Prepared by: Management Board of G.A.M. Kluczowa Sp. z o. o. Aug. 2016, Wrocław

Investment Teaser

STARTING QUARRYING OPERATIONS in the mineral deposit KLUCZOWA owned by

G.A.M Kluczowa Sp. z o.o. of Wrocław, Poland - KRS 250999

Client: Management Board of G.A.M. Kluczowa Sp. z o.o.

The value of the Kluczowa mine as per the valuation report made in 2016 is

PLN 90,900,000

This offer to sell G.A.M Kluczowa Sp. z o.o. is a restricted offer subject to negotiations with prospective buyers

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Table of Content

I. Summary ................................................................................................................ 3

II. Information about the business for sale .................................................................. 4

1. Scope of business of the entity offered for sale ........................................................ 4

2. Location of the site ................................................................................................. 4

3. Infrastructure and logistics ...................................................................................... 5

4. Zoning requirements related to the property of GAM Kluczowa ............................... 5

5. Description of property ........................................................................................... 6

6. Description of the KLUCZOWA deposit ..................................................................... 6

III. Investor's opportunities .......................................................................................... 7

1. Prospects of quarrying operations at the site ........................................................... 7

2. Extraction method .................................................................................................. 8

3. Advantages of the property relevant to mining operations ....................................... 9

4. Time schedule and cost of starting quarrying operations ......................................... 9

STAGE 1 ............................................................................................................................... 9

STAGE 2 ............................................................................................................................... 9

STAGE 3 ............................................................................................................................. 10

IV. Human resources .................................................................................................. 10

V. SWOT analysis ...................................................................................................... 12

VI. Strategy for the years 2016 - 2023 ......................................................................... 13

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I. Summary The global economic slowdown of 2009-2014 affected not only the construction and mining industry. Starting from 2015, the widely understood construction market has been recovering and the value of companies operating mainly in rock mining will be systematically growing. The currently observed revival in building construction and road and railway construction directly translates into increased demand for high quality aggregate for the production of concrete and bitumen as well as for the railway industry or hydraulic engineering.

Another element with a direct impact on business attractiveness of the resources of the KLUCZOWA mine are current material quality tests meeting the standards of aggregate brightness laid down in Order No. 46 of September 2014 by the Director General for National Roads and Motorways (GDDKiA). Kluczowa's rock deposits are of the first grade of the standard and find application in building construction, road and railway construction, hydraulic structures and as components for the metallurgy industry, chemical industry, as an additive for mineral fertilizers, etc.

The end of 2016 and beginning of 2017 seems to be the best time for making the investment and for securing a good position for an extractive company on the recovering market. At the same time, in the context of the expected fulfilment of governmental declarations regarding investments in road and rail infrastructure the above period seems to be an excellent time for planning and work on the start of production of high-quality aggregate or dimension stone. The Kluczowa mine offers deposits with a huge potential: convenient location, test-proven high-quality raw material, convenient transport options including the possibility to build a railway siding – next to the existing PKP (Polish Railways) line (to bring the costs of transport to a minimum).

Extension of the Kluczowa mine is a long-term project that will offer financial returns in a couple of years from the start of extraction and sales. Apart from migmatite, amphibolite and granodiorite that will be extracted, there is big chance that the deposit also includes rare minerals such as titanium which is also used in certain industries. In collaboration with the Wrocław University of Technology, the Company has elaborated studies (funded by the EU) of industrial applications of waste (dust) from aggregate processing. Another way to potentially reduce the costs of starting up a mine in operation is the possibility of obtaining EU co-financing under the new financial framework. EU grants of 50% or as much as 85% of the Investor's outlay are available for innovation, new jobs and for investment projects.

It is also worth noting that owing to their high quality and scarcity of similar ones in other parts of Poland, the mineral deposits of the KLUCZOWA mine do not have much competition on the market. In the future, after the possible drop in the demand for cruched stone, the possibility to mine dimension stones offers a guarantee of stable high profit. The prices of dimension stone exceed several times the price of crushed stone and dimension stone can be sold on the local market - in the Wałbrzych Zone and in the adjacent communes.

Keeping the above in mind and making suitable calculations regarding investment effectiveness, the Investor has a possibility to launch a mobile mining plant on the property of GAM Kluczowa. The above should coincide with the start of investment work connected with new EU programmes and with the investments in infrastructure whose start was promised by the central government. In its current legal status, the Kluczowa mine is an operating mine. In 2016 the mine did not conduct any commercial activity.

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II. Information about the business for sale

1. Scope of business of the entity offered for sale GAM Kluczowa was set up in 2006 as a special purpose vehicle for starting up a quarry. The initial capital was used to cover the cost of geological, land surveyor's and geophysical survey services, borings, laboratory testing, master plan amendment procedure for the extraction site area and preparation, at the Company's cost, of a zoning plan (local development plan) for the area including the mine, railway siding and aggregate haul roads. All and any environmental analyses required in relation to the Environmental Impact Report and the obtained development consent have been carried out. The Company carried out updating of the agricultural land classification in the mine area. This will allow to avoid paying the charge for conversion of farmland to other use. Moreover, there will be no charges for clearing the trees. GAM Kluczowa has prepared the Kluczowa open-pit operations plan approved by the Director of the Mining Office in Wrocław. Vehicle haulage plan has been approved for the mine. The nearby sub-regional road after running for 1 km joins the national trunk road between Świdnica and Ząbkowice Śląskie ca. 6 km away from road No. 8. There is a power line in the vicinity of the mine. The service connection application for the full power needed has been approved for the adjacent 1 ha plot (owned by the Company) bordering the mine area. The area is designated for installation of offices and welfare facilities for the employees. The prospective starting of quarrying operations is not contested by the local community and the local government is fully supportive. The company has no employees and there are no employment-related claims pending. The Company has no liabilities, no unpaid taxes or social security contributions. There have been no leasing or purchase costs paid in relation to machines or equipment. There have been no debt securities, promissory notes, sureties or loans issued. The Company's properties are mortgage and claim free. The company has no subsidiaries and is not a daughter of any parent company. In the initial period of operation it is possible to deliver the aggregate to a railway siding located 6 km away from the deposit at the PKP (Polish Railway Company) station in Ząbkowice Śląskie. There is an option to hire an operational railway siding together with a stacking yard with an area of ca. 2 ha.

2. Location of the site

The subject property of GAM Kluczowa Sp. z o.o. is located beyond the area occupied by homesteads in Brodziszów (in the west part of the village) in an open space area. The property has a total area of 16.2013 ha. The surrounding land uses include forests, natural vegetation along streams and arable land not designated for building. Access to the property is provided through the local asphalt paved road between Brodziszów and Kluczowa. A single-track railway line runs ca. 150 m away from the property. The nearest villages are located at a distance of ca. 1 km from the mine. The Ząbkowice Śląskie municipality is located in the south part of the Lower Silesia region in Przedgórze Sudeckie sub-montane area between Sowie and Bardzkie mountains and Wzgórze Niemczańsko-Strzelińskie hill. The municipal office is in Ząbkowice Śląskie which is also the seat of Ząbkowice sub-region (poviat). The Ząbkowice Śląskie municipality is surrounded by the municipalities of Ciepłowody, Ziębice, Kamieniec Ząbkowicki, Bardo and Stoszowice located in the Ząbkowice sub-region and two municipalities located in the sub-region of Dzierżoniów: Piława

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Górna and Niemcza. The Ząbkowice Śląskie municipality has an area of 146.13 km2, including 13.65 km2 within the boundaries of the town of Ząbkowice Śląskie and has a population of 22,000. Among the largest manufacturing companies operating in the municipality are:

Legrand FAEL Sp. z o.o. - Fabryka Aparatów Elektrycznych – manufacturer of electrical devices;

Spółdzielnia Elsin - Elektrotechniczna Spółdzielnia Inwalidów – manufacturer of rectifiers, battery chargers, and automotive accessories;

Przedsiębiorstwo Wodno-Melioracyjne Sp. z o.o. - construction company specialising in water management systems;

Brukbet Sp. z o.o. - stone paving company, PPUiH TEJA Sp. z o.o. - manufacturer of machines, equipment and instruments for the

chemical and food processing industries; Znut - Fael Sp. z o.o. - manufacturer of injection moulds for plastic and light metal parts.

3. Infrastructure and logistics The town of Ząbkowice Śląskie has convenient access to the transport system and is conveniently located in relation to larger urban centres (67 km from Wrocław, 69 km from Wałbrzych and 57 km from Kudowa-Słone). The following important routes meet in Ząbkowice Śląskie: national road No. 8 (running from the border with Lithuania and passing on its way Warszawa, Piotrków Trybunalski, Wrocław and Kudowa Zdrój and then heading to the south of Europe), forming part of the international route No. E67; regional road No. 382 (between Paczków and Świdnica); regional road No. 385 (between Nowa Ruda and Ziębice). These major roads are accompanied by a well developed network of sub-regional and local roads having a total length of ca. 90 km. There is also a non-electrified single-track railway line running across the municipality, connecting Legnica with Kamień Ząbkowicki. There is a railway station and sidings in Ząbkowice Śląskie which can be used by manufacturing companies for their needs.

4. Zoning requirements related to the property of GAM Kluczowa According to the zoning ordinance for the migmatite deposit Kluczowa adopted by the resolution of the Town Council of Ząbkowice Śląskie No. XI/35/2010 of Oct. 6, 2010 published in the Lower Silesia Official Journal on Dec. 10, 2010, No. 232, item No. 3883 the subject property is located in a PG zoned area. Fragment of graphic Attachment No. 1 to the Resolution of the Town Council of Ząbkowice Śląskie No. XI/35/2010 dated, Oct. 6, 2010. The property boundaries are coloured. According to Cl. 18.1 the area separated by boundary lines marked with the PG symbol is designated for mining operations – mine workings and overburden and topsoil dumping (Fig. 2). Open pit mining of the Kluczowa deposit is permitted in the designated area. Blasting method can be used for rock fragmentation. Onsite piling of overburden and waste materials is allowed as part of mine rehabilitation (reclamation) activities. Planned rehabilitation: flooding and afforestation.

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5. Description of property

The subject property comprises plots No. 74, 75, 76, 77 and 78/ 85 AM-1 in Brodziszów, designated as permanent meadows and pastures with soil quality class III-VI, idle and cultivated arable land, soil quality class IIIb-VI. These plots make up one piece of land located beyond the residential area of the village of Brodziszów, by an asphalt paved road between Kluczowa and Brodziszów. The subject property is located in the KLUCZOWA mining area. The area is surrounded by cultivated land. At the time of valuation survey the area was overgrown with weeds and self-set trees with no market value and plot No. 75 and partly plot No. 77 are occupied by idle arable land and old workings. The terrain is undulating with the main hillock located on plot No. 75.

For the KLUCZOWA deposit the following areas have been designated: mining area of 151.217m2 and impact zone of 820.591m2. The recoverable reserves of the deposit having an area of 127,219 ha total 23,894,000 tonnes. The overburden depth varies over the area. It ranges from 0.50 m at the granodiorite outcrop to ca. 6 m in lower areas with weathered rock overlay. The overburden should be removed entirely and dumped on site. It comprises Quaternary deposits including toposoil, clay, weathered rock and rubble and weathered migmatite, amphibolite and granodiorite. The deposit is easily accessible and extraction is economically viable.

6. Description of the KLUCZOWA deposit

From the physical geography point of view the migmatite is located in the eastern part of the Pogórze Sudeckie sub-montane area in Wzgórza Gumińskie. The KLUCZOWA migmatite deposit is located in the Ślęza river catchment with the river itself flowing ca. 7 km to the NW of the deposit. The nearest running water is an unnamed stream flowing 70 metres from the eastern boundary of the property. The deposit is located in the SE part of the Sowie Góry block. This unit is built of deposits of the Proterozoic. These include different migmatites with thin amphibolite inclusions. It is typical of amphibolite to form thin inclusions in migmatites. Most amphibolites are compact, massive rocks, coarse, medium and fine grained and having random or oriented texture.

According to geophysical and boring surveys the Kluczowa deposit is built predominantly of migmatite with amphibolite as the associated mineral resource with non-uniform depth and distribution and granodiorite in the form of a vein which within the limits of the deposit is ca. 230 m long and 50-90 m wide. The outcrop of granodiorite (syenite) makes up a uniform unit separated naturally from other rock units. Amphibolite has a varying hue, structure and mineral composition. The medium-crystalline deposit is greyish-black had has a compact texture, while fine grained amphibolite is generally greyish-black and greyish-green locally and has a poorly oriented texture. The biggest in area amphibolite bodies are located in the SW part of the deposit. The thickness of these bodies ranges from 10.0m to 48.5m. To the north of the fault over amphibolite the overburden of the Quaternary is accompanied by a layer of migmatite of 8.00-37.4 m in thickness. In the eastern and north-western part of the deposit there are small lenses of amphibolite, also overlain with migmatite of 8.0m-30.0m in depth. There is also a granodiorite vein running NE to SW through the hillock top. The granodiorite vein dips 30-40 degrees SW. Granodiorite having quartz moznodiorite composition is a dark grey, medium crystalline rock with random compact texture,

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cut by veins of quartz, aplite and pegmatite of varying thickness. In the uppermost portion of the hillock, granodiorite has a thin overlay of only 1-1.5 m in thickness. The thickness of the granodiorite deposit ranges from 15.0 m up to 94.0 m in central part of the vein.

III. Investor's opportunities

1. Prospects of quarrying operations at the site Having acquired shares in GAM Kluczowa the investor can within a short time start up quarrying operations and start sales. Taking into account the fact that the resource mineral is ideally suited as granular subbase/ ballast for new constructed and renovated roads and railway lines there is a high probability that the quarry can yield considerable profit, with the governmental infrastructure schemes being a major contributing factor.

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Note that owing to their desirable properties magmatities are one of very few minerals found in Poland which can be used for high-speed rail applications. Preliminary tests have been carried out and confirmed the suitability of the material for railway applications. Moreover, with a very good adhesion to bitumens magmatites are a desirable material for road paving works. 70% of the reserve has been identified as a source of dimension stone, 30% as a source of crushed aggregate and, as such, the quarry can produce various building stones including dimensional stone blocks, slabs, cube stones and also exterior cladding and internal decoration panels, etc.

2. Extraction method The minerals will be extracted by open-pit mining with the longwall top-down method maintaining minimum 20 m distance between the working faces. Five operation levels are planned. The type of mineral, nature of intrusion of the deposit and the existing natural division planes related to sedimentation conditions have all resulted in favourable conditions of extraction with the main focus of obtaining crushed aggregate and broken stone. It will also be possible to obtain large blocks for further processing. Fragmentation by blasting will be used with the long blasthole method as the main blasting technique. Blasting will be outsourced to a specialist company. The migmatite as well as amphibolite and granodiorite reserves of the deposit are expected to provide high quality material. Before staring up quarrying several preparatory activities are required, concerning both the mining operations and defining the market appropriate for the extracted minerals. The site preparatory activities include inter alia stripping and piling of overburden, defining the pit development and extraction methods, use of extracted mineral and processing method and shutdown procedures upon termination of mining operations. According to the "Pit development plan for the Kluczowa migmatite deposit" the extraction operations will start in the eastern part of the site at the level of 350 m a.s.l. after stripping of overburden. The deeper levels will be exposed at appropriate datum in the SE part of the deposit. The mineral will be extracted by surface mining with the longwall method from the hillside, hillside and pit and pit only on five levels of operation. The mining direction will be to the west and to the north. Blast fragmentation will be used and fragmented rock will be transported to the processing plant. In order to start up quarrying migmatite it will be necessary to provide the site with crushing machines, loaders and screening machine. In the initial operation period (for up to 2 years) the investor can use hired equipment as far as practicable. The property has a total area of 162,013 m2 of which the deposit occupies 127,219 m2. The difference, i.e. the area of 34,794 m2 is therefore located beyond the deposit area. It is planned to use that area for aggregate storage and dump site for waste materials (including overburden) to be used for future surface reclamation.

In the future, with own railway siding and haulage to the shipping yard it will be possible to efficiently load and carry the material by rail. As an option, the material can be hauled by roads to the railway siding in Ząbkowice Śląskie (6 km distance) or delivered directly to the client. The resources were estimated on the basis of a boring survey comprising six 80 m exploratory boreholes. Additional exploration was carried out by SKANSKA which made a 100 m deep borehole. The latter exploration showed that migmatite is present also in the deeper part of the

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deposit increasing the potential resources by at least 20%. Thus one can consider future extension of the concession to cover the deeper lying mineral, subject to well planned exploitation of the reserves in compliance with the documentation in hand (concession). Note that the material of deeper strata has better quality parameters than the material extracted from the first level of operation. Change from hillside and pit quarrying to open pit quarrying will on the one hand potentially increase the cost of extraction yet on the other it will considerably increase the reserves and extend the mine lifetime. In surface mines where material is extracted by digging only, the pits reach down to 80-100 m below terrain level.

3. Advantages of the property relevant to mining operations The topsoil overlying the deposit is of quality class IV-VI and as such there are no charges applicable for conversion of arable land to other uses. Moreover, there are no trees in the area for which tree cutting fee could be charged. The deposit is located along the road between Brodziszów and Kluczowa with approved access point onto regional road at the village of Kluczowa. It is not needed to purchase additional land for the road right-of-way. In the close vicinity of the deposit runs a medium-voltage power line and as we have been told by the owner it is possible to install a 1.6 kV service line. Access to municipality-supplied potable water requires a 500 m service line and water drained from the workings can be discharged to the adjacent stream.

4. Time schedule and cost of starting quarrying operations The plan of activities related to starting quarrying operations has been divided into three stages. STAGE 1 After acquiring GAM Kluczowa it is necessary to complete procedures required for starting of quarrying operations. The following are the most important permits to be obtained:

Electrical service permit; With the power transmission line running in the vicinity of the deposit we should not expect problems with obtaining such permit and the service cost would be ca. PLN 150,000

Upgrading of sub-regional road in relation to the project;

For haulage of aggregate in the first phase of mine operation it will be necessary to upgrade the sub-regional road section of 1 km in length only, the cost of which has been estimated at PLN 250,000 incurred progressively as the work proceeds.

STAGE 2 The next stage plans include the commencement of the works consisting in stripping a part of the deposit area of topsoil and depositing the obtained material at the designated topsoil dump. The

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activities related to removal of part of the overburden will be carried out progressively from the date of the deposit’s acquisition until the start of the mine’s operation. Part of the material obtained will be used in the construction of the local road from the overburden material – at the cost of PLN 260,000. In the course of extracting operations carried out after making the mine operational, stripping of overburden will be continued and part of the weathered rock material will be resold as a lower quality material. At this stage stripping works progressing to south-west of the deposit are planned to commence. Time of the works: up to five months - until 50,000 m3 of the overburden has been hauled away or pushed aside. Construction of internal roads leading to the first level of operation in the process of opening will be carried out along with topsoil stripping. The works will be carried out gradually as exposing of the deposit proceeds. The main conveyor lines will be installed as needed – in accordance with the approved Mine Operations Plan. The stripping works progressing in the south-east direction can be performed within one month. At the same time hard surfacing of the terrain within the mine site designed for the construction of the technical, office and employee welfare facilities will be carried out. The work will be performed as needed and using own materials. The cost of internal road and circulation areas preparation is estimated at PLN 90,000. The first drilling and blasting operations are planned two months after the initiation of preparatory activities. STAGE 3 The last stage connected with preparations for quarrying involves the purchase or renting of the necessary equipment for starting extraction and sales of the minerals. First, the following fixed assets are planned to be purchased:

Weighbridge – cost PLN 150,000

Office modules for administration staff necessary to perform work on the site - cost PLN 30,000

Other machines and equipment – planned cost PLN 120,000 Before the mine start-up, it will be necessary to sign lease contracts for the required equipment. In the initial period it will be necessary to rent dumpers, loaders, excavators and mobile crushing plant. Ultimately, other equipment is planned to be purchased or leased. The costs connected with starting up the mine have been estimated at PLN 6m of which PLN 2m will be spent on infrastructure and the remaining part on mobile cruching plant and on transport vehicles. The Management Board of GAM Kluczowa may also obtain financing for the start-up from an investment loan secured by shares in GAM Kluczowa. It is also possible to obtain a working capital loan of PLN 3m in the initial stage of production. In the event that a working capital loan is not available, operating activity may be funded by factoring or from the Investor's own funds.

IV. Human resources

Operation of an open-pit mine is a specific business that requires special qualifications from people directly involved in its management. Before a mining plant can be established a number of formal documents need to be prepared that will regulate the mining process and

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general operation of the mine. The above involves the need to secure a team of specialists with suitable technical expertise. A team of people with appropriate qualifications and experience has been gathered to start up and operate the mine. Person responsible for technical startup - Ireneusz Biel, M.Sc. Eng.

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V. SWOT analysis

SILNE STRONY (S)

SŁABE STRONY (W)

STRENGTHS (S) high quality aggregate for railway IK certyfikt and

road construction, SKANSKA aggregate brightness certificate as per GDDKiA requirements confirmed by numerous tests performed by specialist laboratories;SKANSKA, Biproskal.

visually attractive raw material finding application also in hydraulic engineering and high-rise construction;

licence allowing for extraction of 1 million tons/year;

railway line in the immediate vicinity of the deposit;

convenient conditions of operation;

no objections from the local community;

good relations with the local authorities;

approved Mine Operation Plan;

WEAKNESSES (W) quarrying not yet started;

necessary financial expenditures for the launch of operations ;

future construction of own railway siding;

OPPORTUNITIES (O) launch of Infrastructure Programmes and EU

funds for roads and railway;

raw material export opportunities;

possibility of obtaining EU grants for the purchase of machines, for job creation and for innovative products;

continuation of the national programme of infrastructure investment projects by holding until the end of 2017 of bidding procedures for the construction and modernisation of roads and railways;

first quality mineral deposits;

THREATS (T) partial disbursement of EU funds by 2017

rate of development of infrastructure investment projects slower than expected;

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VI. Strategy for the years 2016 - 2023

Starting extraction at the level of 1 million tonnes per year and the commencement of commercial activity of the Kluczowa quarry at the assumed level of investment can within a few years make GAM Kluczowa one of the biggest players in the Polish dimension and crushed stone market. Accomplishment of these goals by the Company will certainly be more certain if the following Governmental Infrastructure Programmes are continued: National Railway Program until 2023 with the budget of ca. PLN 67,500 million and the National Road Construction Programme until 2023 with the planned expenditure of PLN 155,900 million. By the end of 2017 governmental institutions plan to call for tenders for the construction and upgrading of roads and railway lines worth about PLN 10,500 million. Financial support from the European Infrastructure Funds is of great importance in projects of this kind. Kluczowa is a deposit containing material of a very high quality, which is very important in the light of high quality requirements specified for aggregates for railway applications and for high-speed railway in particular. Thus, the demand for high quality material will be growing considerably in the coming years. The aggregate obtained from the Kluczowa quarry can be successfully used in construction of buildings, land development and hydraulic structures as well as for high-rise buildings (e.g., such as the Sky Tower project in Wrocław). The Company is also planning the construction of a paving cube and natural stone panels manufacturing plant, which due to durability of the material and its visual aspects will become a serious competition to the currently used granite. Taking into account that the Kluczowa Mine plans to extract and process up to 1 million tones per annum, then based on the data given in the Valuation Report, the annual net profit of the investment project will be ca. PLN 9,440,000 .

According to the valuer’s estimation given in a document prepared in2016 the market value of the property calculated by income-based method is PLN 90,900,000. Therefore there is a very good chance that GAM Kluczowa's investment in the extraction of migmatite, granodiorite and amphibolite will turn to be an economic success and will allow the company to achieve an important position among dimension and crushed stone producers operating in the Polish market.