market announcements office asx ltd sydney, nsw 2000 for … · scheme ooet |scheme booklet merger...

Registered Office: Level 1, Suite 5, The Business Centre, 55 Salvado Road, Subiaco Western Australia 6008

Postal Address: PO Box 131, Subiaco Western Australia 6904

Contact Details: Telephone +61 8 6380 1333 Facsimile +61 8 9380 6761 Email: [email protected]

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28 July 2015

The ManagerMarket Announcements OfficeASX Ltd4th Floor, 20 Bridge StreetSYDNEY, NSW 2000

Dear Sir,

AUZEX SCHEME BOOKLET RELEASED

Explaurum Limited (“Explaurum”, “EXU” or the “Company”) is pleased to announce that theAustralian Securities and Investment Commission has registered the Scheme Booklet in relation toa proposal to merge Auzex Exploration Limited and Explaurum by a scheme of arrangement(“Scheme”). The Scheme Booklet attached sets out the information Auzex shareholders require toevaluate the proposal, along with an associated Notice of Meeting.

The Merger is to be implemented through the Scheme pursuant to which Auzex will become awholly owned subsidiary of Explaurum and Auzex Shareholders (other than Explaurum and itsRelated Bodies Corporate) will receive a total of 67,205,796 New EXU Shares as the SchemeConsideration for their Auzex Shares.

Following completion of the Merger EXU will focus principally on development of the TampiaProject, an advanced gold exploration project owned 90% by Auzex.

BDO Corporate Finance (QLD) Ltd, the Independent Expert engaged by the Auzex Board toprovide an opinion regarding the Merger, has concluded the Merger is fair and reasonable toAuzex Shareholders.

The Directors of Auzex have unanimously recommended that all Auzex shareholders vote infavour of the Scheme, in the absence of a Superior Proposal.

The Auzex shareholder meeting is on Monday 24 August 2015.

For more information contact:

Mark Calderwood John LawtonTechnical Director Managing DirectorExplaurum Limited Auzex Exploration Limited+61 8 6380 1333 +61 7 3333 [email protected] [email protected]

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mailto:[email protected]

mailto:[email protected]

SCHEME BOOKLETMerger with

Explaurum LimitedIn relation to a recommended proposal to merge

Auzex Exploration Limited and Explaurum Limited by a scheme of arrangement

Your Directors unanimously recommend that you vote in favour of the scheme of arrangement in the

absence of a Superior ProposalThis is an important document and requires your immediate attention. You should

read this document in its entirety. If you are in any doubt about how to deal with this document, you should contact your broker, financial advisor or legal advisor immediately.

If you have any questions in relation to this Booklet you can call the Auzex Information Line on (07) 3106 5044 (for Australian callers) or + 61 7 3106 5044 (for international

callers) on weekdays between 9.00 am and 5.00 pm (Brisbane time).

ACN 153 608 596

EXU Legal AdvisorAuzex Legal Advisor Independent Expert

SCHEME BOOKLET M

erger with Explaurum

Limited

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Purpose of this Booklet

This Booklet explains the terms of the Scheme, the manner in which the Scheme will be considered and implemented (if the Scheme Conditions are satisfied), and provides such information as is prescribed or otherwise material for Auzex Shareholders when deciding whether or not to vote in favour of the Scheme. This Booklet includes the explanatory statement for the Scheme required by subsection 412(1) of the Corporations Act. You should read this Booklet in its entirety before making a decision on whether or not to vote in favour of the Scheme.

Status of this Booklet

This Booklet does not in any way constitute an offer of securities in any place in which, or to any person to whom, it would be unlawful to make such an offer. It is not a prospectus under the Corporations Act. The distribution of this Booklet in certain jurisdictions may be restricted by law. If this Booklet comes into your possession, you should inform yourself about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the laws of such jurisdictions.

ASIC and ASX

A copy of this Booklet has been examined by ASIC pursuant to subsection 411(2)(b) of the Corporations Act and registered by ASIC under subsection 412(6) of the Corporations Act. Auzex has requested ASIC to provide a statement, in accordance with subsection 411(17)(b) of the Corporations Act, that ASIC has no objection to the Scheme. If ASIC provides that statement, it will be produced to the Court on the Second Court Date.

A copy of this Booklet has been lodged with ASX.

Neither ASIC, ASX nor any of their officers takes any responsibility for the contents of this Booklet.

Court – Important Notice

The fact that under subsection 411(1) of the Corporations Act the Court has ordered that a meeting be convened and has approved this Booklet and explanatory statement required to accompany the notice of meeting does not mean that the Court:

• has formed any view as to the merits of the proposed Scheme or as to how Auzex Shareholders should vote (on this matter Auzex Shareholders must reach their own conclusion); or

• has prepared, or is responsible for the content of, the Booklet and explanatory statement.

An order under subsection 411(1) is not an endorsement of, or any other expression of opinion on, the Scheme. The Court is not in any other way responsible for the contents of this Booklet.

Disclosure to Auzex Shareholders eligible to participate in Scheme

Based on the information available to Auzex as at the date of this Booklet, Auzex Shareholders whose addresses are shown in the Auzex Share Register on the Record Date for the Scheme as being in the following jurisdictions will be entitled to have New EXU Shares allotted and issued to them pursuant to the Scheme subject to the qualifications, if any, set out below in respect of that jurisdiction:

• Australia and its external territories;

• New Zealand; and

• any other person or jurisdiction in respect of which EXU reasonably believes that it is not prohibited and not unduly onerous or impractical to implement the Scheme and to issue New EXU Shares to an Auzex Shareholder with a Registered Address in such a jurisdiction.

Notice to Auzex Shareholders in New Zealand

This Booklet does not constitute a New Zealand product disclosure statement, prospectus or investment statement and has not been registered, filed with or approved by any New Zealand regulatory authority under or in connection with the Securities Act 1978 (NZ) or the Financial Markets Conduct Act 2013 (NZ). The disclosure materials are being distributed in New Zealand only to persons to whom securities may be offered in New Zealand pursuant to the Securities Act (Overseas Companies) Exemption Notice 2013 (or any replacement of that notice). The offer of New EXU Shares will comply with the laws of Australia applicable to the offer of New EXU Shares.

The taxation treatment of Australian securities is not the same as for New Zealand securities. The offer of New EXU Shares may involve a currency exchange risk as they will be quoted on the ASX in Australian dollars. If you are uncertain about whether this investment is appropriate for you, you should seek the advice of an appropriately qualified financial adviser.

Auzex Shareholders in jurisdictions outside Australia and New Zealand

This Booklet is subject to Australian disclosure requirements. Financial information in this Booklet has been prepared in accordance with Australian Accounting Standards and is presented in an abbreviated form and does not contain all of the disclosures that are usually provided in a financial report prepared in accordance with the Corporations Act. Australian disclosure requirements and Australian Accounting Standards may be different from those applicable in other jurisdictions.

Scheme Shareholders in jurisdictions outside Australia and its external territories, and New Zealand are Ineligible Overseas Shareholders under the Scheme and should refer to section 4.11 of this Booklet. EXU is not obliged to issue New EXU Shares to any Ineligible Overseas Shareholder unless EXU is satisfied that it is lawful and not unduly onerous or impracticable.

Auzex Shareholders should consult their tax adviser as to the applicable tax consequences of the Scheme.

This Booklet and the Scheme do not, either individually or in combination, constitute an offer to sell to Auzex Shareholders or a solicitation of an offer to purchase from Auzex Shareholders any

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SCHEME BOOKLET | Merger with Explaurum Limited • 1

IMPORTANT INFORMATION


securities in Auzex or EXU in any jurisdiction where such an offer or solicitation would be illegal. Scheme Shareholders who reside outside of Australia but who do not constitute Ineligible Overseas Shareholders should note that this Booklet has been prepared (in accordance with the requirements in Australia) for the sole purpose of allowing you to consider the Scheme. It must not be distributed, reproduced or disclosed (in whole or part) to other persons or used for any purpose other than consideration of the Scheme. This Booklet has not been filed with or considered or approved by any regulatory body in any country other than Australia. Auzex Shareholders should consult with their professional advisers as to whether any other formalities or consents are required to permit them to receive New EXU Shares pursuant to the Scheme.

The distribution of this Booklet outside of Australia may be restricted by law 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 contravene applicable securities laws. Auzex and EXU disclaim all liabilities to such persons. Auzex Shareholders who are nominees, trustees or custodians may forward the Booklet to all beneficial shareholders resident in Australia or New Zealand but they may not send the Booklet into any other country and are advised to seek independent advice as to how they should proceed.

No action has been taken to register or qualify this Booklet or any aspect of the Scheme in any jurisdiction outside of Australia.

Notice to Auzex Shareholders resident in the United States

The New EXU Shares to be issued in connection with the Scheme have not been registered under the United States Securities Act of 1933, as amended (the US Securities Act) or any United States state securities laws and will not be issued to Shareholders in the United States. Auzex Shareholders in the United States will be Ineligible Overseas Shareholders under the Scheme and should refer to section 4.11 of this Booklet for further information.

No account of personal circumstances

This Booklet does not take into account the investment objectives, financial situation or particular needs of any Auzex Shareholder or any other person. This Booklet should not be relied upon as the sole basis for any investment decision in relation to Auzex Shares, EXU Shares or any other securities. Independent financial and taxation advice should be sought before making any investment decision in relation to Auzex Shares, EXU Shares or any other securities.

Forward Looking Statements

Certain statements in this Booklet relate to the future, including forward looking statements relating to Auzex’s and EXU’s financial position and strategy. These forward looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause the actual results, performance or achievements of Auzex or EXU to be materially different from future results, performance or achievements expressed or implied by such statements. Such risks, uncertainties, assumptions and other important factors include, among other things, the risks and considerations described in section 8 of this Booklet. Actual events or results may differ materially from the events or results expressed or implied in any forward looking statement and deviations are both normal and to be expected.

Other than as required by law, neither Auzex, EXU and their officers nor any other person gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward looking statement in this Booklet will actually occur. You are cautioned to not place undue reliance on those statements.

Subject to any continuing obligations under applicable law or the Listing Rules, Auzex and EXU expressly disclaim any obligation to give any updates or revisions to any forward looking statements to reflect any change in expectations after the date of this Booklet or any change in events, conditions or circumstances on which any such statement is based.

The forward looking statements in this Booklet reflect views held only immediately before the date of this Booklet.

Privacy and personal information

Auzex and EXU and their respective share registries may collect personal information for the purpose of implementing, and administering the shareholdings arising from, the Scheme.

Shareholders who are individuals, and individuals appointed as proxies, corporate representatives or attorneys in respect of whom personal information is collected may access their personal information by calling the Auzex Information Line.

EXU Consolidation

At a general meeting of EXU Shareholders held on 26 June 2015, the EXU Shareholders approved the Consolidation of EXU Shares and EXU Options.

This Booklet contains various references to EXU Shares and EXU Options. Unless stated otherwise, all references to EXU Shares and EXU Options in this Booklet are on a post-Consolidation basis.

Interpretation

Capitalised terms and certain abbreviations used in this Booklet are defined in section 12.

Unless otherwise stated, all times and dates referred to in this Booklet are times and dates in Brisbane, Australia. All times and dates are indicative only. All references to currency is in Australian dollars unless otherwise indicated.

Date of this Booklet

This Booklet is dated 23 July 2015.

Further information

If Shareholders have any queries, they should call the Auzex Information Line on (07) 3106 5044 (within Australia) or +61 7 3106 5044 (from outside Australia).

Note that calls to the information line may be recorded.

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• SCHEME BOOKLET | Merger with Explaurum Limited2

LETTER FROM THE CHAIRMAN OF AUZEX

23 July 2015

Dear Auzex Shareholder

It is with great pleasure that I present to you the opportunity to participate in the creation in an exciting new ASX-listed gold exploration and development company through the merger of Auzex Exploration Limited (Auzex) and Explaurum Limited (EXU).

We have worked cooperatively with EXU in the development and implementation of this proposal for shareholder consideration. Our experience with EXU to date gives us every confidence that this is, and will be, a productive and value generating relationship. John Lawton and I look forward to the opportunity of working with Mark Calderwell and Patrick Flint on the new Board.

On 30 April 2015 EXU announced a recommended proposal under which Auzex and EXU will merge to combine their respective businesses through a merger of Auzex and EXU (Merger).

The Merger is to be implemented through a scheme of arrangement pursuant to which Auzex will become a wholly owned subsidiary of EXU and Auzex Shareholders (other than EXU and its Related Bodies Corporate) will receive New EXU Shares as the Scheme Consideration for their Auzex Shares (Scheme). The number of New EXU Shares to be received by Scheme Shareholders is the number of Auzex Shares they hold multiplied by the Share Scheme Ratio of four (4) New EXU Shares for each Auzex Share.

Following completion of the Merger EXU will focus principally on development of the Tampia Project, an advanced gold exploration project owned 90% by Auzex.

BDO Corporate Finance (QLD) Ltd, the Independent Expert engaged by the Auzex Board to provide an opinion regarding the Merger, has concluded the Merger is fair and reasonable to Auzex Shareholders and, on that basis, in the absence of any other information or a superior offer, the Merger is in the best interests of Auzex Shareholders as at 23 July 2015, being the date of the Independent Expert’s Report. A copy of the Independent Expert’s Report is attached as Annexure A.

The Directors of Auzex unanimously recommend that you vote in favour of the Scheme, in the absence of a Superior Proposal, as we believe the Merger will deliver significant value to Auzex Shareholders. Each Auzex Director intends to vote the Auzex Shares he holds or controls in favour of the Scheme.

The reasons for the unanimous recommendation of the Auzex Board are set out in this Booklet. In summary, all Auzex Directors believe the Merger will provide Auzex Shareholders with a number of benefits, as after the Merger the Merged Group will:

(a) be listed on the Australian Securities Exchange (ASX), providing Auzex Shareholders with liquidity for their shareholding;(b) have a strengthened entrepreneurial management team;(c) be in a position to advance the Tampia project through feasibility; and(d) be a platform on which to build a significant Australian gold and mineral company that can attract new capital

and new management.

This Booklet sets out the full details of the Scheme to Merge Auzex and EXU and the steps associated with its implementation.

If you have any questions about the Scheme please contact the Auzex Information Line on (07) 3106 5044 (for Australian callers) or +61 7 3106 5044 (for international callers) on weekdays between 9.00 am and 5.00 pm (Brisbane time).

On behalf of the Auzex Board, thank you for your support of Auzex. Your vote is important and I look forward to seeing you at the Scheme Meeting at 10.00 am on Monday 24 August 2015.

Yours sincerely

Chris Baker Chairman

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LETTER FROM THE CHAIRMAN OF EXPLAURUM LIMITED

23 July 2015

Dear Scheme Shareholder

The Board of Directors and management of Explaurum Limited (EXU) are pleased to provide you with the opportunity to participate in the combination of Auzex and EXU, whereby the two companies will merge. The combination will be a transformative transaction for both companies and is unanimously supported by EXU’s Board of Directors.

EXU is an Australian company listed on the Australian Securities Exchange (ASX).

The Board of Directors of EXU believes the Merger of EXU and Auzex will provide material value to the shareholders of both EXU and Auzex, including:

(a) the proposed Merger will create a highly attractive listed junior gold company, with an exciting flagship project with a shallow, high-grade under-explored open-pittable gold deposit;

(b) numerous untested soil anomalies within 10km radius of the known gold deposit;

(c) leveraging project and operational synergies between EXU and Auzex;

(d) creation of a larger-scale entity that has a larger market capitalisation and improved access to capital markets; and

(e) a strengthened Board which will provide a strong leadership team with a proven track record of gold exploration, development and production.

Auzex’s Board of Directors has announced it unanimously supports the Merger and recommends that you vote in favour of the Scheme, in the absence of a Superior Proposal. As an Auzex Shareholder, your vote is extremely important to ensure that the Merger is implemented. Therefore, on behalf of the Board of Directors and management of Explaurum Limited, I encourage you to vote in favour of the Scheme and look forward to you being a part of this new ASX-listed emerging gold company, Explaurum Limited.

Yours sincerely

Patrick Flint Chairman

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NOTICE OF COURT ORDERED SCHEME MEETING

Notice of Court ordered meeting of Auzex Shareholders

By order of the Supreme Court of Queensland made on 23 July 2015, pursuant to section 411(1) of the Corporations Act, a meeting of Auzex Shareholders other than Explaurum Limited and its Related Bodies Corporate (Scheme Shareholders) will be held at 15 Ivory Lane, Brisbane on Monday 24 August 2015 at 10:00 am (Brisbane time).

The Court has directed that Mr Chris Baker act as Chairman of the meeting or failing him, Mr John Lawton, and has directed the Chairman to report the result of the meeting to the Court.

Information on the Scheme is set out in the Booklet of which this notice forms part.

Business of the meeting

The purpose of the meeting is to consider and, if thought fit, to agree (with or without modification) to a scheme of arrangement proposed to be made between Auzex and Auzex Shareholders.

Scheme Resolution

‘That pursuant to and in accordance with the provisions of section 411 of the Corporations Act, the Scheme (namely, the scheme of arrangement proposed between Auzex and Scheme Shareholders, referred to as the ‘Scheme’, as contained in and more particularly described in the Booklet accompanying the notice convening this meeting) is agreed to with or without modification as approved by the Court (terms in this resolution having the same meaning as in the Booklet).’

Defined Terms

Terms used in this Notice of Scheme Meeting have the same meaning as defined in the Booklet (of which this notice forms part) accompanying this Notice of Scheme Meeting.

Shareholders who are entitled to vote

The Court has determined that the time for determining eligibility to vote at the Scheme Meeting is 6:00 pm (Brisbane time) on 22 August 2015. Only those Auzex Shareholders entered on the Auzex Share Register at that time will be entitled to attend and vote at the Scheme Meeting.

Explaurum Limited and its Related Bodies Corporate are not entitled to vote at the Scheme Meeting.

Voting in person

To vote in person, attend the Scheme Meeting at the time and place set out above in this Notice of Meeting.

Voting by proxy

To vote by proxy, please complete, sign and return the enclosed Scheme Meeting Proxy Form in accordance with the following instructions. If you require an additional proxy form, Auzex will supply it on request.

An Auzex Shareholder who is entitled to vote at the Scheme Meeting may appoint:

(a) one proxy if the Auzex Shareholder is only entitled to one vote; or

(b) one or two proxies if the Auzex Shareholder is entitled to more than one vote.

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Where the Auzex Shareholder appoints two proxies, the appointment may specify the proportion or number of votes that each proxy may exercise. If the appointment does not specify a proportion or number, each proxy may exercise one-half of the votes, in which case any fraction of votes will be disregarded.

A proxy need not be an Auzex Shareholder.

The proxy form must be signed by the member or the member’s attorney. Proxies given by a corporation must be executed in accordance with the Corporations Act and the constitution of that corporation.

The proxy form (and any power of attorney under which it is signed) must be received by Computershare Investor Services Pty Limited via:

(a) fax on 1800 783 447(from within Australia) or +61 3 9473 2555 (from outside Australia); or

(b) by mail to Computershare Investor Services Pty Limited, GPO Box 242, Melbourne Victoria 3001 Australia,

no later than 48 hours before the commencement of the Scheme Meeting, that is by no later than 10.00 am Brisbane time on 22 August 2015. Any proxy form received after that time will not be valid for the scheduled meeting.

Voting by attorney

A member may appoint an attorney to act on the member’s behalf at the meeting. The power of attorney or such other evidence of the attorney’s appointment and authority to the satisfaction of the Directors must be received by Computershare Investor Services at least 48 hours before the time for holding of the meeting or any adjourned meeting that is by no later than 10:00 am Brisbane time on 22 August 2015.

Court approval

In accordance with section 411(4)(b) of the Corporations Act, the Scheme (with or without modification) must be approved by an order of the Court. If the resolution put to this meeting is passed by the Requisite Majority and the other Scheme Conditions to the Scheme are satisfied, Auzex intends to apply to the Court on 2 September 2015 for approval of the Scheme.

Enquiries

For further information, please contact the Auzex Information Line on (07) 3106 5044 from within Australia or +61 7 3106 5044 from outside Australia, between 9:00 am and 5:00 pm (Brisbane time).

By order of the Board

Paul FrederiksCompany Secretary

23 July 2015

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IMPORTANT DATES

The key dates for the proposed Scheme Meeting of Auzex Shareholders and the Second Court Hearing to approve the Scheme are summarised below. The first Court hearing to convene the Scheme Meeting has already been held.

EVENT DATE

Time and date by which the Scheme Meeting Proxy Form 10:00 am on must be received to be valid for the Scheme Meeting 22 August 2015

Time and date for determining eligibility to vote at the 6:00 pm on Scheme Meeting 22 August 2015

Scheme Meeting 10:00 am on 24 August 2015

If the Scheme is approved by the Requisite Majority of Scheme Shareholders and the Scheme Conditions are satisfied or waived, the expected timetable for implementation of the Scheme is:

Second Court Hearing for approval of the Scheme 2 September 2015

Effective Date: Scheme takes effect 7 September 2015

Record Date: Time and date for determining entitlement to the 14 September 2015 Scheme Consideration

Implementation Date: Transfer of Auzex Shares from Scheme 21 September 2015 Shareholders to EXU pursuant to the Scheme and issue of Scheme Consideration

Dispatch of holding statements for New EXU Shares to 24 September 2015 Eligible Scheme Shareholders

Commencement of quotation of New EXU Shares on ASX 25 September 2015

The timetable and dates above (and the references to these dates throughout this Booklet) are indicative only and, among other things, are subject to all necessary approvals. Auzex can vary these times and dates without directly notifying Auzex Shareholders. Changes to the timetable will however be announced by EXU through the ASX and notified on Auzex’s website at www.auzex.com.

All times and dates referred to in this Booklet are times and dates in Brisbane, Australia, unless otherwise indicated.For

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TABLE OF CONTENTS

1 OVERVIEW, SCHEME MEETING DETAILS AND HOW TO VOTE 101.1 What is the proposal? 101.2 What is this document? 101.3 What are the conditions to the Merger? 101.4 The Scheme in the best interests of Auzex Shareholders 101.5 Your vote is important 101.6 Approval requirements – Requisite Majority 111.7 Entitlement to vote 111.8 What you should do next 111.9 Scheme Meeting 111.10 Address for return of voting forms 121.11 For further information 12

2 ADVANTAGES AND DISADVANTAGES OF THE SCHEME 132.1 Advantages - Key reasons to vote for the Scheme 132.2 Disadvantages - Reasons to vote against the Scheme 15

3 FREQUENTLY ASKED QUESTIONS 17

4 THE MERGER AND THE SCHEME 244.1 Background 244.2 Profile of EXU after completion of the Merger 244.3 Terms of the Merger Implementation Agreement 244.4 The Scheme 254.5 Scheme Consideration 254.6 Unanimous recommendation of the Auzex Directors 264.7 Independent Expert’s Conclusion 264.8 Scheme Conditions 264.9 Scheme Shareholder deemed warranties 274.10 Taxation consequences of the Merger Scheme 284.11 Ineligible Overseas Shareholders 28

5 PROFILE OF AUZEX 295.1 Auzex establishment 295.2 Activities since establishment 295.3 Auzex’s business 305.4 Auzex’s projects 305.5 Directors and management of Auzex 325.6 Auzex Capital Structure and ownership 345.7 Auzex historical financial information 355.8 Material changes in the financial position of Auzex 395.9 Operations of Auzex if Scheme does not proceed 395.10 Auzex risk factors 395.11 Material Contracts 39F

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6 PROFILE OF EXPLAURUM LIMITED 446.1 Overview 446.2 The Lyons Project 446.3 EXU Capital Raising 446.4 Directors and management 456.5 Directors’ interests in EXU Shares 466.6 Capital Structure and ownership of Explaurum Limited 466.7 EXU recent share price performance 476.8 EXU historic financial information 476.9 Subsidiaries 516.10 Rights attaching to EXU Shares 516.11 Material Contracts 536.12 Continuous Disclosing Entity 53

7 PROFILE OF THE MERGED GROUP 547.1 Introduction 547.2 Overview of the Merged Group 547.3 Strategy of the Merged Group 547.4 Directors of the Merged Group 547.5 Operations of the Merged Group 567.6 Capital Structure and ownership of the Merged Group 567.7 Directors’ interests in Shares and Options of the Merged Group 567.8 Intentions of Auzex and EXU in relation to EXU 577.9 Financial information for the Merged Group 57

8 RISKS OF THE MERGER SCHEME 608.1 Risks specific to the Scheme and the creation of the Merged Group 608.2 Risks specific to the Merged Group 618.3 Risks specific to Auzex 638.4 General risks 648.5 Other relevant considerations 66

9 DETAILS OF THE MERGER AND ITS IMPLEMENTATION 679.1 Elements of the Merger 679.2 Entitlement to participate in the Scheme 679.3 Actions already undertaken by Auzex and EXU 689.4 Scheme Conditions 699.5 Scheme Meeting 699.6 Court approval 699.7 Steps after Court approval at the Second Court Hearing 699.8 Warranties by Scheme Shareholders under the Scheme 719.9 New EXU Shares 71

10 AUSTRALIAN TAXATION IMPLICATIONS 7210.1 Introduction 7210.2 Australian Resident Auzex Shareholders 7210.3 Revenue account 7310.4 Consequences of holding EXU Shares 7410.5 Non-Australian Resident Auzex Shareholders 74

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11 ADDITIONAL INFORMATION 7611.1 Introduction 7611.2 Intention of Auzex Directors regarding the business of Auzex 7611.3 Intention of Auzex Directors concerning the Scheme 7611.4 Interests of Auzex Directors in Auzex securities 7611.5 Interests of Auzex and Auzex Directors in EXU securities 7711.6 Interests of EXU and EXU’s associates in Auzex Securities 7711.7 Benefits to Auzex officers in connection with retirement from office 7711.8 Agreements or arrangements connected with or conditional on the Scheme 7711.9 Auzex Directors’ interests in EXU contracts 7811.10 Disclosure of payments and benefits to Auzex Directors, secretaries and executive officers 7811.11 Disclosure of interests 7811.12 Disclosure of fees and other benefits 7811.13 EXU capital structure 7911.14 Capital raising by EXU 7911.15 Material changes in financial position 7911.16 Creditors of Auzex 7911.17 Right to inspect and obtain copies of the Auzex Share Register 7911.18 ASX and ASIC waivers, approvals and exemptions 7911.19 No relevant restrictions in the Auzex constitution 7911.20 Sale of Auzex Shares in the six months ended 21 June 2015 8011.21 No unacceptable circumstances 8011.22 Auzex Shareholders in jurisdictions outside Australia 8011.23 Consents and disclaimers 8011.24 Regulatory and legal 8111.25 Supplementary information 8111.26 Information relating to ore reserves and mineral resources 8211.27 Effects of rounding 8211.28 Data in charts, graphs and tables 8211.29 No other material information 82

12 DEFINITIONS AND INTERPRETATION 8312.1 Definitions 8312.2 General Interpretation 93

13 CORPORATE INFORMATION 94

Annexure Independent Expert’s Report

Annexure B Scheme

Annexure C Deed Poll

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1 OVERVIEW, SCHEME MEETING DETAILS AND HOW TO VOTE

1.1 What is the proposal?

(a) On 30 April 2015 Auzex Exploration Limited (Auzex) and Explaurum Limited (EXU) announced a proposed Merger. The Merger is to be implemented through a scheme of arrangement between Auzex and Auzex Shareholders (other than EXU and its Related Bodies Corporate).

(b) A scheme of arrangement is a Court-supervised process under which the shareholders of Auzex will have the opportunity to vote for or against the proposed Merger.

(c) If the Scheme is approved by Scheme Shareholders and the Court, and the Scheme Conditions are satisfied:

(i) EXU will acquire all of the Auzex Shares in exchange for the Scheme Consideration in the form of New EXU Shares; and

(ii) Auzex will become a wholly owned subsidiary of EXU.

(d) The number of New EXU Shares each Scheme Shareholder will be entitled to as the Scheme Consideration is the number of Auzex Shares they hold on the Record Date, multiplied by the Share Scheme Ratio of four (4) New EXU Shares for each Auzex Share.

(e) If the Scheme is not approved the Merger will not occur and Auzex will continue as a stand-alone unlisted public company.

1.2 What is this document?

This document (Booklet) contains information about the proposed Merger. It also provides you, as an Auzex Shareholder, with information to consider before voting on the resolution to approve the Scheme at the Scheme Meeting scheduled to be held on 24 August 2015.

1.3 What are the conditions to the Merger?

The Scheme to implement the proposed Merger is subject to the satisfaction or waiver of the Scheme Conditions, including:

(a) no Material Adverse Change or Regulated Event occurring before 8:00 am on the Second Court Date; and

(b) the Scheme being approved by the Requisite Majority of Scheme Shareholders and by the Court.

Refer to section 4.8 for details of the Scheme Conditions.

1.4 The Scheme is in the best interests of Auzex Shareholders

(a) The Auzex Directors unanimously recommend that, in the absence of a Superior Proposal, you vote in favour of the Scheme.

(b) The Independent Expert has concluded that the Merger is fair and reasonable to Auzex Shareholders and, on that basis, in the absence of any other information or a superior offer, the Merger is in the best interests of Auzex Shareholders as at 23 July 2015, being the date of the Independent Expert’s Report. A copy of the Independent Expert’s Report is attached as Annexure A.

1.5 Your vote is important

(a) For the Scheme to be implemented, it is necessary that the Requisite Majority of Scheme Shareholders vote in favour of passing the resolution to approve the Scheme at the Scheme Meeting.

(b) The Scheme Meeting will be held at 15 Ivory Lane, Brisbane at 10:00am on 24 August 2015.

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1.6 Approval requirements – Requisite Majority

(a) To pass the resolution approving the Scheme, votes in favour of the Scheme must be cast at the Scheme Meeting by:

(i) more than 50% of Scheme Shareholders present and voting (whether in person, by proxy, by attorney or, in the case of a corporation, by corporate representative); and

(ii) at least 75% of the total number of votes cast by Scheme Shareholders entitled to vote on that resolution.

(b) Voting at the Scheme Meeting will be by poll rather than by show of hands. The Notice of Scheme Meeting is set out in the pages immediately after the letters from the Chairmen of Auzex and EXU at the beginning of this Booklet.

(c) EXU and its Related Bodies Corporate will not vote on the Scheme. As at the date of this Booklet, EXU and its Related Bodies Corporate do not hold any Auzex Shares.

1.7 Entitlement to vote

(a) Auzex Shareholders who are registered on the Auzex Share Register at 6:00 pm Brisbane time on 22 August 2015 may attend and vote at the Scheme Meeting.

(b) Registrable transfers or transmission applications received after that time will be disregarded in determining entitlements to vote at the Scheme Meeting.

1.8 What you should do next:

(a) Step 1: Read this Booklet in full

You should read and carefully consider the information included in this Booklet to help you make an informed decision in relation to your Auzex Shares and on how to vote in relation to the Scheme. If you have any doubt as to what action you should take, you should promptly consult your financial, legal, taxation or other professional adviser.

(b) Step 2: Vote on the Scheme

As an Auzex Shareholder, it is your right to vote on whether the Scheme should be approved, and therefore whether the Merger should proceed. You should note that the Scheme is subject to the Scheme Conditions. Even if the Scheme is approved at the Scheme Meeting, it is possible that the Merger will not proceed if the other Scheme Conditions have not been satisfied.

1.9 Scheme Meeting

(a) Auzex Shareholders as at 6:00 pm (Brisbane time) on 22 August 2015 are entitled to vote on the Scheme. You can vote:

(i) in person by attending the Scheme Meeting to be held at 10.00 am (Brisbane time) on 24 August 2015 at 15 Ivory Lane, Brisbane;

(ii) by proxy using the enclosed Proxy Form;

(iii) by attorney; or

(iv) by corporate representative (if the Auzex Shareholder is a company).

(b) If you wish to vote FOR the Scheme by proxy you should place an ‘X’ in the ‘FOR’ box on the Proxy Form. You must return your validly completed Form by 10:00 am on 22 August 2015 to ensure it is valid.

(c) You can do this by using the enclosed reply paid envelope or by faxing the form to the Auzex Share Registry on fax number 1800 783 447 from within Australia or +61 3 9473 2555 from outside Australia.

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1.10 Address for return of voting forms

Auzex Shareholders should mail or fax their proxy form or power of attorney to Computershare Investor Services Pty Limited (Auzex’s Share Registry) at the following address or fax number:

Computershare Investor Services Pty Limited

GPO Box 242 Melbourne Victoria 3001 AUSTRALIA

Fax: 1800 783 447 (from within Australia) or +61 3 9473 2555 (from outside Australia),

no later than 48 hours before the commencement of the Scheme Meeting, that is by no later than 10:00 am (Brisbane time) on 22 August 2015. Any proxy form received after that time will not be valid for the Scheme Meeting.

1.11 For further information

If you have any questions after reading this Booklet, please call the Auzex Information Line on 07 3106 5044 from within Australia or +61 7 3106 5044 from outside Australia, between 9:00 am and 5:00 pm (Brisbane time).

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2 ADVANTAGES AND DISADVANTAGES OF THE SCHEME

Auzex Shareholders should carefully consider the following advantages and disadvantages and risks of the Merger and other relevant considerations, as well as the other information contained in this Booklet, in deciding whether or not to vote in favour of the Scheme to implement the Merger.

2.1 Advantages - Key reasons to vote for the Scheme

1. Auzex Shareholders will receive shares quoted on ASX, providing liquidity for their equity interest in the Merged Group, and greater access for the Merged Group to global capital markets and reduced cost of capital

(a) Auzex will be a subsidiary of EXU. The Merger is expected to provide increased market capitalisation, greater liquidity of issued securities and increased exposure and access to capital markets and potential investors, providing the Merged Group with greater financial capacity and therefore an improved ability to capitalise on its growth opportunities not otherwise available to Auzex as a stand-alone entity.

(b) In addition:

(i) Auzex Shareholders may benefit as shareholders in EXU from enhanced analyst research coverage as a result of the Merger. This diverse coverage by research analysts should help to ensure that EXU is more highly visible among the investment community.

(ii) EXU will have a more diverse shareholder base.

2. Creation of a larger-scale advanced exploration / pre-development focused gold company, listed on ASX, which has a larger market capitalisation and improved access to capital markets and access to growth opportunities otherwise unlikely to be available to Auzex as a stand-alone company

The Merger will enable Auzex Shareholders to participate in the Merged Group which will have enhanced scale and increased market presence.

The Merged Group’s greater scale and scope are also expected to increase access to additional sources of capital in the equity and debt markets over time. The Merged Group will have a stronger balance sheet and greater financial capacity relative to Auzex as a stand-alone entity.

EXU will have a JORC Inferred mineral resource base of approximately 310,000 to 380,000 ounces of gold with exploration potential both laterally and at depth.

JORC 2012 Inferred Mineral Resource (gold), Gault Prospect, Tampia gold project

Cut off Tonnes Au (cut) Contained gold Au (uncut) g/t Au (,000) g/t Au Ounces g/t Au

0.7 7,100 1.6 370,000 2.0

1.0 4,700 2.0 310,000 2.5

2.0 1,600 3.4 170,000 4.6

Notes(i) About 90% of the resource (at 0.7grams per tonne) is in the upper 100 metres and 73% in

the upper 80 metres.(ii) Details of the estimation were set out in Appendix 1 to the EXU announcement to ASX on 30

April 2015.

(iii) Oxide Resources are not significant at about 15,000 ounces at 0.7 grams per tonne cut off.

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3. Strengthened Board will provide a strong leadership team with a proven track record of gold exploration, development and production

The Merger of Auzex and EXU will create a unified experienced and focussed management team, with complementary skills and experience, to manage the development and operations of each company’s Projects into the future.

4 Provides a platform to build a significant Australian gold company

From a management perspective, the Merger provides:

(a) the opportunity for the management to leverage off its skills base and EXU’s financial strength to add significant value by:

(i) accelerating the exploration program at the Projects;

(ii) fast-tracking development of the Projects; and

(iii) consolidating additional development opportunities;

(b) skills to better liaise with financiers for funding for the development of the Projects;

(c) a platform to better utilise Auzex’s and EXU’s existing management experience and industry relationships to identify further value adding opportunities; and

(d) growth and development opportunities to help attract and retain highly skilled staff.

5 Potential cost savings from synergies by combining Auzex and EXU, leveraging resource, project, operational and financial synergies

(a) Combining Auzex and EXU may create potential cost savings through the elimination of duplicated roles and improved efficiencies.

(b) Functions such as company secretarial and financial management functions will be centralised in Brisbane to best ensure that support services are provided in an efficient and timely manner.

6. There is no alternative proposal to the Merger

There has not been any competing proposal to the Merger of Auzex and EXU. Auzex is not aware of any alternative proposals to the proposed Merger.

7. The Independent Expert has concluded that the Merger is in the best interests of Auzex Shareholders

(a) BDO Corporate Finance (QLD) Ltd was commissioned by the Auzex Board as the Independent Expert to assess the merits of the Scheme and the Merger.

(b) The Independent Expert has concluded the Merger is fair and reasonable to Auzex Shareholders and, on that basis, in the absence of any other information or a superior offer, the Merger is in the best interests of Auzex Shareholders as at 23 July 2015, being the date of the Independent Expert’s Report.

(c) A copy of Independent Expert’s Report is attached as Annexure A. Auzex Shareholders should read the Independent Expert’s Report carefully and in its entirety, and should have regard to the disadvantages of the Merger as set out in that report and in section 2.2 of this Booklet below.

8. Auzex Shareholders who are Australian residents for taxation purposes and receive EXU Shares should generally be able to obtain CGT scrip-for-scrip roll-over relief on any capital gains

(a) Generally, CGT roll-over relief should enable Australian tax resident Auzex Shareholders who receive New EXU Shares under the Scheme to elect to defer any CGT liability they would otherwise incur on any gains on the disposal of their Auzex Shares under the Scheme until the time they dispose of those New EXU Shares. Refer to section 10 for further details on certain Australian taxation considerations for Auzex Shareholders, including the availability of CGT roll-over relief.

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(b) The Auzex Directors recommend that Auzex Shareholders should obtain their own taxation advice that will take into account their own personal circumstances.

9. The Merger is unanimously recommended by the Auzex Directors as being in the best interests of Auzex Shareholders in the absence of a Superior Proposal

(a) The Auzex Directors believe that the Merger is in the best interests of Auzex Shareholders and unanimously recommend that Auzex Shareholders vote in favour of the Scheme, in the absence of a Superior Proposal. The Auzex Directors have formed their conclusion and made their recommendation based on, among other things, the matters outlined in this section 2 and the key risk factors outlined in section 8 of this Booklet.

(b) Each Auzex Director who holds Auzex Shares, or on whose behalf Auzex Shares are held, intends to vote those Auzex Shares in favour of the Scheme, in the absence of a Superior Proposal.

10. The Merger has the unanimous support of the Explaurum Limited Board

The Merger is also unanimously supported by the EXU Board.

2.2 Disadvantages - Reasons to vote against the Scheme

This section summarises the reasons identified by the Auzex Directors as to why you may consider voting against the Scheme.

1. You may hold a different view to the Auzex Directors and the Independent Expert in relation to the Scheme

Notwithstanding the unanimous recommendation of the Auzex Directors and the conclusions of the Independent Expert, you may believe that the Scheme is not in your best interests.

There is no obligation to follow the recommendation of the Auzex Directors or to agree with the opinion of the Independent Expert.

2. You may believe there is the potential for a Superior Proposal to be made in the future

You may believe that a Superior Proposal, which is more attractive for Auzex Shareholders than the Scheme, could emerge in the foreseeable future. Implementation of the Scheme will mean that existing Auzex Shareholders will not receive the benefit of any such proposal.

Since the announcement of the Scheme and up to the date of this Booklet, the Auzex Directors have not received or become aware of a Superior Proposal and have no basis for believing that a Superior Proposal will emerge.

The Auzex Directors note that the Merger Implementation Agreement prohibits Auzex from soliciting Competing Proposals. Auzex is however permitted to respond to any Competing Proposals should the Auzex Directors determine that failing to do so would likely constitute a breach of their fiduciary or statutory duties. Further details of the key terms of the Merger Implementation Agreement are provided in section 4.3 of this Booklet.

3. You may also believe it is in your best interests to maintain your current investment and risk profile

While EXU has a Project with asset characteristics in common with Auzex, the operational profile, size, debt profile and geographic exposure of the Merged Group will be different from that of Auzex on a standalone basis. It is possible that you may wish to maintain an interest in Auzex as a standalone company because you are seeking an investment in a company with the specific characteristics of Auzex.

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You may also believe that the integration of Auzex and EXU may be more difficult or take more time than currently anticipated and there is a risk that synergies may not be realised.

Further details of the risks associated with the Merger and investing in the Merged Group are set out in section 8 of this Booklet. Auzex Shareholders are encouraged to read this section carefully and in its entirety.

The Auzex Directors note that the Merged Group’s shares will trade on the ASX. Accordingly, if you receive New EXU Shares under the Scheme, and you do not wish to hold them after the Implementation Date, you will have the option to sell them on the ASX.

4. The value of the Scheme Consideration is not certain and will depend on the price at which New EXU Shares trade on the ASX after the Implementation Date

If the Scheme is implemented, Auzex Shareholders will receive the Scheme Consideration of four (4) New EXU Shares in respect of each Auzex Share they hold on the Record Date.

The value of New EXU Shares received by Auzex Shareholders on implementation of the Scheme will depend on the price at which the Merged Group’s Shares trade on the ASX as at the Implementation Date.

Following implementation of the Scheme, the price of the Merged Group’s Shares may rise or fall based on market conditions and the Merged Group’s financial and operational performance. If the price of the Merged Group’s Shares falls, the value of the New EXU Shares received as Scheme Consideration will decline. If the price of the Merged Group’s Shares increases, the value of the New EXU Shares received as Scheme Consideration will increase.

Further, in circumstances where Auzex Shareholders do not intend to continue to hold their New EXU Shares, there is a risk that a significant number of Auzex Shareholders may seek to sell their New EXU Shares, which may adversely impact the price of the Merged Group’s Shares.

Accordingly, there is no guarantee as to the future value of the Scheme Consideration to be received under the Scheme.

5. The potential tax consequences pursuant to the Scheme may be adverse to your own financial position

If the Scheme proceeds, there may be tax consequences for you as an Auzex Shareholder which may include tax payable on any gain in the disposal of your Auzex Shares.

A general guide to the taxation implications of the Scheme is set out in section 10 of this Booklet. This guide is expressed in general terms and you should seek independent professional advice regarding the tax consequences applicable to your own circumstances.

The Auzex Directors consider that the potential disadvantages of, and other reasons to vote against, the Scheme outlined above are outweighed by the potential advantages of, and other reasons to vote in favour of, the Scheme (set out in “Advantages - Key reasons to vote for the Scheme” in section 2.1 above) and that the Scheme is in the best interests of Auzex Shareholders, in the absence of a Superior Proposal.

The Auzex Directors believe however that Auzex Shareholders should take the potential disadvantages of, and other reasons to vote against, the Scheme set out above into consideration when deciding whether or not to vote in favour of the Scheme.

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3 FREQUENTLY ASKED QUESTIONS

This section answers some frequently asked questions about the Scheme and the Merger. It is not intended to address all issues relevant to Auzex Shareholders. This section should be read together with all other parts of this Booklet.

Question Answer Further information

What is the Merger? On 30 April 2015 Auzex and EXU announced their intention to merge by Auzex becoming a wholly owned subsidiary of EXU, a company listed on ASX.

The Merger will be implemented by way of a scheme of arrangement between Auzex and Scheme Shareholders.

sections 1 and 9

What is a scheme of arrangement?

A scheme of arrangement is a statutory procedure commonly used to enable one company to merge with another. The Scheme is the mechanism by which Auzex and EXU propose to merge by EXU acquiring all of the shares of Auzex, and requires the approval of Scheme Shareholders by the Requisite Majority, and by the Court.

section 4.1(b)

What is the Scheme? The Scheme is a scheme of arrangement between Auzex and Scheme Shareholders to effect the merger of Auzex and EXU through the acquisition by EXU of all of the issued Auzex Shares in exchange for the issue of the Scheme Consideration in the form of New EXU Shares. If the Scheme proceeds, Auzex will become a wholly owned subsidiary of EXU.

sections 1 and 4.1(b)

Who is entitled to participate in the Scheme?

Auzex Shareholders (other than EXU and its Related Bodies Corporate) on the Auzex Share Register as at 6:00 pm on the Record Date are entitled to participate in the Scheme. If the Scheme is approved and implemented, Scheme Shareholders (other than Ineligible Overseas Shareholders) will receive New EXU Shares as their Scheme Consideration.

section 9.2

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Who is an Ineligible Overseas Shareholder for the purposes of the Scheme?

What do they receive under the Scheme?

A Scheme Shareholder will be an Ineligible Overseas Shareholder for the purposes of the Scheme if their address as shown in the Auzex Share Register at 6:00 pm on the Record Date is a place outside Australia and its external territories and New Zealand unless EXU is satisfied, acting reasonably, that the laws of that Scheme Shareholder’s country of residence (as shown in the Auzex Share Register) permit the issue and allotment of New EXU Shares to that Scheme Shareholder, either unconditionally or after compliance with conditions which EXU in its sole discretion regards as acceptable.

Ineligible Overseas Shareholders will not be issued EXU Shares under the Scheme. Instead, the New EXU Shares that they would otherwise have been entitled to have issued to them under the Scheme (had they not been ineligible) will be issued to the Sale Nominee to sell on market following implementation of the Scheme. All such New EXU Shares will be sold by the Sale Nominee as soon as reasonably practicable and in any event not more than 15 Business Days after the Implementation Date. There is no guarantee of the amount of cash that Ineligible Overseas Shareholders will receive from the sale of the New EXU Shares. This will depend on the prices that can be achieved by the Sale Nominee, and applicable brokerage, stamp duty and other selling costs, taxes and charges. See section 4.11 for more information, including the process by which the Sale Nominee will sell the New EXU Shares and distribute the net Cash Proceeds.

section 4.11


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What is the effect of the Scheme?

The Merger is proposed to be implemented by way of the Scheme.

Subject to the qualifications referred to below, all Scheme Shareholders will receive the Scheme Consideration, whether or not they voted for or against the Scheme, once the Scheme has become Effective.

Ineligible Overseas Shareholders will not receive EXU Shares under the Scheme, but will instead receive a pro rata share of the net Cash Proceeds (in Australian dollars) from the sale by the Sale Nominee of the New EXU Shares attributable to Ineligible Overseas Shareholders.

Upon completion of the Scheme, Auzex will become a wholly owned subsidiary of EXU. Auzex Shareholders will retain an economic interest in Auzex’s current projects after the Merger through their shareholding in EXU. The Share Scheme Ratio will determine the number of New EXU Shares Scheme Shareholders will receive for each Auzex Share they hold on the Record Date.

sections 1 and 4.4

What are the Scheme Conditions?

The Scheme will become Effective only if, among other things, the following conditions are satisfied or waived:

(a) no material Adverse Change or Regulated Event occurring before 8:00 am on the Second Court Date; and

(b) the Scheme being approved by the Requisite Majority of Scheme Shareholders and by the Court.

section 4.8

What are the reasons to vote in favour of the Scheme?

The Auzex Directors believe that the Scheme is in the best interests of Auzex Shareholders. The benefits of the Merger include:

(a) listing on ASX providing Auzex Shareholders with liquidity for their shareholding in the Merged Auzex and EXU;

(b) a unified entrepreneurial and experienced management team;

(c) a platform to build a significant Australian gold and mineral company and attract new management;

(d) allows the Tampia gold project to be accelerated through feasibility; and

(e) being listed on ASX providing greater access to global capital markets and access to growth opportunities otherwise unlikely to be available to Auzex as a stand-alone company.

section 2


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What are the key risks of the Merger Scheme?

The risks associated with the Scheme include:

(a) those general risks associated with an investment in a listed company;

(b) specific risks associated with an investment in a minerals exploration company;

(c) specific risks associated with an investment in the Merged Group, including exposure to the gold price, the risks of development costs, environmental and approval risks; and

(d) merger related risks, including transaction costs and those risks associated with the integration of Auzex and EXU including staff retention, financing and implementation of the Merger.

section 8

What is the Scheme Consideration?

If you are an Eligible Scheme Shareholder (i.e. not an Ineligible Overseas Shareholder), you will receive the Scheme Consideration in the form of New EXU Shares.

The Scheme Consideration to which each Scheme Shareholder will be entitled is the number of Auzex Shares held by the Scheme Shareholder on the Record Date multiplied by the Share Scheme Ratio.

EXU and its Related Bodies Corporate do not have a Relevant interest in any Auzex Shares and will therefore not receive any of the Scheme Consideration.

section 4.5

Is EXU bound to provide the Scheme Consideration?

Yes. Under the Deed Poll, EXU undertakes in favour of each Scheme Shareholder to, among other things, provide the Scheme Consideration in accordance with the terms of the Scheme (subject to the Scheme becoming Effective).

Under the Scheme, the Scheme Shareholders appoint Auzex and its directors, officers and secretaries (jointly and severally) as their agent and attorney to enforce the Deed Poll against EXU on their behalf.

section 9.3(b) and Annexure C


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What happens if the Merger Scheme is approved?

If the resolution to approve the Scheme is passed by the Requisite Majority of Scheme Shareholders at the Scheme Meeting, Auzex will apply to the Court at the Second Court Hearing on the Second Court Date for orders approving the Scheme.

At the Second Court Hearing each of Auzex and EXU will provide a certificate to the Court confirming whether the Scheme Conditions (other than the condition relating to Court approval) has been satisfied or (if applicable) waived in accordance with the Merger Implementation Agreement.

sections 9.6 and 9.7

What happens if the Scheme is not approved?

If the Scheme is not approved by the Requisite Majority or the Court, or the Scheme Conditions are not satisfied or waived:

(a) The Merger will not occur and Auzex will continue to run its business in the same manner as it is currently operating. Auzex Shareholders will therefore continue to be exposed to the risks and benefits of owning Auzex Shares, including the risks set out in section 8.3.

(b) Transaction costs of approximately $400,000 will be borne by Auzex, which will impact Auzex’s financial position.

(c) Auzex will be liable to repay to EXU the amount of $800,000 advanced to Auzex pursuant to the loan agreement summarised in section 5.11.1 of this Booklet. This may require Auzex to seek alternative sources of funds within three months.

Auzex may also become obliged to pay EXU a break fee under the terms of the Merger Implementation Agreement (MIA) if an Auzex Director changes his recommendation that scheme Shareholders approve the Scheme, or Auzex breaches the MIA in a manner permitting EXU to terminate it.

sections 5.9 and 8.5(d)

What do Auzex’s Directors recommend?

The Auzex Directors unanimously recommend that, in the absence of a Superior Proposal, Scheme Shareholders vote in favour of the Scheme.

Each Auzex Director who has a Relevant Interest in Auzex Shares and in respect of which they also have a power to vote intends to vote in favour of the Scheme, in the absence of a Superior Proposal.

section 4.6


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What is the Independent Expert’s opinion on the Merger?

The Independent Expert has concluded that the Merger is fair and reasonable to Auzex Shareholders and, on that basis, in the absence of any other information or a superior offer, the Merger is in the best interests of Auzex Shareholders as at 23 July 2015, being the date of Independent Expert’s Report.

The Independent Expert’s Report is attached as Annexure A and you should read it in full.

Annexure A

What is EXU’s strategy? EXU’s objective will be the development of the Tampia Project to production and development of EXU’s Lyons Project.

section 7.3

When and where will the Scheme Meeting be held?

The Scheme Meeting will be held on Monday 24 August 2015 at 10:00 am (Brisbane time) at 15 Ivory Lane, Brisbane.

Who is entitled to vote? Auzex Shareholders who are recorded as members on the Auzex Share Register as at 6:00 pm (Brisbane time) on 22 August 2015 are entitled to vote at the Scheme Meeting.

How will the Auzex Directors vote?

Each Auzex Director intends to vote any Auzex Shares in which they hold a Relevant Interest and in respect of which they also have the power to vote in favour of the Scheme at the Scheme Meeting, in the absence of a Superior Proposal.

section 4.6(b)

What voting majority is required for Auzex Shareholders to approve the Scheme?

For the Scheme to be approved by Auzex Shareholders, votes in favour of the Scheme must be received from:

(a) a majority in number (more than 50%) of Scheme Shareholders present and voting at the Scheme Meeting (in person, by proxy, by attorney or, in the case of corporate Scheme Shareholders, by corporate representative); and

(b) Scheme Shareholders who together hold at least 75% of the total number of votes cast on the resolution.

section 1.6

Will I be bound by the Scheme if I do not vote or if I vote against the Scheme?

Yes, if the Scheme is approved and becomes Effective, then any Auzex Shares held by you at 6:00 pm on the Record Date will be transferred to EXU and you will receive the Scheme Consideration, notwithstanding that you did not vote, or that you voted against the Scheme.


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When will I be issued the Scheme Consideration?

If the Scheme becomes Effective, the Scheme Consideration (being New EXU Shares) will be issued on the Implementation Date, which is expected to be 21 September 2015.

What are the taxation implications of the Merger?

The tax consequences can vary depending on the Auzex Shareholder’s particular circumstances. The general comments below are provided as a guide only and do not amount to tax advice. Each Auzex Shareholder should consult their own tax adviser for tax advice in relation to the implications of participating in the Scheme.

(a) Generally, Australian resident Scheme Shareholders should be eligible for CGT roll-over relief which, if elected, will enable them to defer any CGT liability in respect of any gains on the disposal of Auzex Shares until the New EXU Shares are sold.

(b) Any gains made by non-Australian resident Scheme Shareholders will generally not be subject to CGT provided their shareholding is less than 10% of the total Auzex Shares on issue.

section 10

What other information is available?

If you have any questions in relation to this Booklet you can call the Auzex Information Line on 07 3106 5044 (for Australian callers) or +61 7 3106 5044 (for international callers) on weekdays between 9:00 am and 5:00 pm (Brisbane time).

If you are in any doubt about how to deal with this document, you should contact your broker, financial advisor or legal advisor immediately.


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4 THE MERGER AND THE SCHEME

4.1 Background

(a) Merger Implementation Agreement

(i) On 30 April 2015 EXU announced the intention for EXU to acquire Auzex.

(ii) Under the Merger Implementation Agreement dated 16 May 2015 (MIA), Auzex and EXU agreed to the Merger that will result in the two companies’ projects being held under the control of EXU, an Australian company listed on ASX. In particular, pursuant to the MIA Auzex and EXU agreed to merge pursuant to which EXU will:

(A) be owned by Scheme Shareholders and EXU Shareholders; and

(B) continue to be listed on ASX.

(iii) Key terms of the MIA are summarised in section 4.3 below.

(iv) Auzex and EXU are seeking to implement this Merger by Auzex proposing a scheme of arrangement pursuant to which Auzex will become a wholly owned subsidiary of EXU.

(b) The Scheme

(i) Pursuant to this Booklet, Auzex is proposing to implement the Merger pursuant to a scheme of arrangement between Auzex and Auzex Shareholders.

(ii) A scheme of arrangement is a statutory Court supervised procedure that is commonly used to enable one company to merge with another. It is an arrangement between a company and its shareholders.

(iii) The Scheme will not proceed unless all Scheme Conditions are satisfied or, where possible, waived.

4.2 Profile of EXU after completion of the Merger

(a) If the Scheme is Effective according to its terms, EXU will become the parent company of Auzex.

(b) Further details of the structure of the Merged Group after completion of the Merger are set out in section 7 of this Booklet.

4.3 Terms of the Merger Implementation Agreement

(a) The MIA sets out each of Auzex’s and EXU’s rights and obligations in connection with the implementation of the Merger.

(b) Key terms of the MIA are:

(i) (Conditions Precedent to the Scheme) implementation of the Scheme will be subject to and conditional upon the following:

(A) Auzex Shareholders and the Court approving the Scheme; and

(B) no Material Adverse Change or Regulated Event occurs before 8:00 am on the Second Court Date;

(ii) (Consideration): the total consideration to be paid to the Auzex Shareholders is 67,205,796 New EXU Shares which are to be apportioned amongst the Auzex Shareholders in accordance with the Share Scheme Ratio of four (4) New EXU Shares for each Auzex Share;

(iii) (Board): upon implementation of the Merger, the EXU Board will be comprised of two current EXU Directors (Patrick Flint and Mark Calderwood) and two Directors nominated by Auzex (Chris Baker and John Lawton);

(iv) (Loan Agreement): EXU has lent the sum of $800,000 to Auzex under the Loan Agreement (a summary of which is set out in section 5.11.1).

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(v) (Exclusivity): Auzex and EXU have agreed to deal with each other exclusively regarding any change of control transaction and, before the earlier of Scheme becoming Effective, the End Date or 23 October 2015, to not solicit, discuss or enter into any commitments regarding a Competing Proposal from a third party, and to notify the other of details of any Competing Proposal they may receive. The exclusivity is subject to an exception where compliance with the exclusivity obligations would breach the fiduciary or statutory obligations of the Auzex Board or EXU Board as relevant.

(vi) (Break Fees): restrictions are imposed on both Auzex and EXU engaging with third parties and a break fee of $250,000 will be payable by a party (Defaulting Party) to the other party in certain circumstances, including:

(A) where the Defaulting Party is in material breach of the MIA;

(B) where a Regulated Event occurs in relation to the Defaulting Party;

(C) in the case of Auzex, an Auzex Director makes a public statement changing or withdrawing their support or recommendation of the Scheme or recommends a Competing Proposal to Auzex Shareholders, each in the absence of a Superior Proposal); or

(D) Auzex Shareholders do not approve the Scheme by the Requisite Majority,

and the MIA is terminated in accordance with its terms before the Implementation Date.

The agreed amount of the break fee is greater than 1% of the transaction value because:

• the break fee arrangements are mutual;

• the break fee was agreed after substantial negotiation between Auzex and EXU to determine the most appropriate structure for the scheme; and

• the break fee was regarded by Auzex and EXU as a reasonable estimate of the costs that each may incur in legal, technical and other costs in carrying out the Scheme.

4.4 The Scheme

(a) If the Scheme is approved by the Requisite Majority of Scheme Shareholders and the Court and becomes Effective, all Auzex Shares outstanding at 6:00 pm on the Record Date, and not already owned by EXU or its Related Bodies Corporate, will be transferred to EXU.

(b) See Annexure B for a copy of the Scheme.

(c) Implementation of the Scheme is subject to the Scheme Conditions being satisfied, including the condition that the Scheme may be implemented only if the Requisite Majority of Scheme Shareholders vote in favour of the Scheme at the Scheme Meeting.

(d) The Scheme Meeting at which Scheme Shareholders may vote for the Scheme will be held at 10:00 am on 24 August 2015 at 15 Ivory Lane, Brisbane.

(e) EXU and its Related Bodies Corporate do not hold any Auzex Shares and will not vote on the Scheme.

(f) A summary of the Scheme Conditions is provided in section 4.8, and a summary of the steps necessary to implement the Scheme is provided in section 9.

4.5 Scheme Consideration

(a) Under the Scheme Auzex Shareholders (other than EXU and its Related Bodies Corporate) are to receive four (4) New EXU Shares for each Auzex Share they hold.

(b) The Share Scheme Ratio was developed on the basis of:

(i) the respective agreed fair value of the assets of Auzex and EXU; and

(ii) the number of issued shares of each Auzex and EXU respectively.

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(c) The Share Scheme Ratio will result in Auzex Shareholders holding approximately 49.30% of the issued shares of the Merged Group (49.77% on a fully diluted basis).

(d) Where a Scheme Shareholder is an Ineligible Overseas Shareholder, the number of New EXU Shares to which that Scheme Shareholder would otherwise be entitled will be allotted to the Sale Nominee who will sell those New EXU Shares as soon as practicable (at the risk of the Ineligible Overseas Shareholder) and pay the Cash Proceeds received, after deducting any applicable brokerage, stamp duty and other taxes and charges, to that Ineligible Overseas Shareholder in full satisfaction of that Ineligible Overseas Shareholder’s rights to any Scheme Consideration under the Scheme.

4.6 Unanimous recommendation of the Auzex Directors

(a) The Auzex Directors unanimously recommend that, in the absence of a Superior Proposal, Auzex Shareholders vote in favour of the Scheme at the Scheme Meeting.

(b) The Auzex Directors believe that the reasons for Auzex Shareholders to vote in favour of the Scheme outweigh the potential disadvantages and reasons to vote against the Scheme. In the absence of a Superior Proposal, each Auzex Director intends to vote in favour of the Scheme any Auzex Shares in which they have a Relevant Interest and in respect of which they have power to vote.

(c) In making their recommendation and determining how to vote on the Scheme, the Auzex Directors have considered:

(i) the advantages and disadvantages of the Scheme, as set out in section 2 of this Booklet;

(ii) the implications of the Scheme (and Merger) not being approved, as summarised in section 8.5(d);

(iii) the opinion of the Independent Expert contained in the Independent Expert’s Report (refer to section 4.7 and Annexure A), that the Merger is in the best interests of Auzex Shareholders; and

(iv) the alternatives to the Scheme that are available to Auzex.

4.7 Independent Expert’s Conclusion

(a) Auzex commissioned BDO Corporate Finance (QLD) Ltd as the Independent Expert to prepare a report on whether or not the Scheme is in the best interests of Auzex Shareholders.

(b) The Independent Expert has concluded that the Merger is fair and reasonable to Auzex Shareholders and, on that basis, in the absence of any other information or a superior offer, the Merger is in the best interests of Auzex Shareholders as at 23 July 2015, being the date of Independent Expert’s Report.

(c) The Independent Expert’s Report is attached to this Booklet as Annexure A. You should read the Independent Expert’s Report in full.

4.8 Scheme Conditions

(a) Under the Merger Implementation Agreement (MIA), Auzex and EXU agreed that the Merger will not be implemented until certain conditions have been fulfilled or waived. The conditions that have not yet been fulfilled as at the date of this Booklet are:

(i) (No Auzex Material Adverse Change): no Material Adverse Change in respect of Auzex occurring or becoming known to EXU, and no Material Adverse Matter in respect of Auzex becomes known to EXU, after the date of the MIA being 16 May 2015 and before 8:00 am AEST on the Second Court Date;

(ii) (No Auzex Regulated Event): no Regulated Event in respect of Auzex occurring or becoming known to EXU after 16 May 2015 and before 8:00 am AEST on the Second Court Date;

(iii) (No EXU Material Adverse Change): no Material Adverse Change in respect of EXU occurring or becoming known to Auzex, and no Material Adverse Matter in respect of EXU becomes known to Auzex, after 16 May 2015 and before 8:00 am AEST on the Second Court Date;

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(iv) (No EXU Regulated Event): no Regulated Event in respect of EXU occurring or becoming known to Auzex after 16 May 2015 and before 8:00 am AEST on the Second Court Date;

(v) (Auzex Warranties): the Auzex Warranties being true and correct in all material respects on 16 May 2015 and as at 8:00 am AEST on the Second Court Date (unless any warranty relates to an earlier date, in which case as at such date);

(vi) (EXU Warranties): the EXU Warranties being true and correct in all material respects on 16 May 2015 and as at 8:00 am AEST on the Second Court Date (unless any warranty relates to an earlier date, in which case as at such date);

(vii) (ASIC consents): before 8:00 am AEST on the Second Court Date, ASIC issuing or providing such consents, waivers or approvals or doing such other things as are reasonably necessary to implement the Scheme; and

(viii) (No adverse regulatory action): no Regulatory Authority having:

(A) undertaken a judicial proceeding seeking to enjoin, restrain or otherwise prohibit or impose adverse conditions on the Scheme which remain in effect as at 8:00 am AEST on the Second Court Date;

(B) issued an order, decree or ruling prohibiting or imposing adverse conditions on or otherwise preventing completion of the Scheme which remains in effect as at 8:00 am AEST on the Second Court Date; or

(C) declined to issue an order, decree, ruling, notification or communication by 8:00 am AEST on the Second Court Date that is required for the Scheme to be implemented in accordance with this deed.

(b) The Scheme is also conditional on the statutory requirements for approval of the Scheme, being:

(i) (Approval by Auzex Shareholders): Auzex Shareholders approving the Scheme by the majorities required under section 411(4)(a) of the Corporations Act in relation to the Scheme Meeting convened by the Court;

(ii) (Approval by the Court): the Court approving the Scheme in accordance with section 411(4)(b) of the Corporations Act;

(iii) (Court conditions): such other conditions made or required by the Court under section 411(6) of the Corporations Act in relation to the Scheme as are acceptable to EXU and Auzex have been satisfied; and

(iv) (Court orders coming into effect): the coming into effect, pursuant to section 411(10) of the Corporations Act, of the orders of the Court made under section 411(4)(b) of the Corporations Act (and, if applicable, section 411(6) of the Corporations Act) in relation to the Scheme.

4.9 Scheme Shareholder deemed warranties

Pursuant to clause 7.6(b) of the Scheme, the Scheme Shareholders are deemed to have warranted to EXU that:

(a) all their Auzex Shares (including any rights and entitlements attaching to those shares) which are transferred to EXU under the Scheme will, at the date of the transfer to EXU, be fully paid and free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or otherwise, and restrictions on transfer of any kind; and

(b) they have full power and capacity to sell and to transfer their Auzex Shares, together with any rights attaching to such shares.

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4.10 Taxation consequences of the Merger Scheme

(a) A general guide to the Australian taxation consequences of the Scheme for Scheme Shareholders is set out in section 10 of this Booklet.

(b) The guide in section 10 is not intended to, and does not, provide specific advice in respect of the individual tax consequences of the Scheme for any Scheme Shareholder. Auzex recommends that all Scheme Shareholders obtain their own independent, professional tax advice before determining how to vote on the Scheme.

4.11 Ineligible Overseas Shareholders

(a) EXU is not obliged to issue, and will not issue, any Scheme Consideration in the form of New EXU Shares to any Ineligible Overseas Shareholder.

(b) The New EXU Shares that would have been issued to Ineligible Overseas Shareholders will be issued to the Sale Nominee on the Implementation Date. EXU will procure that, as soon as reasonably practicable (and in any event not more than 15 Business Days after the Implementation Date), the Sale Nominee:

(i) sells on ASX all of the New EXU Shares issued to the Sale Nominee in relation to Ineligible Overseas Shareholders in such manner, at such price and on such other terms as the Sale Nominee determines in good faith and at the risk of Ineligible Overseas Shareholders; and

(ii) promptly after the last such sale, the Sale Nominee will pay to each Ineligible Overseas Shareholder their proportion of the Cash Proceeds (after deducting any applicable brokerage, stamp duty and other taxes and charges) calculated on an average basis so that all Ineligible Overseas Shareholders receive the same price per New EXU Share, subject to rounding, in full and final satisfaction of that Ineligible Overseas Shareholder’s rights to Scheme Consideration under the Scheme.

(c) The Sale Nominee will pay the relevant proportion of the Cash Proceeds to each Ineligible Overseas Shareholder in accordance with any current notification made by each such Ineligible Overseas Shareholder for the payment of any Auzex dividends by deposit to a nominated bank account or, where there is no such current notification, by sending, or procuring the despatch to each such Ineligible Overseas Shareholder by prepaid post to the registered address of the Ineligible Overseas Shareholder at 6:00 pm on the Record Date, a cheque in the name of that Ineligible Overseas Shareholder for the relevant amount (denominated in Australian dollars).

(d) Pursuant to clause 5.6(e) of the Scheme, Ineligible Overseas Shareholders appoint Auzex as their agent to receive on their behalf any financial services guide or other notices (including any updates of those documents) that the Sale Nominee is required to provide to Ineligible Overseas Shareholders under the Corporations Act. Copies of any document Auzex receives from the Sale Nominee as agent for the Ineligible Overseas Shareholders can be obtained by contacting Auzex’s Company Secretary.

(e) Auzex, EXU and the Sale Nominee give no assurance as to the price that will be achieved for the sale of New EXU Shares as described above. The market price of EXU Shares is subject to change from time to time. You can obtain up-to-date information on the market price of EXU Shares from ASX, code EXU. The proportionate share of Cash Proceeds that Ineligible Overseas Shareholders will receive may be more or less than the market value of New EXU Shares that would otherwise have been issued to that Ineligible Overseas Shareholder at the date of receipt of payment.

(f) The amount of money received by an Ineligible Overseas Shareholder for EXU Shares may be less than the actual price that is received by the Sale Nominee for the EXU Shares.

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5 PROFILE OF AUZEX

5.1 Auzex establishmentAuzex is an unlisted exploration company which was established through the demerger of the non- Bullabulling gold project assets of Auzex Resources Limited and was incorporated on 6 October 2011.

Auzex was established to advance its current portfolio and identify advanced exploration projects, predominantly in gold and tin. Its strategy is to become a self-funded mineral explorer, focusing initially on the Tampia gold project tenements (90% interest) it acquired in Western Australia.

As part of the demerger of the non-Bullabulling gold project assets of Auzex Resources Limited, Auzex Resources Limited shareholders who were on the share register on 30 December 2011 received one (1) new Auzex Exploration Share for each six (6) Auzex Resources Limited shares. Auzex Shares were transferred to eligible Auzex Resources Limited shareholders on 6 January 2012 and share certificates were dispatched on 16 January 2012.

At the time of the demerger Auzex’s assets were valued at approximately $10 million and consisted of early stage gold and tin projects on the east coast of Australia. It held $2 million in cash and 7,022,472 million shares in Bullabulling Gold Limited (ASX:BAB). The exploration assets included:

• Khartoum tin-tungsten project (Queensland – 100%);

• Running Brook copper-gold project (Queensland – 100%);

• Galala Range gold-tungsten-molybdenum project (Queensland – 100%);

• Lyell gold project (New Zealand – 73%);

• Seven Hills gold project (New South Wales – 100%); and

• Kingsgate molybdenum-bismuth-silica project (New South Wales – 100%).

5.2 Activities since establishmentSince its establishment, Auzex has achieved the following:

• Acquired 90% of the Tampia gold project in the eastern goldfields of West Australia, with the vendors retaining a 10% interest. The Tampia gold project will be the focus of exploration and development;

• Developed new drilling targets for resource assessment on the Tampia gold project in Western Australia;

• Signed a Land Access Agreement over the Tampia gold project in Western Australia;

• Completed 3D geological modelling of the Khartoum tin project areas as the basis for targeting future exploration and resource assessment;

• Acquired additional prospective tenements around the Khartoum and Runningbrook projects;

• Completed an initial 492 metres diamond drilling program at Tampia to provide geological data of the known gold mineralisation and confirm previous results;

• Sold its interest in Bullabulling Gold Limited (7,022,472 shares) into the takeover by Norton Gold Fields Ltd for approximately $561,800; and

• Sold its interest in Jervois Mining Limited for $20,784.

Auzex has also relinquished tenements associated with the Klondyke / Seven Hills in NSW, Galala Range in North Queensland and the Lyell Gold Project in New Zealand. The relinquishment of these tenements resulted in a total impairment of $3,872,788 in FY12/13 and $774,771 for FY13/14. This has consolidated Auzex’s projects into four significant projects being:

• Tampia gold project (Western Australia - 90% interest);

• Khartoum tin-tungsten project (Queensland – 100% interest);

• Running Brook copper-gold project (Queensland – 100% interest); and

• Kingsgate molybdenum-bismuth-silica project (New South Wales – 100% interest).

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5.3 Auzex’s businessAuzex is a company at the exploration end of the mineral resources development and mining value chain.

Auzex’s strategy is to use new 3D geological and GIS tools and techniques that are available to explorers to identify, target and develop mineral resources in both two and three dimensions at each of Auzex’s projects to develop new exploration and resource development targets.

5.4 Auzex’s projects5.4.1 Tampia gold project (Auzex Exploration 90%) Western Australia

(a) Overview

The Tampia gold project is Auzex’s primary project, located 300 kilometres east of Perth in the wheat belt of Western Australia. The project comprises eight exploration licences, three prospecting licences and two mining leases. Exploration at the Tampia gold project is still considered to be at an early stage and exploration methods and modelling are yet to be extensively applied.

Auzex acquired an 80% participating interest in the Tampia gold project in February 2012 for a $500,000 cash payment to Tampiagold Pty Ltd and Goldoro Pty Ltd.

On 30 June 2015 Auzex acquired a further 10% participating interest from Tampiagold Pty Ltd and Goldoro Pty Ltd, taking Auzex’s participating interest to 90%, in consideration for Auzex releasing Tampiagold Pty Ltd and Goldoro Pty Ltd from principal and interest totalling $193,803 owing to Auzex pursuant to a loan agreement dated 5 October 2012.

Tampiagold Pty Ltd and Goldoro Pty Ltd retain a free carried interest to completion of a definitive feasibility study. They then retain a 10% participating interest or convert to equity and, or, a royalty interest.

(b) Development by Auzex

The Tampia gold project was acquired by Auzex in 2012, whose activities have since largely focussed on resolving access issues and the consolidation and reinterpretation of existing data, and diamond drilling (2014) at the Tampia Hill prospect on the Exploration Licence and both mining leases.

In August 2014, Auzex completed an initial small diamond drilling program comprising four holes totalling 491.6m at Tampia which confirmed the location and grades of the previous drilling results and highlighted the structure of the mineralised zone. The Tampia gold project area covers a sequence of late Archaean mafic-felsic granulite facies gneiss and granitoid. The lowest unit in the sequence as interpreted from the structural position of the units is a suite of banded feldspar-biotite-quartz granulite that also can contain graphite and pyrrhotite in augen gneiss. The original sequence for this unit is believed to be clastic sediment, wacke, arenite and graphitic shale. The next unit is feldspar-biotite-amphibole-pyroxene granulite that appears to contain a mixture of sedimentary and mafic precursor lithologies. The uppermost part of the sequence consists of a mafic granulite dominated by pyroxene-plagioclase-amphibole lithologies. Minor biotite, spinel, enstatite and quartz with pyrrhotite up to 2% also occur. The precursor lithology is inferred to be tholeiitic basalt. This sequence is intruded by quartz-feldspar granitoid dykes and sills that have complex cross-cutting relationships suggesting multiple phases of emplacement. This entire sequence is intruded by a number of unmetamorphosed dolerite dykes that are thought to be of Proterozoic in age.

Gold mineralisation at Gault is dominantly disseminated throughout, or concentrated within, pods of hornblende-biotite-pyroxene and hornblende-biotite-plagioclase within pyroxene and biotite bearing mafic granulites. The gold occurs with disseminated non-magnetic pyrrhotite, arsenopyrite, chalcopyrite and rare pyrite. Total sulphide contents of mineralised intersections are between 5% and 10%, with a maximum estimated 15% sulphide. Sulphides occur along S1 foliation planes and are folded by F1 minor folds. Mineralisation occurs in elongate to ellipsoidal pods that vary in size from 1-20 m thick, 50-150 m wide (east-west) and 50-200 metres long (north-south).

Four mineralised shoots were identified in the north of the prospect, with another two zones in the central and southern parts. Average grades within a zone >1g/t Au vary between 1 to 20 g/t Au over 5-20 m intervals. The northern zone has yielded the best grades.

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(c) Current drilling program

Auzex commenced a new drill program on 17 June 2015, which was jointly planned by Auzex and EXU and consists of five diamond drill holes totalling approximately 590 metres and is expected to take six weeks to complete. The program is an extension of the drilling undertaken by Auzex in July and August 2014 which consisted of four diamond drill holes totalling 492 metres.

The current program is expected to provide insight to the geology and structure of the gold mineralisation which will be used in follow up resource drilling programs, as well as an understanding of the continuity of mineralisation along strike and down dip. Sections of the mineralised drill core will be used for initial metallurgical test work to determine the gold recovery within the oxidised and fresh lithologies, together with mineralisation characteristics critical for future process plant design.

The objectives of the drilling program include to:

• provide geological and structural data of the known mineralisation zones;

• test for continuity of mineralisation;

• confirm previous drilling intercepts and test resource model;

• provide fresh drill core for metallurgical test work; and

• enable planning for follow up resource drilling.

Exploration at Tampia is still considered to be at an early stage, and modern exploration methods and modelling have yet to be extensively applied. The strategy in the next twelve months is to deliver a number of gold targets that will add significantly to the current resource.

(d) Key highlights

Key highlights of Tampia include:

(i) high grade near surface gold mineralisation discovered is well drilled in part to mostly shallow depth, but open in all directions and at depth;

(ii) the area has significant gaps in drilling. If infill drilling is successful, an increase in mineralisation is anticipated;

(iii) significant potential for further discoveries within 10km radius with a number of strong geochemical and auger/RAB anomalies;

(iv) Tampia is located on private land in the outer wheat belt close to sealed roads, power, water, accommodation, services and labour; and

(v) Tampia is located 135km by road from Westonia and about 185km by road from Southern Cross and Marvel Loch.

5.4.2 Khartoum tin and tungsten project (Auzex 100%) north Queensland

The tenements in the north Queensland project area were initially acquired based on Auzex’s prospectivity models for intrusion related tin mineralisation similar to the porphyry style tin and tungsten mineralisation of the mines of the Bolivian tin belt. These models continue to be used to acquire prospective tenements around our main targets. This led to four new tenement applications around the Khartoum tin project area, which have been targeted for high grade tin vein mineralisation in the exo-contact of tin rich granites and low grade high tonnage tin mineralisation within the tin granites. These tenements have now all been granted.

Located approximately 100km south-west of Cairns in north Queensland, the geology of the Khartoum tenement is dominated by highly fractionated coarse-grained granites with excellent potential to host economic tin-tungsten mineralisation. The project area covers a Late Carboniferous-Early Permian felsic intrusive (the Elizabeth Creek Granite), containing over fifty tin, tungsten, molybdenum and gold occurrences. Historic production is estimated to be 15,000t tin. Outcropping tin mineralisation is associated with 107 recognised greisen zones covering an aggregate area exceeding 50 square kilometres.

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5.4.3 Running Brook copper and gold project (Auzex 100%) north Queensland

The Running Brook project area was originally highlighted by Auzex’s prospectivity modelling studies for granite related gold mineralisation and is located in north Queensland, 150km south- west of Cairns north of Mt Surprise. This project was modelled on the prolific Kidston gold mine (3.5Moz between 1985 and 2001) located approximately 120km south of Running Brook.

Initial soil sampling identified anomalous gold and copper, with a 30ppb Au in soil anomaly defined over a 1000m x 300m area. Sampling also highlighted a 150ppm Cu in soil anomaly measuring 1000m x 500m that partially overlaps the gold in soil anomaly to the north. Infill and extension soil sampling was then completed with additional gold and copper anomalies defined.

5.4.4 Kingsgate molybdenum and silica project (Auzex 100%) New South Wales

The Kingsgate project was acquired by Auzex after prospectivity modelling for granite related gold mineralisation over Eastern Australia and the West coast of New Zealand identified the granites in the Kingsgate region as having the potential to host intrusion related gold mineralisation. Located 20km east of Glen Innes, the Kingsgate Mine was the second largest producer of molybdenum in Australia. Much of the ore was mined from high grade quartz pipes between the 1880s and 1920s. No modern exploration had been completed prior to Auzex acquiring the project.

5.5 Directors and management of Auzex

5.5.1 Management

(a) The Auzex Board of Directors and management team have significant experience in the Australian and New Zealand mining sectors. This includes greenfields exploration through to resource assessment, mine development and operations.

(b) Details of the directors and management of Auzex and a brief description of their qualifications and other directorships are set out below.

5.5.2 Directors

As at the date of this Booklet the Auzex Directors are:

(a) Chris Baker - Non-executive Chairman

(b) John Lawton - Managing Director

(c) Greg Partington - Director of Operations

(d) Paul Frederiks - Non-executive Director and Company Secretary

The Directors of Auzex and a brief description of their qualifications and other directorships are set out below:

Chris Baker – Non-executive ChairmanB.Sc (Hons.), MBA, FAusIMM, IOD

Chris Baker is a company director with over 30 years’ experience in the Australian and New Zealand resources sector. His background is as a metallurgist and his experience includes technical, operational and managing roles in the mining sector including gold, uranium, tungsten, titanium and coal. He has been involved in project development, has extensive experience in joint ventures and governance and has a broad and practical understanding of the mining industry and the multitude of disciplines that comprise successful projects and successful companies.

Chris has a Bachelor of Science (Hons) in Mineral Technology and an MBA, both from Otago University, and is a Fellow of the Australasian Institute of Mining and Metallurgy. He is a member of the Institute of Directors (NZ).

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His positions include: Chief Executive Officer of Straterra Inc., a group that represents the resource sector in New Zealand; Chairman of the Coal Association of New Zealand; Chairman of MinEx, the New Zealand mineral sector Health and Safety Council; Chairman of RSC Mining and Mineral Exploration Ltd. He was formerly a non-executive Director and then Chairman of ASX listed company Auzex Resources Limited (September 2005 to April 2012).

Chris has been a Director of Auzex since incorporation.

John Lawton – Managing DirectorB.Sc. (App.Sci.), MAusIMM, MAICD

John Lawton is the founder of the Auzex group of mining companies and a geologist with 40 years industry experience in mineral exploration, project development, operations corporate management and mergers and acquisitions, including 20 years in management of ASX-listed gold mining and exploration companies.

John founded Auzex Resources Limited in 2003 and held the positions of Executive Chairman or Managing Director throughout its nine year life during which time the company acquired and developed the Bullabulling gold deposit near Coolgardie in the Eastern Goldfields of Western Australia.

John was a co-founder and Executive Director of Ross Mining NL throughout its existence from incorporation in 1986 to merger in 2000, a company which was a low cost and profitable gold miner, developing and operating seven low grade open-cut gold mines in central Queensland, New South Wales and Solomon Islands. The company was innovative in its approach and regularly paid dividends to shareholders.

John has a Bachelor of Science in Applied Geology and is a member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Company Directors.

John has been a Director of Auzex since incorporation.

Dr Greg Partington – Director of OperationsPh.D., MAusIMM

Dr Greg Partington is a founding Director of the Auzex group of companies and is also the Managing Director of his own company, Kenex Knowledge Systems Ltd, based in New Zealand and Western Australia, focusing on creating business opportunities in the spatial world. He was formerly Operations Director of the ASX listed company Auzex Resources Limited (September 2005 to April 2012).

Greg has over 30 years’ experience in the exploration industry in Australia, Pacific Islands and Melanesia where he worked as the exploration manager for Northern Gold and General Manager, exploration for Ross Mining NL. He also has eleven years’ experience in developing earth science GIS databases for use in exploration targeting and resource development.

Greg has expertise in mineral exploration, structural geology, database development and management, spatial analysis of data using Geographic Information Systems (GIS), and business management. He has focussed on gold exploration, but has experience in tin-tantalum deposits and platinum exploration. He has also been continuously active in geoscientific research and published a number of papers on his research.

Greg has been a Director of Auzex since incorporation.

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Paul Frederiks – Non-executive Director and Company SecretaryB.Bus (Acc.), FCPA, FCIS, FAICD

Paul Frederiks has extensive experience in public company financial and secretarial management with more than 29 years’ experience in the mining and resources sector.

He held the position of Company Secretary and Chief Financial Officer of Ross Mining NL for over eight years until 2000. He also has expertise in ASX listed public company reporting, financial modelling and forecasting, treasury management and hedging, project financing and corporate governance.

Paul established his own consultancy in 2000 providing company financial and secretarial services to both listed and unlisted public companies. He was Company Secretary of Billabong International Limited from 2000 to 2004, and Company Secretary and a non-executive Director of the listed company Auzex Resources Limited (September 2005 to April 2012).

He was previously Company Secretary of the listed company Geodynamics Limited and more recently was Chief Financial Officer and Company Secretary of ASX listed Discovery Metals Limited. Paul is a fellow of CPA Australia, the Australian Institute of Company Directors and the Governance Institute of Australia and formerly the QLD branch councillor of Chartered Secretaries Australia and Chairman of the QLD Public Company Discussion Group.

Paul is currently also a Director of Multiphase Drilling Solutions Pty Ltd and Blanckensee Consulting Pty Ltd and Chief Financial Officer and Company Secretary of juwi Renewable Energy Pty Ltd.

Paul has been a Director of Auzex since incorporation.

5.6 Auzex Capital Structure and ownership

As at the date of this Booklet, Auzex has the following securities on issue.

Class of Security Number on Issue

Fully paid ordinary shares 16,801,449

As at the date of this Booklet, the ten largest shareholders are:

Shareholder Number of Percentage Auzex Shares Shareholding

EPOCC XT LLC 2,861,350 17.03

Misty Grange Pty Ltd 1,211,123 7.21

HSBC Custody Nominees (Australia) Limited 1,037,581 6.18

National Nominees Limited 933,273 5.55

John Andrew Rodgers 600,000 3.57

Bullabulling Gold (UK) Limited 570,371 3.39

JP Morgan Nominees Australia Limited 565,943 3.37

Peninsula Goldfields Pty Ltd 546,669 3.25

Jervois Mining Limited 515,000 3.07

CRM Holdings Pty Ltd 500,000 2.98

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As at the date of this Booklet:

(a) The top twenty holders of ordinary equity held 11,657,499 shares representing 69.38% of Auzex Shares.

(b) Directors held or controlled 723,444 ordinary shares representing 4.31% of Auzex Shares.

5.7 Auzex historical financial information

(a) Introduction

This section contains historical financial information for Auzex derived from Auzex’s audited financial statements for the financial years ended 30 June 2013 and 30 June 2014 and management accounts for the six months ended 31 December 2014.

Auzex has inadvertently failed to comply with its obligations, as a disclosing entity under the Corporations Act, to prepare and give to ASIC reviewed financial reports and directors’ reports for each of the six months ended 31 December 2013 and 31 December 2014. Auzex is acting to rectify this oversight, and will provide to Auzex Shareholders, not less than 10 days before the Scheme Meeting, a financial report and directors’ report for the six months ended 31 December 2014 reviewed by Auzex’s external auditors.

(b) Basis of preparation

The historical financial information of Auzex presented is in an abbreviated form and does not contain all the disclosures, presentation, statements or comparatives that are usually provided in an annual report prepared in accordance with the Corporations Act. Auzex considers that for the purposes of this Booklet the historical financial information presented in an abbreviated form is more meaningful to Auzex Shareholders.

The historical financial information of Auzex has been prepared in accordance with the recognition and measurement principles contained in Australian Accounting Standards.

Auzex’s recent statutory historical consolidated income statements, historical consolidated statements of financial position and historical consolidated cash flow statements are disclosed in the annual financial report for the financial years ended 30 June 2014 and 30 June 2013 which can be found at www.auzex.com.

The historical financial information below consists of the historical consolidated income statements for the 6 months ended 31 December 2014 and for the financial years ended 30 June 2014 and 30 June 2013 and the historical consolidated statement of financial position as at 31 December 2014 relate to Auzex (the Auzex Historical Financial Information) on a standalone basis and accordingly does not reflect any impact of the Scheme.

The pro forma financial effect of the Scheme on the Merged Group is set out in section 7.9 of this Booklet.

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Year ended Year ended Six months ended 30 June 2013 30 June 2014 31 December 2014 (audited) (audited) (unaudited and unreviewed) $ $ $

CONTINUING OPERATIONS

Other income on expiry of an option - 30,714 - for the disposal of non-current assets

Profit on disposal of Available for Sale assets - 413,804 -

Interest Income 20,064 43,373 20,112

TOTAL REVENUE 20,064 487,891 20,112

Impairment/write-off of Exploration Expenses 3,872,788 774,771 14,524

Impairment of Available for Sale asset 1,196,204 - -

General & Administrative Expenses 946,941 505,385 647,719

Finance Costs - 22,603 -

TOTAL EXPENSES FROM CONTINUING OPERATIONS 6,015,933 1,302,759 662,243

Profit/(Loss) from Continuing Operations before Income Tax Expense (5,995,869) (814,868) (642,131)

Income Tax Benefit attributable to Operating Loss - - -

Profit/(Loss) from Continuing Operations after Income Tax Expense (5,995,869) (814,868) (642,131)

OTHER COMPREHENSIVE INCOME

Items that may be reclassified subsequently to profit or loss

Net Gain/(Loss) on Foreign Currency - (24,958) - taken to profit and loss

Net Gain/(Loss) on Foreign Currency 8,017 - - Translation Reserve taken to equity

Total Other Comprehensive 8,017 (24,958) - Income for the period

TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD ATTRIBUTABLE TO THE OWNERS (5,987,852) (839,826) (642,131)

(c) Auzex Historical Consolidated Income Statement

The Historical Consolidated Income Statements of Auzex for the 6 months ended 31 December 2014 and for the financial years ended 30 June 2014 and 30 June 2013 is shown below:

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Year ended Year ended Six months ended 30 June 2013 30 June 2014 31 December 2014 (audited) (audited) (unaudited and unreviewed)

$ $ $

CURRENT ASSETS

Cash 358,896 354,214 90,791

Term Deposits (secured) 75,000 75,000 65,000

Other Receivables 165,102 262,138 218,722

TOTAL CURRENT ASSETS 598,998 691,352 374,513

NON CURRENT ASSETS

Investments in Available for Sale Assets 168,780 - -

Deferred Exploration Expenditure 3,987,612 3,942,662 4,398,928

Property Plant & Equipment 50,423 38,753 30,339

TOTAL NON CURRENT ASSETS 4,206,815 3,981,415 4,429,267

TOTAL ASSETS 4,805,813 4,672,767 4,803,780

CURRENT LIABILITIES

Convertible Notes - 525,000 525,000

Payables 516,723 577,613 831,884

Provision for Employee Benefits 102,638 92,993 111,869

TOTAL CURRENT LIABILITIES 619,361 1,195,606 1,468,753

NON CURRENT LIABILITIES

Provision for Rehabilitation 123,605 123,605 123,605

TOTAL NON CURRENT LIABILITIES 123,605 123,605 123,605

TOTAL LIABILITIES 742,966 1,319,211 1,592,358

NET ASSETS 4,062,847 3,353,556 3,211,422

EQUITY

Contributed Equity 10,325,014 10,455,549 10,955,549

Other Reserves 24,958 - -

Retained profits/(losses) (6,287,125) (7,101,993) (7,744,127)

TOTAL EQUITY 4,062,847 3,353,556 3,211,422

(d) Summary of Consolidated Statements of Financial Position

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Year ended Year ended Six months ended 30 June 2013 30 June 2014 31 December 2014 (audited) (audited) (unaudited and unreviewed)

$ $ $

CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES

Goods and services tax received 115,185 73,479 48,342

Payments to suppliers and employees (861,215) (511,072) (464,334)

Interest received 19,683 43,979 20,188

Net cash flows from/(used in) operating activities (726,347) (393,614) (395,804)

CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES

Proceeds from sale of fixed assets 2,016 - -

Proceeds from Available for Sale Assets - 582,584 -

Purchase of property, plant & equipment - (5,073) -

Payments for exploration and evaluation expenditure (1,004,750) (844,114) (367,619)

Net cash flow from/(used in) investing activities (1,002,734) (266,603) (367,619)

CASH FLOWS FROM FINANCING ACTIVITIES

Cash from Demerger from Auzex Resources Limited - - -

Proceeds from issue of shares 1,045,500 130,535 500,000

Proceeds from Convertible notes - 525,000 -

Share Capital raising expenses (93,119) - -

NET CASH FLOW FROM FINANCING ACTIVITIES 952,381 655,535 500,000

Net increase / (decrease) in cash held (776,700) (4,682) (263,423)

Add: Opening cash carried forward 1,135,596 358,896 354,214

CLOSING CASH CARRIED FORWARD 358,896 354,214 90,791

(e) Summary of Consolidated Statements of Cash Flows

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5.8 Material changes in the financial position of Auzex

In the six month period ended 31 December 2014 the Cash held by Auzex declined from $354,214 to $90,791, as a result of cash expended in Auzex’s operations including expenditure in preparing for a proposed Initial Public Offering in October 2014. Cash held by Auzex as at 30 April was $72,964.

Subject to the foregoing paragraph, to the knowledge of Auzex, there have been no material changes to the financial position of Auzex since 30 June 2014, being the last balance sheet laid before Auzex in general meeting or sent to Auzex Shareholders in accordance with section 314 or 317 of the Corporations Act, except as disclosed in this Booklet.

5.9 Operations of Auzex if Scheme does not proceed

In the event that the Scheme does not proceed, Auzex will remain unlisted and will continue as a standalone entity with the Auzex Board and management continuing to implement the strategies it had in place prior to the announcement of the Scheme.

Auzex has sufficient funds to meet its obligations in respect of the Scheme, but may be liable to repay the loan of $800,000 from EXU – refer to the following section 5.11.1. In that event, Auzex will consider:

(a) capital raising initiatives;

(b) asset sales;

(c) inviting EXU to exercise its option to convert the Outstanding Monies to Auzex Shares in satisfaction of the Loan (refer to paragraph 5.11.1(b)).

5.10 Auzex risk factors

Risk factors relating to Auzex and its business are discussed in section 8 of this Booklet.

5.11 Material Contracts

5.11.1 Loan Agreement with EXU

On 23 April 2015, Auzex entered into a loan agreement with EXU (which was subsequently amended on 19 May 2015) pursuant to which EXU agreed to advance a loan of $800,000 (Loan) to Auzex (Loan Agreement).

Auzex has drawn down the full amount of $800,000 under the Loan Agreement.

The loan is secured by a general security interest granted to EXU over the assets, undertakings and unpaid capital of Auzex.

The key terms of the Loan Agreement are:

(a) Repayment Date: the repayment date is the earliest to occur of:

(i) the date that is 3 months after termination of the MIA (including if Scheme Shareholders do not approve the Scheme), other than solely as a result of a material breach of a term of the MIA by EXU;

(ii) 5 Business Days after the date on which Auzex receives a notice from EXU that it is in default of its obligations under the Loan Agreement; and

(iii) 12 months after the date of the Loan Agreement,

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(b) Election or Conversion: EXU shall, on or before the date that is 2 Business Days prior to the Repayment Date, give written notice to Auzex that it wishes to either:

(i) have all debts and monetary liabilities of Auzex to EXU under the Loan Agreement (Outstanding Monies) repaid on the Repayment Date (Repayment Election); or

(ii) have the Outstanding Monies converted into Auzex Shares on the Repayment Date,

provided that if no election is made by EXU within the period required, EXU is deemed to have made the Repayment Election.

(c) Interest: the Loan is interest free.

The Loan Agreement otherwise contains representations and warranties which are customary for an agreementof its kind.

5.11.2 Joint Venture Agreement

On 17 February 2012, Auzex entered into a joint venture agreement with both Tampiagold Pty Ltd (Tampiagold) and Goldoro Pty Ltd (Goldoro) (together the Tampiagold Parties) jointly as tenants in common in equal shares.

The material terms of the joint venture agreement are as follows:

(a) (Purpose): Auzex and the Tampiagold Parties formed an unincorporated joint venture on 17 February 2012 for the purpose of exploring and developing the project as a commercial venture;

(b) (Participation Interest): the participation interests are:

(i) 90% held by Auzex; and

(ii) 10% held by the Tampiagold Parties;

(c) (Free Carry): Auzex will contribute cash calls to meet all joint venture expenditure during the free carry period;

(i) the free carry period commences on 17 February 2012 and ends on the date that a bankable feasibility study has been completed in relation to the project, finance is secured for mining operations on a non-binding but firm basis, or if Auzex elects to proceed with the development of the project based on the findings of the bankable feasibility study and the terms of the finance;

(ii) at the end of the free carry period, each participant must contribute cash calls on a pro rata basis in accordance with their participation interests to meet the joint venture expenditure;

(d) (Termination): the joint venture will terminate on the earlier of the following dates:

(i) any date specified by Auzex after it has given an unwind notice under the sale and purchase agreement;

(ii) upon one of the participants holding 100% of the participation interest;

(iii) the date that all of the participants agree in writing to terminate the joint venture; or

(iv) on the expiry of the last of the tenements.

(e) (Disposal of Joint Venture Assets): if the joint venture is terminated by agreement in writing by all of the participants or due to the expiry of the last of the tenements, on termination all joint venture assets will be:

(i) distributed to or held for the benefit of the participants in proportion to their participation interests; or

(ii) sold with the net proceeds of the sale being divided among the participants in accordance with their respective participation interests.

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5.11.3 Joint Venture Management Agreement

Auzex, Tampiagold and Goldoro (each a Participant) are parties to a Joint Venture Management Agreement (Management Agreement), under the terms of which Auzex is appointed as the manager for the Tampia gold project (Manager) to do all things necessary for the efficient and economic conduct of operating the Tampia gold project.

(a) (Manager responsibilities): As the Manager, Auzex is responsible for, among other things:

(i) making cash calls on a monthly basis and paying joint venture expenditure;

(ii) maintaining and operating the project account;

(iii) ensuring compliance with all laws;

(iv) obtaining and maintaining authorisations for the Tampia gold project in the name of the Participants;

(v) keeping the joint venture committee informed of all matters pertaining to the operations of the Tampia gold project;

(vi) distributing available cash to Participants;

(vii) maintaining and protecting joint venture assets;

(viii) engaging qualified and competent personnel;

(ix) as directed by the joint venture committee, procure feasibility studies and arranging, managing and co-ordinating the development, construction and commissioning of any new mines;

(x) preparing half yearly programs and budgets;

(xi) preparing monthly contribution statements giving a monthly summary of cash calls and disbursements; and

(xii) providing monthly progress reports to the joint venture committee.

(b) (Agreements with associates): The Manager must ensure that any agreement it enters into with any associate of the Manager is first approved by the joint venture committee and on reasonable arms length commercial terms.

(c) (Indemnity): Under the terms of the Management Agreement, Auzex, as Manager, is indemnified on terms which are customary for joint venture management agreements.

(d) (Reimbursement for Costs): The Manager is entitled to be reimbursed for all reasonable expenses incurred in the course of undertaking its duties under the Management Agreement, but is not otherwise entitled to remuneration or other additional amounts, such as the costs of its internal executives’ time in managing the duties or internal administrative costs.

(e) (Termination): The Management Agreement may be terminated:

(i) by the joint venture committee and the Manager together agreeing to terminate in writing;

(ii) if the Manager has committed a material breach under the Management Agreement, and the Manager fails to rectify the breach within 20 business days after the joint venture committee provides notice to the Manager, the Management Agreement will terminate on the expiry of the 20 business day period;

(iii) if a Participant (who is not an associate of the Manager) has committed a material breach under the Management Agreement, and the Participant fails to rectify the breach within 20 business days after the Manager provides notice to the Participant, the Management Agreement will terminate on the expiry of the 20 business day period;

(iv) by the joint venture committee by written notice to the Manager, if the Manager is insolvent;

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(v) by the Manager by written notice to a Participant, if a Participant (who is not an associate of the Manager) is insolvent;

(vi) by the joint venture committee by giving not less than 6 months written notice to the Manager if the Manager or its associate holds less than a 50% interest in the Tampia gold project;

(vii) on completion of the Tampia gold project Joint Venture Agreement; or

(viii) by the joint venture committee if the Manager is guilty of gross negligence or wilful misconduct in performing the duties under the Management Agreement.

5.11.4 Compensation and Access Deed

Swanara Pty Ltd (Swanara) is the registered owner of private land in the South West Mineral Field, Western Australia (Private Land). A portion of the Private Land overlaps the area of the mining tenements owned by the Tampia JV (Overlap Area).

On 17 July 2013, Auzex (as the manager of the Tampia JV) entered into a compensation and access deed (Compensation and Access Deed) with Swanara, under which Swanara grants the Tampia JV access to the Overlap Area for exploration purposes.

The material terms of the Compensation and Access Deed are:

(a) (Purpose): Swanara allows Auzex, as the manager of the joint venture, to conduct exploration activities on the mining tenements which overlap some of the private land owned by Swanara,

(b) (Compensation): Auzex must pay compensation to Swanara at the rate of $40,000 every six months, payable in advance,

(c) (Interest): if Auzex is one calendar month late on payment of compensation to Swanara under the compensation and access deed, Auzex must pay interest at a rate 10% per month which accrues daily.

(d) (Term): the Compensation and Access Deed shall continue to be in force until the first to occur of:

(i) if the mining tenements are forfeited – the date of forfeiture;

(ii) if one or more of the mining tenements expire, are surrendered, or are otherwise terminated with the result that there is no overlap area in existence – the date of the expiration, surrender or other termination of that mining tenement;

(iii) Auzex notifies Swanara that they have no further interest in the overlap area;

(iv) Auzex becomes the registered proprietors of all or a portion of the overlap area;

(v) the Compensation and Access Deed being terminated; or

(vi) the date which is three years from the date of the Compensation and Access Deed.

(e) (Termination):

(i) Swanara may terminate the Compensation and Access Deed with immediate effect in the event that Auzex is in default; and

(ii) Auzex may terminate the Compensation and Access Deed at the earlier of:

(A) Auzex giving notice to Swanara that it abandons its rights pursuant to the Compensation and Access Deed;

(B) Auzex withdrawing its applications for or wholly surrendering the tenements; or

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5.11.5 Debt for Equity Swap Agreement

Pursuant to the MIA, it is a Scheme Condition that Auzex, EXU and the Auzex Directors enter into agreements under which all liabilities of Auzex to the Auzex Directors as at 16 May 2015 will, subject to the Scheme becoming Effective, be extinguished on and from the Effective Date, in consideration for EXU issuing to the Auzex Directors on the Implementation Date, pro rata to their share of the total liabilities, a total of 12,000,000 EXU Creditor Options.

The liabilities owed by Auzex to the directors are for unpaid salaries and fees. As stated in Auzex’s 2014 Annual Report:

* At 30 June 2014 accrued liabilities includes $886,003 payable to the Directors of the Company in respect of salaries and fees owing to them (2013: $278,236). Subsequently on 29 September 2014, Directors resolved to forgive $415,814 of this liability reducing the liability to $470,189 having regard to market conditions and the intention to list the Company on ASX in the December 2014 quarter. The Directors have agreed to defer the payment of the amounts owing to them until such time as the Company has the ability pay the amounts while progressing its exploration program.

Auzex, EXU and the four Auzex Directors have entered into a debt for equity swap agreement which satisfies that Condition. The liabilities of Auzex to the Auzex Directors, and the EXU Creditor Options to which they will be entitled in consideration for the extinguishment of the liabilities subject to the Scheme becoming Effective, are set out in the table below.

Please note:

• The Auzex Liability to be extinguished, is the amount of unpaid salary and fees owing to each director.

• The total number of 12,000,000 EXU Creditor Options was fixed by negotiation. As shown by the valuation at clause 9.2.4 of the IER, the value of the EXU Creditor Options is very substantially less than the liabilities released.

• The number of EXU Creditor Options to be received by each director is in proportion to the proportion of the total liabilities to be released.

Auzex Director Auzex Liability to be Extinguished Number of EXU Creditor Options

Chris Baker $91,875 1,248,000

John Lawton $347,622 4,728,000

Greg Partington $269,303 3,660,000

Paul Frederiks $174,350 2,364,000

TOTAL $883,150 12,000,000

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6 PROFILE OF EXPLAURUM LIMITED

6.1 Overview

Explaurum Limited (EXU) was incorporated on 9 May 2005 and is listed on the ASX, having commenced quotation on 20 July 2005.

EXU is a Western Australia (WA) based mineral exploration company engaged in the exploration and development of gold and base metals within the Lyons Project in WA.

As an exploration entity, EXU has no operating revenue or earnings.

EXU’s stated business strategy is to continue exploration activity on EXU’s mineral projects, identify and assess new mineral project opportunities throughout the world and review development strategies where individual projects have reached a stage that allows for such an assessment.

6.2 The Lyons Project

The Lyons Project is located approximately 230km northwest of Meekatharra in Western Australia. EXU acquired the Lyons Project in June 2013 through the acquisition of Ninghan Exploration Pty Ltd from Mr Mark Calderwood.

At the time of acquisition, the project comprised one granted exploration licence and three licence applications. Following the acquisition EXU completed a detailed review of historic exploration data, completed an initial sampling program and arranged for the reprocessing and analysis of available geophysical data.

During the half year ended 31 December 2014, EXU continued development of the Lyons Project with desktop studies and work undertaken focused on selecting initial target areas. Five target areas prospective for gold and base metals were identified for follow up exploration.

During the same period, the three exploration licence applications were approved and following the initial target review analysis, EXU completed the partial surrender of the least prospective portions of two larger licences. The Lyons Project now comprises four granted exploration licences totalling 908 square kilometres.

EXU’s current intentions are to continue with the development of the Lyons Project particularly in relation to the five initial target areas with erosional regolith suitable for systematic soil and rock chip sampling and mapping to significantly increase the ability to narrow-in on gold and base metal occurrences worthy of drilling. The Lyons project area is best suited to seasonal programs due to the summer heat and wet season.

6.3 EXU Capital Raising

In May and June 2015 EXU completed a placement of 43,333,370 Shares at $0.03 per Share together with 10,833,378 attaching Placement Options to raise approximately $1.3 million (Placement). The Placement was undertaken in two separate tranches as follows:

(a) on 7 May 2015, EXU issued the first tranche of the Placement for 64,003,420 Shares (T1 Shares)at a price of $0.003 each (on a pre-Consolidation basis) to raise approximately $192,000 using its placement capacity under the ASX Listing Rules; and

(b) on 29 June 2015, EXU issued:

(i) 1,600,103 Placement Options to subscribers for the T1 Shares (T1 Options); and

(ii) 36,933,028 Shares and 9,233,275 attaching Placement Options.For

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6.4 Directors and management

Patrick Flint - Independent Non-Executive ChairmanCA, B Com, MAICD

Age: 50 Appointed: 27 November 2013

Mr Patrick Flint has been involved in the resources sector as a Director or Company Secretary of ASX and Toronto Stock Exchange listed companies with mineral projects in Australia, Africa and Asia for the past 20 years. He has significant experience with project acquisitions, joint venture negotiations and management, fundraising and corporate matters.

He is also Non-executive Chairman of Nemex Resources Limited and AVZ Limited and is Company Secretary of Red Metal Limited (all of which are listed on ASX).

Mark Calderwood - Technical DirectorCP AusIMM

Age: 47 Appointed: 7 August 2013

EXU appointed Mr Mark Calderwood as Technical Director in conjunction with the acquisition of the Lyons Project.

Mr Mark Calderwood has 30 years’ experience with both exploration and production companies in Australia and Africa.

Mr Calderwood was Managing Director of ASX-100 listed gold producer Perseus Mining Limited, a West African gold producer and explorer from its inception in 2003 until January 2013. Mr Calderwood steered Perseus from an exploration company to a +200,000oz per year producing gold company. Under Mr Calderwood’s leadership Perseus discovered more than 6.8 million ounces of gold, built the Edikan Gold Mine, Ghana, on time and on budget and commenced commercial production in January 2012.

Previously, Mr Calderwood spent more than a decade with Mt Edon Gold Mines, before moving onto Border Gold, a junior gold explorer which later became Moto Gold Mines. In 1995 he moved to Ghana to run gold explorer Leo Shield Exploration NL’s Ghana office. Leo Shield ultimately created Perseus Mining in 2003.

During 2003 and 2004, whilst waiting for Perseus to list, he was Moto’s Exploration Manager for its world-class gold project in the Democratic Republic of Congo.

Mr Calderwood is a Chartered Professional Member of the Australasian Institute of Mining and Metallurgy, a Non-executive Director of Burey Gold and Non-executive Chairman of Manas Resources Limited.

Paul Jurman - Non-executive Director / Company SecretaryCPA, B Com

Age: 42 Appointed Director: 21 September 2012, Secretary since 23 November 2006

Mr Paul Jurman is a Certified Practising Accountant with over 10 years’ experience and has been involved with a diverse range of Australian public listed companies in company secretarial and financial roles.

He is also a Director and Company Secretary of ASX listed Nemex Resources Limited and Company Secretary of Carnavale Resources Limited.F

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6.5 Directors’ interests in EXU Shares

As at the date of this Booklet, the interests of the EXU Directors in the share capital of EXU is as follows:

(a) Interests in issued EXU Share Capital

Director EXU Shares EXU Options Patrick Flint 1,257,813 125,000

Mark Calderwood 3,870,000 250,000

Paul Jurman 900,000 125,000

6.6 Capital Structure and ownership of Explaurum Limited

(a) Issued Shares

As at the date of the Booklet EXU has the following EXU Shares on issue:


Fully paid ordinary Shares 68,982,491

(b) Options

As at the date of the Booklet EXU has the following EXU Options on issue:

Details Number on Issue

EXU Capital Raising Options 10,833,378

As at the date of this booklet, EXU’s ten largest shareholders are:

Shareholder Number of Percentage EXU Shares Shareholding

Pershing Australia Nominees Pty Ltd <Placement A/c> 10,934,318 15.85%

J P Morgan Nominees Australia Limited 4,410,567 6.39%

HSBC Custody Nominees (Australia) Limited - GSCO ECA 3,144,004 4.56%

Ajava Holdings Pty Ltd 2,840,082 4.12%

Mark Calderwood 2,620,000 3.80%

Redtown Enterprises Pty Ltd 2,286,611 3.31%

BT Portfolios Services Ltd <Warrell Holdings S/F A/c> 1,666,668 2.42%

Jervois Mining Limited 1,666,666 2.42%

Ellamar Pty Ltd 1,600,000 2.32%

Auralandia Pty Ltd 1,562,115 2.26%

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As at the date of this Booklet EXU has the following Substantial Shareholders:

Shareholder Number of Percentage EXU Shares Shareholding

Mark Calderwood 3,870,000 5.6%

Note: The 3.8% stated as Mr Calderwood’s shareholding in the list of the largest 10 EXU Shareholders is the shareholding held by Mr Calderwood personally. The 5.6% shareholding stated above is the shareholding of Mr Calderwood and his associates as defined in the Corporations Act.

As at the date of this Booklet:

(i) As at 6 July 2015 the top twenty holders of ordinary equity held 43,965,320 EXU Shares representing 63.73% of total EXU Shares.

(ii) As at the date of this Booklet EXU Directors held or controlled 6,027,813 EXU Shares representing 8.74% of total EXU Shares.

6.7 EXU recent share price performance

(a) The closing price of EXU Shares on ASX as at 22 July 2015 (last trading day immediately before the date of the Booklet was lodged for registration) was $0.051 (5.1 cents).

(b) During the three months ended 22 July 2015:

(i) the highest recorded daily closing price for EXU Shares on ASX was $0.055 (5.5 cents) on

(ii) the lowest recorded daily closing price for EXU Shares on ASX was $0.02 (2 cents) (stated on a post Consolidation basis) on 22 April 2015.

(c) The last recorded sale price for EXU Shares on ASX before the public announcement of the Merger on 30 April 2015 was $0.002 on 22 April on a pre-Consolidation basis.

6.8 EXU Historic financial information

(a) Introduction

This section contains historical financial information for EXU derived from EXU’s audited financial statements for the financial years ended 30 June 2013 and 30 June 2014, and reviewed financial statements for the six months ended 31 December 2014, which were reviewed by EXU’s auditors.

(b) Basis of preparation

The historical financial information of EXU presented is in an abbreviated form and does not contain all the disclosures, presentation, statements or comparatives that are usually provided in an annual report prepared in accordance with the Corporations Act.

The historical financial information of EXU has been prepared in accordance with the recognition and measurement principles contained in Australian Accounting Standards.

EXU’s recent statutory historical consolidated income statements, historical consolidated statements of financial position and historical consolidated cash flow statements are disclosed in the annual financial report for the financial years ended 30 June 2014 and 30 June 2013, and for the six months ended 31 December 2014, all of which can be found at www.explaurum.com.au.

The historical financial information below consists of the historical consolidated income statements for the last 6 months ended 31 December 2014 and for the financial years ended 30 June 2014 and 30 June 2013 and the historical consolidated statement of financial position as at 31 December 2014 relate to EXU (the EXU Historical

21 July 2015; and

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Financial Information) on a standalone basis and accordingly does not reflect any impact of the Scheme.

The pro forma financial effect of the Scheme on the Merged Group is set out in section 7 of this Booklet.

(c) EXU Historical Consolidated Income Statement

The historical consolidated income statements of EXU for the last 6 months ended 31 December 2014 and for the financial years ended 30 June 2014 and 30 June 2013 are shown below:

Year ended Year ended Six months ended 30 June 2013 30 June 2014 31 December 2014 audited audited reviewed

$ $ $ CONTINUING OPERATIONS

REVENUES

Interest Income 6,473 13,175 3,794

Foreign exchange gain 5,007 - 8,884

Total Revenue 11,480 13,175 12,678

EXPENSES

Exploration expenditure written off - (690) -

Legal, regulatory and compliance (156,489) (124,111) (61,601)

Advertising and promotion (14,438) (13,569) (6,675)

Directors, staff and equity compensation (471,793) (76,898) (37,777)

Administration (169,330) (62,494) (33,668)

Depreciation and amortisation (3,561) (5,230) (3,896)

TOTAL EXPENSES FROM CONTINUING OPERATIONS (815,611) (282,992) (143,617)

PROFIT/(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE (804,131) (269,817) (130,939)

Income Tax Benefit attributable to Operating Loss - - -

PROFIT/(LOSS) FROM CONTINUING OPERATIONS AFTER INCOME TAX EXPENSE (804,131) (269,817) (130,939)

Loss after tax from discontinued operation (5,913,692) (359,960) -

NET LOSS FOR THE PERIOD (6,717,823) (629,777) (130,939)

OTHER COMPREHENSIVE INCOME/(LOSS)

Items that may be reclassified subsequently to profit or loss -

Exchange differences realised on sale of subsidiaries (1,523) (15,004) -

Disposal of subsidiary - (232,963) -

OTHER COMPREHENSIVE INCOME/(LOSS) NET OF TAX (1,523) (247,967) -

TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD, NET OF TAX (6,719,346) (877,744) (130,939)

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Loss attributable to:

Owners of the Parent (4,706,842) (622,031) (130,939)

Non-controlling interests (2,010,981) (7,746)

(6,717,823) (629,777) (130,939)

Total comprehensive gain/(loss) attributable to:

Owners of the Parent (4,591,376) (603,655) (130,939)

Non-controlling interests (2,127,970) (274,089)

(6,719,346) (877,744) (130,939)

(d) Summary of Consolidated Statements of Financial Position

Year ended Year ended Six months ended 30 June 2013 30 June 2014 31 December 2014 audited audited reviewed $ $ $

CURRENT ASSETS

Cash and cash equivalents 360,589 455,530 277,259

Trade and other Receivables 4,271 34 5,237

TOTAL CURRENT ASSETS 364,860 455,564 282,496

NON CURRENT ASSETS

Receivables 9,375 9,375 9,375

Plant and equipment 30,422 15,959 12,063

Deferred Exploration Expenditure 577,308 230,473 266,881

TOTAL NON CURRENT ASSETS 617,105 255,807 288,319

TOTAL ASSETS 981,965 711,371 570,815

CURRENT LIABILITIES

Trade and other payables 30,379 37,524 27,907

TOTAL CURRENT LIABILITIES 30,379 37,524 27,907

TOTAL LIABILITIES 30,379 37,524 27,907

NET ASSETS 951,586 673,847 542,908

EQUITY

Issued capital 14,418,701 15,018,706 15,018,706

Reserves 4,577,517 3,193,794 3,193,794

Accumulated losses (16,916,622) (17,538,653) (17,669,592)

Parent entity interest 2,079,596 673,847 542,908

Non-controlling interests (1,128,010) - -

TOTAL EQUITY 951,586 673,847 542,908

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(e) Summary of Consolidated Statements of Cash Flows

Year ended Year ended Six months ended 30 June 2013 30 June 2014 31 December 2014 audited audited reviewed

$ $ $

CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES

Payments to suppliers and employees (865,179) (265,992) (154,541)

Interest received 6,473 13,175 3,794

NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES (858,706) (252,817) (150,747) CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES

Funds leaving group on disposal of subsidiary - (9,327) -

Payments for plant and equipment (8,939) (15,000) -

Proceeds on disposal of plant and equipment 11,301 19,228 -

Payments for exploration expenditure (2,262,018) (115,910) (36,408)

Payments for subsidiary - (50,000) -

NET CASH FLOW FROM/(USED IN) INVESTING ACTIVITIES (2,259,656) (171,009) (36,408) CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of shares and options 995,357 534,357 -

Proceeds from shares issued to non-controlling interests in subsidiary 1,872,600 - -

Issue costs – shares and options (65,488) (14,352) -

NET CASH FLOW FROM FINANCING ACTIVITIES 2,802,469 520,005 -

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (315,893) 96,179 (187,155) Cash and cash equivalents at beginning of the financial period 663,226 360,589 455,530

Effects of exchange rate fluctuation on cash held 13,256 (1,238) 8,884

CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD 360,589 455,530 277,259

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6.9 Subsidiaries

EXU has the following wholly owned subsidiaries, which upon the Scheme being implemented will remain wholly owned subsidiaries of EXU:

Name Place of Percentage incorporation Equity Interest

Erongo Sands Pty Ltd Australia 100%

Ninghan Exploration Pty Ltd Australia 100%

6.10 Rights attaching to EXU Shares

(a) General

The rights and liabilities attaching to EXU Shares are set out in its constitution, and are regulated by the Corporations Act, the ASX Listing Rules and the general law. Set out below is a summary of the principal rights and liabilities attaching to EXU Shares. This summary is not exhaustive and is not a definitive statement of the rights and liabilities of shareholders.

(b) Voting rights

(i) Subject to any rights or restrictions for the time being attached to any class or classes of EXU Shares every shareholder present at a general meeting, in person or by proxy, representative or attorney has one vote on a show of hands and on a poll, one vote for each fully paid EXU Share.

(ii) The holder of partly paid shares has such number of votes in respect of the share on a poll that is equivalent to the proportion that the amount paid (excluding any amount paid or credited as paid in advance of a call) on the shares bears to the total issue price of the share. A shareholder is not entitled to vote at a general meeting unless all calls and other sums presently payable by the member in respect of a share have been paid.

(iii) Where an EXU Share is jointly held, only one of the joint holders may vote.

(c) General meeting and notices

Each EXU Shareholder is entitled to receive notice of, and to attend and vote at EXU’s general meetings and to receive all notices, accounts and other documents required to be sent to shareholders under the EXU constitution, the Corporations Act or the ASX Listing Rules.

(d) Dividends

Subject to the Corporations Act and the rights of persons (if any) entitled to shares with special rights to dividends, EXU’s profits which the EXU Directors determine to distribute by way of dividends are divisible amongst the holders of EXU Shares in proportion to the amounts paid (excluding amounts credited) on the EXU Shares.

(e) Variation of class rights

At present, EXU has only ordinary shares on issue. The rights and restrictions attaching to a class of shares can only be altered with the written consent of holders of at least 75% of the shares issued in that class or with the approval of a special resolution passed at a meeting of holders of the shares of that class.

(f) Further issues of EXU Shares and options

EXU Directors may, subject to the Corporations Act, the ASX Listing Rules or any special rights conferred on the holders of any EXU Share or class of shares, issue EXU Shares or grant options over EXU Shares to any person at any time and on any terms and conditions as they think fit.

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(g) Pre-emptive rights

EXU Shareholders do not have any pre-emptive rights under the EXU constitution. Under the ASX Listing Rules, certain restrictions apply to a listed company offering its shares otherwise than pro rata among shareholders.

(h) Winding up

Subject to the rights of holders of shares issued on special terms and conditions, on a winding up of EXU, the liquidator may, with the sanction of a special resolution of EXU, divide among the shareholders in kind the whole or any part of EXU’s property. The liquidator may set such value as it deems fair on any property to be so divided and may determine how the division is to be carried out as between shareholders or different classes of shareholders.

(i) Buy backs

Subject to applicable laws, in particular the Corporations Act and the ASX Listing Rules, EXU may buy back its shares on such terms and conditions as the EXU Board may determine from time to time.

(j) Transfer of shares

Subject to the ASX Listing Rules, the ASX Settlement Operating Rules and the EXU constitution, EXU Shares are transferable in accordance with CHESS (for CHESS Approved Securities), by instrument in writing in any usual or common form or in any other form that the EXU Directors approve. EXU Directors may, subject to the requirements of the ASX Listing Rules, request its share registry to apply a holding lock to prevent a transfer of EXU Shares in EXU.

(k) Forfeiture after failure to pay calls on partly paid shares

If a shareholder fails to pay a call or another amount that is payable on EXU Shares within 10 business days after the date for payment has expired, then after notification, and before payment, EXU Directors may resolve that the shareholder has forfeited those EXU Shares. A forfeited EXU Share is deemed to be the property of EXU, and subject to the Listing Rules and the ASTC Settlement Rules, may be sold or otherwise disposed of on such terms and in such manner as the EXU Directors think fit.

(l) Holding statements

(i) EXU will apply to participate in CHESS, in accordance with the ASX Listing Rules and the ASX Settlement Operating Rules, for those investors who have, or wish to have, a sponsoring stock broker. EXU Shareholders who do not wish to participate through CHESS will be issuer sponsored by EXU.

(ii) Electronic sub-registers mean that EXU will not be issuing share certificates to EXU Shareholders. Instead, following the issue of EXU Shares comprising the Scheme Consideration, EXU Shareholders will be sent an initial statement of holding (similar to a bank account statement) that sets out the number of EXU Shares which have been issued to them. That statement will also provide details of the shareholder’s holder identification number (HlN) in the case of a holding on the CHESS sub register, or security holder reference (SRN) in the case of holding on the issuer-sponsored sub-register. EXU Shareholders will be required to quote their HIN or SRN, as applicable in all dealings with a stockbroker or the EXU Share Registry. An updated holding statement will be sent to an EXU Shareholder at the end of each month where the balance of the shareholder’s holding of EXU Shares changes.

(m) Directors

The minimum number of EXU Directors is three and the maximum ten. The EXU Board may appoint new directors subject to the number of EXU Directors not being more than the permitted maximum of nine. Except for the EXU managing director, and subject to the Corporations Act and the ASX Listing Rules,

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an EXU Director must retire from office or seek re-election by no later than the third annual general meeting following his or her appointment or election or three years, whichever is longer. At least one EXU Director must retire from office at each annual general meeting. A retiring EXU Director is eligible for re-election.

(n) Indemnities and insurance

EXU must to the extent permitted by law and subject to the Corporations Act, indemnify current and past EXU Directors, secretaries and executive officers of EXU against a liability incurred by the person acting in that capacity and against all legal costs incurred in connection with proceedings in which the person becomes involved because of that capacity.

(o) Amendment of the EXU Constitution

The Corporations Act provides that the constitution of a company may be modified or repealed by a special resolution passed by the members of the company. The EXU constitution does not impose any further requirements to be complied with to effect a modification of the constitution, or to repeal it.

6.11 Material Contracts

(a) Merger Implementation Agreement

EXU has entered into the Merger Implementation Agreement dated 16 May 2015 with Auzex to set out the terms on which Auzex and EXU will effect the Merger. See section 4.3 of this Booklet for a summary of the Merger Implementation Agreement.

(b) Ninghan Sale Agreement

Pursuant to a share sale agreement under which EXU acquired its interest in Exploration Licence 52/2883 and 52/2906 which make up part of the Lyons Project (Ninghan Tenements) (through the acquisition of Ninghan Exploration Pty Ltd), EXU agreed to make the following performance based payments to the vendor:

(i) if a JORC compliant inferred mineral resource of at least 500,000oz of gold or gold equivalent at greater than or equal to 1.5g/tonne gold or gold equivalent (Lyons Resource) is determined to exist on any part of the Ninghan Tenements prior to 24 June 2016, EXU must issue 5,000,000 EXU Shares (capped to a maximum value of $2,000,000 based on the average closing price of the EXU Shares in the 30 days prior to the announcement of the Lyons Resource).

(ii) If EXU sells, disposes of an interest in, or enters into a joint-venture in respect of the Ninghan Tenements then any future obligation to issue the EXU Shares referred to above ceases and is replaced by the obligation for EXU to:

(A) pay to the vendor a gross royalty of 1.0% on minerals sold from the Ninghan Tenements (Royalty); and

(B) ensure any purchaser of any interest in the Ninghan Tenements enters into a deed in a form acceptable to the vendor evidencing acceptance and payment of the Royalty.

6.12 Continuous Disclosing Entity

(a) EXU is a ‘disclosing entity’ under the Corporations Act and is subject to regular reporting and disclosure obligations under the Corporations Act and the Listing Rules. Shareholders seeking further information on EXU are directed to the list of publicly available announcements listed on the ASX (www.asx.com.au, company code ‘EXU’) or on EXU’s website (www.explaurum.com.au).

(b) As at the date of this Booklet, EXU advises that it is not withholding any information from disclosure on the basis of an exception from disclosure in the Listing Rules.

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7 PROFILE OF THE MERGED GROUP

7.1 Introduction

(a) This section of the Booklet sets out the profile of the Merged Group immediately after the Merger.

(b) If the Merger with Explaurum Limited (EXU) is implemented, Auzex will become a wholly owned subsidiary of EXU and Auzex Eligible Scheme Shareholders will become shareholders in EXU.

7.2 Overview of the Merged Group

After the Merger:

(a) EXU will continue to be listed on ASX; and

(b) EXU’s focus will be:(i) development of the Tampia gold project; and(ii) exploration of the Lyons Project.

7.3 Strategy of the Merged GroupThe Merged Group will be focused primarily on developing the Tampia gold project, with a view to becoming a successful mid-tier Australian gold producer. The Auzex Directors believe that the key to unlocking the full potential of the Tampia gold project is by combining the right mix of both exploration and operational skills which Auzex and EXU currently have.

The strategic objective is to take the Tampia gold project through to completion of a bankable feasibility study, and to development and production within an optimal timeframe. EXU will continue to implement an exploration, feasibility and development program in line with Auzex’s and EXU’s strategic objectives.

7.4 Directors of the Merged Group

(a) Proposed structure of the EXU Board of Directors

Pursuant to the Merger Implementation Agreement (MIA), on the Effective Date the EXU Board will be comprised by:

Chris Baker, Chairman;

John Lawton, Managing Director;

Mark Calderwood, Technical Director; and

Patrick Flint, Non-executive Director.

(b) Profiles of EXU Directors

Chris Baker – Non-executive ChairmanB.Sc (Hons.), MBA, FAusIMM, IOD

Chris Baker is a company director with over 30 years’ experience in the Australian and New Zealand resources sector. His background is as a metallurgist and his experience includes technical, operational and managing roles in the mining sector including gold, uranium, tungsten, titanium and coal. He has been involved in project development, has extensive experience in joint ventures and governance and has a broad and practical understanding of the mining industry and the multitude of disciplines that comprise successful projects and successful companies.

Chris has a Bachelor of Science (Hons) in Mineral Technology and an MBA, both from Otago University, and is a Fellow of the Australasian Institute of Mining and Metallurgy. He is a member of the Institute of Directors (NZ).

His positions include: Chief Executive Officer of Straterra Inc., a group that represents the resource sector in New Zealand; Chairman of the Coal Association of New Zealand; Chairman of MinEx, the New Zealand mineral sector Health and Safety Council; Chairman, RSC Mining and Mineral Exploration Ltd. He was formerly a non-executive Director and then Chairman of ASX listed company Auzex Resources Limited (September 2005 to April 2012).

Chris has been a Director of Auzex since incorporation.

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John Lawton – Managing DirectorB.Sc. (App.Sci.), MAusIMM, MAICD

John Lawton is the founder of the Auzex group of mining companies and a geologist with 40 years industry experience in mineral exploration, project development, operations and corporate management, including 20 years in management of ASX-listed gold mining and exploration companies.

John founded Auzex Resources Limited in 2003 and held the positions of Executive Chairman or Managing Director throughout its nine year life during which time the company acquired and developed the Bullabulling gold deposit near Coolgardie in the Eastern Goldfields of Western Australia.

John was a co-founder and executive director of Ross Mining NL throughout its existence from incorporation in 1986 to merger in 2000, a company which was a low cost and profitable gold miner, developing and operating seven low grade open-cut gold mines in central Queensland, New South Wales and Solomon Islands. The company was innovative in its approach and regularly paid dividends to shareholders.

John has a Bachelor of Science in Applied Geology and is a member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Company Directors.

John has been a Director of Auzex since incorporation.

Mark Calderwood, Technical DirectorCP AusIMM

EXU appointed Mark Calderwood as Technical Director in conjunction with the acquisition of the Lyons Project.

Mark has 30 years’ experience with both exploration and production companies in Australia and Africa.

He was Managing Director of ASX-100 listed gold producer Perseus Mining Limited, a West African Gold producer and explorer from its inception in 2003 until January 2013. Mark steered Perseus from an exploration company to a +200,000oz per year producing gold company. Under his leadership Perseus discovered more than 6.8 million ounces of gold, built the Edikan Gold Mine, Ghana, on time and on budget and started commercial production in January 2012.

Previously, Mark spent more than a decade with Mt Edon Gold Mines, before moving onto Border Gold, a junior gold explorer which later became Moto Gold Mines. In 1995 he moved to Ghana to run gold explorer Leo Shield Exploration NL’s Ghana office. Leo Shield ultimately created Perseus Mining in 2003.

During 2003 and 2004, whilst waiting for Perseus to list, he was Moto’s Exploration Manager for its world-class gold project in the Democratic Republic of Congo.

Mark is a Chartered Professional Member of the Australasian Institute of Mining and Metallurgy, a Non-executive Director of Burey Gold and Non-executive Chairman of Manas Resources Limited.

Patrick Flint, Independent Non-executive DirectorCA, B Com, MAICD

Patrick has been involved in the resources sector as a director or company secretary of ASX and Toronto Stock Exchange listed companies with mineral projects in Australia, Africa and Asia for the past 20 years. He has significant experience with project acquisitions, joint venture negotiations and management, fundraising and corporate matters.

He is also Non-executive Chairman of Nemex Resources Limited and AVZ Limited, and is Company Secretary of Red Metal Limited (all of which are listed on ASX).

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7.5 Operations of the Merged Group

The objectives of the Merged Group will be to advance the Tampia gold project and Lyons gold project, and other projects owned by Auzex.

7.6 Capital Structure and ownership of the Merged Group

(a) Issued Shares


Fully paid ordinary Shares 136,188,287

(b) Options

Details Number on Issue

EXU Capital Raising Options 10,833,378

EXU Creditor Options 12,000,000

(c) Major Shareholders

As at the date of this Booklet, the ten largest shareholders in the Merged Group are expected to be:

Shareholder Number of Percentage Auzex Shares Shareholding

EPOCC XT LLC 11,445,400 8.40

Pershing Australia Nominees Pty Ltd <Placement A/c> 10,934,318 8.03

HSBC Custody Nominees (Australia) Limited 7,294,328 5.36

JP Morgan Nominees Australia Limited 6,674,339 4.90

Misty Grange Pty Ltd 4,844,492 3.56

National Nominees Limited 3,733,092 2.74

Ajava Holdings Pty Ltd 2,840,082 2.09

Mark Calderwood 2,620,000 1.92

John Andrew Rodgers 2,400,000 1.76

Redtown Enterprises Pty Ltd 2,286,611 1.68

7.7 Directors’ interests in Shares and Options of the Merged Group

As at the date of this Booklet, the interests of the Auzex and EXU Directors in the share capital of the Merged Group is expected to be:

Interests in issued EXU Share Capital

Director EXU Shares EXU Options

Chris Baker 103,688 1,248,000

John Lawton 2,192,232 4,728,000

Patrick Flint 1,257,813 125,000

Mark Calderwood 3,870,000 250,000

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7.8 Intentions of Auzex and EXU in relation to EXU

This section sets out the intentions of Auzex and EXU in relation to the Merged Group if the Merger is completed. The statements in this section reflect the intentions of Auzex and EXU at the date of this Booklet only:

(a) Corporate matters in relation to Auzex

If the Merger is implemented it is intended that as Auzex will be a wholly owned subsidiary of EXU, the Auzex Board will be reconstituted so that it comprises persons nominated by the EXU Board.

(b) Continuation of Auzex and EXU business

(i) It is the intention of Auzex and EXU that the Merged Group will continue to operate and develop the Tampia gold project and Lyons gold project.

(ii) The board of the Merged Group will decide how the development of the Projects is to be funded following implementation of the Merger having regard to the cash position and ongoing funding requirements of the Merged Group.

(c) Head office

EXU’s corporate headquarters will be based in Brisbane, Queensland.

(d) Board

The composition of the board of EXU is discussed in section 7.4. It is intended that the Merged Group will adhere to the ASX corporate governance principles consistent with the approach currently adopted by Auzex and EXU.

(e) Reporting

Auzex and EXU intend that the Merged Group will continue to lodge its annual, half yearly and quarterly reports in line with EXU’s existing timetable and applicable laws (including the Listing Rules).

(f) Other intentions in relation to Auzex and EXU

Other than as set out or referred to in this section 7.8, it is the present intention of Auzex and EXU that the Merged Group will:

(i) generally continue the businesses of Auzex and EXU in a manner consistent with past practice; and

(ii) continue the employment of Auzex’s and EXU’s present employees.

7.9 Financial information for the Merged Group

(a) Introduction(i) This section contains historical financial information for Auzex and EXU as at 30 April 2015 and pro

forma historical financial information for the Merged Group as if the Merger had occurred on that date.

(ii) The historical information for Auzex and EXU as at 30 April 2015 is derived from management accounts prepared in accordance with the recognition and measurement principles contained in Australian accounting standards.

(iii) The proforma adjustments and proforma historical financial position of the Merged Group after the merger have been prepared by Mr Paul Frederiks B.Bus (Acc.), FCPA, FCIS, FAICD, Non-Executive Director and Company Secretary of Auzex.

(iv) The information is intended to be illustrative only. It is not a forecast and will not necessarily reflect the actual position and balances on completion of the Merger or on any other date.

(b) Pro forma historical financial position of the Merged Group after the Merger

The following table shows:

(i) A summary of the unaudited historical consolidated balance sheet of Auzex as at 30 April 2015 extracted from the unaudited management accounts of Auzex (Unaudited Auzex Balance Sheet). For further detail refer to section 5.7 of this Booklet.

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(ii) A summary of the unaudited historical consolidated balance sheet of EXU as at 30 April 2015 extracted from the unaudited management accounts of EXU (Unaudited EXU Balance Sheet).

(iii) Unaudited proforma adjustments relating to the Merger as if they had occurred on 30 April 2015 (Pro forma Adjustments).

(iv) A summary of the unaudited pro forma historical consolidated balance sheet of the Merged Group as at 30 April 2015, derived from the Unaudited Auzex Balance Sheet, the Unaudited EXU Balance Sheet and the Pro forma Merger Adjustments (Pro forma Merged Group Balance Sheet).

All historical and pro forma historical financial information is presented in an abbreviated form that does not include all of the disclosures usually provided in an annual report prepared in accordance with the Corporations Act.

(c) The pro forma adjustments

The pro forma adjustments made in the following table are:

Note 1 – cash and cash equivalents: A total of two adjustments:

(i) Cash receipt of $1,030,000, representing the issue of 36,933,333 Shares at an issue price of $0.03 cents per Share pursuant to tranche 2 of the Placement, and 10,833,333 free Options issued in accordance with the Placement raising a gross sum of $1,108,000 less costs of $78,000 raising a net sum of $1,030,000. The amount of $192,000 raised pursuant to tranche 1 of the Placement is included in the historical information regarding EXU as at 30 April 2015 (refer section 6.3 of this Booklet).

(ii) Cash expense of $400,000 being anticipated costs of the Merger.

Note 2 – receivables and loan payable: Elimination of loan of $100,000 provided by EXU to Auzex in April 2015.

Note 3 – deferred exploration expenditure: Adjustment to reduce the carrying value of the Deferred Exploration Expenditure to reflect the fair value based on the consideration issued for the acquisition.

Note 4 – convertible notes: Adjustment to convert notes into equity.

Note 5 – trade and other payables: Amounts owing to related parties totalling $883,150 forgiven in exchange for 12,000,000 creditor options in EXU and an amount of $66,432 being interest on convertible notes also converted into equity.

Note 6 – Provision for annual leave: Amounts owing to related parties totalling $105,205 forgiven in exchange for 12,000,000 creditor options as outlined above.

Note 7 – issued capital: A total of three adjustments:

(i) Net pro forma adjustment of $1,030,000 in respect of the Placement.

(ii) Issue of shares for exercise of convertible notes of $525,000 and accumulated interest of $66,432.

(iii) Write off of Auzex accumulated losses of $7,939,302 and Deferred Exploration Expenditure of $2,579,860 against issued capital.

Note 8 – share based payment reserve: Issue of a total of 12,000,000 Creditor Options valued at $272,285 using the Black & Scholes option valuation model to the Auzex Related Party Creditors upon implementation of the Merger.

Note 9 – accumulated losses: A total of four adjustments:

(i) The expense of $272,285 associated with the issue of a total of 12,000,000 Creditor Options valued at $272,285.

(ii) Write off of Auzex accumulated losses of $7,939,302 against issued capital.

(iii) Write off of amounts owing to Auzex related parties totalling $988,355.

(iv) Write off costs of the transaction of $400,000.

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Historical Historical 30 April 2015 30 April 2015 Pro-Forma EXU Auzex Pro-Forma 30 April 2015 management management adjustments Notes Pro-Forma account accounts merged unaudited and unaudited and unreviewed unreviewed $ $ $ $

ASSETS

CURRENT ASSETS

Cash and cash equivalents 309,400 72,964 630,000 1. 1,012,364

Trade and other receivables 1,949 279,056 281,005

TOTAL CURRENT ASSETS 311,349 352,020 630,000 1,293,369

NON - CURRENT ASSETS

Receivables 109,375 (100,000) 2. 9,375

Plant and equipment 12,063 26,501 38,564

Deferred exploration expenditure 269,310 4,610,156 (2,579,860) 3. 2,299,606

TOTAL NON - CURRENT ASSETS 390,748 4,636,657 (2,679,860) 2,347,545

TOTAL ASSETS 702,097 4,988,677 (2,049,860) 3,640,914

LIABILITIES

CURRENT LIABILITIES

Loan payable – 100,000 (100,000) 2. 0

Convertible Notes 525,000 (525,000) 4. -

Trade and other payables 56,273 1,109,851 (949,582) 5. 216,542

TOTAL CURRENT LIABILITIES 56,273 1,734,851 (1,574,582) 216,542

NON - CURRENT LIABILITIES

Provision for annual leave - 113,974 (105,205) 6. 8,769

Provision for rehab 123,605 123,605

TOTAL NON - CURRENT LIABILITIES 0 237,579 (105,205) 132,374

TOTAL LIABILITIES 56,273 1,972,430 (1,679,787) 348,916

NET ASSETS 645,824 3,016,247 (370,073) 3,291,998

EQUITY

Issued capital 15,210,715 10,955,549 (8,897,730) 7. 17,268,534

Option premium reserve 3,193,794 3,193,794

Share based payment reserve 272,285 8. 272,285

Accumulated losses (17,758,685) (7,939,302) 8,255,372 9. (17,442,615)

TOTAL EQUITY 645,824 3,016,247 (370,073) 3,291,998

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8 RISKS OF THE MERGER SCHEME

Auzex Shareholders should be aware that there are a number of risks, both general and specific, associated with the Scheme.

This section outlines:

(a) risks specific to the Scheme and the creation of the Merged Group (see section 8.1 of this Booklet);

(b) risks specific to the Merged Group (see section 8.2 of this Booklet);

(c) risks specific to Auzex (see section 8.3 of this Booklet); and

(d) general investment risks (see section 8.4 of this Booklet).

The outline of risks in this section 8 is a summary only and should not be considered exhaustive. No assurances or guarantees are given in relation to the future performance of, profitability of, or potential payment of dividends by any of, Auzex, EXU or the Merged Group.

These risk factors do not take into account the investment objectives, financial situation, position and particular needs of any Auzex Shareholder.

You should carefully consider the risk factors discussed in this section 8, as well as the other information contained in this Booklet before voting on the Scheme.

8.1 Risks specific to the Scheme and the creation of the Merged Group

(a) Market value of the Scheme Consideration

Under the terms of the Scheme, Scheme Shareholders will receive four (4) New EXU Shares for each Auzex Share they hold. The value of the Scheme Consideration that would be realised by individual Auzex Shareholders will be dependent on the price at which New EXU Shares trade on the ASX after the Implementation Date.

For Ineligible Overseas Shareholders, the value of the consideration they will receive will depend on the price realised by the Sale Nominee in respect of the sale of New EXU Shares attributable to the Ineligible Overseas Shareholders.

Some Scheme Shareholders may not intend to continue to hold the New EXU Shares received under the Scheme and may wish to sell them on the ASX soon after the Implementation Date. In addition, the Sale Nominee will sell New EXU Shares on the ASX as soon as reasonably practical after the Implementation Date. There is a risk that such sales may exert downward pressure on the price of EXU Shares in the short term.

In any event, there is no guarantee regarding the market price of the EXU Shares before the Scheme Meeting or after the Implementation Date. Future market prices may either be above or below current or historical market prices. Information about the current trading prices of EXU Shares may be obtained from www.asx.com.au.

In providing services to EXU in connection with the sale of New EXU Shares to which the Ineligible Overseas Shareholders would otherwise have been entitled, the Sale Nominee is not acting as agent or sub agent of any Ineligible Overseas Shareholder.

(b) Integration and synergies

There is a risk that implementation and other one-off costs may be substantial or greater than reasonably anticipated. This could have a material adverse impact on the Merged Group’s financial position and performance.

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The transition of information systems and data, technical, financial and legal information and resources may not proceed smoothly and may divert management’s attention from managing the Merged Group’s business. There is a risk that revenue streams or operations could be disrupted or that costs associated with the transition may be greater than expected, which could adversely affect the Merged Group’s financial position and performance.

(c) Accounting revisions may be required

Auzex has particular accounting policies and methods which are fundamental to how it records and reports its financial position and results of operations. The Auzex Directors may have exercised judgement in selecting and applying certain accounting policies or methods which might have been reasonable under the circumstances yet might have resulted in reporting materially different outcomes than would have been reported under EXU’s policies and methods.

While no material differences between Auzex and EXU policies and methods have been identified to date, there remains some uncertainty associated with the extent of any impact of such differences. The integration of Auzex’s accounting functions may lead to revisions of these accounting policies, which may adversely impact on the Merged Group’s reported results of operations and/or financial position and performance.

(d) Change in risk and investment profile

Auzex Shareholders, other than the Ineligible Overseas Shareholders, will receive New EXU Shares in exchange for their Auzex Shares. An investment in the Merged Group is not an identical substitute for an investment in Auzex as the Merged Group will have a different risk and investment profile.

Auzex Shareholders who receive New EXU Shares will be exposed to risk factors relating to EXU and certain risks relating to the Merged Group. In some cases those risks are different or additional to those of Auzex. See section 8.2 of this Booklet for details of the risks relating to the Merged Group.

The investment profile of Auzex Shareholders who receive New EXU Shares will also change. The operational profile, capital structure and size of the Merged Group will be different from that of Auzex on a standalone basis.

These changes in risk and investment profile may be considered a disadvantage by some Auzex Shareholders.

8.2 Risks specific to the Merged Group

(a) Exploration success

The Merged Group’s projects are at various stages of exploration, and potential investors should understand that exploration and development are high-risk undertakings.

There can be no assurance that exploration will result in the conceptual project developments discussed in this Booklet being achieved. Even if an apparently viable deposit is identified, there is no guarantee that it can be economically exploited.

In the event that exploration programs prove to be unsuccessful this could lead to a diminution in the value of the assets, a reduction in the case reserves of the Merged Group and possible relinquishment of the assets.

(b) Loss of key personnel

The Merged Group’s business model will depend on a management team with the talent and experience to develop exploration projects. There is a risk that operating and financial performance would be adversely affected by the loss of these key personnel.

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(c) Title risk and native title

The Merged Group may lose title to, or interests in, its tenements if an appeal or challenge is made in respect of that title or interest. Moreover, if the conditions to which those tenements are subject are not satisfied by the Merged Group, or if insufficient funds are available to meet expenditure commitments, this may lead to dilution of its interest in, or the loss of, such permits or licences without compensation.

It is also possible that, in relation to tenements which the Merged Group has an interest or will in the future acquire such an interest, there may be areas over which legitimate common law native title rights of Aboriginal Australians exist. If native title rights do exist, the ability of the Merged Group to gain access to tenements (through obtaining consent from any relevant landowner) or to progress from the exploration phase to the development and mining phases of operations may be adversely affected.

(d) Environmental

If the Merged Group is responsible for environmental damage it may incur substantial costs for environmental rehabilitation, damage control and losses by third parties resulting from its operations.

Environmental and safety legislation may change in a manner that may require stricter or additional standards than those now in effect, a heightened degree of responsibility for companies and their directors and employees and more stringent enforcement of existing laws and regulations. This may lead to increased costs or other difficulties with compliance for the Merged Group.

(e) Ability to exploit discoveries

It may not always be possible for the Merged Group to participate in the exploitation of successful discoveries made in areas in which the Merged Group has an interest. Such exploitation may involve the need to obtain licences or clearances from the relevant authorities, which may require conditions to be satisfied or the exercise of discretion by such authorities. It may or may not be possible for such conditions to be satisfied.

Furthermore, the decision to proceed to further exploitation may require the participation of other companies whose interests and objectives may not be the same as those of the Merged Group. Such further work may also require the Merged Group to meet or commit to financing obligations, which it may not have anticipated or may not be able to commit to due to lack of funds or inability to raise funds.

(f) Access to infrastructure

Access to the appropriate infrastructure is an essential component in the exploitation of successful exploration discoveries. There is a risk that in order to secure a position with respect to infrastructure access, the Merged Group may be required to enter into commitments (for example for the cost of feasibility studies) in advance, which may then expose the Merged Group to financial obligations, which might also include ‘take or pay’ obligations.

(g) Operating risks

The operations of the Merged Group may be affected by various factors, including failure to locate or identify mineral deposits, failure to achieve predicted grades in exploration and mining, operational and technical difficulties encountered in commissioning and operating plant and equipment, mechanical failure or plant breakdown, unanticipated metallurgical problems which may affect extraction costs, adverse weather conditions, industrial and environmental accidents, industrial disputes, unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment and many other factors beyond the control of the Merged Group.

No assurances can be given that the Merged Group will achieve commercial viability through the successful exploration and/or mining of its tenement interests. Until the Merged Group is able to realise value from its Projects, it is likely to incur ongoing operating losses.

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(h) Regulatory risk

The Merged Group’s will be subject to extensive laws and regulations relating to matters including licence consents and conditions including environmental compliance and rehabilitation, taxation, employee relations, worker health and safety, waste disposal, protection of the environment, native title and heritage matters, protection of endangered and protected species and other matters. The Merged Group will require permits from regulatory authorities to perform its operations. These permits relate to exploration, development, production and rehabilitation activities.

Obtaining necessary permits can be a time consuming process and there is a risk that the Merged Group will not obtain these permits on acceptable terms, in a timely manner or at all. The costs and delays associated with obtaining necessary permits and complying with these permits and applicable laws and regulations could materially delay or restrict the Merged Group from proceeding with the development of a project or the operation or further development of a mine. Any failure to comply with applicable laws and regulations or permits, even if inadvertent, could result in material fines, penalties or other liabilities. In extreme cases, failure could result in suspension of the Merged Group’s activities or forfeiture of one or more of the Merged Group’s tenements.

(i) Cash flow and requirements for capital

There is a risk that difficult conditions in the equity and debt markets may prevail at any time that the Merged Group needs to source funding to develop its projects, and may make it more difficult and costly for the Merged Group to obtain funding. There can be no certainty that the Merged Group will have access to sufficient financial resources to fund the development of its projects into a producing operation.

If the Merged Group is unable to obtain additional financing as and when needed, it may be required to reduce the scope of its operations or limit expansion.

(j) Health and safety

(i) Any future operations of the Merged Group will be subject to strict health and safety laws and regulations. The Merged Group may be liable for any conduct which violates such laws and regulations. Penalties for breaching health and safety laws can be significant and include criminal penalties. Victims of workplace accidents may also commence civil proceedings against the Merged Group. These events might not be insured by the Merged Group or may be uninsurable.

(ii) In addition, any changes in health and safety laws and regulations may increase compliance costs for the Merged Group. Such an event would negatively impact the financial results of the Merged Group.

8.3 Risks specific to Auzex

(a) Illiquidity of Auzex shares

Auzex is not listed on ASX, and so there is a limited ability for Auzex Shareholders to realise the value of their Auzex Shares.

(b) Limited operating history

Auzex was incorporated in 2011 and has limited operating and financial history. No assurances can be given that Auzex will achieve commercial viability through the successful exploration of its assets. Until Auzex is able to realise value from its projects, it is likely to incur ongoing operating losses.F

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(c) Private land owners

The Tampia gold project is located in the wheatbelt of Western Australia where landholdings are typically designated as private land.

Landholders may deny access to their farmland for mineral exploration unless access agreements between themselves and the Merged Group are concluded. While Auzex has entered into the Compensation and Access Deed (the terms of which are summarised in section 5.11.4) with the landowner over which the Tampia gold project exists, the term of the agreement expires on 17 July 2016, following which the Merged Group will be required to negotiate an extension for further exploration, and there is a risk that access to some areas may be denied in the future.

8.4 General risks

(a) General equity market risks

As an entity with listed ordinary shares on the ASX, the market price of the Merged Group’s Shares is influenced by a variety of general business cycles and economic and political factors in Australia, including economic growth, interest rates, exchange rates, inflation, employment levels, changes in government fiscal, monetary and regulatory policy in relevant jurisdictions and changes to accounting or financial reporting standards.

There can be no guarantee that a liquid market in Merged Group Shares will exist after completion of the Merger. There may be relatively few, or many, potential buyers or sellers of Merged Group Shares on ASX at any given time. This may affect the prevailing market price at which Merged Group shareholders are able to sell their shares.

(b) Economic conditions

Economic conditions, both domestic and global, may affect the performance of Auzex or EXU. Adverse changes in such things as global and country-by country economic growth, the level of economic activity and inflation, interest rates, exchange rates, government policy (including fiscal, monetary and regulatory policies), general consumption and consumer spending, employment rates and industrial disruption, amongst others, are outside the control of Auzex or EXU and may result in material adverse impacts on the business and operating results of Auzex or EXU.

(c) Government policy and legislation

Auzex or EXU may be affected by change to government policies and legislation, including those relating to the minerals industry.

(d) Litigation risk

As with any company, the Merged Group will be exposed to the risks of litigation which may have a material adverse effect on its financial position. The Merged Group could become exposed to claims or litigation by a person alleging they are owed fees for services, or by employees, regulators, competitors or other third parties. To the extent that such claims or litigation are not covered by insurance, an adverse outcome in litigation or the cost of initiating or responding to potential or actual claims or litigation may have a material adverse impact on financial performance.

As at the date of this Booklet, neither Auzex nor EXU is aware of any material contractual disputes or litigation matters in respect of them respectively.

(e) Taxation risks

A change to the current taxation regime may affect Auzex or EXU and Auzex Shareholders or EXU Shareholders. Personal tax liabilities are the responsibility of each individual investor in Auzex or EXU. Auzex and EXU are not responsible for taxation or penalties incurred by investors in Auzex or EXU.

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(f) Accounting standards

Australian accounting standards are set by the Australian Accounting Standards Board (AASB) and are outside the Auzex Directors’ and EXU Directors’ and Auzex’s and EXU’ control. Changes to accounting standards issued by AASB could materially adversely affect the financial performance and position reported in the financial statements of either Auzex or EXU.

(g) Macro-economic risks

Changes in the general economic outlook both in Australia and globally may impact the performance of the Merged Group and its projects. Such changes may include:

(i) interest rates;

(ii) contractions in the Australian economy or increases in the rate of inflation resulting from domestic or international conditions (including movements in domestic interest rates and reduced economy activity);

(iii) increases in expenses (including the cost of goods and services used by the Merged Group);

(iv) increase in unemployment rates; and

(v) fluctuations in equity markets in Australia and internationally.

(h) Commodity price volatility and exchange rate risks

If the Merged Group achieves success leading to mineral production, the revenue it will derive through the sale of commodities exposes the potential income of the Merged Group to commodity price and exchange rate risks. Commodity prices fluctuate and are affected by many factors beyond the control of the Merged Group. Such factors include supply and demand fluctuations for commodities, technological advancements, forward selling activities and other macro- economic factors (outlined above).

Furthermore, international prices of various commodities are denominated in United States dollars, whereas the income and expenditure of the Merged Group will be taken into account in Australian dollars, exposing the Merged Group to the fluctuations and volatility of the rate of exchange between the United States dollar and the Australian dollar as determined in international markets.

(i) Gold price

The demand for, and price of, gold is dependent on a variety of factors which will be beyond the Merged Group’s control including expectations regarding inflation, interest rates and global and regional demand for, and supply of, gold as well as general global economic conditions. Fluctuations in gold prices, development and operating costs may have a material adverse effect on the Merged Group’s exploration activities, business activities and financial condition.

(j) Competition risk

The industry in which the Merged Group will be involved is subject to domestic and global competition. The Merged Group will have no influence or control over the activities or actions of its competitors, which activities or actions may, positively or negatively, affect the operating and financial performance of the Merged Group’s business.

(k) Impact of hostilities, terrorism or other force majeure events

War, other hostilities, terrorism or major catastrophes can adversely affect global and Australian market conditions. Such events can have direct and indirect impacts on the Merged Group’s business and earnings.F

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8.5 Other relevant considerations

(a) Dividends and franking capacity

(i) To date Auzex and EXU have not paid any dividends and Auzex has no board approved dividend policy in place as at the date of this Booklet.

(ii) After the Merger, EXU will not have any cash-flow generating assets and it is unlikely that a dividend will be paid by the Merged Group in the short-term.

(b) Taxation implications for Auzex Shareholders

(i) The Merger may have taxation implications for Auzex Shareholders.

(ii) The taxation implications of the Merger are complex and depend on the laws of the country in which an Auzex Shareholder is a tax resident. Auzex Shareholders should consider these implications when deciding how to vote in relation to the Merger. A more detailed discussion of the Australian taxation consequences of the Merger is contained in section 10 of this Booklet. The discussion is in general terms and does not take into account the particular circumstances of Auzex Shareholders. It is recommended that all Auzex Shareholders should, in considering the implications to them of the Merger, obtain independent professional tax advice regarding the income tax and capital gains tax implications specific to their circumstances.

(c) Independent Expert’s opinion

(i) Auzex has commissioned the Independent Expert as an independent expert to prepare a report stating whether, in its opinion, the advantages of the Merger outweigh the disadvantages and if the Merger is in the best interests of Auzex Shareholders.

(ii) The Independent Expert has concluded that the Merger is fair and reasonable to Auzex Shareholders and, on that basis, in the absence of any other information or a superior offer, the Merger is in the best interests of Auzex Shareholders as at 23 July 2015, being the date of the Independent Expert’s Report.

(iii) A copy of the Independent Expert’s Report is attached as Annexure A to this Booklet.

(d) Implications if the Merger does not proceed

If Auzex Shareholders do not approve the Scheme the Merger will not proceed. In that event:

(i) Auzex will continue to be owned by the existing Auzex Shareholders;

(ii) Auzex wll be required to repay the loans provided by EXU totalling $800,000 no later than April 2016 or, if EXU so elects, issue up to 6.67 million Auzex Shares to EXU, representing 28.4% of the total issued shares of Auzex;

(iii) Auzex would be required to raise additional capital to fund the further development of its Projects. There is no guarantee that Auzex will be able to raise the full amount of any additional capital required on terms acceptable to Auzex;

(iv) Auzex may be required to pay a break fee to EXU of $250,000 if the failure of the Scheme Shareholders to approve the Scheme follows an Auzex Director withdrawing his recommendation that Scheme Shareholders vote in favour of the Scheme, or if the MIA is terminated by EXU as a result of breach of the MIA by Auzex; and

(v) transaction costs of approximately $400,000 will be incurred.

Auzex has sufficient funds to pay the costs and potential costs associated with the Scheme. There is a risk that Auzex may not be able to procure funding sufficient to repay the loans provided by EXU, in which case, unless EXU elects to convert its loan into Auzex Shares, Auzex may necessarily be placed into administration.

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9 DETAILS OF THE MERGER AND ITS IMPLEMENTATION

9.1 Elements of the Merger(a) General

(i) The Merger is to be effected by a scheme of arrangement pursuant to section 411 of the Corporations Act between Auzex and the Scheme Shareholders.

(ii) For the Merger with EXU to proceed, the Scheme must be approved by the Requisite Majority of Scheme Shareholders, and by the Court at the Second Court Hearing.

(b) Key Dates

(i) If the Scheme is approved, there are two important dates - the Record Date and the Implementation Date.

(ii) The Record Date is the date on which the Auzex Share Register is examined to determine who is entitled to participate in the Scheme and receive the Scheme Consideration in the form of New EXU Shares. The Record Date is currently expected to be 6:00 pm (Brisbane time) on 14 September 2015.

(iii) The Implementation Date is the date on which New EXU Shares will be issued to Eligible Scheme Shareholders under the Scheme (or issued to the Sale Nominee in the case of Ineligible Overseas Shareholders). The Implementation Date is currently expected to be 21 September 2015.

(iv) New EXU Shares issued as Scheme Consideration are expected to commence trading on ASX on or about 25 September 2015.

(c) Merger Implementation Agreement

Auzex and EXU entered into the Merger Implementation Agreement on 16 May 2015, in which they agreed (among other things) to their respective obligations in implementing the Scheme. The key terms of the Merger Implementation Agreement are summarised in section 4.3 of this Booklet.

(d) The Scheme

(i) If the Scheme is approved by the Requisite Majority of Scheme Shareholders and by the Court, and becomes Effective, all Auzex Shares outstanding at 6:00 pm on the Record Date, and not already owned by EXU or EXU or their Related Bodies Corporate, will be transferred to EXU.

(ii) The Scheme Consideration to be issued to Auzex Shareholders is described in section 4.5 of this Booklet.

(iii) See Annexure B to this Booklet for a copy of the Scheme.

(iv) Implementation of the Scheme is subject to the Scheme Conditions being satisfied, including the condition that the Scheme may only be implemented if the Requisite Majority of Scheme Shareholders vote in favour of the Scheme at the Scheme Meeting.

(v) The Scheme Meeting at which Auzex Shareholders may vote for the Scheme will be held at 10:00 am on 24 August 2015 at 15 Ivory Lane, Brisbane.

(vi) A summary of the Scheme Conditions is provided at section 4.8 of this Booklet, and a summary of the steps necessary to implement the Scheme is provided in this section 9.

9.2 Entitlement to participate in the Scheme(a) Scheme Shareholders as at 6:00 pm on the Record Date will be entitled to participate in the Scheme

and be entitled to the Scheme Consideration. EXU is however not obliged to issue, and will not issue, any EXU Shares to any Ineligible Overseas Shareholder.

(b) The way in which Scheme Shareholders participate will depend on whether they are classified as Eligible Scheme Shareholders or as Ineligible Overseas Shareholders. Refer to section 4.11 for details regarding the participation by Ineligible Overseas Shareholders.

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(c) EXU will not vote on the Scheme. As at the date of this Booklet, EXU does not own or control any Auzex Shares. If EXU becomes an Auzex Shareholder on or before the Record Date, EXU will never-the-less be excluded from voting on the Scheme.

9.3 Actions already undertaken by Auzex and EXUSince signing the MIA, Auzex and EXU have undertaken the following activities to progress the Implementation of the Scheme.

(a) Appointment of Independent Expert

(i) Auzex commissioned the Independent Expert to prepare a report on whether the Scheme is in the best interests of Auzex Shareholders.

(ii) The Independent Expert has concluded that the Merger is fair and reasonable to Auzex Shareholders and, on that basis, in the absence of any other information or a superior offer, the Merger is in the best interests of Auzex Shareholders as at 23 July 2015, being the date of the Independent Expert’s Report. A copy of the Independent Expert’s Report is attached as Annexure A.

(b) Execution of Deed Poll by EXU

(i) On 16 July 2015 EXU executed the Deed Poll in favour of each Scheme Shareholder pursuant to which EXU covenants to perform its obligations under the Scheme. The key obligation of EXU under the Scheme is to issue the Scheme Consideration to Eligible Scheme Shareholders and to the Sale Nominee in relation to Ineligible Overseas Shareholders, subject to satisfaction of the Scheme Conditions.

(ii) The Deed Poll may be relied upon by a Scheme Shareholder, despite the fact that they are not a party to it, and pursuant to the Scheme each Scheme Shareholder appoints Auzex as its agent and attorney to enforce their rights against EXU under the Deed Poll.

(iii) The Deed Poll is governed by the laws of Queensland and is set out in full at Annexure C.

(c) Lodgement of draft Booklet with ASIC

(i) On 30 June 2015 Auzex lodged a draft of this Booklet with ASIC pursuant to section 411(2)(b) of the Corporations Act. ASIC has registered the draft Booklet for the purposes of section 412(6) of the Corporations Act.

(ii) Auzex has requested that ASIC provide a statement, in accordance with section 411(17)(b) of the Corporations Act, that ASIC has no objection to the Scheme. If ASIC provides that statement, it will be produced to the Court at the time of the Court hearing to approve the Scheme.

(iii) EXU has also lodged a copy of this Booklet with ASX.

(iv) Neither ASIC, ASX nor any of their officers takes any responsibility for the contents of this Booklet.

(d) First Court Hearing

(i) On 23 July 2015 the Supreme Court of Queensland ordered that Auzex convene the Scheme Meeting for 10:00 am on 24 August 2015 at 15 Ivory Lane, Brisbane for the purpose of allowing Auzex Shareholders to consider, and if thought fit, approve the Scheme.

(ii) Auzex Shareholders should note that the fact that the Court has ordered that the meeting be convened and has approved this Booklet (including the explanatory statement required to accompany the notice of the Scheme Meeting) does not mean that the Court:

(A) has formed any view as to the merits of the proposed Scheme or as to how Auzex Shareholders should vote (on this matter Auzex Shareholders must form their own decision); or

(B) has prepared, or is responsible for, the content of the Booklet.

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(iii) An order under subsection 411(1) is not an endorsement of, or any other expression of opinion on, the Scheme. The Court is not in any other way responsible for the contents of this Booklet.

(iv) For a Scheme to proceed, the Requisite Majority must approve the Scheme at the Scheme Meeting. Details of how to vote at the Scheme Meeting are set out at the beginning of this Booklet in section 1, ‘Overview, Scheme Meeting Details and How to Vote’. A copy of the Notice of the Scheme Meeting is set out in pages 6 and 7.

9.4 Scheme Conditions(a) Implementation of the Scheme is subject to satisfaction of the Scheme Conditions, which are set out in

section 4.8.

(b) As at the date of this Booklet, Auzex is not aware of any circumstances that would cause any of the Scheme Conditions to not be satisfied. Auzex Shareholders will receive an update on the status of the Scheme Conditions at the Scheme Meeting.

(c) EXU will also announce to ASX any relevant matter that affects the likelihood of a Scheme Condition being satisfied or not being satisfied, in accordance with EXU’s continuous disclosure obligations. These details will be published on ASX’s website (www.asx.com.au) and will also appear on Auzex’s website (www.auzex.com).

9.5 Scheme Meeting(a) The Scheme Meeting is scheduled to be held at 15 Ivory Lane, Brisbane on 24 August 2015 at 10:00 am.

(b) For the Scheme to be approved by Auzex Shareholders, votes in favour of the Scheme must be received from:(i) a majority in number (more than 50%) of Auzex Shareholders present and voting at the Scheme

Meeting (in person, by proxy, by attorney or, in the case of corporate Auzex Shareholders, by corporate representative); and

(ii) Auzex Shareholders who together hold at least 75% of the total number of votes cast on the resolution.

9.6 Court approval(a) To become Effective, the Scheme must be approved by the Court at the Second Court Hearing. If the

Scheme is approved by the Requisite Majority of Auzex Shareholders, and all other Scheme Conditions (other than its approval by the Court) have been satisfied or waived, Auzex will apply to the Court for orders approving the Scheme at the Second Court Hearing.

(b) Each Auzex Shareholder has the right to seek leave to appear at the Second Court Hearing and be heard in respect of the Scheme. The Court may refuse to approve the Scheme even if it is approved by the Requisite Majority of Auzex Shareholders.

9.7 Steps after Court approval at the Second Court Hearing(a) Action by Auzex

If the Scheme is approved by the Court, Auzex will:

(i) promptly lodge with ASIC an office copy of the orders approving the Scheme in accordance with section 411(10) of the Corporations Act;

(ii) close the Auzex Share Register as at 6:00 pm on the Record Date and determine entitlements to the Scheme Consideration in accordance with the Scheme and provide such information to EXU (or its share registry) in such form as EXU may reasonably require to facilitate the payment of the Scheme Consideration;

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(iii) promptly register all transfers of Scheme Shares to EXU in accordance with the Scheme; and

(iv) promptly do all other things contemplated by or necessary to give effect to the Scheme and the orders of the Court approving the Scheme.

(b) Record Date

(i) The Record Date for the Scheme is currently expected to be 6:00 pm on 14 September 2015. Only Scheme Shareholders whose names appear on the Auzex Share Register at 6:00 pm on the Record Date will be entitled to receive the Scheme Consideration.

(ii) For the purposes of determining persons entitled to Scheme Consideration, dealings in Auzex Shares will be recognised by Auzex provided that registrable transfers or transmission applications in respect of those dealings are received by the Auzex Share Registry on or before 6:00 pm on the Record Date (in which case Auzex will cause such transfers to be registered before 6:00 pm on the Record Date).

(iii) Auzex will not recognise, for the purpose of establishing who is entitled to Scheme Consideration, any transmission application or transfer in respect of Auzex Shares received after that time.

(c) Effective Date

(i) If the Scheme is approved by the Court, Auzex must lodge a copy of the orders of the Court approving the Scheme with ASIC. The Scheme will become Effective on the date that lodgement occurs. This date is the Effective Date. Upon the Scheme becoming Effective it will bind Auzex and all Scheme Shareholders, including those who do not attend the Scheme Meeting or who do not vote at the Scheme Meeting or who vote against the Scheme at the Scheme Meeting.

(ii) If the Scheme has not become Effective or the Scheme Conditions have not been satisfied by the End Date, or such later date as Auzex and EXU may agree in writing, the Scheme will not be Effective and the Merger will not occur.

(d) Implementation Date

(i) On the Implementation Date, subject to the provision of the Scheme Consideration, all Auzex Shares held by Scheme Shareholders will be transferred to EXU without any further action required by Scheme Shareholders. Auzex will enter the name of EXU into the Auzex Share Register in respect of the Auzex Shares. Auzex will then become a wholly owned subsidiary of EXU.

(ii) EXU will:

(A) issue the New EXU Shares required to be issued by it under the Scheme on terms such that each such New EXU Share will rank equally in all respects with each existing EXU Share;

(B) ensure that each New EXU Share issued as Scheme Consideration is duly issued and is fully paid and free from any mortgage, charge, lien, encumbrance or other security interest; and

(C) use all reasonable endeavours to ensure that all New EXU Shares issued as Scheme Consideration are approved for listing and trading on ASX and, to the extent permitted by ASX respectively, that trading in them commences as soon as practicable after the Effective Date and on a normal settlement basis no later than the second Business Day after the Implementation Date.

(iii) As from the time at which the Scheme Consideration is provided, all share certificates and holding statements for the Scheme Shares will cease to have any effect other than as evidence of entitlement to Scheme Consideration, other than for EXU and its Related Bodies Corporate.

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(e) Commencement of trading of New EXU Shares comprising Scheme Consideration

It is expected that the New EXU Shares comprising the Scheme Consideration will commence trading on ASX on or about 25 September 2015.

(f) Payments to Ineligible Overseas Shareholders

(i) New EXU Shares to which the Ineligible Overseas Shareholders would otherwise be entitled will be sold by the Sale Nominee as soon as practicable (and in any event not more than 15 Business Days after the Implementation Date) and the Cash Proceeds shall be promptly remitted to the relevant Ineligible Overseas Shareholders.

(ii) For more information see section 4.11 of this Booklet.

9.8 Warranties by Scheme Shareholders under the Scheme

Pursuant to section 7.6(b) of the Scheme all Scheme Shareholders, including those who vote against the Scheme and those who do not vote, are deemed to have warranted to EXU that their Auzex Shares are not subject to any of the encumbrances specified in the Scheme. The Scheme is attached at Annexure B to this Booklet.

9.9 New EXU Shares

(a) Under the terms of the Scheme all Scheme Shareholders who receive New EXU Shares will have their names and addresses entered on the EXU Share Register on the Implementation Date.

(b) For a discussion of the rights attaching to EXU Shares see section 6.10 of this Booklet.

(c) Each holder of EXU Shares is responsible for confirming their holding before selling their EXU Shares on a deferred settlement basis. Any sale of New EXU Shares before receipt of a holding statement is at the risk of the holder of those securities. To the extent permitted by law, Auzex, EXU and Computershare Investor Services Pty Limited disclaim all liability, whether in negligence or otherwise, to persons who sell their New EXU Shares before receiving their holding statement, whether on the basis of a confirmation of allocation provided by Auzex, EXU, Computershare Investor Services Pty Limited, a broker or otherwise.

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10 AUSTRALIAN TAXATION IMPLICATIONS

10.1 Introduction

(a) This section provides general comments only regarding the Australian income tax implications for Auzex Shareholders arising from the disposal of their Auzex Shares under the Scheme.

(b) The Australian tax consequences of the Scheme for Auzex Shareholders will depend on a number of factors, including:

(i) the tax residence of the Auzex Shareholder;

(ii) whether the Auzex Shareholder holds their Auzex Shares on capital account or revenue account; and

(iii) the nature of the Auzex Shareholder – that is, whether they are an individual, company, trust or other entity.

(c) The comments below identify the general Australian tax implications of the Scheme for Australian resident and non-Australian resident Auzex Shareholders who hold their Auzex Shares on capital and revenue account. The taxation consequences for an individual Auzex Shareholder may differ from those outlined below depending on the Auzex Shareholder’s particular circumstances.

(d) Accordingly, Auzex Shareholders should not rely on the summary below as a substitute for professional advice. Auzex Shareholders should obtain, and rely only on, their own professional tax advice about the consequences of the disposal of Auzex Shares for EXU Shares pursuant to the Scheme.

(e) It is also recommended that all non-Australian resident Auzex Shareholders separately confirm the taxation implications associated with the Scheme in their country of residence.

(f) The comments below are based on the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997 (collectively referred to as the Tax Act) and relevant Australian Taxation Office pronouncements at the date of this Booklet, except as otherwise indicated.

10.2 Australian Resident Auzex Shareholders

(a) Capital account

(i) Australian resident Auzex Shareholders who hold their shares with a view to generating long term capital growth and dividend income will generally be considered to hold their shares on capital account.

(ii) The Australian income tax implications to such Auzex Shareholders as a result of the Scheme may be summarised as follows:

(A) A capital gains tax (CGT) event will occur when Auzex Shareholders exchange their Auzex shares for EXU Shares. Subject to the availability of scrip for scrip rollover relief (see section 10.2(b) below), a capital gain will arise where the market value of the EXU Shares at the time of exchange is greater than the Auzex Shareholder’s CGT cost base held in the existing Auzex Shares. Certain Auzex Shareholders may be eligible for a CGT discount (see paragraph (D) below). Where the market value of the EXU New Shares is less than the CGT cost base of the Auzex Shares held, a capital loss will arise.

(B) Subject to certain conditions being met, scrip for scrip rollover relief should be available for Australian resident Auzex Shareholders in relation to the exchange of Auzex Shares for EXU Shares. The result of Auzex Shareholders electing for the rollover rules to apply should be as follows:

(i) any capital gain which would otherwise have been realised on the exchange should be disregarded; and

(ii) the cost base of the EXU Shares received is determined by attributing the particular shareholder’s cost base of their Auzex Shares to their EXU Shares.

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(C) Scrip for scrip rollover relief will not be available to Auzex Shareholders who would otherwise realise a capital loss as a result of the Scheme.

(D) Auzex Shareholders who are individuals or trusts and do not elect for rollover relief, or who are not eligible for rollover relief, may be eligible for a 50% discount on any capital gain that would arise, provided that they have held their shares in Auzex for at least 12 months prior to the exchange of Auzex Shares. Similarly, complying superannuation funds that do not elect for rollover relief or are not eligible for rollover relief, may be eligible for a 33 % discount on any capital gain that would arise, provided that they have held their shares in Auzex for at least 12 months prior to the exchange. No such discount arises with respect to shares held by companies.

(b) Availability of scrip for scrip capital gains tax rollover relief

(i) In order for Auzex Shareholders to be able to obtain scrip for scrip rollover relief, all of the following conditions need to be satisfied:

(A) the Auzex Shareholder exchanges their Auzex Shares for EXU Shares;

(B) the exchange is in consequence of a single arrangement where:

(I) all the owners of voting shares in Auzex could participate on substantially the same terms; and

(II) as a result of the arrangement, EXU becomes the holder of at least 80% of those voting shares of Auzex.

(C) apart from the rollover, the Auzex Shareholder would make a capital gain as a result of the exchange of their Auzex Shares under the Scheme; and

(D) the Auzex Shareholder chooses to obtain scrip for scrip rollover relief.

(ii) Other than the specific issue to each Auzex Shareholder of whether or not they would make a capital gain and whether or not they elect to adopt rollover relief, all of the above conditions should be satisfied with respect to the Scheme.

(iii) In the case of Ineligible Overseas Shareholders, the Sale Nominee is appointed to sell the EXU Shares to which the Auzex Shareholder is otherwise entitled and pay the proceeds to the Ineligible Overseas Shareholder. Ineligible Overseas Shareholders will therefore receive only the Cash Proceeds on sale, as opposed to an ongoing shareholding in EXU.

(iv) The mechanism to provide a cash payment on sale of Auzex Shares to Ineligible Overseas Shareholder does not prevent the Scheme being on substantially the same terms for all Auzex Shareholders. In particular, Ineligible Overseas Shareholders receive the same economic value as Eligible Auzex Shareholders, and the sale of Auzex Shares on their behalf is an event which occurs subsequent to completion of the Scheme.

(v) This is consistent with a number of Class Rulings issued by the Commissioner of Taxation dealing with similar scrip for scrip transactions.

10.3 Revenue account(a) Australian resident Auzex Shareholders who hold their Auzex Shares as part of a share trading business

or with a view to making a short term profit may be viewed as holding their shares on revenue account.

(b) In such instances any gain made by such Auzex Shareholders as a result of the Scheme will constitute assessable income of the Shareholder. No scrip for scrip rollover relief or CGT discount will be available with respect to this gain.

(c) Any loss incurred by such Auzex Shareholders as a result of the Scheme may be applied against other assessable income of the Shareholder, or alternatively carried forward to offset against future assessable income.

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10.4 Consequences of holding EXU Shares

(a) Subsequent Disposal of EXU Shares

(i) If an Australian resident Auzex Shareholder who held their Auzex Shares on capital account sells their EXU Shares after the Implementation Date, any gain or loss is likely to be subject to CGT on the basis the EXU Shares have been held on capital account.

(ii) If an Australian resident Auzex Shareholder who held their Auzex Shares on revenue account sells their EXU Shares after the Implementation Date, any gain or loss is likely to be subject to taxation on the basis the EXU Shares have been held on revenue account.

(b) Dividend Income

Dividends received by Australian resident Auzex Shareholders in relation to their EXU Shares are required to be included in their assessable income.

(c) Other Taxes

No Goods and Services Tax or stamp duty should be payable in Australia by Auzex Shareholders in relation to the disposal of Auzex Shares or on the receipt of EXU Shares.

10.5 Non-Australian Resident Auzex Shareholders

The following comments are general in nature and address only the Australian tax implications of the Scheme for non-Australian resident Auzex Shareholders. Non-resident Scheme Shareholders should obtain independent professional advice to confirm the tax implications of the Scheme in their country of residence.

(a) Capital account

(i) Generally, any capital gain or loss realised by non-Australian resident Auzex Shareholders on the exchange of their Auzex Shares will be disregarded unless either:

(A) the Auzex Shares are held in connection with a business carried on by the Auzex Shareholder through a permanent establishment in Australia; or

(B) both of the following conditions are satisfied:

(I) the non-Australian resident Auzex Shareholder together with their associates hold at least 10% of the Auzex Shares either at the time of the exchange or for at least 12 months during the 24 months before the exchange; and

(II) at the time of the exchange, at least 50% or more of the market value of Auzex’s assets are attributable to taxable Australian real property. Taxable Australian real property includes mining, quarrying or prospecting rights where the minerals, petroleum or quarry materials are situated in Australia.

(ii) In the event that a non-Australian resident Auzex Shareholder cannot disregard a capital gain or loss, then the Australian tax implications of the Scheme will be similar to those outlined above for Australian resident Auzex Shareholders. However, the tax implications will differ for Ineligible Overseas Shareholders who receive cash proceeds from the sale of the EXU Shares. In this regard:

(A) Auzex Shareholders who only receive proceeds from the sale of the EXU Shares by the appointed Sale Nominee will calculate their capital gain or loss based on the sale proceeds received. No CGT discount will be available; and

(B) other non-Australian resident Auzex Shareholders (ie New Zealand resident Auzex Shareholders) who receive EXU Shares may be eligible for scrip for scrip rollover relief, depending on their particular circumstances.

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(iii) Subsequent Disposal of EXU Shares

(A) If the EXU Shares are not considered to be Taxable Australian Property (TAP) at the Implementation Date, non-Australian resident Auzex Shareholders should not be subject to CGT in relation to any gains (or losses) from the disposal of their EXU Shares acquired pursuant to the Scheme.

(B) In broad terms, Auzex Shares may be TAP of a non-Australian resident Auzex Shareholder if the conditions in section 10.5(a)(i)(B) above are satisfied.

(b) Revenue account

Where non-Australian resident Auzex Shareholders hold their shares in Auzex on revenue account, then any gain or profit on exchange of these shares may be assessed In Australia. The tax implications will depend on a number of factors, including the provisions of any double tax agreement between Australia and the country of residence of the Shareholder. Auzex Shareholders in this situation should seek their own independent advice in relation to the taxation implications arising from the Scheme, both within and outside of Australia,

(c) Dividend Income

Non-Australian resident EXU Shareholders may be subject to Australian dividend withholding tax on dividends received from EXU.

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11 ADDITIONAL INFORMATION

11.1 Introduction

This section 11 sets out additional information required to be disclosed to Auzex Shareholders in relation to the Scheme pursuant to the Corporations Act and the Corporations Regulations, together with other information that may be of interest to Auzex Shareholders in relation to the Scheme and the Merger.

11.2 Intention of Auzex Directors regarding the business of Auzex

If the Scheme becomes Effective, it is a matter for the reconstituted EXU Board to determine its intentions as to:

(a) the continuation of the business of Auzex;

(b) any major changes to the business of Auzex; and

(c) the future employment of the present employees of Auzex.

The current intentions of Auzex and EXU in relation to these matters are set out in section 7 of this Booklet.

If the Scheme does not become Effective, the current Auzex Board intends to continue the business of Auzex as holder of its projects.

11.3 Intention of Auzex Directors concerning the Scheme

(a) The Auzex Directors believe that, taking into account all relevant matters, including alternatives, the Scheme is in the best interests of Auzex and Auzex Shareholders.

(b) While you do not have to vote, the Auzex Board believes that the Scheme is important to all Auzex Shareholders. Each Auzex Director recommends that Auzex Shareholders vote in favour of the Scheme at the Scheme Meeting in order to effect the Merger.

(c) Each Auzex Director intends to vote all Auzex Shares held or controlled by them in favour of the Scheme.

11.4 Interests of Auzex Directors in Auzex securities

As at the date of this Booklet, the number and description of securities of Auzex in which each of the Directors of Auzex has a Relevant Interest are:

Name Shares Held

Chris Baker 25,922

John Lawton 548,058

Greg Partington 81,962

Paul Frederiks 67,501

TOTAL 723,443

On 30 June 2015, John Lawton acquired a Relevant Interest in:

(a) 138,650 Auzex Shares upon conversion of a convertible note; and

(b) 21,913 Auzex Shares by purchase for consideration of $0.12 per Auzex Share.

Except as stated above, the Auzex Directors had no dealings in securities of Auzex in the four months preceding the date of this Booklet.F

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11.5 Interests of Auzex and Auzex Directors in EXU securities

(a) As at the date of this Booklet:

(i) Auzex does not have a Relevant Interest in any EXU Shares or any other marketable securities of EXU; and

(ii) no Auzex Directors hold Relevant Interests in any EXU Shares or any other marketable securities of EXU.

(b) Except as indicated in paragraph (d) below, there has been no dealing in and no agreement to deal has been entered into in respect of any marketable securities of EXU by any Auzex Director in the four months preceding the date of this Booklet.

(c) Auzex Directors who hold Auzex Shares will be entitled to vote on the Scheme and receive EXU Shares on the same terms as all other Auzex Shareholders.

(d) Auzex Directors will be entitled to receive EXU Creditor Options in exchange for their entitlements to receive outstanding amounts payable to them by Auzex as at 16 May 2015. Refer to section 5.11.5 of this Booklet.

11.6 Interests of EXU and EXU’s associates in Auzex Securities

(a) As at the date of this Booklet EXU holds no Auzex Shares or other securities. If the Scheme is implemented EXU will control all Auzex Shares.

(b) No EXU Directors hold Relevant Interests in any Auzex Shares or any other marketable securities of Auzex.

(c) During the four months before the date of this Booklet neither EXU nor any associate of EXU has:

(i) provided, or agreed to provide, consideration for any Auzex Shares; or

(ii) given or offered to give or agreed to give a benefit to another person where the benefit was likely to induce the other person, or an associate, to vote in favour of the Scheme or dispose of Auzex Shares which benefit is not offered to all Auzex Shareholders under the Scheme.

11.7 Benefits to Auzex officers in connection with retirement from office

There is no current proposal for a payment or other benefit to be made or given to a director, secretary or executive officer of Auzex or any Related Body Corporate of Auzex, as compensation for the loss of, or as consideration for or in connection with his or her retirement from office in Auzex or any Related Body Corporate of Auzex as a result of the Scheme.

11.8 Agreements or arrangements connected with or conditional on the Scheme

Except as disclosed below or elsewhere in this Booklet, there are no agreements or arrangements made between any Auzex Director and another person in connection with, or conditional on, the outcome of the Scheme other than in their capacity as an Auzex Shareholder.

(a) Pursuant to the Merger Implementation Agreement each of Auzex and EXU releases the directors, officers and employees of the other for anything done or not done in connection with the preparation or provision of information to the extent that such director, officer or employee has acted in good faith and has not engaged in wilful misconduct.

(b) In accordance with the terms of the MIA, if the Merger is implemented, John Lawton and Chris Baker, who are both current Auzex Directors, will be appointed to the EXU Board. It is anticipated that EXU Directors will be entitled to receive an annual retainer, meeting attendance fees, reimbursement of actual expenses from EXU and be eligible for participation in EXU stock-based compensation programs.

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(c) The Auzex Directors have entered into services agreements with EXU, which are conditional upon the scheme becoming Effective. The services agreements are on the same terms as their existing services agreements with Auzex, subject to the following amendments:

(d) Auzex Directors will also be entitled to receive EXU Creditor Options in exchange for their entitlements to receive outstanding amounts payable to them by Auzex as at 16 May 2015. Refer to section 5.11.5 of this Booklet.

11.9 Auzex Directors’ interests in EXU contracts

Except as disclosed elsewhere in this Booklet, no Auzex Director has any interest in any contract entered into with EXU, or any interest as a creditor of EXU.

11.10 Disclosure of payments and benefits to Auzex Directors, secretaries and executive officers

Except as disclosed elsewhere in this Booklet, no Auzex Director, secretary or officer of Auzex (or any of its Related Bodies Corporate) has agreed to receive, or is entitled to receive, any payment or benefit from EXU which is conditional on, or is related to, the Scheme.

11.11 Disclosure of interests

Except as disclosed below or elsewhere in this Booklet, no:

(a) Auzex Director;

(b) EXU Director;

(c) person named in this Booklet as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Booklet; or

(d) promoter of the Merged Group,

(together Interested Persons) holds, or held at any time during the two years before the date of this Booklet any interests in:

(e) the formation or promotion of the Merged Group;

(f) property acquired or proposed to be acquired by EXU in connection with the formation or promotion of the Merged Group or the offer of New EXU Shares under the Scheme; or

(g) the offer of EXU Shares under the Scheme.

11.12 Disclosure of fees and other benefitsExcept as disclosed elsewhere in this Booklet or otherwise in accordance with usual, arms length commercial arrangements, neither EXU nor Auzex has paid or agreed to pay any fees, or provided or agreed to provide any benefit to a proposed director of EXU to induce them to become or qualify as a director of EXU.

Director Salary Notice Period Annual Leave

John Lawton Managing Director $120,000 per annum (including superannuation) 3 months 4 weeks

Greg Partington $100,000 per annum (including superannuation) 1 month 4 weeks

Chris Baker $30,000 per annum (including superannuation) 1 month N/A

Paul Frederiks Company Secretary $4,200 per month (including superannuation) 1 month N/A

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11.13 EXU capital structure

(a) The capital structure of EXU is set out in section 6 of this Booklet. Except pursuant to the EXU capital raising described in section 6.3 of this Booklet, no EXU Shares have been issued during the three month period ending on the date of this Booklet other than pursuant to the EXU Scheme.

(b) The rights attaching to EXU Shares are set out in the EXU constitution described in section 6.10 of this Booklet.

11.14 Capital raising by EXU

Except pursuant to the EXU Capital Raising as described in section 6.3, EXU has not raised any capital for the three months prior to the date of this Booklet and, except pursuant to the Scheme, will not need to raise any capital for the three months after that date.

11.15 Material changes in financial position

(a) The latest published financial statements of Auzex are the financial statements for the year ended 30 June 2014. To the knowledge of the Auzex Directors, there has not been a material change in the financial position of Auzex since 30 June 2014, except as disclosed in this Booklet.

(b) Auzex will provide, free of charge, copies of the financial statements to anyone who requests them.

11.16 Creditors of Auzex

(a) The Scheme, if implemented, is not expected to materially prejudice Auzex’s ability to pay its creditors because it involves an acquisition of Auzex Shares by a third party, rather than the acquisition of Auzex’s underlying assets.

(b) No material new liability (other than transaction costs) is expected to be incurred by Auzex as a consequence of the implementation of the Scheme.

(c) Auzex has paid and is paying all its creditors within normal terms of trade. It is solvent and is trading in an ordinary commercial manner.

11.17 Right to inspect and obtain copies of the Auzex Share Register

An Auzex Shareholder has the right to inspect the Auzex Share Register and the Auzex Option Register, which contain the name and address of each Auzex Shareholder and certain other prescribed details relating to Auzex securities, without charge. An Auzex Shareholder also has the right to request a copy of the register, upon payment of a fee (if any) up to a prescribed amount.

11.18 ASX and ASIC waivers, approvals and exemptions

ASX has indicated to EXU that:

(a) the change in nature and scale of the EXU’s activities as a result of the Merger requires EXU in accordance with ASX Listing Rule 11.1.2 to obtain shareholder approval and must comply with any requirements of ASX in relation to the Notice of Meeting; and

(b) the change in the nature and scale of EXU’s activities as a result of the Merger does not require EXU to re-comply with the admission requirements set out in Chapters 1 and 2 of the ASX Listing Rules in accordance with ASX Listing Rule 11.1.3.

11.19 No relevant restrictions in the Auzex constitution

There are no restrictions on the right to transfer Auzex Shares in the Auzex constitution.

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11.20 Sale of Auzex Shares in the six months ended 21 June 2015

So far as Auzex is aware, the only sales of Auzex Shares in the six (6) months immediately before 23 July 2015, being the date on which this Booklet was lodged with ASIC for registration, was a purchase of 21,913 Auzex Shares by John Lawton for consideration of $0.12 per Auzex Share, a total of $2,629.56.

11.21 No unacceptable circumstances

The Auzex Directors believe that the Scheme will not involve any circumstances in relation to the affairs of Auzex that could reasonably be characterised as constituting ‘unacceptable circumstances’ for the purposes of section 657A of the Corporations Act.

11.22 Auzex Shareholders in jurisdictions outside Australia

(a) This Booklet and the Scheme are subject to Australian disclosure requirements that may be different to those applicable in other jurisdictions. This Booklet and the Scheme do not in any way constitute an offer of securities in any place in which, or to any person to whom, it would not be lawful to make such an offer.

(b) Any Auzex Shareholder whose address as shown in the Auzex Share Register at 6:00 pm on the Record Date as a place outside Australia and its external territories and New Zealand (unless EXU is satisfied, acting reasonably, that the laws of that Auzex Shareholder’s country of residence (as shown in the Auzex Share Register) permit the issue and allotment of New EXU Shares, either unconditionally or after compliance with conditions which EXU in its sole discretion regards as acceptable) will be an Ineligible Overseas Shareholder for the purposes of the Scheme.

(c) EXU will not issue New EXU Shares to an Ineligible Overseas Shareholder. If you are an Ineligible Overseas Shareholder, you should refer to section 4.11 for further information.

11.23 Consents and disclaimers(a) Consents

Each of the parties named below as consenting parties:

(i) has given and has not, before lodgement of this Booklet with ASIC, withdrawn its written consent to be named in this Booklet in the form and context in which it is named;

(ii) has given and has not, before the lodgement of this Booklet with ASIC, withdrawn its written consent to the inclusion of their respective statements and reports (where applicable) noted next to their names below, and the references to those statements and reports in the form and context in which they are included in this Booklet; and

(iii) does not make, or purport to make, any statement in this Booklet other than those statements referred to below in respect of that person’s name (and as consented to by that person).

Role Consenting Party

Independent Expert BDO Corporate Finance (QLD) Limited ABN 54 010 185 725, Australian Financial Services Licence No 245513

Technical Valuer Mining Associates Limited

Financial advisor CCZ Corporate Finance Pty Ltd

Auzex Legal Adviser Thomson Geer Lawyers

EXU Legal Adviser Steinepreis Paganin

Sale Nominee Merchant Capital Markets Pty Ltd

Share Registry Computershare Investor Services Pty Limited

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(b) Disclaimer

Each person named in this section 11.23:

(i) does not make, or purport to make, any statement in this Booklet or any statement on which a statement in this Booklet is based, other than their respective statements and reports noted next to their names (where applicable) which has been included in this Booklet with the consent of that party; and

(ii) to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any part of this Booklet, other than their respective statements and reports noted next to their names (where applicable) which has been included in this Booklet with the consent of that party.

11.24 Regulatory and legal

(a) Foreign exchange controls

The Reserve Bank of Australia generally does not restrict the import and export of Australian dollars. There are currently no Australian exchange controls or other limitations, other than an applicable withholding of Australian tax, which restrict the remittances of any dividends, interest or other payment by EXU to non-resident holders of EXU Shares outside Australia, provided they are not resident in or a resident of a place to which, or a person to whom, such remittances would be prohibited.

(b) Restrictions on foreign ownership

There are no limitations, either under the laws of Australia or under the constitution of EXU, to the right of non-residents to hold or vote EXU Shares other than the Foreign Acquisitions and Takeovers Act 1975 (Commonwealth) (FATA). FATA may affect the right of certain persons to hold or control EXU Shares. Acquisitions of shares in Australian companies by foreign interests are subject to review and approval by the Treasurer of the Commonwealth of Australia under FATA, which applies to any acquisition by a foreign person or associated foreign person which would result in a holding of 15% or more of the issued shares of, or control of 15% or more of the voting power in, an Australian company. Further, it applies to any acquisition by non-associated foreign persons which would result in a holding by these persons of 40% or more of the issued shares of, or control of 40% or more of the voting power in, an Australian company.

11.25 Supplementary information

(a) Auzex will issue a supplementary document to this Booklet if it becomes aware of any of the following between the date of lodgement of this Booklet for registration by ASIC and the Effective Date:

(i) a material statement in this Booklet is false or misleading;

(ii) a material omission from this Booklet;

(iii) a significant change affecting a matter included in this Booklet; or

(iv) a significant new matter has arisen and it would have been required to be included in this Booklet if it had arisen before the lodgement of this Booklet for registration by ASIC.

(b) Depending on the nature and timing of the changed circumstances and subject to obtaining any relevant approvals, Auzex may circulate and publish any supplementary document by:

(i) placing an advertisement in a prominently published newspaper which is circulated generally throughout Australia; or

(ii) posting the supplementary document on Auzex’s website at www.auzex.com.

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11.26 Information relating to ore reserves and mineral resources

(a) Auzex

The information in this Booklet that relates to mineral resources for Auzex is based on information compiled by Dr Greg Partington, who is a full time employee of Auzex. Dr Partington has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Dr Partington consents to the inclusion in this Booklet of the matters based on this information in the form and context in which it appears.

(b) EXU

The information in this Booklet of a scientific or technical nature relating to the EXU properties is based on technical reports prepared for those properties. The information in this document that relates to Exploration Results, Mineral Resources and Ore Reserves as each item is identified in the JORC Code is based on information compiled by Mr Mark Calderwood who is a full-time employee of EXU and Member of The Australasian Institute of Mining and Metallurgy. He is Qualified as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. He consents to the inclusion in this Booklet of the matters based on this information in the form and context in which it appears.

11.27 Effects of rounding

A number of figures, amounts, percentages, prices, estimates, calculations of value and fractions in this Booklet (including but not limited to those in respect of the Scheme Consideration), are subject to the effect of rounding. Accordingly, the actual calculations of these figures may differ from the figures set out in this Booklet.

11.28 Data in charts, graphs and tables

Unless otherwise stated, all data contained in charts, graphs and tables is based on information available at the latest reasonably practicable date before the date of this Booklet. Any discrepancies in any chart, graph or table between totals and sums of amounts presented or listed therein or to previously published financial figures are due to rounding.

11.29 No other material information

Other than as set out in this Booklet, there is no information material to the making of a decision in relation to the Scheme or a decision by an Auzex Shareholder whether or not to vote in favour of the Scheme, being information that is within the knowledge of any Auzex Directors or of a Related Body Corporate of Auzex and which has not previously been disclosed to Auzex Shareholders.

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12 DEFINITIONS AND INTERPRETATION

12.1 Definitions

In this Booklet the following words have these meanings unless the contrary intention appears or the context otherwise requires:

AEST Australian Eastern Standard Time

Annexure an annexure to this Booklet

ASIC Australian Securities and Investments Commission

Associate has the meaning given to that term in section 9 of the Corporations Act

ASX ASX Limited or the financial market which it operates, as the context requires

ASX Listing Rules or Listing Rules

the official listing rules of the ASX

Auzex Auzex Exploration Limited ACN 153 608 596

Auzex Board the board of Auzex Directors

Auzex Directors the directors of Auzex

Auzex Information Line the Auzex information line established by Auzex for the purpose of the Merger

Auzex Share a fully paid ordinary share issued in the capital of Auzex

Auzex Shareholder a person who is registered in the Auzex Share Register as the holder of one or more Auzex Shares from time to time

Auzex Share Register the register of Auzex Shareholders maintained in accordance with section 169 of the Corporations Act

Auzex Share Registry Computershare Investor Services Pty Limited ABN 48 078 279 277

Booklet this booklet containing the explanatory statement relating to the Scheme as required by Part 5.1 of the Corporations Act, the notice of meeting in relation to the Scheme, and other information (including any supplementary information) relating to any of the above matters and distributed to Auzex Shareholders

Business Day a day that is both a Business Day within the meaning given in the ASX Listing Rules and a day that banks in Perth, Western Australia and Brisbane, Queensland, are open for business

Cash Proceeds the sale proceeds of New EXU Shares sold by the Sale Nominee in respect of Ineligible Overseas Shareholders, converted into Australian dollars and less any applicable brokerage, stamp duty and other selling costs, taxes and charges

CGT capital gains tax

CHESS the Clearing House Electronic Subregister System operated by ASX Settlement Pty Ltd, a wholly owned subsidiary of ASX

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Consolidation

Corporations Act

the consolidation of the issued capital of EXU on the basis of one (1) EXU Share for every 10 EXU Shares on issue and one (1) EXU Option for every 10 EXU Options on issue, as approved by EXU Shareholders at the EXU General Meeting held on 26 June 2015.

the Corporations Act 2001 (Cth)

Competing Proposal in respect of Auzex or EXU (each a Body), a transaction or arrangement pursuant to which (other than as contemplated by the Scheme a Third Party will, if the proposed transaction or arrangement is entered into or completed substantially in accordance with its terms:

(a) directly or indirectly acquire, have a right to acquire or otherwise acquire an economic interest in, all or a majority of the business of the Body;

(b) acquire a Relevant Interest in any of the shares of the Body, as a result of which the Third Party will have a Relevant Interest in 50% or more of the shares of the Body;

(c) otherwise acquire control of the Body within the meaning of section 50AA of the Corporations Act; or

(d) otherwise directly or indirectly acquire, merge with, or acquire a significant shareholding or economic interest in the Body or its businesses, whether by way of takeover offer, scheme of arrangement, shareholder approved acquisition, capital reduction, share buy-back, sale or purchase of assets, joint venture, reverse takeover, dual-listed company structure, recapitalisation, establishment of a new holding company for the Body or other synthetic merger or any other transaction or arrangement,

which, if completed, would require either Auzex or EXU to abandon, or otherwise fail to proceed with, the Scheme.

Court the Supreme Court of Queensland

Deed Poll the deed poll dated 16 July 2015 executed by EXU whereby, among other things, EXU covenants to carry out its obligations under the Scheme, as set out in Annexure C

Effective in respect of the Scheme, the coming into effect, under section 411(10) of the Corporations Act of the order of the Court made under sections 411(4)(b) (and if applicable, section 411(6)) in relation to the Scheme

Effective Date the date on which the Scheme becomes Effective

Eligible Scheme Shareholder

a Scheme Shareholder who is not an Ineligible Overseas Shareholder

End Date 30 September 2015 or such later date as may be agreed by Auzex and EXU in writing

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EXU Explaurum Limited ACN 114 175 138

EXU Board

EXU Creditor Option

the board of EXU Directors

an EXU Option to acquire an EXU Share at and exercise price of $0.03 per EXU Share, exercisable at any time until 31 August 2018 provided that the volume weighted average price of EXU Shares for five (5) consecutive trading days prior to the date of exercise is at least $0.05. The EXU Creditor Options will not be quoted on ASX, but comply with the requirements of the ASX Listing Rules.

EXU Directors the directors of EXU

EXU Option an option to subscribe for EXU Shares

EXU Share a fully paid ordinary share issued in the capital of EXU

EXU Shareholder

EXU Share Register

a holder of an EXU Share

the register of EXU shareholders maintained in accordance with section 169 of the Corporations Act

IFRS International Financial Reporting Standards

Implementation Date 21 September 2015 or such other date as Auzex and EXU may agree in writing

Independent Expert BDO Corporate Finance (QLD) Limited ABN 54 010 185 725, Australian Financial Services Licence No 245513

Independent Expert’s Report

the report of the Independent Expert, a copy of which is Annexure A of this Booklet

Ineligible Overseas Shareholder

any Scheme Shareholder whose address as shown in the Auzex Share Register at 5:00 pm on the Record Date is a place outside Australia and its external territories and New Zealand unless EXU and Auzex are satisfied, acting reasonably, that the laws of a particular Auzex Shareholder’s country of residence (as shown in the Auzex Share Register) permit the issue and allotment of EXU Shares to that Scheme Shareholder either unconditionally or after compliance with conditions which EXU regards in its sole discretion as acceptable

JORC Code the Australasian Code of Reporting of Exploration Results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy and the Australasian Institute of Geoscientists and Minerals Council of Australia, 2012 edition

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Material Adverse Change in respect of Auzex or EXU (each a Body), any one or more events, occurrences or matters which individually or when aggregated with all such events, occurrences or matters of a like kind or category, has (or would be likely to have) a material adverse effect on:

(a) the business, properties, financial condition, results, operations or prospects of that Body, taken as a whole; or

(b) that Body’s consolidated net assets,

other than:

(c) an event, occurrence or matter required to be undertaken or procured pursuant to the Scheme;

(d) to the extent that an event, occurrence or matter was announced to the ASX or otherwise fairly disclosed;

(e) as a result of the release of the announcement of the Scheme;

(f) any change (excluding changes to taxation laws or policies) in accounting standards, law, regulation or policy;

(g) a change in the price of gold, or any other event, occurrence or matter affecting the gold mining industry generally;

(h) general economic, financial, currency exchange, securities or commodity market conditions;

(i) any outbreak or escalation of hostilities or armed conflict;

(j) any change in the market price of Auzex Shares or EXU Shares (provided that the causes underlying such change may be taken into account when determining whether a material adverse effect has occurred); or

(k) an event that affects the other party in a substantially consistent and proportionate manner.

Merged Group

Merged Group Shares

EXU and its controlled entities after the Merger

EXU Shares after the Implementation Date

Merger the proposed merger between Auzex and EXU to be implemented through the Scheme

Merger Implementation Agreement or MIA

the merger implementation agreement dated 16 May 2015 between Auzex and EXU relating to the Merger

New EXU Shares

Project

such EXU Shares as are issued by EXU (credited as fully paid) pursuant to the EXU Scheme and which will rank pari passu in all respects with existing EXU Shares

a project of either Auzex or EXU

Proxy Form the proxy form for the Scheme Meeting which is enclosed with this Booklet

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Record Date 6:00 pm on 14 September 2015, or any other date agreed by Auzex and EXU in writing to be the record date to determine entitlements to receive the Scheme Consideration under the Scheme

Regulated Event Other than as required or contemplated by the Scheme or the Merger, the occurrence of any of the following in relation to Auzex or EXU (each a Body):

(a) the Body or any of its Subsidiaries converts all or any of its securities into a larger or smaller number of securities;

(b) the Body or any of its Subsidiaries resolves to reduce its capital in any way;

(c) the Body or any of its Subsidiaries:

(i) enters into a buy-back agreement; or

(ii) resolves to approve the terms of a buy-back agreement under section 257C(1) or section 257D(1) of the Corporations Act;

(d) the Body or any of its Subsidiaries issues securities, or grants an option over or to subscribe for its securities, or agrees to make such an issue or grant such an option, other than:

(i) to a wholly-owned Subsidiary of the Body; or

(ii) pursuant to the conversion of the Auzex Convertible Notes;

(e) the Body or any of its Subsidiaries issues, or agrees to issue, convertible notes or any other security convertible into shares, other than to a wholly-owned Subsidiary of the Body;

(f) the Body or any of its Subsidiaries agrees to pay, declares or pays a dividend or any other form of distribution of profit or capital, other than the declaration and payment by any Subsidiary of the Body of a dividend where the recipient of that dividend is the Body or a wholly-owned Subsidiary of the Body;

(g) the Body makes any change to its constitution;

(h) the Body or any of its Subsidiaries acquires or agrees to acquire any assets, properties or businesses, or incurs, agrees to incur or enters into a commitment or a series of commitments involving capital expenditure by the Body, whether in one or more transactions, where the amounts or value involved in such transaction, transactions, commitments or series of commitments exceeds $250,000 in aggregate; F

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(i) the Body or any of its Subsidiaries disposes of, or agrees to dispose of, any assets, properties or businesses, whether in one transaction or a number of such transactions, where the amount or value involved in such transaction or transactions exceeds $250,000 in aggregate;

(j) the Body or any of its Subsidiaries creates, or agrees to create, any mortgage, charge, lien or other encumbrance over its business or any part of its property other than in the ordinary course of its business;

(k) other than as contemplated by this deed or the Loan Agreement, the Body or any of its Subsidiaries incurs any financial indebtedness or issues any debt securities, other than in the ordinary course of business or pursuant to advances under its credit facilities in existence as at the date of this deed where the funds drawn pursuant to those advances are used in the ordinary course of business or in connection with a purpose that is contemplated and permitted in paragraph (h) above;

(l) other than as contemplated by this deed, the Body or any of its Subsidiaries makes any loans, advances or capital contributions to, or investments in, any other person (other than to or in the Body or any wholly-owned Subsidiary of the Body in the ordinary course of business), other than in the ordinary course of business;

(m) the Body or any of its Subsidiaries resolves that it be wound up or an application or order is made for the winding up or dissolution of the Body or any of its Subsidiaries other than where the application or order (as the case may be) is set aside within 14 days;

(n) a liquidator or provisional liquidator of the Body or any of its Subsidiaries is appointed;

(o) a court makes an order for the winding up of the Body or any of its Subsidiaries;

(p) an administrator of the Body or of any of its Subsidiaries is appointed under sections 436A, 436B or 436C of the Corporations Act;

(q) the Body or any of its Subsidiaries ceases, or threatens to cease, to carry on business;

(r) the Body or any of its Subsidiaries executes a deed of company arrangement;

(s) a receiver, or a receiver and manager, is appointed in relation to the whole, or a substantial part, of the property of the Body or any of its Subsidiaries;

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(t) the Body or any of its Subsidiaries is deregistered as a company or otherwise dissolved;

(u) the Body or any of its Subsidiaries is or becomes unable to pay its debts when they fall due;

(v) the Body or any of its Subsidiaries enters into any arrangement, commitment or agreement with a related party (as that term is defined in section 228 of the Corporations Act), other than in the ordinary course of business;

(w) the Body or any of its Subsidiaries makes or amends any tax election, changes any method of tax accounting, settles or compromises any tax liability, files any material amended tax return, enters into a closing agreement, surrenders any right to claim a material tax refund or consents to the extension or waiver of the limitation period applicable to any material tax claim or assessment, other than in the ordinary course of business;

(x) the Body or any of its Subsidiaries pays, discharges, settles, satisfies, compromises, waives, assigns or releases any claims, liabilities or obligations other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice, of liabilities reflected or reserved against in the Body’s financial statements or incurred in the ordinary course of business consistent with past practice;

(y) the Body or any of its Subsidiaries authorises, recommends or proposes any release or relinquishment of any contractual right, except in the ordinary course of business consistent with past practice; or

(z) the Body or any of its Subsidiaries enters into or renews any agreement, contract, lease, licence or other binding obligation containing:

(i) any limitation or restriction on the ability of the Body or any of its Subsidiaries or, following completion of the transactions contemplated by this deed, the ability of EXU, to engage in any type of activity or business;

(ii) any limitation or restriction on the manner in which, or the localities in which, all or any portion of the business of the Body or, following completion of the transactions contemplated by this deed, all or any portion of the business of the Merged Group, is or would be conducted; orF

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(iii) any limit or restriction on the ability of the Body or any of its Subsidiaries or, following completion of the transactions contemplated by this deed, the ability of EXU, to solicit customers or employees,

or that would reasonably be expected to materially delay or prevent the completion of the transactions contemplated by the Scheme, other than in the ordinary course of business,

provided that a Regulated Event will not include a matter:

(aa) required to be done or procured by the Body pursuant to this deed or the Scheme;

(bb) which the Body is permitted to do, or not to do, as an exception to the exclusivity provisions of the MIA;

(cc) fairly disclosed by the Body in writing prior to the date of the MIA; or

(dd) in relation to which the other Body has expressly consented in writing.

Regulatory Approvals

ASX and any other Regulatory Authority consents, approvals, clearances, decisions or determinations or other acts necessary or desirable to implement the Merger

Regulatory Authority

(a) any government, semi-government or local authority and any department, minister or agency of any government; and

(b) any other authority, agency, commission, administrative, fiscal or judicial body (including the Court), tribunal or similar entity having powers or jurisdiction under any law or regulation or the listing rules of any recognised stock or securities exchange, including without limitation the ASX.

Related Entity the meaning given to that term in section 9 of the Corporations Act

Related Party the meaning given to that term in section 9 of the Corporations Act

Relevant Interest the meaning given to that term in sections 608 and 609 of the Corporations Act

Requisite Majority in respect of the Scheme, approval by:

(a) a majority in number (more than 50%) of Scheme Shareholders present and voting at the Scheme Meeting (in person, by proxy, by attorney or, in the case of corporate Scheme Shareholders, by corporate representative); and

(b) at least 75% of the total number of votes cast by Scheme Shareholders at the Scheme Meeting

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Resource the meaning in the JORC Code

Sale Facility

Sale Nominee

the facility in accordance with an agreement between EXU and the Sale Nominee, under which the EXU shares of Ineligible Overseas Shareholders will be sold, as described in section 4.11 of this Booklet

Merchant Capital Markets Pty Ltd (ACN 154 848 469), or its nominee, being the person that EXU intends to appoint prior to the Implementation Date to sell the New EXU Shares referable to Ineligible Overseas Shareholders.

Merchant Capital Markets Pty Ltd is an authorised representative (representative number 415728) of Draupner Investment Management Pty Ltd (ACN 112 894 845), holder of Australian Financial Services License 303566.

Scheme the scheme of arrangement pursuant to Part 5.1 of the Corporations Act between Auzex and the Scheme Shareholders contained in Annexure B of this Booklet, subject to any alteration or condition made or required by the Court pursuant to section 411(6) of the Corporations Act

Scheme Conditions means the conditions to the Scheme as set out in section 4.8 of this Booklet

Scheme Consideration means the consideration to be provided to Scheme Shareholders under the terms of the Scheme for the transfer to EXU of their Auzex Shares

Scheme Meeting the meeting of Auzex Shareholders ordered by the Court to be held to consider the resolution set out in the notice of meeting contained in pages immediately after the letters from the chairmen of Auzex and EXU at the beginning of this Booklet to be held on Monday 24 August 2015 at 10:00 am (Brisbane time) at 15 Ivory Lane, Brisbane

Scheme Share an Auzex Share

Scheme Shareholder a person who is an Auzex Shareholder as at the Record Date

Second Court Date the date of the Second Court Hearing

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Second Court Hearing the hearing of the application made to the Court for an order under section 411(4)(b) of the Corporations Act approving the Scheme

Share Scheme Ratio four (4) New EXU Shares for each Scheme Share

Superior Proposal In relation to Auzex or EXU (each a Body) a Competing Proposal in respect of the Body which:

(a) in the determination of the Board of Directors of the Body acting in good faith, is reasonably capable of being completed without undue delay, taking into account both the nature of the Competing Proposal and the person or persons making it; and

(b) in the determination of the Board of Directors of the Body acting in good faith, after receiving the advice of its external legal and financial advisers, would, if completed substantially in accordance with its terms, result in a transaction more favourable to the shareholders of the Body than the Scheme.

Third Party a person who is neither a party to this deed, nor any Related Body Corporate of a party to this deed, including without limitation any individual, corporation, partnership, party, trust, fund, association and or other organised group of persons or combination of persons acting in concert by virtue of an agreement, arrangement, commitment or understanding which is not a party to this deed.

VWAP volume weighted average price

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12.2 General Interpretation

The following rules of interpretation apply unless the contrary intention appears or the context requires otherwise:

(a) a reference to time is a reference to Brisbane time;

(b) headings are for convenience only and do not affect interpretation;

(c) the singular includes the plural and conversely;

(d) a reference to a section is to a section of this Booklet;

(e) a gender includes all genders;

(f) where a word or phrase is defined, its other grammatical forms have a corresponding meaning;

(g) $, dollar or cents is a reference to the lawful currency in Australia, unless otherwise stated;

(h) a reference to a person includes a body corporate, an unincorporated body or other entity and conversely;

(i) a reference to a person includes a reference to the person’s executors, administrators, successors, substitutes (including persons taking by novation) and assigns;

(j) a reference to any legislation or to any provision of any legislation includes any modification or re-enactment of it, any legislative provision substituted for it and all regulations and statutory instruments issued under it;

(k) a reference to any instrument or document includes any variation or replacement of it;

(l) a term not specifically defined in this Booklet has the meaning given to it (if any) in the Corporations Act or the ASX Settlement Operating Rules, as the case may be;

(m) a reference to a right or obligation of any two or more persons confers that right, or imposes that obligation, as the case may be, jointly and individually; and

(n) the words ‘include’, ‘including’, ‘for example’ or ‘such as’ are not used as, nor are they to be interpreted as, words of limitation, and, when introducing an example, do not limit the meaning of the words to which the example relates to that example or examples of a similar kind.

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DirectorsMr Chris BakerMr John LawtonDr Greg PartingtonMr Paul Frederiks

Company SecretaryMr Paul Frederiks

Share RegistryComputershare Investor Services Pty Limited117 Victoria StreetWest End QLD 4101

Corporate AdvisorCCZ Corporate Finance Pty LtdLevel 4, 410 Collins StreetMelbourne VIC 3000

Independent Expert BDO Corporate Finance (QLD) Ltd Level 1012 Creek Street Brisbane QLD 4000

Registered OfficeC/- Level 16 Waterfront Place 1 Eagle StreetBrisbane QLD 4000

Websitehttp://www.auzex.com

Legal Advisor to AuzexThomson GeerLevel 16 Waterfront Place 1 Eagle StreetBrisbane QLD 4000

Legal Advisor to EXUSteinepreis PaganinLevel 4, 16 Milligan StreetPerth WA 6000

Technical ExpertMining Associates Limited67 St Paul’s TerraceSpring Hill Queensland 4004

13 CORPORATE INFORMATIONF

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AUZEX EXPLORATION LIMITED Independent Expert’s Report 23 July 2015

ANNEXURE A | Independent Expert’s Report

AUZEX EXPLORATION LIMITED Independent Expert’s Report 23 July 2015

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1.0 INTRODUCTION ...................................................................................................... 1

2.0 SUMMARY OF OPINION ............................................................................................. 2

3.0 DESCRIPTION OF THE PROPOSED TRANSACTION ............................................................ 4

4.0 SCOPE OF REPORT AND METHODOLOGY FOR ASSESSMENT ............................................... 6

5.0 OVERVIEW OF AUZEX EXPLORATION LIMITED ................................................................ 9

6.0 OVERVIEW OF EXPLAURUM LIMITED ........................................................................... 15

7.0 OVERVIEW OF THE MERGED GROUP ........................................................................... 23

8.0 VALUE OF AUZEX ON A MINORITY INTEREST BASIS PRIOR TO THE PROPOSED TRANSACTION .... 23

9.0 VALUE OF THE MERGED GROUP FOLLOWING THE PROPOSED TRANSACTION ........................ 29

10.0 FAIRNESS OF THE PROPOSED TRANSACTION .............................................................. 34

11.0 REASONABLENESS OF THE PROPOSED TRANSACTION ................................................... 35

12.0 EXPERT’S OPINION ON THE PROPOSED TRANSACTION .................................................. 39

13.0 SOURCES OF INFORMATION ................................................................................... 39

14.0 REPRESENTATIONS, INDEMNITIES AND WARRANTIES .................................................... 40

15.0 EXPERIENCE, DISCLAIMERS AND QUALIFICATIONS ....................................................... 41

APPENDIX A: INDUSTRY OVERVIEW: GOLD MINING IN AUSTRALIA ............................................. 42

APPENDIX B: COMMON VALUATION METHODOLOGIES ............................................................ 44

APPENDIX C: CONTROL PREMIUM ANALYSIS ........................................................................ 46

APPENDIX D: TECHNICAL EXPERT’S REPORT: AUZEX EXPLORATION LIMITED ............................... 46

Table of Contents

iii 23 July 2015 Independent Expert’s Report | Auzex Exploration Limited

The Financial Services Guide (‘FSG’) is provided to comply with the legal requirements imposed by the Corporations Act 2001 and includes important information regarding the general financial product advice contained in this report (‘this Report’). The FSG also includes general information about BDO Corporate Finance (QLD) Ltd (‘BDO CFQ’ or ‘we’, ‘us’ or ‘our’), including the financial services we are authorised to provide, our remuneration and our dispute resolution.

BDO CFQ holds an Australian Financial Services Licence to provide the following services:

(a) financial product advice in relation to deposit and payment products (limited to basic deposit products and deposit products other than basic deposit products), securities, derivatives, managed investments schemes, superannuation, and government debentures, stocks and bonds; and

(b) arranging to deal in financial products mentioned in a) above, with the exception of derivatives.

General Financial Product Advice

This Report sets out what is described as general financial product advice. This Report does not consider personal objectives, individual financial position or needs and therefore does not represent personal financial product advice. Consequently any person using this Report must consider their own objectives, financial situation and needs. They may wish to obtain professional advice to assist in this assessment.

The Assignment

BDO Corporate Finance (QLD) Ltd ABN 54 010 185 725, Australian Financial Services Licence No. 245513 has been engaged to provide general financial product advice in the form of a report in relation to a financial product. Specifically, BDO CFQ has been engaged to provide an independent expert’s report to the shareholders of Auzex Exploration Limited (‘Auzex’) in relation to the proposed merger between Auzex and Explaurum Limited (‘the Proposed Transaction’). The Proposed Transaction will be implemented by way of an Australian scheme of arrangement.

Further details of the Proposed Transaction are set out in Section 3.0. The scope of this Report is set out in detail in Section 4.0. This Report provides an opinion on whether or not the Proposed Transaction is in the best interests of Auzex shareholders.

This Report cannot be relied upon for any purpose other than the purpose mentioned above and cannot be relied upon by any person or entity other than those mentioned above, unless we have provided our express consent in writing to do so. A shareholder’s decision to vote in favour of or against the Proposed Transaction is likely to be influenced by their particular circumstances, for example, their taxation considerations and risk profile. Each shareholder should obtain their own professional advice in relation to their own circumstances.

Fees, commissions and other benefits we may receive

We charge a fee for providing reports. The fees are negotiated with the party who engages us to provide a report. We estimate the fee for the preparation of this Report will be approximately $40,000 plus GST. Fees are usually charged as a fixed amount or on an hourly basis depending on the terms of the agreement with the engaging party. Our fees for this Report are not contingent on the outcome of the Proposed Transaction.

Except for the fees referred to above, neither BDO CFQ, 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 this Report.

Directors of BDO CFQ may receive a share in the profits of BDO Group Holdings (QLD) Pty Ltd, a parent entity of BDO CFQ. All directors and employees of BDO Group Holdings (QLD) Pty Ltd and its subsidiaries (including BDO CFQ) are entitled to receive a salary. Where a director of BDO CFQ is a shareholder of BDO Group Holdings (QLD) Pty Ltd, the person is entitled to share in the profits of BDO Group Holdings (QLD) Pty Ltd.

Financial Services Guide F

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Associations and relationships

From time to time BDO CFQ or its related entities may provide professional services to issuers of financial products in the ordinary course of its business. These services may include audit, tax and business advisory services. BDO CFQ has previously been engaged by Auzex to prepare an independent accountant’s report. BDO CFQ also prepared an independent expert’s report in relation to the transaction that established Auzex through the demerger of Auzex Resources Limited’s non-Bullabulling assets.

The signatory to the Report does not hold any shares in Auzex or Explaurum and no such shares have ever been held by the signatory.

To prepare our reports, including this Report, we may use researched information provided by research facilities to which we subscribe or which is publicly available. Reference has been made to the sources of information in this Report, where applicable. Research fees are not included in the fee details provided in this Report.

Complaints

We are members of the Financial Ombudsman Service. Any complaint about our service should be in writing and sent to BDO Corporate Finance (QLD) Ltd, GPO Box 457, Brisbane QLD 4001.

We will endeavour to resolve the complaint quickly and fairly. If the complaint cannot be satisfactorily resolved within 45 days of written notification, there is a right to lodge a complaint with the Financial Ombudsman Service. They can be contacted on 1300 780 808. This service is provided free of charge.

If the complaint involves ethical conduct, a complaint may be lodged in writing with the Institute of Chartered Accountants, Queensland Branch, GPO Box 2054, Brisbane QLD 4001. The Australian Securities and Investment Commission (‘ASIC’) also has an Infoline on 1300 300 630 which can be used to make a complaint and obtain information about investor rights.

Contact Details

BDO Corporate Finance (QLD) Ltd

Location Address: Postal Address:

Level 10 12 Creek Street BRISBANE QLD 4000

GPO Box 457 BRISBANE QLD 4001

Phone: (07) 3237 5999 Email: [email protected]

Fax: (07) 3221 9227

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Associations and relationships

From time to time BDO CFQ or its related entities may provide professional services to issuers of financial products in the ordinary course of its business. These services may include audit, tax and business advisory services. BDO CFQ has previously been engaged by Auzex to prepare an independent accountant’s report. BDO CFQ also prepared an independent expert’s report in relation to the transaction that established Auzex through the demerger of Auzex Resources Limited’s non-Bullabulling assets.

The signatory to the Report does not hold any shares in Auzex or Explaurum and no such shares have ever been held by the signatory.

To prepare our reports, including this Report, we may use researched information provided by research facilities to which we subscribe or which is publicly available. Reference has been made to the sources of information in this Report, where applicable. Research fees are not included in the fee details provided in this Report.

Complaints

We are members of the Financial Ombudsman Service. Any complaint about our service should be in writing and sent to BDO Corporate Finance (QLD) Ltd, GPO Box 457, Brisbane QLD 4001.

We will endeavour to resolve the complaint quickly and fairly. If the complaint cannot be satisfactorily resolved within 45 days of written notification, there is a right to lodge a complaint with the Financial Ombudsman Service. They can be contacted on 1300 780 808. This service is provided free of charge.

If the complaint involves ethical conduct, a complaint may be lodged in writing with the Institute of Chartered Accountants, Queensland Branch, GPO Box 2054, Brisbane QLD 4001. The Australian Securities and Investment Commission (‘ASIC’) also has an Infoline on 1300 300 630 which can be used to make a complaint and obtain information about investor rights.

Contact Details


Location Address: Postal Address:

Level 10 12 Creek Street BRISBANE QLD 4000

GPO Box 457 BRISBANE QLD 4001

Phone: (07) 3237 5999 Email: [email protected]

Fax: (07) 3221 9227

v 23 July 2015 Independent Expert’s Report | Auzex Exploration Limited

Reference Definition

ABV Asset-based valuation

Auzex Auzex Exploration Limited

ASIC Australian Securities and Investment Commission

ASX Australian Securities Exchange

AUD or $ Australian dollars

AZX Auzex Resources Limited

BDO CFQ BDO Corporate Finance (QLD) Ltd

BDO Persons BDO CFQ, BDO (QLD) or any of its partners, directors, agents or associates

Capital Raising, the Explaurum’s capital raising of $1.3 million completed on 29 June 2015

CME Capitalisation of maintainable earnings

Company, the Auzex Exploration Limited

Corporations Act, the The Corporations Act 2001

DCF Discounted cash flow

Explaurum Explaurum Limited before the Proposed Transaction

FSG Financial Services Guide

IPO Initial Public Offering

km Kilometres

MA Report, the Technical valuation report of the mineral exploration assets held by Auzex prepared by Mining Associates dated 24 June 2015

MBV Market-based valuation

Merged Group, the Explaurum after the Proposed Transaction

oz Ounces

Proposed IPO, the Auzex’s planned IPO and ASX listing in December 2014

Proposed Transaction, the The proposed merger of Auzex and Explaurum (as further defined in Section 3.1)

Regulations, the The Corporation Regulations 2001

Report, this This independent expert's report prepared by BDO CFQ dated 23 July 2015

RG 111 Regulatory Guide 111: Content of Expert Report

RGs Regulatory guides published by ASIC

Scheme Booklet, the

The Scheme Booklet prepared by Auzex in relation to the Proposed Transaction dated 23 July 2015

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Share consolidation

Consolidation of the issued capital of Explaurum on the basis of 1 Explaurum share for every 10 Explaurum shares on issue and 1 Explaurum option for every 10 Explaurum options on issue

t Tonnes

Tampiagold Parties, the

Tampiagold Pty Ltd and Goldoro Pty Ltd, Auzex’s joint venture partners in the Tampia Gold Project

Tranche 1 Capital Raising

64,003,420 shares (on a pre-consolidation basis) issued by Explaurum on 7 May 2015 at an issue price of $0.003 with 1,600,103 attaching options (on a post-consolidation basis)


36,933,028 shares issued by Explaurum at an issue price of $0.03 with 9,233,275 attaching options (each on a post-consolidation basis)

VWAP Volume weighted average price

We, us, our BDO Corporate Finance (QLD) Ltd

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Share consolidation

Consolidation of the issued capital of Explaurum on the basis of 1 Explaurum share for every 10 Explaurum shares on issue and 1 Explaurum option for every 10 Explaurum options on issue

t Tonnes

Tampiagold Parties, the

Tampiagold Pty Ltd and Goldoro Pty Ltd, Auzex’s joint venture partners in the Tampia Gold Project


64,003,420 shares (on a pre-consolidation basis) issued by Explaurum on 7 May 2015 at an issue price of $0.003 with 1,600,103 attaching options (on a post-consolidation basis)


36,933,028 shares issued by Explaurum at an issue price of $0.03 with 9,233,275 attaching options (each on a post-consolidation basis)

VWAP Volume weighted average price

We, us, our BDO Corporate Finance (QLD) Ltd

1

Level 10, 12 Creek Street Brisbane, QLD 4000 GPO Box 457, Brisbane QLD 4001 AUSTRALIA

Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au

BDO Corporate Finance (QLD) Ltd ABN 54 010 185 725 AFS Licence No. 245513 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Corporate Finance (QLD) Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

The Shareholders C/- The Directors Auzex Exploration Limited GPO Box 3249 BRISBANE QLD 4001

23 July 2015

Dear Shareholders,

Independent Expert’s Report

1.0 Introduction

BDO Corporate Finance (QLD) Ltd (‘BDO CFQ’, ‘we’, ‘us’ or ‘our’) has been engaged to provide an independent expert’s report (‘this Report’) to the shareholders of Auzex Exploration Limited (‘Auzex’ or ‘the Company’) in relation to the proposed merger (‘the Proposed Transaction’) of Auzex and Explaurum Limited (‘Explaurum’).

Under the terms of the Proposed Transaction, Explaurum will acquire 100% of the shares outstanding in Auzex via a scheme of arrangement pursuant to Part 5.1 of the Corporations Act 2001. Auzex shareholders will receive 4 Explaurum shares for each Auzex share held. Immediately following the Proposed Transaction, Auzex shareholders will collectively hold approximately 49.3% of the total outstanding shares in the Merged Group.

To differentiate between Explaurum prior to the Proposed Transaction and Explaurum post the Proposed Transaction, in this Report we refer to the pre-transaction entity as Explaurum and the post-transaction entity as 'the Merged Group'. We note that the Merged Group as referred to in this Report will not be a ‘new entity’ as such, but rather Explaurum following the Proposed Transaction. The Merged Group will continue to be called Explaurum Limited following the Proposed Transaction and will remain listed on the ASX.

A more detailed description of the Proposed Transaction is set out in Section 3.0 of this Report.

In this Report, BDO CFQ has expressed an opinion as to whether or not the Proposed Transaction is ‘fair and reasonable’ and in the ‘best interests’ of Auzex shareholders.

This Report has been prepared solely for use by the Auzex shareholders prior to the scheme meeting to provide them with information relating to the Proposed Transaction.

We understand that this Report will be provided to Auzex shareholders to assist them to make an informed decision on whether to vote in favour of or against the Proposed Transaction. Apart from the purpose stated directly above, this Report cannot be used or relied on for any other purpose or by any other person or entity.

This Report should be read in full, including the assumptions underpinning our work together with the other information provided to Auzex shareholders in conjunction with this Report, including the Scheme Booklet prepared by Auzex in relation to the Proposed Transaction dated 23 July 2015 (‘the Scheme Booklet’).

This Report does not address circumstances specific to individual Auzex shareholders. An Auzex shareholder’s decision to vote in favour of or against the Proposed Transaction is likely to be influenced by their own particular circumstances including, for example, their taxation considerations and risk profile. Auzex shareholders should obtain their own professional advice in relation to their own circumstances. F

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2 23 July 2015 Independent Expert’s Report | Auzex Exploration Limited

2.0 Summary of Opinion

This section is a summary of our opinion only and cannot substitute for a complete reading of this Report.

2.1 Fairness of the Proposed Transaction

In accordance with Regulatory Guide 111: Content of Expert’s Reports (‘RG 111’), a transaction is considered fair if the value of the consideration offered is equal to or greater than the value of the securities subject of the transaction. To assess the fairness of the Proposed Transaction, we have:

(a) Calculated the value of the consideration offered to Auzex shareholders under the Proposed Transaction, being the value of 4 shares in the Merged Group immediately following the Proposed Transaction on a minority interest basis; and

(b) Compared the value of the consideration offered as determined in (a) above with the value of a share in Auzex immediately prior to the Proposed Transaction on minority interest basis.

We have completed the value comparison on an equivalent basis (i.e. minority interest in Auzex and a minority interest in the Merged Group) for the reasons set out in Section 4.2.1 of this Report.

Table 2.1 below summarises our assessment of the fairness of the Proposed Transaction. For a more detailed assessment of the Proposed Transaction, refer to Section 10.0 of this Report.

Table 2.1: Fairness of the Proposed Transaction

Low ($)

Preferred ($)

High ($)

Value of the consideration offered per Auzex share under the Proposed Transaction 0.074 0.093 0.180

Value per Auzex share immediately prior to the Proposed Transaction 0.000 0.036 0.232

Source: BDO CFQ analysis

Having regard to the values set out in Table 2.1 above, it is our view that the value of the consideration offered to Auzex shareholders under the Proposed Transaction is within the range of value of an Auzex share immediately prior to the Proposed Transaction. After considering the information summarised above and set out in more detail in Section 10.0 of this Report, in our view, the Proposed Transaction is Fair to Auzex shareholders as at the date of this Report.

2.2 Reasonableness of the Proposed Transaction

Table 2.2 below summarises the advantages and disadvantages of the Proposed Transaction. For a more detailed assessment of the Proposed Transaction, refer to Section 11.0 of this Report.

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2.0 Summary of Opinion

This section is a summary of our opinion only and cannot substitute for a complete reading of this Report.


In accordance with Regulatory Guide 111: Content of Expert’s Reports (‘RG 111’), a transaction is considered fair if the value of the consideration offered is equal to or greater than the value of the securities subject of the transaction. To assess the fairness of the Proposed Transaction, we have:


(b) Compared the value of the consideration offered as determined in (a) above with the value of a share in Auzex immediately prior to the Proposed Transaction on minority interest basis.

We have completed the value comparison on an equivalent basis (i.e. minority interest in Auzex and a minority interest in the Merged Group) for the reasons set out in Section 4.2.1 of this Report.

Table 2.1 below summarises our assessment of the fairness of the Proposed Transaction. For a more detailed assessment of the Proposed Transaction, refer to Section 10.0 of this Report.


Low ($)

Preferred ($)

High ($)

Value of the consideration offered per Auzex share under the Proposed Transaction 0.074 0.093 0.180

Value per Auzex share immediately prior to the Proposed Transaction 0.000 0.036 0.232


Having regard to the values set out in Table 2.1 above, it is our view that the value of the consideration offered to Auzex shareholders under the Proposed Transaction is within the range of value of an Auzex share immediately prior to the Proposed Transaction. After considering the information summarised above and set out in more detail in Section 10.0 of this Report, in our view, the Proposed Transaction is Fair to Auzex shareholders as at the date of this Report.


Table 2.2 below summarises the advantages and disadvantages of the Proposed Transaction. For a more detailed assessment of the Proposed Transaction, refer to Section 11.0 of this Report.


Table 2.2: Advantages and Disadvantages of the Proposed Transaction

Advantage Disadvantage

The Proposed Transaction is fair

The primary business activities of the Merged Group will continue to be consistent with the current business activity of Auzex

The Merged Group will have more cash, relative to Auzex prior to the Proposed Transaction, to fund its operations

Auzex shareholders will be issued with shares in the Merged Group which will be listed on the ASX

The Merged Group may realise cost synergies

The Proposed Transaction may increase board capabilities and technical expertise

The Merged Group may have an improved position in capital markets which may assist to reduce financing risk

Auzex shareholders interest in the Tampia Project will be diluted

Auzex shareholders will be issued new shares in the Merged Group and have exposure to a company with a different non-systematic risk profile

Implementation and other one-off costs of the Proposed Transaction may be substantial or greater than anticipated


After considering the advantages and disadvantages of the Proposed Transaction summarised above and set out in more detail in Section 11.0 of this Report, in our view the Proposed Transaction is Reasonable to Auzex shareholders as at the date of this Report.

2.3 Expert’s Opinion on the Proposed Transaction

In our opinion, the Proposed Transaction is fair and reasonable to Auzex shareholders. On this basis, in the absence of any other information or a superior offer, it is our view that the Proposed Transaction is in the Best Interests of Auzex shareholders as at the date of this Report.

Notwithstanding our view that the Proposed Transaction is in the best interests of Auzex shareholders, we strongly recommend that Auzex shareholders also have regard to the information set out in the balance of this Report.

2.4 Other Considerations for Auzex Shareholders

Before forming a view on whether to vote in favour of or against the Proposed Transaction, we strongly recommend that Auzex shareholders:

Consult their own professional advisers;

Carefully read all relevant documentation provided to them, including this Report and the Scheme Booklet; and

Consider their own specific circumstances.

The analysis set out in this Report has relied on certain economic, market and other conditions prevailing as at the date of this Report. We note that changes in these conditions may have a material impact on the information presented in this Report. BDO CFQ is not responsible for updating this Report in the event that these circumstances change.

Notwithstanding our view above, we note that both Auzex and Explaurum are companies that are engaged in the early stages of exploration of mineral assets. In our view, the value of such companies may increase or decrease materially over short time periods depending upon the outcome of exploration and development activities and changes in economic circumstances.

The decision to vote in favour of or against the Proposed Transaction is a separate decision to the investment decision to hold or divest shares in the Merged Group in the event the Proposed Transaction is approved. We recommend shareholders consult their own professional advisers in relation to the decision on whether to hold or divest shares in the Merged Group following the Proposed Transaction.

Auzex shareholders should refer to Section 11.5 of this Report for a more detailed discussion of the position of Auzex shareholders in the event that the Proposed Transaction is not approved and implemented.

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3.0 Description of the Proposed Transaction


3.1.1 Overview

On 30 April 2015, Auzex announced that it had entered into a Heads of Agreement with Explaurum whereby Explaurum would acquire 100% of the shares in Auzex via a scheme of arrangement pursuant to Part 5.1 of the Corporations Act 2001. As consideration for 100% of the shares outstanding in Auzex, Explaurum will issue to Auzex shareholders a total of 67,205,796 new ordinary shares (on a post-consolidation basis). Pursuant to the terms of the Proposed Transaction, each Auzex shareholder will receive 4 Explaurum shares for each Auzex share held.

Following the Proposed Transaction, it is expected that the Merged Group will have 136.2 million ordinary shares and 22.8 million share options outstanding. The 22.8 million share options will comprise 10.8 million share options issued to Explaurum shareholders as part of a capital raising prior to the Proposed Transaction (‘the Capital Raising’) and 12.0 million share options will be issued to directors of Auzex as consideration for the settlement of amounts owing to them. Further information in relation to the share options are set out in Sections 3.1.2 and 3.1.4 below.

Auzex shareholders will collectively hold approximately 49.3% of the total ordinary shares outstanding in the Merged Group, on an undiluted basis (i.e. if none of the 22.8 million outstanding share options are exercised), and approximately 49.8% of the total ordinary shares outstanding in the Merged Group on a fully diluted basis (i.e. if all of the 22.8 million outstanding share options are exercised).

Upon completion of the Proposed Transaction, the board of the Merged Group will consist of two current directors of Auzex and two directors of Explaurum.

On 26 June 2015 (prior to the Proposed Transaction), Explaurum shareholders passed the resolution for a 1 for 10 share consolidation (‘the Share Consolidation’) and to conduct the Capital Raising as per the terms set out in Section 3.1.2 below. Following the Share Consolidation and the Capital Raising, but prior to the Proposed Transaction, Explaurum has approximately 69.0 million ordinary shares and 10.8 million share options outstanding.

Key terms of the Scheme are set out in the balance of this section.

3.1.2 Explaurum Capital Raising

On 30 April 2015, Explaurum announced that it has secured commitments for $1.3 million via the issue of up to 433,333,333 fully paid ordinary shares at $0.003 per share, together with 108,333,333 attaching options (on a pre-consolidation basis). The proceeds from the Capital Raising will be used to advance Explaurum’s Lyons Gold Project, fund exploration at Auzex’s Tampia Gold Project, investigate further project acquisitions and meet working capital needs.

The issue consists of two tranches:

64.0 million shares (on a pre-consolidation basis) issued on 7 May 2015 (‘Tranche 1 Capital Raising’). This equates to 6.4 million shares on a post-consolidation basis;

1.6 million attaching options (on a post-consolidation basis) issued to the participants of the Tranche 1 placement on 29 June 2015; and

36.9 million shares and 9.2 million attaching options (on a post-consolidation basis) issued on 29 June 2015 (‘Tranche 2 Capital Raising’).

The Capital Raising is expected to cost $78,000.

Refer to section 6.3 of the Scheme Booklet for additional information in relation to the Capital Raising.

3.1.3 Explaurum Loan

On 23 April 2015 Explaurum entered into a loan agreement with Auzex to a loan of $600,000 to Auzex. As at 15 May 2015, Auzex had drawn down a sum of $200,000 under the loan agreement with $100,000 of this amount being drawn down in April 2015. The loan agreement was subsequently amended on 19 May 2015 for the total loan amount to increase from $600,000 to $800,000.

The final $600,000 was advanced to Auzex within one business day of Explaurum issuing the shares and options under Tranche 2 Capital Raising.

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3.1.1 Overview

On 30 April 2015, Auzex announced that it had entered into a Heads of Agreement with Explaurum whereby Explaurum would acquire 100% of the shares in Auzex via a scheme of arrangement pursuant to Part 5.1 of the Corporations Act 2001. As consideration for 100% of the shares outstanding in Auzex, Explaurum will issue to Auzex shareholders a total of 67,205,796 new ordinary shares (on a post-consolidation basis). Pursuant to the terms of the Proposed Transaction, each Auzex shareholder will receive 4 Explaurum shares for each Auzex share held.

Following the Proposed Transaction, it is expected that the Merged Group will have 136.2 million ordinary shares and 22.8 million share options outstanding. The 22.8 million share options will comprise 10.8 million share options issued to Explaurum shareholders as part of a capital raising prior to the Proposed Transaction (‘the Capital Raising’) and 12.0 million share options will be issued to directors of Auzex as consideration for the settlement of amounts owing to them. Further information in relation to the share options are set out in Sections 3.1.2 and 3.1.4 below.

Auzex shareholders will collectively hold approximately 49.3% of the total ordinary shares outstanding in the Merged Group, on an undiluted basis (i.e. if none of the 22.8 million outstanding share options are exercised), and approximately 49.8% of the total ordinary shares outstanding in the Merged Group on a fully diluted basis (i.e. if all of the 22.8 million outstanding share options are exercised).

Upon completion of the Proposed Transaction, the board of the Merged Group will consist of two current directors of Auzex and two directors of Explaurum.

On 26 June 2015 (prior to the Proposed Transaction), Explaurum shareholders passed the resolution for a 1 for 10 share consolidation (‘the Share Consolidation’) and to conduct the Capital Raising as per the terms set out in Section 3.1.2 below. Following the Share Consolidation and the Capital Raising, but prior to the Proposed Transaction, Explaurum has approximately 69.0 million ordinary shares and 10.8 million share options outstanding.

Key terms of the Scheme are set out in the balance of this section.

3.1.2 Explaurum Capital Raising

On 30 April 2015, Explaurum announced that it has secured commitments for $1.3 million via the issue of up to 433,333,333 fully paid ordinary shares at $0.003 per share, together with 108,333,333 attaching options (on a pre-consolidation basis). The proceeds from the Capital Raising will be used to advance Explaurum’s Lyons Gold Project, fund exploration at Auzex’s Tampia Gold Project, investigate further project acquisitions and meet working capital needs.

The issue consists of two tranches:

64.0 million shares (on a pre-consolidation basis) issued on 7 May 2015 (‘Tranche 1 Capital Raising’). This equates to 6.4 million shares on a post-consolidation basis;

1.6 million attaching options (on a post-consolidation basis) issued to the participants of the Tranche 1 placement on 29 June 2015; and

36.9 million shares and 9.2 million attaching options (on a post-consolidation basis) issued on 29 June 2015 (‘Tranche 2 Capital Raising’).

The Capital Raising is expected to cost $78,000.

Refer to section 6.3 of the Scheme Booklet for additional information in relation to the Capital Raising.

3.1.3 Explaurum Loan

On 23 April 2015 Explaurum entered into a loan agreement with Auzex to a loan of $600,000 to Auzex. As at 15 May 2015, Auzex had drawn down a sum of $200,000 under the loan agreement with $100,000 of this amount being drawn down in April 2015. The loan agreement was subsequently amended on 19 May 2015 for the total loan amount to increase from $600,000 to $800,000.

The final $600,000 was advanced to Auzex within one business day of Explaurum issuing the shares and options under Tranche 2 Capital Raising.


Refer to section 5.11.1 of the Scheme Booklet for additional information in relation to the loan agreement between Explaurum and Auzex.

3.1.4 Auzex Related Party Creditors

Auzex has payables of $883,150 in relation to salaries and fees and $105,205 in relation to annual leave entitlements owing to the directors of Auzex. As a condition of the Scheme, Explaurum will issue 12,000,000 creditor options (on a post-consolidation basis) to the directors of Auzex as consideration for the settlement of amounts owing to them.

3.1.5 Ineligible Foreign Shareholders

Ineligible foreign shareholders are Auzex shareholders whose address as shown in the Auzex Share Register at 5.00 pm on the Record Date is a place outside Australia and its external territories and New Zealand.

Explaurum will not issue shares to any ineligible foreign shareholders as part of the Proposed Transaction. New Explaurum shares that would have been issued to ineligible foreign shareholders will be issued to a sale agent, who will sell the shares on ASX and pay to each ineligible foreign shareholder their proportion of the cash proceeds.

Refer to section 4.11 of the Scheme Booklet for additional information in relation to ineligible foreign shareholders.

3.1.6 Implementation

Auzex shareholders should refer to section 9 of the Scheme Booklet for further information in relation to the merger and its implementation.

3.1.7 Indicative Timetable

Auzex shareholders should refer to the ‘Important Dates’ section at the front of the Scheme Booklet for the key dates relating to the Proposed Transaction.

3.2 Conditions Precedent

On 18 May 2015, Explaurum announced that it has executed a Merger Implementation Deed with Auzex, which sets out conditions to the Scheme being proposed and becoming effective in sections 3 and 4. These conditions precedent, which are also set out in section 4.3 of the Scheme Booklet, include the following:

Auzex and Explaurum completing their financial, commercial and legal due diligence to their sole and absolute discretion;

Auzex and Explaurum obtaining all necessary shareholder approvals in relation to the Proposed Transaction;

Explaurum issuing 12 million options (on a post-consolidation basis) at an exercise price of $0.03 per Explaurum share (provided that the volume weighted average price of Explaurum shares for five consecutive trading days prior to the date of exercise is at least $0.05) and expiring three years from the date of issue to related party creditors of Auzex as consideration for the settlement of outstanding amounts owing to those parties;

Convertible notes issued by Auzex being converted into 3 million Auzex shares;

All Auzex staff, contractors and directors to whom Explaurum wishes to offer employment entering into replacement services agreements with Explaurum;

Auzex procuring an Independent Expert’s Report which concludes that the Proposed Transaction is in the best interests of Auzex shareholders;

No material adverse change in respect of Auzex and Explaurum occurring or becoming known to the other party in the Proposed Transaction;

No Auzex or Explaurum regulated event occurring or becoming known to the other party in the Proposed Transaction, where regulated event is any of the events set out in Schedule 3 and 5 of the Merger Implementation Deed;

The court approving the Proposed Transaction in accordance with section 411(4)(b) of the Corporations Act;

ASIC issuing or providing consents, waivers or approvals necessary to implement the Proposed Transaction; and

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No regulatory authority prohibiting the completion of the Proposed Transaction or declining to issue an order, decree, ruling, notification or communication required for the Proposed Transaction to be implemented.

3.3 Strategic Rationale for the Proposed Transaction

The Proposed Transaction represents a realisation of Auzex’s company strategy to:

gain access to funds and experience to assist in exploring and developing the Tampia Gold Project; and

list shares on the ASX to provide shareholders with a more liquid market for transacting in their shares.

4.0 Scope of Report and Methodology for Assessment

4.1 Scope of Report

An independent expert, in certain circumstances, must be appointed to meet requirements set out in the Corporations Act 2001 (‘the Corporations Act’), the Corporation Regulations 2001 (‘the Regulations’), the regulatory guides (‘RGs’) published by the Australian Securities and Investments Commission (‘ASIC’) and the listing requirements of the stock exchanges on which a company is listed. We have summarised the requirements of the Corporations Act and the Regulations, and the ASX listing requirements in sections 4.1.1 and 4.1.2 below. We have summarised the guidance provided by the RGs in section 4.2 below.

Auzex has engaged BDO CFQ to provide an opinion on whether the Proposed Transaction is ‘fair and reasonable’ and ‘in the best interests’ of Auzex shareholders. This Report cannot be used by any other person for any other reason or for any other purpose. We understand that this Report will be distributed to Auzex shareholders together with the Scheme Booklet.

This Report is general financial product advice only and has been prepared without taking into account the objectives, risk profile, financial situation or needs of individual Auzex shareholders. Before deciding whether to vote in favour of or against the Proposed Transaction, individual Auzex shareholders should consider the appropriateness of the advice having regard to their own objectives, financial situation or needs, including their own taxation consequences. Auzex shareholders should read in full the Scheme Booklet in relation to the Proposed Transaction.

Whether to vote in favour of or against the Proposed Transaction is a matter for individual Auzex shareholders based on their expectations as to value and future market conditions, and their own particular circumstances including risk profile, liquidity preference, investment strategy, portfolio structure and tax position. Auzex shareholders who are in doubt as to the action they should take in relation to the Proposed Transaction should consult their own professional advisers.

4.1.1 Requirements of the Corporations Act and Regulations

Section 411 of the Corporations Act relates to Australian schemes of arrangement. Under section 411, in order for an Australian scheme of arrangement to be approved, no less than 75% of the votes cast at the scheme meeting must vote in favour of the scheme and no less than 50% by number of the shareholders present at the meeting must vote in favour of the scheme.

Part 3 of schedule 8 of the Regulations details the prescribed information relating to schemes of arrangement. Specifically, clause 8303 of schedule 8 states that an independent expert’s report stating whether, in the opinion of the expert, the proposed scheme is in the best interests of the company’s shareholders must accompany a scheme document if:

(a) A party to the proposed scheme has a prescribed shareholding in the company subject to the scheme; or

(b) The directors of the company are also directors of the company subject to the scheme.

As at the date of this Report, we understand that the above conditions do not apply and neither the Corporations Act nor the Regulations specifically require that an independent expert’s report be provided to Auzex shareholders in relation to the Proposed Transaction. While this Report is not required to be provided for the purpose of complying with any specific provisions of the Corporations Act or the Regulations, we have been requested by the directors of Auzex to prepare this Report to accompany the Scheme Booklet.

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No regulatory authority prohibiting the completion of the Proposed Transaction or declining to issue an order, decree, ruling, notification or communication required for the Proposed Transaction to be implemented.

3.3 Strategic Rationale for the Proposed Transaction

The Proposed Transaction represents a realisation of Auzex’s company strategy to:

gain access to funds and experience to assist in exploring and developing the Tampia Gold Project; and

list shares on the ASX to provide shareholders with a more liquid market for transacting in their shares.

4.0 Scope of Report and Methodology for Assessment

4.1 Scope of Report

An independent expert, in certain circumstances, must be appointed to meet requirements set out in the Corporations Act 2001 (‘the Corporations Act’), the Corporation Regulations 2001 (‘the Regulations’), the regulatory guides (‘RGs’) published by the Australian Securities and Investments Commission (‘ASIC’) and the listing requirements of the stock exchanges on which a company is listed. We have summarised the requirements of the Corporations Act and the Regulations, and the ASX listing requirements in sections 4.1.1 and 4.1.2 below. We have summarised the guidance provided by the RGs in section 4.2 below.

Auzex has engaged BDO CFQ to provide an opinion on whether the Proposed Transaction is ‘fair and reasonable’ and ‘in the best interests’ of Auzex shareholders. This Report cannot be used by any other person for any other reason or for any other purpose. We understand that this Report will be distributed to Auzex shareholders together with the Scheme Booklet.

This Report is general financial product advice only and has been prepared without taking into account the objectives, risk profile, financial situation or needs of individual Auzex shareholders. Before deciding whether to vote in favour of or against the Proposed Transaction, individual Auzex shareholders should consider the appropriateness of the advice having regard to their own objectives, financial situation or needs, including their own taxation consequences. Auzex shareholders should read in full the Scheme Booklet in relation to the Proposed Transaction.

Whether to vote in favour of or against the Proposed Transaction is a matter for individual Auzex shareholders based on their expectations as to value and future market conditions, and their own particular circumstances including risk profile, liquidity preference, investment strategy, portfolio structure and tax position. Auzex shareholders who are in doubt as to the action they should take in relation to the Proposed Transaction should consult their own professional advisers.

4.1.1 Requirements of the Corporations Act and Regulations

Section 411 of the Corporations Act relates to Australian schemes of arrangement. Under section 411, in order for an Australian scheme of arrangement to be approved, no less than 75% of the votes cast at the scheme meeting must vote in favour of the scheme and no less than 50% by number of the shareholders present at the meeting must vote in favour of the scheme.

Part 3 of schedule 8 of the Regulations details the prescribed information relating to schemes of arrangement. Specifically, clause 8303 of schedule 8 states that an independent expert’s report stating whether, in the opinion of the expert, the proposed scheme is in the best interests of the company’s shareholders must accompany a scheme document if:

(a) A party to the proposed scheme has a prescribed shareholding in the company subject to the scheme; or

(b) The directors of the company are also directors of the company subject to the scheme.

As at the date of this Report, we understand that the above conditions do not apply and neither the Corporations Act nor the Regulations specifically require that an independent expert’s report be provided to Auzex shareholders in relation to the Proposed Transaction. While this Report is not required to be provided for the purpose of complying with any specific provisions of the Corporations Act or the Regulations, we have been requested by the directors of Auzex to prepare this Report to accompany the Scheme Booklet.


4.1.2 Requirements of the ASX Listing Rules

We have been instructed that Auzex will not be using this Report or our assessment of the Proposed Transaction for the purpose of complying with the listing requirements of the ASX or any other stock exchange.

4.2 Methodology for Assessment

ASIC have issued Regulatory Guide 111: Content of Expert Report (‘RG 111’), which provides guidance in relation to independent expert’s reports. RG 111 relates to the provision of independent expert’s reports in a range of circumstances, including those where the expert is required to provide an opinion in relation to a proposed merger. RG 111 states that the independent expert’s report should explain the particulars of how the proposed merger was examined and evaluated as well as the results of the examination and evaluation.

RG 111 specifically differentiates between control and non-control transactions in providing guidance on the type of analysis to complete. Where a control transaction is to occur by way of a scheme of arrangement, RG 111 states that the independent expert should have regard to whether the transaction is ‘fair’ and ‘reasonable’ to shareholders. As per the opinion required under part 3 of schedule 8 of the Regulations, an offer that is ‘fair and reasonable’ or ‘not fair but reasonable’ would be ‘in the best interests’ of Auzex shareholders.

To meet the ASIC requirements, an expert seeking to determine whether a proposal is ‘fair’ and ‘reasonable’, and therefore in the ‘best interests’ of shareholders, should complete the steps set out below.

4.2.1 Step 1 – Assessment of Fairness

Under RG 111, an offer will be considered ‘fair’ if the value of the consideration to be received by the shareholders is equal to or greater than the value of the shares that are the subject of the offer. Fairness in a control transaction is to be assessed by comparing the value of the consideration offered with the full underlying value of the target assuming 100% of the target was available to be acquired. Where the consideration offered comprises scrip in the acquirer, the consideration value is to be assessed as the expected market price of those securities on a minority interest basis immediately following the proposed transaction.

In certain circumstances, RG 111 provides for some flexibility in the basis of the assessment. RG 111.31 states that a different approach may be appropriate where there is a merger of entities of equivalent value when control of the merged entity will be shared between the bidder and target (‘merger of equals’). In these circumstances, the expert may be justified in using an equivalent approach to valuing the securities of the bidder and target.

In our view, the Proposed Transaction represents a merger of equals for the following reasons:

Auzex shareholders in aggregate will hold approximately 49.3% of the Merged Group on an undiluted basis and approximately 49.8% on a fully diluted basis;

No individual shareholder in the Merged Group, or group of associated shareholders in the Merged Group, will have a shareholding in excess of 20% (the threshold generally accepted as the ability to exert significant influence over a company);

The Board of the Merged Group will be equally represented. The anticipated Board will consist of two directors from Auzex and two directors from Explaurum;

The intention of both Auzex and Explaurum directors at the time of negotiating the Proposed Transaction was a merger rather than a control transaction; and

Explaurum’s proposed takeover of Auzex will not reduce the opportunity for shareholders in the Merged Group to attract a takeover offer and may even increase the opportunity for Auzex shareholders to attract a takeover offer and obtain a control premium.

Having regard to the above, in our view, to assess whether the Proposed Transaction is ‘fair’ it is appropriate to:

(a) Determine the value of a share in Auzex immediately prior to the Proposed Transaction on a minority interest basis. We have valued Auzex on a minority basis to ensure an 'equivalent approach' is used to valuing the bidder and the target given our view that the Proposed Transaction represents a merger of equals; and

(b) Compare the value determined in (a) above with the value of a share in the Merged Group immediately following the Proposed Transaction, on a minority interest basis.

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Under RG 111 the Proposed Transaction will be considered ‘fair’ to Auzex shareholders if the value of a share in the Merged Group determined in (b) above is equal to or greater than the value of a share in Auzex determined in (a) above.

4.2.2 Step 2 – Assessment of Reasonableness

To assess whether the Proposed Transaction is ‘reasonable’ it is appropriate to examine other significant factors to which Auzex shareholders may give consideration prior to forming a view on whether to vote for or against the Proposed Transaction. This includes comparing the likely advantages and disadvantages of approving the Proposed Transaction with the position of an Auzex shareholder if the Proposed Transaction is not approved, as well as a consideration of other significant factors.

There is no explicit legal definition of what constitutes an advantage or disadvantage, nor is there a definitive legal or regulatory definition for the methodology to be adopted to weight each advantage and disadvantage relative to each other. The requirements involve judgement on the part of the expert as to the overall commercial effect of the proposal. The expert must weigh up the advantages and disadvantages of the proposal and form an overall view as to whether the advantages of the proposal outweigh the disadvantages.

Our assessment of the reasonableness of the Proposed Transaction is set out in Section 11.0 below.

4.2.3 Step 3 – Expert’s Opinion

Upon completion of steps 1 and 2, it may be possible to conclude that the Proposed Transaction is ‘reasonable’ if there are valid reasons for the approval, notwithstanding that the Proposed Transaction may not be regarded as ‘fair’ to the shareholders. Generally speaking, an offer is ‘reasonable’ if it is ‘fair’. It may also be ‘reasonable’, despite not being ‘fair’, if after considering other significant factors the interests of the shareholders are reasonably balanced.

Our report will provide our opinion as to whether or not the Proposed Transaction is ‘fair’ and ‘reasonable’. While all issues need to be considered before drawing an overall conclusion, we will assess the ‘fairness’ and ‘reasonableness’ issues separately for clarity.

If our opinion of the Proposed Transaction is that it is ‘fair and reasonable’ then we will also be able to conclude that the Proposed Transaction is ‘in the best interests of the shareholders of Auzex’. If our opinion of the Proposed Transaction is that it is ‘not fair but reasonable’, we may still conclude that the Proposed Transaction is ‘in the best interests of the shareholders of Auzex’. In this circumstance, we will clearly state that the consideration is not equal to or greater than the value of an Auzex share, but there are sufficient reasons for Auzex shareholders to vote in favour of the Proposed Transaction in the absence of a superior proposal. If our opinion of the Proposed Transaction is that it is ‘not fair and not reasonable’, then we will conclude that the Proposed Transaction is ‘not in the best interests of the shareholders of Auzex’.

Our conclusion in relation to whether or not the Proposed Transaction is in the best interests of the shareholders of Auzex is set out in Section 12.0 of this Report.

In this Report we have not provided any taxation, legal or other advice of a similar nature in relation to the Proposed Transaction. Other advisers have provided advice in relation to those matters to Auzex in relation to the Proposed Transaction.

In the process of assessing the Proposed Transaction, we have:

relied on certain economic, market and other conditions prevailing as at the date of this Report. We note that changes in these conditions may have a material impact in the results presented in this Report. BDO CFQ is not responsible for updating this Report in the event that these circumstances change; and

made certain assumptions. Where these assumptions are material to our work, we have set them out in this Report.

This Report has been prepared in accordance with professional standard APES 225: Valuation Services issued by the Accounting Professional and Ethical Standards Board. F

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Under RG 111 the Proposed Transaction will be considered ‘fair’ to Auzex shareholders if the value of a share in the Merged Group determined in (b) above is equal to or greater than the value of a share in Auzex determined in (a) above.

4.2.2 Step 2 – Assessment of Reasonableness

To assess whether the Proposed Transaction is ‘reasonable’ it is appropriate to examine other significant factors to which Auzex shareholders may give consideration prior to forming a view on whether to vote for or against the Proposed Transaction. This includes comparing the likely advantages and disadvantages of approving the Proposed Transaction with the position of an Auzex shareholder if the Proposed Transaction is not approved, as well as a consideration of other significant factors.

There is no explicit legal definition of what constitutes an advantage or disadvantage, nor is there a definitive legal or regulatory definition for the methodology to be adopted to weight each advantage and disadvantage relative to each other. The requirements involve judgement on the part of the expert as to the overall commercial effect of the proposal. The expert must weigh up the advantages and disadvantages of the proposal and form an overall view as to whether the advantages of the proposal outweigh the disadvantages.

Our assessment of the reasonableness of the Proposed Transaction is set out in Section 11.0 below.

4.2.3 Step 3 – Expert’s Opinion

Upon completion of steps 1 and 2, it may be possible to conclude that the Proposed Transaction is ‘reasonable’ if there are valid reasons for the approval, notwithstanding that the Proposed Transaction may not be regarded as ‘fair’ to the shareholders. Generally speaking, an offer is ‘reasonable’ if it is ‘fair’. It may also be ‘reasonable’, despite not being ‘fair’, if after considering other significant factors the interests of the shareholders are reasonably balanced.

Our report will provide our opinion as to whether or not the Proposed Transaction is ‘fair’ and ‘reasonable’. While all issues need to be considered before drawing an overall conclusion, we will assess the ‘fairness’ and ‘reasonableness’ issues separately for clarity.

If our opinion of the Proposed Transaction is that it is ‘fair and reasonable’ then we will also be able to conclude that the Proposed Transaction is ‘in the best interests of the shareholders of Auzex’. If our opinion of the Proposed Transaction is that it is ‘not fair but reasonable’, we may still conclude that the Proposed Transaction is ‘in the best interests of the shareholders of Auzex’. In this circumstance, we will clearly state that the consideration is not equal to or greater than the value of an Auzex share, but there are sufficient reasons for Auzex shareholders to vote in favour of the Proposed Transaction in the absence of a superior proposal. If our opinion of the Proposed Transaction is that it is ‘not fair and not reasonable’, then we will conclude that the Proposed Transaction is ‘not in the best interests of the shareholders of Auzex’.

Our conclusion in relation to whether or not the Proposed Transaction is in the best interests of the shareholders of Auzex is set out in Section 12.0 of this Report.

In this Report we have not provided any taxation, legal or other advice of a similar nature in relation to the Proposed Transaction. Other advisers have provided advice in relation to those matters to Auzex in relation to the Proposed Transaction.

In the process of assessing the Proposed Transaction, we have:

relied on certain economic, market and other conditions prevailing as at the date of this Report. We note that changes in these conditions may have a material impact in the results presented in this Report. BDO CFQ is not responsible for updating this Report in the event that these circumstances change; and

made certain assumptions. Where these assumptions are material to our work, we have set them out in this Report.

This Report has been prepared in accordance with professional standard APES 225: Valuation Services issued by the Accounting Professional and Ethical Standards Board.


5.0 Overview of Auzex Exploration Limited

5.1 Description of Auzex

Auzex is an unlisted public company limited by shares that was incorporated in October 2011 to assist in enabling the demerger of the non-Bullabulling Gold Project assets of Auzex Resources Limited (‘AZX’) in December 2011. Assets acquired by Auzex at the time of the demerger included:

Khartoum tin-tungsten project in north Queensland (100%);

Running Brook gold-copper project in north Queensland (100%);

Galala Range gold-tungsten-molybdenum project in north Queensland (100%);

Kingsgate molybdenum- bismuth project in northern New South Wales (100%);

Klondyke/Seven Hills gold project in northern New South Wales (100%);

Lyell gold project on the south island of New Zealand (73%);

$2.0 million cash; and

7,022,472 shares in the merged entity Bullabulling Gold Limited (ASX: BAB).

Following the demerger, Auzex acquired an 80% interest in the Tampia Gold Project in February 2012. Auzex’s Lyell Gold Project and its Seven Hills Gold Project have been surrendered, while the Galala Range Gold-tungsten-molybdenum Project is also in the process of being surrendered.

An overview of Auzex’s current projects is set out in Section 5.1.1 below.

5.1.1 Overview of Auzex Projects

Tampia Gold Project (Auzex 90%)

The Tampia Gold Project was acquired by Auzex in February 2012 for a $500,000 cash payment to Tampiagold Pty Ltd and Goldoro Pty Ltd (‘the Tampiagold Parties’) in consideration for an 80% interest in the project. Tampia Gold Project is located 300 kilometres (‘km’) east of Perth in the Wheat Belt of Western Australia and consists of eight exploration licences, three prospecting licences and two mining leases.

Exploration within the Tampia Gold Project is considered to be within its early stages, and modern exploration methods and modelling have yet to be extensively applied. A public release from Explaurum dated 30 April 2015 reported inferred mineral resources at the Tampia Gold Project of 4,700,000 tonnes at an average grade of 2.0g/t Au for 310,000 ounces (‘oz’) of gold, in accordance with the guidelines of JORC 2012 code. The deposits are contained within a zone named the Gault prospect. We understand that Auzex has a target to add 550,000 to 700,000 oz of gold to the current resource within the twelve month period commencing February 2015.

Under the terms of the joint venture agreement between Auzex and the Tampiagold Parties, the Tampiagold Parties may convert their participating interest in Tampia Gold Project into a similar percentage of Auzex shares under certain conditions (i.e. a 20% interest in the joint venture would convert into a 20% interest in Auzex shares). In the event of conversion of the Tampiagold Parties’ interests, Auzex will have to pay a royalty to the Tampiagold Parties equal to 2% of the gross proceeds received by Auzex after the conversion date, semi-annually in arrears. In addition, Auzex will contribute cash calls to meet all joint venture expenditure during the free carry period, which commences on 17 February 2012 and ends at the completion of the project’s feasibility study.

Auzex advanced a $120,000 loan to Tampiagold Pty Ltd in February 2013. As at 30 April 2015, the outstanding amount owing to Auzex was $187,501, which includes accrued interest of $67,501. This loan will be converted on 30 June 2015 into an additional 10% interest in the Tampia Gold Project, resulting in an increase in Auzex’s interest in the project from 80% to 90%.

Refer to section 4.0 of the technical expert’s report for more detailed discussion of the Tampia Gold Project and section 5.11.2 of the Scheme Booklet for more detailed discussion of the joint venture agreement between Auzex and the Tampiagold Parties.

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Figure 5.1: Tampia Gold Projects

Source: Auzex Management

Khartoum, Tin and Tungsten Project (Auzex 100%)

The tenements in the North Queensland Project area were initially acquired based on Auzex’s prospectivity models for intrusion related tin mineralisation similar to the porphyry style tin and tungsten mineralisation of the mines of the Bolivian tin belt. We understand four new tenements have accordingly been targeted for high grade tin vein mineralisation in the exo-contact of tin rich granites and low grade high tonnage tin mineralisation within the tin granites.

The Khartoum tenement is located approximately 100km south-west of Cairns in North Queensland and contains over 50 tin, tungsten, molybdenum and gold occurrences. Historic production is estimated to be 15,000 tonnes (‘t’) tin. Outcropping tin mineralisation is associated with 107 recognised greisen zones covering an aggregate area exceeding 50km2.

Refer to section 5.0 of the technical expert’s report for more detailed discussion of the Khartoum Project.

Running Brook, Copper and Gold Project (Auzex 100%)

The Running Brook Project area was originally highlighted by the prospectivity modelling studies of Auzex for granite related gold mineralisation and is located in North Queensland, 150km south-west of Cairns. This project was modelled on the prolific Kidston Gold Mine (3.5 Million ounces between 1985 and 2001) located approximately 120km south of Running Brook.

We understand that AEL has an objective to develop a 3D prospectivity model for the Running Brook prospect that will be used to produce prioritised drill targets to test the source of gold and copper mineralisation found to date. Drilling will be carried out to test all targets, especially the granite contacts to the east and at depth. This is due to be carried out immediately once Auzex has successfully secured alternative funding for the project.

Refer to section 5.0 of the technical expert’s report for more detailed discussion of the Running Brook Project.

Kingsgate, Molybdenum and Bismuth Project (Auzex 100%)

The Kingsgate project was acquired after prospectivity modelling for granite related gold mineralisation over Eastern Australia and the West coast of New Zealand identified the granites in the Kingsgate region as having the potential to host intrusion related gold mineralisation. Located 20km east of Glen Innes, the Kingsgate Mine was the second largest producer of molybdenum in Australia.

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Figure 5.1: Tampia Gold Projects


Khartoum, Tin and Tungsten Project (Auzex 100%)

The tenements in the North Queensland Project area were initially acquired based on Auzex’s prospectivity models for intrusion related tin mineralisation similar to the porphyry style tin and tungsten mineralisation of the mines of the Bolivian tin belt. We understand four new tenements have accordingly been targeted for high grade tin vein mineralisation in the exo-contact of tin rich granites and low grade high tonnage tin mineralisation within the tin granites.

The Khartoum tenement is located approximately 100km south-west of Cairns in North Queensland and contains over 50 tin, tungsten, molybdenum and gold occurrences. Historic production is estimated to be 15,000 tonnes (‘t’) tin. Outcropping tin mineralisation is associated with 107 recognised greisen zones covering an aggregate area exceeding 50km2.

Refer to section 5.0 of the technical expert’s report for more detailed discussion of the Khartoum Project.

Running Brook, Copper and Gold Project (Auzex 100%)

The Running Brook Project area was originally highlighted by the prospectivity modelling studies of Auzex for granite related gold mineralisation and is located in North Queensland, 150km south-west of Cairns. This project was modelled on the prolific Kidston Gold Mine (3.5 Million ounces between 1985 and 2001) located approximately 120km south of Running Brook.

We understand that AEL has an objective to develop a 3D prospectivity model for the Running Brook prospect that will be used to produce prioritised drill targets to test the source of gold and copper mineralisation found to date. Drilling will be carried out to test all targets, especially the granite contacts to the east and at depth. This is due to be carried out immediately once Auzex has successfully secured alternative funding for the project.

Refer to section 5.0 of the technical expert’s report for more detailed discussion of the Running Brook Project.

Kingsgate, Molybdenum and Bismuth Project (Auzex 100%)

The Kingsgate project was acquired after prospectivity modelling for granite related gold mineralisation over Eastern Australia and the West coast of New Zealand identified the granites in the Kingsgate region as having the potential to host intrusion related gold mineralisation. Located 20km east of Glen Innes, the Kingsgate Mine was the second largest producer of molybdenum in Australia.


We understand that the preferred option for Auzex is the injection of development capital for project equity, and a contribution to development and operational management. Subject to a suitable outcome regarding financing of the project, the approvals path (culminating in the grant of a Mining Lease and the right to commence operation), could commence immediately and is estimated to take six to twelve months.

Refer to section 6.0 of the technical expert’s report for more detailed discussion of the Kingsgate Project.

5.2 Equity Structure of Auzex

As at 31 May 2015, Auzex had 13,801,449 ordinary shares on issue and 6 convertible notes on issue. After conversion of the 6 convertible notes into 3,000,000 fully paid ordinary Auzex shares on 30 June 2015, Auzex has 16,801,449 ordinary shares on issue.

5.2.1 Top 10 Shareholders of Auzex Ordinary Shares

The top 10 shareholders of Auzex ordinary shares as at the date of this Report are set out in Table 5.1 below. Table 5.1 does not consider the impacts of any changes in shareholding arising from the Proposed Transaction.

Table 5.1: Top 10 Auzex Shareholders as at 23 July 2015

Shareholder Number of Shares Percentage of Total Shares

(%)

1 EPOCC XT LLC 2,861,350 17.03

2 Misty Grange Pty Ltd 1,211,123 7.21

3 HSBC Custody Nominees (Australia) Limited 1,037,581 6.18

4 National Nominees Limited 933,273 5.55

5 John Andrew Rodgers 600,000 3.57

6 Bullabulling Gold (UK) Limited 570,371 3.39

7 JP Morgan Nominees Australia Limited 565,943 3.37

8 Peninsula Goldfields Pty Ltd 546,669 3.25

9 Jervois Mining Limited 515,000 3.07

10 CRM Holdings Pty Ltd 500,000 2.98

Other shareholders 7,460,139 44.40

Total Shares on Issue 16,801,449 100.00


5.3 Auzex Historical Financial Information

This section of this Report sets out the historical financial information of Auzex. As this Report contains only summarised historical financial information, we recommend that any user of this Report read and understand the additional notes and financial information contained in Auzex’s annual reports which include the full statements of comprehensive income, statements of financial position and statements of cash flows.

Auzex’s accounts were audited by Ernst and Young. BDO CFQ has not performed any audit or review of any type on the historical financial information of Auzex. We make no statement as to the accuracy of the information provided. However, we have no reason to believe that the information is misleading.

5.3.1 Comprehensive Income

The consolidated statements of comprehensive income of Auzex for the 12 months ended 30 June 2012, 2013 and 2014 and for the 6 month period ended 31 December 2014 are summarised in Table 5.2 below.

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Table 5.2: Summarised Auzex Statements of Comprehensive Income

12 Months Ended 30-Jun-12

Audited ($)


Audited ($)


Audited ($)

6 Months Ended 31-Dec-14 Unaudited

($)

Other income on expiry of an option for the disposal of non-current assets

- - 30,714 -

Profit on disposal of non-current assets - - 413,804 -

Interest Income 32,710 20,064 43,373 20,112

Total income from continuing operations 32,710 20,064 487,891 20,112

Impairment / write-off of exploration expenses (277) (3,872,788) (774,771) (14,524)

Impairment of available for sale asset (45,924) (1,196,204) - -

General & administrative expenses (277,765) (946,941) (505,385) (647,719)

Finance costs - - (22,603) -

Total expenses from continuing operations (323,966) (6,015,933) (1,302,759) (662,243)

Profit/(Loss) from continuing operations before tax (291,256) (5,995,869) (814,868) (642,131)

Income tax benefit attributable to operating loss - - - -

Profit/(Loss) from continuing operations after tax (291,256) (5,995,869) (814,868) (642,131)

Net gain/(loss) on foreign currency taken to profit and loss - - (24,958) -

Net gain/(loss) on foreign currency translation reserve taken to equity

16,941 8,017 - -

Total comprehensive income (274,315) (5,987,852) (839,826) (642,131)

Source: Auzex 2012-14 Annual Reports, Auzex 2015 Half Year Management Accounts

In relation to the financial performance of Auzex set out in Table 5.2 above we note the following:

Aside from interest income, Auzex has no consistent operating revenues for the periods set out in Table 5.2 above;

In FY2014, Auzex recognised profit on disposal of its shares held in Bullabulling Gold Limited and Jervois Mining Limited. These assets were disposed as a result of Auzex implementing its objective to divest non-core mining exploration projects;

Auzex impaired approximately $3.9 million and $0.8 million of previously capitalised deferred exploration costs in FY2013 and FY2014 in relation to the Kingsgate, Klondyke/Seven Hills and Lyell tenements which were relinquished during these years; and

Auzex impaired approximately $1.2 million of available for sale assets in FY2013 due to the decline in value of Bullabulling Gold Limited and Jervois Mining Limited shares held by Auzex. F

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Table 5.2: Summarised Auzex Statements of Comprehensive Income


Audited ($)


Audited ($)


Audited ($)

6 Months Ended 31-Dec-14 Unaudited

($)

Other income on expiry of an option for the disposal of non-current assets

- - 30,714 -

Profit on disposal of non-current assets - - 413,804 -

Interest Income 32,710 20,064 43,373 20,112


Impairment / write-off of exploration expenses (277) (3,872,788) (774,771) (14,524)

Impairment of available for sale asset (45,924) (1,196,204) - -

General & administrative expenses (277,765) (946,941) (505,385) (647,719)

Finance costs - - (22,603) -

Total expenses from continuing operations (323,966) (6,015,933) (1,302,759) (662,243)

Profit/(Loss) from continuing operations before tax (291,256) (5,995,869) (814,868) (642,131)

Income tax benefit attributable to operating loss - - - -

Profit/(Loss) from continuing operations after tax (291,256) (5,995,869) (814,868) (642,131)

Net gain/(loss) on foreign currency taken to profit and loss - - (24,958) -

Net gain/(loss) on foreign currency translation reserve taken to equity

16,941 8,017 - -

Total comprehensive income (274,315) (5,987,852) (839,826) (642,131)


In relation to the financial performance of Auzex set out in Table 5.2 above we note the following:

Aside from interest income, Auzex has no consistent operating revenues for the periods set out in Table 5.2 above;

In FY2014, Auzex recognised profit on disposal of its shares held in Bullabulling Gold Limited and Jervois Mining Limited. These assets were disposed as a result of Auzex implementing its objective to divest non-core mining exploration projects;

Auzex impaired approximately $3.9 million and $0.8 million of previously capitalised deferred exploration costs in FY2013 and FY2014 in relation to the Kingsgate, Klondyke/Seven Hills and Lyell tenements which were relinquished during these years; and

Auzex impaired approximately $1.2 million of available for sale assets in FY2013 due to the decline in value of Bullabulling Gold Limited and Jervois Mining Limited shares held by Auzex.


5.3.2 Financial Position

The consolidated statements of financial position of Auzex as at 30 June 2012, 2013 and 2014 and as at 31 December 2014 are summarised in Table 5.3 below.

Table 5.3: Summarised Auzex Statements of Financial Position

As at 30-Jun-12

Audited ($)

As at 30-Jun-13

Audited ($)

As at 30-Jun-14

Audited ($)

As at 31-Dec-14 Unaudited

($)

Current assets

Cash 1,135,596 358,896 354,214 90,791

Term deposits (secured) 75,000 75,000 75,000 65,000

Other receivables 38,701 165,102 262,138 218,722

Total current assets 1,249,297 598,998 691,352 374,513

Non-current assets

Property, plant and equipment 67,347 50,423 38,753 30,339

Deferred exploration and evaluation phase costs 6,724,517 3,987,612 3,942,662 4,398,928

Investment in available for sale asset 1,334,271 168,780 -

Total non-current assets 8,126,135 4,206,815 3,981,415 4,429,267

Total assets 9,375,432 4,805,813 4,672,767 4,803,780

Current liabilities

Convertible notes - - 525,000 525,000

Payables 79,478 516,723 577,613 831,884

Provisions for employee benefits 74,031 102,638 92,993 111,869

Total current liabilities 153,509 619,361 1,195,606 1,468,753

Non-current liabilities

Provisions for rehabilitation 123,605 123,605 123,605 123,605

Total non-current liabilities 123,605 123,605 123,605 123,605

Total liabilities 277,114 742,966 1,319,211 1,592,358

Net assets 9,098,318 4,062,847 3,353,556 3,211,422

Equity

Contributed equity 9,372,633 10,325,014 10,455,549 10,955,549

Other reserves 16,941 24,958 - -

Accumulated losses (291,256) (6,287,125) (7,101,993) (7,744,127)

Total equity 9,098,318 4,062,847 3,353,556 3,211,422


In relation to the financial position of Auzex set out in Table 5.3 above we note the following:

Of the $6.7 million deferred exploration and evaluation phase costs as at 30 June 2012, $6.0 million was transferred from AZX. Exploration expenditure for FY2012 totalled $0.7 million;

Auzex has a $75,000 term deposit lodged with Westpac Banking Corporation which is used as security for bank guarantees issued to the NSW Government to secure tenement rehabilitation obligations. Bank guarantees outstanding as at 30 June 2014 totalled $75,000;

Auzex sold its investments in Bullabulling Gold Limited and Jervois Mining Limited in FY2014 which were classified as available for sale assets. The sale of the shares resulted in a gain of $413,804;

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Auzex issued the following convertible notes in FY2014:

— Five convertible notes to EPOCC XT LLC each with a face value of $100,000 for a total subscription of $500,000; and

— One convertible note to Peninsula Goldfields Pty Ltd with a face value of $25,000;

Auzex is required to outlay annual rentals and meet expenditure requirements to maintain current rights of its exploration tenements. The expenditure commitments relate to Auzex’s Queensland, New South Wales and Western Australia tenements and are based on an agreed work program with the relevant respective state governments and can be varied by agreement or by relinquishment of the underlying tenements. The commitments as at 30 June 2014 total $8.3 million, of which $1.6 million is payable not later than one year. It is ordinarily expected that as work is completed and the relevant commitments are met, the value of the exploration tenements will also increase;

Payables as at 30 June 2014 include $470,189 of accrued liabilities owing to the directors of Auzex in relation to salaries and fees owing to them. For completeness it is noted that the accrued liability was $886,003 as at 30 June 2014 prior to the directors of Auzex resolving to forgive $415,814 of the liability; and

Contributed equity increased from $9.4 million as at 30 June 2012 to $11.0 million as at 31 December 2014 as a result of capital raising through a series of share placements and a rights issue. The rights issue, undertaken in October 2014, was to raise funds for a proposed listing on the ASX in November 2014. The proposed listing did not materialise.

5.3.3 Cash Flows

The consolidated statement of cash flows of Auzex for the 12 month periods ended 30 June 2012, 2013 and 2014 and for the 6 month period ended 31 December 2014 are summarised in Table 5.4 below.

Table 5.4: Summarised Auzex Statements of Cash Flow

12 Months Ended

30-Jun-12 Audited

($)

12 Months Ended

30-Jun-13 Audited

($)

12 Months Ended

30-Jun-14 Audited

($)

6 Months Ended

31-Dec-14 Unaudited

($)

Cash Flows from / (used in) Operating Activities Goods and services tax received 9,218 115,185 73,479 48,342

Payments to suppliers and employees (212,930) (861,215) (511,072) (464,334)

Interest received 32,068 19,683 43,979 20,188

Net cash flows from / (used in) operating activities (171,644) (726,347) (393,614) (395,804)

Cash Flows from / (used in) Investing Activities

Proceeds from sale of fixed assets - 2,016 - -

Proceeds from available for sale assets - - 582,584 -

Redemption of short term deposits - - - -

Purchase of short term deposits - - - -

Purchase of property, plant and equipment - - (5,073) -

Payment for exploration and evaluation expenditure (692,760) (1,004,750) (844,113) (367,619)

Net cash flows from / (used in) investing activities (692,760) (1,002,734) (266,602) (367,619) F

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Auzex issued the following convertible notes in FY2014:

— Five convertible notes to EPOCC XT LLC each with a face value of $100,000 for a total subscription of $500,000; and

— One convertible note to Peninsula Goldfields Pty Ltd with a face value of $25,000;

Auzex is required to outlay annual rentals and meet expenditure requirements to maintain current rights of its exploration tenements. The expenditure commitments relate to Auzex’s Queensland, New South Wales and Western Australia tenements and are based on an agreed work program with the relevant respective state governments and can be varied by agreement or by relinquishment of the underlying tenements. The commitments as at 30 June 2014 total $8.3 million, of which $1.6 million is payable not later than one year. It is ordinarily expected that as work is completed and the relevant commitments are met, the value of the exploration tenements will also increase;

Payables as at 30 June 2014 include $470,189 of accrued liabilities owing to the directors of Auzex in relation to salaries and fees owing to them. For completeness it is noted that the accrued liability was $886,003 as at 30 June 2014 prior to the directors of Auzex resolving to forgive $415,814 of the liability; and

Contributed equity increased from $9.4 million as at 30 June 2012 to $11.0 million as at 31 December 2014 as a result of capital raising through a series of share placements and a rights issue. The rights issue, undertaken in October 2014, was to raise funds for a proposed listing on the ASX in November 2014. The proposed listing did not materialise.

5.3.3 Cash Flows

The consolidated statement of cash flows of Auzex for the 12 month periods ended 30 June 2012, 2013 and 2014 and for the 6 month period ended 31 December 2014 are summarised in Table 5.4 below.

Table 5.4: Summarised Auzex Statements of Cash Flow

12 Months Ended

30-Jun-12 Audited

($)

12 Months Ended

30-Jun-13 Audited

($)

12 Months Ended

30-Jun-14 Audited

($)

6 Months Ended

31-Dec-14 Unaudited

($)

Cash Flows from / (used in) Operating Activities Goods and services tax received 9,218 115,185 73,479 48,342

Payments to suppliers and employees (212,930) (861,215) (511,072) (464,334)



Cash Flows from / (used in) Investing Activities

Proceeds from sale of fixed assets - 2,016 - -

Proceeds from available for sale assets - - 582,584 -

Redemption of short term deposits - - - -

Purchase of short term deposits - - - -

Purchase of property, plant and equipment - - (5,073) -

Payment for exploration and evaluation expenditure (692,760) (1,004,750) (844,113) (367,619)

Net cash flows from / (used in) investing activities (692,760) (1,002,734) (266,602) (367,619)


12 Months Ended

30-Jun-12 Audited

($)

12 Months Ended

30-Jun-13 Audited

($)

12 Months Ended

30-Jun-14 Audited

($)

6 Months Ended

31-Dec-14 Unaudited

($)

Cash Flows from Financing Activities

Cash from demerger from AZX 2,000,000 - - -

Proceeds from issue of shares - 1,045,500 130,534 500,000

Proceeds from convertible notes - - 525,000 -

Share capital raising expenses - (93,119) - -

Net cash flows from financing activities 2,000,000 952,381 655,534 500,000

Net increase / (decrease) in cash held 1,135,596 (776,700) (4,682) (263,423)

Opening cash balance - 1,135,596 358,896 354,214

Closing cash balance 1,135,596 358,896 354,214 90,791


In relation to the cash flows of Auzex set out in Table 5.4 above we note the following:

Auzex’s net cash used in operating activities increased by $0.6 million in FY2013 largely as a result of an increase in general and administrative expenses;

Payments in relation to exploration and evaluation expenditure increased substantially in FY2013. Exploration effort has been focussed on the Tampia Gold Project since Auzex acquired an 80% interest in February 2013;

In FY2014, the proceeds from available for sale assets significantly increased as a result of Auzex divesting its interests in Bullabulling Gold Limited and Jervois Mining Limited; and

Auzex’s operating and investing activities have been funded by cash from financing activities over the past three and a half year period starting 30 June 2012.

6.0 Overview of Explaurum Limited

6.1 Description of Explaurum

Explaurum Limited, a junior exploration company, acquires and explores mineral projects primarily in Australia. The company was formerly known as Erongo Energy Limited before changing its name to Explaurum Limited in November 2013. Explaurum is based in Subiaco, Western Australia and has been listed on the ASX since 15 July 2005.

The focal point of Explaurum operations is the discovery of significant gold and base metal deposits. It holds a 100% interest in the Lyons Project consisting of four exploration licences and licence applications totalling 908km2 in Western Australia. We understand that Explaurum is currently reviewing new project opportunities to complement its existing asset portfolio.

6.1.1 Overview of Explaurum Projects

Lyons Project, Western Australia (100%)

The Lyons Project, located about 230km northwest of Meekatharra and 65km west of the Abra polymetallic deposit, covers a highly prospective portion of the Edmund Subgroup of the Western (lower) Bangemall Basin close to the northern margin of the Yilgarn Craton or ‘reworked’ lower Proterozoic Craton remnants. Explaurum acquired the Lyons Project in June 2013 through the acquisition of Ninghan Exploration Pty Ltd.

Desktop studies continue and work undertaken in early 2015 focused on selecting initial target areas. Subsequently, we understand that five target areas prospective for gold and base metals were identified for follow up exploration.

During early 2015 the three remaining exploration licence applications were approved, and following the initial target review analysis, Explaurum completed the partial surrender of the least prospective portions of the two larger licences. This is expected to reduce the annual work commitment and licence fees. The project now comprises four granted exploration licences totalling 908 km2.

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Other Projects

Explaurum has continued to review new project opportunities to complement the existing asset portfolio. The projects reviewed have been located in Australia, South America and Africa, and are prospective for a range of precious and base metals.

6.2 Equity Structure of Explaurum

On 7 May 2015, Explaurum issued 64,003,420 shares through Tranche 1 of the Capital Raising. The issuance of these shares increased the total number of shares on issue to 320,494,080.

Explaurum subsequently performed the following:

Complete a 1 for 10 share consolidation; and

Issue a further 36,933,028 shares with 9,233,275 attaching options through Tranche 2 Capital Raising as well as 1,600,103 options to Tranche 1 Capital Raising participants on 29 June 2015.

Explaurum has 68,982,491 shares on issue and 10,833,378 options on issue following the completion of the Capital Raising and the Share Consolidation.

6.2.1 Top 10 Shareholders of Explaurum Ordinary Shares

The top 10 shareholders of Explaurum ordinary shares as at the date of this Report are set out in Table 6.1 below. Table 6.1 does not consider the impacts of any changes in shareholding arising from the Proposed Transaction.

Table 6.1: Top 10 Explaurum Shareholders as at 23 July 2015


(%)

1 Pershing Australia Nominees Pty Ltd <Placement A/c> 10,934,318 15.85

2 J P Morgan Nominees Australia Limited 4,410,567 6.39

3 HSBC Custody Nominees (Australia) Limited - GSCO ECA 3,144,004 4.56

4 Ajava Holdings Pty Ltd 2,840,082 4.12

5 Mark Calderwood 2,620,000 3.80

6 Redtown Enterprises Pty Ltd 2,286,611 3.31

7 BT Portfolios Services Ltd <Warrell Holdings S/F A/c> 1,666,668 2.42

8 Jervois Mining Limited 1,666,666 2.42

9 Ellamar Pty Ltd 1,600,000 2.32

10 Auralandia Pty Ltd 1,562,115 2.26



Source: Explaurum Management

6.3 Trading of Explaurum Shares on the ASX

This section sets out our analysis of the share market performance of Explaurum by considering:

The recent price of Explaurum shares listed on the ASX; and

The liquidity of Explaurum shares.

6.3.1 Explaurum’s Share Price

Explaurum’s shares are listed on the ASX. Figure 6.1 below sets out Explaurum’s daily volume weighted average price (‘VWAP’) and volume traded over the period from 2 June 2014 to 31 May 2015. F

or p

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Other Projects

Explaurum has continued to review new project opportunities to complement the existing asset portfolio. The projects reviewed have been located in Australia, South America and Africa, and are prospective for a range of precious and base metals.

6.2 Equity Structure of Explaurum

On 7 May 2015, Explaurum issued 64,003,420 shares through Tranche 1 of the Capital Raising. The issuance of these shares increased the total number of shares on issue to 320,494,080.

Explaurum subsequently performed the following:

Complete a 1 for 10 share consolidation; and

Issue a further 36,933,028 shares with 9,233,275 attaching options through Tranche 2 Capital Raising as well as 1,600,103 options to Tranche 1 Capital Raising participants on 29 June 2015.

Explaurum has 68,982,491 shares on issue and 10,833,378 options on issue following the completion of the Capital Raising and the Share Consolidation.

6.2.1 Top 10 Shareholders of Explaurum Ordinary Shares

The top 10 shareholders of Explaurum ordinary shares as at the date of this Report are set out in Table 6.1 below. Table 6.1 does not consider the impacts of any changes in shareholding arising from the Proposed Transaction.

Table 6.1: Top 10 Explaurum Shareholders as at 23 July 2015


(%)

1 Pershing Australia Nominees Pty Ltd <Placement A/c> 10,934,318 15.85

2 J P Morgan Nominees Australia Limited 4,410,567 6.39

3 HSBC Custody Nominees (Australia) Limited - GSCO ECA 3,144,004 4.56

4 Ajava Holdings Pty Ltd 2,840,082 4.12

5 Mark Calderwood 2,620,000 3.80

6 Redtown Enterprises Pty Ltd 2,286,611 3.31

7 BT Portfolios Services Ltd <Warrell Holdings S/F A/c> 1,666,668 2.42

8 Jervois Mining Limited 1,666,666 2.42

9 Ellamar Pty Ltd 1,600,000 2.32

10 Auralandia Pty Ltd 1,562,115 2.26



Source: Explaurum Management

6.3 Trading of Explaurum Shares on the ASX

This section sets out our analysis of the share market performance of Explaurum by considering:

The recent price of Explaurum shares listed on the ASX; and

The liquidity of Explaurum shares.

6.3.1 Explaurum’s Share Price

Explaurum’s shares are listed on the ASX. Figure 6.1 below sets out Explaurum’s daily volume weighted average price (‘VWAP’) and volume traded over the period from 2 June 2014 to 31 May 2015.


Figure 6.1: Explaurum’s Daily VWAP from 2 June 2014 to 31 May 2015

Source: Capital IQ as at 29 June 2015

Over the period graphed in Figure 6.1, the Explaurum daily VWAP shows a period low of $0.0012 on 20 March 2015 and a period high of $0.0090 on 5 September 2014.

In addition to the share price and trading data, we have also provided additional information in this Report to assist readers to understand possible reasons for movements in Explaurum’s share price and volume of share trades over the time period analysed. We have provided a summary of Explaurum’s announcements over the period from 2 June 2014 to 31 May 2015 in Table 6.2 below.

Table 6.2: Summary of Explaurum’s Announcements over the period from 2 June 2014 to 31 May 2015

Date Announcement

(a) 26 September 2014 Explaurum released Annual Report for the year ended 30 June 2014. Explaurum had an after tax loss of $629,777 for the financial year.

(b) 21 October 2014 Explaurum released a Notice of Annual General Meeting which included a proposed resolution for issuance of ordinary shares up to 10% of its issued share capital through placements.

(c) 27 November 2014 Explaurum released results of Annual General Meeting, including the passing of all proposed resolutions.

(d) 30 January 2015 Explaurum released a Quarterly Activity Report which included the announcement of the partial surrender of the least prospective portions of two licences, reducing annual work commitment and reducing tenement holding by 38%.

(e) 23 April 2015 Explaurum announced that its securities would be placed on a trading halt at the company’s request, pending the release of an announcement by Explaurum regarding the acquisition of new mineral projects and capital raising plans.

(f) 27 April 2015 Explaurum announced that its securities would be suspended from official quotation immediately at the company’s request, pending the release of an announcement providing details of the Capital Raising.

(g) 30 April 2015

Explaurum announced the Capital Raising and proposed acquisition of a 100% interest in Auzex. Explaurum announced its immediate reinstatement to official quotation and released the merger presentation for investors in relation to the proposed merger between Explaurum and Auzex.

(h) 7 May 2015 Explaurum announced completion of first tranche of the Capital Raising for 64 million shares at $0.003 each, totalling $192,000.

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

$0.0010

$0.0020

$0.0030

$0.0040

$0.0050

$0.0060

$0.0070

$0.0080

$0.0090

$0.0100Volum

e VWAP

($)

Volume VWAP ($) Key Event

(a)

(b) (c)

(d) (e)

(f)

(g)

(h)

(i)

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Date Announcement

(i) 17 May 2015 Explaurum announced that it has executed a formal merger implementation deed in respect of the acquisition of Auzex.

Source: ASX Announcements

In Table 6.3 below we have set out Explaurum’s VWAP for the 1 week, 1 month, 3 months, 6 months, 9 months and 12 months prior to 23 April 2015, being the date Explaurum entered into a trading halt pending the release of the announcement of the Proposed Transaction, and 31 May 2015. We have set out Explaurum’s VWAP prior to 23 April 2015 to provide additional information regarding Explaurum’s share price performance excluding the effects of the Proposed Transaction.

Table 6.3: Explaurum’s VWAP prior to 23 April 2015 and 31 May 2015

Period before 23 April 2015 VWAP ($)

Period before 31 May 2015 VWAP ($)

1 Week 0.0020 1 Week 0.0034

1 Month 0.0020 1 Month 0.0032

3 Months 0.0019 3 Months 0.0027

6 Months 0.0023 6 Months 0.0026

9 Months 0.0038 9 Months 0.0036

12 Months 0.0040 12 Months 0.0038


The information set out it Table 6.3 above is also expressed graphically in Figure 6.2 below.

Figure 6.2: Explaurum VWAP over Specified Periods


6.3.2 Liquidity of Explaurum Shares

Table 6.4 below summarises the monthly liquidity of Explaurum shares from May 2014 to April 2015. Liquidity has been summarised by considering the following:

Volume of Explaurum trades per month;

Number of trades in Explaurum shares per month;

Total value of trades per month;

Volume of Explaurum trades per month as a percentage of total Explaurum shares on issue at the end of the month; and

Average volume of Explaurum shares per trade per month.

0.0000

0.0005

0.0010

0.0015

0.0020

0.0025

0.0030

0.0035

0.0040

0.0045

1 Week 1 Month 3 Months 6 Months 9 Months 12 Months

Volu

me-

Wei

ghte

d Av

erag

e Sh

are

Pric

e ($

)

Period Included in VWAP

Period prior to 23 April 2015 Period prior to 31 May 2015

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Date Announcement

(i) 17 May 2015 Explaurum announced that it has executed a formal merger implementation deed in respect of the acquisition of Auzex.

Source: ASX Announcements

In Table 6.3 below we have set out Explaurum’s VWAP for the 1 week, 1 month, 3 months, 6 months, 9 months and 12 months prior to 23 April 2015, being the date Explaurum entered into a trading halt pending the release of the announcement of the Proposed Transaction, and 31 May 2015. We have set out Explaurum’s VWAP prior to 23 April 2015 to provide additional information regarding Explaurum’s share price performance excluding the effects of the Proposed Transaction.

Table 6.3: Explaurum’s VWAP prior to 23 April 2015 and 31 May 2015

Period before 23 April 2015 VWAP ($)

Period before 31 May 2015 VWAP ($)

1 Week 0.0020 1 Week 0.0034

1 Month 0.0020 1 Month 0.0032

3 Months 0.0019 3 Months 0.0027

6 Months 0.0023 6 Months 0.0026

9 Months 0.0038 9 Months 0.0036

12 Months 0.0040 12 Months 0.0038


The information set out it Table 6.3 above is also expressed graphically in Figure 6.2 below.

Figure 6.2: Explaurum VWAP over Specified Periods


6.3.2 Liquidity of Explaurum Shares

Table 6.4 below summarises the monthly liquidity of Explaurum shares from May 2014 to April 2015. Liquidity has been summarised by considering the following:

Volume of Explaurum trades per month;

Number of trades in Explaurum shares per month;

Total value of trades per month;

Volume of Explaurum trades per month as a percentage of total Explaurum shares on issue at the end of the month; and

Average volume of Explaurum shares per trade per month.

0.0000

0.0005

0.0010

0.0015

0.0020

0.0025

0.0030

0.0035

0.0040

0.0045

1 Week 1 Month 3 Months 6 Months 9 Months 12 Months

Volu

me-

Wei

ghte

d Av

erag

e Sh

are

Pric

e ($

)

Period Included in VWAP

Period prior to 23 April 2015 Period prior to 31 May 2015


Table 6.4: Liquidity of Explaurum Shares

Month Volume Turnover Shares Outstanding

Volume per Shares

Outstanding

Monthly VWAP

May 2015 22,872,690 77,140 306,779,060 7.46% $0.0034

April 2015 1,221,780 3,480 256,490,660 0.48% $0.0028

March 2015 3,479,100 6,960 256,490,660 1.36% $0.0020

February 2015 412,500 830 256,490,660 0.16% $0.0020

January 2015 211,000 430 256,490,660 0.08% $0.0020

December 2014 3,660,750 10,900 256,490,660 1.43% $0.0030

November 2014 852,500 2,570 256,490,660 0.33% $0.0030

October 2014 2,463,700 9,950 256,490,660 0.96% $0.0040

September 2014 9,028,970 71,040 256,490,660 3.52% $0.0079

August 2014 308,670 1,590 256,490,660 0.12% $0.0052

July 2014 2,422,700 10,880 256,490,660 0.94% $0.0045

June 2014 961,000 5,050 256,490,660 0.37% $0.0053

Total 47,895,360 200,820 260,681,3601 18.37% $0.0042

Source: Capital IQ as at 29 June 2015 1 Average number of shares outstanding.

Based on an average number of 260,681,360 Explaurum shares on issue, approximately 18.37% of Explaurum shares on issue were traded over the period from 1 June 2014 to 31 May 2015. Given the above information, we consider that Explaurum exhibited relatively low liquidity over the period.

6.4 Explaurum Historical Financial Information

This section of this Report sets out the historical financial information of Explaurum. As this Report contains only summarised historical financial information, we recommend that any user of this Report read and understand the additional notes and financial information contained Explaurum’s annual reports which include the full statements of comprehensive income, statements of financial position and statements of cash flows.

Explaurum’s full year accounts were audited by HLB Mann Judd and its accounts for the 6 month period ending 31 December 2014 were reviewed by HLB Mann Judd. BDO CFQ has not performed any audit or review of any type on the historical financial information of Explaurum. We make no statement as to the accuracy of the information provided. However, we have no reason to believe that the information is misleading.

6.4.1 Comprehensive Income

The consolidated statement of comprehensive income of Explaurum for the 12 month periods ended 30 June 2012, 2013 and 2014 and for the 6 month period ended 31 December 2014 are summarised in Table 6.5 below.

Table 6.5: Summarised Explaurum Statements of Comprehensive Income

12 Months Ended

30-Jun-12 Audited

($)

12 Months Ended

30-Jun-13 Audited

($)

12 Months Ended

30-Jun-14 Audited

($)

6 Months Ended

31-Dec-14 Reviewed

($)

Interest income 57,173 6,473 13,175 3,794

Foreign exchange gain 26,962 5,007 - 8,884

Net gain on disposal of property, plant and equipment 681 - - -


Exploration expenditure written off (158,910) - (690) -

Legal, regulatory and compliance (138,238) (127,902) (123,181) (61,601)

Advertising and promotion (21,530) (14,438) (13,569) (6,675)

Benefits expense (550,142) (419,793) (76,898) (37,777)

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12 Months Ended

30-Jun-12 Audited

($)

12 Months Ended

30-Jun-13 Audited

($)

12 Months Ended

30-Jun-14 Audited

($)

6 Months Ended

31-Dec-14 Reviewed

($)

Legal and other consultants (21,828) (28,587) (930) -

Administration (305,834) (169,330) (62,494) (33,668)

Depreciation and amortisation (6,114) (3,561) (5,230) (3,896)

Equity compensation expense (80,997) (52,000) - -

Total expenses from continuing operations (1,283,593) (815,611) (282,992) (143,617)

Profit/(Loss) from continuing operations before tax (1,198,777) (804,131) (269,817) (130,939)

Loss after tax from discontinued operation - (5,913,692) (359,960) -

Profit/(Loss) from continuing operations after tax (1,198,777) (6,717,823) (629,777) (130,939)

Net gain/(loss) on foreign currency translation reserve taken to equity 80,200 (1,523) (15,004) -

Disposal of Subsidiary - - (232,963) -

Total comprehensive income (1,118,577) (6,719,346) (877,744) (130,939)

Source: Explaurum 2012-2014 Annual Reports and Explaurum 2015 Half Year Statutory Accounts.

In relation to the financial performance of Explaurum set out in Table 6.5 above we note the following:

Explaurum disposed of its 60% interest in the Maniema Gold Project and its 90% interest in Erongo Energy Namibia (Pty) Ltd in FY2014 for nominal consideration. As a result, previously written off exploration expenditure in relation to these projects are classified as losses after tax from discontinued operation and disposal of subsidiary, totalling $5.8 million in FY2013 and $0.6 million in FY2014; and

Explaurum has experienced net loss in total comprehensive income in all periods reported. In particular, there was a significant loss in FY2013 as a result of the $5.8 million exploration expenditure write off in relation to the Maniema Gold Project.


The consolidated statements of financial position of Explaurum as at 30 June 2012, 2013 and 2014 and for the 6 month period ended 31 December 2014 are summarised in Table 6.6 below.

Table 6.6: Summarised Explaurum Statements of Financial Position

As at 30-Jun-12

Audited ($)

As at 30-Jun-13

Audited ($)

As at 30-Jun-14

Audited ($)

As at 31-Dec-14 Reviewed

($)

Current assets

Cash 663,226 360,589 455,530 277,259

Trade and other receivables 19,952 4,271 34 5,237

Total current assets 683,178 364,860 455,564 282,496

Non-current assets

Receivables 9,375 9,375 9,375 9,375

Plant and equipment 32,909 30,422 15,959 12,063

Deferred exploration expenditure 4,559,249 577,308 230,473 266,881

Total non-current assets 4,601,533 617,105 255,807 288,319

Total assets 5,284,711 981,965 711,371 570,815

Current liabilities

Loans payable 541,285 - - -

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12 Months Ended

30-Jun-12 Audited

($)

12 Months Ended

30-Jun-13 Audited

($)

12 Months Ended

30-Jun-14 Audited

($)

6 Months Ended

31-Dec-14 Reviewed

($)

Legal and other consultants (21,828) (28,587) (930) -

Administration (305,834) (169,330) (62,494) (33,668)

Depreciation and amortisation (6,114) (3,561) (5,230) (3,896)

Equity compensation expense (80,997) (52,000) - -

Total expenses from continuing operations (1,283,593) (815,611) (282,992) (143,617)

Profit/(Loss) from continuing operations before tax (1,198,777) (804,131) (269,817) (130,939)

Loss after tax from discontinued operation - (5,913,692) (359,960) -

Profit/(Loss) from continuing operations after tax (1,198,777) (6,717,823) (629,777) (130,939)

Net gain/(loss) on foreign currency translation reserve taken to equity 80,200 (1,523) (15,004) -

Disposal of Subsidiary - - (232,963) -

Total comprehensive income (1,118,577) (6,719,346) (877,744) (130,939)


In relation to the financial performance of Explaurum set out in Table 6.5 above we note the following:

Explaurum disposed of its 60% interest in the Maniema Gold Project and its 90% interest in Erongo Energy Namibia (Pty) Ltd in FY2014 for nominal consideration. As a result, previously written off exploration expenditure in relation to these projects are classified as losses after tax from discontinued operation and disposal of subsidiary, totalling $5.8 million in FY2013 and $0.6 million in FY2014; and

Explaurum has experienced net loss in total comprehensive income in all periods reported. In particular, there was a significant loss in FY2013 as a result of the $5.8 million exploration expenditure write off in relation to the Maniema Gold Project.


The consolidated statements of financial position of Explaurum as at 30 June 2012, 2013 and 2014 and for the 6 month period ended 31 December 2014 are summarised in Table 6.6 below.

Table 6.6: Summarised Explaurum Statements of Financial Position

As at 30-Jun-12

Audited ($)

As at 30-Jun-13

Audited ($)

As at 30-Jun-14

Audited ($)


($)

Current assets

Cash 663,226 360,589 455,530 277,259

Trade and other receivables 19,952 4,271 34 5,237

Total current assets 683,178 364,860 455,564 282,496

Non-current assets

Receivables 9,375 9,375 9,375 9,375

Plant and equipment 32,909 30,422 15,959 12,063

Deferred exploration expenditure 4,559,249 577,308 230,473 266,881

Total non-current assets 4,601,533 617,105 255,807 288,319

Total assets 5,284,711 981,965 711,371 570,815

Current liabilities

Loans payable 541,285 - - -


As at 30-Jun-12

Audited ($)

As at 30-Jun-13

Audited ($)

As at 30-Jun-14

Audited ($)


($)

Trade and other payables 468,613 30,379 37,524 27,907

Total liabilities 1,009,898 30,379 37,524 27,907

Net assets 4,274,813 951,586 673,847 542,908

Equity

Issued equity 13,445,832 14,418,701 15,018,706 15,018,706

Reserves 3,050,952 4,577,517 3,193,794 3,193,794

Accumulated losses (12,209,780) (16,916,622) (17,538,653) (17,669,592)

Non-controlling interests (12,191) (1,128,010) - -

Total equity 4,274,813 951,586 673,847 542,908


In relation to the financial position of Explaurum set out in Table 6.6 above we note the following:

The $9,375 non-current receivables figure each year represents a rental bond held by Explaurum;

Loans outstanding of $0.5 million as at 30 June 2012 relate to a loan from Afrimines, Explaurum’s joint venture partner in the Maniema Gold Project. Explaurum drew down a further US$1.95 million in FY2013 before the total loan outstanding was converted into equity in the Maniema Gold Project, resulting in Afrimines’ 10% increase in interest in the Maniema Project;

Deferred exploration expenditure declined significantly in FY2013 and FY2014 due to exploration expenditure write offs of $5.8 million and $0.6 million respectively;

Explaurum acquired all shares in Ninghan Exploration Pty Ltd, which holds 100% interest in the Lyons Project in August 2013 for a consideration of 16 million newly issued ordinary shares and $50,000. The acquisition resulted in an increase in capitalised exploration expenditure of $130,000 in FY2014; and

Explaurum issued 45.3 million shares worth $1.0 million and 122.9 million shares worth $0.6 million in FY2013 and FY2014 respectively as a result of the acquisition of the Lyons Project, private placements, consideration for consulting services and exercise of share options.

6.4.3 Cash Flows

The consolidated statement of cash flows of Explaurum for the 12 month periods ended 30 June 2012, 2013 and 2014 and for the 6 month period ended 31 December 2014 are summarised in Table 6.7 below.

Table 6.7: Summarised Explaurum Statements of Cash Flow

12 Months Ended

30-Jun-12 Audited

($)

12 Months Ended

30-Jun-13 Audited

($)

12 Months Ended

30-Jun-14 Audited

($)

6 Months Ended

31-Dec-14 Reviewed

($)

Cash flows from / (used in) Operating Activities Payments to suppliers and employees (1,049,963) (865,179) (265,992) (154,541)



Cash flows from / (used in) Investing Activities Proceeds on disposal of plant and equipment 49,764 11,301 19,228 -

Funds leaving group on disposal of subsidiary - - (9,327) -

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12 Months Ended

30-Jun-12 Audited

($)

12 Months Ended

30-Jun-13 Audited

($)

12 Months Ended

30-Jun-14 Audited

($)

6 Months Ended

31-Dec-14 Reviewed

($)

Payments for subsidiary - - (50,000) -

Payment for property, plant and equipment (28,828) (8,939) (15,000) -

Loans received from JV partner 541,285 - - -

Payment for exploration expenditure (2,240,326) (2,262,018) (115,910) (36,408)

Net cash flows from / (used in) investing activities (1,678,105) (2,259,656) (171,009) (36,408)


Proceeds from issue of shares and options 1,800,500 995,357 534,357 -

Proceeds from shares issued to non-controlling interests in subsidiary - 1,872,600 - -

Issue costs for shares and options (115,746) (65,488) (14,352) -

Net cash flows from financing activities 1,684,754 2,802,469 520,005 -

Net increase / (decrease) in cash held (977,641) (315,893) 96,179 (187,155)

Opening cash balance 1,592,736 663,226 360,589 455,530

Effects of exchange rate fluctuations on the balances of cash held in foreign currencies 48,131 13,256 (1,238) 8,884

Closing cash balance 663,226 360,589 455,530 277,259


In relation to the cash flows of Explaurum set out in Table 6.7 above we note the following:

Proceeds from shares issued to non-controlling interests in subsidiary relate to the further US$1.95 million ($1.87 million) loan drawn down from Afrimines. The full amount of outstanding loan, including the $0.5 million drawn down in FY2012, was subsequently converted into equity in the Maniema Gold Project;

In FY2014, the payments for exploration expenditure significantly decreased as a result of Explaurum’s disposal of its interest in the Maniema Gold Project;

Payments for subsidiary of $50,000 in FY2014 relates to the acquisition of the Lyons Project; and

Explaurum’s operating and investing activities have been funded by cash from financing activities over the three and a half year period starting 30 June 2012.

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12 Months Ended

30-Jun-12 Audited

($)

12 Months Ended

30-Jun-13 Audited

($)

12 Months Ended

30-Jun-14 Audited

($)

6 Months Ended

31-Dec-14 Reviewed

($)

Payments for subsidiary - - (50,000) -

Payment for property, plant and equipment (28,828) (8,939) (15,000) -

Loans received from JV partner 541,285 - - -

Payment for exploration expenditure (2,240,326) (2,262,018) (115,910) (36,408)

Net cash flows from / (used in) investing activities (1,678,105) (2,259,656) (171,009) (36,408)


Proceeds from issue of shares and options 1,800,500 995,357 534,357 -

Proceeds from shares issued to non-controlling interests in subsidiary - 1,872,600 - -

Issue costs for shares and options (115,746) (65,488) (14,352) -

Net cash flows from financing activities 1,684,754 2,802,469 520,005 -

Net increase / (decrease) in cash held (977,641) (315,893) 96,179 (187,155)

Opening cash balance 1,592,736 663,226 360,589 455,530

Effects of exchange rate fluctuations on the balances of cash held in foreign currencies 48,131 13,256 (1,238) 8,884

Closing cash balance 663,226 360,589 455,530 277,259


In relation to the cash flows of Explaurum set out in Table 6.7 above we note the following:

Proceeds from shares issued to non-controlling interests in subsidiary relate to the further US$1.95 million ($1.87 million) loan drawn down from Afrimines. The full amount of outstanding loan, including the $0.5 million drawn down in FY2012, was subsequently converted into equity in the Maniema Gold Project;

In FY2014, the payments for exploration expenditure significantly decreased as a result of Explaurum’s disposal of its interest in the Maniema Gold Project;

Payments for subsidiary of $50,000 in FY2014 relates to the acquisition of the Lyons Project; and

Explaurum’s operating and investing activities have been funded by cash from financing activities over the three and a half year period starting 30 June 2012.


7.0 Overview of the Merged Group

7.1 Description of the Merged Group

Under the Proposed Transaction, Explaurum will obtain a 100% interest in Auzex by issuing 67.2 million Explaurum shares (on a post-consolidation basis) and it is intended that Auzex be a wholly owned subsidiary of Explaurum. The Merged Group is expected to have 22.8 million options on issue, of which 10.8 million relate to options attached to shares issued in the Capital Raising and 12 million relate to options issued to Auzex directors for settlement of amounts owing to them.

The Merged Group will be focused on developing the Tampia Gold Project, with a view to becoming a successful mid-tier Australian gold producer. The strategic objective is to take the Tampia Gold Project through to completion of a bankable feasibility study, and subsequently, to development and production.

The board of the Merged Group will initially comprise two directors nominated by Auzex and two directors nominated by Explaurum. The proposed board composition of the Merged Group is set out in Table 7.1 below.

Table 7.1: Proposed Merged Group Board

Name Board Position

Mr Patrick Flint (Explaurum) Non-Executive Director

Mr Mark Calderwood (Explaurum) Technical Director

Mr Chris Baker (Auzex) Independent Non-Executive Chairman

Mr John Lawton (Auzex) Managing Director

Source: 30 April 2015 Merger Presentation

7.2 Pro Forma Financial Position of the Merged Group

Auzex shareholders should refer to section 7.9 of the Scheme Booklet for further information in relation to the pro forma financial position of the Merged Group.

8.0 Value of Auzex on a Minority Interest Basis Prior to the Proposed Transaction

This section of this Report sets out our valuation of Auzex on a minority interest basis prior to the Proposed Transaction and is structured as follows:

Section 8.1 sets out our view of the most appropriate valuation methodologies to adopt for the purpose of valuing Auzex;

Section 8.2 sets out our calculation of the value of each Auzex share using the asset based valuation methodology;

Section 8.3 sets out our calculation of the value of each Auzex share using the market based valuation methodology; and

Section 8.4 sets out our view of the most appropriate value to adopt for each Auzex share for the purpose of this Report.

8.1 Valuation Approach

RG 111 outlines a number of methodologies that a valuer should consider when valuing securities or assets for the purposes of, among other things, share buy-backs, selective capital reductions, schemes of arrangement, takeovers and prospectuses. The valuation methodologies we have considered in this Report include the discounted cash flow (‘DCF’), capitalisation of maintainable earnings (‘CME’), asset-based valuation (‘ABV’) and market-based valuation (‘MBV’) methodologies. Further details on each of these valuation methodologies are set out in Appendix B of this Report.

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RG 111 does not prescribe which methodology should be used by the expert but rather notes that the decision lies with the expert based on the expert’s skill and judgement and after considering the unique circumstances of the securities or assets being valued. We have considered each of the valuation methodologies outlined above and determined, in our view, the most appropriate methodology for calculating the value of Auzex prior to the Proposed Transaction. Table 8.1 below summarises our view of the most appropriate valuation methodology to adopt to value Auzex in this Report.

Table 8.1: Summary of Possible Auzex Valuation Methodologies

Valuation Methodology Appropriate Explanation

DCF Valuation ×

The DCF methodology relies on the ability to forecast future cash flows with a reasonable degree of certainty over a sufficiently long period of time. The future cash flows of Auzex are unable to be forecast with the appropriate degree of accuracy as at the date of this Report. In particular, we note that the mineral exploration assets held by Auzex are in very early stages of development and are unlikely to generate any positive cash flows in the near term. In our view, a DCF methodology is not appropriate for the purposes of valuing Auzex shares in this Report.

CME Valuation ×

The assets owned by Auzex do not currently generate an earnings stream that is suitable for use in a CME valuation methodology. In our view, a CME valuation methodology is not appropriate for the purposes of valuing Auzex shares in this Report.

Asset Based Valuation

In our view, it is appropriate to have regard to an asset based valuation methodology for the purposes of valuing Auzex shares in this Report. The assets and liabilities of Auzex can be identified and it is possible to determine the fair value of this identifiable assets and liabilities with a reasonable degree of accuracy. Mining Associates, a specialist valuation expert, has prepared a valuation of the mining exploration assets held by Auzex. We have had regard to a valuation report prepared by Mining Associates when determining an appropriate value to adopt for the mining exploration assets held by Auzex.

Market Based Valuation

Cross check

Auzex is not listed on a stock exchange where market prices for Auzex shares can be readily observed. We have however considered the information which is available, including a rights issue. In our view it is appropriate to have regard to the MBV methodology as a cross-check to our ABV of Auzex in this Report.


Having regard to the information set out in Table 8.1 above, in our view it is appropriate to adopt the ABV methodology to value Auzex. We have adopted the MBV methodology as a cross-check to our ABV of Auzex in this Report.

8.2 Asset Based Valuation of Auzex Prior to the Proposed Transaction

In order to complete an asset based valuation of Auzex we have considered the value of Auzex’s assets and liabilities as set out in Auzex’s management statement of financial position as at 30 April 2015 and the value of Auzex’s mineral exploration assets as determined by Mining Associates. BDO CFQ has not performed any audit or review work on the historical financial information of Auzex. Accordingly, we make no statement as to the accuracy of the information provided however we have no reason to believe that the information is false or misleading.

Our asset based valuation of Auzex is set out as follows:

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RG 111 does not prescribe which methodology should be used by the expert but rather notes that the decision lies with the expert based on the expert’s skill and judgement and after considering the unique circumstances of the securities or assets being valued. We have considered each of the valuation methodologies outlined above and determined, in our view, the most appropriate methodology for calculating the value of Auzex prior to the Proposed Transaction. Table 8.1 below summarises our view of the most appropriate valuation methodology to adopt to value Auzex in this Report.

Table 8.1: Summary of Possible Auzex Valuation Methodologies

Valuation Methodology Appropriate Explanation

DCF Valuation ×

The DCF methodology relies on the ability to forecast future cash flows with a reasonable degree of certainty over a sufficiently long period of time. The future cash flows of Auzex are unable to be forecast with the appropriate degree of accuracy as at the date of this Report. In particular, we note that the mineral exploration assets held by Auzex are in very early stages of development and are unlikely to generate any positive cash flows in the near term. In our view, a DCF methodology is not appropriate for the purposes of valuing Auzex shares in this Report.

CME Valuation ×

The assets owned by Auzex do not currently generate an earnings stream that is suitable for use in a CME valuation methodology. In our view, a CME valuation methodology is not appropriate for the purposes of valuing Auzex shares in this Report.

Asset Based Valuation

In our view, it is appropriate to have regard to an asset based valuation methodology for the purposes of valuing Auzex shares in this Report. The assets and liabilities of Auzex can be identified and it is possible to determine the fair value of this identifiable assets and liabilities with a reasonable degree of accuracy. Mining Associates, a specialist valuation expert, has prepared a valuation of the mining exploration assets held by Auzex. We have had regard to a valuation report prepared by Mining Associates when determining an appropriate value to adopt for the mining exploration assets held by Auzex.

Market Based Valuation

Cross check

Auzex is not listed on a stock exchange where market prices for Auzex shares can be readily observed. We have however considered the information which is available, including a rights issue. In our view it is appropriate to have regard to the MBV methodology as a cross-check to our ABV of Auzex in this Report.


Having regard to the information set out in Table 8.1 above, in our view it is appropriate to adopt the ABV methodology to value Auzex. We have adopted the MBV methodology as a cross-check to our ABV of Auzex in this Report.

8.2 Asset Based Valuation of Auzex Prior to the Proposed Transaction

In order to complete an asset based valuation of Auzex we have considered the value of Auzex’s assets and liabilities as set out in Auzex’s management statement of financial position as at 30 April 2015 and the value of Auzex’s mineral exploration assets as determined by Mining Associates. BDO CFQ has not performed any audit or review work on the historical financial information of Auzex. Accordingly, we make no statement as to the accuracy of the information provided however we have no reason to believe that the information is false or misleading.

Our asset based valuation of Auzex is set out as follows:


Section 8.2.1 sets out the value adopted for Auzex’s mineral exploration assets;

Section 8.2.2 sets out the value adopted for Auzex’s other assets and liabilities;

Section 8.2.3 sets out our rationale for the minority interest figure we adopted; and

Section 8.2.4 sets out the asset based valuation of Auzex prior to the Proposed Transaction.

8.2.1 Mining Associate’s Valuation of the Mineral Exploration Assets held by Auzex

We have engaged the services of Mining Associates to assist with a technical valuation of the mineral exploration assets held by Auzex. Mining Associates are specialist technical valuers of mineral assets and, in our opinion, are suitably qualified to complete a valuation of the mineral exploration assets held by Auzex.

Mining Associates have set out their view of the fair value of the mineral exploration assets held by Auzex in a report addressed to BDO CFQ titled “Report on the Technical Valuation of Auzex Exploration Limited’s Mineral Assets in Australia”, dated 24 June 2015 (‘the MA Report’). We are of the view that it is appropriate for us to refer to the MA Report when determining an appropriate value for the mineral exploration assets held by Auzex. The MA Report is attached as Appendix D of this Report.

Mining Associates has adopted the market approach and its extension, the yardstick approach, as the principle bases for the properties included in their valuation. The Kilburn Geoscience Rating method, a cost approach, is included as a check on values obtained by the market approach. Further details in relation to the valuation methodologies considered by Mining Associates are as follows:

Comparable transactions approach (market approach)

— This approach considers transaction values observed for exploration assets considered broadly comparable to the mineral exploration assets held by Auzex, on the basis of size and grade; and

— This methodology is used by Mining Associates in determining the value of the JORC compliant mineral resources in Tampia;

Yardstick approach (extension of market approach)

— This approach considers transaction values in terms of a dollar per unit area or dollar per unit of resource in the ground for exploration assets considered broadly comparable to the mineral exploration assets held by Auzex;

— A range of implied dollar per unit of resource from broadly comparable transactions is used by Mining Associates in determining the value of the JORC compliant mineral resources in Tampia; and

— Various ranges of implied dollar per unit area from broadly comparable transactions with no published resources is used by Mining Associates in determining the value of the tenements in Tampia (excluding the Gault deposit mining lease, which contains the JORC compliant resources in Tampia), North Queensland and Kingsgate; and

Kilburn Geoscience Rating method

— This method values a project based on an assessment of its technical attributes to define prospectivity. The prospectivity rating is then applied to the property’s Base Acquisition Cost, which is defined by totalling licence application fees, minimum expenditure requirements and access costs; and

— Mining Associates have separately assessed the prospectivity of each group of tenements to generate a value for each group as a verification of the values from other methods. The groups of tenements valued using this method are those in Tampia (excluding the Gault deposit mining lease), North Queensland and Kingsgate.

The preferred values for the exploration projects are based on a combination of ranges determined by the market approach values supplemented with lower confidence Kilburn Geoscience Ratings for exploration licences.

Table 8.2 summarises the range of values that Mining Associates has determined for the mineral exploration assets held by Auzex.

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Table 8.2: Summary Valuations for the Mineral Exploration Assets held by Auzex

Market Approach Cost Approach Preferred

Comparable Transactions Yardstick

Kilburn Geoscience

Project Low ($m)

High ($m)

Low ($m)

High ($m)

Low ($m)

High ($m)

Low ($m)

Preferred ($m)

High ($m)

Tampia Resources 1.29 1.50 1.10 2.50 - - 1.10 1.50 2.50

Tampia Exploration - - 0.09 0.34 0.08 1.30 0.10 0.30 1.30

North Queensland Exploration - - 0.18 0.68 0.26 2.60 0.20 0.50 2.60

Kingsgate - - 0.01 0.01 0.01 0.22 0.01 0.01 0.20

Total 1.41 2.31 6.6

Source: Table 22 of the Mining Associates Report 1 The preferred values adopted for Tampia Resources are on the basis of 90% ownership by Auzex and account for the

Tampiagold Parties’ 10% interest which is free-carried up to completion of a feasibility study, after which time they can elect to either retain a 10% participating interest, or convert their interest to shares and receive a 2% royalty. Auzex’s joint venture agreement with the Tampiagold Parties is discussed in more detail in section 5.11.2 of the Scheme Booklet.

Table 8.2 shows that Mining Associates considers the value of the mineral exploration assets held by Auzex to be within the range of $1.4 million to $6.6 million, with a preferred value of $2.3 million. As set out in section 8 of the MA Report, Mining Associates has chosen preferred market values closer to the lower value ranges as the tenements are not in immediate proximity to existing mines and infrastructure.

We note that Mining Associates’ valuation is on a fair value basis, which provides the “estimate of the amount of money, or cash equivalent, which would be likely to change hands between a willing buyer and a willing seller in an arms-length transaction, wherein each party had acted knowledgeably, prudently and without compulsion” as at 24 June 2015, being the date of MA Report.

8.2.2 Value of Other Assets and Liabilities

We have been provided with Auzex’s management statement of financial position as at 30 April 2015 which sets out the value of Auzex’s other assets and liabilities. In order to determine an appropriate value for Auzex’s other assets and liabilities, we have considered the values set out in Auzex’s statement of financial position as at 30 April 2015 and have made enquiries of the directors and management of Auzex in relation to any material adjustments required to reflect the fair market value of these assets and liabilities for the purposes of this Report.

Table 8.3 below summarises our view, based on our enquiries of the directors and management of Auzex, of an appropriate value to adopt for Auzex’s other assets and liabilities for the purpose of the valuation work set out in this Report.

Table 8.3: Value of Auzex’s Other Assets and Liabilities

Value ($)

Assets

Cash 72,964

Add: Proceeds from Explaurum loan1 700,000

Less: Estimated transaction costs2 (340,000)

Trade and other receivables3 91,555

Property, plant and equipment 26,501

Liabilities

Loan from Explaurum (800,000)

Trade and other payables (169,269)

Related party creditors (883,150)

Provision for annual leave (113,974)

Provisions for rehabilitation (123,605)

Net assets / deficiency excluding mineral exploration assets (1,529,978)

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Table 8.2: Summary Valuations for the Mineral Exploration Assets held by Auzex

Market Approach Cost Approach Preferred

Comparable Transactions Yardstick

Kilburn Geoscience

Project Low ($m)

High ($m)

Low ($m)

High ($m)

Low ($m)

High ($m)

Low ($m)

Preferred ($m)

High ($m)

Tampia Resources 1.29 1.50 1.10 2.50 - - 1.10 1.50 2.50


North Queensland Exploration - - 0.18 0.68 0.26 2.60 0.20 0.50 2.60

Kingsgate - - 0.01 0.01 0.01 0.22 0.01 0.01 0.20

Total 1.41 2.31 6.6

Source: Table 22 of the Mining Associates Report 1 The preferred values adopted for Tampia Resources are on the basis of 90% ownership by Auzex and account for the

Tampiagold Parties’ 10% interest which is free-carried up to completion of a feasibility study, after which time they can elect to either retain a 10% participating interest, or convert their interest to shares and receive a 2% royalty. Auzex’s joint venture agreement with the Tampiagold Parties is discussed in more detail in section 5.11.2 of the Scheme Booklet.

Table 8.2 shows that Mining Associates considers the value of the mineral exploration assets held by Auzex to be within the range of $1.4 million to $6.6 million, with a preferred value of $2.3 million. As set out in section 8 of the MA Report, Mining Associates has chosen preferred market values closer to the lower value ranges as the tenements are not in immediate proximity to existing mines and infrastructure.

We note that Mining Associates’ valuation is on a fair value basis, which provides the “estimate of the amount of money, or cash equivalent, which would be likely to change hands between a willing buyer and a willing seller in an arms-length transaction, wherein each party had acted knowledgeably, prudently and without compulsion” as at 24 June 2015, being the date of MA Report.

8.2.2 Value of Other Assets and Liabilities

We have been provided with Auzex’s management statement of financial position as at 30 April 2015 which sets out the value of Auzex’s other assets and liabilities. In order to determine an appropriate value for Auzex’s other assets and liabilities, we have considered the values set out in Auzex’s statement of financial position as at 30 April 2015 and have made enquiries of the directors and management of Auzex in relation to any material adjustments required to reflect the fair market value of these assets and liabilities for the purposes of this Report.

Table 8.3 below summarises our view, based on our enquiries of the directors and management of Auzex, of an appropriate value to adopt for Auzex’s other assets and liabilities for the purpose of the valuation work set out in this Report.

Table 8.3: Value of Auzex’s Other Assets and Liabilities

Value ($)

Assets

Cash 72,964

Add: Proceeds from Explaurum loan1 700,000

Less: Estimated transaction costs2 (340,000)

Trade and other receivables3 91,555


Liabilities

Loan from Explaurum (800,000)


Related party creditors (883,150)

Provision for annual leave (113,974)

Provisions for rehabilitation (123,605)

Net assets / deficiency excluding mineral exploration assets (1,529,978)


Source: Auzex management statement of financial position as at 30 April 2015 and BDO CFQ analysis 1 As at 30 April 2015, $100,000 of the loan has already been advanced to Auzex and is included in the cash balance. The

$700,000 set out in this table represents the remaining amount of loans to be advanced to Auzex. 2 Estimated transaction costs set out in this table are transaction costs that will be incurred by Auzex irrespective of whether

or not the Proposed Transaction is approved and which have not been accrued as at 30 April 2015. 3 Trade and other receivables have been adjusted to exclude a loan advanced to Tampiagold Pty Ltd with an amount

outstanding as at 30 April 2015 of $187,501 ($120,000 principal and $67,501 interest accrued). We understand that this loan will be converted on 30 June 2015 into an additional 10% interest in the Tampia Gold Project, resulting in an increase in Auzex’s interest in the project from 80% to 90%.

With reference to Table 8.3 above, we have calculated the net value of Auzex’s other assets and liabilities to be a net asset deficiency of approximately $1.5 million.

For completeness we note that in addition to the liabilities set out in Table 8.3, Auzex also had convertible notes outstanding as at 30 April 2015 totalling $591,432 (including accrued interest of $66,432). For the purpose of our analysis we have assumed that the convertible notes have been converted into 3 million shares and we have not included them above.

8.2.3 Application of a Minority Interest Discount

An asset based valuation typically calculates the value of a company on a controlling interest basis. As the valuation of Auzex set out in this section is an asset based valuation (i.e. a controlling interest basis), it is appropriate to apply a minority discount to calculate the value on a minority interest basis. We note that a minority interest in a company is generally regarded as being less valuable than that of a controlling interest as a controlling interest may provide the owner with the following:

Control over the operating and financial decisions of the company;

The right to set the strategic direction of the company;

Control over the buying, selling and use of the company’s assets; and

Control over the appointment of staff and setting of financial policies.

The increase in value for a controlling interest is often observed where an acquirer launches a takeover bid, or some other mechanism for control, for another company. Empirical research suggests that control premiums are typically within the range of 20% to 40% which is consistent with recent transactions in Australia. The inverse of this range to apply for a minority discount is 16.7% to 28.6%.

For the purposes of this Report, in our view it is appropriate to adopt a minority discount of 23.1% to calculate the value of Auzex on a minority interest basis. We have set out further discussion in relation to the control premium in Appendix C of this Report.

8.2.4 Asset Based Valuation of Auzex on a Minority Interest Basis Prior to the Proposed Transaction

Table 8.4 below summarises our asset based valuation of Auzex on a minority interest basis prior to the Proposed Transaction.

Table 8.4: Equity Value of Auzex on a Minority Interest Basis

Section

Reference Low Value

($) Preferred

($) High Value

($) Mineral exploration assets 8.2.1 1,410,000 2,310,000 6,600,000

Other assets and liabilities 8.2.2 (1,529,978) (1,529,978) (1,529,978)

Asset based value of Auzex - controlling interest basis

(119,978) 780,022 5,070,022

Less minority interest discount 8.2.3 -23.10% -23.10% -23.10% Asset based value of Auzex - minority interest basis

(92,263) 599,837 3,898,847

Number of Auzex shares on issue1 5.2 16,801,449 16,801,449 16,801,449 Value per Auzex share - minority interest basis

0.0002 0.036 0.232

Source: BDO CFQ Analysis 1 Number of Auzex shares equal to 13,801,449 shares plus 3,000,000 shares issued on conversion of the convertible notes. 2 While the calculation is equal to negative $0.005, we have adopted a value of $0.000.

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With reference to Table 8.4 above, our asset based valuation equates to a value range of $0.000 to $0.232 per Auzex ordinary share on a minority interest basis.

8.3 Market Based Valuation of Auzex Prior to the Proposed Transaction

We have cross-checked our asset based valuation of an Auzex share with a market based valuation. We note that a market based valuation generally provides a value per share on a minority interest basis.

Since its demerger from AZX, Auzex has completed numerous share placements and a rights issue. These transactions have primarily related to capital raisings to fund explorations and in preparation for an IPO and ASX listing in December 2014 (‘the Proposed IPO’). In addition, Auzex performed a consolidation of its issued capital on the basis of 1 Auzex share for every 3 Auzex shares on issue on 25 August 2014.

Table 8.5 below summarises Auzex’s past share placements and a rights issue. To improve comparability across the periods before and after the 1:3 share consolidation completed on 25 August 2014, in the right hand column of the table we have provided additional information in relation to the implied share prices of the transactions assuming the 1:3 share consolidation had occurred.

Table 8.5: Auzex Movements in Ordinary Share Capital

Transaction Description Post-Consolidation Basis

$0.10 million share placement

On 9 August 2012, Auzex issued 400,000 ordinary shares for cash at $0.25 per share

The shares issued represented approximately 1.84% of the total Auzex shares outstanding prior to the completion of the issue

Implied share price: $0.75 per share

Implied shares issued: 133,333


On 12 October 2012, Auzex issued 600,000 ordinary shares for cash at $0.25 per share





On 28 February 2013, Auzex issued 2,280,000 ordinary shares for cash at $0.25 per share





On 15 April 2013, Auzex issued 902,000 ordinary shares for cash at $0.25 per share




$0.13 million share purchase plan

On 25 September 2013, Auzex issued 520,000 ordinary shares for cash at $0.25 per share




1:3 share consolidation

On 25 August 2014, Auzex performed a consolidation of Auzex’s issued capital on the basis of 1 Auzex share for every 3 Auzex shares on issue

Auzex had 25,883,084 shares on issue pre-consolidation

Number of shares on issue post-consolidation: 8,801,449

$0.50 million pre-IPO rights issue

On 27 October 2014, Auzex issued 5,000,000 ordinary shares fully paid for cash at $0.10 per share

The rights issue relates to funding a proposed listing on the ASX in November 2014 and is offered to shareholders who have subscribed to any capital raising of Auzex in the last 30 months at $0.25 per share

The issue was fully subscribed from existing shareholders taking up the rights issue and sophisticated investors taking up the balance

Actual share price: $0.10 per share

Actual shares issued: 5,000,000 F

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With reference to Table 8.4 above, our asset based valuation equates to a value range of $0.000 to $0.232 per Auzex ordinary share on a minority interest basis.

8.3 Market Based Valuation of Auzex Prior to the Proposed Transaction

We have cross-checked our asset based valuation of an Auzex share with a market based valuation. We note that a market based valuation generally provides a value per share on a minority interest basis.

Since its demerger from AZX, Auzex has completed numerous share placements and a rights issue. These transactions have primarily related to capital raisings to fund explorations and in preparation for an IPO and ASX listing in December 2014 (‘the Proposed IPO’). In addition, Auzex performed a consolidation of its issued capital on the basis of 1 Auzex share for every 3 Auzex shares on issue on 25 August 2014.

Table 8.5 below summarises Auzex’s past share placements and a rights issue. To improve comparability across the periods before and after the 1:3 share consolidation completed on 25 August 2014, in the right hand column of the table we have provided additional information in relation to the implied share prices of the transactions assuming the 1:3 share consolidation had occurred.

Table 8.5: Auzex Movements in Ordinary Share Capital



On 9 August 2012, Auzex issued 400,000 ordinary shares for cash at $0.25 per share





On 12 October 2012, Auzex issued 600,000 ordinary shares for cash at $0.25 per share





On 28 February 2013, Auzex issued 2,280,000 ordinary shares for cash at $0.25 per share





On 15 April 2013, Auzex issued 902,000 ordinary shares for cash at $0.25 per share




$0.13 million share purchase plan

On 25 September 2013, Auzex issued 520,000 ordinary shares for cash at $0.25 per share




1:3 share consolidation

On 25 August 2014, Auzex performed a consolidation of Auzex’s issued capital on the basis of 1 Auzex share for every 3 Auzex shares on issue

Auzex had 25,883,084 shares on issue pre-consolidation

Number of shares on issue post-consolidation: 8,801,449

$0.50 million pre-IPO rights issue

On 27 October 2014, Auzex issued 5,000,000 ordinary shares fully paid for cash at $0.10 per share

The rights issue relates to funding a proposed listing on the ASX in November 2014 and is offered to shareholders who have subscribed to any capital raising of Auzex in the last 30 months at $0.25 per share

The issue was fully subscribed from existing shareholders taking up the rights issue and sophisticated investors taking up the balance

Actual share price: $0.10 per share

Actual shares issued: 5,000,000


Source: Auzex management, BDO CFQ Analysis

With reference to Table 8.5 above, we note the following:

The share issues set out above have occurred since August 2012;

The share trades have separately represented between 1.84% and 56.81% of the total shares outstanding prior to the completion of each issue of shares. We consider the transactions to relate to minority parcels of shares;

There have been approximately 6.6 million Auzex shares issued at between $0.10 and $0.75 per share on a post-consolidation basis. The majority of the share issues at $0.75 (on an implied post-consolidation basis) were in the period from August 2012 to September 2013 while the October 2014 rights issue was at a significant discount of $0.10; and

It is our view that the most relevant transaction for the purpose of the market based valuation is the rights issue on 27 October 2014 at $0.10, due to the following:

— It is a relatively recent cash transaction that is post Auzex’s 1:3 share consolidation; and

— It represents a significant proportion of Auzex shares outstanding prior to the completion of the issue.

Having regard to the information set out above, our market based valuation equates to a value of $0.10 per Auzex ordinary share on a minority interest basis and supports our ABV calculation.

For completeness we note that our MBV of Auzex of $0.10 is between our ABV preferred value of $0.036 and ABV high value of $0.232. Possible explanations for this include:

The rights issue was a pre-IPO capital raising. Participants in the capital raising may have been more optimistic on Auzex’s prospects in light of the anticipated IPO (which ultimately did not eventuate);

Our ABV incorporates transaction costs in relation to the Proposed Transaction; and

Auzex has incurred operational expenses since the rights issue in October 2014.

8.4 Value per Auzex Share Prior to the Proposed Transaction

In our view, for the purpose of the analysis set out in this Report it is appropriate to adopt a value in the range of $0.000 to $0.232 per Auzex ordinary share on a minority interest basis, based on ABV and supported by MBV as a cross check.

For completeness we note that the valuation range adopted above is a relatively wide range. It is our view that it is appropriate to adopt a relatively wide range having regard to the relatively early stage of development of the key assets of Auzex, the speculative nature of exploration companies generally and the valuation range (i.e. minimum, preferred, and maximum) of the mineral exploration assets as set out in the MA Report.

9.0 Value of the Merged Group Following the Proposed Transaction

This section sets out our valuation of the Merged Group immediately following the Proposed Transaction, assuming it is approved. This section is structured as follows:

Section 9.1 sets out our view of the most appropriate methodology to value the Merged Group assuming the Proposed Transaction is approved; and

Section 9.2 sets out our calculation of the value of a share in the Merged Group.

9.1 Valuation Approach

In our view, the ABV methodology is the most appropriate methodology to apply in order to calculate the value of shares in the Merged Group immediately following the Proposed Transaction, assuming that the Proposed Transaction is approved and implemented. In our view, it is not appropriate to apply the DCF or CME valuation methodologies to determine a value of the Merged Group for the following reasons:

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The DCF methodology relies on projections which predict the future cash flows of a company. Due to the nature and stage of development of both Auzex’s and Explaurum’s projects, in our view, future cash flows of the Merged Group cannot be determined with the appropriate level of certainty or accuracy at the current time. The DCF methodology is not appropriate for calculating the value of the Merged Group’s shares; and

The business activities of Auzex and Explaurum do not generate an earnings stream at the current time and it is expected that earnings will not be generated in the short term following the Proposed Transaction. Neither Auzex nor Explaurum generate and report maintainable earnings suitable for use in a CME valuation of the Merged Group’s shares.

To determine a value for the Merged Group’s net assets, in our view it is appropriate to add:

the value of Auzex’s assets and liabilities from Section 8.0 above;

the value of Explaurum implied by recent capital raisings including the $1.3 million capital raising at $0.003 announced on 30 April 2015 which, when tranche 1 and 2 are completed, will increase the number of shares in Explaurum from 256.5 million to 689.8 million on a pre-consolidation basis. We have assumed that tranche 1 and 2 will complete as they are conditions precedent for the Proposed Transaction. While Explaurum shares are listed on the ASX and market prices for the shares can be observed, in our view the prices may not be reflective of the value of Explaurum due to the low liquidity of Explaurum’s shares over the past twelve months; and

make adjustments for other assets and liabilities expected to be held by the Merged Group immediately following the Proposed Transaction.

Our valuation of the Merged Group is set out in Section 9.2 below.

9.2 Value of the Merged Group

To determine a value for ordinary shares in the Merged Group following the Proposed Transaction, we have had regard to the following:

The value of Auzex’s contribution (set out in Section 9.2.1);

The value of Explaurum’s contribution (set out in Section 9.2.2);

Adjustments to the value of the Merged Group as a result of the Proposed Transaction (set out in Section 9.2.3); and

Impact of options on the valuation of the Merged Group (set out in Section 9.2.4).

9.2.1 Value of Auzex Contribution

As set out in Section 8.2 of this Report, we have calculated the net value of Auzex’s assets and liabilities on a controlling interest basis to be within the range of -$119,978 to $5,070,022.

9.2.2 Value of Explaurum Contribution

In order to value Explaurum’s contribution to the Merged Group, we have considered information in relation to recent share issues by Explaurum. These transactions have primarily related to capital raisings to fund explorations and in preparation for the Proposed Transaction. Table 9.1 below summarises Explaurum’s recent share issues.

To improve comparability across the periods before and after the proposed 1 for 10 share consolidation, we have provided additional information in the right hand column of the table below in relation to the implied share prices of the transactions assuming the share consolidation has occurred.

Table 9.1: Explaurum Movements in Ordinary Share Capital


$0.53 million rights issue

In July 2013, Explaurum issued 106,871,400 ordinary shares fully paid for cash at $0.005 per share in a pro-rata (on the basis of four shares for every five shares held) non-renounceable entitlement issue of shares

The shares issued represented approximately 80.0% of the total Explaurum shares outstanding prior to the completion of the issue


Implied shares issued: 10,687,140

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The DCF methodology relies on projections which predict the future cash flows of a company. Due to the nature and stage of development of both Auzex’s and Explaurum’s projects, in our view, future cash flows of the Merged Group cannot be determined with the appropriate level of certainty or accuracy at the current time. The DCF methodology is not appropriate for calculating the value of the Merged Group’s shares; and

The business activities of Auzex and Explaurum do not generate an earnings stream at the current time and it is expected that earnings will not be generated in the short term following the Proposed Transaction. Neither Auzex nor Explaurum generate and report maintainable earnings suitable for use in a CME valuation of the Merged Group’s shares.

To determine a value for the Merged Group’s net assets, in our view it is appropriate to add:

the value of Auzex’s assets and liabilities from Section 8.0 above;

the value of Explaurum implied by recent capital raisings including the $1.3 million capital raising at $0.003 announced on 30 April 2015 which, when tranche 1 and 2 are completed, will increase the number of shares in Explaurum from 256.5 million to 689.8 million on a pre-consolidation basis. We have assumed that tranche 1 and 2 will complete as they are conditions precedent for the Proposed Transaction. While Explaurum shares are listed on the ASX and market prices for the shares can be observed, in our view the prices may not be reflective of the value of Explaurum due to the low liquidity of Explaurum’s shares over the past twelve months; and

make adjustments for other assets and liabilities expected to be held by the Merged Group immediately following the Proposed Transaction.

Our valuation of the Merged Group is set out in Section 9.2 below.

9.2 Value of the Merged Group

To determine a value for ordinary shares in the Merged Group following the Proposed Transaction, we have had regard to the following:

The value of Auzex’s contribution (set out in Section 9.2.1);

The value of Explaurum’s contribution (set out in Section 9.2.2);

Adjustments to the value of the Merged Group as a result of the Proposed Transaction (set out in Section 9.2.3); and

Impact of options on the valuation of the Merged Group (set out in Section 9.2.4).

9.2.1 Value of Auzex Contribution

As set out in Section 8.2 of this Report, we have calculated the net value of Auzex’s assets and liabilities on a controlling interest basis to be within the range of -$119,978 to $5,070,022.

9.2.2 Value of Explaurum Contribution

In order to value Explaurum’s contribution to the Merged Group, we have considered information in relation to recent share issues by Explaurum. These transactions have primarily related to capital raisings to fund explorations and in preparation for the Proposed Transaction. Table 9.1 below summarises Explaurum’s recent share issues.

To improve comparability across the periods before and after the proposed 1 for 10 share consolidation, we have provided additional information in the right hand column of the table below in relation to the implied share prices of the transactions assuming the share consolidation has occurred.

Table 9.1: Explaurum Movements in Ordinary Share Capital


$0.53 million rights issue

In July 2013, Explaurum issued 106,871,400 ordinary shares fully paid for cash at $0.005 per share in a pro-rata (on the basis of four shares for every five shares held) non-renounceable entitlement issue of shares



Implied shares issued: 10,687,140



$0.08 million share issue

In August 2013, Explaurum issued 600,000 ordinary shares fully paid for cash at $0.005 per share




$1.3 million capital raising

As a condition to the Proposed Transaction becoming effective, Explaurum completed a capital raising of 433,333,700 Explaurum shares and 108,333,780 Explaurum options to raise no less than $1.3 million before offer costs at an issue price of $0.003 per share (on a pre-consolidation basis).

The capital was raised in two tranches: — Tranche 1: On 7 May 2015, Explaurum announced that it

has completed Tranche 1 Capital Raising for 64,003,420 shares (on a pre-consolidation basis), raising approximately $192,010. 16,000,103 attaching options (on a pre-consolidation basis) to participants of Tranche 1 Capital Raising was issued on 29 June 2015; and

— Tranche 2: Explaurum raised $1,108,000 in Tranche 2 Capital Raising, by issuing 369,330,280 Explaurum shares and 92,332,750 Explaurum options (each on a pre-consolidation basis), on 29 June 2015.

The shares to be issued represent approximately 168.9% of the total Explaurum shares outstanding prior to the completion of the issue.


Implied total securities issued: 43,333,370 ordinary shares and 10,833,378 options

Implied securities issued in Tranche 1 Capital Raising: 6,400,342 ordinary shares and 1,600,010 options

Implied securities issued in Tranche 2 Capital Raising: 36,933,028 ordinary shares and 9,233,275 options

Source: Explaurum management, BDO CFQ Analysis

Having regard to the information set out in Table 9.1 above, it is our view that it is appropriate to adopt $0.03 per share from the $1.3 million capital raising (on a post-consolidation basis) for the purpose of valuing Explaurum’s contribution to the Merged Group as it is a recent cash transaction for a significant proportion of Explaurum shares.

The adopted share price of $0.031 implies a value of $2,069,475 for Explaurum and 68,982,491 Explaurum shares on issue after the Tranche 2 Capital Raising. We note that this value is for a minority interest.

Table 9.2 below sets out an apportionment of the value we have assigned to Explaurum’s contribution between its assets and liabilities with the residual value being assigned to Explaurum’s mineral assets.

Table 9.2: Apportionment of Explaurum’s Value to Assets and Liabilities

Value ($)

Assets

Cash1 639,400

Trade and other receivables 11,324


Loan to Auzex (receivable) 800,000

Mineral assets2 1,284,610

1 The value of $0.03 per share implied by the capital raising includes one option for every four shares. As we are valuing

Explaurum’s contribution to the Merged Group, it is our view that it is appropriate to adopt a value that includes both the shares and options issued under Tranche 1 and Tranche 2 of the capital raising. As the shares on issue prior to the capital raising do not include a right to an option, the $0.03 capital raising price less the value of the option should theoretically be applied to these shares. We consider this adjustment immaterial to the analysis set out in this Report and have adopted $0.03 to simplify the analysis.

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Value ($)

Liabilities


Total – Controlling Interest 2,691,124

Less minority interest discount 23.1%

Value of Explaurum’s Contribution 2,069,475

Source: Explaurum management statement of financial position as at 30 April 2015 and BDO CFQ analysis 1 Cash is calculated as $309,400 balance as at 30 April 2015 plus $1,030,000 being Tranche 2 of the capital raising net of costs

less the $700,000 being the balance of the loan to Auzex. 2 The value apportioned to Explaurum’s mineral assets was the residual value after adjusting for the other assets and

liabilities. 3 In our view, it is appropriate to adopt a similar minority interest to the value adopted for Auzex which is discussed in

Section 8.2.3.

9.2.3 Adjustments as a Result of the Proposed Transaction

In addition to the assets and liabilities of Auzex and Explaurum, we have considered the following adjustments as a result of the Proposed Transaction in determining a value for the Merged Group:

Decrease in cash in relation to costs totalling $150,000 comprising $100,000 of Explaurum legal costs and an additional $50,000 of costs that Auzex expects to have to pay to implement the Proposed Transaction if approved; and

Decrease in liabilities by $988,355 in relation to the settlement of outstanding amounts and provision for annual leave owing to related party creditors of Auzex by way of issuance of 120 million options in the Merged Group.

Table 9.3 below summarises our view of an appropriate value to adopt for the Merged Group, having regard to the information set out above.

Table 9.3: Equity Value of the Merged Group on a Minority Interest Basis

Section

Reference Low Value

($) Preferred

($) High Value

($) Value of Auzex – controlling interest basis 8.2.4 (119,978) 780,022 5,070,022

Value of Explaurum - controlling interest basis 9.2.2 2,691,124 2,691,124 2,691,124

Proposed Transaction costs 9.2.3 (150,000) (150,000) (150,000) Adjustment to remove related party creditors 9.2.3 988,355 988,355 988,355

Value of Merged Group – controlling interest basis 3,409,501 4,309,501 8,599,501

Less minority interest discount 23.1% 23.1% 23.1% Value of Merged Group - minority interest basis 2,621,907 3,314,007 6,613,017

Source: BDO CFQ Analysis

With reference to Table 9.3 above, we have calculated a value in the range of $2,621,907 to $6,613,017 for the Merged Group on a minority interest basis.

9.2.4 Value of Options in the Merged Group

Following the Proposed Transaction, the Merged Group is expected to have the following options on issue:

10,833,378 options attached to shares in the Capital Raising, exercisable at $0.05 per option on or before 31 August 2016 (on a post-consolidation basis); and

12,000,000 options issued to Auzex related party creditors as consideration for the settlement of amounts owing to those parties, exercisable at $0.03 per option on or before 31 August 2018 (on a post-consolidation basis).

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Value ($)

Liabilities


Total – Controlling Interest 2,691,124

Less minority interest discount 23.1%

Value of Explaurum’s Contribution 2,069,475

Source: Explaurum management statement of financial position as at 30 April 2015 and BDO CFQ analysis 1 Cash is calculated as $309,400 balance as at 30 April 2015 plus $1,030,000 being Tranche 2 of the capital raising net of costs

less the $700,000 being the balance of the loan to Auzex. 2 The value apportioned to Explaurum’s mineral assets was the residual value after adjusting for the other assets and

liabilities. 3 In our view, it is appropriate to adopt a similar minority interest to the value adopted for Auzex which is discussed in

Section 8.2.3.

9.2.3 Adjustments as a Result of the Proposed Transaction

In addition to the assets and liabilities of Auzex and Explaurum, we have considered the following adjustments as a result of the Proposed Transaction in determining a value for the Merged Group:

Decrease in cash in relation to costs totalling $150,000 comprising $100,000 of Explaurum legal costs and an additional $50,000 of costs that Auzex expects to have to pay to implement the Proposed Transaction if approved; and

Decrease in liabilities by $988,355 in relation to the settlement of outstanding amounts and provision for annual leave owing to related party creditors of Auzex by way of issuance of 120 million options in the Merged Group.

Table 9.3 below summarises our view of an appropriate value to adopt for the Merged Group, having regard to the information set out above.

Table 9.3: Equity Value of the Merged Group on a Minority Interest Basis

Section

Reference Low Value

($) Preferred

($) High Value

($) Value of Auzex – controlling interest basis 8.2.4 (119,978) 780,022 5,070,022

Value of Explaurum - controlling interest basis 9.2.2 2,691,124 2,691,124 2,691,124

Proposed Transaction costs 9.2.3 (150,000) (150,000) (150,000) Adjustment to remove related party creditors 9.2.3 988,355 988,355 988,355

Value of Merged Group – controlling interest basis 3,409,501 4,309,501 8,599,501

Less minority interest discount 23.1% 23.1% 23.1% Value of Merged Group - minority interest basis 2,621,907 3,314,007 6,613,017


With reference to Table 9.3 above, we have calculated a value in the range of $2,621,907 to $6,613,017 for the Merged Group on a minority interest basis.

9.2.4 Value of Options in the Merged Group

Following the Proposed Transaction, the Merged Group is expected to have the following options on issue:

10,833,378 options attached to shares in the Capital Raising, exercisable at $0.05 per option on or before 31 August 2016 (on a post-consolidation basis); and

12,000,000 options issued to Auzex related party creditors as consideration for the settlement of amounts owing to those parties, exercisable at $0.03 per option on or before 31 August 2018 (on a post-consolidation basis).


As options represent a claim on the equity of the relevant company by the holder, it is necessary to adjust the value of the equity to allow for the options.

The valuation methodology that we have adopted to value the options for the purpose of this Report is the Black-Scholes formula. The inputs that we have adopted are summarised in Table 9.4 below.

Table 9.4: Inputs Adopted for the Black-Scholes Formula Capital Raising Options Creditor Options Exercise price $0.05 $0.03 Time to maturity1 0.96 2.96 Interest rate 2.0% 2.0% Volatility 80% 80% Dividend rate 0% 0%

Source: BDO CFQ Analysis 1 Time to maturity has been calculated based on a valuation date of 14 September 2015, being the record date for determining

entitlement to the scheme consideration.

The share price adopted is the final valuation share price on a minority interest basis which results in circularity as this value relies on the value of the options. We have used an iterative process to overcome this circularity.

9.2.5 Value of Ordinary Shares in the Merged Group

Table 9.5 below summarises our valuation of ordinary shares in the Merged Group on a minority interest basis following the Proposed Transaction. The number of shares assumed for the Merged Group is 136,188,287 and was calculated as follows:

Shares outstanding in Explaurum following the Capital Raising and the Share Consolidation of 68,982,491; and

Under the terms of the Proposed Transaction, Explaurum will issue 67,205,796 shares in consideration of 100% of Auzex shares, or 4 new Explaurum shares for each Auzex share outstanding, based on 16,801,449 Auzex shares outstanding (inclusive of the 3 million shares converted from convertible notes issued by Auzex).

Table 9.5: Value of Ordinary Shares the Merged Group on a Minority Interest Basis

Section

Reference Low Value

($) Preferred

($) High Value

($) Value of Merged Group after adjustments - minority interest basis 9.2.3 2,621,907 3,314,007 6,613,017

Value of options issued in the Explaurum capital raising and to Auzex related party creditors

9.2.4 102,344 153,128 470,893

Value of ordinary shares in the Merged Group – minority interest basis 2,519,563 3,160,878 6,142,124

Number of ordinary shares on issue in the Merged Group 9.2.5 136,188,287 136,188,287 136,188,287

Value per ordinary share in the Merged Group – minority interest basis 0.0185 0.0232 0.0451


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To assess the fairness of the Proposed Transaction, we have:


(b) Compared the value of the consideration offered as determined in (a) above with the value of a share in Auzex immediately prior to the Proposed Transaction on a minority interest basis.

We have completed the value comparison on an equivalent basis (i.e. minority interest in Auzex and minority interest in the Merged Group) for the reasons set out in Section 4.2.1.

In accordance with RG 111, the Proposed Transaction is considered fair if the value of the consideration offered is equal to or greater than the value of the securities subject of the Proposed Transaction.

10.1 Value of the Consideration Offered per Auzex Share

Section 9.2 of this Report sets out our valuation of a share in the Merged Group immediately following the Proposed Transaction. As per the terms of the Proposed Transaction, the consideration offered to Auzex shareholders is 4 shares in the Merged Group for every Auzex share held.

Table 10.1 below sets out our calculation of the value of the consideration offered per Auzex share under the terms of the Proposed Transaction.

Table 10.1: Value of the Consideration Offered per Auzex Share

Low ($)

Preferred ($)

High ($)

Value of a share in the Merged Group immediately following the Proposed Transaction 0.0185 0.0232 0.0451

Number of Merged Group shares offered per Auzex share 4 4 4

Value of the consideration offered per Auzex share 0.074 0.093 0.180


For the purpose of assessing the fairness of the Proposed Transaction, we have calculated the value of the consideration offered per Auzex share under the terms of the Proposed Transaction to be within the range of $0.074 to $0.180 on a minority interest basis.

10.2 Value per Auzex Share Immediately Prior to the Proposed Transaction

For the purpose of assessing the fairness of the Proposed Transaction, we calculated the value of an Auzex share to be within the range of $0.000 to $0.232 (with a preferred value of $0.036) on a minority interest basis (refer Section 8.0 of this Report for our valuation of Auzex).

10.3 Assessment of the Fairness of the Proposed Transaction

Table 10.2 below sets out our assessment of the Proposed Transaction.


Low ($)

Preferred ($)

High ($)


Value of an Auzex share 0.000 0.036 0.232


Figure 10.1 below illustrates the value comparison of the value of the consideration offered per Auzex share under the terms of the Proposed Transaction and the value of an Auzex share immediately prior to the Proposed Transaction.

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To assess the fairness of the Proposed Transaction, we have:


(b) Compared the value of the consideration offered as determined in (a) above with the value of a share in Auzex immediately prior to the Proposed Transaction on a minority interest basis.

We have completed the value comparison on an equivalent basis (i.e. minority interest in Auzex and minority interest in the Merged Group) for the reasons set out in Section 4.2.1.

In accordance with RG 111, the Proposed Transaction is considered fair if the value of the consideration offered is equal to or greater than the value of the securities subject of the Proposed Transaction.

10.1 Value of the Consideration Offered per Auzex Share

Section 9.2 of this Report sets out our valuation of a share in the Merged Group immediately following the Proposed Transaction. As per the terms of the Proposed Transaction, the consideration offered to Auzex shareholders is 4 shares in the Merged Group for every Auzex share held.

Table 10.1 below sets out our calculation of the value of the consideration offered per Auzex share under the terms of the Proposed Transaction.

Table 10.1: Value of the Consideration Offered per Auzex Share

Low ($)

Preferred ($)

High ($)

Value of a share in the Merged Group immediately following the Proposed Transaction 0.0185 0.0232 0.0451

Number of Merged Group shares offered per Auzex share 4 4 4



For the purpose of assessing the fairness of the Proposed Transaction, we have calculated the value of the consideration offered per Auzex share under the terms of the Proposed Transaction to be within the range of $0.074 to $0.180 on a minority interest basis.

10.2 Value per Auzex Share Immediately Prior to the Proposed Transaction

For the purpose of assessing the fairness of the Proposed Transaction, we calculated the value of an Auzex share to be within the range of $0.000 to $0.232 (with a preferred value of $0.036) on a minority interest basis (refer Section 8.0 of this Report for our valuation of Auzex).

10.3 Assessment of the Fairness of the Proposed Transaction

Table 10.2 below sets out our assessment of the Proposed Transaction.


Low ($)

Preferred ($)

High ($)


Value of an Auzex share 0.000 0.036 0.232


Figure 10.1 below illustrates the value comparison of the value of the consideration offered per Auzex share under the terms of the Proposed Transaction and the value of an Auzex share immediately prior to the Proposed Transaction.


Figure 10.1: Fairness of the Proposed Transaction


As illustrated above, the value of the consideration offered per Auzex share is within the range of value of an Auzex share immediately prior to the Proposed Transaction. After considering the information summarised above and set out in detail in the balance of this Report, in our view the Proposed Transaction is Fair to Auzex shareholders as at the date of this Report.


In accordance with RG 111, a transaction is considered reasonable if it is fair. Notwithstanding this, we have also considered the reasonableness of the Proposed Transaction having regard to other significant factors to which Auzex shareholders may give consideration prior to voting in favour of or against the Proposed Transaction. Our assessment of the reasonableness of the Proposed Transaction includes consideration of the likely advantages and disadvantaged of the Proposed Transaction and the position of Auzex shareholders if the Proposed Transaction does not proceed.

11.1 Advantages of the Proposed Transaction

Table 11.1 below outlines the potential advantages of the Proposed Transaction to Auzex shareholders.

Table 11.1: Advantages of the Proposed Transaction

Advantage Explanation

The Proposed Transaction is fair

In our view, the Proposed Transaction is fair to Auzex shareholders as at the date of this Report. In accordance with RG 111, a transaction is considered reasonable if it is fair.

Refer to Section 10.0 of this Report for our assessment of the fairness of the Proposed Transaction.

No significant change to nature of business activities

The primary business activities of the Merged Group will continue to be consistent with the current business activity of Auzex. Auzex shareholders will continue to hold shares in a company engaged in the exploration and exploitation of mineral deposits in Australia.

Auzex shareholders will also retain their exposure to the Tampia Gold Project and benefit from the stated intention of the Merged Group to accelerate exploration activities for the Tampia Gold Project.

- 0.050 0.100 0.150 0.200 0.250

Value ofConsideration Offered

per AEL Share

Value perAEL Share

Value per AEL Share ($)

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Funding for operations The Merged Group will have more cash relative to Auzex prior to the Proposed Transaction. This cash will assist the Merged Group to deliver on a number of planned initiatives, including: Advancement of the next round of drilling activity for the Tampia Gold Project

in 2015; Advancement of the Lyons Gold Project; Investigation of further project acquisitions; and Other general working capital purposes.

The Merged Group will be listed on the ASX

Auzex shareholders will be issued with shares in the Merged Group which will be listed on the ASX. Shares in the Merged Group are likely to be more liquid than shares in Auzex prior to the Proposed Transaction. An increase in liquidity will make it relatively easier for Auzex shareholders to buy and sell their shares.


The directors of Auzex and Explaurum are of the view that the Merged Group may be able to reduce overhead expenses by minimising the duplication of various back office functions and services. For completeness we note that we have not adjusted the valuation set out in Section 9.2 for any synergies that may be able to be realised.

Increased board capabilities and technical expertise

Following the Proposed Transaction, the board of the Merged Group will consist of two directors of Auzex (Mr Chris Baker and Mr John Lawton) and two directors nominated by Explaurum (Mr Patrick Flint and Mr Mark Calderwood). The directors of Auzex are of the view that the combined experience will increase the technical expertise of the board of the Merged Group. This is likely to increase operational efficiencies and provide the capability to take on more technically complex projects that are potentially more valuable.

Improved position in capital markets

Following the Proposed Transaction, Auzex shareholders will hold an interest in a larger company which may have the ability to raise additional capital on more favourable terms relative to terms currently available to Auzex. This may assist to reduce the financing risk associated with exploring and developing Auzex’s and Explaurum’s projects.


11.2 Disadvantages of the Proposed Transaction

Table 11.2 below outlines the potential disadvantages of the Proposed Transaction to Auzex shareholders.

Table 11.2: Disadvantages of the Proposed Transaction

Disadvantage Explanation

Dilution of shareholding Auzex shareholders currently own 100% of the shares in Auzex and the Company’s interests in the Tampia Gold Project and other projects. If the Proposed Transaction is approved, Auzex shareholders will hold approximately 49.3% to 49.8% of the total outstanding shares in the Merged Group. As a result, the Proposed Transaction will: Dilute the exposure of Auzex shareholders to any potential upside which may

be realised from Auzex’s future operations; and Give Auzex shareholders less influence over the future direction of Auzex and

its assets. Auzex shareholders may be of the view that it is preferable to hold shares in Auzex rather than shares in the Merged Group.

Potential exposure to a number of risks to which Auzex shareholders currently do not have exposure to

Auzex shareholders will be issued new shares in the Merged Group and have exposure to a company with a different non-systematic risk profile (i.e. those risks contributed by Explaurum). We understand that the directors of Auzex are of the view that the Merged Group represents an enhanced risk and investment profile relative to Auzex on a standalone basis, however, Auzex shareholders may hold a different view.

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Funding for operations The Merged Group will have more cash relative to Auzex prior to the Proposed Transaction. This cash will assist the Merged Group to deliver on a number of planned initiatives, including: Advancement of the next round of drilling activity for the Tampia Gold Project

in 2015; Advancement of the Lyons Gold Project; Investigation of further project acquisitions; and Other general working capital purposes.

The Merged Group will be listed on the ASX

Auzex shareholders will be issued with shares in the Merged Group which will be listed on the ASX. Shares in the Merged Group are likely to be more liquid than shares in Auzex prior to the Proposed Transaction. An increase in liquidity will make it relatively easier for Auzex shareholders to buy and sell their shares.


The directors of Auzex and Explaurum are of the view that the Merged Group may be able to reduce overhead expenses by minimising the duplication of various back office functions and services. For completeness we note that we have not adjusted the valuation set out in Section 9.2 for any synergies that may be able to be realised.

Increased board capabilities and technical expertise

Following the Proposed Transaction, the board of the Merged Group will consist of two directors of Auzex (Mr Chris Baker and Mr John Lawton) and two directors nominated by Explaurum (Mr Patrick Flint and Mr Mark Calderwood). The directors of Auzex are of the view that the combined experience will increase the technical expertise of the board of the Merged Group. This is likely to increase operational efficiencies and provide the capability to take on more technically complex projects that are potentially more valuable.

Improved position in capital markets

Following the Proposed Transaction, Auzex shareholders will hold an interest in a larger company which may have the ability to raise additional capital on more favourable terms relative to terms currently available to Auzex. This may assist to reduce the financing risk associated with exploring and developing Auzex’s and Explaurum’s projects.


11.2 Disadvantages of the Proposed Transaction

Table 11.2 below outlines the potential disadvantages of the Proposed Transaction to Auzex shareholders.

Table 11.2: Disadvantages of the Proposed Transaction


Dilution of shareholding Auzex shareholders currently own 100% of the shares in Auzex and the Company’s interests in the Tampia Gold Project and other projects. If the Proposed Transaction is approved, Auzex shareholders will hold approximately 49.3% to 49.8% of the total outstanding shares in the Merged Group. As a result, the Proposed Transaction will: Dilute the exposure of Auzex shareholders to any potential upside which may

be realised from Auzex’s future operations; and Give Auzex shareholders less influence over the future direction of Auzex and

its assets. Auzex shareholders may be of the view that it is preferable to hold shares in Auzex rather than shares in the Merged Group.

Potential exposure to a number of risks to which Auzex shareholders currently do not have exposure to

Auzex shareholders will be issued new shares in the Merged Group and have exposure to a company with a different non-systematic risk profile (i.e. those risks contributed by Explaurum). We understand that the directors of Auzex are of the view that the Merged Group represents an enhanced risk and investment profile relative to Auzex on a standalone basis, however, Auzex shareholders may hold a different view.



Implementation and one-off costs

There is a risk that implementation and other one-off costs of the Proposed Transaction may be substantial or greater than anticipated, which could have a material adverse impact on the Merged Group’s financial position.


11.3 Ineligible Foreign Shareholders

Under the terms of the Merger Implementation Agreement, the Merged Group shares that would otherwise have been issued to an Ineligible Foreign Shareholder will be issued to a sales agent (and/or to a nominee of the sale agent) and sold with the net sale proceeds to be remitted to the Ineligible Foreign Shareholders.

As the value that is ultimately realised by Ineligible Foreign Shareholders is dependent upon the value that the sales agent (and/or the nominee of the sales agent) is able to obtain (after deduction of any applicable brokerage, taxes and charges), it is possible that Ineligible Foreign Shareholders may not receive cash value for their shares in the Merged Group which reflects the value of the shares in the Merged Group adopted for the purposes of this Report.

For further information regarding the treatment of Ineligible Foreign Shareholders under the Proposed Transaction, refer to section 4.11 of the Scheme Booklet.

11.4 Taxation Considerations

The Proposed Transaction has taxation implications for Auzex shareholders. The taxation implications of the Proposed Transaction are complex and depend on the laws of the country in which an Auzex shareholder is a tax resident. It is outside the scope of this Report to address taxation considerations in detail. Auzex shareholders should consider these implications when deciding how to vote in relation to the Proposed Transaction.

A more detailed discussion of the taxation implications of the Proposed Transaction for Australian resident Auzex shareholders is contained in section 10 of the Scheme Booklet. It is recommended that all Auzex shareholders should, in considering their tax implications from the Proposed Transaction, obtain independent professional tax advice regarding the income tax and capital gains tax implications specific to their circumstances.

11.5 Position of Auzex Shareholders if the Proposed Transaction does not Proceed

Table 11.3 below outlines the possible position of Auzex shareholders in the event that the Proposed Transaction does not proceed. We note that the Proposed Transaction may not proceed for a number of reasons including, but not limited to, Auzex and/or Explaurum not satisfying the conditions precedent to the Proposed Transaction (refer to Section 3.2 of this Report).

Table 11.3: Position of Auzex Shareholders if the Proposed Transaction does not Proceed

Position of Shareholders Explanation

The directors of Auzex will need to seek alternative funding strategies

Auzex will be required to seek alternative methods of capital raising in order to fund its operations in the short term and finance the development of its assets.

Any capital raising undertaken is likely to be dilutive to Auzex shareholders and there is no guarantee that Auzex will be able to raise the full amount of any additional capital required on terms acceptable to Auzex.

Auzex may not be able to develop its assets

In circumstances where Auzex is unable to raise additional capital, the Company may not be in a position to further develop its assets. In relation to the Tampia Gold Project, this may lead to Auzex not fulfilling the minimum work and expenditure requirements. This may lead to the licenses being invalidated and not being renewed.

Auzex may default on its loans

Auzex will be required seek alternative methods to raise funds to pay interest and principal owing to creditors due to Auzex’s current low cash balance. In circumstances where Auzex is unable to raise additional funds, Auzex may default on its loans. We note that Auzex’s current cash balance would be negative had Explaurum not advanced a loan to Auzex.

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Explaurum shares will not be issued to Auzex shareholders

Auzex shareholders will not receive shares in the Merged Group. Auzex shareholders will continue to hold their shares in Auzex and will continue to be exposed to the risks and benefits of holding an interest in Auzex as an unlisted entity.

Break fees may be payable by Auzex

In circumstances set out in section 4.3 of the Scheme Booklet, if the Proposed Transaction is not approved Auzex may be required to pay a break fee of $0.25 million.

Auzex will have incurred costs which are not recoverable

Auzex will have incurred costs in relation to the Proposed Transaction irrespective of whether or not the Proposed Transaction is approved. Auzex will not be able to recover the costs incurred in relation to the Proposed Transaction in the event that the Proposed Transaction is not approved.

Auzex will be required to repay loans provided by Explaurum

Auzex will be required to repay the loans provided by Explaurum totalling $800,000 by no later than April 2016 or, if Explaurum so elects, issue up to 6.67 million Auzex shares to Explaurum.


11.6 Assessment of the Reasonableness of the Proposed Transaction

In our opinion, after considering all of the issues set out in this Report, in the absence of any other information, the Proposed Transaction is Reasonable to Auzex shareholders as at the date of this Report.

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Explaurum shares will not be issued to Auzex shareholders

Auzex shareholders will not receive shares in the Merged Group. Auzex shareholders will continue to hold their shares in Auzex and will continue to be exposed to the risks and benefits of holding an interest in Auzex as an unlisted entity.

Break fees may be payable by Auzex

In circumstances set out in section 4.3 of the Scheme Booklet, if the Proposed Transaction is not approved Auzex may be required to pay a break fee of $0.25 million.

Auzex will have incurred costs which are not recoverable

Auzex will have incurred costs in relation to the Proposed Transaction irrespective of whether or not the Proposed Transaction is approved. Auzex will not be able to recover the costs incurred in relation to the Proposed Transaction in the event that the Proposed Transaction is not approved.

Auzex will be required to repay loans provided by Explaurum

Auzex will be required to repay the loans provided by Explaurum totalling $800,000 by no later than April 2016 or, if Explaurum so elects, issue up to 6.67 million Auzex shares to Explaurum.


11.6 Assessment of the Reasonableness of the Proposed Transaction

In our opinion, after considering all of the issues set out in this Report, in the absence of any other information, the Proposed Transaction is Reasonable to Auzex shareholders as at the date of this Report.


12.0 Expert’s Opinion on the Proposed Transaction

In our opinion, the Proposed Transaction is fair and reasonable to Auzex shareholders. On this basis, in the absence of any other information or a superior offer, it is our view that the Proposed Transaction is in the Best Interests of Auzex shareholders as at the date of this Report.

The decision to vote in favour of or against the Proposed Transaction is a separate decision to the investment decision to hold or divest shares in the Merged Group in the event the Proposed Transaction is approved. We recommend shareholders consult their own professional advisers in relation to the decision on whether to hold or divest shares in the Merged Group following the Proposed Transaction.

13.0 Sources of Information

This Report has been prepared using information obtained from the following sources:

Auzex annual report for the year ended 30 June 2012;



Auzex management accounts for the 6 months ended 31 December 2014;

Auzex management accounts for the 10 months ended 30 April 2015;

Explaurum ASX announcements;

Explaurum annual report for the year ended 30 June 2012;



Explaurum half year report for the 6 months ended 31 December 2014;

Explaurum management accounts for the 10 months ended 30 April 2015;

Auzex company website (www.auzex.com);

Explaurum company website (www.explaurum.com.au);

Technical Valuation Report prepared by Mining Associates dated 24 June 2015;

Capital IQ;

Australian Bureau of Statistics;

Australian Government Department of Foreign Affairs and Trade;

Australian Government Department of Industry;

London Bullion Market Association;

IBISWorld;

Various transaction documents including the Merger Implementation Deed, draft Scheme Booklet and Notice of Meeting;

Various other research publications and publicly available data as sourced throughout this Report; and

Various discussions and other correspondence with Auzex and Explaurum directors, management and their advisers.

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14.0 Representations, Indemnities and Warranties

Auzex has agreed to our usual terms of engagement in addition to the indemnities and representations set out below.

14.1 Indemnities

In connection with BDO CFQ’s engagement to prepare this Report, Auzex agrees to indemnify and hold harmless BDO CFQ, BDO (QLD) or any of the partners, directors, agents or associates (together ‘BDO Persons’), to the full extent lawful, from and against all losses, claims, damages, liabilities and expenses incurred by them. Auzex will not be responsible, however, to the extent to which such losses, claims, damages, liabilities or expenses result from the negligent acts or omissions or wilful misconduct of any BDO Persons.

Auzex agrees to indemnify BDO Persons in respect of all costs, expenses, fees of separate legal counsel or any other experts in connection with investigating, preparing or defending any action or claim made against BDO Persons, including claims relating to or in connection with information provided to or which should have been provided to BDO CFQ by Auzex (including but not limited to the directors and advisers of Auzex) as part of this engagement.

14.2 Representations & Warranties

Auzex recognises and confirms that, in preparing this Report, except to the extent to which it is unreasonable to do so, BDO Persons will be using and relying on publicly available information and on data, material and other information furnished to BDO Persons by Auzex, its management, and other parties, and may assume and rely upon the accuracy and completeness of, and is not assuming any responsibility for independent verification of, such publicly available information and the other information so furnished.

Auzex management represent and warrant to BDO Persons that all information and documents furnished by Auzex (either directly or through its advisors) in connection or for use in the preparation of this Report will not, at the time so furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein.

Auzex has acknowledged that the Company’s engagement of BDO CFQ is as an independent contractor and not in any other capacity including a fiduciary capacity.

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14.0 Representations, Indemnities and Warranties

Auzex has agreed to our usual terms of engagement in addition to the indemnities and representations set out below.

14.1 Indemnities

In connection with BDO CFQ’s engagement to prepare this Report, Auzex agrees to indemnify and hold harmless BDO CFQ, BDO (QLD) or any of the partners, directors, agents or associates (together ‘BDO Persons’), to the full extent lawful, from and against all losses, claims, damages, liabilities and expenses incurred by them. Auzex will not be responsible, however, to the extent to which such losses, claims, damages, liabilities or expenses result from the negligent acts or omissions or wilful misconduct of any BDO Persons.

Auzex agrees to indemnify BDO Persons in respect of all costs, expenses, fees of separate legal counsel or any other experts in connection with investigating, preparing or defending any action or claim made against BDO Persons, including claims relating to or in connection with information provided to or which should have been provided to BDO CFQ by Auzex (including but not limited to the directors and advisers of Auzex) as part of this engagement.

14.2 Representations & Warranties

Auzex recognises and confirms that, in preparing this Report, except to the extent to which it is unreasonable to do so, BDO Persons will be using and relying on publicly available information and on data, material and other information furnished to BDO Persons by Auzex, its management, and other parties, and may assume and rely upon the accuracy and completeness of, and is not assuming any responsibility for independent verification of, such publicly available information and the other information so furnished.

Auzex management represent and warrant to BDO Persons that all information and documents furnished by Auzex (either directly or through its advisors) in connection or for use in the preparation of this Report will not, at the time so furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein.

Auzex has acknowledged that the Company’s engagement of BDO CFQ is as an independent contractor and not in any other capacity including a fiduciary capacity.


15.0 Experience, Disclaimers and Qualifications

BDO CFQ has extensive experience in the provision of corporate finance advice, including takeovers, valuations and acquisitions. BDO CFQ holds an Australian Financial Services Licence issued by ASIC for preparing expert reports pursuant to the Listing Rules of the ASX and the Corporations Act.

BDO CFQ and its related parties in Australia have a wide range of experience in transactions involving the advising, auditing or expert reporting on companies that have operations domestically and in foreign jurisdictions. BDO in Queensland and in Australia is a national association of separate partnerships and entities and is a member of the international BDO network of individual firms.

Steven Sorbello has prepared this Report with the assistance of staff members. Mr Sorbello is a director of BDO CFQ and has extensive experience in corporate advice and the provision of valuation and business services to a diverse range of clients, including large private, public and listed companies, financial institutions and professional organisations.

This Report has been prepared at the request of the directors of Auzex to provide Auzex shareholders with information to assist them to decide whether to vote in favour of or against the Proposed Transaction. BDO CFQ hereby consents to this Report being used for that purpose. 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 CFQ.

BDO CFQ takes no responsibility for the contents of other documents supplied in conjunction with this Report. BDO CFQ has not audited or reviewed the information and explanations supplied to us, nor has it conducted anything in the nature of an audit or a review of any of the entities mentioned in this Report. However we have no reason to believe that any of the information or explanations so supplied is false or that material information has been withheld.

Any forecast information which has been referred to in this Report has been prepared by the relevant entity and is generally based upon best estimate assumptions about events and management actions, which may or may not occur. Accordingly, BDO CFQ cannot provide any assurance that any forecast is representative of results or outcomes that will actually be achieved.

With respect to taxation implications of the Proposed Transaction, it is strongly recommended that Auzex shareholders obtain their own taxation advice, tailored to their own particular circumstances.

APES 225 ‘Valuation Services’ issued by the Accounting Professional & Ethical Standards Board sets out mandatory requirements for the provision of quality and ethical valuation services. BDO CFQ has complied with this standard in the preparation of 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. This Report is current as at 23 July 2015.


Steven Sorbello Director

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Appendix A: Industry Overview: Gold Mining in Australia2

We have set out a summary of the Australian gold mining industry below. The gold mining industry consists of companies that explore, mine, extract, process and refine gold ore resources into a concentrate or bullion. The information presented in this section has been compiled from a range of publicly available sources. This summary is not intended to be a comprehensive analysis of the Australian gold mining industry.

We recommend that Auzex shareholders refer to the original source of the information referred to in this section, and any other information they believe appropriate, for a more comprehensive analysis. This section should be referred to as a broad guide only.

A.1 Description

Gold is classified as a precious metal which naturally occurs in element form as nuggets or grains in rocks, mineral veins and alluvial deposits. Pure gold is bright yellow in colour and is considered one of the most malleable and ductile of all metals. Gold has a number of uses, including a store of value in the form of coins or bullion, jewellery, electronics, dentistry and other industrial applications.

A.2 Gold Production

Gold is generally sourced from open pit mining, however when the depth of the ore renders open pit mining uneconomical, underground mining may be used. The process of extracting of gold from the ore is dependent upon the grade of ore mined.

Low grade ore follows a process whereby the ore is broken into small pieces and a cyanide solution is distributed over the ore to dissolve carbon loaded gold, which is then collected from the solution. High grade ore undergoes a grinding process where the ore is crushed into a powder. Depending on the metallurgical characteristics of the high grade ore, either a roasting, leaching or oxidisation process is used to extract gold loaded carbon. Gold is then chemically stripped from the carbon and is melted and refined into bars containing up to 99.99% pure gold.

Australia was the world’s second largest producer of gold in 2014, behind China. In 2013-14, Australia mined approximately 274 tonnes of gold, which represents approximately 8.8% of the global gold production for the period. Western Australia is the largest state producer and exporter of gold in Australia, accounting for approximately 69% of total Australian production and 98.7% of total Australian gold exports in 2013-14. Western Australia also hosts approximately two thirds of Australia’s gold reserves, which were estimated at 9,778 tonnes in December 2013.

Australia’s gold production in 2014-15 is forecast to remain relatively steady at 274 tonnes as higher output at most operations is offset by the closure of the Murchison mine in December 2014. Australia’s gold exports for the same forecast period are expected to increase by approximately two per cent to 285 tonnes relative to 2013-14. Global gold production is expected to increase by approximately one per cent to approximately 3,136 tonnes in 2015, with production projected to increase at an average annual rate of 1.5 per cent and total 3,386 tonnes in 2020.

A.3 Global Demand

World demand for gold is driven by two primary factors, namely consumption and investment. Gold consumption relates to the use of gold in the manufacturing of jewellery, electronics, dentistry and other industrial applications. Gold investment relates to gold purchases as a store of value, usually in the form of gold bullion.

Data from the Australian Bureau of Statistics indicates that consumption demand for gold accounts for approximately three-quarters of total global demand.Global demand for gold increased in 2014 in comparison to 2013. Following strong growth trends in recent years, the current global demand for gold is, however, below its five-year average.

Factors which influence the demand for gold consumption and investment differ. Gold consumption demand is influenced by changes at the household level, including household income, changes in consumer appetite / taste for jewellery and gold dentistry, and demand for electronics. Gold investment demand is influenced by broader economic factors, including developments in the outlook for global economies, shifts in the value of major currencies and changes in the perceived riskiness of other assets.

2 Information in this section has been sourced from the Australian Bureau of Statistics, Australian Government Department of

Foreign Affairs and Trade, Composition of Trade Australia 2013-14, Australian Government Department of Industry, Resources and Energy Statistics 2014 and Resources and Energy Quarterly March Quarter 2015, London Bullion Market Association, IBISWorld Industry Report B0804: Gold Ore Mining in Australia, Capital IQ, and other publicly available information.

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A.4 Australian Gold Exports

In 2013-14, Australia’s gold exports totalled approximately 277 tonnes, representing approximately 6.1% of Australia’s total commodity exports. Figure A.1 below illustrates Australia’s commodities exports by value for 2013-14.

Figure A.1: Australian Commodity Exports – 2013-14

Source: Australian Government Department of Foreign Affairs and Trade, Composition of Trade Australia 2013-14

Demand for Australian gold in 2013-14 was largely dominated by China, Singapore, and United Kingdom. Australian gold exports to China constitute over 60% of Australia’s total gold export markets. As disposable incomes in China continue to rise, together with China representing the world’s largest economy, it is expected that China’s gold demand will remain a significant market for Australian gold exports.

Overall, the gold exports from Australia are forecast to remain relatively steady. Figure A.2 below sets out historical and forecast Australian gold exports over a 50 year period from 1970 to 2020.

Figure A.2: Australian Gold Exports – Historical Data and Forecast Data

Source: Australian Government Department of Industry, Resources and Energy Statistics 2014 and Resources and Energy Quarterly March Quarter 2015

In 2014-15, gold exports are forecast to increase by two per cent to 285 tonnes. This will represent a value of $13.6 billion, a 4.2 per cent rise from 2013-14 supported by higher volumes of gold exports and a depreciating Australian dollar.

A.5 Gold Price

Over the 10 years to 2015, the value of gold exports has fluctuated substantially. Gold experienced an approximate growth rate of 11.0% per annum in the decade prior to 2011-12. Subsequently, the gold price has decreased by an average of approximately 12.5%. Figure A.3 below sets out historical and forecast gold price for the period from 1970 to 2020.

22%

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Copper ores & concentrates

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Figure A.3: Historical and Forecast Gold Price from 1970 to 2020

Source: Australian Government Department of Industry, Resources and Energy Statistics 2014 and Resources and Energy Quarterly March Quarter 2015, London Bullion Market Association AM Fix

Appendix B: Common Valuation Methodologies

A ‘fair market value’ is often defined as the price that reflects a sales price negotiated in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller, with both parties at arm’s length. The valuation work set out in this Report assumes this relationship.

There are a number of methodologies available to value an entity at fair market value. In preparing this Report, we have considered, amongst other metrics, the valuation methodologies recommended by ASIC in RG 111 regarding content of expert reports. The methodologies include those mentioned directly below.

B.1 Discounted Future Cash Flows (‘DCF’)

The DCF approach calculates the value of an entity by adding all of its future net cash flows discounted to their present value at an appropriate discount rate. The discount rate is usually calculated to represent the rate of return that investors might expect from their capital contribution, given the riskiness of the future cash flows and the cost of financing using debt instruments.

In addition to the periodic cash flows, a terminal value is included in the cash flow to represent the value of the entity at the end of the cash flow period. This amount is also discounted to its present value. The DCF approach is usually appropriate when:

An entity does not have consistent historical earnings but is identified as being of value because of its capacity to generate future earnings; and

Future cash flow forecasts can be made with a reasonable degree of certainty over a sufficiently long period of time.

Any surplus assets, along with other necessary valuation adjustments, are added to the DCF calculation to calculate the total entity value.

B.2 Capitalisation of Future Maintainable Earnings (‘CME’)

The CME approach involves identifying a maintainable earnings stream for an entity and multiplying this earnings stream by an appropriate capitalisation multiple. Any surplus assets, along with other necessary valuation adjustments, are added to the CME calculation to calculate the total entity value.

The maintainable earnings estimate may require normalisation adjustments for non-commercial, abnormal or extraordinary events.

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The capitalisation multiple typically reflects issues such as business outlook, investor expectations, prevailing interest rates, quality of management, business risk and any forecast growth not already included in the maintainable earnings calculation. While this approach also relies to some degree on the availability of market data, the rate is an alternative way of stating the expected return on an asset, allowing for a risk premium over the risk free rate.

The CME approach is generally most appropriate where an entity has historical earnings and/or a defined forecast or budget. Further, a CME is usually considered when relevant comparable information is available.

B.3 Asset Based Valuations (‘ABV’)

Asset based valuations (‘ABV’) are used to estimate the fair market value of an entity based on the book value of its identifiable net assets. The ABV approach using a statement of financial position alone may ignore the possibility that an entity’s value could exceed the book value of its net assets, however, when used in conjunction with other methods which determine the value of an entity to be greater than the book value of its net assets, it is also possible to arrive at a reliable estimate of the value of intangible assets including goodwill.

Alternatively, adjustments can be made to the book value recorded in the statement of financial position in circumstances where a valuation methodology exists to readily value the identifiable net assets separately and book value is not reflective of the true underlying value. Examples of circumstances where this type of adjustment may be appropriate include when valuing certain types of identifiable intangible assets and/or property, plant and equipment.

The ABV approach is most appropriate where the assets of an entity can be identified and it is possible, with a reasonable degree of accuracy, to determine the fair value of those identifiable assets.

B.4 Market Based Valuations (‘MBV’)

Market based valuations (‘MBV’) relate to the valuation of an entity having regard to the value which securities in the entity have recently been purchased at. This approach is particularly relevant to:

Entities where the shares are traded on an exchange. The range of share prices observed may constitute the market value of the shares where sufficient volumes of shares are traded and the shares are traded over a sufficiently long period of time; and/or

Entities where it is possible to observe recent transactions relating to the transfer of relatively large parcels of shares (e.g. recent capital raisings).

For listed entities, the range of share prices observed may constitute the market value of the shares where sufficient volumes of shares are traded and the shares are traded over a sufficiently long period of time. Share market prices usually reflect the prices paid for parcels of shares not offering control to the purchaser.

B.5 Industry Specific Metrics

It is often appropriate to have regard to industry specific valuation metrics in addition to the traditional valuation approaches outlined above. These metrics are particularly relevant in circumstances where it is reasonably common for market participants to have regard to the alternative measures of value.

For resource companies, it is common for market analysts to have regard to multiples related to resources and tenement size.

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Appendix C: Control Premium Analysis

A controlling interest in a company is usually regarded as being more valuable than a minority interest as it provides the owner with control over the operating and financial decisions of the company, the right to set the strategic direction of the company, control over the buying, selling and use of the company’s assets, and control over appointment of staff and setting financial policies.

The increase in value for a controlling interest is often observed where an acquirer launches a takeover bid, or some other mechanism for control, for another company. For the purposes of our research on control premiums, we have defined a controlling interest to be an interest where the acquirer has acquired a shareholding of greater than 50% in the target company.

Generally, control premiums may be impacted by a range of factors including the following:

Specific acquirer premium and/or special value that may be applicable to the acquirer;

Level of ownership in the target company already held by the acquirer;

Market speculation about any impending transactions involving the target and/or the sector that the target belongs to;

The presence of competing bids; and

General market sentiment and economic factors.

To form our view of an appropriate range of control premium applicable to Auzex for the purposes of this Report, we have considered information which includes:

Control premiums implied in merger and acquisition transactions of mineral exploration companies in Australia, which indicate median control premiums in the range of 30% to 40%;

Recent independent expert’s reports which apply control premiums in the range of 20% to 40%;

Various industry and academic research, which suggests that control premiums are typically within the range of 20% to 40%;

Various valuation textbooks; and

Industry practice.

Having regard to the information set out above, in our view, it is appropriate to consider control premiums within the range of 20% to 40% for the purposes of assessing the Proposed Transaction within the context of this Report. For the purposes of the calculations set out in this Report we have adopted a control premium of 30%, being the mid-point of the control premium range that we consider is appropriate based on our research.

Appendix D: Technical Expert’s Report: Auzex Exploration Limited

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Mining Associates Pty Ltd ABN 29 106 771 671 Level 4, 67 St Paul’s Terrace PO Box 161 Spring Hill QLD 4004 AUSTRALIA T +61 7 3831 9154 F +61 7 3831 6754 W www.miningassociates.com

Report on the Market Valuation

Of Auzex Exploration Limited’s Mineral Assets in Australia

Prepared by Mining Associates Pty Ltd

for

BDO Author: Andrew Vigar, B App.Sc.(Geol), F.AusIMM, M.SEG Effective Date: 24 June 2015 Reference: MA1508-1

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ANNEXURE B

i

TABLE OF ACRONYMS

AHD Australian Height Datum

AUD Australian Dollar

Auzex Auzex Exploration Limited

AZX Auzex Resources Limited

BSc. Bachelor of Science degree

DDH Diamond drill hole

DEM Digital Elevation Model

DNRM Department of Natural Resources and Mines (Qld)

EL Exploration Licence

ELA Exploration Licence Application

EPM Exploration Permit for Minerals

EPMA EPM Application

ERA Environmental Risk Assessment

FAIG Fellow of the Australian Institute of Geoscientists

FAusIMM. Fellow of the Australasian Institute of Mining and Metallurgy

DMPWA WA Department of Mines and Petroleum

GSQ Geological Survey of Queensland

GSWA Geological Survey of Western Australia

IP Induced Polarisation

JV Joint Venture

Km Kilometre

LME London Metal Exchange

M Million

M Metre

MA Mineral Agreement

MAIG Member of the Australian Institute of Geoscientists

MSc Master of Science degree

NNE North northeast

NNW North northwest

NSW New South Wales

QA/QC Quality Assurance/Quality Control

QLD Queensland

RC Reverse Circulation

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RTP Reduction to Pole

SAG semi-autogenous grinding

SEDAR System for Electronic Document Analysis and Retrieval

SG Specific Gravity

sq km Square kilometres

tpd Tonnes per day

USD$ United States Dollar

UTM Universal Transverse Mercator

VALMIN Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports

WA Western Australia

WGS84 World Geodetic System 1984

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TABLE OF CONTENTS REPORT ON THE TECHNICAL VALUATION .................................................................................... I

OF AUZEX EXPLORATION LIMITED’S MINERAL ASSETS IN AUSTRALIA .......................................... I

1 SUMMARY .................................................................................................................... 6

2 INTRODUCTION AND TERMS OF REFERENCE .................................................................. 8 2.1 COMMISSIONING ENTITY AND SCOPE ............................................................................................... 8 2.2 VALUATION MANDATE ....................................................................................................................... 8 2.3 PURPOSE ............................................................................................................................................. 8 2.4 VALUATION DATE ............................................................................................................................... 8 2.5 QUALIFIED VALUATOR AND QUALIFIED PERSON ............................................................................... 9 2.6 DEFINITION OF VALUATION TYPES ..................................................................................................... 9 2.7 OTHER DEFINITIONS USED IN THE REPORT ...................................................................................... 10 2.8 INFORMATION USED ........................................................................................................................ 13 2.9 SITE VISIT BY QUALIFIED PERSON ..................................................................................................... 13 2.10 COMPLIANCE WITH THE VALMIN CODE ........................................................................................... 13

3 PROJECTS .................................................................................................................... 14

4 WESTERN AUSTRALIA PROJECTS .................................................................................. 16 4.1 PROJECT DESCRIPTION AND ACCESS ................................................................................................ 16 4.2 CLIMATE ............................................................................................................................................ 18 4.3 EXPLORATION HISTORY .................................................................................................................... 19

4.3.1 Core Tampia Hill Tenements .................................................................................................. 19 4.3.2 Emu Hill Prospect ................................................................................................................... 21 4.3.3 Historic Mineral Resource Estimates ..................................................................................... 24

4.4 GEOLOGY AND MINERALISATION ..................................................................................................... 24 4.4.1 Regional Geology .................................................................................................................... 24 4.4.2 Local Geology ......................................................................................................................... 27 4.4.3 Mineralisation ........................................................................................................................ 29 4.4.4 Metallurgical Testwork ........................................................................................................... 31

4.5 MINERAL RESOURCES ....................................................................................................................... 31 4.6 EXPLORATION POTENTIAL ................................................................................................................ 32

5 NORTH QUEENSLAND PROJECTS .................................................................................. 33 5.1 PROJECT DESCRIPTION AND ACCESS ................................................................................................ 33 5.2 CLIMATE ............................................................................................................................................ 34 5.3 DISCOVERY & PREVIOUS EXPLORATION ........................................................................................... 35 5.4 GEOLOGY & MINERALISATION ......................................................................................................... 38

5.4.1 Regional Geology .................................................................................................................... 38 5.4.2 Local Geology ......................................................................................................................... 39 5.4.3 Mineralisation ........................................................................................................................ 42

5.5 EXPLORATION RESULTS AND POTENTIAL ......................................................................................... 43 5.5.1 EPMs 14797 “Khartoum” & 15570 “Khartoum North” .......................................................... 43 5.5.2 EPM 19114 “Carbonate Creek” .............................................................................................. 44 5.5.3 EPM 14418 “Running Brook” ................................................................................................. 44

6 NEW SOUTH WALES PROJECTS .................................................................................... 48 6.1 PROJECT DESCRIPTION AND ACCESS ................................................................................................ 48

6.1.1 Kingsgate ................................................................................................................................ 48 6.1.2 Junction Reefs ........................................................................................................................ 49

6.2 CLIMATE ............................................................................................................................................ 49

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6.3 DISCOVERY & PREVIOUS EXPLORATION ........................................................................................... 50 6.4 GEOLOGY & MINERALISATION ......................................................................................................... 52

6.4.1 Regional Geology .................................................................................................................... 52 6.4.2 Local Geology ......................................................................................................................... 52 6.4.3 Mineralisation ........................................................................................................................ 53

6.5 EXPLORATION RESULTS & POTENTIAL.............................................................................................. 54 6.5.1 EL 8203 “Kingsgate” ............................................................................................................... 54

7 VALUATION ................................................................................................................. 55 7.1 CURRENCY AND EXCHANGE RATES .................................................................................................. 55 7.2 DATABASE ......................................................................................................................................... 55 7.3 MARKET AND EMPIRICAL APPROACHES – COMPARABLE TRANSACTIONS,

AUSTRALIAN GOLD PROJECTS WITH RESOURCES ............................................................................ 55 7.3.1 Terramin – Bird in Hand, South Australia ............................................................................... 55 7.3.2 Bullseye Mining – Melrose/Darlot East .................................................................................. 56 7.3.3 WPG Resources – Tarcoola/Tunkillia, South Australia ........................................................... 56 7.3.4 Ramelius Mining – Kathleen Valley, Western Australia ......................................................... 56 7.3.5 Sovereign Gold – Mt Adrah, New South Wales...................................................................... 57 7.3.6 A1 Consolidated Gold – Walhalla, Victoria ............................................................................ 57 7.3.7 Gasgoyne Resources – Egerton, Western Australia ............................................................... 57 7.3.8 Northern Star Resources – Hermes, Western Australia ......................................................... 57 7.3.9 Fortuna Mining – Linden, Western Australia ......................................................................... 58 7.3.10 GBM Resources – Mt Coolon, Queensland ............................................................................ 58 7.3.11 Discussion ............................................................................................................................... 58

7.4 MARKET AND EMPIRICAL APPROACHES – COMPARABLE TRANSACTIONS, AUSTRALIAN EXPLORATION PROJECTS ............................................................................................. 60

7.5 KILBURN GEOSCIENCE RATING ......................................................................................................... 61 7.5.1 Tampia Core Tenements ........................................................................................................ 63 7.5.2 Tampia Remaining Tenements ............................................................................................... 63 7.5.3 North Queensland Tenements – Khartoum ........................................................................... 64 7.5.4 North Queensland Tenements – Running Brook ................................................................... 64 7.5.5 New South Wales - Kingsgate................................................................................................. 65 7.5.6 Summary ................................................................................................................................ 65

8 VALUATION SUMMARY ............................................................................................... 67

9 REFERENCES ................................................................................................................ 68

10 GLOSSARY OF TECHNICAL TERMS ................................................................................ 70

11 CERTIFICATE OF QUALIFICATIONS ................................................................................ 75

Figures

Figure 1. Auzex Project Areas .......................................................................................................................... 15 Figure 2. Location Map, Western Australia Tenements .................................................................................. 16 Figure 3. Western Australia Projects Tenements ............................................................................................ 18 Figure 4. Climate Data for Narembeen (1965-2012) ....................................................................................... 18 Figure 5. Emu Hill Prospect (E70/4473). .......................................................................................................... 22 Figure 6. Soils geochemistry with contours for gold values in ppb. ................................................................ 23 Figure 7. Drill hole collars with best intersections labelled for gold................................................................ 24 Figure 8. Regional Location within Yilgarn Craton ........................................................................................... 25 Figure 9. Regional geology of the Western Gneiss terrane ............................................................................. 26 Figure 10. Gault Prospect - Local Geology Map ............................................................................................... 27

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Figure 11. Gault Prospect Long-Section ........................................................................................................... 28 Figure 12. Section View of THDD001 and THDD002, Looking West. ............................................................... 31 Figure 13. Local access, infrastructure and topography, North Queensland projects .................................... 34 Figure 14. Climate data, Dimbulah (1968-2013) .............................................................................................. 35 Figure 15. North Queensland Granite Province ............................................................................................... 39 Figure 16. Local geology, EPMs 14497 15570, 19112, 19113, & 19203 “Khartoum” ...................................... 41 Figure 17. Local Geology: Carbonate Creek EPM19114 .................................................................................. 41 Figure 18. Local Geology: Lyndbrook Project .................................................................................................. 42 Figure 19. Main prospects - EPMs 14797 and 15570 ...................................................................................... 43 Figure 20. Local geology, EPM 14418 “Fossilbrook” & EPM 19305 “Running Brook” ..................................... 45 Figure 21. Local geology, Running Brook Prospect .......................................................................................... 46 Figure 22. Kingsgate tenement, Glen Innes area, New England ...................................................................... 48 Figure 23. Location and access, ELA 4402 ........................................................................................................ 49 Figure 24. Climate data, Glen Innes 1907-2012 ............................................................................................... 50 Figure 25. Geology of the Kingsgate molybdenite pipe area, EL 8203 ............................................................ 53

Tables

Table 1. Auzex Exploration Limited –Mineral Tenements in Western Australia ............................................. 17 Table 2. Drillhole Collar Information, Auzex Tampia Drilling ........................................................................... 20 Table 3. Summary of Previous Exploration work, Tampia Project. .................................................................. 21 Table 4. Best Intercepts from DOM drilling, Emu Hills. ................................................................................... 23 Table 5. Deformation Events at Tampia Interpreted by Kuhns (1988). ........................................................... 29 Table 6. Selected mineralised intersections* .................................................................................................. 30 Table 7. Auzex Exploration Limited - Mineral Tenements in North Queensland ............................................ 33 Table 8. Previous Exploration by Companies in Auzex North QLD EPMs ........................................................ 35 Table 9. Exploration carried out by AZX in the Auzex North QLD tenements ................................................. 37 Table 10. Exploration to date carried out by Auzex in the Auzex North QLD tenements ............................... 38 Table 11. Auzex drilling results, Running Brook prospect ............................................................................... 47 Table 12. Auzex Exploration Limited - Mineral Tenements in NSW ................................................................ 48 Table 13. Previous Exploration by Companies in Auzex New England granted EL .......................................... 51 Table 14. Exploration carried out by AZX in the Auzex New England tenement ............................................. 51 Table 15. Exploration to date carried out by Auzex on the New England tenement ...................................... 52 Table 16. Summary of Comparable Transactions, Gold Projects with Resources. .......................................... 59 Table 17. Summary of Comparable Exploration Project Transactions ............................................................ 60 Table 18. Valuation of Auzex Exploration Tenements by Comparable Transactions ...................................... 61 Table 19. Kilburn Geoscience Rating Assessment Criteria. .............................................................................. 62 Table 20. Kilburn Geoscience Ratings For Auzex Projects. .............................................................................. 65 Table 21. Kilburn Geoscience Rating Values for Auzex Exploration Projects .................................................. 66 Table 22. Summary of Valuations, Auzex Projects. .......................................................................................... 67

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1 SUMMARY

This report is an independent technical review prepared at the request of BDO Corporate Finance (QLD) Ltd (“BDO”) to provide an opinion as to the current fair market value of mineral assets currently held by Auzex Exploration Limited (“Auzex”) in Australia.

At the request of Steven Sorbello of BDO, Mining Associates Pty Ltd (“MA”) was commissioned in May 2015 to prepare an Independent Technical Report on the fair market value of Auzex’s mineral assets in Australia. BDO has been engaged by Auzex to prepare an Independent Experts Report (“IER”) in relation to relation to the proposed acquisition of Auzex by Explaurum Limited (“Explaurum”). The IER will be presented to the shareholders of Auzex in relation to the proposed acquisition of Auzex by Explaurum Limited (“Explaurum”). The scope of this report is to conduct an assessment of the fair market value of Auzex’ projects, which will be included in the IER prepared by BDO.

MA has conducted the technical review and valuation assessment in accordance with the VALMIN code. MA is providing the technical review and valuation report to BDO to assist in evaluating whether the Proposed Transaction is fair and reasonable to the shareholders of Auzex.

Auzex’s mineral assets in Australia comprise three main projects: Tampia Hill (mineral resource and exploration), North Queensland exploration (Khartoum and Running Brook) and Kingsgate. Tampia Hill is located in the Western Gneiss Terrane of Western Australia, an under-explored region prospective for metamorphosed orogenic gold deposits. North Queensland projects cover two areas within the Hodgkinson Province considered prospective for high grade tin and intrusion-related gold deposits. Kingsgate in northern New South Wales comprises a single exploration licence covering several defined small molybdenum deposits.

Tampia Hill is the most advanced project in Auzex’s portfolio. It includes the Gault gold deposit that has an Inferred Resource of 310,000 ounces of gold (90% owned by Auzex), which is based on results of historic drilling confirmed by four new diamond drill holes completed by Auzex in 2014. The Mineral Resource is reported in accordance with the guidelines of the JORC (2012) Code. Gault

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comprises two main shallow-dipping, near-surface zones of gold mineralisation that remain open at depth. Some 450 km2 of exploration tenements are currently held by Auzex around, and near the Gault deposit and were selected on the basis of reviewing historic exploration data and interpretation of regional geophysics.

North Queensland exploration tenements comprise two project areas: Khartoum and Running Brook. Khartoum contains numerous occurrences and historic workings on high-grade tin veins. Drilliing by Auzex has defined continuous mineralisation over considerable strike lengths, but no Mineral Resources have yet been defined. Running Brook is at an early stage of exploration and Auzex consider it to be prospective for intrusion-related gold mineralisation similar to the Kidston deposit in the same region.

Kingsgate in northern New South Wales is a small exploration licence held over the historic Kingsgate molybdenum mine 20 km east of Glenn Innes. Auzex completed trial mining in 2006 and a feasibility study in 2008 that indicated a mining project would be financially viable. Several prospects in the same licence have not been drill tested.

MA considers the total value for Auzex’s Australian mineral assets to be in the range AUD1.4 M to AUD6.6 M, with a preferred value of AUD2.3 M. This is based on a combination of ranges determined by Market Approach comparable transactions (including implied AUD/oz and AUD/km2 values supplemented with lower confidence Kilburn Geoscience Ratings for exploration licences.

Project Market

Approach Cost

Approach Preferred Market Value

Comparable Transactions

Yardstick AUD/oz or AUD/km2

Kilburn Geoscience

Low

AUDM High

AUDM Low

AUDM High

AUDM Low

AUDM High

AUDM Low

AUDM Preferred

AUDM High

AUDM Tampia

Resources 1.29 1.5 1.1 2.5 - - 1.1 1.5 2.5


North Queensland Exploration

- - 0.18 0.68 0.26 2.6 0.2 0.5 2.6

Kingsgate 0.01 0.01 0.01 0.22 0.01 0.01 0.2

Total 1.4 2.3 6.6

Note: Preferred valuations are rounded to nearest AUD0.1 M to reflect accuracy.

The Preferred value for Auzex’s Australian mineral assets is AUD2.3M, which is based on a consideration of ranges determined by Market Comparable Transactions and Cost Approaches.

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2 INTRODUCTION AND TERMS OF REFERENCE

2.1 COMMISSIONING ENTITY AND SCOPE

At the request of Mr Steven Sorebello of BDO Corporate Finance (QLD) Ltd (“BDO”), Mining Associates Pty Ltd (“MA”) was commissioned in May 2015 to prepare an Independent Technical Report for inclusion in an Independent Expert’s Report to be presented to the shareholders of Auzex Exploration Limited (“Auzex”) in relation to the proposed acquisition of Auzex by Explaurum Limited (“Explaurum”).

MA has conducted the technical review and valuation assessment in accordance with the VALMIN code. MA is providing the technical review and valuation report to BDO to assist in evaluating whether the Proposed Transaction is fair and reasonable to the shareholders of Auzex. This Technical Report will be included in the Independent Expert’s Report presented to the shareholders of Auzex

The scope of the Valuation included the following:

Review of Auzex’s projects in Australia including but not limited to historical exploration expenditure, prospectivity, resources, exploration targets and good standing of the tenements.

Assessment of the fair market value of the Projects based on appropriate valuation methodologies.

Report to be prepared in accordance with the VALMIN Code and for the specific purpose of assisting BDO in the preparation of an Independent Experts Report.

MA was not requested to comment on the Fairness or Reasonableness of any vendor or promoter considerations, and therefore no opinion on these matters has been offered.

2.2 VALUATION MANDATE

MA was requested to provide an Independent Valuation of Auzex’s projects in Australia, comprising their main project areas in Western Australia (Tampia Hill), northern Queensland (Khartoum and Running Brook) and New South Wales (Kingsgate).

2.3 PURPOSE

BDO intends that this report be used as part of an Independent Expert’s Report (“IER”) to be presented to the shareholders of Auzex in relation to the proposed acquisition of Auzex by Explaurum. The IER will provide an opinion as to whether the proposed transaction is fair and reasonable to the shareholders of Auzex, and as such, the report will be a public document.

2.4 VALUATION DATE

All time-sensitive data used in this Valuation, including metal prices, exchange rates, cost-of-living indices etc. were taken as at 5pm Sydney time on 14th May 2015. Accordingly, this valuation is valid as of 14th May 2015 and refers to the writer’s opinion of the value of the Projects at this date.

This valuation can be expected to change over time having regard to political, economic, market and legal factors. Most importantly, the valuation can also vary due to the success or otherwise of any mineral exploration that is conducted either on the properties concerned or by other explorers on prospects in the near environs. The valuation could also be affected by the consideration of other exploration data, not in the public domain, affecting the properties which have not been made available to the author. F

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2.5 QUALIFIED VALUATOR AND QUALIFIED PERSON

This Valuation was prepared by Mr Andrew Vigar. Mr Vigar has no direct or indirect interest in the properties which are the subject of this Valuation, nor does he hold, directly or indirectly, any shares in Auzex or any associated company, or any direct interest in any mineral tenements in Australia.

The technical review and valuation of the Exploration Projects was conducted by Mr Andrew Vigar. Mr Vigar has sufficient experience which is relevant to the styles of mineralisation and deposits under consideration and to their valuation to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (Australia) and is a Qualified Person as defined in NI43-101 (Canada). He is a Fellow of The Australasian Institute of Mining and Metallurgy (Melbourne) and a Member of the Society of Economic Geologists (Denver). Mr Vigar is employed by Mining Associates Pty Ltd of Brisbane, Australia.

2.6 DEFINITION OF VALUATION TYPES

The three generally accepted Valuation approaches under VALMIN are:

• Income Approach.

• Market Approach.

• Cost Approach.

The Income Approach is based on the principle of anticipation of benefits and includes all methods that are based on the income or cash flow generation potential of the Mineral Property. This method provides an indication of the value of a property with identified reserves. It utilises an economic model based upon known resources, capital and operating costs, commodity prices and a discount for risk estimated to be inherent in the project. Alternatively a value can be assigned on a royalty basis commensurate with the in situ contained metal value. The Exploration Projects do not contain mineral reserves that meet the standards of the JORC 2012 Code so the Income Approach is not appropriate for Auzex’s projects

The Market Approach is based primarily on the principle of substitution and is also called the Sales Comparison Approach. The Mineral Property being valued is compared with the transaction value of similar Mineral Properties, transacted in an open market. Methods include comparable transactions and option or farm-in agreement terms analysis. The terms of a proposed joint venture agreement may be used to provide a fair market value based upon the amount an incoming partner is prepared to spend to earn an interest in part or all of the property. This pre-supposes some form of subjectivity on the part of the incoming party when grass roots properties are involved.

An extension to the Market Approach is to rate transactions in terms of a dollar value per unit area or dollar value per unit of resource in the ground. This includes the range of values that can be estimated for an exploration property based on current market prices for equivalent properties, existing or previous joint venture and sale agreements, the geological potential of the properties, regarding possible potential resources, and the probability of present value being derived from individual recognised areas of mineralisation. This method is sometimes termed a “Yardstick” approach. It allows recent transactions to be related to the property in question even if they are not strictly comparable in terms of size of resources and/or exploration area. However, the results should be confirmed using other methods.

The Cost Approach is based on the principle of contribution to value. The appraised value method is one commonly used method where exploration expenditures are analysed for their contribution to the exploration potential of the Mineral Property. The multiple of exploration expenditure method (‘MEE’) is used whereby a subjective factor (also called the prospectivity enhancement multiplier or ‘PEM’) is based on previous expenditure on a tenement with or without future committed

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exploration expenditure and is used to establish a base value from which the effectiveness of exploration can be assessed. Where exploration has produced documented positive results a MEE multiplier can be selected that takes into account the valuer's judgment of the prospectivity of the tenement and the value of the database. MEE factors typically range from 0 to 3.0 and occasionally up to 5.0 applied to previous exploration expenditure to derive a dollar value.

The Kilburn Geological Engineering/Geoscience Method is a cost approach rating method that values a project based on an assessment of its technical attributes to define prospectivity. A basic acquisition cost (‘BAC’) is determined, which represents the baseline costs of applying for and maintaining a tenement for a period of 12 months. Four key technical factors are then assessed and assigned a numeric value, each of which enhance, downgrade or have no impact on the value of the property. The factors are then applied serially to the BAC of each tenement in order to derive a value for the property. The factors used are: off-property attributes, on-property attributes, anomalies and geology. A fifth factor that may be applied is the current state of the market. The Kilburn method is highly subjective since it relies on technical considerations and the opinion of the valuer. Choice of an appropriate BAC can also be difficult in jurisdictions that do not specify minimum exploration expenditures, or where information of average expenditure is difficult to obtain. Because Kilburn valuations are based on area units, they can distort values for large licence holdings. However, MA considers that it serves as a useful validation of Market and Cost approaches and at the very least provides a minimum value for a licence.

MA has adopted the Market Approach and its extension the Yardstick Approach as the principal bases for the properties included in this Valuation. The Kilburn Geoscience Rating method is included as a check on values obtained by the Market Approach.

Valuation methodology of mineral properties is exceptionally subjective. If an economic reserve or resource is subsequently identified then there is likely to be a substantial increase in the Project’s value and this valuation will be dramatically low relative to any later valuations. Alternatively, if further exploration is unsuccessful it is likely that the Project’s value will decrease and this valuation will be higher than later valuations.

Values obtained are estimates of the amount of money, or cash equivalent, which would be likely to change hands between a willing buyer and a willing seller in an arms-length transaction, wherein each party had acted knowledgeably, prudently and without compulsion. This is the required basis for the estimation to be in accordance with the provisions of VALMIN.

There are a number of generally accepted procedures for establishing the value of mineral properties with the method employed depending upon the circumstances of the property. When relevant, MA uses the appropriate methods to enable a balanced analysis. Values are presented as a range and the preferred value is identified.

The readers should therefore form their own opinion as to the reasonableness of the assumptions made and the consequent likelihood of the values being achieved.

2.7 OTHER DEFINITIONS USED IN THE REPORT

Commissioning Entity means the organization, company or person commissioning a Valuation.

Competence or Competent means having relevant qualifications and relevant experience.

Current means current with respect to, and relative to, the Valuation Date.

Data Verification means the process of confirming that data has been generated with appropriate procedures, has been accurately transcribed from the original source and is suitable to be used.

Development Property means a Mineral Property that is being prepared for mineral production and for which economic viability has been demonstrated by a Feasibility Study or Prefeasibility Study and

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includes a Mineral Property which has a Current positive Feasibility Study or Prefeasibility Study but which is not yet financed or under construction.

Exploration Property means a Mineral Property that has been acquired, or is being explored, for mineral deposits but for which economic viability has not been demonstrated.

Fair Market Value means the highest price, expressed in terms of money or money’s worth, obtainable in an open and unrestricted market between knowledgeable, informed and prudent parties, acting at arm’s length, neither party being under any compulsion to transact.

Feasibility Study means a comprehensive study of a deposit in which all geological, engineering, operating, economic and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production.

Guideline means a best practices recommendation, which, while not mandatory in the Valuation of Mineral Properties, is highly recommended.

Independence or Independent means that, other than professional fees and disbursements received or to be received in connection with the Valuation concerned, the Qualified Valuator or Qualified Person (as the case requires) has no pecuniary or beneficial (present or contingent) interest in any of the Mineral Properties being valued, nor has any association with the Commissioning Entity or any holder(s) of any rights in Mineral Properties which are the subject of the Valuation, which is likely to create an apprehension of bias. The concepts of “Independence” and “Independent” are questions of fact. For example, where a Qualified Valuator’s fees depend in whole or in part on an understanding or arrangement that an incentive will be paid based on a certain value being obtained, such Qualified Valuator is not Independent.

Materiality and Material refer to data or information which contribute to the determination of the Mineral Property value, such that the inclusion or omission of such data or information might result in the reader of a Valuation Report coming to a substantially different conclusion as to the value of the Mineral Property. Material data and information are those which would reasonably be required to make an informed assessment of the value of the subject Mineral Property.

Mineral Property means any right, title or interest to property held or acquired in connection with the exploration, development, extraction or processing of minerals which may be located on or under the surface of such property, together with all fixed plant, equipment, and infrastructure owned or acquired for the exploration, development, extraction and processing of minerals in connection with such properties. Such properties shall include, but not be limited to, real property, unpatented mining claims, prospecting permits, prospecting licences, reconnaissance permits, reconnaissance licences, exploration permits, exploration licences, development permits, development licences, mining licences, mining leases, leasehold patents, crown grants, licences of occupation, patented mining claims, and royalty interests

Mineral Reserves and Mineral Resources. The terms Mineral Reserve, Proven Mineral Reserve, Probable Mineral Reserve, Mineral Resource, Measured Mineral Resource, Indicated Mineral Resource, and Inferred Mineral Resource and their usage have the meaning ascribed by the JORC Code (2004).

Mineral Resource Property means a Mineral Property which contains a Mineral Resource that has not been demonstrated to be economically viable by a Feasibility Study or Prefeasibility Study. Mineral Resource Properties may include past producing mines, mines temporarily closed or on care-and-maintenance status, advanced exploration properties, projects with Prefeasibility or Feasibility Studies in progress, and properties with Mineral Resources which need improved circumstances to be economically viable.

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Prefeasibility Study and Preliminary Feasibility Study mean a comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has been established, and which, if an effective method of mineral processing has been determined, includes a financial analysis based on reasonable assumptions of technical, engineering, operating, economic factors and the assessment of other relevant factors which are sufficient for a Qualified Person, acting reasonably, to determine if all or part of the Mineral Resource may be classified as a Mineral Reserve. A Prefeasibility Study is at a lower confidence level than a Feasibility Study.

Preliminary Assessment means a preliminary economic study by a Qualified Person that includes Inferred Mineral Resources. The Preliminary Assessment must include a statement that the Inferred Mineral Resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves, outlines the basis for the Preliminary Assessment and any qualifications and assumptions made, and specifies that there is no certainty that the Preliminary Assessment will be realized.

Production Property is a Mineral Property with an operating mine, with or without processing plant, which has been fully commissioned and is in production.

Professional Association is a self-regulatory organization of engineers, geoscientists or both engineers and geoscientists that (a) has been given authority or recognition by law; (b) admits members primarily on the basis of their academic qualifications and experience; (c) requires compliance with the professional standards of competence and the code of ethics established by the organization; and (d) has disciplinary powers, including the power to suspend or expel a member.

Qualified Person is an individual who (a) is an engineer or geoscientist with at least five years of experience in mineral exploration, mine development or operations or mineral project assessment, or any combination of these; (b) has experience relevant to the subject matter of the mineral project and the Technical Report; and (c) is a member in good standing of a Professional Association

Qualified Valuator is an individual who (a) is a professional with demonstrated extensive experience in the Valuation of Mineral Properties, (b) has experience relevant to the subject Mineral Property or has relied on a Current Technical Report on the subject Mineral Property by a Qualified Person, and (c) is regulated by or is a member in good standing of a Professional Association or a Self-Regulatory Professional Organization.

Reasonableness, in reference to the Valuation of a Mineral Property, means that other appropriately qualified and experienced valuators with access to the same information would value the property at approximately the same range. A Reasonableness test serves to identify Valuations which may be out of step with industry standards and industry norms. It is not sufficient for a Qualified Valuator to determine that he or she personally believes the value determined is appropriate without satisfying an objective standard of proof.

Report Date means the date upon which the Valuation Report is signed and dated.

Self-Regulatory Professional Organization means a self-regulatory organization of professionals that (a) admits members or registers employees of members primarily on the basis of their educational qualifications, knowledge and experience; (b) requires compliance with the professional standards of competence and code of ethics established by the organization; and (c) has disciplinary powers, including the power to suspend or expel a member or an employee of the member.

Standard means a general rule which is mandatory in the Valuation of Mineral Properties.

Technical Report means a report prepared, filed and certified in accordance with NI 43-101 and Form 43-101F1 Technical Report or JORC guidelines. F

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Transparency and Transparent means that the Material data and information used in (or excluded from) the Valuation of a Mineral Property, the assumptions, the Valuation approaches and methods, and the Valuation itself must be set out clearly in the Valuation Report, along with the rationale for the choices and conclusions of the Qualified Valuator.

Valuation is the process of estimating or determining the value of a Mineral Property.

Valuation Date means the effective date of the Valuation, which may be different from the Report Date or from the cut-off date for the data used in the Valuation.

Valuation Report means a report prepared in accordance with the VALMIN Standards and Guidelines.

2.8 INFORMATION USED

Auzex made available a very large body of data from their various tenements, encompassing a period of 50 years from 1955 to present. Auzex provided a warranty that, to the best of Auzex’s knowledge, full accurate and true disclosure of all material information had been supplied to Mining Associates. Although Mining Associates has made diligent efforts to cross-check and compare the Auzex data with available material from other sources, investors should bear in mind that this report is, by its nature, heavily reliant on the data supplied by Auzex.

Additional data was sourced from published books and journals, unpublished company reports held by the WA Department of Mines and Petroleum (“DMPWA”), Geological Survey of Queensland (“GSQ”) and the Geological Survey of NSW (“GSNSW”), university theses etc. These references are cited within the report and listed at the back of this report.

Maps in this report are generally in Universal Transverse Mercator (“UTM”) projection, using the Map Grid of Australia 1994 (“MGA94”) coordinate system set to the Grid Datum of Australia 1994 (“GDA94”). If latitude and longitude is shown, these are set to GDA94. Maps shown in this report are for illustration only, and should not be relied upon for navigation.

2.9 SITE VISIT BY QUALIFIED PERSON

Mr Andrew Vigar has not visited the properties that are the subject of this valuation. However, Mr James Lally and Anthony Woodward, both employees of MA carried out a desktop review of the Western Australian projects exploration history and mineralisation. They did not visit the project sites for the compilation of this report as there is no outcropping mineralisation according to the exploration reports, or site sample storage facilities. Mr Woodward has previously visited the Khartoum project area on behalf of other clients.

2.10 COMPLIANCE WITH THE VALMIN CODE

This Valuation complies with the VALMIN Code (2005 Edition) in its entirety. The author has taken due note of Regulatory Guide ("RG") 111 "Content of Expert Reports" (October 2007 & March 2011) and RG 112 "Independence of Experts" (March 2011 update) promulgated by the Australian Securities and Investments Commission ("ASIC") and this report meets the guidelines set out in RG 111 and RG 112.

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3 PROJECTS

Auzex is an unlisted public company that was incorporated on 6 October 2011. As part of the demerger of the non-Bullabulling Gold project assets of Auzex Resources Limited, Auzex Resources Limited shareholders who were on the share register on 30 December 2011 received one (1) new Auzex Exploration Limited Share for each six (6) Auzex Resources Limited shares. Auzex Exploration Limited Shares were transferred to eligible shareholders on 6 January 2012 and Auzex share certificates were dispatched on 16 January 2012.

Auzex in its original form began exploring at the end of September 2003. During the nine years since its inception, Auzex has compiled an extensive spatial database of previous company and government exploration records. Utilising a “Weights of Evidence” approach to analyse spatial data, Auzex highlighted a number of areas in North Queensland and the New England Batholith, with the potential for particularly gold, tin and tungsten mineralisation. These areas most closely fit the modified Intrusion Related Gold System (“IRGS”) model that Auzex previously developed, and are covered by the licences and applications that Auzex has secured. The Tampia Gold Project (“Tampia Project”) at Tampia Hill in Western Australia is located in the Western Gneiss Terrane and although related to Archaean granites has more similarities to orogenic gold deposits of the Yilgarn craton, particularly the Southern Cross belt 200 km to the east. Current Auzex properties are at the early to advances exploration stages.

For convenience, the Auzex tenements have been divided into three groups:

Western Australia (Tampia Hill) North Queensland (Khartoum, Running Brook) New South Wales (Kingsgate and Junction Reefs)

Project descriptions are provided for each group separately under each topic heading below.

Auzex tenements were verified by Mining Associates using searches of the Queensland Mines Online Maps (“MOMaps”) database, the NSW MinView online database and the WA Mineral Titles online database.

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Figure 1. Auzex Project Areas

(after Auzex Exploration Limited, 2014)

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4 WESTERN AUSTRALIA PROJECTS

Western Australia projects comprise the Tampia Hill Project and the Dumbleyung Project, both located in the Southern Cross region in the south-western part of Western Australia (Figure 2). Tenement details are shown in Table 1.

Figure 2. Location Map, Western Australia Tenements (Source: Department of Mined and Petroleum, WA, after Google, 2013)

4.1 PROJECT DESCRIPTION AND ACCESS

Western Australia projects are covered by 14 granted tenements consisting of two mining leases (“ML), nine exploration licences (“EL”) and three prospection licences (“PL”) (Table 1).

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Table 1. Auzex Exploration Limited –Mineral Tenements in Western Australia

Tenement Data Auzex

Ownership %

Status Tenement Area Name Applicationn Date Grant Date Expiry Date Area km2

E 70/2132 Tampia ‘core’ 17-Sep-1998 23-Aug-2005 22-Aug-2014 27.90 90 Verified

E 70/4411 Tampia ‘core’ 03-Sep-2012 04-Jan-2013 03-Jan-2018 20.35 100 Verified

E 70/4420 Tampia ‘core’ 07-Sep-2012 02-Nov-2012 01-Nov-2017 2.45 100 Verified

E 70/4433 Tampia ‘core’ 10-Oct-2012 05-Dec-2012 04-Dec-2017 2.91 100 Verified

E 70/4473 Emu Hill 05-Mar-2013 06 Jan 2014 05 Jan 2019 16.38 100 Verified

E 70/4474 Tampia Hill 05-Mar-2013 18 Dec 2013 17 Dec 2018 5.82 100 Verified

E 70/4475 Tampia Hill 05-Mar-2013 06 Jan 2014 05 Jan 2019 323.7 100 Verified

E70/4616 Tampia ‘core’ 30-May-2014 8.72 100 Pending

M 70/815 Tampia ‘core’ 06-Jul 1993 13-Aug-1997 12-Aug-2018 1.99 90 Verified

M 70/816 Tampia ‘core’ 06-Jul-1993 13-Aug-1997 12-Aug-2018 5.02 90 Verified

P 70/1637 Tampia ‘core’ 07-Sep-2012 06-Nov-2012 5-Nov-2016 1.27 100 Verified

P 70/1638 Tampia ‘core’ 07-Sep-2012 06-Nov-2012 5-Nov-2016 0.93 100 Verified

P 70/1645 Tampia ‘core’ 7-Sep-2013 03 Apr-2013 02 Apr-2017 0.20 100 Pending

E70/4545 Dumbleyung 27-Sept-2013 08 Jan 2014 07 Jan 2019 34.45 100 Verified

Total 452.09

The Tampia Hill Project is located about 250 km east from Perth and 12 km south-east of the town of Narembeen (Figure 3). The project comprises 8 exploration licences, 3 prospecting licences and 2 mining leases. Mining leases M70/815 and M70/816, and exploration license E70/2132 are 90% owned by Auzex, with the remaining 10% owned by Tampiagold/Goldoro. Tampiagold/Goldoro’s 10% interest is free-carried up to completion of a feasibility study, after which time they can elect to either retain a 10% participating interest, or convert their interest to shares and receive a 2% royalty.

The area is easily accessible by sealed and unsealed minor roads from the Great Eastern Highway about 75 km to the north, or the Condinin-Hyden Road 50 km to the south. The nearest sealed road is South Kumminin Road East.

The Dumbleyung Project is located approximately 250 km southeast from Perth and comprises one exploration licence (E70/4545). It is accessible via sealed roads from Perth, and is approximately 5 km north of the township of Moulyinning.

Physiography in the Southern Cross region comprises undulating lowlands with small hills. Elevation across the project areas varies from approximately 300 m to 400 m ASL. West, northwest and north draining ephemeral river channels occur throughout the region.

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Figure 3. Western Australia Projects Tenements (Source: Department of Mines and Petroleum, WA, after Google, 2013)

4.2 CLIMATE

The local climate is grassland type with hot, dry summers and cool, wetter winters. Annual average rainfall of 335 mm mostly occurs between the months of May and August. Figure 4 shows average climate statistics for the region.

Figure 4. Climate Data for Narembeen (1965-2012) (Source: Australian Bureau of Meteorology)

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4.3 EXPLORATION HISTORY

Previous exploration activities are described below for two areas of the Tampia Hill Project: the ‘core’ Tampia tenements (E70/4420, E70/2132, P70/1637, E70/4433, P70/1645, P70/1638, E70/4411, E70/4616, M70/815 and M70/816), and Emu Hill (E70/4473).

The remaining tenements in the Tampia Hill Project, and the single tenement in the Dumbleyung Project have had very little previous exploration work undertaken within their boundaries and are not described any further in regards to exploration history. Auzex applied for these tenements on the basis of their regional target generation work using GIS-based prospectivity analysis and there is little or no additional information available.

4.3.1 Core Tampia Hill Tenements

Exploration on the Core Tampia Hill tenements is summarised in Table 3.

BHP discovered gold mineralisation at Tampia Hill in 1987 from follow-up of a regional BLEG stream sediment survey. BHP Minerals undertook a considerable amount of exploration work, including geological mapping, rock chipping, grid soil and auger sampling, RAB drilling and ground geophysics that lead to the discovery of the Gault Gold Deposit.

Detailed grid soil sampling outlined a highly anomalous zone over what was named the Gault prospect, which was tested with shallow RAB drilling followed by diamond core drilling. BHP calculated a small, shallow high-grade resource for Gault that was pre-JORC code and is not presented here.

Mining Leases M70/815 and M70/816 were originally part of E70/463, which was granted to BHP Gold Mines Ltd (later Newcrest Mining Ltd) in 1987. These tenements were sold to Dry Creek Mining in 1990. Dry Creek Mining was renamed to Nexus Minerals NL in 1993.

Conversion to mining leases occurred in 1998 after a compensation agreement with LAN Stacey was signed allowing for the approval process to commence for mining lease applications. Nexus Minerals was renamed as IPT Systems Ltd in 2000, and then was changed to Synergy Equities Group in 2002. Tenements were transferred to Meridian Mining Ltd in 2005, BHPs royalty interest terminated wtih the sale of the properties to Meridian Mining Ltd. The properties were subsequently transferred to Tampiagold Pty Ltd (“Tampiagold”) in 2010.

E70/2132 (originally 24 blocks) was granted to Synergy Equities Group in 2005, and was transferred to Meridian Mining Pty Ltd in 2006. In 2010, the tenement underwent a 50% reduction (now 12 blocks), and was transferred to Goldoro Pty Ltd (“Goldoro”).

Exploration from 1990 to 1997 was hampered by failure to secure access rights from landowners and a plaint lodged in 1993. The plaint was dismissed in 1997 and Nexus Minerals commenced RC drilling at Gault with the aim of confirming BHP results and defining a gold resource. In 2000, Widenbar and Associates provided a JORC-compliant resource estimate at Gault totalling 3.49Mt grading 2.08 g/t Au at a cut-off grade of 1 g/t Au. A top cut of 40 g/t and a bulk density of 2.65 t/m3 was applied to the resource model. Limited metallurgical testwork was undertaken on composite RC samples, which indicated recovery from conventional cyanide leaching of around 45%.

Further plaint actions from 2001 to 2005 resulted in cessation of exploration activity on the tenements. In 2005, Meridian Mining acquired the project from IPT Systems and commenced a data review and assessment of exploration targets on the remainder of the licenses outside the limits of Gault. The mining lease tenements M70/815 and M70/816 were transferred to Tampiagold in 2010, with the exploration license E70/2132 being transferred to Goldoro in the same year. Both companies continued to experience problems with land access. High resolution airborne magnetics was flown over the project area in 2010 and further exploration was planned on the basis of interpretation of results.

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Auzex completed a sale and purchase agreement with Tampiagold/Goldoro in February 2012, forming a joint venture whereby Auzex acquired 80% of the licenses. The remaining 20% is held by Tampiagold/Goldoro under a free carry arrangement that will persist until a bankable feasibility study is completed. At that time Tampiagold/Goldoro can either become full participants in the JV, or convert their interest to shares in Auzex and retain a 2% NSR. Since completing the purchasem Auzex’s exploration activities have since largely focussed on the consolidation and reinterpretation of existing data, and diamond drilling (2014) at the Tampa Hill prospect on the Exploration Licence and both Mining Leases.

A total of four NQ2 sized diamond drill holes were drilled from 26th June to 31st July, 2014. The drilling contractor ONQ Exploration Limited operated two rigs during the program: a Desco 550 and a Desco 1250. The diamond drilling programme was planned to take approximately 20 days with an average drill rate of 20 meters per day. Unfortunately, due to drill rig break downs and constant heavy rainfall, the programme extended to 34 days with an average drill rate of only 14.6 meters per day.

All holes were drilled with HQ size diamond core until fresh rock was encountered and then switched to NQ2 sized diamond coring. Table 2 shows collar information for each hole drilled.

Table 2. Drillhole Collar Information, Auzex Tampia Drilling

Collar Easting Northing RL Dip Azmith Hole depth THDD001 636827.17 6440742.22 345.85 -60 0 97.7 THDD002 636822.8 6440398.04 338.02 -60 130 152.3 THDD003 636780.35 6441232.14 335.74 -60 0 81.3 THDD004 636250.73 6442089.94 336 -60 90 150

All holes were orientated, metre marked, logged (lithology, alteration and structural logging) and had XRF and magnetic susceptibility readings taken. Detailed collar and survey information, lithological, alteration and structural logs and XRF and magnetic susceptibility readings were collected according to Auzex standard operating procedures.

Auzex’s results confirmed the historic drill results and confirmed the position, grades and widths of gold mineralisation in historic mineral resource estimates.

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Table 3. Summary of Previous Exploration work, Tampia Project.

Period Company Exploration Activities Comments

1987-1988

BHP Minerals Ltd

Stream Sediment, Soil, Rock Chip sampling

over the Tampia Hill Prospect Drilling – 428 RAB for 133,376m, RC 1,335m; 18 DDH for 2,944m Petrology Geophysics - Aeromagnetics, Ground magnetics over the Gault Prospect - Induced polarisation, VLF EM survey over the Gault Prospect - Down hole magnetics - Sirotem survey Structural analysis Mineral Resource pre-JORC, Gault Prospect

1990-1993

Dry Creek Mining NL

Preliminary pit designs

Gault prospect Evaluation of Tampia Hill 40 RAB for 1,145m at the Smoker prospect Soil sampling

1997-1999

Nexus Minerals N.L.

Literature review

Three zones identified

4,553m RC drilling 11 Rock samples Data Review and Aeromagnetic Re-interpretation Survey Control and Gridding

2000-2001

IPT Systems Ltd

Geological interpretation Gault Prospect JORC compliant - inferred resource of 3.49Mt at 2.08 g/t Au 45% leachable recovery

independent Mineral Resource Estimate for the Gault deposit Metallurgical testwork Soil sampling LANDSAT data interpretation

2001-2005

Synergy Equities Group

No exploration conducted a number of plaint actions

2006-2009

Meridian Mining Ltd

Data review

Covering Tampia Project area 2,240 line kms high resolution aeromagnetic and radiometric survey

2010-2011

Tampiagold Pty Ltd

GIS compilation 1:20,000 scale Geochemical and geophysical structural target definition

Surficial geology and regolith interpretation Bedrock geology interpretation

SAM geophysical survey planned Not completed 2012-2014

Auzex Exploration Ltd Data review and consolidation Covering Tampia Hill Prospect

4 Diamond drill holes

4.3.2 Emu Hill Prospect

Emu Hill is located 8 km northwest of Tampia Hill and 6 km south of Narembeen (Figure 3). Previous exploration included stream and soil sampling, RAB and aircore drilling.

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The prospect was first identified using low order gold anomalies from soil, rock chip and stream sediment sampling carried out by BHP in 1987; however these were not followed up.

Dominion Mining Ltd (“DOM”) collected 434 augered surface geochemical samples within the current area of tenement E70/4473 and delineated a coherent gold/copper anomaly over 1 km in strike length with gold values up to 863 ppb from lateritic and surface material (Figure 6).

Figure 5. Emu Hill Prospect (E70/4473).

(Source: Auzex, 2014)

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Figure 6. Soils geochemistry with contours for gold values in ppb.


DOM completed 60 drill holes (23 RAB and 47 aircore) over the geochemical anomaly and 560 3 m composite samples were assayed, giving best intercepts of 6 m @ 2.50 g/t Au, 6 m @ 0.51 g/t Au and 3 m @.81 g/t Au (Table 4, Figure 7).

Table 4. Best Intercepts from DOM drilling, Emu Hills.

Hole Number Hole depth (m) Intersection length (m) Gold grade (ppm)

03EHVR022 9 m 6 m 2.5 ppm

03EHAC056 9 m 3 m 0.81 ppm

03EHAC056 24 m 6 m 0.51 ppm

03EHAC053 48 m 3 m 0.58 ppm

03EHAC029 27 m 3 m 0.38 ppm

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Figure 7. Drill hole collars with best intersections labelled for gold.


4.3.3 Historic Mineral Resource Estimates

BHP conducted a mineral resource estimate for the Gault Gold Deposit during its tenure. However, it was conducted before the establishment of the JORC Code and therefore was not included in this report. It has since been superseded by a mineral resource estimate conducted in 2000 by Widenbar and Associates Pty Ltd (“Widenbar”), referred to in this report as the 2000 Mineral Resource Estimate.

The 2000 Mineral Resource Estimate for the Gault deposits was prepared by Widenbar in compliance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (“JORC Code 1999”). Widenbar estimated total mineral resources in the inferred category at a cut-off grade of 1 g/t Au of 3,491,000 tonnes at an average grade of 2.08 g/t Au for 233,000 oz gold. This estimate used a top-cut of 40 g/t gold and an assumed dry bulk density of 2.65 t/m3.

4.4 GEOLOGY AND MINERALISATION

4.4.1 Regional Geology

The Tampia Hill and Dumbleyung Projects tenements are located in the southwest portion of the Yilgarn Craton (Figure 8).

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Figure 8. Regional Location within Yilgarn Craton (Source: Auzex 2012)

Previous reports on the Tampia Hill Project placed it within one of two geological regions of Western Australia: the Western Gneiss Terrane; or the Southern Cross Province (Figure 9). Both regions are subdivisions of the Archean-age Yilgarn Craton and the confusion arises from differing interpretations of the location of their contact.

According to the interpretation presented on the Geological Survey of Western Australia’s web mapping service, both the Tampia Hill Project and the Griffins Find-Lake Grace JV tenements lie within the Western Gneiss Terrane some 100 km west of its contact with the Southern Cross Province (Figure 9). The Terrane is dominated by recrystallised granitoid gneiss of quartz monzonite composition with enclaves of metamorphosed mafic gneiss and associated sediments (“greenstones”) that have a complex structural and metamorphic history.

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Figure 9. Regional geology of the Western Gneiss terrane (Source: after Tomkins & Grundy, 2009)

The Western Gneiss Terrane occupies a broadly triangular-shaped area of the south and western portion of the Yilgarn Craton. It is distinguished from granite-greenstone terranes of the Southern Cross, Murchison and Eastern Goldfields Provinces by the predominance of granitic rocks and higher metamorphic grade. Granulite to upper amphibolite grade rocks of the Western Gneiss Terrane contrast with mostly greenschist facies rock of the granite-greenstone terranes.

Wilde et al (1996) divided the Western Gneiss Terrane into three smaller terranes comprising different metamorphic belts (Figure 9) which are separated by major thrust faults. The Lake Grace Terrane, which contains the Tampia Hill Project, is the easternmost of these belts. The terrane contains several remnant greenstone belts metamorphosed to granulite facies surrounded by granitoids and felsic gneisses. The dominant rock type in these domains is a banded quartz-feldspar-biotite paragneiss, also containing garnet, hypersthene, cordierite, and sillimanite. Small, layered mafic intrusions are distributed throughout the paragneiss between Lake Grace and Dumbleyung in the Lake Grace terrane (Wilde, 1990).

Syn-metamorphic granites within the Lake Grace Terrane have been dated at 2627±12 Ma. Younger coarse-grained granodiorites post-dating granulite facies metamorphism have an average age of 2587±25 Ma (Tomkins & Grundy, 2009).

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There are a number of greenstone belts throughout the region, also metamorphosed to a high grade, and migmatites are common at the margins of metamorphic belts, indicating partial melting at high temperatures (Wilde et al., 1996).

4.4.2 Local Geology

Detailed geological work has only been undertaken on the core Tampia Hill tenements around the Gault Gold Deposit. The remainder of the Tampia Hill and Dumbleyung Projecs are largely covered by soils and colluvium, with sparse small outcrops of granite gneiss.

Descriptions of the local geology around the Gault Prospect are based on work done by BHP in 1987-1988 (Woad, 1988). Subsequent license holders have reported very little work on detailed surface mapping.

Quaternary sand, silt and gravel occur as a thin veneer overlying Archean rocks. Remnant outcrop is sparse and is visible in areas cleared for agriculture. Woad (1988) describes the Archean geology of the Tampia Hill area as dominated by banded felsic granulite gneiss that was intruded by seriate and porphyritic granite plutons, sills and dykes. Belts of mafic granulite gneiss and subordinate metamorphosed banded iron formation (BIF) and metasedimentary rocks occur within the felsic gneiss. Pegmatitic granite dykes and sills locally intruded mafic granulite gneiss. Dolerite dykes of Proterozoic age strike northeast and cross-cut all older rocks and structures. Gneissic foliation strikes north and dips vary between sub-horizontal and vertical (Figure 10). Structural measurements from the recent core show the foliation and associated quartz veins strike NW; indicating further work on the local geology of the Tampia Gold Project is required.

Figure 10. Gault Prospect - Local Geology Map (Source: after BHP-Utah, 1988)

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Figure 11. Gault Prospect Long-Section (Source: Auzex, 2012)

Several different rock types were identified at Gault through mapping and limited drilling. Kuhns (Woad 1988) identified three principal lithological groups: pyroxene-dominated (mafic-volcanic derived) gneiss; feldspar-dominated (sedimentary-derived) granulite; and various granitic rocks. However, it has not been possible to construct a coherent stratigraphic succession due to poor outcrop and lack of drilling outside of the Gault prospect. Woad (1998) listed the following rock types identified from RC and diamond drilling with drill hole logging codes used by BHP in brackets:

Pyroxene- plagioclase-amphibolite granulite (GLM)

Feldspar – biotite amphibole –pyroxene granulite (GLM2)

Feldspar – biotite – quartz granulite (GLS)

Feldspar quartz granite (GLF)

Hornblende/biotite granite (GLF2)

Garnet bearing granite (GLF3)

Granite gneiss (GLG)

Hydration/porphyroblastic pods of hornblende + pyroxene +biotite (within GLM and GLM2)

Hornblende + biotite + plagioclase (in GLS)

Diorite dykes (DIO)

Dolerite dykes (DOL)

Mineral assemblages in granulites indicate peak metamorphic conditions of 675-775°C temperature and 3.0-4.5 kb pressure, equivalent to upper amphibolite to lower granulite facies.

Structural geology in the project area is complex, with interpretation hampered by poor outcrop. BHP drilled twelve oriented diamond drill holes in Gault that were used to assist in structural interpretation. All four Auzex diamd drill holes were orientated and structural measurements on quartz veins in THDD001 have an average orientation of 50º dipping towards 190º. Structural

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measurements taken from quartz veining in THDD002 have a shallower average orientation of 20º towards 240º.

Kuhns (Woad 1988) interpreted the Gault area as an open, northeast-trending synform folding earlier layer-parallel foliation and recumbent folds. He recognised three main deformation events as shown in Table 5. Gold mineralisation was interpreted to pre-date the earliest deformation fabric.

Table 5. Deformation Events at Tampia Interpreted by Kuhns (1988).

Event Fabric Other Relationship to mineralisation

D1

Strong penetrative S1 foliation sub-parallel to gneissic banding. Dips 45° to 120 on northwestern side of Gault prospect

Shears and asymmetric folds (F1) sub-parallel to S1 with hinges plunging 17° to 120

F1 folds deform sulphides

D2

Upright, open, northeast-striking synformal fold axial plane (F2) plunging 8° to northeast

Intrusion of granitic sills and veins Minor gold remobilisation

D3 Low to high angle brittle faulting striking NNE Possibly related to Proterozoic dykes No effect on mineralisation

Baxter (Woad 1988) carried out structural analysis work on oriented diamond drill core and proposed a different structural model. Baxter’s earliest event, D1, is related to mineralisation and is essentially the same as that recognised by Kuhns, but with F1 fold hinges plunging to 135°. There is no open F2 folding event in Baxter’s model, with the Gault area interpreted as an inclined, tight, F1 fold. D2 deformation is interpreted as being related to “sinistral shearing” on a shallow NE-dipping surface, with associated “pressure shears” and folding. Weak D3 and D4 events were also recognised, but the exact nature of these was unclear.

Rafty (1998) reported that check mapping in the vicinity of Tampia Hill over the Gault prospect indicated that many of the outcrops marked on BHP maps were either float or calcrete. Rafty also commented that the extent of outcrops appears to have been exaggerated and that much of the BHP ‘mapping’ was information projected from drill section interpretation. There is clearly a need for detailed surface mapping over the core Tampia Hill project licences to refine structural models of mineralisation.

4.4.3 Mineralisation

According to Kuhns (1988), gold at Gault is dominantly disseminated throughout, or concentrated within, pods of hornblende-biotite-pyroxene and hornblende-biotite-plagioclase within pyroxene and biotite-bearing mafic granulites. Minor remobilised gold is hosted by fractures in granites, but does not occur within metasedimentary granulites, or gneisses. The association of gold with biotite rich mafic granulite was also reported by Nexus Minerals (2000). Kuhns (1988) states that gold occurs with disseminated non-magnetic pyrrhotite, arsenopyrite, chalcopyrite and rare pyrite. Nexus Minerals report that pyrite and arsenopyrite are the dominant sulphides, with pyrrhotite being rare. Total sulphide contents of mineralised intersections are between 5% and 10%, with a maximum estimated 15% sulphide in Nexus drill hole NRC20 from 97-98 m depth. Sulphides occur along S1 foliation planes and are folded by F1 minor folds.

Mineralisation grading more than 1 g/t Au occurs in elongate to ellipsoidal pods that vary in size from 1-10 m thick, 50-150 m wide (east-west) and 50-200 m long (north-south). Four zones were identified by BHP in the north of the prospect, with another two zones in the central and southern parts. Average grades within a zone >1g/t Au vary between 1 to 5 g/t Au over 5-10 m intervals. The northern zone has yielded the best grades, with selected results from BHP and Nexus drilling programmes given in Table 6.

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Very high grade mineralisation (>50 g/t Au over 1 m intervals) was encountered in one area by BHP through RAB and diamond drilling (GDH01). Gold occurs as free grains within apparently remobilised and deformed quartz pods and veins, which is atypical of mineralisation in the remainder of Gault.

A four-hole diamond drill hole programme was designed by Auzex to test the historical data at the Gault Prospect and to test geophysical data and gather geological data in the wider Tampia Hill Project area. Drilling results from the diamond drilling programme have confirmed the two historic NW-SE trending gold and arsenic rich ore zones intersected by BHP and Dry Creek Mining in the upper and lower sections of the Gault Prospect. (Table 6)

Table 6. Selected mineralised intersections*

from BHP and Nexus Minerals drilling, Gault prospect.

Company Drill Hole Hole type Interval from-to (m) Gold grade (g/t)

BHP

GDH01 diamond 19-28 20.30



GR001 RAB 10-24 17.90

GR003 RAB 13-25 19.80

GR004 RAB 12-25 3.70

GR026 RAB 16-25 16.50

GR028 RAB 8-15 59.30

GR235 RAB 16-25 2.40

GR236 RAB 10-20 3.20

GR238 RAB 9-21 4.10

GR411 RAB 81-95 3.80

Nexus

NRC12 RC 13-21 2.20

NRC13 RC 57-69 5.03

NRC14 RC 26-30 7.12

NRC15 RC 51-58 1.13

NRC16 RC 31-39 10.26

NRC16 RC 42-56 7.06

NRC17 RC 32-42 1.83

NRC18 RC 11-20 7.73

NRC19 RC 9-13 2.71

NRC20 RC 89-104 1.77

NRC21 RC 84-87 12.88

* Intervals are not true widths of mineralisation

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In the cross section shown in Figure 12, it appears that steeply dipping quartz veining in THDD001 could have a listric shape and flatten out at depth towards THDD002. There is very little, to no, infill drilling between the two mineralised zones intersected in THDD001 and THDD002 to confirm if the zones are continuous. MA considers there is potential for mineralisation to extend between the two drill holes to defined a zone over 365 m down-dip length with grades up to 22 g/t Au (based on historical intersects).

Figure 12. Section View of THDD001 and THDD002, Looking West.

(THDD001 and THDD002 as black solid lines. Blue surfaces are the interpreted quartz vein orientation from both holes. Yellow shells are interpreted grade shells created from historical data, at a cut off grade of 0.5g/t. pink sold lines is the interpreted grade intersected in

both holes.)

4.4.4 Metallurgical Testwork

Six samples were submitted to Oretest in Perth for metallurgical testwork by Nexus Minerals from their 1999 RC drilling programme. In total 18 m of sampling from two RC holes were composited to give a single test sample with a head grade of 2.25 g/t Au. Samples were all from fresh, unoxidised material (minimum downhole depth of 84 m). Cyanidation at a grind size of 75 µm yielded a gold recovery of 45.3% (0.96 g/t Au). Oretest concluded that the remainder of the gold was sulphide occluded, i.e. refractory; although it is not known which sulphide phase contains the gold.

Oretest recommended further testwork was necessary to determine the optimal treatment path for refractory gold.

4.5 MINERAL RESOURCES

A public release from Explaurum dated 30th April 2015 included details of a Mineral Resource Estimate of the Gault deposit undertaken by Auzex and reported in accordance with the guidelines of the JORC 2012 code. Auzex utilised all historic data, which was verified using the results from Auzex’s drill programme.

Inferred Mineral Resources for Gault reported at a cut-off grade of 1 g/t Au are 4,700,000 tonnes at an average grade of 2.0 g/t Au for 310,000 oz of gold. Estimation was carried out using the inverse distance squared method constrained within three dimensional mineralisation domains defined using 0.2 g/t Au grade shells. A single value for dry density of 3.05 t/m3 was used for all mineralised blocks, which is considered appropriate for the mafic host lithology.

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4.6 EXPLORATION POTENTIAL

The Tampia Hill and Dumbleyung Project areas are considered prospective for orogenic gold mineralisation. Regionally the Tampia Hill Project lies approximately 10 km east of a major transcrustal structure evident on GSWA aeromagnetic imagery, which is most probably the main controlling structure for mineralisation. Second- or third-order faults associated with this major structure are the main targets for gold deposition, although remobilisation during metamorphism also needs to be considered. Granulites with mafic and sedimentary protoliths intersected by drilling at Gault indicate that the project area covers a greenstone remnant that was subjected to high grade metamorphism. The geological setting is similar in nature to other gold deposits/prospects in southwest WA, such as Griffins Find (100 km south of Tampia Hill) and Ausgold’s Katanning Project (160 km south-southwest of Tampia Hill).

Significant gold mineralisation with locally high grade shoots is present in the Tampia Hill Project area at the Gault prospect. Shallow gold mineralisation has also been discovered from drilling at Emu Hill. It is not clear from the reports provided to MA whether a 3D model of mineralisation exists for the Gault prospect, or whether there is a clear understanding of the structural geology in the area. Auzex is currently undertaking work to resolve these issues so that further exploration in the licenses can be effectively targeted.

Meridian (2006) undertook a review of previous exploration and concluded that there were a number of soil anomalies identified during BHP sampling on the core Tampia Hill tenements that have not been followed up. Furthermore, Meridian considered, and MA would concur, that the threshold of 50 ppm used by BHP for soil anomaly follow-up was too high by modern gold exploration standards and led to Gault as the sole focus of nearly all subsequent work. Application of a lower (20 ppb) threshold to soil results yields a number of anomalies in the core Tampia Hill tenements that require testing.

Gold mineralisation previously defined in shallow drilling at Emu Hill requires further work to determine if more follow-up is required. Other Western Australia tenements need early stage sampling programmes to define drilling targets.

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5 NORTH QUEENSLAND PROJECTS


North Queensland projects comprise 8 granted exploration licences and one exploration licence (EPM14117) submitted for surrender. As at 5th May 2015 the Queensland Department of Natural Resources and Mines had not relinquished EPM14417. All tenements are 100% owned by Auzex. Tenements are centred between 100 km and 180 km SW of Cairns (Figure 13).

Table 7. Auzex Exploration Limited - Mineral Tenements in North Queensland

Tenement Data Auzex Ownership

% Status

Tenement Application Date Grant Date Expiry Date Sub-

blocks Area sq km

EPM 14417 01 Dec 2003 06 Jan 2005 05-Jan-2016 8 26.1 100

Under relinquish

ment

EPM 14418 01 Dec 2003 06 Jan 2005 05-Jan-2016 7 22.81 100 Verified

EPM 14797 22 Sep 2004 13 Jan 2006 12 Jan 2017 65 212.20 100 Verified

EPM 15570 26 Apr 2006 23 Aug 2007 22 Aug 2015 2 6.53 100 Verified

EPM 19112 01 Mar 2011 04 Mar 2014 03 Mar 2019 14 45.70 100 Verified

EPM 19113 01 Mar 2011 29 May 2014 28 May 2019 35 114.22 100 Verified

EPM 19114 01 Mar 2011 03 Mar 2014 02 Mar 2019 70 228.84 100 Verified

EPM 19203 03 May 2011 03 Mar 2014 02 Mar 2019 11 35.90 100 Verified

EPM 19305 25 Jul 2011 19 Jun 2013 18 Jun 2018 72 234.66 100 Verified

Total 900.86

Tenements are further divided into areas as follows: EPM 15570 “Khartoum North”, EPM’s 19112, 19113, 19114, 19203, 14797, 19203 “Khartoum”, EPM 14417 “Galala”, EPM 14418 “Fossilbrook” and EPM 19305 “Running Brook”

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Figure 13. Local access, infrastructure and topography, North Queensland projects Figure compiled by D G Jones from GSQ mapping

The North Queensland projects are well located near major sealed highways and numerous secondary roads. These connect the tenements to the city of Cairns (population 164,000 in July 2009) and the city of Townsville (population 182,000 in July 2009). Both cities are serviced by international airports, the main road and rail system in Queensland, and thriving ports. There is an active rail line between Chillagoe and Cairns. A branch line from Almaden to Mt Surprise via Lyndbrook is also still in service.

Documentation to surrender EPM 14417 was lodged with the Queensland Department of Natural Resources and Mines (DNRM) on 20 January 2014, but as at 11th September 2014 the licence has not been formally relinquished. EPM 14417 is shown on the maps in this report for completeness, but details of the geology and exploration are not included.

5.2 CLIMATE

The local climate is characterised by hot, rainy summers and a distinctly dry winter season (Figure 14). The nearest station for both temperature and rainfall records is Dimbulah, with continuous reporting from 1931-2004. Mean annual rainfall at Dimbulah is 775 mm, with mean monthly temperatures averaging 38° C in December and 25.6° C in June. Wind frequency data for the region shows that around 70% of winds come from the east, with average wind strength throughout the day of 20 kph, typical of a Trade Wind Coast. Rainfall results from a variety of systems, ranging from convergence related to summer upper-level troughs, orographic wave disturbances within the general easterly flow, weak tropical depressions through to fully developed tropical cyclones originating in the Coral Sea. The latter can cause prolonged high-intensity damaging winds and rain, preventing access for many days. Fortunately such occurrences are rare.

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Figure 14. Climate data, Dimbulah (1968-2013) Compiled by D G Jones from Bureau of Meteorology data

5.3 DISCOVERY & PREVIOUS EXPLORATION

Alluvial cassiterite was first discovered in the Herbert River in 1879 and the project area was subject to historical mining for gold, tin and other metals until prices reduced after World War 1 when only intermittent mining continued in the Herberton tin field. Total recorded production of cassiterite concentrate from 1879-1957 was 96,411 tonnes at 70% Sn. From 1937 through 1938, the Aerial Geological and Geophysical Survey of North Australia (“AGGSNA”) carried out reconnaissance geological mapping of the Herberton and Watsonville districts. The first company exploration began in 1957 when New Consolidated Goldfields (Australasia) Pty Ltd (“Goldfields”) commenced reconnaissance geological mapping of EPM 107 which covered 36,000 sq km of north QLD. The focus shifted to the Herberton tin field and compilation of mine data, and then to the Cooktown tin field. Ten large-diameter bores (total 60m) tested the alluvial potential of some river flats. Exploration since then is summarised in the following table. In all cases, part or the entire tenement overlaps the current granted tenements held by Auzex. The expenditure shown is in dollars of the day as reported to the GSQ. Where expenditure was not reported on open file it is shown as zero.

Table 8. Previous Exploration by Companies in Auzex North QLD EPMs

Year(s) EPM Sq km Company Spend Work undertaken

1959-60 150 2331 Rio Tinto $9037 Geol mapping

1960-66 164 580 Alluvial Gold Ltd $178440 Drilled 334 holes in Nettle Creek

1961-69 182 700 Tableland Tin $550000 Drilled 2000 holes in Return Creek

1962-64 185 386 BHP $60406 Test pits for Sn in Blacks & Return Cks

1963 United Exploration 0 Bulk sampling for Sn in Emu Creek

1963-64 189 111 CEC $27590 Drilled Montalban prospect

1964-65 253 33 Mineral Search $13239 Scout boring 35 holes for alluvial Sn

1966-69 319 226 Alluvial Gold Ltd $258737 Drilled 600 holes in Nettle Creek

1969-70 692 2763 ICI $246409 Drilling for Mo at Khartoum

1970 944 72 Dampier Mining $30000 Prospecting for fluorspar

1972-73 1038 30 CEC $20000 Drilled 3 core holes at Khartoum

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Year(s) EPM Sq km Company Spend Work undertaken

1972-73 1020 262 Samedan 0 Claret Creek Ring Complex base metals

1976-77 1609 262 Renison 0 Gilmore & Smiths Creek Sn pipes

1978-81 1888 327 Houston Oil $406380 Claret Creek Ring Complex base metals

1979-81 2105 164 Laloma $25790 Test pitting for alluvial Sn

1979-83 2155 262 CEC $292457 Drilling for Sn

1979-83 3624 193 Anmekia Pty Ltd 0 Pit sampling for alluvial Sn

1984-85 3727 327 AOG Minerals $74943 Claret Creek Ring Complex base metals

1984-85 3686 255 Esso $216657 Regional geochem, geophysics

1984-87 3973 4971 CRA 0 Bulk sampling for diamonds

1986 4336 327 Homestake $24035 BLEG sampling

1986-87 4289 131 Ravenshoe Tin 0 Claret Creek Ring Complex base metals

1986-87 4927 233 WMC $12957 Claret Creek Ring Complex base metals

1986-92 4030 327 AOG/Elders $567355 Regional work & drilling

1987-89 5274 301 WMC $115297 Regional geochem for Au

1991-92 7871 82 S Moroney 0 Geochem sampling

1992-94 8994 20 Auralia Resources 0 Geochem sampling

1992-97 8982 190 Dominion Mining 0 Geochem sampling & drilling

1992-96 8998 321 Poseidon Gold 0 Geochem sampling & drilling

1992-99 8812 Centamin Egypt 0 Geochem sampling

1993-94 9437 111 Cyprus Gold $300000 Geochem sampling

1993-94 9774 491 CRA 0 Geochem sampling for Cu-Au

1995 10280 190 BHP 0 Geochem sampling & geophysics

95-2000 10453 288 GTN Resources $19300 Data compilation

96-2001 11138 324 Capricorn Dolom 0 Geochem sampling

98-2005 8998 100 Diatreme 0 Ground mag, RC drilling

98-2000 10804 69 GTN Resources $14700 Geochem sampling

Auzex Resources Limited (AZX) commenced exploration in North QLD in 2005. The table below summarises exploration to date carried out by AZX.

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Table 9. Exploration carried out by AZX in the Auzex North QLD tenements

Year EPMs Expenditure Work undertaken

2005 14417, 14418 NA Geochem sampling

2006 14417, 14418 NA Geochem sampling

2006 14797 $234734 Geochem sampling

2007 14417, 14418 $675514 Geochem, RC (35 holes 3226m), core (2 holes 300m)

2007 14797 NA RC (9 holes 1185m) & 1 core hole (150m); prelim metallurgy

2007 15570 $21777 Data compilation



2008 14797 $454264 Geochem sampling, geophysics


2009 14417 $26196 Data review

2009 14418 $75563 RC (3 holes 340m)

2009 14797 NA Data review

2009 15570 $13635 Data review

2010 14417 $36282 Data review


2010 14797 $165494 Geochem sampling, geophysics

2010 15570 NA Data review

2011 14417 $22109 Data review

2011 14418 $41222 Data review

2011 14797 $50514 Data review

2011 15570 $7462 Data review

Auzex Exploration Limited commenced exploration in North QLD in 2012. The table below summarises exploration to date carried out by Auzex.

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Table 10. Exploration to date carried out by Auzex in the Auzex North QLD tenements

Year EPMs Expenditure Work undertaken

2012 14417 $31,843 Geochemistry, Geological mapping, geophysical modelling



2012 15570 $7,462 Data review

2013 14418 $15,000 Data compilation (approximated)

2013 14797 $227,136 Data compilation, Prospectivity modelling, 3D modelling

2013 15570 $12,278 Data compilation,

2014 14417 $5,000 Review and relinquish

2014 15570 $40,000 prospectivity modelling, 3D modelling (approximated)

5.4 GEOLOGY & MINERALISATION


The early-middle Paleozoic Hodgkinson Province succession forms the northern part of the Tasman Fold Belt. The province is the most extensive element in the Cairns Region, where it forms a belt about 500 km long and up to ~150 km wide. It is separated from the coeval Broken River Province to the south by Carboniferous-Permian igneous rocks of the Kennedy Province and the northwest-trending part of the Palmerville Fault. Lithologies consist dominantly of sandstone, greywacke and siltstone with limestones occurring along the western margin. To the west, the Palmerville Fault defines the boundary with the Proterozoic high-grade metamorphic and associated intrusive rocks of the Dargalong and Yambo Inliers.

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Figure 15. North Queensland Granite Province Figure compiled by D G Jones from GSQ mapping

The Dargalong Inlier was intruded by numerous Early Silurian age leucogranitoid bodies (Blackman Gap Granite Complex). Both the Dargalong Inlier and adjacent Hodgkinson Province were intruded by numerous I- and A-Type granite plutons of Late Carboniferous-Permian age that belong to the Townsville – Mornington Island belt. Three major I-type supersuites and one minor I type supersuite have been identified, namely the Almaden, Ootan, O’Briens Creek, and Claret Creek Supersuites (Champion, 1991).

The O'Briens Creek Supersuite in the region consists of highly fractionated characteristically pale pink to white, alkali-feldspar-rich biotite granites, leucogranites and microgranites, some of which are porphyritic and some of which are miarolitic. The supersuite includes the Go Sam and Nettle Suites of Johnston (1984), the Emu Suite of Pollard (1984, 1988) and Witt (1985), and the Herberton Suite of Clarke (1990). Small bodies of relatively felsic (mostly fractionated), fine grained, commonly miarolitic and/or porphyritic, granite are abundant; some of these contain topaz and/or fluorite.

Plutons of the O'Briens Creek Supersuite intruded the Etheridge Group, Dargalong and McDevitt Metamorphics (Paleoproterozoic), and the Blackman Gap Granite Complex; and the Hodgkinson Formation. They were intruded by granites of the Ootan and Claret Creek Supersuites, and were overlain (or faulted against) volcanic rocks of the Featherbed Group, Nanyeta, Boxwood, Slaughter Yard, Pratt, Glen Gordon and Walsh Bluff Volcanics.

5.4.2 Local Geology

5.4.2.1 EPMs 14797 “Khartoum”, 15570 “Khartoum North”, 19112, 19113, 19203 & 19114

Basement geology in the Emuford area consists of sandstones and mudstones of the Devonian age Hodgkinson Formation. These sedimentary rocks were intruded by granites of the Ootan and O’Briens Creek Supersuites. Pollard (1984, 1988) subdivided the granites in the Emuford area into two main types based on grain size and field relationships (Donchak and Bultitude, 1994): early

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granites and late-stage granites; the Late Carboniferous Emuford Granite being the most extensive of the early granites (Figure 16 and Figure 17).

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Figure 16. Local geology, EPMs 14497 15570, 19112, 19113, & 19203 “Khartoum” Figure compiled by D G Jones from GSQ mapping

Figure 17. Local Geology: Carbonate Creek EPM19114

The Emuford Granite forms a relatively large pluton (>200 sq km) and underlays approximately 75% of the Khartoum permit (Figure 16). The Emuford Granite is composed in the main of a coarse grained granite which is intruded by numerous small bodies of fine and medium grained, mainly sparsely to moderately porphyritic biotite granite and adamellite (late-stage). Most of the late-stage granites form dykes, sheets and small plutons (<10 sq km) which occur along the margins and within the early granites. The late-stage granites have generally sharp contacts although Pollard and Auzex geologists have found local evidence of gradational contacts. The most extensive of the late stage granites is the Billings Granite which forms a sheet-like body in the northwest of the permit.

Granite and diorite and associated volcanics assigned to the Ootan Supersuite form part of the Gurrumba Ring Complex 1 km west of the Great Boulder deposit in the Khartoum permit area and surround and intrude an inlier of sandstone and siltstone of the Hodgkinson Formation.

In the south of the tenement area there is a volcanic sequence (Nanyeta Volcanics) of rhyolitic to andesitic composition interpreted as comagmatic with the O’Brien Creek Supersuite. The Featherbed Volcanics lie off the northern bounds of the tenement. Adjacent and to the west of the Nanyeta Volcanics is a narrow north-west trending exposure of Silurian Chillagoe Formation.

5.4.2.1 EPMs 14418 “Fossilbrook”, 19305 “Running Brook”

The Llyndbrook project area is comprised of three exploration permits – EPMs 14417 “Galala” (in process of relinquishment), 14418 “Fossilbrook” and 19305 Running Brook. Late Carboniferous –

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Early Permian granites from the Late Carboniferous O’Briens Creek and Ootan Supersuites make up 50% of the Lyndbrook Project area and intrude the Silurian granites/granodiorites of the Blackman Gap Granite Complex that make up the other half of the area (Figure 18).

Figure 18. Local Geology: Lyndbrook Project Figure compiled by D G Jones from GSQ mapping


Alteration, especially greisenisation, is extensive and most, if not all O’Briens Creek Supersuite rocks contain some Sn ± W ± Mo ± F mineralisation. Most of the tin mineralisation in the Herberton, Irvinebank, Emuford, Mt Garnet and Tate River areas is intimately associated with granites of this supersuite. Tin mineralisation occurs mainly in veins, pipes and breccias within shear zones and fractures in Hodgkinson province sediments adjacent to granite contacts and in veins, pipes and disseminated deposits in granite or at the contact with Hodgkinson sediments. Estimated total production from the Herberton-Mt Garnet Tin field is more than 150,000 tonnes of cassiterite concentrate with close to half (70,000 tonnes) mined from primary lode deposits.

Tin mineralisation occurs mainly as fracture-controlled fissure filling and/or replacement bodies. Ore types are diverse (Pollard, 1984) with the most prominent types including chlorite-, sericite-, tourmaline-, and sulphide-rich assemblages. Greisenisation with associated quartz veins is common within the granites, and quartz-cassiterite veinlet swarms are associated with albite-rich lenses and albitised granite at Mt Misery near Irvinebank. Skarn-type mineralisation occurs in altered carbonate rocks near Mt Garnet and tin mineralisation is associated with hydrothermally altered basic volcanics in the Silver Valley and Sunnymount districts.

Tungsten occurs either in association with molybdenum, bismuth or tin, or as a sole commodity generally in quartz vein lodes or greisen veins. Wolframite is the dominant species. Tungsten and bismuth ores associated with molybdenite occur in flat lying greisen lodes occupying joints in granite in the Gows area. Pollard (1994) reported that at several localities in the Emuford district wolframite mineralisation appears to be associated with relatively late fine-grained granite and/or pegmatite.

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Greisen deposits commonly have central cores of quartz and fluorite with abundant large wolframite crystals.

5.5 EXPLORATION RESULTS AND POTENTIAL

5.5.1 EPMs 14797 “Khartoum” & 15570 “Khartoum North”

Exploration by Auzex since 2006 has defined six prospective areas for tin and tungsten, with gold potential of the area remaining fully untested (Figure 19). The six prospects are:

Great Boulder Group in the south (centred on the Great Boulder Mine with production 182 tons cassiterite).

Denford Group in the centre (centred on the Denford and related mines). Normanby Group centred on the abandoned township of Emuford. Right Bower group, centred on the twin historical mines of Right Bower and Omeo. Gows group (or Glen deposits) in the central east. Excelsior group in the southeast near the old township of Brownsville.

Figure 19. Main prospects - EPMs 14797 and 15570 Figure supplied by Auzex

Regional mapping and soil sampling initially identified a 9 km by 3 km zone of highly anomalous tin geochemistry with 15 key areas that have soil values up to 1.8% tin and 10% of the samples returned

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greater than 0.05% Sn. The high grade tin values are developed in soils that form on zones of greisen alteration. The greisen zones are flat-lying or steeply dipping and can be mapped over a 1 km strike length and are up to 50m wide.

Channel sampling was followed up by five RC holes and one HQ diamond hole, for a total of 528m (384m RC, 144m DD). Most holes were designed to test down-dip continuations of outcropping greisen bodies with lower priority drill-targets including structurally controlled linear greisen, soil anomalies and some conceptual targets. Most holes were designed to finish in unmineralised granite. All holes intersected the targeted greisen mineralisation and visible coarse cassiterite was logged in the diamond drill hole within the greisen alteration. Mineralisation was intersected over wide intervals from the surface to a depth of 132m with grades of mineralisation between 0.13% and 0.26% Sn intersected. Narrow zones of high grade tin were also intersected within the broader intersections with 1m at 1.76% Sn from 13m and 1m at 1.10% Sn from 102m in BARD07-05 and 1m at 3.00% Sn from 44m in BARC07-02. The drilling results compare well with the surface sample results.

Of 107 greisens mapped and sampled on the surface, 45 greisen bodies average greater than 0.10% Sn and Auzex estimated tonnage per vertical metre at about 250,000 tonnes per vertical metre at 0.18% using a SG of 2.55. Given many of the greisens form 20-30m hills and drilling intersected mineralisation to a depth of 135m, Auzex assumes that the greisens can be mined to a depth of 150m. This gives a reasonable target for the project of approximately 40 Mt at an average grade of about 0.2% Sn, which is a typical average grade for tin greisen deposits. However, MA would caution that there is no guarantee that this target will be achieved with further exploration.

Initial metallurgical test work, performed on diamond drill core comprising fresh greisen mineralisation, returned a combined tin recovery from gravity and flotation of 71%. This result is considered highly encouraging because significant improvements are likely to be made with modification to grinding and flotation circuit parameters. Mineralogical studies indicate the cassiterite is generally of fine grained (<100μm), free from sulphide and contains only trace stannite (an uneconomic tin mineral). The greisen mineralisation is also anomalous in silver, indium and gallium associated with recoverable zinc and copper sulphides.

5.5.2 EPM 19114 “Carbonate Creek”

Carbonate Creek is a recently granted tenement and forms part of the Khartoum project. The tenement has good tin potential around and along strike from the Kitchener Tin Prospect. Significant occurrences of W and Sn exist on the property.

The bulk of production from the Kitchener area came from a single line of lode 1.3 km in strike length. The Kitchener Tin Project comprises several historic mines, the larger You and Me, Kitchener, Kitchener Extended, Black Rock and Eclipse workings, extending south to the General White, Great Western and Thea mines. The mines were discovered in 1891 and have been intermittently worked up until open pit mining in 1978 at the You and Me mine.

Incomplete records show 2,760 tons of cassiterite concentrate (containing ~71% tin metal) was produced at an average grade of 1.83% Sn. EPM19114 surrounds these mining leases.

5.5.3 EPM 14418 “Running Brook”

The Running Brook prospect is located 36 km north of Mount Surprise township and lies directly adjacent to one of the main access tracks to the area 5 km west of Burlington Station homestead (Figure 20). The topography is undulating with only limited outcrop.

The prospect comprises 5 hard rock historical copper workings and was originally included in the Auzex exploration portfolio because of its high prospective potential for Au. Limited stream

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sediment and rock chip sampling by CRA returned highly anomalous results for Au and Cu with maxima of 130 ppb Au in streams and 0.81 ppm Au in rocks.

First phase mapping determined Running Brook comprises a large body of moderate to strongly foliated, fine to medium-grained orthogneiss or paragneiss. The unit is dominantly derived from a biotite rich protolith, with layering varying from 1 cm to >10 m. Alteration within the gneiss varies from unaltered to weakly sericite or chlorite altered.

Figure 20. Local geology, EPM 14418 “Fossilbrook” & EPM 19305 “Running Brook” Figure compiled by D G Jones from GSQ mapping

Intruding the gneiss at the southern end of the prospect is an unfoliated, porphyritic unit with a fine grained groundmass. The overall composition of the unit is granitic to dacitic. Projecting out from this stock are a number of dykes with variable width (0.5 to >20 m) and a sub-radial outcrop pattern; although most dykes appear to dip moderately to steeply west. This unit is pervasively silica-sericite ± chlorite altered with intensity varying from moderate to strong.

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Figure 21. Local geology, Running Brook Prospect Figure compiled by D G Jones from Pilcher (2010)

Initial soil sampling by Auzex identified a 30 ppb Au in soil anomaly defined over a 1 km x 300 m area. Sampling also highlighted a 150 ppm Cu in soil anomaly measuring 1 km x 500 m that partially overlaps the gold in soil anomaly to the north. Results from follow-up sampling confirm the prospectivity of the region with coherent gold and copper anomalies defined over 900 m x 200 m and 1,700 m x 800 m areas respectively. The anomalies overlap but are offset from each other. Work completed to date includes:

Digital data compilation of previous geochemical data over the permit area. Minus 80# (mesh) soil sampling completed at Running Brook over a 4.2km x 3.1km area

(n=1033). Detailed geological mapping and rock chip sampling (n=121). Four costeans excavated and sampled across Au and Cu soil anomalies at Running Brook for

a total of 1040m. Costeans were sampled as 2m composites and submitted to ALS Townsville for analysis for Au via Au-AA21, Sn via XRF05 and Ag, As, Bi, Cu, In, Ge, Ga, Mo, Pb, Sb, W and U via ME-MS62s.

A drill program comprising a total of 9 RC holes and 2 HQ diamond holes, for a total of 1196.7m (896m RC, 300.7m DD) at the Running Brook Prospect.

Ground based magnetic survey over a 4km x 4.5km area covering the main soil anomaly. F

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Drill holes intersected broad zones of weak to moderately anomalous gold in chlorite-sericite altered gneiss. All holes were drilled on an azimuth of 120° at a 60° angle. The results are summarised in the table below:

Table 11. Auzex drilling results, Running Brook prospect

Hole No. Easting Northing RL m Length Mineralisation

RBDD 01 218870 8027403 423 150.1m 5m @ 0.15 g/t Au from 39m

RBDD 02 218670 8027290 418 150.6m 150.6m @ 0.037 g/t Au

RBRC 03 218699 8027277 415 100.0m 100m @ 0.13 g/t Au

RBRC 04 218752 8027252 414 120.0m 113m @ 0.18 g/t Au

RBRC 05 218769 8027343 414 114.0m 114m @0.05 g/t Au

RBRC 06 218805 8027322 419 102.0m 5m @ 0.72 g/t Au from 43m

RBRC 07 218851 8027296 420 100.0m 90m @ 0.23 g/t Au

RBRC 08 218614 8027216 412 108.0m 108m @0.026 g/t Au

RBRC 09 218660 8027188 414 96.0m 92m @ 0.1 g/t Au

RBRC 10 219235 8027908 424 78.0m 5m @ 0.13% Cu from 35m

RBRC 11 219173 8027935 426 78.0m 7m @ 0.2% Cu from 11m

TOTAL: 1197m

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6 NEW SOUTH WALES PROJECTS

Auzex has one exploration licence at Kingsgate and one exploration licence application at Junction Reefs (Table 12), both 100% owned by Auzex. Since Junction Reefs is still under application, MA has not included detailed descriptions of the project apart from its location and will not be considering the area as part of its valuation of Auzex’s assets.

Table 12. Auzex Exploration Limited - Mineral Tenements in NSW

Tenement Data Auzex Ownership % Status

Tenement Grant Date Expiry Date Sub-blocks Area sq km

EL8203 18 Nov 2013 18 Nov 2016 8.94 100 Verified

ELA 4402 Application 12 Oct 2011 44 125.87 100 Verified


6.1.1 Kingsgate

EL 8203 “Kingsgate” is located 25 km east of Glen Innes (population 6,000 in the 2010 census). The tenement lies on the dissected eastern edge of the New England Plateau (Figure 22). Topography varies from minor areas of undulating agricultural land to extensive areas of heavily timbered mountainous terrain, frequently dissected by spectacular gorges. Access is provided by numerous fire trails and farm tracks.

Figure 22. Kingsgate tenement, Glen Innes area, New England (Source: Google Maps, 2014)

The New England Highway passes close to the Auzex tenement, and a comprehensive network of local highways and roads provides excellent access. The area has a long history of mining (including

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tin, gold, wolfram, molybdenum and sapphires) and grazing (sheep and cattle). Cropping, orchards and vineyards are becoming more significant every year.

The rural centre of Glen Innes (population 6,000) provides limited engineering support services to the dominantly rural industries in the area.

6.1.2 Junction Reefs

In October 2011, Auzex made application for 44 sub-blocks (125.87 sq km) in the Bathurst-Orange district of NSW. ELA 4402 “Junction Reefs” is centred about 35 km south of Orange and 30 km WSW of Bathurst. It lies 20 km due south of Newcrest’s Cadia mines complex, and 25 km SW of the town of Blayney (Figure 23).

There are numerous known gold and copper occurrences within the ELA, of which the largest is the former skarn copper-gold mine of Sheahan-Grants. Auzex considers the area to be prospective for intrusion-related copper-gold deposits, of which the adjacent Cadia mines are prime examples.

The grant of any ELA can never be certain. If the ELA is granted, the boundaries may be different from those that were in the application, subject to competing land use priorities as determined by the government. Nevertheless, if Auzex is granted ELA 4402, it is very favourably located and in an area demonstrably rich in copper-gold intrusion-related deposits.

Figure 23. Location and access, ELA 4402 Compiled by D G Jones from mapping published by Geoscience Australia

6.2 CLIMATE

Glen Innes is close to Guyra, the coldest town in New England (record minimum -11°C). Frosts are common overnight in winter, although the days are generally clear, mild and sunny. In summer, maximum temperatures often reach 38°C, and peak rainfall occurs at this time, generally from thunderstorms.

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Figure 24. Climate data, Glen Innes 1907-2012 Compiled by D G Jones from Bureau of Meteorology data

6.3 DISCOVERY & PREVIOUS EXPLORATION

Bismuth was discovered on Yarrow Creek Station in 1877 (Kenny, 1924). Mining commenced prior to the 1883 visit by Chief Government Geologist (Andrews, 1916). He noted that the Mo pipes were clustered along the margins of the granite. Approximately 380t of bismuth concentrate and 175t of molybdenite concentrate was produced between 1880 and 1922. There was sporadic production from 1922 to 1951. At Glen Elgin, records of mine production commenced in 1892, although alluvial mining may have commenced as early as 1853. From 1892 to 1940 a total of 742t of tin and 10,252 oz of gold production was recorded. The Surprise molybdenite mine was worked during the 1920s and 1930s but not records of production are available. The first company exploration reported commenced in 1964, when Carpentaria Exploration Company Pty Ltd (“CEC”) undertook tape and compass mapping of 150 acres around the Glen Eden molybdenum prospect. CEC drilled 79 percussion holes (2,103m). Most assays were below their 0.4% Mo cut-off.

Exploration since then is summarised in the following table. In all cases, part or the entire tenement overlaps the current granted tenements held by Auzex. The expenditure shown is in dollars of the day as reported to the GSQ. Where expenditure was not reported on open file it is shown as zero.

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Table 13. Previous Exploration by Companies in Auzex New England granted EL

Year EL Company Expenditure Work undertaken

1964 CEC $14721 Percussion drilling (79 holes 2103m)

1969-70 162 North BH $15859 Geochem sampling

1969-72 AOG Minerals $208601 Geochem sampling, percussion drilling

1969-72 195 Eastmet $151994 Geochem sampling, airborne geophysics

1971 383 Glendale $17209 Geochem sampling , mapping

1972 455 Kingsgate Mining 0 Data compilation

1974-75 715 Buka Minerals $4121 Geochem sampling

1978-82 1084 Amoco Minerals 0 Geochem sampling, percussion drilling

1981 Aerospace Metals $11065 Bulk sampling, metallurgy

1981-82 1644 Amoco Minerals $7077 Geochem sampling

1988-92 G&J Gem Merchants $80000 Sampling, ground mag, RAB drilling

2001-02 5858 Tamas Kapitany 0 Data review

2002-03 5836 Great Northern 0 Sapphire search

$510647.00

In dollars of the day, identified expenditure in the area prior to the entry of Auzex is $510,647. Escalating the expenditures using the Consumer Price Indices published by the Reserve Bank of Australia gives an equivalent expenditure in 2011 dollars of at least $5.5 million.

Auzex Resources Limited commenced exploration in New England in 2005. The table below summarises exploration to date carried out by Auzex Resources Limited.

Table 14. Exploration carried out by AZX in the Auzex New England tenement

Year Expenditure Work undertaken

2005 $201461 Geochem sampling, ground radiometrics

2006 $803042 Geochem sampling, IP, RC drilling (38 holes 1268m)

2007 $2077412 Geochem sampling, IP, RC drilling (83 holes 4169m)

2008 $2300633 Geochem sampling, airborne geophysics, RC (252 holes 12136m)

2009 $87028 Data review & feasibility study on Kingsgate

2010 $103877 Data compilation, RC drilling (5 holes 492m)

2011 $42618 Data review

2008 $78360 Geochem sampling

2008 $454264 Geochem sampling, geophysics



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2009 $75563 RC (3 holes 340m)

2009 0 Data review




Auzex Exploration Limited commenced exploration in New England in 2011. The table below summarises exploration to date carried out by Auzex Exploration Limited.

Table 15. Exploration to date carried out by Auzex on the New England tenement

Year EPM Expenditure Work undertaken

2011 6333 $15,077 Rehabilitation Reviews

2012 6333 $13,310 Data Management, Reconnaisance

2013 6333 $7,000 approx Rehabilitation reviews , data

6.4 GEOLOGY & MINERALISATION


The Upper Carboniferous to Triassic New England Batholith (“NEB”) has an outcrop area of ~15,000 sq km and intrudes the accretionary prism complexes of the southern New England Fold Belt (Shaw and Flood, 1981). It is composed of synorogenic, Late Carboniferous to Early Permian peraluminous S-type granitoids, and post-orogenic Permo-Triassic I-type intrusions. The I-type intrusions form a NNE trending 300 km long by 60 km wide belt and are interpreted to be products of a continental margin magmatic arc with Andean-type affinities (Chappell 1994). The intrusion-related gold deposits that are the focus of this appraisal are considered to be associated with Late Permian-Early Triassic I-type granitoids that intrude the accretionary prism rocks of the Coffs Harbour block.

Shaw and Flood (1981) subdivided the New England Batholith into the Bundarra, Hillgrove, Moonbi, Uralla and Clarence River suites based on distinct mineralogical, geochemical, isotopic and age criteria. Several economically-significant, fractionated and felsic granitoids were assigned to a separate “leuco-adamellite” group. Subsequently Chappell and Bryant (1994) renamed these groups Supersuites and reclassified the “leuco-adamellites” as leuco-monzogranite and incorporated many of them into the Moonbi Supersuite.

6.4.2 Local Geology

Late Permian-Early Triassic granitoids dominate the geology of EL 8203 “Kingsgate” (Figure 25). The Wards Mistake Adamellite is extensively developed and comprises coarse to medium-grained monzogranite-granodiorite (Undifferentiated granitoid in Figure 25). It has been intruded by the two main leucogranites in the area, the Kingsgate Leucogranite and the Red Range Microleucogranite. The Kingsgate Leucogranite is a very coarse-grained, equigranular biotite granite. The Red Range Microleucogranite is a fine- to very fine-grained saccharoidal, pink, equigranular microleucogranite.

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The Red Range Microleucogranite is considered to form the carapace to the Kingsgate Leucogranite. This region has high potential for intrusion related gold deposits (IRGD’s) due to the analogous geological setting to Timbarra.

Figure 25. Geology of the Kingsgate molybdenite pipe area, EL 8203 Figure compiled by D G Jones from mapping by GSNSW


The NEB has been a significant historical producer of tin and molybdenum. Estimated production of approximately 300,000 tonnes tin and 450 tonnes molybdenum were won from dominantly alluvial and hard rock sources respectively (Stroud et al., 1999; Weber et al., 1978). Timbarra represents the first significant disseminated intrusion-hosted gold deposit recognised in the NEB. This new class of gold deposit are now being recognised in tin-tungsten bearing magmatic provinces elsewhere around the world (Thompson et al., 1999).

The Kingsgate Leucogranite and the Red Range Microleucogranite host a range of Mo, Bi, W and Sn deposits. Mo-Bi-Ag±Au quartz pipes and veins are developed in clusters along the margins of the Kingsgate Leucogranite and the Red Range Microleucogranite (Figure 25). The Kingsgate and Yarrow Creek (Comstock) deposits are the best known examples of this mineralisation style. F

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6.5 EXPLORATION RESULTS & POTENTIAL

6.5.1 EL 8203 “Kingsgate”

Within EL 8023, detailed exploration commenced in late 2004 at Kingsgate. Trial mining was successfully completed in December 2006 with results forming part of a scoping study. Drilling of the quartz pipe which was the subject of trial mining revealed an average grade of 0.34% Mo and 0.64% Bi. The amount and grade of bismuth was unexpected and, if maintained, will add significant value to the project.

A scoping study for development of the project (based on an annual processing rate of 250,000 tpa at an average grade of 0.23% Mo and 0.23% Bi) was completed in June 2007. This study was based on production of separate Mo and Bi concentrates.

Best results from the resource drilling program include 5m at 1.35% Mo and 0.69% Bi from 42m and 7m at 0.70% Mo and 0.52% Bi from 43m. Drilling was successful in identifying individual mineralised zones (quartz pipes) with the results revealing a much larger scale of mineralisation than had been modelled.

Auzex idefined an Exploration Target of 1 Mt to 1.5 Mt of molybdenum pipe mineralisation at grades ranging from 0.20% to 0.25% Mo and 0.20% to 0.25% Bi. The target was based on 25 individual molybdenum pipes of which 11 were interpreted from geophysical data with the remainder evidenced by surface historical workings and exploration drilling.

A study for development of the hypothetical target was completed in December 2008, based on downstream processing of high purity silica, ammonium molybdate (or molybdenum trioxide), and bismuth metal or fusible Bi-Pb alloy. According to Auzex, the study indicated that if the Kingsgate resource target could be established, then the project would be attractive for development in the current market.

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7 VALUATION

The three generally accepted Valuation approaches are:

Income Approach. Market Approach. Cost Approach.

The primary methods used in this Valuation are the Market Approach and its derivative the Empirical Yardstick Approach, with Kilburn Geoscience Rating used as an alternative check on values of exploration projects.

7.1 CURRENCY AND EXCHANGE RATES

The currency used in this Valuation is the Australian dollar (“AUD”). In the case of comparing transactions carried out in other currencies, exchange rates utilized are the Monthly and Annual Noon Exchange Rate Averages published by the Reserve Bank of Australia (http://www.rba.gov.au/statistics/frequency/exchange-rates.html).

7.2 DATABASE

The database used for the valuations comprises public company announcements, annual reports, annual information forms, management discussions and analysis, news releases and statutory technical reports.

7.3 MARKET AND EMPIRICAL APPROACHES – COMPARABLE TRANSACTIONS, AUSTRALIAN GOLD PROJECTS WITH RESOURCES

MA researched transactions that occurred since January 2013 involving the acquisition of gold projects with published resources and only involving ASX listed companies as the vendor or purchaser. January 2013 was chosen as a cut-off date because it approximates the period during which gold prices dropped from around US$1600/oz to US$1300/oz. Since January 2013 the gold price has stabilised around US$1200-US$1300/oz.

In total there were twenty transactions involving sale and purchase of 100% of gold projects. Transactions were filtered to remove those that were not comparable with Tampia because they included mining assets, which left ten in total. Details of the properties and acquisition deals considered comparable to Tampia are given below, and summarised in Table 16. For all transactions, an AUD value per ounce of attributable contained gold was derived by taking the total purchase cost divided by contained gold ounces in resources. In one case where silver resources were also reported (Tunkillia), these were converted to a gold equivalent amount using a silver price of US$17.50/oz and a gold price of US$1300/oz.

7.3.1 Terramin – Bird in Hand, South Australia

On 19th July 2013 Terramin Australia Ltd (ASX:TZN) announced it had entrered intoa binding agreement to acquire 100% of the Bird-in-Hand Gold Project from Maximus Resources Ltd (ASX: MXR). Terramin agreed to pay AUD3,500,000 in upfront and staged payments conditional on the satisfaction of performance milestones, and 25 million ordinary Terramin shares (priced at AUD0.02 on the day of the announcement).

The Bird-in-Hand Gold Project is located approximately 30 km north of Terramin’s existing mining and processing facilities at the Angas Zinc Mine in the Adelaide Hills area of South Australia. The project had a total Resource of 598,000 tonnes at 12.3 g/t gold for 237,000 ounces mostly in Indicated and Inferred categories, which was considered amenable to underground mining.

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Assuming that all conditional payments were met, the deal valued 237,000 ounces of gold resources at $4,000,000 yielding an implied value of AUD16.88/oz.

7.3.2 Bullseye Mining – Melrose/Darlot East

On 13 January 2014, Korab Resources Ltd (ASX: KOR) announced the completion of the sale of its Melrose/Darlot East project to Bullseye Mining Ltd, an unlisted private company. Terms of the sale were a consideration of AUD1,500,000 in cash payable in three tranches.

Melrose-Darlot East is located in the Eastern Goldfields region of Western Australia, 160 km northwest of Laverton. In 2012 Korab reported JORC (2004) Mineral Reources for three deposits (Boundary, Bungarra and Stirling), totalling 6.56 Mt grading 1.61 g/t gold for 340,000 ounces gold, mostly in Indicated and Inferred categories with some Measured. Metallurgical testwork carried out in 2013 indicated amenability for heap-leach gold extraction for Boundary and Bungarra mineralisation with recoveries >87%.

The deal valued 340,000 ounces of gold resources at AUD1.5 million, yielding an implied value of AUD4.41/oz.

7.3.3 WPG Resources – Tarcoola/Tunkillia, South Australia

On 22nd May 2014 WPG Resources (ASX: WPG) entered into a binding Term Sheet agreement with Mungana Goldmines Ltd (ASX: MUX) to purchase 100% of Tarcoola and 72% of Tunkillia Gold Projects. WPG agreed to pay a non-refundable deposit of AUD150,000 while it undertook due diligence on the project. To complete the acquisition, WPG agreed to pay a further AUD1.35 million in cash and 7.5 million fully paid ordinary shares. WPG also agreed to pay a Net Smelter Return to Mungana on a sliding scale depending on gold price from 1% to 1.5%. WPG also agreed AUD1.25 million in a number of stages dependent on the achievement of certain milestones.

Tarcoola and Tunkillia are located 450 km northwest of Port Augusta in South Australia, within the Gawler Craton geological region. Mungana had undertaken resource estimates on both deposits in 2012. Tunkillia (WPG purchasing 72%) was estimated to contain 26.3 Mt grading 1.05 g/t gold and 3.0 g/t silver for 878,000 ounces gold and 2,500,000 ounces silver in Measured, Indicated and Inferred categories. Tarcoola (WPG purchasing 100%) was estimated to contain 0.973 Mt grading 3.12 g/t gold for 97,540 ounces gold. Two scoping studies had also been completed on the projects.

Assuming that all conditional payments were met, the deal valued 754,000 attributable gold equivalent resource ounces at AUD2.975 million, yielding an implied value of AUD3.95/oz

7.3.4 Ramelius Mining – Kathleen Valley, Western Australia

On 10th June 2014 Ramelius Resources Ltd (ASX: RMS) signed a sale and purchase agreement with Xstrata Nickel Australasia Operations Pty Ltd (XNAO), a subsidiary of Glencore plc, to acquire 100% of the Kathleen Valley tenements. Terms of the agreement were a single cash payment of AUD3,645,000 to XNAO.

The XNAO Kathleen Valley tenements are located 50 km north of Leinster in Western Australia and contain a JORC (2012) Mineral Resource of 1.44 Mt grading 2.8 g/t gold in Indicated and Inferred categories for 130,000 ounces of gold in three deposits - Mossbecker, Yellow Aster and Nils Desperandum. Scoping studies completed on the deposits indicated potential for open pit developments with low capital costs.

The deal valued 130,000 resource ounces of gold at AUD3.645 million, yielding an implied value of AUD28.04/oz. F

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7.3.5 Sovereign Gold – Mt Adrah, New South Wales

On 11th July 2014 Sovereign Gold Company Ptd (ASX: SOC) announced that it had increased its interest in Mount Adrah Gold Limited (private company) to 99.2% following a share purchase plan implemented on 17th June 2014. The announcement stated that the consideration for the total acquisition would be the issue of 64.7 million Sovereign Gold shares with a cash value of AUD3,100,000.

Mt Adrah owned several prospects in southern New South Wales on the same tectonic structure that hosts world-class intrusion-related Au and Au-Cu deposits at Northparkes, Cadia-Ridgeway and Cowal. Adrah’s main prospect, named Hobbs Pipe 1, was estimated to contain a total JORC 2012 Mineral Resource of 20.5 Mt grading 1.1 g/t gold for 770,000 ounces gold in Indicated and Inferred categories. The area was considered to have excellent potential for increasing the resource base and for additional discoveries.

The deal valued 770,000 resource ounces of gold at AUD3.1 million, yielding an implied value of AUD4.03/oz.

7.3.6 A1 Consolidated Gold – Walhalla, Victoria

On 29th August 2014, A1 Consolidated Gold Ltd (ASX: AYC) announced it had entered into an option agreement with Orion Gold NL (ASX: ORN) to acquire the Walhalla tenements. Terms of the agreement were payment of AUD10,000 on execution, AUD40,000 12 weeks from execution, an exercise fee of AUD500,000 cash plus AUD500,000 shares. Included was AUD240,000 to replace environmental bonds. Orion was to retain a 2% NSR on any future production.

Walhalla tenements cover approximately 80 km2 of strike in the Walhalla Goldfield of Victoria, covering historic mines. Inferred resources in three deposits (Tubal Cain, Eureka and Cohen’s) total 1.91 Mt grading 4.37 g/t gold for 268,400 ounces gold.

The deal valued 268,400 resource ounces of gold at AUD1.29 million, yielding an implied value of AUD4.81/oz.

7.3.7 Gasgoyne Resources – Egerton, Western Australia

On 24th September 2014 Gasgoyne Resources Ltd (ASX: GCY) announced it had exercised an exclusive option for the purchase of the Egerton Gold Project from Exterra Resources Ltd (ASX: ). Terms of the option were a consideration of 4,166,667 shares (AUD0.18 per share on date of announcement) plus 5000 options exercisable at 25c.

The Egerton project is located in the Gasgoyne region of Western Australia. It includes the Hibernian deposit, which has a JORC (2012) Mineral Resource totalling 116,400 tonnes grading 6.4 g/t gold for 24,000 ounces gold in Measured, Indicated and Inferred categories. Drilling at a second prospect in the project area intersected narrow high grade gold mineralisation.

The deal values 24,000 resource ounces of gold at AUD751,250, yielding an implied value of AUD31.30/oz.

7.3.8 Northern Star Resources – Hermes, Western Australia

On 24th February 2015 Northern Star Resources (ASX: NST) entered into an agreement to purchase 100% of the Hermes Gold Project from Alchemy Resources Ltd (ASX: ALY). Terms of the deal were payment of AUD1.45M cash, acquisition of Alchemy shares valued at $500,000, and payment of 1% NSR to Alchemy on gold produced >70,000 oz and less than 90,000 oz. Northern Star could also earn an interest in additional Bryah Basin projects held by Alchemy by spending $400,000 per year for 3 years.

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The Hermes Gold Project is located in the Bryah Basin region of Western Australia, and is within trucking distance of Northern Star’s Plutonic Gold Mine. The Hermes deposit contains JORC (2004) Mineral Resources of 3.3 Mt grading 2.0 g/t gold for 212,000 ounces gold in the Indicated category.

The deal values 212,000 resource ounces of gold at AUD1.95 million, yielding an implied value of AUD9.20/oz.

7.3.9 Fortuna Mining – Linden, Western Australia

On 13th April 2015 Extrerra Resources Ltd (ASX: EXC) announced it had entered into a project sale agreement for the Linden Project to Fortuna SL Mining Pty Ltd. Under the agreements, Exterra will receive a total consideration of AUD7,000,000 cash in three tranches. Exterra will also be granted a 2% gross royalty on the mining property.

The Linden project is located in the Eastern Goldfields of Western Australia, at the southern end of the Laverton Tectonic Zone. The project covers most of the historic Linden Goldfield, which produced about 34,500 ounces gold from small, high-grade mines. Exterra largely focused work on the Second Fortune deposit, where a pre-feasibility for the development of a high grade underground mine was completed in 2014. The PFS indicated that the mine would yield a positive cash flow of AUD17.3 million over 2.5 years. This study was based on a JORC (2004) Mineral Resource estimate of 478,000 t grading 8.5 g/t gold for 131,000 ounces gold.

The deal values 131,000 resource ounces of gold at AUD7 million, yielding an implied value of $53.44/oz.

7.3.10 GBM Resources – Mt Coolon, Queensland

On 13th April 2015 GBM Resources Ltd (ASX: GBZ) announced completion of its acquisition of 100% interest in Mt Coolon Gold Mines Pty Ltd, a wholly owned subsidiary of Drummond Gold Ltd (ASX: DGO). Consideration included cash of $850,000 (which was inclusive of $370,000 in financial assurance bonds), plus 50 million shares in GBM (valued at AUD0.02 each).

The Mt Coolon Project is located in the northern Drummond Basin region of central Queensland, 250 km west of Mackay. The region hosts several major gold deposits, including high grade epithermal gold veins at Pajingo, to bulk tonnage intrusive related gold stockwork/breccia style at Mt Leyshon. Mount Coolon Gold Mines reported JORC (2004) Mineral Resources totalling 5.174 Mt grading 1.7 g/t gold for 283,000 ounces gold in Measured, Indicated and Inferred categories.

The deal values 283,000 resource ounces of gold at AUD1.48 million, yielding an implied value of AUD5.23/oz

7.3.11 Discussion

As shown in Table 16, implied AUD/oz values for in situ gold resources in Australia purchased since 1st January 2013 vary between AUD4.0/oz to AUD53.4/oz. Of the ten transactions examined, five have AUD/oz values of AUD5.2 or less, with higher values spread fairly evenly between about AUD10/oz and AUD53/oz. The Linden project purchased by Fortuna Mining can be considered an outlier in the analysis and most probably attracted a premium value because a pre-feasibility study had been completed by the vendor.

Using implied AUD/oz values (but ignoring Linden), MA would consider a value of AUD5.5/oz as a preferred value for Tampia Mineral Resources, with a minimum of AUD4.0/oz and a maximum of AUD9.0/oz. Applying these figures to the Tampia Mineral Resource of 310,000 ounces and adjusting for Auzex’s 90% ownership gives a range of values from AUD1.1 million to AUD2.5 million with a preferred value of AUD1.5 M.

Four projects could be considered directly comparable to Auzex’s Tampia deposit on the basis of size and grade: Melrose, Walhalla, Hermes and Mt Coolon. Total consideration for three of these

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transactions was between AUD1.29 and AUD1.5 million, which MA would consider as a reasonable range for the value of Tampia. Hermes attracted a far higher consideration of AUD9.2 million, which was most likely due to its strategic importance and proximity to Northern Star’s Plutonic gold mine and MA does not consider the transaction to be a reasonable comparison to Tampia.

Table 16. Summary of Comparable Transactions, Gold Projects with Resources.

Project State Purchaser Acquisition date

% Purchased

Purchase price

(AUDM)

Attributable resource

ounces Au

Implied AUD/attributable

resource ounce Comment

Bird in Hand SA Terramin 19/7/2013 100% 4.0 237,000 16.9

Melrose/Darlot East WA Bullseye

Mining 13/1/2014 100% 1.5 340,000 4.4 similar size and grade to Tampia

Tarcoola/Tunkilllia SA WPG Resources 22/5/2014

100% Tarcoola,

72% Tunkillia

2.975 753,900 4.0

Kathleen Valley WA Ramelius Mining 10/6/2014 100% 3.645 130,000 28.0

Mt Adrah NSW Sovereign Gold 11/7/2014 100% 3.1 770,000 4.0

Walhalla VIC A1

Consolidated Gold

24/8/2014 100% 1.29 268,000 4.8 similar size and grade to Tampia

Egerton WA Gasgoyne Resources 24/9/2014 100% 0.75 24,000 31.3

Hermes WA Northern Star 24/2/2015 100% 1.95 212,000 9.2

similar size and grade to Tampia

Linden WA Fortuna Mining 13/4/2015 100% 7.0 131,000 53.4

Most advanced

stage project, had PFS

completed

Mt Coolon QLD GBM Resources 13/4/2015 100% 1.48 283,000 5.2

similar size and grade to Tampia

Median / Mean (after removing Linden) 5.2 / 12.0

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7.4 MARKET AND EMPIRICAL APPROACHES – COMPARABLE TRANSACTIONS, AUSTRALIAN EXPLORATION PROJECTS

MA researched transactions that occurred since January 2013 involving the acquisition exploration projects with no published resources and only involving ASX listed companies as the vendor or purchaser. Only those transactions involving 100% of a project were used in the analysis of comparable value and are summarised in Table 17. An implied AUD value per km2 was calculated as a means of applying values to Auzex’s tenements.

As shown in Table 17, there is a very wide range of implied values per km2. This is mainly because a large number of factors determine how much a purchaser is prepared to pay for an exploration project, including its perceived prospectivity (largely driven proximity to known, large deposits), the commodity being sought, ‘fit’ of the project with the purchaser’s existing projects, and the level of exploration work already undertaken. In general there is a negative correlation between value per km2 and total area, in part because larger areas tend to be ‘greenfields’ projects in geological terranes that are less mature in an exploration sense. However, the correlation is not precise enough to enable values to be assigned on the basis of area alone.

Table 17. Summary of Comparable Exploration Project Transactions

Project Name Location Commodity Transaction date Purchaser % Consideration

AUD Area, km2 Implied AUD/km2

Bergslagen Sweden W 3/10/2013 Tasman Metals 100 13,400 36.8 364

Morille Spain Sn-W 7/10/2013 Plymouth Minerals 80% 420,000 57 7,368

Sandstone Australia (WA) Au 16/02/2014 Beacon

Minerals 100 1,550,000 4 387,500

Viking Australia (WA) Au 3/03/2014 Genesis

Minerals 100 50,000 970 52

Mystique Australia (WA) Au 7/03/2014 Parmelia

Resources 100 312,957 205 1,526

Yellow Jack/Devils Mountain

Australia (QLD) Au 14/04/2014 Laura

Exploration 100 125,000 167 748

Mt Harris/Kathleen Valley JV

Australia Au 10/06/2014 Ramelius Mining 100 405,000 80.5 5,031

Miclere Australia (QLD) Au 19/12/2013 Plenty Gold

Pty Ltd 100 395,000 111 3,558

Fraser Range North

Australia (WA) Au,Ni 17/02/2014 Ram

Resources 100 330,000 163 2,024

Kintore Australia (WA) Au 20/06/2013 Phoenix

Gold 100 33,000 1.72 19,186

Grafters Australia (WA) Au 17/10/2013 Excelsior

Gold 100 250,000 18 13,889

Coulston Lakes Australia (QLD) Au-Cu 19/11/2013 ActiveX 100 200,000 189.9 1,053

Cuddingwarra Australia (WA) Au 12/08/2013 Gleneagle

Gold 100 20,000 114.85 174

Valley Floor Australia (WA) Au 4/07/2013 Tychean

Resources 100 150,000 5.5 27,273

Spargoville Australia Au 1/07/2013 Tychean Resources 100 400,000 114.4 3,497

Ardlethan Australia (NSW) Sn 13/04/2015 Thomson

Resources 100 14,400,000 372 38,710

Staveley Australia (VIC) Au 10/04/2015 Stavely Minerals 100 5,000 132 38

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Eight transactions highlighted in grey in Table 17 are considered by MA to be closest to Auzex’s exploration tenements in terms of exploration stage and overall prospectivity. The remaining transactions involve either more advanced exploration projects (eg Grafters), or projects in proximity to significant known mineralisation (eg Ardlethan). Implied values per area range from AUD38/km2 to $2,024/km2, with a median value of AUD556 and a mean value of AUD747.

MA has applied a range of values from AUD200/km2 to AUD750/km2 to Auzex’s early stage exploration tenements in North Queensland and Tampia non-core tenements. A range of values from AUD550/km2 to AUD1000/km2 was applied to Tampia core and Kingsgate tenements on the basis that they are more advanced projects with higher prospectivity. Preferred values within these ranges are varied to reflect the different stages of exploration, with earlier stage projects valued less than more advanced ones. Tampia non-core tenements are considered to have somewhat higher prospectivity due to their proximity to known mineralisation at Gault when compared to North Queensland tenements.

Valuations for Tampia exploration tenements do not include the area covered by mining leases over the Gault deposit as these are already valued by using resources. Exploration license E70/2132 is included, but assuming 100% ownership. Correcting the area of this single, small tenement to 80% has a negligible effect on the valuation.

Tampia core tenements (not including Gault deposit ML)– AUD700/km2

Tampia non-core tenements (not including Gault deposit ML)– AUD550/km2

North Queensland tenements – AUD500/km2

Kingsgate – AUD750/km2

Valuation of the various tenement packages are summarised in Table 18.

Table 18. Valuation of Auzex Exploration Tenements by Comparable Transactions

Project Area Area km2

AUD/km2 low

Value low (AUD 1000’s)

AUD/km2 high

Value high AUD 1000’s)

AUD/km2 preferred

Preferred Value

(AUD 1000’s) Tampia Core tenements 71.74 500 36 1000 72 750 55

Tampia non-core 380.35 200 76 750 285 550 210 North Queensland 900.86 200 180 750 676 500 450

Kingsgate 8.9 500 5 1000 9 750 7

7.5 KILBURN GEOSCIENCE RATING

Use of the Kilburn geoscience rating method requires the definition of an appropriate Base Acquisition Cost (BAC) for the licence being assessed. BAC’s are defined by totalling licence application fees, minimum expenditure requirements and access costs (eg land title negotiation fees). The main assumption is that when a property is acquired it is deemed to be worth at least the cost of holding the licence. There is no allowance for previous exploration work carried out, although results are factored into a prospectivity ranking

In Australia the BAC varies depending on jurisdiction, but is between AUD350-AUD550 per km2 for exploration licences, which accounts for licence acquisition costs and minimum expenditure requirements per km2. Kilburn Geoscience rating criteria used to assess Auzex’s exploration projects are shown in Table 19.

MA has divided the valuation by Kilburn Geoscience Rating into groups of tenements that share similar geological and geographic characteristics. For the Western Australia Tenements, the single Mining Lease that includes the Gault deposit is not assessed by this method. The remaining Western

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Australia tenements are divided into the Tampai “core” licences (those continguous with the Gault ML, including Emu Hill), and the remaining larger tenements to the south-southwest. For North Queensland tenements, Khartoum and Running Brook groups are assessed separately as they have different mineralisation targets and have seen different amounts of work completed.

Note that MA has does not put a high significance on the values generated by the Kilburn Geoscience Rating, but they are included as a verification of the values that should be expected from other methods.

Table 19. Kilburn Geoscience Rating Assessment Criteria.

Rating Off Property Factor On Property Factor Anomaly Factor Geological Factor

0.1 Unfavourable lithology

0.2 Unfavourable with structures

0.3 Generally favourable lithology

(10-20%)

0.5 Extensive previous exploration

with poor results Alluvium covered, generally

favourable lithology

0.9 Poor results to date Generally favourable lithology (50%)

1 No known mineralisation No known mineralisation No targets outlined Generally favourable lithology (70%)

1.5 Minor workings Minor workings or mineralised zones exposed

Several well-defined targets, initial results promising

2 Several old workings or exploration targets identified Several old workings Generally favourable lithology

2.5

3 Abundant workings/mines with

significant historical production

Abundant workings Several significant subeconomic intersections

Significant mineralised zones exposed in prospective host

rocks

3.5

Abundant workings/mines with significant historical

production

Several economic grade intersections on adjacent

sections

4 Along strike from major mine(s)

4.5

5 Along strike from world class mine Significant historic production Several significant ore grade

correlatable intersections

10 World class mine

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7.5.1 Tampia Core Tenements

MA has considered the following as part of its assessment of the Kilburn rating criteria for Tampia Core tenements (excluding Gault deposit mining lease, but including Emu Hill)

Off Property Factor:

o Tampia Hill lies within the Western Gneiss Terrane, host to at least one significant gold deposit (Griffins Find) in a different greenstone belt

o Factor: 1.5-2.5

On Property Factor:

o Inferred Mineral Resource defined at Gault prospect

o Factor: 1.0-2.0

Anomaly Factor:

o Gold in auger anomaly at Emu Hill

o Other areas untested, but high potential

o Factor: 1.5-3.0

Geological Factor:

o Extensive alluvial/colluvial cover

o Geophysics indicates prospective metamorphosed greenstones under cover

o Factor: 1.0-1.5

7.5.2 Tampia Remaining Tenements

MA has considered the following as part of its assessment of the Kilburn rating criteria for Tampia tenements other than Tampia Core


o Within the Western Gneiss Terrane, host to at least one significant gold deposit (Griffins Find) in a different greenstone belt

o Inferred Mineral Resource defined at Gault prospect to north

o Factor: 1.0-2.0

On Property Factor:

o No significant exploration done, no known mineralisation

o Factor: 0.5-1.0

Anomaly Factor:

o Gold in auger anomaly at Emu Hill

o Other areas untested, but high potential

o Factor: 0.5-1.0

Geological Factor:

o Extensive alluvial/colluvial cover

o Geophysics indicates prospective metamorphosed greenstones under cover

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o Factor: 0.5-1.0

7.5.3 North Queensland Tenements – Khartoum

MA has considered the following as part of its assessment of the Kilburn rating criteria for North Queensland Khartoum tenements


o Within Hodginskon Province, contain several major intrusion related mineral deposit types (tin, tungsten, bismuth, gold)

o Numerous small historic workings

o Factor: 1.5-1.75

On Property Factor:


o Factor: 1.5-1.75

Anomaly Factor:

o Several targets identified, mostly small extents

o No intersects correlated into larger system

o Factor: 0.5-1.0

Geological Factor:

o Reasonable outcrop with generally favourable lithologies (tin bearing granites)

o Factor: 0.75-1.5

7.5.4 North Queensland Tenements – Running Brook

MA has considered the following as part of its assessment of the Kilburn rating criteria for North Queensland Running Brook tenements


o South of Kidston gold mine, a significant past producer, but not in same structure


o Factor: 1.5-1.75

On Property Factor:

o Several small historic workings for Cu, Sn, W, but no Au recorded

o Factor: 1.0-1.75

Anomaly Factor:

o Several targets identified, none drilled

o Factor: 1.0-1.5

Geological Factor:

o Reasonable outcrop with generally favourable lithologies

o Factor: 0.5-1.5

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7.5.5 New South Wales - Kingsgate

MA has considered the following as part of its assessment of the Kilburn rating criteria for Kingsgate:


o Numerous small historic workings in area for Sn, Mo

o Factor: 1.5-2.5

On Property Factor:

o Several small historic workings for Sn, Mo, Bi

o Factor: 1.0-2.0

Anomaly Factor:

o Several targets identified, some quartz-Mo pipes drilled and others interpreted from geophysics.

o Factor: 1.5-3.0

Geological Factor:

o Reasonable outcrop with generally favourable lithologies in a small licence area

o Factor: 1.0-3.0

7.5.6 Summary

Factors assigned to Auzex’s projects are summarised in Table 20, with the Prospectivity Index ranges derived by successive multiplication of factors.

Table 20. Kilburn Geoscience Ratings For Auzex Projects.

Project Off Property Factor

On Property Factor Anomaly Factor Geological Factor Prospectivity Index

low high low high low high low high low high

Tampia core + Emu Hill 1.5 2.5 1 2 1.5 3 1 1.5 2.25 22.50

Tampia remaining 1 2 0.5 1 0.5 1 0.75 1 0.19 2.00

North Queensland-

Khartoum 1.5 1.75 1.5 1.75 0.5 1 0.75 1.5 0.84 4.6

North Queensland -

Running Brook

1.5 1.75 1 1.75 1 1.5 0.5 1.5 0.75 96.9

Kingsgate 1.5 2.5 1 2 1.5 3 1 3 2.25 45

For Auzex’s projects, the Kilburn Geoscience Rating valuations are given by:

BAC(per Ha) x licence area (Ha) x Prospectivity Index

MA considers the value ranges in Table 21 to provide a check of whether the values derived from comparable market transactions are reasonable. There is a general tendency for the Kilburn Geoscicence method to over-value the projects when compared with a market transaction value.

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This is largely due to the underlying premise that a project with some prospectivity is worth at least the amount of holding the licences. Market comparisons on the other hand reflect what a vendor is likely to pay for a project, which as discussed previously reflects factors other than prospectivity.

Table 21. Kilburn Geoscience Rating Values for Auzex Exploration Projects

Project Area BAC Prospectivity Index Value AUD 1000’s

Low High low high low high average

Tampia core + Emu Hill 71.74 350 550 2.25 22.50 56 888 472

Tampia Remaining 380.35 350 550 0.19 2.00 25 418 221

North Queensland-

Khartoum 643.39 350 550 0.84 6.00 190 1,626 908

North Queensland -

Running Brook

257.47 350 550 0.75 9.00 68 976 522

Kingsgate 8.9 350 550 2.25 45.00 7 220 113

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8 VALUATION SUMMARY

On the basis of an analysis of comparable transactions and Kilburn Geoscience Ratings for Auzex’s Projects, Table 22 has been compiled. The “Preferred Market Value” column indicates the most preferable market value placed on the Projects by MA. These values consider a large of number of variables and geographical location, and are not necessarily the median values of the high and low ranges. MA has chosen preferred market values closer to the lower value ranges as the tenements are not in immediate proximity to existing mines and infrastructure.

MA notes that the total high value of AUD6.6 M is mostly influenced by the high Kilburn Geoscience Rating for North Queensland exploration tenements, and reflects the limitations of this valuation technique.

Table 22. Summary of Valuations, Auzex Projects.

Project Market

Approach Cost

Approach Preferred Market Value

Comparable Transactions

Yardstick AUD/oz or AUD/km2

Kilburn Geoscience

Low

AUDM High

AUDM Low

AUDM High

AUDM Low

AUDM High

AUDM Low

AUDM Preferred

AUDM High

AUDM Tampia

Resources 1.29 1.5 1.1 2.5 - - 1.1 1.5 2.5


North Queensland Exploration

- - 0.18 0.68 0.26 2.6 0.2 0.5 2.6

Kingsgate 0.01 0.01 0.01 0.22 0.01 0.01 0.2

Total 1.4 2.3 6.6

Note: Preferred valuations are rounded to nearest AUD0.1 M to reflect accuracy.

The Preferred value for Auzex’s Australian mineral assets is AUD2.3M, which is based on a consideration of ranges determined by Market Comparable Transactions and Cost Approaches.

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9 REFERENCES

Andrews, E.C., 1916. The Molybdenum Industry of New South Wales. NSW Dept. Mines Geol. Survey Mineral Report No.24, pp.92-116.

Auzex Exploration Limited, 2014. The Tampia Hill Gold Project Western Australia and Company Update, April 2014

Baker, T., 2003, Intrusion-Related Gold Deposits: Explorable Characteristics. Gold Short Course, Cordilleran Exploration Roundup. 12pp.

Boleneus, D.E., Raines, G.E., Causey, J.D., Bookstrom, A.A., Frost, T.P., and Hyndman, P.C., 2001, Assessment Method for Epithermal Gold Deposits in northeast Washington State using Weights of Evidence GIS Modeling. USGS Open File Report No.01-501, 52 pp.

Champion, D.C., 1991. Petrogenesis of the felsic granitoids of far north Queensland. Ph. D. Thesis, Australian National University, Canberra (unpublished).

Chappell, B.W., 1994. Lachlan and New England: Fold Belts of contrasting magmatic and tectonic development. J Proc Roy Soc NSW 127: pp.47-59.

Chappel, B.W. and Bryant C.J., 1994. New England Batholith granites chemical data. Department of Geology, Australian National University. AMIRA Project P147B.

Chappell, B.W., Blevin P.L. and Bryant C.J., 1999. Moonbi Supersuite: evolution from partially melted juvenile crust to strongly fractionated leucogranites. In: Flood PG (ed) Regional geology, tectonics and metallogenesis: New England Orogen. Earth Sciences, University of New England, Armidale, pp.295-296.

Department of Minerals and Energy, 2007. Queensland Geological Mapping (polygonised vector) Data Regional & 1:100000 Sheet areas: Atherton, Ravenshoe, Chillagoe and Bullock Creek.

Donchak, P.J.T. and Bultitude, R.J., 1994. Geology of the Atherton 1:250000 Sheet area. Department of Minerals and Energy Queensland.

Flood, C.L. and Aitchison J.C., 1993. eds. New England Orogen, eastern Australia. Department of Geology and Geophysics, University of New England, Armidale.

Kemp, L.D., Bonham-Carter, G.F. and Raines, G.L., 1999, Arc-W of E: Arcview extension for weights-of-evidence mapping. Geol Surv of Canada, Users guide, 76 pp.

Kenny, E.J., 1924. Antimony, Arsenic, Bismuth, Molybdenum, Tungsten. NSW Dept. Mines Geol. Survey Mineral Bulletin No.5, 54p.

Mustard, R., 2001, Granite-hosted Gold Mineralisation at Timbarra, northern New South Wales, Australia. Min. Dep. 36, pp 542-562.

Partington, G.A, and Smillie, R., 2002, A National Scale GIS and Prospectivity Models of Mesothermal Gold in New Zealand. In Mesothermal Gold in New Zealand: GIS Data Package and Prospectivity Modelling. Crown Minerals NZ CD set.

Pollard, P., 1984. Granites and associated tin-tungsten mineralisation in the Emuford District, Northeast Queensland, Australia. Ph. D. Thesis, James Cook University, Townsville (unpublished).

Pollard, P.J, Taylor, R.G., and Cuff, C., 1988, Genetic Modelling of Greisen-Style Tin Systems. In Hutchison, C.S. (ed) Geology of Tin Deposits in Asia and the Pacific. Mineral Concentrations and Hydrocarbon Accumulations in the ESCAP Region, Vol. 3, pp 59-72.

Rafty, D.J., 1998, Annual Report M70/815, 816, 13 August 1997 to 12 August 1998, Tampia Hill Project, Report Reference M6085/1.

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Shaw, S.E. and Flood R.H., 1981. The New England Batholith, eastern Australia: geochemical variations in time and space. J Geophys Res 86: pp.1530-1544.

Stroud, W.J., Barnes R.G., Brown R.E., Brownlow J.W. and Henley H.F., 1999. Some aspects of the metallogenesis of the Southern New England Fold Belt. In: Flood PG (ed) Regional geology, tectonics and metallogenesis: New England Orogen. Earth Sciences, University of New England, Armidale, pp.365-371.

Thompson J.F.H., Sillitoe R.H., Baker T., Lang J.R., Mortensen J.K. 1999, Intrusion-related gold deposits associated with tungsten-tin provinces. Min Dep 34, pp 323-334.

Tomkins, A.G., Grundy, C., 2009, Upper Temperature Limits of Orogenic Gold Deposit Formation: Constraints from the Granulite-Hosted Griffin’s Find Deposit, Yilgarn Craton, in Economic Geology, 2009 v. 104, pp. 669–685

Weber, C.R., Patterson I.B.L. and Townsend D.J., 1978. Molybdenum in New South Wales. Geological Survey of NSW, Mineral Resources 43, pp.218.

Widenbar, L., 2000. Tampa Prospect Resource Review. Internal Report for IPT Systems Ltd.

Wilde, S.A., Middleton, M.F., and Evans, B.J., 1996, Terrane accretion in the southwestern Yilgarn craton; evidence from a deep seismic crustal profile: Precambrian Research, v. 78, p. 179–196.

Woad, G., 1988, Tampia Hill Exploration Licence E70/463 Western Australia Annual Report July 1987 to August 1988, Report CR 6201 October 1988.

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10 GLOSSARY OF TECHNICAL TERMS

This glossary comprises a general list of common technical terms that are typically used by geologists. The list has been edited to conform in general to actual usage in the body of this report. However, the inclusion of a technical term in this glossary does not necessarily mean that it appears in the body of this report, and no imputation should be drawn. Investors should refer to more comprehensive dictionaries of geology in printed form or available in the internet for a complete glossary.

AAS (Atomic Absorption Spectrophotometry) – a chemical analysis technique.

aeromagnetic survey Systematic measurement and collection, from an aircraft, of the earth’s magnetic field at regular intervals.

alluvial deposit A mineral deposit consisting of recent surface sediments laid down by water.

alteration The change in the mineral composition of a rock, commonly due to hydrothermal activity.

alteration zone A zone in which rock-forming minerals have been chemically changed.

anomaly A departure from the expected or normal background.

auger sampling A sampling technique utilising a screw-like tool to obtain shallow samples.

AusIMM Australasian Institute of Mining and Metallurgy.

basalt A dark-coloured igneous rock.

base-metal A non-precious metal, usually referring to copper, lead and zinc.

BLEG – Bulk leach extractable gold

breccia A rock composed of angular rock fragments.

bulk sample A large volume of soil or rock obtained for examination or analysis.

Cainozoic An era of geological time from the end of the Mesozoic to the present.

calcalkaline Igneous rocks containing calcium-rich feldspar.

calcrete Superficial gravels cemented by secondary calcium carbonate.

Cambrian A period of geological time approximately from 506 Ma to 544 Ma.

Carboniferous A period of geological time approximately from 295 Ma to 355 Ma.

chalcopyrite A mineral of copper with the chemical formula CuFeS2.

clastic A rock composed principally of fragments derived from pre-existing rocks.

complex An assemblage of rocks of various ages and origins intricately mixed together.

conglomerate A sedimentary rock formed by the cementing together of water-rounded pebbles, distinct from a breccia.

costean A trench excavated in the surface for the purpose of geological investigation.

craton A major part of the Earth’s crust that has been stable and little deformed for a long time.

Cretaceous A period of geological time approximately from 65 Ma to 135 Ma.

crosscut A level driven across the main direction of underground mine workings.

cut-off grade The lowest or highest assay value that is included in a resource estimate.

dacite A fine-grained extrusive rock composed mainly of plagioclase, quartz and pyroxene or hornblende or both. It is the extrusive equivalent of granodiorite.

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Devonian A period of geological time approximately from 355 Ma to 410 Ma.

diamond drilling Rotary drilling technique using diamond set or impregnated bits, to cut a solid, continuous core sample of the rock. The core sample is retrieved to the surface, in a core barrel, by a wire line.

dilution The proportion of material which is inadvertently included during mining operations, and which is generally of a significantly lower grade than the ore zone of interest.

dip The angle at which any planar feature is inclined from the horizontal.

dyke A tabular igneous intrusion that cuts across the bedding or other planar structures in the host rock.

EM survey Electromagnetic survey. A method of measuring the alternating magnetic fields associated with electrical currents artificially or naturally maintained in the subsurface. A technique often used to identify massive sulphide deposits.

Famennian A stratigraphic name for a stage at the top of the European Upper Devonian (around 355-370 Ma).

felsic Light coloured rocks containing an abundance of feldspars and quartz.

foreland basin A basin formed within a continental setting, often adjacent to a mountain range.

Frasnian A stratigraphic name for a stage at the base of the European Upper Devonian (around 370-375 Ma).

Ga Billion years ago.

gabbro A coarse-grained intrusive igneous rock composed chiefly of plagioclase feldspar and pyroxene.

GIS Geographic Information System. A system devised to present spatial data in a series of compatible and interactive layers.

Givetian A stratigraphic name for a stage at the top of the European Middle Devonian (around 375-380 Ma).

gossan A ferruginous deposit remaining after the oxidation of the original sulphide minerals in a vein or ore zone.

graben An elongate, relatively depressed crustal unit or block that is bounded by faults on its long sides.

granitoids A general term to describe coarse-grained, felsic intrusive plutonic rocks, resembling granite.

granodiorite A coarse-grained granitic rock containing quartz, feldspar and biotite.

gravity survey Systematic measurement and collection of the earth’s gravitational field at the surface at regular intervals. Used to discern different rock types based on associated variations with differences in the distribution of densities, and hence rock types.

greenschist A schistose metamorphic rock which owes its green colour and schistosity to abundant chlorite and lesser epidote and/or actinolite.

ignimbrite The rock formed by the widespread deposition and consolidation of volcanic ash flows (=welded tuff).

indicated resource A mineral resource sampled by drill holes, underground openings or other sampling procedures at locations too widely spaced to ensure continuity but close enough to give a

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reasonable indication of continuity, and where geoscientific data is known with a reasonable level of reliability.

inferred resource A mineral resource inferred from drill holes, geoscientific evidence, underground openings or other sampling procedures where the gaps in the data are such that continuity cannot be predicted with confidence, and where geoscientific data may not be known with a reasonable level of reliability.

intermediate Igneous rocks whose composition is intermediate between felsic and mafic rocks.

intracratonic Within a large, stable mass of the earth’s crust.

IP survey Induced Polarisation survey - an electrical geophysical survey technique measuring the magnetic field spontaneously induced in a volume of rock by the application of an electric current. This technique is often used to identify disseminated sulphide deposits.

ironstone A rock formed by cemented iron oxides.

I-type granite A granite that results from igneous magmatic processes.

JORC Joint Ore Reserves Committee - The Australasian Institute of Mining and Metallurgy. The guidelines of the JORC Code (1999) are observed in the calculation and reporting of ore resources and ore reserves.

jordisite An amorphous variety of molybdenite.

Jurassic A period of geological time approximately from 135 Ma to 203 Ma.

LandSat imagery Reflective light data of the earth’s surface collected by the LandSat satellite and commonly processed to enhance particular features. Includes the visible and invisible light spectrums.

lithic tuff A tuff containing fragments of previously formed non-pyroclastic rocks.

lithophile element An element that is concentrated in crustal rather than mantle rocks, and associated with the silicate rather than the sulphide phases.

Ma Million years ago.

mafic A dark-coloured rock composed dominantly of magnesium, iron and calcium-rich rock-forming silicates, and for rocks in which these minerals are abundant.

magma Naturally occurring molten rock, generated within the earth.

magnetic anomalies Zones where the magnitude and orientation of the earth’s magnetic field differs from adjacent areas.

magnetic survey Systematic collection of readings of the earth’s magnetic field. The data are collected on the surface or from aircraft.

mantle The zone in the earth between the crust and the core.

massive sulphides Rock containing abundant sulphides that constitutes close to 100% of the rock mass.

mesothermal Mineral deposits formed (precipitated) at moderate temperatures.

Mesozoic An era of geological time approximately from 65 Ma to 248 Ma.

meteoric water Water derived from the earth’s atmosphere.

molybdenite The main ore of molybdenum; a lead-grey hexagonal mineral with composition MoS2.

monzogranite A granular plutonic rock with a composition between monzonite and granite.

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Namurian A stratigraphic name for a stage at the base of the European Upper Carboniferous (around 320-325 Ma).

Neoproterozoic An era of geological time approximately from 544 Ma to 1000 Ma.

Ordovician An era of geological time approximately from 435 Ma to 500 Ma.

oxide Pertaining to weathered or oxidised rock.

pelite A sediment or sedimentary rock composed of the finest detritus (clay or mud-sized particles).

penecontemporaneous Formed at almost the same time.

percussion A method of drilling where the rock is broken into small chips by a hammering action.

Permian An era of geological time approximately from 248 Ma to 295 Ma.

pitchblende A massive brown to black variety of uraninite.

plunge The attitude of a line in a plane which is used to define the orientation of fold hinges, mineralised zones and other structures.

Porphyritic Descriptive of igneous rocks containing relatively large crystals set in a finer-grained groundmass.

ppb, ppm Parts per billion, parts per million (quantitative equivalent of g/t).

pyrite A common iron sulphide mineral with the chemical formula FeS2.

RAB drilling Rotary Air Blast drilling - a method of rotary drilling in which sample is returned, using compressed air, to the surface in the annulus between drill-rod and the drill-hole. This is a relatively inexpensive but less accurate drilling technique than RC or diamond coring.

radiometric survey Systematic collection of radioactivity emitted by rocks at or near the earth’s surface; usually collected by helicopter or fixed wing aircraft.

raft A relatively large block of extraneous rock incorporated into an intrusive magma.

RC drilling Reverse Circulation drilling - a method of rotary drilling in which the sample is returned to the surface, using compressed air, inside the inner-tube of the drill-rod. A more accurate drilling technique than simple percussion drilling, the RC technique minimises contamination.

refractory Descriptive of ore difficult to treat for recovery of valuable minerals.

rhyolite A volcanic rock composed chiefly of potassium feldspar and quartz.

rift basin A large fault-bound depression, in-filled with volcanic and/or sedimentary material.

sericite A white, fine-grained mica, usually formed as an alteration product of various silicates in metamorphic rocks and the wall rocks of ore deposits.

shear zone A zone in which rocks have been deformed primarily in a ductile manner in response to applied stress.

sheet wash A widely distributed, thin blanket of sediment deposited in a broad, poorly defined drainage.

silicified The alteration or replacement of primary minerals by silica.

Silurian An era of geological time approximately from 410 Ma to 435 Ma.

skarn A thermally metamorphosed impure limestone.

soil sampling The collection of soil specimens for mineral analysis.

stockwork A network of (usually) quartz veinlets produced during pervasive brittle fracture.

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stratabound Occurring within and parallel to the rock strata, but not necessarily deposited at the same time.

stratiform Occurring within and parallel to the rock strata, and deposited at the same time.

stream sampling The collection of stream sediments for mineral analysis.

strike The direction or bearing of a geological structure on a level surface, perpendicular to the direction of dip.

stringer A small, thin discontinuous or irregular veinlet.

subduction The process where one slab of the Earth’s crust descends beneath another.

syncline A basin-shaped fold.

syntectonic Occurring or forming at the same time as deformation and metamorphism.

t, tpa Metric tonne, tonnes per annum.

tectonics The processes that create the broad architecture of the surface of the earth.

tectonism A general term for all movement of the crust produced by tectonic processes.

Tertiary Applied to the first period of the Cainozoic era, 1.8Ma to 65Ma.

terrane A crustal block or fragment that preserves a distinctive geologic history that is different from the surrounding areas.

tholeiitic A term applied to mafic or ultramafic rocks composed predominantly of magnesium-rich feldspar and pyroxene minerals.

tonalite A coarse grained plutonic rock similar to diorite in composition but containing quartz as 5% to 20% of the light coloured minerals.

trench A long, narrow depression in the sea floor.

Tournaisian A stratigraphic name for a stage at the base of the European Carboniferous (around 345-355 Ma).

Triassic Applied to the first period of the Mesozoic era, 203Ma to 248Ma.

ultramafic Igneous rocks consisting essentially of ferro-magnesium minerals with trace quartz and feldspar.

uraninite The main ore of uranium, essentially UO2.

Viséan A stratigraphic name for a stage at the top of the European Carboniferous (around 325-345 Ma).

volcanoclastic A sedimentary clastic rock containing volcanic material.

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11 CERTIFICATE OF QUALIFICATIONS

ANDREW JAMES VIGAR, F.AusIMM, M.SEG.,

STATEMENT OF QUALIFICATIONS

I, Andrew James Vigar, B.App.Sc (Geol.), hereby certify that:

1. I am an independent Consulting Geologist and Professional Geoscientist residing at 97 Isaac Street, Spring Hill Queensland 4000, Australia with my office at Level 4, 67 St Paul’s Terrace, Brisbane, Queensland 4001, Australia (Telephone +61-7-38319154).

2. I graduated from the Queensland University of Technology, Brisbane, Australia in 1978 with a Bachelor Degree in Applied Science in the field of Geology.

3. I have continuously practised my profession as a Geologist for the past 30 years since graduation, in the fields of Mineral Exploration, Mine Geology and Resource Estimation. I have held senior positions with Emperor Gold, WMC, Costain Australia and CRA (Rio Tinto) prior to commencing full-time consulting in 1996. I have been involved in consulting to the minerals industry both independently (Vigar & Associates and now Mining Associate Pty Ltd) and as an employee of the international consultancy, SRK Consulting.

4. My specific experience concerning the Kharmagtai Project is my extensive experience in mineral resource estimation in a number of porphyry-style copper-gold. I have worked in mineral exploration since 1980 when I joined the exploration team at the Vatukoula gold mine in Fiji. This was followed by senior roles at gold mines in Western Australia and Queensland and exploration/evaluation in SE Asia and PNG. I spent 2 years with the WH Bryan Mining Geology Research Centre at the University of Queensland tutoring and studying Geostatistics. I commenced full-time consulting in 1996. I have prepared in-depth reviews and/or resource estimates of a large number of deposits over the last 14 years. I have worked on the identification and estimation of resources for porphyry style mineralisation in similar environments in PNG, Philippines, Indonesia and throughout Australia.

5. I was elected a Fellow of the Australasian Institute of Mining and Metallurgy (“The AusIMM”) in 1993, having been a member since 1980. My status as a Fellow of The AusIMM is current, and I am recognized by the Australian Securities and Investments Commission and the Australian Stock Exchange as a Qualified Person for the submission of Independent Geologist’s Reports.

6. I have read the definition of “Independent Individual Expert” set out VALMIN Section 37 and certify that by reason of my education, affiliation with a professional association (as defined in VALMIN) and past relevant work experience, I fulfill the requirement to be an "Expert" for the purposes of VALMIN. I have read the definition of "qualified valuator" set out in CIMVal and certify that by reason of my education, affiliation with a professional association (as defined in CIMVal) and past relevant work experience, I fulfill the requirement to be a "qualified valuator" for the purposes of CIMVal.

7. I am author of the Valuation entitled "Report on the Market Valuation of Auzex Ltd’s Mineral Assets in Australia” dated 24th June 2015 (“the Valuation”). I have reviewed all sections of the report for which I am responsible and found them to be accurate and reliable within the limitations of this Valuation.

I have not previously inspected the property that is the subject of the Valuation

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ANNEXURE B | Scheme of Arrangem

ent

AUZEX EXPLORATION LIMITED ACN 153 608 596 (AZX) AND THE HOLDERS OF FULLY PAID ORDINARY SHARES IN AUZEX LIMITED

SCHEME OF ARRANGEMENT – PURSUANT TO SECTION 411 OF THE CORPORATIONS ACT

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T A B L E O F C O N T E N T S

1. DEFINITIONS AND INTERPRETATION ............................................................................... 1

1.1 Definitions .......................................................................................................... 1 1.2 Interpretations ................................................................................................... 3 1.3 Best and reasonable endeavours .................................................................. 4 1.4 Business Day ...................................................................................................... 5

2. CONDITIONS ................................................................................................................... 5

2.1 Conditions to this Scheme ............................................................................... 5 2.2 Certificates in relation to conditions .............................................................. 5 2.3 Termination of Merger Implementation Deed .............................................. 6

3. SCHEME ........................................................................................................................... 6

3.1 Effective Date of Scheme ............................................................................... 6 3.2 End Date ........................................................................................................... 6

4. IMPLEMENTATION OF SCHEME ...................................................................................... 6

4.1 Lodgement ....................................................................................................... 6 4.2 Transfer of Scheme Shares .............................................................................. 6 4.3 Timing ................................................................................................................. 7

5. SCHEME CONSIDERATION ............................................................................................. 7

5.1 Scheme Consideration .................................................................................... 7 5.2 Rounding entitlements ..................................................................................... 7 5.3 Provision of Scheme Consideration ............................................................... 7 5.4 Joint holders ...................................................................................................... 8 5.5 Binding instruction or notifications .................................................................. 8 5.6 Ineligible Overseas Shareholders ................................................................... 8 5.7 Status of EXU Shares ......................................................................................... 9

6. DEALINGS IN AZX SHARES ............................................................................................. 9

6.1 Dealings in AZX Shares by Scheme Shareholders ......................................... 9 6.2 AZX Share Register ........................................................................................... 9 6.3 Information to be made available to EXU .................................................. 10 6.4 Effect of Share certificates and holding statements ................................. 10 6.5 Disposals after Record Date ......................................................................... 10

7. GENERAL PROVISIONS ................................................................................................. 10

7.1 Effect of Scheme ............................................................................................ 10 7.2 Appointment of agent and attorney .......................................................... 10 7.3 Enforcement of Deed Poll ............................................................................. 10 7.4 Scheme Shareholders' consent .................................................................... 11 7.5 Scheme Shareholder’s agreements ............................................................ 11 7.6 Transfer with clear title and warranty by Scheme Shareholders .............. 11 7.7 Title to Scheme Shares ................................................................................... 11 7.8 Appointment of EXU as sole proxy ............................................................... 12 7.9 Alterations or conditions ................................................................................ 12 7.10 Notices ............................................................................................................. 12 7.11 Inconsistencies ................................................................................................ 12 7.12 Further assurances ......................................................................................... 12 7.13 Stamp duty ...................................................................................................... 12 7.14 Fees and charges .......................................................................................... 12 7.15 Governing law ................................................................................................ 13 7.16 Limitation of liability ........................................................................................ 13 7.17 Definition of "send" ......................................................................................... 13

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1989-09/Legal/44092753_1 1

Scheme of Arrangement made under section 411 of the Corporations Act 2001 (Cth)

B E T W E E N

AUZEX EXPLORATION LIMITED (ACN 153 608 596) of C/- Level 16, Waterfront Place, 1 Eagle Street, BRISBANE QLD 4000 (AZX);

AND

THE HOLDERS OF AZX SHARES.

R E C I T A L S

A. AZX is a public company incorporated in the state of Queensland.

B. Explaurum Ltd (EXU) is a public company incorporated in the state of Western Australia and is admitted to the Official List of the ASX.

C. AZX and EXU have entered into a merger implementation deed dated on or about 15 May 2015 (Merger Implementation Deed) pursuant to which, amongst other things, AZX has agreed to propose this Scheme to AZX Shareholders, and each of AZX and EXU have agreed to take certain steps to give effect to this Scheme.

D. If this Scheme becomes Effective (as defined below), then:

(a) all of the Scheme Shares will be transferred to EXU and the Scheme Consideration will be provided to the Scheme Shareholders in accordance with the provisions of this Scheme; and

(b) AZX will enter the name and address of EXU in the AZX Share Register as the holder of all of the Scheme Shares.

E. EXU has entered into the Deed Poll for the purpose of covenanting in favour of Scheme Shareholders to perform the obligations contemplated of it under this Scheme.

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

In this document, unless the contrary intention appears or the context requires otherwise:

AEST means Australian Eastern Standard Time.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited (ACN 008 624 691) or the Australian Securities Exchange, as the context requires.

ASX Listing Rules means the official listing rules of ASX.

AZX Share means a fully paid ordinary share in the capital of AZX.

AZX Shareholder means each person who is registered as a holder of an AZX Share.

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AZX Share Register means the register of members of AZX maintained by or on behalf of AZX in accordance with section 168(1) of the Corporations Act.

Business Day is any day that is both a business day within the meaning given in the ASX Listing Rules and a day that banks in Perth, Western Australia are open for business.

Condition means a condition to this Scheme set out in clause 2.1.

Consolidation means the consolidation of the issued capital of the EXU on the basis of 1 EXU Share for every 10 EXU Shares on issue and 1 EXU Option for every 10 EXU Options on issue (with the exercise price of the EXU Options adjusted accordingly), rounded up to the nearest EXU Share or EXU Option, or such other ratio as agreed between EXU and AZX in writing.

Corporations Act means the Corporations Act 2001 (Cth).

Court means the Federal Court of Australia or such other court of competent jurisdiction as AZX and EXU agree in writing.

Deed Poll means the deed poll to be executed by EXU in favour of the Scheme Shareholders (subject to any amendments permitted by its terms) prior to the despatch of the Explanatory Memorandum to Scheme Shareholders.

Effective means, when used in relation to this Scheme, the coming into effect, pursuant to section 411(10) of the Corporations Act, of the order of the Court made under section 411(4)(b) (and, if applicable, section 411(6)) of the Corporations Act in relation to this Scheme.

Effective Date means the date on which this Scheme becomes Effective.

End Date means 30 September 2015 or such later date as is agreed by AZX and EXU in writing.

Explanatory Memorandum means the explanatory memorandum to be prepared by AZX in respect of this Scheme approved by the Court under section 411(1) of the Corporations Act for distribution to AZX Shareholders containing, among other things, the explanatory statement required by Part 5.1 of the Corporations Act relating to this Scheme and a notice convening the Scheme Meeting.

EXU Share means a fully paid ordinary share in the capital of EXU.

EXU Share Register means the register of holders of EXU Shares maintained by or on behalf of EXU in accordance with section 168(1) of the Corporations Act.

Implementation Date means the date which is 5 Business Days after the Record Date or such other date as AZX and EXU agree in writing.

Ineligible Overseas Shareholder means an AZX Shareholder whose address as shown in the AZX Share Register at 5.00 pm on the Record Date is a place outside Australia and its external territories and New Zealand unless EXU and AZX are satisfied, acting reasonably, that the laws of that AZX Shareholder's country of residence (as shown in the AZX Share Register) permit the issue and allotment of EXU Shares to that AZX Shareholder, either unconditionally or after compliance with conditions which EXU in its sole discretion regards as acceptable.

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Record Date means the date which is 5 Business Days after the Effective Date.

Registered Address means, in relation to an AZX Shareholder, the address of that AZX Shareholder shown in the AZX Share Register.

Regulatory Authority means:

(a) any government, semi-government or local authority and any department, minister or agency of any government; and

(b) any other authority, agency, commission, administrative, fiscal or judicial body (including the Court), tribunal or similar entity having powers or jurisdiction under any law or regulation or the listing rules of any recognised stock or securities exchange, including without limitation the ASX.

Related Body Corporate has the meaning given in section 9 of the Corporations Act.

Sale Nominee means the person appointed by EXU to sell the EXU Shares that are attributable to Ineligible Overseas Shareholders under the terms of this Scheme.

Scheme means the scheme of arrangement under Part 5.1 of the Corporations Act between AZX and the Scheme Shareholders as set out in this document, subject to any alterations or conditions made or required by the Court pursuant to section 411(6) of the Corporations Act and approved in writing by EXU and AZX.

Scheme Consideration means the consideration to be provided to Scheme Shareholders under the terms of this Scheme being 672,057,960 EXU Shares (subject to clauses 5.2 and 5.6) to be apportioned amongst the AZX Shareholders on a fully diluted basis after the AZX Convertible Notes are converted into AZX Shares (as contemplated by the condition set out in clause 4(c)(i)).

Scheme Meeting means the meeting of AZX Shareholders ordered by the Court in relation to this Scheme pursuant to section 411(1) of the Corporations Act.

Scheme Share means each AZX Share on issue as at 5.00 pm on the Record Date.

Scheme Shareholder means each person registered in the AZX Share Register as the holder of Scheme Shares.

Second Court Date means the first day of hearing of an application made to the Court for an order pursuant to section 411(4)(b) of the Corporations Act approving this Scheme or, if the hearing of such application is adjourned for any reason, means the first day of the adjourned hearing.

1.2 Interpretations

In this document unless the contrary intention appears or the context requires otherwise:

(a) a word importing the singular includes the plural and vice versa, and word indicating gender includes every other gender

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(b) if a word or phrase is given a defined meaning, any other part of speech or grammatical form of that word or phrase has a corresponding meaning;

(c) references to a person includes an individual the estate of an individual, a corporation, an authority, an association or a joint venture (whether incorporated or unincorporated), a partnership and a trust;

(d) unless stated otherwise, references to EXU Shares and EXU Options are on a pre-Consolidation basis;

(e) a reference to a statute includes any regulations or other instruments made under it and a reference to a statute or any regulation or other instrument made under it or a provision of any such statute, regulation or instrument includes consolidations, amendments, re-enactments and replacements;

(f) a reference to a party includes a reference to that party's executors, administrators, and permitted assigns, s including persons taking by novation and, in the case of a trustee, includes any substituted or additional trustee;

(g) if a time period is specified and dates from a given date or the day of an act or event, it is to be calculated exclusive of that day;

(h) a reference to any time is a reference to that time in Perth, Australia, except where specified to be AEST;

(i) a reference to "$" or "A$" is to the lawful currency of the Commonwealth of Australia;

(j) a reference to a document is that document as varied, novated, ratified or replaced from time to time;

(k) a reference to a party, clause, schedule, exhibit, attachment or annexure is a reference to a party, clause, schedule, exhibit, attachment or annexure to or of this document, and a reference to this document includes all schedules, exhibits, attachments and annexures to it;

(l) this document must not be construed adversely to a party just because that party prepared it or caused it to be prepared; and

(m) the word including or any form of that word is not a word of limitation.

1.3 Best and reasonable endeavours

Any provision of this document which requires a party to use best endeavours or reasonable endeavours, or to take all steps reasonably necessary, to procure that something is performed or occurs does not include any obligation:

(a) to pay any money or to provide any financial compensation, valuable consideration or any other incentive to or for the benefit of any person; or

(b) to commence any legal action or proceeding against any person, to procure that that thing is done or happens, except for payment of any

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applicable fee for the lodgement or filing of any relevant application with any Regulatory Authority,

except where that provision expressly specifies otherwise.

1.4 Business Day

Except where otherwise expressly provided, where under this document the day on which any act, matter or thing is to be done is a day other than a Business Day, such act, matter or thing shall be done on the immediately following Business Day.

2. CONDITIONS

2.1 Conditions to this Scheme

This Scheme is conditional upon, and the provisions of clauses 3, 4 and 5 will not come into effect unless and until each of these conditions have been satisfied:

(a) as at 8.00 am AEST on the Second Court Date each of the conditions set out in clause 4.1 of the Merger Implementation Deed (other than the condition relating to the approval of the Court set out in clause 4.1(l) of the Merger Implementation Deed) have been satisfied or waived in accordance with the terms of the Merger Implementation Deed;

(b) as at 8.00 am AEST on the Second Court Date the Merger Implementation Deed has not been terminated;

(c) the Court approves this Scheme under section 411(4)(b) of the Corporations Act with or without modification;

(d) such other conditions made or required by the Court under section 411(6) of the Corporations Act in relation to this Scheme as are acceptable to EXU and AZX have been satisfied; and

(e) the coming into effect, pursuant to section 411(10) of the Corporations Act, of the orders of the Court made under section 411(4)(b) of the Corporations Act (and, if applicable, section 411(6) of the Corporations Act) in relation to this Scheme.

2.2 Certificates in relation to conditions

(a) At or before the Court hearing on the Second Court Date, AZX and EXU will each provide to the Court a certificate (or such other evidence as the Court may request) confirming whether or not all of the conditions set out in clause 4.1 of the Merger Implementation Deed (other than the condition set out in clause 4.1(l) of the Merger Implementation Deed) have been satisfied or waived in accordance with the terms of the Merger Implementation Deed.

(b) The certificates given by AZX and EXU constitute conclusive evidence that the conditions set out in clause 4.1 of the Merger Implementation Deed (other than the condition set out in clause 4.1(l) of the Merger Implementation Deed) have been satisfied or waived (as the case may be).

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2.3 Termination of Merger Implementation Deed

Without limiting any rights under the Merger Implementation Deed, in the event that the Merger Implementation Deed is terminated in accordance with its terms before 8.00 am AEST on the Second Court Date, AZX and EXU are each released from:

(a) further obligation to take steps to implement this Scheme; and

(b) any liability with respect to this Scheme.

3. SCHEME

3.1 Effective Date of Scheme

Subject to clause 3.2, this Scheme will take effect on and from the Effective Date.

3.2 End Date

This Scheme will lapse and be of no further force or effect if the Effective Date has not occurred on or before the End Date.

4. IMPLEMENTATION OF SCHEME

4.1 Lodgement

If the Conditions are satisfied, AZX must lodge with ASIC in accordance with section 411(10) of the Corporations Act an office copy of the Court order approving this Scheme promptly after, and in any event by no later than 4.00 pm AEST on the Business Day following the date on which the Court approves this Scheme (or such other Business Day as AZX and EXU agree in writing).

4.2 Transfer of Scheme Shares

On the Implementation Date, subject to the provision of the Scheme Consideration in the manner contemplated by clause 5 and EXU having provided AZX with written confirmation thereof, all of the Scheme Shares will, together with all rights and entitlements attaching to the Scheme Shares, be transferred to EXU without the need for any further act by any Scheme Shareholder (other than acts performed by AZX or its directors as attorney or agent for Scheme Shareholders under this Scheme), by:

(a) AZX delivering to EXU a duly completed and executed share transfer form or forms to transfer all of the Scheme Shares to EXU (executed by AZX as the attorney and agent of each Scheme Shareholder under clause 7.2) (which may be a master transfer of all or part of the Scheme Shares);

(b) EXU duly executing such share transfer form or forms and delivering it or them to AZX for registration; and

(c) immediately after receipt of the share transfer form or forms under clause 4.2(b), AZX entering, or procuring the entry of, the name and address of EXU in the AZX Share Register as the holder of all of the Scheme Shares.

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4.3 Timing

Notwithstanding any other provision of this Scheme, while EXU Shares forming part of the Scheme Consideration must be issued (and relevant registers updated to record their issuance) on the Implementation Date, any requirements under clause 5 for the sending of share certificates, holding statements or allotment advices may be satisfied within 10 Business Days after the Implementation Date.

5. SCHEME CONSIDERATION

5.1 Scheme Consideration

Subject to this Scheme becoming Effective, AZX will procure that, in consideration of the transfer to EXU of each Scheme Share held by a Scheme Shareholder under this Scheme, EXU will provide the Scheme Consideration to each Scheme Shareholder for each Scheme Share held by it on the Implementation Date.

5.2 Rounding entitlements

If the number of Scheme Shares held by a Scheme Shareholder as at 5.00 pm on the Record Date is such that the aggregate entitlement of the Scheme Shareholder to Scheme Consideration is a fractional entitlement to an EXU Share, then the entitlement of that Scheme Shareholder must be rounded down to the nearest whole number of EXU Shares.

5.3 Provision of Scheme Consideration

Subject to clause 4.3, the obligations of EXU under this Scheme to provide the Scheme Consideration to Scheme Shareholders will be satisfied:

(a) in the case of EXU Shares which are required to be issued to Scheme Shareholders under this clause 5, by EXU procuring that:

(i) the name and Registered Address of each such Scheme Shareholder is entered into the EXU Share Register on the Implementation Date in respect of the EXU Shares to which it is entitled under this clause 5; and

(ii) the Scheme Shareholder is entered into a direct registration system or other electronic book-entry system as holding the number of EXU Shares issued to the Scheme Shareholders pursuant to this Scheme;

(b) in the case of EXU Shares to be issued in respect of Scheme Consideration due to Ineligible Overseas Shareholders - by EXU procuring that:

(i) the name and address of the Sale Nominee is entered into the EXU Share Register on the Implementation Date in respect of the EXU Shares required to be issued to it under this clause 5;

(ii) a share certificate in the name of the Sale Nominee is sent to the Sale Nominee representing the number of EXU Shares so issued to it; and

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(iii) the Sale Nominee sells those EXU Shares on behalf of the Ineligible Overseas Shareholders, and pays the proceeds in accordance with clauses 5.6.

5.4 Joint holders

In the case of Scheme Shares held in joint names:

(a) any cheque required to be paid to Scheme Shareholders will be payable to the joint holders; and

(b) the EXU Shares to be issued under this Scheme will be issued to and registered in the names of the joint holders,

and will be forwarded to the holder whose name appears first in the AZX Share Register as at 5.00 pm on the Record Date.

5.5 Binding instruction or notifications

Except for a Scheme Shareholder's tax file number, any binding instruction or notification between a Scheme Shareholder and AZX relating to Scheme Shares as at 5.00 pm on the Record Date (including any instructions relating to payment of dividends or to communications from AZX) will, from 5.00 pm on the Record Date, be deemed (except to the extent determined otherwise by EXU in its sole discretion) to be a similarly binding instruction or notification to, and accepted by EXU, in respect of the EXU Shares issued to the Scheme Shareholder until that instruction or notification is revoked or amended in writing addressed to EXU, provided that any such instructions or notifications accepted by EXU will apply to and in respect of the issue of EXU Shares as the Scheme Consideration only to the extent that they:

(a) are not inconsistent with the other provisions of this Scheme; or

(b) are recognised under Australian law or EXU's constituent documents.

5.6 Ineligible Overseas Shareholders

(a) Unless EXU and AZX are satisfied, acting reasonably, that the laws of an Ineligible Overseas Shareholder's country of residence (as shown in the AZX Share Register) permit the issue of EXU Shares to the Ineligible Overseas Shareholder, either unconditionally or after compliance with conditions which EXU in its sole discretion regards as acceptable, EXU will issue the EXU Shares to which that Ineligible Overseas Shareholder would otherwise be entitled to the Sale Nominee, and EXU will be under no obligation under this Scheme to issue, and will not issue, any EXU Shares to any such Ineligible Overseas Shareholder.

(b) EXU will procure that, as soon as reasonably practicable and in any event not more than 15 Business Days after the Implementation Date, the Sale Nominee:

(i) sells on the ASX all of the EXU Shares issued to the Sale Nominee pursuant to clause 5.6(a) in such manner, at such price and on such other terms as the Sale Nominee determines in good faith and at the risk of the Ineligible Overseas Shareholders; and

(ii) remits to EXU the proceeds of sale in Australian dollars, subject to any applicable withholding taxes.

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(c) Promptly after the last sale of EXU Shares in accordance with clause 5.6(b), EXU will pay to each Ineligible Overseas Shareholder the proportion of the net proceeds of sale received by EXU pursuant to clause 5.7(b)(ii) to which that Ineligible Overseas Shareholder is entitled (calculated on an average basis so that all Ineligible Overseas Shareholders receive the same price per Scheme Share subject to rounding).

(d) EXU will pay the relevant fraction of the proceeds of sale referred to in clause (c) to each Ineligible Overseas Shareholder by sending, or procuring the despatch to each such Ineligible Overseas Shareholder by prepaid post to the registered address of the Ineligible Overseas Shareholder at 5.00 pm on the Record Date, a cheque in the name of that Ineligible Overseas Shareholder for the relevant amount (denominated in Australian dollars).

(e) Each Ineligible Overseas Shareholder appoints AZX as its agent to receive on its behalf any financial services guide or other notices (including any updates of those documents) that the Sale Nominee is required to provide to Ineligible Overseas Shareholders under the Corporations Act.

5.7 Status of EXU Shares

Subject to this Scheme becoming Effective, EXU will:

(a) issue the EXU Shares required to be issued by it under this Scheme on terms such that each such EXU Share will rank equally in all respects with each existing EXU Share;

(b) ensure that each EXU Share issued as Scheme Consideration is duly issued and is fully paid, non assessable and free from any mortgage, charge, lien, encumbrance or other security interest; and

(c) use all reasonable endeavours to ensure that all EXU Shares issued as Scheme Consideration are approved for quotation and trading on the ASX as of the first trading day following the Effective Date (or such later date as the ASX requires).

6. DEALINGS IN AZX SHARES

6.1 Dealings in AZX Shares by Scheme Shareholders

For the purposes of establishing who are Scheme Shareholders, dealings in AZX Shares will be recognised by AZX provided that registrable transfers or transmission applications in respect of those dealings are received at the place where the AZX Share Register is kept on or before 5.00 pm on the Record Date, and AZX will not accept for registration, or recognise for the purpose of establishing who are Scheme Shareholders, any transmission application or transfer in respect of AZX Shares received after 5.00 pm on the Record Date.

6.2 AZX Share Register

AZX will, until the Scheme Consideration has been paid and EXU has been entered in the AZX Share Register as the holder of all of the Scheme Shares, maintain the AZX Share Register in accordance with the provisions of this clause

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6 and the AZX Share Register in this form and the terms of this Scheme will solely determine entitlements to the Scheme Consideration.

6.3 Information to be made available to EXU

AZX must procure that as soon as practicable following the Record Date, details of the names, Registered Addresses and holdings of AZX Shares of every Scheme Shareholder shown in the AZX Share Register at 5.00 pm on the Record Date are made available to EXU in such form as EXU may reasonably require.

6.4 Effect of Share certificates and holding statements

As from 5:00 pm the Record Date, all share certificates and holding statements for the Scheme Shares (other than for EXU following the Implementation Date) will cease to have effect as documents of title, and each entry on the AZX Share Register at that date will cease to have any effect other than as evidence of entitlement to the Scheme Consideration.

6.5 Disposals after Record Date

If this Scheme becomes Effective, a Scheme Shareholder, and any person claiming through that Scheme Shareholder, must not dispose of or purport or agree to dispose of any Scheme Shares or any interest in them after the Record Date.

7. GENERAL PROVISIONS

7.1 Effect of Scheme

Each Scheme Shareholder acknowledges that this Scheme binds AZX and all of the holders for the time being of AZX Shares (including those who do not attend the meeting of AZX Shareholders to approve this Scheme or who do not vote at that meeting or who vote against this Scheme at that meeting) and, to the extent permitted by law, overrides the constitution of AZX.

7.2 Appointment of agent and attorney

Each Scheme Shareholder, without the need for any further act, is deemed to have irrevocably appointed AZX as its agent and attorney for the purpose of:

(a) executing any document or form or doing any other act necessary to give effect to the terms of this Scheme including, without limitation, the execution of the share transfer(s) to be delivered under clause 4.2(a) and the giving of the Scheme Shareholders' consent under clause 7.4; and

(b) enforcing the Deed Poll against EXU,

and AZX accepts such appointment. AZX, as agent of each Scheme Shareholder, may sub-delegate its functions, authorities or powers under this clause 7.2 to all or any of its directors and officers (jointly, severally, or jointly and severally).

7.3 Enforcement of Deed Poll

AZX undertakes in favour of each Scheme Shareholder that it will enforce the Deed Poll against EXU on behalf of and as agent and attorney for the Scheme Shareholder.

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7.4 Scheme Shareholders' consent

Each Scheme Shareholder irrevocably:

(a) consents to AZX and EXU doing all things and executing all deeds, instruments, transfers or other documents as may be necessary, incidental or expedient to the implementation and performance of this Scheme; and

(b) acknowledges that this Scheme binds AZX and all of the AZX Shareholders from time to time (including those who do not attend the Scheme Meeting, do not vote at that meeting or vote against this Scheme).

7.5 Scheme Shareholder’s agreements

Under this Scheme:

(a) each Scheme Shareholder (other than an Ineligible Overseas Shareholder) who is issued EXU Shares under this Scheme agrees to become a shareholder of EXU in respect of those EXU Shares, to be bound by the constitution of EXU and to have their name entered in the EXU Share Register;

(b) each Scheme Shareholder that is an Ineligible Overseas Shareholder agrees and acknowledges that the payment to it of an amount in accordance with clause 5.6 constitutes the satisfaction in full of its entitlement under this Scheme; and

(c) each Scheme Shareholder agrees to the transfer of its Scheme Shares, together with all rights and entitlements attaching to those Scheme Shares, to EXU in accordance with the terms of this Scheme.

7.6 Transfer with clear title and warranty by Scheme Shareholders

(a) To the extent permitted by law, the Scheme Shares transferred to EXU under this Scheme must be transferred free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or otherwise.

(b) Each Scheme Shareholder is deemed to have warranted to AZX, in its own right and for the benefit of EXU, that all their Scheme Shares (including any rights and entitlements attaching to those shares) will, at the date of the transfer of them to EXU, be fully paid and free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or otherwise, and restrictions on transfer of any kind, and that they have full power and capacity to sell and to transfer their Scheme Shares to EXU under this Scheme.

7.7 Title to Scheme Shares

EXU will be beneficially entitled to the Scheme Shares transferred to it under this Scheme pending registration by AZX of EXU in the AZX Share Register as the holder of the Scheme Shares.

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7.8 Appointment of EXU as sole proxy

From the Effective Date until AZX registers EXU as the holder of all of the AZX Shares in the AZX Share Register, each Scheme Shareholder:

(a) appoints EXU as attorney and agent (and directs EXU in each capacity) to appoint any officer or agent nominated by EXU as its sole proxy and where applicable, corporate representative, to attend shareholders' meetings, exercise the votes attaching to AZX Shares registered in its name and sign any shareholders resolution, and no Scheme Shareholder may itself attend or vote at any of those meetings or sign any resolutions, whether in person, by proxy or by corporate representative (other than pursuant to this clause 7.8(a); and

(b) must take all other actions in the capacity of the registered holder of AZX Shares as EXU directs.

7.9 Alterations or conditions

AZX may, by its counsel or solicitors, and with the consent of EXU, consent on behalf of all persons concerned, including a Scheme Shareholder, to any alteration or condition to this Scheme which the Court thinks fit to make or impose.

7.10 Notices

(a) Where a notice, transfer, transmission application, direction or other communication referred to in this Scheme is sent by post to AZX, it will for all purposes be deemed to be received on the date (if any) on which it is actually received at AZX's registered office (and it will not be deemed to be received in the ordinary course of post).

(b) The accidental omission to give notice of the Scheme Meeting to any AZX Shareholder, or the non-receipt of such a notice by any AZX Shareholder, will not, unless ordered by the Court, invalidate this Scheme or the proceedings at the Scheme Meeting.

7.11 Inconsistencies

This Scheme binds AZX and all AZX Shareholders, and to the extent of any inconsistency, overrides the constitution of AZX.

7.12 Further assurances

The AZX Shareholders consent to AZX doing all things necessary for the implementation and performance of its obligations under this Scheme. AZX will execute all documents and do all acts and things as may be necessary or expedient for the implementation of, and performance of its obligations under, this Scheme.

7.13 Stamp duty

EXU will pay any stamp duty payable on the transfer by Scheme Shareholders of the Scheme Shares to EXU.

7.14 Fees and charges

AZX must pay all filing, application or similar fees due in relation to this Scheme.

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7.15 Governing law

This Scheme is governed by the laws of the State of Western Australia. Each of AZX and EXU and the holders of AZX Shares irrevocably and unconditionally submits, in connection with this Scheme, to the non-exclusive jurisdiction of the Court and any courts which have jurisdiction to hear appeals from the Court and waives any right to object to any proceedings being brought in these courts.

7.16 Limitation of liability

None of AZX or EXU nor any officer of any of them is liable for anything done or omitted to be done in the performance of this Scheme in good faith.

7.17 Definition of "send"

For the purposes of clause 5, the word "send" (or any variant thereof) means

(a) sending by ordinary pre-paid post or courier to the Registered Address of the Scheme Shareholder; or

(b) delivering to that address by any other means at no cost to the recipient.

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ANNEXURE C | Deed Poll

EXPLAURUM LIMITED (EXU)

IN FAVOUR OF EACH SCHEME SHAREHOLDER

DEED POLL (IN RESPECT OF THE SCHEME)

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SCHEME BOOKLETMerger with

Explaurum LimitedIn relation to a recommended proposal to merge

Auzex Exploration Limited and Explaurum Limited by a scheme of arrangement

Your Directors unanimously recommend that you vote in favour of the scheme of arrangement in the

absence of a Superior ProposalThis is an important document and requires your immediate attention. You should

read this document in its entirety. If you are in any doubt about how to deal with this document, you should contact your broker, financial advisor or legal advisor immediately.

If you have any questions in relation to this Booklet you can call the Auzex Information Line on (07) 3106 5044 (for Australian callers) or + 61 7 3106 5044 (for international

callers) on weekdays between 9.00 am and 5.00 pm (Brisbane time).

ACN 153 608 596

EXU Legal AdvisorAuzex Legal Advisor Independent Expert

SCHEME BOOKLET M

erger with Explaurum

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