores and14 new bores to be drilled and a power supply option study
was conducted with a direct connection option selected.
A Preliminary Environmental Scoping Study was completed prior to
the PFS. None of the potential environmental impacts identified for
the key aspects of the Project were considered to be high risk,
with mainly negligible and minor ratings given.
The work undertaken by BGL is of a conventional approach to
mining and processing and shows no fatal flaws which would impact
the valuation.
The new mining study has 17% of the contained gold mining
inventory based on Inferred Resources. On this basis, the in-pit
ore quantities cannot be classified as an Ore Reserve under the
JORC code. In addition, as the VALMIN code requires any valuation
based on a discounted cash flow (DCF) approach to be based on Ore
Reserves prepared in accordance with the JORC Code, a DCF
assessment cannot be used for this work. The valuation therefore
used a Market-based approach as a primary valuation method and a
Cost-based approach as a secondary valuation method.
3. Valuation
The primary asset is the Bullabulling project being at advanced
exploration stage. The project contains substantial resources of
3.8 million ounces with a preliminary mining to Pre-Feasibility
Study completed. This asset is the basis of valuation. The outlying
tenements were reviewed and shown to be at grass roots exploration
level with no distinct exploration targets defined and were deemed
to not be material to the valuation.
3.1 Valuation Methodology
Generally there are three broad methods of valuation that are
used for valuing mineral assets. These are the income approach,
market approach and cost approach, and each is specifically
suitable for the relevant status of the exploration or mining
project from grass roots exploration through to an operating
mine.
The valuation approach that is generally adopted for mine
operations or advanced projects with a level of Pre-Feasibility
Study allowing the estimation of Ore Reserves from Measured and
Indicated Resources is the income approach using cash flow and
Discounted Cash Flow (DCF) analysis. For exploration tenements or
projects with Mineral Resources an appraised value or market value
method is adopted. The market value method includes projects with
estimated Mineral Resources with a value applied to the unit ounce
of gold based on comparative transactions, or a value per unit area
(usually hectare or square kilometres) for exploration projects
with none or little Mineral Resources. The value would be
discounted by any specific site factors as well as the status of
resource classification. This method does rely on the selection of
suitably comparable transactions for determining a transaction unit
rate. The cost approach uses actual specific sunk and short term
future costs for exploration relevant to the property being
considered.
A discussion of typical valuation methods follows.
3.1.1 Income Approach
The income approach uses a DCF analysis of a mining operation or
projects forecast production, costs and revenue. A mining operation
or project's budget or forecast over the life of mine of the
project is incorporated into a financial model, generally with the
following parameters utilised:
-- Available Ore Reserves and Mineral Resources;
-- Production profiles for mining and processing operations;
-- Dilution and recovery parameters;
-- Capital and operating costs;
-- Product prices, exchange rates;
-- Depreciation, amortisation, taxes, royalties and other costs; and,
-- Discount rate.
A Net Present Value for the project is determined on which the
value is based.
3.1.2 Market Approach
This is generally referred to as a comparative transaction
method where similar properties should have similar value. It
assumes that arms-length transactions have been undertaken on a
reasonable basis between a willing seller and willing buyer. Many
such transactions are not completed at the particular time but may
involve a farm-in arrangement of future exploration expenditure
that must be taken into consideration.
A dollar value per resource ounce is used as a basis for the
valuation. For appropriate comparison the asset transaction must be
at a similar stage of development as that of the property being
valued. RPM has reviewed transactions over recent years and has
found that:
-- The value of individual assets with Mineral Resources can vary significantly;
-- The value can depend on the ratio of Measured + Indicated +
Inferred Resources to the total Resources;
-- Size, potential size, and grade of the resource;
-- Potential mining and processing methods;
-- Proximity of infrastructure and infrastructure included in the transaction;
-- Synergies with existing operations for the buyer; and,
-- Potential land access and environmental issues.
Historical transaction costs require to be adjusted to reflect
the present market environment. The corresponding metal price at
the date of the transactions has been adjusted to the current
prices based on the historical inflation figures provided by the
Australian Bureau of Statistics.
3.1.3 Cost Approach
This method is based on the principle of a contribution paid to
develop or increase assets. One of the common methods in the
category is the Multiples of Exploration Expenditure (MEE) whereby
past and planned exploration expenditures are used for valuing the
property. It has as its fundamental premise that future expenditure
is warranted recognising the potential to enhance the property to
define Resources. In using this method it is important that:
-- Only past expenditure that has been productive in identifying
a target and/or resource is considered;
-- Recent historical expenditure is used and the last five years
is usually adopted as a cut-off;
-- This method is best applied to properties that are actively being explored; and,
-- Future budgeted expenditure of one year beyond the current
exploration year is added on the assumption that this is a
warranted expenditure based on the attractiveness of the outcome of
previous exploration campaigns.
Historical expenditure is escalated using the average CPI to
bring to the current expenditure value.
The MEE is generally adjusted by an enhancement multiplier based
on the likelihood of the attractiveness of the Project improving
with further exploration and study and ultimately to production.
These multiplying factors are somewhat subjective but a based on
sound principles that define the potential of a project to advance
as well as any detracting features such as environment and land
ownership risk.
Issues and limitations of this method include:
-- The technique should be applied to properties that are actively being explored;
-- Experienced judgment must be applied to separate past
expenditures considered productive from those that have not
contributed to the value of the property; and,
-- Properties with difficult geological structure may have
incurred higher costs in exploration that may not necessarily be
transferred to meaningful advancement of the property.
This method requires judgment and has some subjective elements,
but is a recognised methodology for valuing exploration properties
and is transparent in its application.
3.2 RPM's Valuation Approach
In determining the appropriate valuation method(s) to be used
for estimating the value of the Bullabulling project RPM has taken
into consideration the classification of the resources assets as
defined in the VALMIN Code and the different methodologies that are
generally accepted as industry practice for each
classification.
The Discounted Cash Flow method was not deemed appropriate for
the valuation due to no Ore Reserves defined by the Pre-Feasibility
Study. The Pre-feasibility Study would normally have allowed Ore
Reserves to be determined from Measured and Indicated Resources,
and may have been appropriate for valuation, but this was not
possible due to the inclusion of Inferred Resources for 17% of the
contained gold. Significant Inferred Resources of >20% of the
mined tonnages were incorporated in the first five years of the
mining operation. The inability to remove the Inferred Resources
from the mine plan and the financial model rendered the option
invalid.
For the valuation of the Bullabulling project RPM has used
Comparable Transactions as a primary valuation method with
appropriate discount or premium based on underlying factors
associated with the property. Fair market value is usually the
technical value plus a premium or discount to account for market,
strategic considerations and special purposes.
As a secondary valuation method to check the appropriateness of
the Comparable Transactions Value the Appraised Value method was
selected.
3.3 Comparable Transactions Value
3.3.1 Comparable Transactions Approach
RPM used several sources for information on recent gold project
transactions, including in-house databases, subscribed database,
web-based research and company web sites.
Many transactions were of a very small value, of less than A$1M
and were not considered. Transactions involving operating mines
were not included as their operating status and the presence of Ore
Reserves generally gives these projects unit values multiples
higher than projects with resources at feasibility stages. Key
criteria considered were: a level of feasibility study, potentially
mined by open cut methods, reasonable sized Mineral Resources with
a proportion of Inferred Resources and a Western Australia
location. Fourteen (14) gold project transactions were
identified.
3.3.2 Comparable Transactions
3.3.2.1 Bullabulling Gold Project
The Bullabulling gold project is located 25km west of Coolgardie
in Western Australia and is close to infrastructure. There has been
historical production of 7.9Mt at 1.45g/t Au for 371k oz from open
pit and CIL and minor heap leach operations. The project had
Mineral Resources at the time of purchase less approximately 14k oz
gold production from the heap leach operation:
Measured Resource: 4.9Mt @ 1.51g/t Au for 237k oz Au
Indicated Resource: 4.2Mt @ 1.35g/t Au for 181k oz Au
Inferred Resource: 0.3Mt @ 1.52 g/t Au for 14k oz Au
Total Resources: 9.3Mt @ 1.44 g/t Au for 432k oz Au
3.3.2.2 Mt Magnet Gold Project
The Mt Magnet gold project is located 600km northeast of Perth
in WA and has a historic production of 5.6M oz of gold. Harmony
Gold Australia P/L completed a feasibility study identifying 474k
oz of mineable material from open cut with upside from satellite
deposits. The deposit is close to infrastructure and has a 1.7Mtpa
mill, a camp, offices and other facilities.
There are 24 deposits with combined Mineral Resources as
below:
Measured Resource: 2.2Mt @ 2.7g/t Au for 193k oz Au
Indicated Resource: 33.6Mt @ 2.0g/t Au for 2,122k oz Au
Inferred Resource: 15.0Mt @ 2.1 g/t Au for 1,030k oz Au
Total Resources: 50.9Mt @ 2.0 g/t Au for 3,345k oz Au
There is also an Ore Reserve of 8.9Mt @ 1.7g/t Au for 474k oz
gold.
3.3.2.3 Coogee Gold Project
The Coogee gold project is located 20km northeast of Kambalda in
Western Australia and is close to infrastructure. The purchase
includes the mining lease and two adjacent sub-blocks of an
exploration licence. The Mineral Resource is small but of moderate
grade:
Indicated Resource: 138kt @ 4.1g/t Au for 18k oz Au
Inferred Resource: 140kt @ 3.7 g/t Au for 17k oz Au
Total Resources: 278kt @ 3.9 g/t Au for 35k oz Au
3.3.2.4 Vivien Gold Project
The Vivien gold project is located 20km west southwest of
Leinster in WA. Ramelius purchased the project and also intended to
enter a toll agreement for the ore with Gold Fields. The project
has a high grade Indicated Resource of 579kt @ 8.3 g/t Au for 154k
oz of gold.
3.3.2.5 Western Mt Jewell Gold Project
The Western Mt Jewell gold project is located 50km north of
Kalgoorlie in Western Australia and is close to infrastructure. The
project consists of two deposits, Tregurtha and Hughes, with a
mining lease application and 490km(2) of tenements adjoining
KalNorth Gold Mines Ltd's existing tenements delivering synergies
to the LKK project. The projects have combined Mineral Resources
of:
Indicated Resource: 2.5Mt @ 1.6 g/t Au for 131k oz Au
Inferred Resource: 1.3Mt @ 1.3 g/t Au for 54k oz Au
Total Resources: 3.8Mt @ 1.5 g/t Au for 186k oz Au
3.3.2.6 Mt Gibson Gold Project
The Mt Gibson gold project is located 290km northeast of Perth
in Western Australia. Mt Gibson operated for 12 years, producing
870k oz of gold from 16.5Mt of ore at 1.68g/t Au, until 1998 when
it was placed on care and maintenance. The project had a 2006
Mineral Resource of:
Indicated Resource: 8.7Mt @ 1.96g/t Au for 547k oz Au
Inferred Resource: 0.1Mt @ 4.55 g/t Au for 12k oz Au
Total Resources: 8.8Mt @ 1.98 g/t Au for 5593k oz Au
3.3.2.7 Kundip and Trilogy Gold Project
The Kundip and Trilogy gold projects are located 25km southeast
of Ravensthorpe in Western Australia. Both projects are
gold-silver-copper projects which have had past feasibility studies
to define total Ore Reserves of 7.4Mt @ 1.8g/t Au, 35g/t Ag and
0.8% Cu for 442k oz Au, 8.3M oz Ag and 60kt Cu. The combined
Mineral Resources are:
Measured Resource: 0.3Mt @ 2.4g/t Au, 14g/t Ag, 0.3% Cu for 24k
oz Au, 0.14M oz Ag, 0.9Kt Cu
Indicated Resource: 10.1Mt @ 1.9g/t Au 28g/t Ag, 0.8% Cu for
617k oz Au, 9.2M oz Ag, 78Kt Cu
Inferred Resource: 4.7Mt @ 2.0g/t Au 3g/t Ag, 0.3% Cu for 311k oz Au, 0.39M oz Ag, 16Kt Cu
Total Resources: 15.2Mt @ 1.9g/t Au 21g/t Ag, 0.6% Cu for 952k oz Au, 10M oz Ag, 95Kt Cu
For the purposes of the value estimation silver and copper
credits were determined using prices and exchange rates at the time
of acquisition to determine a gold equivalent.
3.3.2.8 Mt Henry Gold Project
The Mt Henry gold project is located 20km south of Norseman in
Western Australia and is close to infrastructure. There are three
deposits, Mt Henry, North Scotia and Selene on granted mining
leases. Two scoping studies were completed in 2008 (Mt Henry,
Selene) and 2009 (North Scotia) for low strip ratio open pits. The
projects have combined Mineral Resources (70% equity) of:
Indicated Resource: 12.5Mt @ 1.74g/t Au for 701k oz Au
Inferred Resource: 6.0Mt @ 1.66 g/t Au for 321k oz Au
Total Resources: 18.5Mt @ 1.72 g/t Au for 1,023k oz Au
3.3.2.9 Sandstone Gold Project
The Sandstone gold project is located 120km west of Leinster in
Western Australia and includes a 600ktpa CIL process plant, camp
and associated infrastructure, and 1,100km(2) of exploration
tenements. The acquisition provides the purchaser with significant
synergy for its nearby Marda gold project and provides a process
plant for production reducing capital costs, though relocation of
the plant was considered. The project Mineral Resources are:
Indicated Resource: 1.9Mt @ 2.35g/t Au for 146k oz Au
Inferred Resource: 2.6Mt @ 1.42 g/t Au for 574k oz Au
Total Resources: 14.5Mt @ 1.54 g/t Au for 720k oz Au
3.3.2.10 Southern Cross Gold Project
The Southern Cross gold project is located 250km west of
Kalgoorlie in Western Australia and is includes mine
infrastructure, camps, office buildings, production equipment and a
processing plant, which has been under care and maintenance. The
project has 932km(2) of tenements and combined Mineral Resources as
below, of which a significant portion are underground:
Measured Resource: 0.7Mt @ 1.9g/t Au for 41k oz Au
Indicated Resource: 11.1Mt @ 3.6g/t Au for 1,291k oz Au
Inferred Resource: 8.8Mt @ 3.8 g/t Au for 1,073k oz Au
Total Resources: 20.6Mt @ 3.6 g/t Au for 2,405k oz Au
3.3.2.11 Dalgaranga Gold Project
The Dalgaranga gold project is located 70km northwest of Mt
Magnet in Western Australia and has had past production of more
than 200k oz of gold. The tenement package is 850km(2) was acquired
along with the following Mineral Resources:
Measured Resource: 0.7Mt @ 1.3g/t Au for 28k oz Au
Indicated Resource: 6.9Mt @ 1.6g/t Au for 354k oz Au
Total Resources: 7.5Mt @ 1.6 g/t Au for 382k oz Au
3.3.2.12 Red Legs and Die Hardy Gold Project
The Red Legs and Die Hardy gold projects are located 200km north
of Southern Cross in Western Australia. The purchase of the
projects has strong synergy with Southern Cross Goldfields Ltd's
Marda project. The projects have combined Mineral Resources of:
Indicated Resource: 1.3Mt @ 1.7g/t Au for 72k oz Au
Inferred Resource: 1.0Mt @ 1.7 g/t Au for 50k oz Au
Total Resources: 2.3Mt @ 1.7 g/t Au for 122k oz Au
3.3.2.13 Murchison Gold Project
The Murchison gold project is located near Meekathara 765km
north of Perth in Western Australia. The tenement package of
98km(2) has, a 260ktpa CIL processing plant process plant, camp
site and other infrastructure. The two deposits, Burnakura and
Gabanintha, contain combined Mineral Resources of:
Indicated Resource: 2.0Mt @ 2.4g/t Au for 153k oz Au
Inferred Resource: 11.2Mt @ 1.6 g/t Au for 571k oz Au
Total Resources: 13.2Mt @ 1.7 g/t Au for 718k oz Au
3.3.2.14 Bundarra Gold Project
The Bundarra gold project is located 100km north of Leonora in
Western Australia. Purchasers, Bligh Resources Ltd, previously held
42.9% equity in the project and acquired an additional 29%, to
release vendors from personal guarantees to a loan facility. The
project contains a 2013 Ore Reserve of 1.6Mt at 2.3 g/t Au for 120k
oz of gold in four deposits. The combined Mineral Resources in the
29% additional equity are:
Measured Resource: 0.1Mt @ 2.2g/t Au for 10k oz Au
Indicated Resource: 1.0Mt @ 2.2g/t Au for 70k oz Au
Inferred Resource: 1.0Mt @ 1.9 g/t Au for 62k oz Au
Total Resources: 2.2Mt @ 2.0 g/t Au for 142k oz Au
3.3.2.15 Other Transactions
There were two significant transactions of note during 2012 for
projects with similar size resources to Bullabulling.
The Norton gold project is located 35km northwest of Kalgoorlie
in Western Australia and was an operating mine producing from open
cut and underground at a rate of 150k oz pa (2011) at the time of
the transaction. Zijin Mining Group Co. Plc held 16.8% equity in
Norton Gold Fields Ltd at the time of the transaction to purchase
the remaining equity. The equity purchased included 96.9Mt @ 1.6
g/t Au for 5,020k oz Au of Mineral Resources and, in addition, Ore
Reserves of 1M oz gold.
Focus Minerals Ltd owned the Coolgardie and Laverton gold
projects producing 177k oz pa (2012) from existing mines. Focus
Minerals Ltd placed a parcel of shares equivalent to 51% of the
company with Shandong Gold for A$ 225M. The equity purchased
included the 59Mt @ 2.2 g/t Au for 4,270k oz Au of Mineral
Resources and, in addition, Ore Reserves of 0.5M oz gold.
These transactions have a significantly higher value per ounce,
Norton (A$40/oz) and Focus (A$103/oz). These transactions were not
considered due to the projects being existing producers, some from
underground mines, significant existing infrastructure and
significant reserves.
3.3.3 Comparable Transactions Results
The transaction values were inflated using CPI data from the
Australian Bureau of Statistics and the values per ounce of total
Measured, Indicated and Inferred Resources were determined as shown
in Table 3.1.
Table 3.1 - Recent Gold Project Transactions
Project Transaction Buyer Seller Status at Interest Price Price Total Total Value
Date Time of Sale Sold (A$M) May14 Resource Inferred (A$/oz)
(%) (A$M) (k oz Resource
Au) (oz Au)
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
Auzex
Resources
Ltd &
Central
China Jervois
Goldfields Mining Historical
Bullabulling Apr-10 Plc Ltd producer 100.0 2.0 2.2 418 14 5.2
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
O/C Reserves,
Ramelius Harmony mill and
Resources Gold other
Mt Magnet Jul-10 Ltd Aust. P/L infrastructure 100.0 40.0 43.7 3,345 1,030 13.1
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
Ramelius Terrain
Resources Minerals
Coogee Jan-12 Ltd Ltd Deposit 100.0 0.9 0.9 35 17 27.2
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
Ramelius Agnew Gold
Resources Mining
Vivien Feb-12 Ltd Co. Deposit 100.0 10.0 10.4 154 0 67.3
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
KalNorth Pioneer
Western Mt Gold Mines Resources
Jewell Mar-12 Ltd Ltd Deposit 100.0 8.0 8.2 186 54 43.9
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
Legend
Extension Mining
Mt Gibson Mar-12 Hill P/L Ltd Care & Mtce 100.0 6.8 7.0 559 12 12.6
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
Phillips
Silver Lake River
Kundip & Resources Mining
Trilogy Mar-12 Ltd Ltd Reserve 100.0 18.1 18.8 1,583 417 11.5
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
Panoramic Matsa
Resources Resources Scoping study,
Mt Henry Jun-12 Ltd Ltd O/C resources 70.0 14.0 14.6 1,023 321 14.2
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
Mill and
Southern other
Cross Troy infrastructure
Goldfields Resources on care &
Sandstone Aug-12 Ltd Ltd mtce 100.0 7.0 7.2 720 574 9.7
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
Mill and
China other
Hanking infrastructure
Southern Holdings St Barbara on care &
Cross Jan-13 Ltd Ltd mtce 100.0 22.5 23.2 2,405 1,073 9.7
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
Gascoyne
Resources
Dalgaranga Feb-13 Ltd Private Deposit 80.0 1.6 1.6 306 0 5.2
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
Southern
Cross Barranco
Red Legs & Goldfields Resources
Die Hardy Sep-13 Ltd Ltd Deposit 100.0 0.9 0.9 122 50 7.3
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
Monument KGL Mill and
Mining Resources other
Murchison Jan-14 Ltd Ltd infrastructure 100.0 15.0 15.1 711 571 21.3
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
Bligh
Resources S R Mining
Bundarra Feb-14 Ltd P/L Reserve 29.0 0.9 0.9 142 62 6.6
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------- --------
The Bullabulling project contains a Mineral Resource of 3.8M oz
of gold with approximately 40% in the Inferred category. The
comparable transactions have variable categories of resources. To
understand the impact of the resource classifications on the value
of resource ounce, the resource ounces were factored. High
confidence resources, Measured applied a factor of 1.0, Indicated
Resources had a factor of 0.75 and Inferred were factored by 0.25
as being the classification with the lowest confidence. The results
of this are shown in Table 3.2. Projects with a high proportion of
lower confidence resources show an increase in value per ounce.
With these factors the gold ounces for Bullabulling are 2.1M oz and
similar to Mt Magnet which also has a similar ratio of Inferred
Resources to total resources (31%).
Table 3.2 - Recent Gold Project Transactions Factored by
Resource Type
Project Transaction Buyer Seller Status at Interest Price Price Total Value
Date Time of Sale Sold (A$M) May14 Factored (A$/oz)
(%) (A$M) Resource
(k oz
Au)
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
Auzex
Resources
Ltd &
Central
China Jervois
Goldfields Mining Historical
Bullabulling Apr-10 Plc Ltd producer 100.0 2.0 2.2 376 5.8
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
O/C Reserves,
Ramelius Harmony mill and
Resources Gold other
Mt Magnet Jul-10 Ltd Aust. P/L infrastructure 100.0 40.0 43.7 2,042 21.4
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
Ramelius Terrain
Resources Minerals
Coogee Jan-12 Ltd Ltd Deposit 100.0 0.9 0.9 18 53.1
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
Ramelius Agnew Gold
Resources Mining
Vivien Feb-12 Ltd Co. Deposit 100.0 10.0 10.4 116 89.7
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
KalNorth Pioneer
Western Mt Gold Mines Resources
Jewell Mar-12 Ltd Ltd Deposit 100.0 8.0 8.2 123 66.1
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
Legend
Extension Mining
Mt Gibson Mar-12 Hill P/L Ltd Care & Mtce 100.0 6.8 7.0 413 17.1
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
Phillips
Silver Lake River
Kundip & Resources Mining
Trilogy Mar-12 Ltd Ltd Reserve 100.0 18.1 18.8 1,030 17.6
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
Panoramic Matsa
Resources Resources Scoping study,
Mt Henry Jun-12 Ltd Ltd O/C resources 70.0 14.0 14.6 606 24.0
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
Mill and
Southern other
Cross Troy infrastructure
Goldfields Resources on care &
Sandstone Aug-12 Ltd Ltd mtce 100.0 7.0 7.2 253 27.5
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
Mill and
China other
Hanking infrastructure
Southern Holdings St Barbara on care &
Cross Jan-13 Ltd Ltd mtce 100.0 22.5 23.2 1,278 18.2
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
Gascoyne
Resources
Dalgaranga Feb-13 Ltd Private Deposit 80.0 1.6 1.6 235 6.8
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
Southern
Cross Barranco
Red Legs & Goldfields Resources
Die Hardy Sep-13 Ltd Ltd Deposit 100.0 0.9 0.9 67 13.4
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
Monument KGL Mill and
Mining Resources other
Murchison Jan-14 Ltd Ltd infrastructure 100.0 15.0 15.1 251 21.3
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
Bligh
Resources S R Mining
Bundarra Feb-14 Ltd P/L Reserve 29.0 0.9 0.9 78 12.1
-------------- ------------- ------------ ----------- ---------------- --------- ------ ------ --------- --------
3.3.4 Comparable Transactions Discussion
Table 3.1 shows transactions clustered around A$5-15/oz for
projects up to 1M oz, with some higher value projects from
A$20-68/oz. The few larger projects of 1.5-3.5M oz sit between
A$9-13/oz.
The timing of the transactions in relation to the gold price was
reviewed. The more recent transactions, 2013-14, at a time when the
gold price was falling, for small deposits have low values of
A$5-10/oz. The Murchison project (2014), however, has a higher
value at A$21.3/oz, though there is existing infrastructure.
In 2012 when the gold price was at its peak, the acquisitions
varied significantly from A$9.7/oz to A$67.3/oz. Projects with
higher gold grades generally commanded higher prices.
2010 gold prices are similar to current prices, but capital and
operating costs have increased.
The Bullabulling initial acquisition in 2010 was low at
A$5.2/oz. Since then the project has advanced in level of study and
in total resource ounces.
The 2013 Mineral Resource for the Bullabulling project is 114Mt
@ 1.02 g/t Au for 3.75M oz of gold. This would place the project
higher along the X axis of Figure 3.1 and between AUD 9.65/oz for
the Southern Cross gold operations and A$13.06/oz for the Mt Magnet
project. Both of these latter operations have existing
infrastructure, including a process plant, which are difficult to
assess for in these transaction, but if accounted for would
probably reduce the value per resource oz.
Bullabulling is similar to the Mt Henry project in terms of
level of study and proportion of Inferred Resources, though the
latter has higher grade and Bullabulling is larger in terms of
resources. Mt Henry has a higher value at A$14.2/oz.
3.3.5 Comparable Transactions Valuation
The value for Bullabulling based on the distribution of the
similar sized projects is suggested as being between A$9/oz and
A$13/oz. Considering the current resource of 3.8M oz this gives a
valuation range of A$34M to A$49M.
If one considers the value of factored resources the value of
Bullabulling is suggested as being in the range of between A$18/oz
to A$21/oz. With these factors Bullabulling has resource of 2.07M
oz, and a valuation range of A$37M to A$44M.
Geological review of the Mineral Resources shows greater
confidence in upgrading the Inferred Resources and suggests a 50%
factor is used overall in place of 25%. This provides a factored
resource of 2.45M oz and a valuation range of A$44M to A$51M.
The average value of the comparable transactions will be biased
by the high values for the small high grade deposits. The median
value of the transactions for the un-factored resources is
A$12.1/oz, which provides a value for Bullabulling's 3.8M oz of
A$45M.The median value of the transactions for the factored
resources is A$19.8/oz, which provides a value for Bullabulling's
2.1M oz of A$48M. These median valuations lend support to the above
ranges.
This suggested valuation range is A$34M to A$51M. A preferred
value of A$46M is suggested due to the lack of infrastructure,
though compensated for by the ongoing work which may lead to the
upgrading of the resource classification of Inferred Resources,
additional resources defined by exploration at depth and along
strike, and the generation of Ore Reserves.
3.4 Cost Approach Value
The cost approach or multiples of exploration method (MEE) is
founded on the assumption that the intrinsic value of the
exploration tenement is based on the exploration potential. This
includes the amount of expenditure that has been meaningfully used
in the past to define a target or resource and the future costs in
advancing the exploration to a pre-feasibility stage. A
prospectivity enhancement multiplier (PEM) is applied to the
exploration expenditure, usually limited to the past five years and
one year forecast expenditure, and is based on the overall
attractiveness of the exploration area for progressing to a
reserves status. The multiplier ranges from 0.5 to 5.0 are
indicated in Table 3.3 (after Lawrence/Minval/PEM schema).
Table 3.3 - Prospectivity Enhancement Multiplier (PEM) (after
Lawrence, 2007)
3.4.1 Expenditure
From the information provided by Bullabulling and a review of
the exploration reports, the effective exploration expenditure and
warranted future cost is A$26.4 M, this is shown in Table 3.4.
Table 3.4 - Past Exploration and Warranted Future Expenditure
(A$M)
Year Historical Escalated Warranted Total
Exploration Exploration Future
------- ------------- ------------- ---------- ------
2010 1.7 1.9 - 1.9
------- ------------- ------------- ---------- ------
2011 11.6 12.6 - 12.6
------- ------------- ------------- ---------- ------
2012 4.7 4.9 - 4.9
------- ------------- ------------- ---------- ------
2013 0.5 0.5 - 0.5
------- ------------- ------------- ---------- ------
2014 - - 6.5 6.5
------- ------------- ------------- ---------- ------
Total 18.5 19.9 6.5 26.4
------- ------------- ------------- ---------- ------
Past exploration expenditure includes the exploration
expenditure for each tenement since the tenements were acquired.
Expenditure is escalated to 2014 dollars.
Warranted future expenditure includes expected expenditure for
the 2014 calendar year to complete a Definitive Feasibility Study
and additional exploration.
Both past exploration and warranted future expenditure are
deemed productive as:
-- Exploration occurred in the last five years;
-- The quantity of the resources has increased; and,
-- Work is underway to complete a feasibility study with the aim
of increasing the accuracy and the quantity of resources and/or
reserves.
3.4.2 Adjustment Factors
A prospectivity enhancement multiplier of 3.0 to 4.0 (Table 3.5)
has been applied to total past and warranted future expenditure
based on:
-- Exploration results that have defined a resource of 3.8M oz,
-- A pre-feasibility study has been completed, albeit on
resources which include Inferred Resources and hence no Ore
Reserves have been defined; and,
-- A Definitive Feasibility Study with additional drilling and
exploration will be completed in the short term.
With the range of prospectivity enhancement multiplier a range
of A$79M to A$106M was determined.
Table 3.5 - Prospectivity Enhancement Multiplier
Total PEM
Expenditure
------------- ---------------
Min Max
3.0 4.0
------------- ------ -------
A$26.4M A$79M A$106M
------------- ------ -------
RPM has adjusted the above range of values downwards by a factor
of 55%, based on normal factors applied to Indicated and Inferred
Resources. The factor applied is consistent with the adjustment
factor used in the comparable transaction assessment in Section
3.3. Table 3.6 illustrates the resource adjustment.
Table 3.6 - Resource Adjustment
Classification Mt Au M oz Reduction Reduced Resource
factor M oz Adjustment
---------------- ---- ----- ----- ---------- -------- ------------
Indicated 72 0.98 2.3 75% 1.7 n/a
---------------- ---- ----- ----- ---------- -------- ------------
Inferred 42 1.10 1.5 25% 0.4 n/a
---------------- ---- ----- ----- -------- ------------
Combined 114 1.02 3.8 2.1 55%
---------------- ---- ----- ----- -------- ------------
The range of values produced is A$43M to A$58M.
3.4.3 Cost Approach Valuation
The range of values for the multiples of exploration method
range from a minimum A$43M to a maximum of A$58M.
3.5 Valuation Summary
The primary valuation method of comparable transactions gives a
valuation range of A$34M to A$51M with a preferred value of
A$46M.
The secondary method of valuation of cost-approach was to check
the reasonableness of the primary method. This returned a valuation
range of A$43M to A$58M. This range straddles the comparable
transactions range, but gives a good check on the primary
valuation.
The valuation is therefore A$34M to A$51M with a preferred value
of A$46M.
Appendix A - Glossary of Terms
aplite means an intrusion of igneous granitic material in a
plane through the host rock,
assets means tenements and projects,
Au means gold (the chemical symbol),
Basalt means a volcanic rock
Block model means a set of blocks representing the orebody for
which the tonnage and grade is calculated to determine the Mineral
Resource,
Bulk density means the weight of the rock as in tonnes per cubic
metre,
carbon-in-leach a process for extracting gold from the crushed
and ground rock through a process plant,
core means a stick of rock retrieved from the ground by diamond
drilling,
CPI means consumer price index and is a measure of
inflation,
craton means a large region of rock which acts as one unit,
diamond drilling means a method of drilling in which solid
sticks of core are retrieved from the rock,
dilution means the contamination of the coal by surrounding rock
during mining,
downhole survey means a survey taken down the drill hole to
determine its position,
drill hole collar means the start point of the drill hole on the
surface,
dyke means an intrusion of igneous material in a plane through
the host rock,
electrowinning means the removal of the gold from the solution
after elution in readiness for smelting,
elution means the removal of gold from the carbon in a gold
plant and into solution,
fault means a dislocation of rock,
Feasibility Study as defined by the JORC Code means a
comprehensive technical and economic study of the selected
development option for a mineral project. The confidence level of
the study is higher than that of a Pre-Feasibility Study. Includes
a Definitive Feasibility Study.
felsic volcanic means a volcanic rock essentially rich in silica
(quartz) and of fine grain size,
flowsheet means a designed full process the mineralised rock
goes through to extract the gold,
granite means a rock essentially rich in silica (quartz) and of
coarse grain size,
grass roots exploration means exploration at a very early stage
with little prospectivity defined,
greenstone means a basalt rock which has been altered by
solutions characterised by green minerals such as chlorite,
heap leach means a process for extracting gold from the crushed
rock on a the surface,
Indicated Mineral Resources means that part of a mineral deposit
for which the quantity and grade can be estimated with a reasonable
level of confidence, as defined in JORC Code,
Inferred Mineral Resources means that part of a mineral deposit
for which the quantity and grade can only be estimated with a low
level of confidence, as defined in JORC Code,
Intrusion means a rock which forced its way into other rocks as
a magma and solidified,
ITR means Independent Technical Review,
JORC Code means the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves prepared by
the Joint Ore Reserves Committee,
K oz means thousand ounces,
kt means thousand tonnes,
laterite means an oxidised and weathered rock, sometimes
mineralised,
m means metre,
Measured Mineral Resources means that part of a mineral deposit
for which the quantity and grade can be estimated with a high level
of confidence, as defined in JORC Code,
Metallurgical testwork means tests undertaken to define the
minerals and nature of the gold in the ore and the methods and
efficiency of the gold's removal from the ore,
Metamorphosed means a rock has changed its minerals
Mine plan means a plan in which to mine the mineral deposit,
mine production means mine production equal to the total
production from the particular mine,
mineralisation means metals which have been deposited in the
rock,
ML means mine lease,
Monzogranite means a type of granite with less quartz
content,
Mt means million tonnes,
Mtpa means million tonnes per annum,
Niton XRF signature means a signature derived from an x-ray
fluorescence test
Orebody means a body of mineralised rock,
Ounce an imperial measure of a quantity of gold, equivalent to
approximately 31.1 grammes,
pegmatite means an intrusion of igneous granitic material in a
plane through the host rock,
Pre-Feasibility Study as defined by the JORC Code means 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, is established and an
effective method of mineral processing is determined. It includes a
financial analysis based on reasonable assumptions. A
Pre-Feasibility Study is at a lower confidence level than a
Feasibility Study.
primary mineralisation means the initial mineralisation, in this
case gold and pyrite,
Probable reserves means Measured and/or Indicated Resources
which are not yet proven but of which detailed technical and
economic studies have demonstrated that extraction can be justified
at the time of determination and under specific economic
conditions,
Proved reserves means Measured Resources for which detailed
technical and economic studies have demonstrated that extraction
can be justified at the time of determination and under specific
economic conditions,
QAQC means quality assurance and quality control and refers to
how well the collection of exploration data was completed, such as
samples and assays,
RC drilling means drilling of holes where broken rock is
retrieved as a sample from the rock. Also applies to RAB and air
core drilling,
Royalty means a payment for a proportion of production, which
for example could be in dollars per ounce or as a percentage of the
value received for the gold produced,
Schist means a laminated rock,
Sediment or sedimentary means or refers to a layered rock such
as a sandstone or a shale,
shear similar to a fault, i.e. a dislocation of rock,
soil samples means a sample of soil which has been tested for
its metal content,
solids means the shell as a solid representing the orebody,
statistical analysis means a mathematical analysis of the
metals,
stratigraphy means a sequence of sedimentary rocks,
strip ratio means the ratio of waste to ore rock mined,
supergene means modified primary mineralisation,
Surpac means mining software used to assist in Mineral Resource
Estimation and mine design,
Topography means the surface of the earth,
Top cut means a cut of the very high grade values to prevent
bias,
tpa means tonnes per annum or tonnes per year,
ultramafic similar to a basalt but with different minerals,
variography means a mathematical analysis of the distribution of
the metals,
wireframe means a shell design around the orebody to capture all
of the mineralisation of interest,
Appendix B - References
General
Bullabulling Gold Project Pre-Feasibility Study Report (Final
Draft), February 2013
Tenements
Deed of Authorisation Indemnity (Final).pdf, May, 2013.
Mining Register tenement research documents for all tenements,
provided by Hetherington, Exploration & Mining Title Services
Pty Ltd.
Environmental and Heritage
Kellie Hill Consulting Pty Ltd letter to BGL dated 24th
November, 2012
Valuation
VALMIN Code, 2005. Code for Technical Assessment and Valuation
of Mineral and Petroleum Assets and Securities for Independent
Expert Reports, 29 April, 23 p (The Australasian Institute of
Mining and Metallurgy and Australian Institute of
Geoscientists).
Tenement Expenditure 2010 - 2014.xlsx
BBG_TENS_April2014 Annual Obligations_Expenditure_Prospectivity
SH edits.xlsx
BAS April 14 Forecast.xlsx
Lawrence, MJ, 2007. Valuation Methodology for Iron Ore Mineral
Properties - Thoughts of an Old Valuer. In Iron Ore Conference.
Australia, 22 August 2007. Australia: AusIMM. 11-18.
Roscoe, WE, Valuation of Mineral Exploration Properties Using
the Cost Approach.
Found at: http://www.cim.org/mes/pdf/VALDAYBill_Roscoe.pdf.
Accessed Date:
May 7, 2014.
Geology
Auzex: February 2012, Final QAQC Report on Resource Drilling at
Bullabulling
Bullabulling Gold Limited: March 2013, Annual Report for Period
1 January 2012 - 31 December 2012
Bullabulling Gold Limited: March 2014, Annual Report for Period
1 January 2013 - 31 December 2013
Bullabulling Gold Limited: April 2013, Bullabulling Resource
Drilling Summary Report
Saul S: July 2012, QAQC Report - Infill Drilling Programme
Snowden: March 2012, Auzex: Bullabulling Gold Project, Project
No. AU3168, Resource Estimate, Final
Snowden: September 2012, Bullabulling Gold Limited: Bullabulling
Gold Project, Project No. AU3829, Resource Estimate Update,
Final
Snowden: July 2013, Bullabulling Gold Limited: Edwards Gryphon
Resource Estimate Update, Project No. AU4108, Bullabulling Gold
Project
Snowden: September 2013, Bullabulling Gold Limited: Dicksons
Bonecrusher Resource Estimate Update, Project No. AU4236, Summary
Report
Snowden: October 2013, Bullabulling Gold Limited: Gibralter
Estimate, Project No. AU4261, Summary Report
Mining
Spread sheets:
-- DFS Financial Model Schedule 2a1 Mining Optimisation 130626.xls
-- BGL L&H Link_to_FM 996B DT793F Schedule_1 130620c.xls
-- BGL Mine Service L & H Parameters 130611.xls
-- Mining Capital - Plant, Infrastructure, Mobilisation & Establishment June 2013.xls
-- Schedule 2a1 Data - Ore.xls
Pit designs: Open Pit Designs01_June official Designs
Blockmodel: combined_(0413_0912_0913)_7_5mtpa_v3.mdl
Fuel quote from Fuel Logistic (email 29/4/14)
Cat mobile equipment quote (email 14/2/13)
Liebhermobile equipment quote (email 20/2/13)
Snowden geotechnical parameters quote (email 9/5/13)
Processing
Metallurgical test-work identifies further potential cost
reductions; Announcement to the ASX 12(th) march, 2014.
Metallurgical Test-Work Program Expanded; Announcement to the
ASX 28th April, 2014.
Appendix C - Experts and Specialists
Philip Mitchell, Executive Consultant RPM, BSc, BE (Mining),
Grad Dip App Fin, MAusIMM
Phil has over forty years' experience in underground mining in
both technical and management roles, he has worked as a consultant
for ten years undertaking due diligence, technical reviews and
valuation work for mergers and acquisitions. Phil is a competent
person for coal reserves reporting and VALMIN assessments.
Phil has had extensive experience in longwall operations in NSW
and Queensland, ventilation planning and technical specialist roles
for public reporting including IPO's.
Steve Hinde, Manager Resource Development - Metals RPM, BSc Mine
Geology, MSc Mineral & Energy Economics, MAusIMM
Steve has over thirty years' experience in geology in both
exploration and mine geology roles, he has worked in consultancy
and business development roles for seven years undertaking due
diligence, technical reviews and valuation work for mergers and
acquisitions. Steve is a competent person for metals reporting and
VALMIN assessments.
Igor Bojanic, Manager Metals Consulting Australasia +
Russia/CIS, BE (Mining, Hons), Grad. Dip. Business, MAppl. Sc.
(Environmental Management)
Igor has over 28 years' experience in the mining industry, and
has a broad range of experience, including being involved with a
large number of mining studies on metalliferous and coal mining
projects throughout the world. He has approximately 10 years'
professional experience at operating mines having worked for
Newcrest and BHP Iron Ore.
Igor's key strengths include strategic analysis of new and
existing mining projects to optimise value, and developing mine
plans that deliver practical and achievable outcomes. He is a
senior project manager and has extensive experience in technical
reviews of mining projects. He is familiar with both the Australian
JORC Code and the Canadian NI 43-101 reporting requirements having
been involved with a number of relevant studies.
In addition, Igor has post-graduate qualifications in business
and environmental management.
Andrew Newell, B.Eng. (Metallurgy), M.Eng.Sci. (Base-metal
Flotation), PhD (Base-metal & PGM Sulfidisation/Flotation),
Member SME, CIMM, AusIMM & IEA, Chartered Professional
Engineer, Australasia, Chartered Professional Metallurgist,
Australasia
Andrew has 34 years' in the mining industry with a broad
experience in the fields of minerals processing, hydrometallurgy,
plant design, process engineering (including equipment selection
and design) and metallurgical testwork.
Andrew's experience includes operating experience in gold
leaching facilities as well as the design and commissioning of gold
leaching plants. In addition, he has had considerable experience
with gold ores and plants through process and process plant
evaluations, due diligence audits, feasibility studies and
metallurgical testwork and program development.
Joe McDiarmid, Principal Mining Engineer RPM, BEng (Mining),
MAusIMM(CP), RPEQ
Joe is an experienced and fully qualified Mining Manager with
exposure to operational, technical and leadership roles in mineral
resource companies globally since 1995. He has a broad exposure to
a variety of metalliferous mining methodologies coupled with a
well-developed understanding of the commercial, functional and
safety management aspects of mining operations globally.
Joe as a Competent Person for JORC and Qualified Person for
NI43-101 reporting, Ore Reserve estimation, media releases, short
and long-term planning, due diligence investigations, studies
ranging from scoping level (PEA) to Bankable Feasibility and into
cash positive operations.
Graham de la Mare, Principal Consultant RPM, MSc (Earth
Science), MAIG
Graham has twenty years' experience in geology in both
exploration and mine geology roles; he has worked as a consultant
for five years undertaking resource estimations, due diligence
investigations, technical reviews and exploration planning and
management on a wide range of projects. Graham is a competent
person for metals reporting.
Peter Goh, Business Analyst RPM, BCom, Grad Cert App Fin,
ICAA
Peter is an experienced Business Analyst, having seven years'
experience in the mining industry. He is an expert in mining
economic evaluation using RPM's XERAS economic modelling software.
His expertise is in development of mining economic models from
first principles in order to produce a transparent, accurate and
defendable cost estimates. Peter has also developed XERAS budgeting
models for several large Australian mining companies.
Peter has a degree in Accounting and Finance, is a Member of the
Institute of Chartered Accountants (Australia) and has a Graduate
Certificate in Applied Finance.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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