MOD.L Regulatory News (MOD)

25 June 2019

MOD Resources Limited

("MOD" or the "Company")

Sandfire to Acquire MOD Resources

Strengthening Sandfire's global development and exploration pipeline

· Sandfire Resources NL (Sandfire) (ASX: SFR) to acquire 100% of MOD Resources Limited (MOD) (ASX/LSE: MOD) by way of a MOD Scheme of Arrangement (Scheme)1

· Value-accretive transaction for Sandfire based on T3 Feasibility Study with upside from regional exploration potential

· Highly prospective, dominant landholding on the underexplored Kalahari copper belt in Botswana

· Combination leverages the strengths of both companies to both optimise and de-risk development

· T3 Project in Botswana meets Sandfire's investment criteria, including returns, cost profile, scale, life and upside potential

· Represents an attractive premium for MOD shareholders, whilst providing a funding solution for the development of T3 and retaining exposure to MOD's significant exploration potential

· Sandfire and MOD have executed a binding Scheme Implementation Deed (SID)

· Implied Scheme Consideration of A$0.45 per MOD share2, valuing the equity of MOD at A$167 million3, with MOD shareholders to elect either:

- Scrip Consideration of 0.0664 Sandfire shares for every 1 MOD share held; or

- Cash Consideration of A$0.45 per share, subject to an aggregate Cash Cap of A$41.6 million4

· Sandfire has agreed to extend its dividend record date to no later than 15 November 2019 in order to allow MOD shareholders to participate if the Scheme is complete by this date

· Implied Scheme Consideration represents a premium of:

- 45% to the closing MOD share price of A$0.310 per share on 24 June 2019;

- 45% to the 20-day MOD VWAP of A$0.310 per share up to and including 24 June 20195; and

- 108% to the undisturbed closing MOD share price on 18 January 2019 (i.e. confirmation of Sandfire's preliminary, indicative and non-binding approach to MOD as reported in the media)

· Unanimously recommended by the MOD Board, who have confirmed their present intention to vote in favour of the Scheme in respect of approximately 7.02% of MOD shares6

· Metal Tiger has agreed to vote in favour of the Scheme in respect of approximately 10.48% of MOD shares currently held and MOD shares that it will hold after the exercise of options prior to the Scheme meeting to a maximum of 19.9% of MOD shares

· 100% consolidation of MOD's tenement package across the Kalahari copper belt with MOD to also acquire Metal Tiger Plc's 30% indirect interest in several exploration licences

· SID contains standard "no shop", "no talk", "notification" and "matching rights" provisions, with a break fee payable in certain circumstances

1. Subject to customary conditions

2. Based on Sandfire's Volume Weighted Average Price (VWAP) for the 5 trading days up to and including 24 June 2019 (volumes traded on the ASX and Chi-X)

3. Includes unlisted options held by Metal Tiger, unlisted performance rights and shares issued by MOD to Metal Tiger for the acquisition of Metal Tiger's 30% indirect interest in several licences

4. European Holders will receive Scrip Consideration only. In the event the Cash Cap is exceeded, the amount of cash paid per share to shareholders electing cash will be reduced pro rata, and Sandfire shares issued in respect of the shortfall, at a deemed Sandfire share price of A$6.78.

5. Volume weighted average price (VWAP) for the 20 trading days up to and including 24 June 2019 (volumes traded on the ASX and Chi-X)

6. In the absence of a superior proposal and subject to a favourable opinion of the independent expert. Present intention only and subject to change. This holding is prior to dilution on the exercise of options by Metal Tiger, upon which the commitments by directors will represent 6.28%.

TRANSACTION SUMMARY

Sandfire Resources NL (Sandfire) (ASX: SFR) and MOD Resources Limited (MOD) (ASX/LSE: MOD) are pleased to announce the execution of a binding Scheme Implementation Deed (SID) for the implementation of a Scheme of Arrangement (Scheme) under which Sandfire will acquire 100% of the issued and to be issued share capital of MOD.

Under the Scheme, each MOD shareholder will elect to receive either:

· 0.0664 Sandfire shares for 1 MOD share (Scrip Consideration); or

· Cash of A$0.45 per share up to a maximum of A$41.6 million - representing 25% of the overall consideration (Maximum Cash Consideration)1,

Each of these alternatives implies Scheme Consideration of A$0.45 per share (Implied Scheme Consideration)2, with an implied equity value of A$167 million for MOD.3

The total cash consideration payable to MOD shareholders who elect the Maximum Cash Consideration is capped at A$41.6 million (Cash Cap). If a MOD shareholder elects for the Maximum Cash Consideration and the Cash Cap is not exceeded, the MOD shareholder will receive A$0.45 per share. If a MOD shareholder elects for the Maximum Cash Consideration and the Cash Cap is exceeded, the MOD shareholder will receive less than A$0.45 per share in cash, with the remainder in the form of Sandfire shares at a deemed issue price of A$6.78 (based on the 5 day VWAP up to 24 June 2019) per Sandfire share. The SID (a full copy of which is attached to this announcement) contains further details on the consideration to be provided under the Scheme.

The Implied Scheme Consideration represents a premium of:

· 45% to the closing price of A$0.310 per share on 24 June 2019;

· 45% to the 20-day VWAP of A$0.310 per share up to and including 24 June 20194; and

· 108% to the undisturbed closing price on 18 January 2019 (i.e. confirmation of Sandfire's preliminary, indicative and non-binding approach to MOD as reported in the media)

MOD shareholders who receive Sandfire shares will have the opportunity to receive any dividend paid by Sandfire if the Scheme is implemented on or before 15 November 2019.

1. European Holders will receive Scrip Consideration only

2. [1] Based on Sandfire's Volume Weighted Average Price (VWAP) for the 5 trading days up to and including 24 June 2019 (volumes traded on the ASX and Chi-X)

3. [1] Includes unlisted options held by Metal Tiger, unlisted performance rights and shares issued by MOD to Metal Tiger for the acquisition of Metal Tiger's 30% indirect interest in several licences

4. [1] Volume weighted average price (VWAP) for the 20 trading days up to and including 24 June 2019 (volumes traded on the ASX and Chi-X)

MOD BOARD RECOMMENDATION AND SHAREHOLDER SUPPORT

The Board of MOD has unanimously recommended that, in the absence of a superior proposal and subject to the independent expert to be appointed by the company opining that the Scheme is in the best interests of MOD shareholders (Standard Qualifications), MOD shareholders vote in favour of the Scheme.

Directors of MOD have confirmed their present intention to vote in favour of the Scheme in respect of approximately 7.02% of MOD shares.1

Metal Tiger has agreed to vote in favour of the Scheme in respect of approximately 10.48% of MOD shares currently held and MOD shares that it will hold after the exercise of options prior to the Scheme meeting to a maximum of 19.9% of MOD shares in the absence of a superior proposal.

The Board of MOD has also unanimously recommended that shareholders vote in favour of the MOD acquisition of Metal Tiger's 30% interest in Metal Capital Exploration Limited2 at the general meeting to be held prior to the Scheme meeting and have also confirmed their present intention to vote in favour in respect of their MOD shares.

1. In the absence of a superior proposal and subject to the favourable opinion of an independent expert. Present intention only and subject to change. This holding is prior to dilution on the exercise of options by Metal Tiger, upon which the commitments by directors will represent 6.28%

2. See section entitled "Metal Tigers Interest in Several Exploration Licenses"

TRANSACTION RATIONALE

MOD, through its Botswana operating companies (Tshukudu Metals, Tshukudu Exploration and MOD Botswana), owns a dominant landholding on the underexplored Kalahari copper belt in Botswana which includes the advanced T3 Project scheduled to commence construction in 2020 with first production expected in 2021.

Sandfire is a successful mid-tier copper-gold producer with a strong track record of exploration, project development and operations at its flagship DeGrussa Copper-Gold Mine in Western Australia. Sandfire is currently expanding its operations globally with an extensive exploration and development pipeline.

Commenting on the acquisition, Karl Simich, Managing Director and CEO of Sandfire, said:

"The acquisition of MOD adds the near-term T3 Project in Botswana to our global development pipeline while also adding a significant landholding on the highly prospective and underexplored Kalahari copper belt. The acquisition ticks all of our boxes from an acquisition criteria perspective and is value-accretive based on the T3 asset alone which, importantly can be funded out of cash flow.

We see this transaction as a partnership, with compelling benefits for both sets of shareholders. MOD shareholders will gain exposure to Sandfire's development and operating expertise, strong balance sheet and a growing global portfolio of base metal development and exploration assets with the potential to deliver transformational growth for the Company over the next decade.

Botswana is an attractive investment jurisdiction for mining and we look forward to working with the Government of Botswana going forward. We're excited to partner with MOD's existing management and in-country Tshukudu Metals and Tshukudu Exploration teams to further optimise and develop the T3 Project while also embarking on an expansive and well-funded exploration program designed to unlock the province's potential."

Commenting on the acquisition, Julian Hanna, Managing Director of MOD said,

"The MOD Board considers the implementation of a Scheme with Sandfire to reflect a compelling value proposition for MOD shareholders, who will benefit from Sandfire's platform to deliver the T3 Project into production, and realise the full potential of the underexplored Kalahari copper belt.

We see this partnership as providing the opportunity to maximise value from T3 which can be funded from Sandfire's balance sheet and cash flows. At the same time, it will provide MOD shareholders with exposure to Sandfire's substantial high-grade copper production in Australia and the outstanding potential of MOD's extensive licence holdings through an accelerated exploration program.

Importantly, the Sandfire partnership will continue MOD's vision of conducting all development, mining and exploration activities through the Botswana operating companies to enable the expansion of employment, training, and skills transfer programs, and build on the excellent work being undertaken by the Community Relations team based in Ghanzi."

BENEFITS TO SANDFIRE SHAREHOLDERS

· Value accretive from T3 alone based on Feasibility Study NPV;

· Gain exposure to upside potential from discoveries on the underexplored Kalahari copper belt;

· Add life to the Sandfire portfolio beyond current DeGrussa Ore Reserves;

· Benefit from the experience and strong in-country relationships of the MOD team;

· Extend the Sandfire Group's leverage to the copper thematic, which has attractive mid to long term fundamentals; and

· Benefit from a further enhancement in liquidity, scale, asset and jurisdictional diversification.

BENEFITS TO MOD SHAREHOLDERS RECEIVING SANDFIRE SHARES

· Receive a significant premium of 45% to last close, 45% to 20-day VWAP and 108% to the undisturbed closing price;

· Opportunity to receive Sandfire's final dividend for FY19 (if implemented prior to 15 November 2019);

· Benefit from immediate cash flow from Sandfire's DeGrussa mine, whilst retaining ongoing exposure to T3;

· Benefit from exposure to future upside from well funded exploration in this highly prospective region;

· Benefit from enhanced liquidity, scale, asset and jurisdictional diversification;

· Benefit from Sandfire's project delivery experience and balance sheet strength; and

· Benefit from Sandfire's operational excellence and class leading marketing, systems and sustainability practices.

DETAILS OF THE SCHEME IMPLEMENTATION DEED

The Scheme will be subject to the conditions set out in the SID, which include:

· Approval being received from the MOD shareholders;

· Regulatory approvals;

· Court approval;

· The Independent Expert concluding that the Scheme is in the best interests of MOD shareholders and not changing that conclusion; and

· Other conditions customary for a transaction of this nature.

Full details of the conditions are set out in the SID which is attached to this announcement.

EXCLUSIVITY ARRANGEMENTS

The SID contains standard "no shop", "no talk", "notification" and "matching rights" provisions, with a break fee payable in certain circumstances. MOD has agreed it will not solicit any competing proposal or participate in any discussions or negotiations in relation to any competing proposal (unless failure to do so would involve a breach of the fiduciary duties of its Directors).

METAL TIGER'S INTEREST IN SEVERAL EXPLORATION LICENCES

MOD has pre-existing rights under the Sale and Demerger Agreement with Metal Tiger dated 18 July 2018 to acquire Metal's Tiger's 30% interest in Metal Capital Exploration Limited, which indirectly owns several exploration licences on the highly prospective Kalahari copper belt. The consideration for the exercise of the option in terms of the Sale and Demerger Agreement comprises a cash sum and the grant of a 2% net smelter royalty (NSR) over future production from the exploration licence areas.

As a term of the SID, MOD has agreed (subject to the satisfaction of certain conditions) to exercise this option, and Metal Tiger has agreed, in lieu of receipt of the cash component of the consideration, to accept 22,322,222 MOD shares and the NSR as consideration for the 30% interest, in each case subject to the Scheme proceeding. The MOD shares issued on exercise of the option will be exchanged for Sandfire shares under the Scheme on the same basis as all other MOD shares. A general meeting of MOD shareholders will be held immediately before the Scheme meeting for shareholders to consider resolutions relating to this acquisition.

The agreement with Metal Tiger results in the consolidation of 100% of the landholding across the Kalahari copper belt (~11,700km2).

MOD and Metal Tiger have agreed to terminate the Share and Voting Deed dated 18 July 2018.1 If the Scheme is not effected, Metal Tiger has agreed to not dispose of its MOD shares to certain strategic investors for a period of 12 months.

1. Refer to the notice of substantial shareholder announced to ASX on 20 July 2018

INDICATIVE TIMETABLE

Shareholders of MOD will be asked to approve the Scheme at a meeting which is expected to be held in October 2019. Further details of the Scheme, transaction terms and recommendations will be provided to MOD shareholders through an Explanatory Booklet which will include an Independent Expert's Report. It is expected that this booklet will be mailed to MOD shareholders in late August 2019.

ADVISORS

Sandfire has appointed Citi as financial advisor and Gilbert + Tobin as legal advisor.

MOD has appointed Sternship Advisers and BMO Capital Markets as joint financial advisors and DLA Piper as legal advisor.

INVESTOR CALL AND WEBCAST

A teleconference on the transaction will be held for the investment community on Tuesday 25th June 2019 commencing at 10.00am (AWST) / 12.00pm (AEST). Investors, brokers, analysts and media can join the teleconference by dialling the following numbers:

Within Australia (Toll Free): 1 800 558 698

Alternate Australia Toll Free: 1 800 809 971

International: +61-2 9007 3187

Conference ID: 1000 0784

 Alternatively, investors or media can simply click on the following link to register for the call:

https://services.choruscall.com.au/diamondpass/sandfire-10000784.html

The MOD Acquisition Investor Presentation will be available via the ASX Company Announcements Platform (ASX code: SFR, ASX and LSE code: MOD) as well as at Sandfire's website at www.sandfire.com.au and MOD's website at www.modresources.com.au.

A live webcast of the teleconference and synchronised slide presentation will also be available via the BRR Media service website at the following link (with a recording to be available at the same link later today):

https://webcasting.boardroom.media/broadcast/5d00a51511608861983664ce

The full version of the announcement, including the Scheme Implementation Deed is available from the Company's website here: https://www.modresources.com.au/announcements.

ENDS

Shareholders resident in the United Kingdom, Channel Islands or Isle of Man should note that MOD is not a company that is subject to the City Code on Takeovers and Mergers ("City Code"), and that the Scheme will be governed by the Corporations Act 2001. The timetable, terms and conditions and rules governing the Scheme, which will be set out in the Explanatory Booklet, are different to those that would apply to a UK scheme of arrangement conducted under the City Code.

This announcement includes inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations. On the publication of this announcement via a Regulatory Information Service, this information is considered to be in the public domain.