Communicators

SPITFIRE AND EXCELSIOR GOLD TO MERGE, CREATING

+2Moz CONSOLIDATED JORC RESOURCE

The combined company, to be led by Managing Director Mr John Young, aims to fast-track the creation and development of the North Kalgoorlie gold production hub

HIGHLIGHTS

-    Spitfire Materials Limited (ASX: SPI) (Spitfire) and Excelsior Gold Limited (ASX: EXG) (Excelsior) have signed a Merger Implementation Agreement (MIA) to combine the companies by way of a court-approved Scheme of Arrangement.

-    The merger will create a leading ASX-listed gold company with an attractive diversified portfolio of exploration and development assets and a clear pathway to production in the highly prospective North Kalgoorlie region of Western Australia.

-    The merger will allow the two companies to realise the strong synergies that exist between their neighbouring North Kalgoorlie gold projects, located 35-70km north of Kalgoorlie in Western Australia along the highly prospective Bardoc Tectonic Zone within an almost contiguous land-holding of ~200km2.

-   The merged entity will have a combined Indicated and Inferred Mineral Resource inventory of over 2.1Moz – providing the critical mass required to accelerate development plans with the aim of becoming a recognised mid-tier gold producer.

-    The merged entity plans to embark immediately on a Pre-Feasibility Study (PFS) of the combined Aphrodite and Kalgoorlie North gold projects, providing the foundation for a Definitive Feasibility Study (DFS) aimed at fast-tracking the creation of a substantial new WA gold production hub near Kalgoorlie.

-    The merged entity will be led by Managing Director Mr John Young, who together with Mr Neil Biddle founded the successful lithium miner Pilbara Minerals (ASX: PLS). Mr Young will be supported by Mr Biddle as an Executive Director and current Excelsior Managing Director Mr Rowan Johnston, also as an Executive Director.

-   Post-merger, the Board of the merged entity will be comprised of three members from each of the current Spitfire and Excelsior Boards. The Non-Executive Chairman of the merged entity’s Board will be current Excelsior Chairman Mr David Hatch. Excelsior Non-Executive Director Mr Sam Randazzo will join current Spitfire Chairman Mr Peter Buttigieg as Non-Executive Directors of the merged entity.

Spitfire Materials Limited (“Spitfire”) (ASX: SPI) and Excelsior Gold Limited (“Excelsior”) (ASX: EXG) are pleased to announce that they have entered into an agreement to merge the two companies to create a significant diversified Australian gold company.

The merged entity will have an extensive resource inventory totalling over 2.1Moz in the prospective North Kalgoorlie district of WA, outstanding synergies due to their neighbouring project locations and near-term production potential, and a strong exploration and growth pipeline covering Tier-1 mineral provinces in WA and Queensland. Refer to Annexure A to this announcement for further details of the merged entity’s projects and JORC resource inventory.

The merger is to be implemented by way of a Scheme of Arrangement whereby Spitfire has agreed to acquire all of the issued capital of Excelsior by the issue of 1 new SPI share for every 2.208 Excelsior shares held. Further details of the MIA and Scheme of Arrangement are provided under the heading “Transaction Summary” below.

The merged entity will have an enhanced capital markets profile, a strengthened investor base and a strong growth pipeline of assets – positioning it to become a significant new ASX-listed gold developer at a favourable period in the market cycle for Australian gold companies.

DIRECTOR COMMENTS

Spitfire's Managing Director, Mr John Young, said:

“This is a game-changing transaction for both companies which will result in the creation of a diversified Australian gold developer with a strong pipeline of development and growth assets in the North Kalgoorlie region and a clear pathway to production. The merged entity will have the scale, relevance, access to capital and management capability to build a significant new mid-tier Australian gold producer.

“The combination of our respective WA gold assets gives us the critical mass to pursue a near-term development strategy based on the establishment of a new production hub near the world-class mining centre of Kalgoorlie. The large resource inventory at Aphrodite has exceptional exploration upside and growth potential, and offers significant synergies with our emerging high-grade discovery at Mulwarrie.

“This transaction is consistent with Spitfire’s strategy to create value for our shareholders through aggressive exploration and value-accretive strategic acquisitions in high quality mineral provinces – providing us with what is essentially a fast-track pathway to create Australia’s next significant mid-tier gold company. This represents the third significant M&A transaction which Spitfire has undertaken in the Australian gold sector in the past 18 months, demonstrating our commitment to build a company with a sizeable resource inventory and meaningful scale and relevance.

“We are also delighted that Mr Rowan Johnston, Mr David Hatch and Mr Sam Randazzo have agreed to join the Spitfire board and we believe that their skill-sets will be of great value to an enlarged Spitfire into the future.”

Excelsior’s Managing Director, Mr Rowan Johnston, said:

“This may be one of the few ‘one plus one equals three’ scenarios in the WA gold sector, as the synergies between the two companies are exceptional. There is no doubling up of management or Board skills, the two companies will blend seamlessly into one, and the leases adjoin each other – which means no duplication of infrastructure or site personnel. So, essentially this merger will result in one project, one office and one board with over 2.1Moz in resource and the critical mass to potentially generate a meaningful production profile.

“By achieving the critical mass and scale to support production, the merged entity will be in a great position to deliver superior returns to our shareholders, with a clear growth pipeline through exploration success and/or future M&A opportunities. The combined leases provide a clear pathway to near-term production, as well as a significantly enhanced exploration portfolio through an extensive and consolidated land-holding covering the highly prospective Bardoc Tectonic Zone.”

“We believe that the upgraded resources at Zoroastrian and Excelsior, when combined with the Aphrodite Project, will form the basis of a new standalone mine plan that will support a long-term gold business in the North Kalgoorlie region. At the same time, we are progressing a concerted exploration campaign to test our highly prospective land-holding for new gold deposits and will continue to do so throughout the merger implementation process.”

TRANSACTION SUMMARY

-          Merger to be implemented by way of a Scheme of Arrangement.

-          Spitfire shareholders will hold approximately 58.3% of the merged entity.

-          Excelsior shareholders will hold approximately 41.7 % of the merged entity.

-     In exchange for their fully-paid ordinary shares, Excelsior shareholders will receive one (1) new fully- paid ordinary Spitfire share for approximately every 2.208 Excelsior shares held under the Scheme.

-          The transaction values Excelsior at approximately A$0.0443 (based on SPI 30 Day VWAP).

-     The MIA includes provisions that the directors of Excelsior, as the Scheme company, will recommend the transaction and intend to vote in favour of the Transaction Resolutions and any general meeting resolutions in relation to their personal shareholdings in Excelsior, in the absence of a superior proposal (and subject to any other applicable voting restrictions and their fiduciary duties).

-          The MIA, is subject to:

• Receipt of all regulatory, shareholder and other approvals including (without limitation) the approval of the ASX and any necessary approvals, waivers or modifications of the Corporations Act from the Australian Securities and Investment Commission;
• Approval of the Scheme of Arrangement by Excelsior shareholders under section 411(4)(a) of the
• Corporations Act;

-                    Approval of the Scheme of Arrangement by a court of competent jurisdiction under the

• Corporations Act;

-                    The independent expert to be appointed by Excelsior concluding that the Scheme of Arrangement is in the best interests of Excelsior shareholders and the independent expert not withdrawing or adversely modifying that conclusion; and

-                    Other customary conditions precedent, including but not limited to the absence of a material adverse change in the business affairs, financial conditions of each of SPI and Excelsior, and no material transactions being entered into by either SPI and Excelsior with the usual or customary carve-outs, no prescribed occurrence occurring, accuracy of representations and warranties, obtaining material third party consents and/or waivers.

-     The MIA contains customary provisions covering exclusive dealing, no shop and talk, as well as a mutual break fee ($300,000).

-          A copy of the MIA will be announced separately.

TRANSACTION RATIONALE

The boards of Spitfire and Excelsior believe that the merger of the two companies has a clear strategic rationale and will generate significant value for the shareholders of both companies. Shareholders in the merged entity will have exposure to a large and diversified gold exploration and development portfolio in Western Australia, with a significant JORC compliant Mineral Resource inventory totalling over 2.1Moz and considerable exploration upside.

The portfolio will include Spitfire’s advanced, PFS-level Aphrodite Gold Project and Excelsior’s KNGP near Kalgoorlie, providing an advanced gold development opportunity with the potential to add further value via the emerging high-grade gold discovery at Spitfire’s nearby Mulwarrie Gold Project and the highly prospective Excelsior leases.

Both companies have made significant recent exploration and resource development progress at their respective gold projects in the North Kalgoorlie region of WA.

Spitfire has recently completed a highly successful resource in-fill and extensional diamond drilling program at its flagship 100%-owned 1.26Moz Aphrodite Gold Project, located 65km north of Kalgoorlie in the Eastern Goldfields of WA (see Figure 1).

The results received so far have confirmed the quality and consistency of the mineralisation within the

Underground Inferred Resource of 1.4Mt at 7.5g/t for 332,000oz (see Spitfire’s ASX releases dated 25 January

2018 and 29 May 2018), further supporting Spitfire’s objective of upgrading its Inferred Resource as the cornerstone of its development studies. An additional follow-up diamond drilling program has just commenced.

Excelsior recently re-established its resource position with updates on the Zoroastrian and Excelsior deposits following the completion of a resource drilling program at its 100%-owned Kalgoorlie North Gold Project (“KNGP”), located 30-55km north of Kalgoorlie in Western Australia. Excelsior’s ASX announcement of 22 May

2018 reported a high confidence resource foundation of 825,000oz, primarily at the adjacent Zoroastrian and Excelsior deposits, reflecting a higher degree of geological confidence and with the updated Resources constrained by open pit optimisation shells, leading the way to the potential establishment of Reserves in the near future, which will form the foundation of a combined Spitfire/Excelsior mine plan.