ABX GROUP LIMITED - Capital/Financing Update 2009

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REPLACEMENT PRosPECTus

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AUSTRALIAN BAUXITE LIMITED

ACN 139 494 885

iNitiAl publiC OFFERiNg OF 20,000,000 SHARES At AN iSSuE pRiCE OF $0.20 pER SHARE tO RAiSE $4,000,000. tHE MiNiMuM SubSCRiptiON iS $4 MilliON.

priority Offer: Hudson Shareholders will be guaranteed an allocation of 10,000 Shares if they hold at least a Marketable Parcel of Hudson Shares on the Record Date. Hudson Shareholders may apply for more Shares under the Priority Offer, but will not be guaranteed the additional allocation. Any further allocation will be at the discretion of the Directors.

Sponsoring Broker and Lead Manager

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This is a replacement prospectus dated 28 October 2009. it replaces a prospectus dated 19 October 2009, relating to shares of Australian bauxite limited.

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ABx DIRECTORY

IssuER

Australian Bauxite Limited ACN 139 494 885

Level 2 131 Macquarie Street Sydney NSW 2000 p: +61 2 9251 7177 f: +61 2 9251 7500 e: [email protected] w: australianbauxite.com.au

LAwyERs

Piper Alderman Level 23, Governor Macquarie Tower 1 Farrer Place Sydney NSW 2000

ExPERT GEoLoGIsT

Terrence Willsteed & Associates

13/1 The Quay 2 Phillip Street Sydney NSW 2000

shARE REGIsTRy

The Registrar Computershare Investor Services Pty Limited GPO Box 2975 Melbourne VIC 3001 Australia

p: 1300 850 505

DIRECToRs

Peter Meers (Chairman) Ian Levy (Managing Director) Rado Jacob Rebek Wei Huang Vincent Tan

CoMPANy sECRETARIEs Henry Kinstlinger David Hughes

ChIEf fINANCIAL offICER

Francis Choy

AuDIToRs

K.S. Black & Co

Suite 2404 MLC Centre 19 - 21 Martin Place Sydney NSW 2000

INvEsTIGATING ACCouNTANT

K.S. Black & Co Suite 2404 MLC Centre 19 - 21 Martin Place Sydney NSW 2000

sPoNsoRING BRokER & LEAD MANAGER

State One Stockbroking Ltd AFSL No. 247100

Level 14 State One House 172 St Georges Terrace Perth WA 6000 p: +61 8 9288 3388 Level 20 Australia Square 264 George St Sydney NSW 2000 p: +61 2 9024 9118 e: [email protected] w: www.stateone.com.au

All illustrations or other visual images are for presentation and illustration purposes only and are not to be taken to represent assets of ABx.

AUSTRALIAN BAUXITE LIMITED

Key	Points of Ofering	ii
Important Information		ii
Key	Dates for Investors	iii
1.	Letter to Investors	1
2.	Investment Summary	2
3.	Details of the Ofer	4
4.	Market and Industry Overview	7
5.	ABx Business and Project Review	14
6.	ABx Project Tenements Summary	18
7.	Directors and Management	20
8.	Independent Technical (Geologist) Report	22
9.	Financial Information	55
10.	Investigating Accountant’s Report	58
11.	Legal Report on ABx Project Tenements	61
12.	Risk Factors	78
13.	Additional Information	83
14.	Directors’ Statement	92
15.	Glossary	93

This is a replacement prospectus dated 28 October 2009. it replaces a prospectus dated 19 October 2009, relating to shares of Australian bauxite limited.

ImpORTAnT InfORmATIOn

KEY pOInTs Of OffERInG

Initial public offering of 20 million shares at an issue price of $0.20 per share to raise $4,000,000.
Priority Offer to Hudson shareholders holding a Marketable Parcel at a Record Date.
ABx will use the funds raised through this IPO to accelerate exploration on the ABx Project Tenements
ABx is seeking to capitalize on the global shortage of low-temperature bauxite and refractory grade bauxite.
ABx has first mover advantage on three new provinces containing such material in Southern Queensland and New South Wales.
Hudson is transferring its 100% interest in the ABx project tenements to ABx subject to the Minister’s approval. The ABx project tenements consists of 13 tenements and have applications to hold a further 4 Bauxite tenements, covering a total of over 5,000 square kilometers.
All three bauxite provinces are in relatively close proximity to required infrastructure – road, rail and ports.
To date 130 drill holes have been completed on selected targets on EL 6997 (Inverell) and EL 7269 (Windellama).
More than 4,000 bauxite samples have been collected and analysed (across all the ABx Project Tenements).
Further drilling and analysis is essential to reliably determine the quality and quantity of bauxite.
Resource drilling has been conducted largely at Inverell in northern NSW and Windellama in southern NSW, with 7 metre seams identified at surface.
Analysis shows the bauxite ore on EL 6997 (Inverell) to be largely Gibbsite (tri-hydrate alumina), highly desired due to its amenability to low temperate and low cost extraction in an alumina plant.
The quality of bauxite on EL 6997 (Inverell) is characterized by:
» High alumina (typically 40 - 50% Al2O3) and high available alumina (35-40%);
»
Low reactive silica: 1.5 - 4.0% SiO2 (ie low clay contamination);
» Course grains of gibbsite – easily upgraded by wet screening and other simple beneficiation methods.
• Targets for further drill testing have already been identified on all exploration tenements.

RIsKs

As at the date of the Prospectus, applications for the transfer of 100% legal and beneficial interest in the ABx Project Tenements have been lodged under the applicable Mineral Legislation. Pending transfer of title these tenements are registered in the name of the Hudson. The Minister has a discretion not to approve transfer of title and in particular the Minister must not approve the transfer unless the Minister is satisfied the transferee has the human, technical and financial resources to comply with the conditions of the exploration permit. Therefore there is a risk that ABx may not be able to get good title to all the ABx Project Tenements.
The Acquisition Agreement provides that pending transfer of title ABx shall be deemed to hold the 100% beneficial interests in each of the ABx Project Tenements free and clear of all Encumbrances upon a constructive trust and if a relevant Government Agency does not consent to the transfer of a tenement the Hudson will hold that tenement on trust for ABx.
The ABx Project Tenements consist only of exploration permits. Even if economic quantities of bauxite are discovered, there is a risk that ABx will not be granted the necessary lease to mine the bauxite.
The expiry date of EL 6997 (Inverell) is 24 December 2009. Notwithstanding a report received on 23 October 2009 from DII confirming that licence reporting requirements are up to date and minimum expenditure requirements have been met, renewal of the licence is subject to the Minister’s consent. In the event that the licence is not renewed ABx will not be able to complete its exploration program before the expiry of the licence.
The nature of exploration is such that there is always a risk that approval for renewal of a licence will not be granted. This risk will be mitigated by ABx complying with all conditions of grant.
Persons who accept the offer will be minority shareholders as Hudson will hold 71% after the Offer. According to the Listing Rules, the shares held by Hudson will be subject to escrow for a period of two years after which time the shares allotted under the Offer may be thinly traded.

Investors should carefully read the section on risk factors outlined in section 12.

ii AUSTRALIAN BAUXITE LIMITED

ImpORTAnT InfORmATIOn

KEY DATEs fOR InvEsTORs

Offer Opens Offer expected to close

Expected Date for Despatch of Shareholding Statements Expected Date for listing on ASX

3 November 2009 14 December 2009 21 December 2009 23 December 2009

These dates are indicative only and subject to change. The Board at its own discretion and subject to its statutory obligations reserve the right to alter this timetable at any time and may extend the period of the Offer or bring forward the Close of the Offer.

IMPoRTANT NoTICE

This is a Replacement Prospectus dated 28 October 2009 prepared by Australian Bauxite Limited (ABx) to the prospectus dated and lodged with Australian Securities and Investments Commission (ASIC) on 19 October 2009.

Neither ASIC nor Australian Stock Exchange Limited (ASX) take any responsibility for the contents of this Prospectus.

No Securities will be issued on the basis of this Prospectus later than thirteen months after the date of this Prospectus.

Australian Bauxite Limited (ABx) will make application within seven days of the date of this Prospectus for official quotation by ASX of the Shares offered by this Prospectus.

The Offer is being made in Australia. No offer will be made in any overseas jurisdiction where it would not be lawful to do so. It is the responsibility of overseas Applicants to ensure compliance with all laws of any country relevant to their Application. No person named in this Prospectus, nor any other person, guarantees the performance of ABx, the repayment of capital or the payment of a return on the Shares.

The Prospectus will be made generally available in electronic form during the Exposure Period by being posted through the ABx website at australianbauxite.com.au and also at www.stateone.com.au. Persons having received a copy of this Prospectus in its electronic form may obtain an additional paper copy of this Prospectus and the Application Form (free of charge) from the registered office of ABx during the Offer Period by contacting ABx on +61 2 9251 7177. The Offer constituted by this Prospectus in electronic form is only available to persons receiving an electronic version of this Prospectus and Application Form within Australia.

Please read this document carefully before you make a decision to invest. An investment in ABx has specific risks which you should consider before making a decision to invest.

Investors should carefully read the section on risk factors outlined in section 12.

PRIoRITy offER

As part of a Priority Offer, Hudson Shareholders will be guaranteed an allocation of 10,000 Shares if they hold at least a Marketable Parcel of Hudson Shares on the Record Date.

Hudson Shareholders may apply for more Shares under the Priority Offer, but will not be guaranteed the allocation. Any further allocation will be at the discretion of the Directors.

In the event that a Hudson Shareholder applies for Shares under the Priority Offer and is ineligible to participate such application will be treated as made under the Public Offer.

how To APPLy foR shAREs

Applications for Shares will only be accepted on the Application Form attached to or accompanying this Prospectus or in its paper copy form from australianbauxite.com.au or from www.stateone.com.au. The Corporations Act 2001 prohibits any person from passing on to another person the Application Form unless it is accompanied by or attached to a complete and unaltered copy of this Prospectus.

Applications must be for a minimum of 10,000 Shares at the Offer price of $0.20 per Share. Applications for more than 10,000 Shares must be in multiples of 1,000 Shares.

iii

ImpORTAnT InfORmATIOn

REPREsENTATIoN

No person is authorised to give any information or make any representation in connection with the Offers other than as is contained in this Prospectus. Any information or representation not contained in the Prospectus should not be relied on as having been made or authorised by ABx or its Directors in connection with the Offers.

ExPosuRE PERIoD

Applications for Shares under this Prospectus will not be processed until after expiry of the Exposure Period for this Prospectus under the Corporations Act 2001. No preference will be conferred on Applications received during the Exposure Period. All Applications received during the Exposure Period will be treated as if they were simultaneously received on the date on which the Offers open. If the Exposure Period is extended by the ASIC, Applications will not be processed until after expiry of the extended Exposure Period.

The purpose of the Exposure Period is to enable examination of this Prospectus by market participants prior to the acceptance of Applications and the raising of funds. That examination may result in the identification of deficiencies in the Prospectus and, in those circumstances; any Application that has been received may need to be dealt with in accordance with section 724 of the Corporations Act 2001.

not complete the Application Form in full, ABx may not accept your Application Form.

By submitting an Application Form, each Applicant agrees that ABx may use the information provided by that Applicant on the Application Form for the purposes set out in the privacy disclosure statement and may disclose it for those purposes to the Share Registry, ABx’s related bodies corporate, agents, contractors and third party service providers, including mailing houses and professional advisers and to ASX and regulatory authorities.

If an Applicant becomes a Security Holder, the Corporations Act 2001 requires ABx to include information about the Security Holder (including name, address and details of the Shares held) in its public register. The information contained in ABx’s public register must remain there even if that person ceases to be a Security Holder. Information contained in ABx’s registers is used to facilitate distribution payments and corporate communications (including ABx’s financial results, annual reports and other information that ABx may wish to communicate to its Security Holders) and for compliance by ABx with legal and regulatory requirements.

If an Applicant does not provide the information required on the Application Form, ABx may not be able to accept or process that Application efficiently, or at all.

To make a request for access or to obtain further information about ABx's personal information management practices, please contact ABx on +61 2 9251 7177.

sPECuLATIvE INvEsTMENT

Persons wishing to subscribe for the Securities offered by this Prospectus should read this Prospectus in its entirety in order to make an informed assessment of the assets and liabilities, financial position and performance, profits and losses and prospects of ABx and the rights and liabilities attaching to the Securities offered pursuant to this Prospectus. If persons considering subscribing for the Securities offered by this Prospectus have any questions, they should consult their stockbroker, solicitor, accountant or other professional advisers for advice.

Potential investors should carefully consider whether the Securities offered by this Prospectus are an appropriate investment for them in light of their personal circumstances, including financial and taxation position. The Securities offered by this Prospectus should be considered speculative. Refer to section 12.5(a) for details relating to the investment risks.

GLossARy

Defined terms and abbreviations used in this Prospectus are explained in the Glossary in section 15.

PRIvACy AND PERsoNAL INfoRMATIoN

The completed Application Form provides personal information about you to ABx. ABx collects your personal information to process and administer your investment in ABx and to provide related services to you. If you do

An Applicant has a right to gain access to the information that ABx holds about that person subject to certain exemptions under law. A fee may be charged for such access. You can obtain access to personal information that ABx holds about you.

iV AUSTRALIAN BAUXITE LIMITED

1. lETTER TO InvEsTORs

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peter John Meers Chairman

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ian Warwick levy Managing Director

Dear Investors,

On behalf of the Board of Directors it is our pleasure to offer you the opportunity to become an investor in Australian Bauxite Limited (ABx).

ABx was incorporated on 23rd September 2009 and was formed specifically for the purpose of acquiring the bauxite interests of Hudson Resources Limited; increasing the value of the portfolio through a staged development program in each of three bauxite provinces which would include exploration sampling, drill testing & analyses from a wider range of targets on all exploration tenements; resource definition drilling and bauxite metallurgical testwork on the more advanced prospects .

The bauxite deposits are located close to existing transport and other infrastructure, close to coal mines, industrial centres and ports on the east coast of Australia.

Directors see considerable social and communal benefits from the bauxite mining by creating new jobs and opportunities for local business. ABx will strive to maintain high standards of occupational health and safety and will act as a responsible corporate citizen through close links and co-operation with local government and community stakeholders.

Based on two years of information studies and field work in eastern New South Wales and south-east Queensland, the areas that the directors believe have the best potential for bauxite commercialisation were selected and protected by the Hudson team with exploration tenements.

Hudson is transferring its 100% interest in the ABx exploration tenements to ABx subject to the Minister’s approval. The ABx project tenements consists of seventeen exploration tenements granted or under application covering over 5,000 sq km of ground considered prospective for bauxite.

Funds being raised through this IPO will be used for exploration on the ABx Project Tenements and will include exploration sampling, drill testing & analyses from a wider range of targets on all exploration tenements; and resource definition drilling and bauxite metallurgical testwork on the more advanced prospects. It should be noted that should circumstances warrant, ABx will require significantly more capital (through debt or equity financing) to conduct appropriate feasibility assessments, mine establishment and ore beneficiation for the sale of medium to high value bauxite ore.

The directors believe that ABx represents an exciting investment opportunity.

ABx is seeking through this public offering to raise $4,000,000 by the issue of 20,000,000 new fully paid ordinary shares priced at $0.20 per share.

The directors recommend the Offer and look forward to your participation in this exciting investment opportunity.

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peter John Meers Chairman

ian Warwick levy Managing Director

2. InvEsTmEnT summARY

The information set out in this section is not intended to be comprehensive and should be read in conjunction with the full text of this Prospectus.

2.1 ThE offER

A total of 20,000,000 Shares in ABx at $0.20 per Share are being offered for subscription. The minimum subscription is 20,000,000 Shares in ABx totalling $4,000,000.

2.2 APPLICATIoNs foR shAREs

The minimum application is for 10,000 Shares at a total cost of $2,000. Additional Shares can only be applied for in multiples of 1,000 Shares. Applications for Shares can only be made by completing and lodging the Application Form attached to or accompanying this Prospectus. Instructions on how to complete the Application Form are included on the reverse side of the form. Application Forms must not be circulated to prospective investors unless accompanied by this Prospectus.

2.3 offER sTATIsTICs

A summary of the capital structure of ABx following this Issue is set out below:

	No of Shares	No. of Options
Existing	50,000,000	7,200,000
Total on issue after issue pursuant to this Prospectus	70,000,000	10,200,000
* Te existing shares are owned by Hudson Resources Limited, which will represent 71% of the issued capital of ABx upon the successful completion of the Ofer. Tere are 1,800,000 unallocated options that may be issued pursuant to the ESOP. If all of those options are allocated prior to the issue pursuant to this Prospectus, the No. of Options will be 12,000,000.

Further details of the number and terms of Options are set out in section 13.7.

The effect on new ABx shareholders’ interest in ABx in the event that all allocated and unallocated options are exercised is that their interest in ABx will reduce from 29% to 24%. The interest of new ABx shareholders will further reduce to 22% in the event that 8 million shares are issued to Hudson upon conversion of the Convertible Note.

2.4 ABx BusINEss AND PRojECT REvIEw

ABx is at the date of this Prospectus a fully owned subsidiary of Hudson Resources Limited.

ABx proposes to use the funds raised through this Prospectus less the expenses of the Offer to conduct a staged development program in each of three bauxite provinces which would include exploration sampling, drill testing & analyses from a wider range of targets on all exploration tenements; resource definition drilling and bauxite metallurgical testwork on the more advanced prospects.

The three provinces have been identified and classified in commercial development zones, each associated with a major port:

Gladstone/Brisbane;
Newcastle; and
Port Kembla.

Applications have been made to transfer title in each of the ABx Project Tenements to one of three wholly owned subsidiaries of ABx. This is a summary only and investors should read the whole of this Prospectus. More detail concerning the exploration programme is set out in section 5. Investors should also have regard to the business risks in section 12.4.

2.5 PuRPosE of ThE IssuE

The purpose of the capital raising under this issue of Shares is to provide ABx sufficient funds to conduct the bauxite exploration and development programs described in section 5 of this Prospectus as indicated in the table below.

Included in the Costs of the Offer, under project management and overhead are costs associated with attendance at the China Mining Congress and Expo; legal fees and expenses payable to State One; Provision of administrative, secretarial and support staff as provided under the Executive Services Agreement; corporate branding; costs of research conducted during the preparation of the Prospectus; and other marketing and promotional costs.

The estimates of expenditure set out in this section 2.5 are based on budgets set by the Directors. The actual level and break up of expenditure may change on an ongoing basis depending on results obtained from the exploration and appraisal work carried out.

The results obtained from exploration and evaluation programmes may lead to increased or decreased levels of expenditure, reflecting success and changes in emphasis of aspects of the Project.

Following completion of the Offer, the Directors are of the view that ABx will have sufficient working capital to carry out ABx's objectives pursuant to section 2.4.

2 AUSTRALIAN BAUXITE LIMITED

2. InvEsTmEnT summARY

2.6 PRoCEEDs of ThE IssuE

After expenses of the issue the net proceeds are estimated to be:

$3, 2,990 with the net asset backing of the Shares being 5.11 cents per share on a proforma basis.

2.7 DIvIDENDs

It is anticipated that there will be no dividends declared for the year ended 31 December 2010.

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gross proceeds from ipO $ 4,000,000
Year 1 Year 2 total
Cost of Offer
Independent Technical (Geologist) Report $30,000 - $30,000
Legal expenses $30,000 - $30,000
Preparation, printing and distribution $25,000 - $25,000
ASX admission $30,000 - $30,000
ASX pro-rata annual fees $15,000 - $15,000
ASIC fees $2,010 - $2,010
Investigating Accountant's Report $10,000 - $10,000
Taxation advice $5,000 - $5,000
State One corporate management fee $35,000 - $35,000
State One placement fees $52,500 - $52,500
Brokerage and/or handling fees $67,500 - $67,500
Project management and overhead $115,000 - $115,000
Cost of Offer $417,010 $417,010
Cash balance after costs of Offer $3,582,990
Administration / Overhead (incl ASX & Registry) $360,000 $430,000 $790,000
Interest earned $(120,000) $(90,000) $(210,000)
Administration / Overhead $240,000 $340,000 $580,000
Exploration
Reconnaissance exploration $120,000 $80,000 $200,000
Reconnaissance drilling $300,000 $200,000 $500,000
Resource definition (drilling) $160,000 $240,000 $400,000
Analysis and testing of drilling samples $200,000 $300,000 $500,000
Metallurgy $120,000 $80,000 $200,000
Exploration tenements and land $350,000 $350,000 $700,000
Marketing $120,000 $80,000 $200,000
Feasibility studies $90,000 $210,000 $300,000
Exploration $1,460,000 $1,540,000 $3,000,000
total Cost of Offer / Administration / Exploration $2,117,010 $1,880,000 $3,997,010
Cash balance $1,882,990 $2,990 $2,990
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3. DETAIls Of ThE OffER

3.1 AusTRALIAN BAuxITE LIMITED

Australian Bauxite Limited (ABx) is a public company incorporated on 23rd September 2009.

ABx is as at the date of this Prospectus a wholly owned subsidiary of Hudson.

Hudson holds 50,000,000 shares in ABx.

For the purposes of Chapter 9 of the Listing Rules, Hudson is considered a promoter and accordingly the 50,000,000 shares are considered Restricted Securities. Hudson must enter into a Restriction Agreement with ABx under which Hudson cannot transfer it's effective ownership or control of the 50,000,000 shares for a period of 2 years (unless the ASX fixes a different period). This delays the time in which Hudson can realise the value of the shares and allows for the market price of the shares to adjust before Hudson receives full consideration.

Hudson is an Australian mining company that listed on the Australian Stock Exchange on 26 November 1979 with ASX code HRS.

Hudson’s principal business segments are determined by commodity type:

Attapulgite / Diatomite (100% owned);
Bauxite (100% owned pre-IPO); and
• Coal (60% interest in Tiaro Coal Limited ASX:TCL).

Hudson has also commissioned research and development programmes to add value and expand the commercial uses of these commodities.

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Hudson Resources Limited
100%
Australian Bauxite Limited
50 milion shares
100%
ABx3 Pty Ltd ABx2 Pty Ltd ABx1 Pty Ltd
Gladstone/Brisbane Zone Port Kembla Zone Newcastle Zone
Haden Trundle Inverell
EPM 17830 EL 7360 EL 6997
264 Sq Km 252 Sq Km 297 Sq Km
Red Hill South Taralga Pindaroi
EPM 17801 EL 7357 EL 7268
300 Sq Km 300 Sq Km 138 Sq Km
Red Hill Windellama Guyra
EPM 17800 EL 7269 EL 7361
300 Sq Km 270 Sq Km 300 Sq Km
Hampton Wingello West Yarrowitch
EPM 17790 EL 7279 EL 7344
336 Sq Km 21 Sq Km 279 Sq Km
Hillgrove Penrose Merriwa
EPM 17831 ELA 3774 ELA 3626
267 Sq Km 42 Sq Km 1,272 Sq Km
Binjour Bungonia
EPMA 18014 ELA 3740
150 Sq Km 276 Sq Km
legend
Parent Company Subsidiary NSW Granted
NSW Application QLD Granted QLD Application
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4 AUSTRALIAN BAUXITE LIMITED

3. DETAIls Of ThE OffER

ABx's research is well advanced with respect to:

bauxite beneficiation; and
building materials, specifically,
» heat-insulating diatomite bricks/blocks; and
» diatomite insulating aggregate.

The strategic direction of Hudson is focused on developing commercial deposits of bauxite and coal, in combination with Hudson’s historic involvement in mining of attapulgite clay and development of its diatomite resources.

At the heart of Hudson’s strategy is the intention to originate and own (and where appropriate divest) tenements prospective in the bulk minerals of high valued coals and bauxite.

In order to accelerate development of the bauxite segment, Hudson determined that a stand-alone operation would provide the most practical and beneficial path for further development; whilst retaining a significant investment for Hudson shareholders.

Hudson has applied to transfer title in each of the ABx Project Tenements to ABx in consideration of ABx issuing the Convertible Note. Please refer to section 9.2(a) for details of the Note. The transfer of title in the ABx Project Tenements is subject to the relevant Minster providing consent and pending registration of title Hudson will hold the ABx Project Tenements in trust for ABx.

Following completion of the Offer Hudson will hold 71.43% of the issued Shares of ABx.

Hudson and ABx have provided all consents and completed all required transaction documents to effect the transfer of the ABx Project Tenements. The ABx Project Tenements will be held by wholly owned subsidiaries of ABx as shown in the chart opposite (Pre-IPO)

3.2 ExPosuRE PERIoD

No Application can or will be processed until after the period of 7 days from the date of lodgement of the Prospectus with the ASIC or, if that period is extended by the ASIC by notice in writing, 14 days from the date of lodgement (Exposure Period). No preference will be conferred on Applications received during the Exposure Period.

The purpose of the Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds. Examination during the Exposure Period may result in the identification of deficiencies in this Prospectus and in those circumstances any Application that has been received may need to be dealt with in accordance with section 724 of the Corporations Act 2001.

3.3 how To APPLy foR shAREs priority Offer

Under the Priority Offer, Hudson Shareholders will be guaranteed an allocation of 10,000 Shares if they hold at least a Marketable Parcel of Hudson Shares on the Record Date.

Hudson Shareholders may apply for more Shares under the Priority Offer, but will not be guaranteed the allocation of the additional shares. Any further allocation will be at the discretion of the Directors which will be allocated under the General Terms.

Applications for Shares by Hudson Shareholders who wish to apply for Shares under the Priority Offer will only be accepted on the Application Form accompanying this Prospectus.

Hudson Shareholders applying under the Priority Offer must provide their Holder Identification Number (HIN) or their Shareholder Reference Number (SRN) on the Application Form where indicated.

In the event that a Hudson Shareholder applies for Shares under the Priority Offer and is ineligible to participate, such application will be treated as if made under the Public Offer.

public Offer

To participate in the Public Offer, the Application Form attached to or accompanying this Prospectus must be completed in accordance with the instructions on its reverse side.

general terms

Payment for the Shares must be made in full at the issue price of 20 cents per Share. Applications for Shares must be for a minimum of 10,000 Shares ($2,000) and thereafter, in multiples of 1,000 Shares ($200).

Completed Application Forms and cheques for the relevant amount should be posted to:

The Registrar Computershare Investor Services Pty Limited GPO Box 2975 MELBOURNE VIC 3001 Australia

While it is not obligatory for Applicants to quote their Tax File Number (TFN), tax will be withheld at the rate of 45% plus Medicare levy on unfranked or partially franked dividends if Australian resident shareholders do not quote their TFN.

Applications for the Shares offered by the Prospectus must be made, and will only be accepted, on the Application Form attached to or accompanying this Prospectus. A duly completed and lodged Application Form will constitute an offer by the Applicant to subscribe for the number of Shares applied for pursuant to the Application Form. The Issue will open at 9.00 am on 3rd November 2009 and will remain open until 5.00 pm on 7

3. DETAIls Of ThE OffER

December 2009, subject to the right of the Directors to extend the Offer period, or bring forward the close of the Offer without prior notice.

No brokerage or stamp duty is payable by Applicants in respect of their applications for Shares under this Prospectus. The amount payable on application will not vary during the period of the Offer and no further amount is payable on allotment.

Applications must be accompanied by cheques for the subscription amount. Cheques should be made payable to “ABx – Offer Account”. The Application Monies will be held in trust in a subscription account until allotment. The subscription account will be established and kept by ABx on behalf of the Applicants.

3.4 ALLoTMENT AND ALLoCATIoN

ABx will proceed to allocate Shares as soon as possible after the Closing Date Shares will be alloted after receiving ASX permission for Official Quotation of the Shares.

In relation to applications for Shares, ABx reserves the right to allocate to any Applicant a lesser number of Shares than that applied for, or to decline any Application. Where no allocation is made to a particular Applicant or the number of Shares allocated is less than the number applied for by an Applicant, surplus Application Monies will be returned to that Applicant within 30 days of the Closing Date. No interest will be paid on refunded Application Monies. Successful Applicants will be notified in writing of the number of Shares allocated to them as soon as possible following the allocation being made after the Closing Date. It is the responsibility of Applicants to confirm the number of Shares allocated to them prior to trading in Shares. Applicants who sell Shares before they receive notice of the number of Shares allocated to them do so at their own risk.

3.5 Asx LIsTING

Within seven (7) days after the date of issue of this Prospectus, ABx will apply for listing and quotation of its Shares on the ASX. If granted, quotation of the Shares will commence as soon as practicable after allotment of Shares to Applicants. If the application for admission to quotation of the Shares to the ASX is not made within the said seven (7) days or the Shares are not admitted for quotation within three (3) months after the date of this Prospectus then the issue of Shares will not proceed and the Application Monies will be returned to the applicant.

3.6 ChEss

ABx will apply to the ASX to participate in the Securities Clearing House Electronic Subregister System known as CHESS. CHESS is operated by the ASX’s Securities Clearing House (SCH) in accordance with the ASX Listing Rules and the SCH Business Rules. Under CHESS, ABx will not be issuing certificates to investors who elect to hold their Shares on the CHESS subregister.

After allotment of Shares, Shareholders will receive a CHESS statement. The CHESS statements, which are similar in style to bank account statements, will set out the number of Shares allotted to each Shareholder pursuant to this Prospectus. The statement will also advise holders of their Holder Identification Number and explain for future reference the sale and purchase procedures under CHESS. Further statements will be provided to holders which reflect any changes in their shareholding in ABx during a particular month.

3.7 RANkING

Shares issued pursuant to this Prospectus will rank equally in all respects with existing Shares. Full details of the rights attaching to Shares are contained in the ABx Constitution, a summary of which is set out in section 13.1. The Constitution is available for

inspection, without a charge, during normal business hours at the ABx registered office.

3.8 uNDERwRITING

This Offer is not underwritten.

3.9 BRokERAGE

The Directors will pay brokerage and/or handling fees of 3% of the Application Monies to member firms of ASX or licensed investment advisers on Application Forms bearing their stamp and accepted by the Company.

3.10 INvEsTMENT RIsks

Investors should carefully read the section on risk factors outlined in section 12. An investment of this kind involves risks, a number of which are specific to ABx and the industry in which it operates.

3.11 TAxATIoN

Investors should seek and rely on their own taxation advice regarding an investment in ABx.

3.12 ELECTRoNIC PRosPECTus

This Prospectus may be accessed through the ABx website at australianbauxite.com.au and also from www.stateone.com.au.

Any person accessing the electronic version of this Prospectus for the purposes of investing in ABx must only access this Prospectus from within Australia. The Corporations Act 2001 prohibits any person from passing on to another person the Application Form unless it is accompanied by a hard copy of this Prospectus or accompanies a complete and unaltered electronic version of this Prospectus. Investors should read the Prospectus before completing the Application Form. During the offer period, any person may obtain a hard copy of this Prospectus on request without charge by contacting ABx on +61 2 9251 7177. Applications will not be received by email or any other electronic means.

6 AUSTRALIAN BAUXITE LIMITED

4. mARKET AnD InDusTRY OvERvIEw

Demand for bauxite is growing at a faster rate than the growth in global industrial production. In the emerging economies of Asia and India, bauxite demand is particularly strong.

Over 85% of the bauxite mined globally is converted to alumina for the production of aluminium metal. An additional 10% goes to non-metal uses in various forms of specialty alumina and the remainder is used for non-metallurgical bauxite applications (e.g. commercial applications as abrasives and refractories) – see section 4.1.

Australia’s aluminium industry is a large integrated industry of mining, refining, smelting and semi-fabrication, which is of major economic importance nationally and globally. Australia was the leading producer of bauxite and alumina globally in 2008, and the world’s fifth largest aluminium producer. Based on International Aluminium Institute data, Australian production totalled 63 million tonnes (Mt) of bauxite (31% of world production), 19.7 Mt of alumina (33%) and 2 Mt of aluminium (8%).

According to Geoscience Australia, Australia has demonstrated bauxite resources of 7.9 Gt, and economically demonstrated resources of 6.2 Gt (2008). This reserve base ranks Australia as the second largest bauxite province in the world after the Republic of Guinea.

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Inverell EL 6997

Outcrop of bauxite layer at the edge of Target F - sample site NE 43-45

This provides a world class resource base for the Australian industry, which comprises five bauxite mining operations, seven alumina refineries, six primary aluminium smelters, twelve extrusion plants and two rolled product (sheet, plate and foil) mills.

The industry is geared to serve world demand for alumina and aluminium with more than 80% of production being exported.

The expanding market

Due to a combination of factors, including continued above-average growth of the Chinese economy, a shortage of bauxite deposits in China and the higher cost of treating the difficult Chinese domestic bauxite, the low capital and operating costs of Chinese alumina refineries and aggressive expansion in Chinese alumina refining capacity, we expect that future demand for bauxite sales to China will continue to grow rapidly.

We also see a falling output of bauxite in Indonesia, especially refractory-grade bauxite, due to exhaustion of traditional deposits. Indonesia has long been a source of gibbsite-rich bauxite supplies to China. Australia is the logical future supplier of bauxite into Chinese alumina refineries.

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Inverell EL 6997 Target F - sample of bauxite sample NE 43

4. mARKET AnD InDusTRY OvERvIEw

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Inverell EL 6997 Outcrop of bauxite layer

Monthly bauxite imports by China

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3.5
3
2.5
2
1.5
1
0.5
0
Month
Mt
Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09
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4.1 BAuxITE TyPEs AND usEs

Bauxite is aluminium-rich ore that is used for aluminium production (the metallurgical bauxites) and for production of refractory materials, chemicals or cements (the nonmetallurgical bauxites).

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Inverell EL 6997 Bauxite exposed by rabbits Target A - sample site NE 239

Metallurgical bauxites are sub-divided into two basic types based on the processing methods that must be applied to them at the alumina refinery stage, namely

low temperature gibbsite (aka: tri-hydrate or tropical bauxite); and
high-temperature boehmite (aka: mono-hydrate or European bauxite)

Note: ABx bauxites are predominantly the gibbsite-rich type.

Alumina refineries extract pure alumina from bauxite by dissolution in hot caustic soda followed by purification and precipitation of alumina powder which is aluminium oxide (Al2O3) – the raw material for smelting into pure aluminium metal by electrolytic reduction in a molten bath at aluminium smelters.

The gibbsite mineral is alumina tri-hydrate and is the most valuable of alumina ore minerals because it readily dissolves at low temperatures and pressures at the alumina refinery stage (the Bayer process).

The boehmite mineral is alumina mono-hydrate which must be processed at high temperatures and high pressures in more expensive pressure vessels. Some unwanted non-alumina minerals are also dissolved so that additional processing stages to remove the non-alumina contaminants are required. The additional processing stages to remove contaminants can also be associated with alumina loss.

Boehmite bauxites are sourced from Weipa in far northern Queensland, Gove in NT and from west African states, including parts of Guinea in northwest Africa.

Gibbsite bauxites are sourced from southwest Western Australia, the Republic of Guinea in northwest Africa, Indonesia, Caribbean islands and South America, mainly in Brazil, Guyana and other parts of tropical Amazonia. Gibbsite ores are in short supply.

8 AUSTRALIAN BAUXITE LIMITED

4. mARKET AnD InDusTRY OvERvIEw

bauxite production Flowchart

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Bauxite
Refractory Abrasives Alumina Chemical Cement
Aluminium legend
Metal
Non-
Metallurgical
Metallurgical
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4.2 METALLuRGICAL BAuxITE foR ALuMINA & ALuMINIuM growth in aluminium demand

China’s remarkable growth of approximately 9% real GDP per annum over the past decade[1] , has fuelled an unprecedented demand for Australian commodities[2] . China dominates the global aluminium industry accounting for one third of world production and world consumption[3] . Total primary aluminium output by China was 13.1 million tonnes in 2008[4] . Dependence on bauxite imports will remain high. China’s strong domestic growth means increased consumption of aluminium[5] which rose by 8% over 2008[6] and has forecasted growth of 4% for 2009[7] . Significant growth in aluminium consumption is also taking place in India[8] and other developing countries[9] .

1 http://www.chinability.com/GDP.htm, accessed 06/10/09; http://www. indexmundi.com/g/g.aspx?c=ch&v=66 based on the CIA world fact book
2 http://www.aares.info/files/2006_garnaut.pdf, Presented at the Australian Agriculture and Resource Economics Conference. Sydney, 8-10th February 2006, by professor of economics, Ross Garnaut, see ‘Introduction’, accessed 06/10/09
3 http://www.roskill.com/reports/aluminium based on Roskill Information Services’ ‘The Economics of Aluminium, 9th edition 2009’, published 15/05/2009, accessed 06/10/09
4 http://steelguru.com/news/index/2009/09/10/MTExMTQ2/Aluminum_ major_market_developments_in_August.html, in paragraph starting as ‘August 20th’, accessed 06/10/09
5 http://newsstore.smh.com.au/apps/previewDocument.ac?docID=GCA0099038 8CBX&f=pdf, Cape Alumina ASX Announcement, AmmendedAmended Presentation, 22 Sep, slide 11
6 http://www.engineeringnews.co.za/article/china-dominates-global-aluminiumindustry-2009-09-25, under section ‘Recovery in Aluminium Consumption to begin in 2010, accessed 07/10/09

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Inverell EL 6997 Target A - central part sample NE 239

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Inverell EL 6997 Target A - outcrop of bauxite on the top of plateau

7 http://www.financialpost.com/story.html?id=1955786, article name: Alcoa raises world aluminum forecast on China demand, published 02/09/09, accessed 07/10/09
8 http://siteresources.worldbank.org/INTCHIINDGLOECO/Resources/ ChinaIndiaCommodityImpact.pdf, see summary p.4, accessed 06/10/09
9 http://www.aluminium.gl/content/us/about_the_project/aluminum/the_ global_demand_for_aluminium,

4. mARKET AnD InDusTRY OvERvIEw

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Inverell EL 6997

Target A - outcrop of bauxite layer on southern edge (sample site NE 212)

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From 2008 to 2018, it is expected that the aluminium industry of China will grow by 12.5% as opposed to 7% growth for the rest of the world over the same time period[10] .

Due to inadequate infrastructure as well as increasing economic and political instability and conflicts with the tragic loss of life in some bauxite producing countries (such as recently in the Republic of Guinea[11] ), customers are likely to turn to a stable country like Australia as a reliable source of supply[12] .

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50
40
30
20
10
0
1996 2000 2004 2008 2012
Rest of World North America China Estimate
Mt
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global alumina

Currently, alumina production worldwide is operating at close to full utilisation capacity, and therefore significant increases in capacity either by expanding the capacity of existing refineries (brownfields) or by building new refineries (greenfields) are expected.

Over the next ten to fifteen years, industry forecasts predict that there will be up to fifteen million tonnes of new alumina refining capacity made available through brownfield expansions. Such brownfield expansions will not be sufficient to meet world demand. Therefore, new greenfield projects are required to meet the growing world demand. Due to expansions of capacity of existing refineries and development of new refineries, opportunities to supply bauxite will increase significantly. Premium quality beneficiated bauxite products are preferred.

Inverell EL 6997 Target A - southern edge sample NE 212

10 http://www.bharatbook.com/Market-Research-Reports/China-AluminiumMarket-Analysis.html, accessed 06/09/10
11 http://www.se2009.eu/en/meetings_news/2009/9/29/presidency_statement_ on_the_violent_events_in_conakry_republic_of_guinea, accessed on 06/10/09
12 http://www.roskill.com/reports/bauxite, The Economics of Bauxite, 7th edition 2008, accessed 07/10/09

10 AUSTRALIAN BAUXITE LIMITED

4. mARKET AnD InDusTRY OvERvIEw

Return on assets

ABx is investing in bauxite exploration so as to identify a bauxite mining opportunity as its first priority. The following graph demonstrates the returns on assets for the various stages of the industry.good returns on funds invested are achievable in mining provided that the deposit is in a favourable / low cost location. Even better returns are achievable in exploration, especially for discovery of premium quality bauxites.

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----- Start of picture text -----

70% 25%
60%
20%
50%
15%
40%
30%
10%
20%
5%
10%
0% 0%
Bauxite Aluminium Downstream Downstream
Mining Smelting extrusion rolling
Source: Citigroup Investment Research EBITDA margins (LHS) ROA (RHS)
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Rising prices for metallurgical bauxite

Most metallurgical-grade bauxite and alumina are purchased under long-term contracts. Contract terms for these commodities normally are not made public.

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----- Start of picture text -----

$45
Bauxite Price - Nominal Terms
Exp’l Trendline 1991 - 2000
$40
Bauxite Price - Real 2007 Terms
Exp’l Trendline 2001 - 2007
$35
$30
$25
$20
Source: USGS
$US/tonne (FOB)
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
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Haden EPM 17830 Outcrop of bauxite layer in main Haden Target (sample site TW2123)

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Haden EPM 17830 Main Haden Target sample TW 213

The above graph shows (along with most commodities) a long term historical price decline of average quality bauxite in real terms and a recent reversal of this trend. It is also significant in that up until the end of 2005, the United States was the dominant driver of demand for internationally traded bauxite. Prior to 2000, the supply of bauxite from Jamaica to USA, and from the Republic of Guinea to USA was the main determinant of the prices reported by the USGS in the above graph.

4. mARKET AnD InDusTRY OvERvIEw

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Hillgrove EPM 17831 Outcrop of bauxite layer in main Hillgrove Target - sample site TW 223

Most of these sales were transfer prices between mines and refineries owned by the same large aluminium companies. In 2003, China’s free-traded bauxite became a large contributor to the price figures in the graph. Prices for bauxite destined for the United States in recent times have ranged on a weighted average basis between US$25 to $US40 per tonne FOB, averaging around US$35 per tonne.

A similar price trend was also observed in iron ore, except that the rise started earlier and was sharper. When a country goes through industrial development, steel consumption rises first and a rise in consumption of aluminium follows after a few years.

4.3 NoN-METALLuRGICAL BAuxITE

Demand for non-metallurgical Bauxite has continued to increase and a set of applications have been developed. These include refractories, abrasives (including the recently development proppants), high aluminium cements, aluminium chemicals, activated bauxite and alumina.

Other uses include filters and pigments for plastics and elastomers; special calcined aluminas for ceramics, refractories, abrasives, soft burned calcined aluminas, hard burned calcined aluminas to produce alumina cements and calciumaluminate cements.

Non-metallurgical bauxite can be presented as:

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Hillgrove EPM 17831 Main Hillgrove Target sample site TW 223

Chemical-grade bauxite for the production of aluminium chemicals;
Refractory-grade bauxite to produce high alumina refractories; and
Abrasive-grade bauxite for the production of abrasives.

Calcined bauxite

Calcined bauxite (following iron reduction) is produced by calcining (heating) high alumina containing bauxite (55% to 60% Al2O3) at at temperatures ranging from 900°C to 1200°C for 50 to 60 minutes.

Calcination removes the inert moisture and increases the alumina content by converting tri-hydrate and mono-hydrate (gibbsite and boehmite) into anhydrous aluminium oxide by expulsion of water of crystallisation – similar to a laboratory “Loss of Ignition” (LOI) test.

uses

Calcined bauxite is used for different applications that include:,

Refractory bricks
Grinding media (Abrasives)
Road surfacing material
Proppants
Alumina cement
Ceramics

Refractory grade calcined bauxite is produced mainly in China, India, Guyana and the USA.

The raw bauxite used for calcination should contain alumina up to 55 to 60%. Availability of this quality bauxite is limited.

12 AUSTRALIAN BAUXITE LIMITED

4. mARKET AnD InDusTRY OvERvIEw

Key non-metallurgical bauxite requirements are:

grade	Al2O3	SiO3	Fe2O3	tiO2
	%	%	%	%
Abrasive	Min 55	Max 5	Max 6	Min 2.5
Chemical	Min 55-58	Max 5-12	Max 2
Refractory	Min 59-61	Max 1.5-5.5	Max 2	Max 2.5
NB. Most of the remainder represents water of crystallisation (Loss on Ignition LOI) which is removed bycalcination.

NB. Most of the remainder represents water of crystallisation (Loss on Ignition LOI) which is removed by calcination.

The Roskill guide states that around 1.1 million tonnes of bauxite per annum is used for refractories and around 1.2 million tonnes of bauxite for global consumption is used for abrasives.

Approximately 70% of the refractory use is in the iron and steel industries with most of the remainder being used in cement kilns and the glass industry.

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Hillgrove EPM 17831 Main Hillgrove Target sample TW 223

4.4 susTAINABILITy

The aluminium industry employs a lifecycle approach to address future challenges, focusing not only on the energy required to produce aluminium products but also on the energy savings to be made through their use and reuse. It is in the use phase that the majority of energy is used and/or saved (e.g. during the useful life of cars, buildings, aircraft, etc). The high strength-to-weight ratio of aluminium plays a crucial role in producing lighter vehicles and other forms of transport, reducing fuel consumption without compromising performance and safety. The use of lightweight aluminium components in a vehicle can save six to twelve times the energy taken to produce the primary aluminium used in its construction. Up to eight per cent fuel savings can be realised for every 10% reduction in weight. One kilogram of aluminium used to replace heavier materials in a car or light truck, has the potential to achieve significant energy savings over the lifetime of the vehicle. For other vehicles, such as trains, ferries and aircraft, the potential savings are even greater.

The International Aluminium Institute material mass flow model’s projections show that greenhouse gas emissions from the world wide aluminium industry will be fully offset through a combination of reduction measures, increased recycling and the use of aluminium in transport by around 2020.

ABx is engaging with land owners and local communities and endeavouring to ensure that the benefits of mining are shared with present and future generations. Good environmental management and rehabilitation, which ensures that all potential land-use options are conserved, is one of the ways in which ABx is meeting its responsibility to the wider, global community. Other ways in which ABx supports local communities is by providing:

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Pindaroi EL 7268

Main Pindaroi Target - outcrop of bauxite layer on southern edge of Pindaroi target

employment under conditions that comply with accepted labour standards
support to local businesses
support to community initiatives and various social programmes
infrastructure that will benefit communities into the future

It is possible for everyone to gain from mining activities.

5. ABx BusInEss AnD pROjECT REvIEw

5.1 BusINEss ovERvIEw

Hudson is transferring its 100% interest in the ABx Project Tenements to ABx subject to the Minister's approval.

The ABx Project Tenements consist of seventeen exploration tenements and applications for licences (8 granted Exploration Licences and 3 still in application in NSW; and 5 Exploration Permits granted and 1 still in application in Queensland). They cover several areas with bauxite outcrops and/or exposures which represent targets for drill testing.

The bauxite exploration programme started 2 years ago and is still at an early stage.

Only a few of the targets in Inverell (EL 6997) and in Windellama (EL 7269) have been drill tested to date. Funds being raised through this IPO will enable drill testing of a much wider range of targets on all exploration tenements.

Key factors relating to bauxite mining economics are:

quality of beneficiated product;
thickness of bauxite layer, and
• the distance of transport to port (preferably by rail).

Encouraging results have been obtained during exploration from analyses of samples of bauxite from outcrops and / or exposures for all the ABx Project Tenements.

However, samples of bauxite exposed at surface over a long period of (geological) time are not representative of bauxite at depth. Drilling is essential to reliably determine the quality of beneficiated product and thickness of bauxite layer.

Customers have a wide range of quality requirements depending on their requirements (metallurgical, refractory, abrasive or chemical).

Long term contracts for supply from a specific bauxite resource may be required. Therefore it is important to have a number of bauxite resources with varying quality characteristics and in different locations and these are being evaluated.

The ABx plan is to use funds being raised through this IPO for exploration on the ABx Project Tenements and will include exploration sampling, drill testing & analyses from a wider range of targets on all exploration tenements; and resource definition drilling and bauxite metallurgical testwork on the more advanced prospects

The program will be regularly reviewed and the Board will determine the circumstances and timing for any further capital raising (through debt or equity financing) to conduct appropriate feasibility assessments, mine establishment and ore beneficiation for the sale of medium to high value bauxite ore. The directors are mindful that sufficient funds need to be available to conduct any such capital raising and will time such activities accordingly.

During the past 2 years target definition was based on surface exploration. The IPO will provide funds to shift emphasis to drill testing targets over the next two years.

A small expert team has been established, based in Sydney. Field work can be undertaken in all seasons and travelling time from Sydney out to the tenements is only between 2 and 6 hours.

Rapid progress in testing targets is achieved with each hole being drilled in about one hour.

5.2 QuALITy

The ABx objective is to produce a beneficiated bauxite product of premium quality for Australian east coast and overseas markets. Customers will be able to achieve savings through the use

of premium quality bauxite feed for their processing plants.

In general terms, analyses of bauxite samples from the ABx targets indicate:

relatively low reactive silica content (a significant advantage for all types of uses),
relatively high proportion of trihydrate (a significant advantage for bauxite that is processed in alumina plants).

Iron content is generally higher than in bauxites from Northern and Western Australia, however:

in some of the targets, initial samples returned low iron assays so that it may be possible to define several low iron resources;
ABx has access to proprietary low-cost iron reduction technology being developed by Hudson for coarse grained bauxites (bauxites in the ABx Project Tenements are comprised of coarse grains of gibbsite and iron oxide minerals which can be liberated and separated by simple inexpensive processing methods).

5.3 ThICkNEss of BAuxITE LAyER

Drill testing of the first set of targets in Inverell (EL 6997) indicates that average thickness of the bauxite layer is 7 metres, with some drill intersections exceeding 9.5 metres.

Surface sampling and geological mapping in several other tenements indicates the presence of an equally thick layer of bauxite.

Targets in which the bauxite layer is relatively thick will be drill tested as a matter of priority as a thick layer means a smaller mine footprint is required to achieve a commercial tonnage, resulting in cost savings.

14 AUSTRALIAN BAUXITE LIMITED

5. ABx BusInEss AnD pROjECT REvIEw

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ABx Project Tenements

5. ABx BusInEss AnD pROjECT REvIEw

5.4 LoCATIoN

ABx targets are located in regions with existing infrastructure and close to population centres with a skilled workforce and a full range of services.

Capital cost of mine development is likely to be an order of magnitude lower than in remote regions.

Due to the low capital cost, initial production rate can be relatively low, making it easier to place initial quantities of product into the market. Targets located close to a railway and a port that has spare capacity (for example Port Kembla) will also be drill tested as a high priority.

5.5 suPPLyING CusToMERs oN EAsT CoAsT of AusTRALIA AND ovERsEAs

By marketing premium quality beneficiated bauxite products to customers on the east coast of Australia and overseas ABx will endeavour to establish a solid foundation for a long term bauxite mining and processing business.

5.6 PRojECT ovERvIEw

Based on two years of studies and field work in eastern New South Wales and south-eastern Queensland, the areas which the directors are of the view have the best potential for bauxite have been selected and protected by 100% owned exploration tenements.

Historic (mainly 1920 – 1954) reports on investigations of bauxite deposits in eastern New South Wales and south-

eastern Queensland provided a good starting base.

Tonnage estimates made up to 1954 were relatively modest. According to H. B. Owen (Bauxite in Australia, Bureau of Mineral Resources Bulletin no. 24), in 1954 the largest known bauxite deposit was Parish’s:

4,755,000 long tonnes averaging 3.2% SiO2, 38.6% Al2O3, 30.1% Fe2O3, 5.0% TiO2, 33.7% Available Al2O3 (Al2O3 soluble in 10 percent NaOH solution boiling at atmospheric pressure).

ABx has secured this deposit, which is known as Target A – located in Inverell (EL 6997). Drill testing undertaken in January - February and August 2009 confirmed the silica and alumina content and the thickness of bauxite layer (about 7 metres), however the tonnage potential is an order of magnitude larger than the historic estimate.

The licence for EL 6997 (Inverell) expires on 24 December 2009 and renewal is subject to the conditions of licence having been met and the Minister’s consent being obtained. On 23 October 2009 the DII has advised that that licence reporting requirements are up to date and minimum expenditure requirements have been met.

Historic context was as follows:

The Parish team also tested 15 other deposits in the Inverell region.
• Their testing programme started in

January 1947 and in June 1948 the team was redeployed to Wingello [now within our Wingello West (EL 7279) and Penrose (ELA 3774) tenements], where two deposits containing about 1.9 million long tons and 1.45 million long tons respectively were proven.

• In the late 1940’s – early 1950’s, there was no domestic alumina or aluminium metal production and imports of aluminium metal amounted to 16,456 tons (Owen, 1954 – page 7).

An alumina and aluminium plant was under construction at Bell Bay in Tasmania; planned production rate was 26,000 tons of alumina and 13,000 tons of aluminium metal per annum ( Alan Trengove – Discovery / Stories of modern mineral exploration – Stockwell Press, 1979).
Bauxite deposits known in Tasmania at the time contained sufficient tonnages of appropriate quality for the plant at Bell Bay, so that the deposits at Inverell and Wingello were considered to represent a backup for the longer term.
In late 1940’s / early 1950’s there was no need to continue testing of extensions to increase tonnages in known deposits.
Therefore reserves reported at that time are modest.
Those who have studied historic reports but did not take into consideration historic context, made erroneous conclusions that deposits in easily accessible parts of eastern New South Wales and south-east Queensland are small.

16 AUSTRALIAN BAUXITE LIMITED

5. ABx BusInEss AnD pROjECT REvIEw

A bauxite deposit was discovered in 1955 at Weipa on Cape York Peninsula; due to very remote location and total lack of infrastructure, it was essential to prove up large tonnage and develop a project on a large scale to make it economic.

In the period 1960 to 2000, large deposits like Weipa and Gove located in very remote northern Australian locations and large low grade deposits in favourable location in West Australia (and similar large projects overseas, notably in the Republic of Guinea and in the Amazon region of Brazil) were able to meet global demand for bauxite.

However, in recent years there were significant changes in supply and demand:

Large deposits discovered in the late 1950’s to 1970’s are still capable of meeting demand however, after a very long period of mining and a degree of high-grading, the quality of bauxite is in decline.
Some large bauxite deposits that were discovered by the 1970’s still remain to be developed but because of a high cost remote

location and other major problems which caused postponement of mine development, one can expect further postponements because the problems have not been solved.

• Increasing political problems and eruptions of conflicts resulting in tragic loss of life in some of the bauxite producing countries (for example the Republic of Guinea) is another significant factor affecting global bauxite supply – demand balance.

For such reasons, bauxite deposits in favourable low cost locations will be developed ahead of those in remote locations.

The ABx objective is to define several deposits (or groups of deposits) containing 100 - 200 million tonnes each in several sectors along the east coast of Australia.

The main focus is on quality because it is essential to produce premium quality bauxite in order to establish market presence.

During two years of extensive field work our team has made discoveries

of new bauxite outcrops / exposures and defined new targets for drilling which are located up to 100km from the nearest bauxite occurrences reported in literature. Exploration for new targets will continue contemporaneously with drill testing of targets defined to date.

6. ABx pROjECT TEnEmEnTs summARY

Hudson is transferring its 100% interest in the ABx Project Tenements to ABx subject to the Minister's approval.

The ABx Project Tenements consist of 17 tenements which all contain identified areas of bauxite mineralisation.

In New South Wales there are 8 granted Exploration Licences (EL) and 3 EL applications (ELA). In Queensland there are 5 granted Exploration Permits (EPM) and 1 EPM application (EPMA). All tenements are new, with the oldest having been granted in December 2007 and only two have been drilled to date, with encouraging results.

Key factors for the potential economics of bauxite developments are: bauxite quality, volume (thickness) and logistical-infrastructure setting, including proximity to port.

High Quality

Generally, initial bauxite samples indicate relatively low reactive silica content and relatively high proportion of tri-hydrate gibbsite (Al2O3, 3H2O), which is the most valuable alumina ore mineral, being suited to low temperature processing to recover alumina. Iron content is typically elevated but some areas represent low iron bauxite targets.

iron Reduction

In some of ABx’s bauxite areas sampled to date, the iron occurs as relatively coarse-grained, discrete iron mineral grains so that removal of iron by simple, cheap physical simple processing methods is possible.

==> picture [336 x 490] intentionally omitted <==

ABx NSW Tenements

metres. This is relatively thick, high quality bauxite.

Inverell EL 6997 & Pindaroi EL 7268: Thick bauxite layer with indicative bauxite grades of:

targets

Thickness

Some areas are known to contain thin bauxite layers however the first area tested at Inverell has drillproven thicknesses of more than 9.5 metres with drill indications that typical thicknesses range from 5 to 7

ABx has an objective to locate in eastern Australia, several deposits or groups of deposits containing 100 to 200 million tonnes of premium export-quality bauxite in several development zones; each zone with established transport links to major export ports.

Raw: 35 – 55% total Al2O3
• Screened: 30 – 50% total Al2O3 • Screened 30 – 45% available Al2O3 • 1.5 – 9% total SiO2 • screened 1.0 – 3.5% SiO2 • approx 85% of the silica is reactive.

18 AUSTRALIAN BAUXITE LIMITED

6. ABx pROjECT TEnEmEnTs summARY

==> picture [336 x 489] intentionally omitted <==

Taralga EL 7357, Windellama EL 7269, Bungonia ELA3740, Wingello West EL 7279 & Penrose ELA 3774: Outcrops of pisolitic bauxite underlain by non-pisolitic bauxite in Tertiary Volcanic areas.

Groups of outcrops of pisolitic bauxite underlain by non-pisolitic bauxite in Tertiary Volcanics have been found during initial reconnaissance trips. All within short haulage distance of the rail line to Port Kembla export port.

Red Hill EPM 17800 & EPM 17801: Outcrops of massive cemented bauxite layers in a Tertiary Volcanic area similar to those in EL 6997 at Inverell, NSW.

Hampton EPM 17790: Bauxite in thick red soil on a 3 kilometres wide plateau. Whilst close to Brisbane Port, alternative transport options warrant consideration. Hillgrove EPM 17830 & EPM 17831: Outcrops of a massive cemented bauxite layer.

Binjour EPM 18014: Bauxite in thick lateritic red soil profile developed on a wide plateau. May be transported to Gladstone via an old rail line that could be rehabilitated.

For more detailed descriptions of ABx’s tenements and discussions about bauxite prospects and qualities, see Independent Technical (Geologist) Report in Section 8 of this Prospectus.

ABx QLD Tenements

Premium quality bauxite is Trundle ELA 3661: Outcrops of pisolitic being targeted to offset the long and non-pisolitic bauxite surrounded transport required. by areas of no outcrop. Pisolites are pea-sized rounded nodules. Trundle Guyra EL 7361, Yarrowitch EL 3644 & lies inland but close to the major Merriwa ELA 3626: transnational rail line.

Guyra EL 7361, Yarrowitch EL 3644 & Merriwa ELA 3626: Outcrops of massive cemented bauxite layers have been found during initial reconnaisiance trips. Near to rail lines.

7. DIRECTORs AnD mAnAGEmEnT

7.1 DIRECToRs

Chairman

Peter J Meers BA (Economics) FAIB

Peter Meers has broad business experience across a range of industries including consumer, commercial and investment banking, securities trading and origination, mining and exploration and building materials. He is CEO of Tiaro Coal Limited, a subsidiary of Hudson.

Mr. Meers held senior executive positions and portfolio management roles in agribusiness, mining, property and trade finance during a career spanning 25 years with ANZ Bank in Australia and Asia. Past directorships include appointment on company boards in Malaysia, Indonesia and Singapore. Mr Meers is Executive Chairman of Hudson.

Managing Director Ian Levy BSc (Hons) MSc DIC FAusIMM FAIG

Ian Levy has thirty years senior management experience with small to large mining companies, including WMC, Pancontinental Mining, Gympie Gold and CEO of Allegiance Mining, involving development of bauxite, gold, coal, base metals, nickel and industrial minerals projects from discovery to marketing. He is Chairman of D’Aguilar Gold, Dynasty Metals Australia and a former Director of Gloucester Coal. He was a member of the Joint Ore Reserves Committee (JORC) for 11 years including 4 years as Vice Chairman and Federal President, Australian Institute of Geoscientists.

Director & Chief geologist Rado Jacob Rebek

Jacob Rebek is an Australian geologist with forty years experience in exploration. From 1970 to 2003 he worked for CRA and Rio Tinto in various parts of Australia and overseas. His roles included that of exploration manager for Papua New Guinea in 1970’s, South Australia and Northern Territory from 1981 to 1984, Eastern Australia from 1987 to 1993 and Exploration Director for South America from 1997 to 2000. He led teams which discovered new zinc, copper and gold deposits. Since 2003 he worked for emerging companies, generating new projects. In 2006 he started working for Hudson as Chief Geologist and led the small team which discovered the bauxite deposits.

20 AUSTRALIAN BAUXITE LIMITED

7. DIRECTORs AnD mAnAGEmEnT

Non-Executive Director Vincent Tan BCom and Admin CA

Vincent Tan is a chartered accountant and has over the past 35 years worked in a range of industries, including insurance, securities trading, finance and property.

Mr Tan has held senior management positions in a number of public and nongovernment organisations and has broad experience in corporate structuring.

Non-Executive Director

Wei Huang BEcon MCom

Wei Huang graduated with a Bachelor of Economics from Macquarie University and a Master of Commerce from University of New South Wales. He is a member of CPA Australia.

He has experience in financial control, new business start ups and development within the mining, construction, financial services, and retail and textile industries both in Australia and overseas.

Mr Huang also has extensive experience in promoting and facilitating two-way investment between China and Australia and is familiar with the business cultures of both China and Australia.

7.2 offICERs

Joint Company Secretary Henry Kinstlinger

Henry Kinstlinger has been actively involved in the financial and corporate management of a number of public companies and non-governmental organisations for the past twenty-five years. He is a corporate consultant with broad experience in investor and community relations and corporate and statutory compliance.

Joint Company Secretary David L Hughes

Mr Hughes is currently the company secretary for a number of ASX listed public companies including Latrobe Magnesium Limited, Hudson Investment Group Limited, Hudson Resources Limited and Imperial Corporation Limited.

Chief Financial Officer Francis Choy MComm MBA FCPA(HK) CPA

Francis Choy has held a number of senior positions in corporate financial management roles throughout Australia and South East Asia. He has extensive experience in project finance, compliance, acquisition and investment appraisals. He has been involved in project finance, financial management of property development and telecommunication projects in South East Asia. He held senior financial roles for numerous public listed companies both in Hong Kong and Australia.

7.3 TEChNICAL TEAM

Consulting geologist Andrew White BSc(Hons) PhD FAIG GAICD

Dr White is a consulting geologist, management consultant and company director. He has over forty five years experience in the mining sector, including roles as exploration manager at Comalco (the bauxite / alumina / aluminium subsidiary of CRA / Rio Tinto) and at Poseidon and was founding director of the W.H. Bryan Mining Geology Research Centre, University of Queensland.

He has extensive experience in exploration, mining, financial evaluation, project development and management, and is author of the text, "Management of Mineral Exploration".

Meridian Corporate Advisory pty ltd

Meridian Corporate Advisory (Meridian) has been providing senior advisory services to the resources sector for 10 years. Meridian will assist ABx with:

strategies in growing value for stakeholders and to deliver on corporate objectives;
overall financing plans (and the component elements of those plans across all forms of capital) and;
• assisting directly with execution and delivery of ABx’s corporate plan.

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

TERENCE WILLSTEED & ASSOCIATES

CONSULTING MINING ENGINEERS

POSTAL ADDRESS: P O BOX N284 GROSVENOR PLACE, SYDNEY NSW 1220 13/1, THE QUAY, 2 PHILLIP STREET, SYDNEY NSW 2000

E-mail: [email protected]

PRINCIPAL: T V WILLSTEED, BE(MIN)HONS BA FAUSIMM MMICA MSME T V WILLSTEED & ASSOCIATES PTY LTD

[02] 9251 3804 Facsimile : [02] 9251 3788

: 44 001 859 712

14 October 2009 The Directors Hudson Resources Limited Level 2, 131 Macquarie St SYDNEY NSW 2000

Dear Sirs,

INDEPENDENT GEOLOGICAL AND TECHNICAL REVIEW OF BAUXITE PROJECTS

Terence Willsteed & Associates [TWA] have been requested by Hudson Resources Limited [Hudson] to prepare an Independent Geological and Technical Review report on the bauxite projects held by Hudson for inclusion in an Initial Public Offer document required for listing Hudson’s wholly owned subsidiary, Australian Bauxite Limited [ABx] on ASX.. The review does not provide an opinion on share value or corporate investment value.

The Geological and Technical Review of the Bauxite Projects has been prepared by T V Willsteed, Consulting Mining Engineer, BE[Min]Hons BA FAusIMM MAIME MMICA MSME and R C Pyper, Consulting Geologist, BSc FAusIMM, based on the technical and geological data provided by Hudson. The Review Report is prepared to generally conform to the JORC and VALMIN Codes of AusIMM. It includes an opinion as to Hudson’s proposed exploration programmes and budget estimates.

The report reviewed the following tenement areas in Queensland and New South Wales, which contain bauxite mineralisation, held or applied for, by wholly owned subsidiaries of ABx, in defined project areas, viz: ABx1 Pty Ltd [Newcastle zone], ABx2 Pty Ltd [Port Kembla zone] and ABx3 Pty Ltd [Gladstone/Brisbane zone].

AUSTRALIAN BAUXITE PROJECT TENEMENTS

LICENCENO	PROJECT	STATUS	HELD BY	EXPIRY DATE	UNITS/ BLOCKS	AREA SQ KM
EL 6997	Inverell	Granted	ABx1	23-12-09	99	297
EL 7268	Pindaroi	Granted	“	23-12-10	46	138
EL 7361	Guyra	Granted	“	17-07-11	100	300
EL 7344	Yarrowitch	Granted	“	20-05-11	93	279
ELA 3626	Merriwa	Application	“		424	1,272
EL 7360	Trundle	Granted	ABx2	17-07-11	84	252
EL 7357	Taralga	Granted		01-07-11	100	300
EL 7269	Windellama	Granted		23-12-10	90	270
EL 7279	Wingello West	Granted		30-01-11	7	21
ELA 3774	Penrose	Application			14	42
ELA 3740	Bungonia	Application			92	276
					Total NSW	3,477
EPM 17830	Haden	Granted	ABx3	25-02-11	88	264
EPM 17801	Red Hill South	Granted	“	12-03-11	100	300
EPM 17800	Red Hill	Granted	“	25-02-11	100	300
EPM 17790	Hampton	Granted	“	28-04-11	112	336
EPM 17831	Hillgrove	Granted	“	25-02-11	89	267
EPMA 18114	Binjour	Application	“		50	150
					Total QLD TOTAL	1,617 5,094

[1]

22 AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

To support the assessment, Hudson and its advisors have provided:

The most recent reported results of investigations for the exploration projects.
Copies of recent independent assessments of the project including resource statements and projections.
Details of agreements relating to transactions and joint venture interests
involving the projects.
Current and previous investigations and economic analyses.
Records of expenditure on the project areas and by previous tenement holders.
Data on proposed expenditure commitments and budgets for the project areas.

Site visits have not been carried out for the assessments but reliance is planned on information supplied by Hudson, and on assessments prepared by TWA and other independent consultants for these, and equivalent projects. Reliance has been placed on Hudson’s resource estimation and geological interpretation and description, but these have been checked and confirmed in the preparation of this report.

The legal status and tenure of these tenements is not independently reviewed for this report. Geological and economic background to the projects is detailed in the reports and records listed in the Reference section of this Review Report.

This review is prepared in accordance with the relevant requirements and listing rules of the Australian Stock Exchange Limited, the Valmin and JORC Codes of the Australasian Institute of Mining and Metallurgy, and the Australian Securities Investment Commission Practice Note 42. The Valmin Code sets out the principles and matters that should be taken into account in preparing an expert report concerned with mineral assets. Practice Note 42 provides guidance to ensure that the expert report is independent of the commissioning party and that the assessments contained within the report are in accordance with the highest possible level of professional standards. Mineralisation and Mineral resources are present in some of the tenements, which have been reported on by Independent Competent Persons to conform with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves [the JORC Code].

OVERVIEW

Hudson Resources Limited is transferring its 100% interest in 11 Exploration Licences [8 granted [EL], 3 still in application stage (ELA)] in NSW and 6 Exploration Permits, 5 granted [EPM], 1 still in application stage (EPMA)] in Queensland to ABx. The transfer is subject to the responsible Minister’s consent. Each exploration tenement covers several areas with bauxite outcrops / exposures which represent potential exploration targets.

The ABx bauxite exploration programme started 2 years ago and is still in its early stages. Limited previous exploration has been carried out on some of the areas during the early stages of the development of the Australian aluminum industry

Encouraging results have been obtained from analyses of samples of bauxite from outcrops / exposures for all exploration tenements. Drilling is planned to reliably determine the quality of beneficiated product and thickness of bauxite layer. The stated ABx plan is to undertake initial drill testing of targets on all exploration tenements to determine which tenements and targets are highest priority for follow-up drilling, metallurgical testing and feasibility studies.

The determination of priority is based on the economies of the bauxite mining. The key factors for project assessment are:

– quality of beneficiated product

– thickness of bauxite layer, and – distance of transport to the port.

The ABx stated objective is to produce a beneficiated bauxite product of premium quality for eastern Australian and overseas markets. Generally analyses of initial bauxite samples from the target areas indicates relatively low reactive silica content and relatively high proportion of tri-hydrate gibbsite [Al2O3, 3H2O], which is suited to low temperature processing to recover alumina.

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Iron content is generally higher than in comparative bauxites, however in some of the ABx targets, initial samples returned low iron assays so that it may be possible to define several low iron resources areas. Also in a number of the targets, iron is present in discrete iron oxide rich mineral grains and the reduction of iron content by simple processing methods is possible.

The selected bauxite targets are located in regions with existing infrastructure and population centers and the capital cost of mine development is likely to be substantially lower than in remote regions. Initial production rates may be relatively low, which would facilitate the placement of product into the market.

The ABx objective is to define several deposits [or groups of deposits] containing 100 million tonne [million t] each in several sectors along East Coast of Australia with the main focus producing a premium quality bauxite in order to establish presence in the market.

The following summary of the bauxite mineralisation has been determined by hand sampling in most instances, with limited systematic surface and drill sampling recorded in some areas as noted:

NEW SOUTH WALES ABx1 [NEWCASTLE ZONE]

Inverell EL 6997 Extensive plateau bounded by outcrops of a bauxite layer with an average thickness of 7 metres [m]. Based on programmes carried out by Hudson, the following mineralisation ranges are estimated:

36 – 42% total Al2O3; screened 40 – 50% total Al2O3 / 35 – 38%; available Al2O3 22% - 30% Fe203; screened 19 – 25% Fe203

1.5 – 5% total SiO2; screened 1.0 – 3% SiO2 [85% of the silica is reactive].

In addition, several groups and ‘chains’ of outcrops of massive cemented bauxite layers in Tertiary Volcanic areas occur. Based on systematic surface sampling, the following mineralisation is recorded:

35 – 56% total Al2O3 / 29 – 45% available Al2O3 7 - 36% Fe203

2 – 10% total SiO2 / 1.3 – 8% reactive SiO2.

Pindaroi EL 7268 A number of widely spaced outcrops of massive cemented bauxite layers occur in Tertiary Volcanic area. Systematic surface sampling has been carried out as follows:

30 – 57% total Al2O3 / 27 - 52% available Al2O3 4 - 26% Fe203

[2.5 ][–][ 12% total SiO] 2[ / 2 ][–][ 9% reactive silica. ]

Guyra EL 7361 One group of outcrops of a massive cemented bauxite layer in Tertiary Volcanic areas has been found. The range of assay results from hand samples is as follows:

38 – 45% total Al2O3 / 36 – 42% available Al2O3 23 - 33% Fe203

2.3 – 2.4% total SiO2 / 1.8 – 1.9% reactive SiO2.

Yarrowitch EL 3644 Outcrops of a massive cemented bauxite layer in Tertiary Volcanic areas have been found. The range of better assay results recorded include:

44 – 46% total Al2O3 / 36 – 39% available Al2O3 17 – 23% Fe203

[2.7 ][–][ 8%; total SiO] 2[ / 1.6 ][–][ 6% reactive SiO] 2[. ]

Merriwa ELA 3626 Outcrops of massive cemented bauxite layer occur in Tertiary Volcanic areas. The range of better assay results recorded include:

36 – 41% Al2O3 24 – 29% Fe203

7 – 9% SiO2.

AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

NEW SOUTH WALES ABX2 [PORT KEMBLA ZONE]

Trundle ELA 3661 Outcrops of pisolitic and non-pisolitic bauxite surrounded by extensive areas of red soil in upper part of lateritic weathering profile with poor outcrop. The following range of assay results are recorded:

Pisolitic bauxite 44 – 49% total Al2O3/ 30 – 35% available Al2O3;14 – 15% Fe203 Non-pisolitic bauxite 53 – 57% total Al2O3/ 42 – 53% available Al2O3;9 – 14% Fe203 Pisolitic bauxite 14 – 23% total SiO2 / 7 – 12% reactive SiO2 Non-pisolitic bauxite 2 – 6.5%; total SiO2/1.6 – 4.7% reactive SiO2.

Taralga EL 7357 Outcrops of pisolitic bauxite underlain by non-pisolitic bauxite in Tertiary Volcanic areas. The following range of assay results recorded include:

38 – 49% total Al2O3/ 27 – 44% available Al2O3 18 – 36% Fe203

1.8 – 6%; total SiO2 / 0.6 – 2.1% reactive SiO2.

Windellama EL 7269 and Bungonia ELA 3740 Groups of outcrops of pisolitic bauxite underlain by nonpisolitic bauxite in Tertiary Volcanics. Range of assays quoted for selected samples of non-pisolitic bauxite from EL 7269 as follows:

38 - 57% total Al2O3 / 34 - 51% available Al2O3

6 – 18% Fe203

3 –8% total SiO2 / 0.8 – 2.6% reactive silica

Wingello West EL 7279 and Penrose ELA 3774 A number of outcrops of pisolitic and non-pisolitic bauxite in Tertiary Volcanic areas. Assays quoted for selected samples with low iron.

45 – 50% Al2O3

9 – 22% Fe203 4 – 8% SiO2.

SOUTH EAST QUEENSLAND ABX3 [GLADSTONE/BRISBANE ZONE]

Red Hill EPM’s 17800-01 Two groups of outcrops of massive cemented bauxite layers in a Tertiary Volcanic area similar to those EL 6997 [Inverell]. No systematic exploration has been carried out to date.

35 – 46% total Al2O3 / 25 – 41% available Al2O3 19 - 33% Fe203

3 – 8% total SiO2 / 3 – 7% reactive SiO2.

Hampton EPM 17790 Bauxite in thick red soil in upper part of lateritic profile developed on a 3 kilometres [km] wide Tertiary Volcanic plateau. Random sampling results indicate:

38 – 52% total Al2O3 / 28 – 45% available Al2O3 15 – 33% Fe203

2 – 7% total SiO2 / 1.5 – 5% reactive silica.

Hillgrove EPM’s 17830-31 Outcrops of a massive cemented bauxite layer in a Tertiary volcanic area. Assays ranges for spot samples across the entire thickness of massive cemented bauxite outcrops as follows:

35 – 55% total Al2O3 / 30 – 50% available alumina

15 – 37% Fe203

1.5 – 7% total SiO2 / 1.0 – 6% reactive SiO2.

Binjour EPM 18014 Bauxite in thick lateritic red soil profile developed on a Tertiary Volcanic plateau. Random sampling results indicate:

35 - 50% total Al2O3 / 40% available Al2O3 17 – 36% Fe203

3 – 8 % total SiO2 / 1.2 – 6 % reactive silica.

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

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26 AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

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8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

GEOLOGICAL REVIEW OF ABx PROJECTS

NEW SOUTH WALES Newcastle Zone Tenements [100% ABx]

INVERELL EL6997

Introduction

The Inverell tenement, EL 6997, of 297 square kilometres [sq km], covers extensive bauxite deposits developed by weathering of a porous friable layer in Tertiary Basaltic. These have been preserved from erosion by a thin layer of overlying basalt. The laterites form a horizontal layer of bauxite generally from 2 to 5m thick but in places, much thicker, suggesting that a target tonnage of 150 million t is possible. Additional thick bauxite deposits may also occur from erosion and deposition in palaeo-depression and channels.

Tonnage estimates made in the period up to 1954 were relatively modest. According to H. B. Owen [Bauxite in Australia, Bureau of Mineral Resources Bulletin no. 24], in 1954 the largest known bauxite deposit was Parish’s: 4,755,000 long tonnes averaging 38.6% Al2O3, 33.7% available Al2O3 [Al2O3 soluble in 10% NaOH solution boiling at atmospheric pressure], 3.2% SiO2, 30.1% Fe2O3 and 5.0% TiO2.

This deposit is called Target A. After initial assays showed the presence of high quality bauxite with very low silica, and that the thickness of the bauxite was about 7m, it was clear that the tonnage potential was an order of magnitude larger than the historic estimate; drilling programmes were undertaken in areas now designated A and B.

28 AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Table. Summary of Inverell Bauxite Data

Location	Geological Description	Al2O3	Fe2O3	SiO2	LOI
Inverell–	Extensive plateau bounded by	36–42%	22 -	1.5–5%	20–
drilling	outcrops of bauxite along the edge on		30%		25%
Targets	east side; on west side bauxite is	Screened
A and B	overlain by a thin cover; average	40–		1.0–3%
	thickness of bauxite is 7 m; there is	50%	19-	reactive	23–
	potential for tens of millions of tonnes		25%		27%
	Two drilling programmes completed–	35-38%
	several more planned, including drill	av
	testing under cover toward west.
Inverell
Central part [including	Several groups and ‘chains’ of outcrops of massive cemented	35–56% total	7–	2–10% total	20–
Targets A and B] and NE	bauxite layers in Tertiary volcanics.	29–45% available	36%	1.3 - 8% reactive	28%
part
	Loose lumps of bauxite in thick
Inverell– North- Western	lateritic red soil profile developed on Tertiary volcanic plateaus. Range of assays quoted is for hand	36–52% total	13–	1.5–6% total	19–
Targets. NW part of EL	selected lumps of bauxite [red soil has not been included in the samples].	28– 46% available	32%	1.2–5% reactive	28%
6997

Location

EL 6997, of 297 sq km, is located approximately 20 km north-west of Inverell, in northeastern New South – Wales with a skilled workforce and full range of engineering services power, water and bitumen roads. The EL is 90 km from Guyra where bauxite has also been discovered and where bauxite could be loaded on train if the Armidale – Guyra line is rehabilitated. Alternatively the bauxite can be trucked another 30 km to Armidale where the rail is still active. Railway distance from Armidale to Newcastle is approximately 450 km.

Previous Work

Bauxite deposits are widespread throughout the eastern half of the map sheet area [Inverell 1:250 000 Metallogenic Map 2]. They were first reported in 1875 and prospected extensively during and after the Second World War by the Department of Mines, Broken Hill Proprietary Company Ltd and The Australian Aluminium Production Commission. Prior to the discovery of bauxite at Weipa in North Queensland, they constituted the largest known bauxite resource in the country. Some have been quarried locally as a source of roadbase material.

The average composition of bauxites in the Tingha–Inverell–Warialda area is 39.5% Al2O3, 30 % Fe2O3, 4.5 % SiO2 and 4 % TiO2. The major minerals in these bauxites are gibbsite and subordinate boehmite and diaspore. These are commonly intermixed with various amounts of kaolinite and limonite.

Bauxite Mineralisation

The bauxite is hosted in Tertiary volcanics, which consist of alternating basalt and tuff layers. Outcrops of hard basalt layers are rare as most volcanics are weathered and friable. The bauxite has formed by weathering of a porous friable layer in volcanics during the Tertiary, when a tropical climate of high rainfall and relatively high temperatures resulted in strong weathering and the production of bauxite in the surface profile.

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

First stage drilling only covered a small part [50 sq km] of the EL but tested bauxite from 3 to 12m thick. Assays obtained to date indicate that the bauxite in EL 6997 [Inverell] are as follows:

	Al2O3	Fe2O3	SiO2	LOI
Samples from majority of bauxite outcrops sampled to date	35–56%	7–36%	2–12%	20–27%
Samples only from bauxite outcrops in the first stage [2 km by 1km] main target area	45–48%	19–26%	2–5%	23–27%

The Loss on Ignition [LOI] data indicate that alumina is present predominantly as gibbsite which is also a significant advantage.

Targets in the central and north east part of EL, include Targets A and B and Simpson, Derek and Bucknell targets. A large area south-east of Target A [Holder Plateau] remains to be explored on foot and additional targets are expected. A large area in SW part of EL remains to be explored.

The first drilling programme on Target A [Holder Plateau], Target B [Lockwood Plateau] and several other – – targets notably Wimbledon Plateau has been completed. Drilling was by air core so that comminution of friable bauxite by drill bit and tumbling in the pipe and cyclone occurred. No assays for reactive silica and available alumina have been made on air core samples. In the second drilling programme, also on Target A and B, a push-tube was used which recovers less disturbed sample. A resource estimate for Target A and B is in preparation.

The Wimbledon Plateau target to the northwest of Target B, is similar to Targets A and B. The width of the zone in which the bauxite is exposed is narrower but potential for bauxite extending a long distance toward the north west under the thin black soil cover exists, to be tested by drilling as a matter of priority.

In the area to the south and southeast of Target A, exploration remains to be undertaken and there is potential for discovery of a substantial continuation of the bauxite layer for about 4 km. This will be a high priority zone for future work.

Samples collected from Simpson North and Simpson East targets, Derek target and Bucknell target gave a wide range of values for reactive silica, available alumina and LOI that may be caused by the variation in the type of outcrop. These areas have the potential to be thick and extensive and of similar quality to areas A and B.

North-Western Targets Zone

In northwest part of the EL, a thick [+9.5m] bauxite profile was intersected in scout holes half way down slope on which only red soil with rare loose lumps of bauxite is visible and indicates that bauxite will probably only be located by drilling. The North-Western Targets bauxite is fully exposed throughout and was partly eroded in some parts as the Younger Tertiary basalt cover is missing and has only been observed outside the EL.

Samples submitted gave consistent very low reactive silica assay values and high available alumina and LOI assay values so that there may be higher grade bauxite than found in Targets A and B, making this a priority area for further testing. The Bauxite layer consists of friable bauxite which tends to break down to ‘soft’ grains in 1 to 0.1 mm size range and cemented lumps with irregular shapes. The ratio of lumps to friable bauxite is variable.

Seven holes were drilled by push tube but some did not reach the base of bauxite layer due to harder zones. On current indications the thickness of bauxite layer is between 3m and more than 9.5m. In some cases the drill holes located a certain distance down a gentle slope intersected a greater thickness of bauxite than the adjacent drill hole further up the slope, indicating that the bauxite layer was not a horizontal slab and that there may be thicker bauxite accumulations in certain lower parts of terrain, which will be tested by future drilling.

30 AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Metallurgical Testing

Metallurgical beneficiation tests are underway and will include:

optical and electron microscope studies;
wet screening;
determination of reactive silica and available alumina and other specialist chemical analyses; and
assessment of beneficiated product quality.

The work has indicated that the size of grains of gibbsite and iron oxide minerals in the samples is much larger than in bauxite from deposits in northern Australia and overseas. Extraction of iron oxide mineral grains during beneficiation may be possible and would result in a significant increase in the alumina content of the beneficiated product, thus increasing the range of marketing opportunities.

Logistics

Transport and beneficiation are currently being investigated. The main option is trucking 90 km to Guyra – where bauxite has also been discovered by ABx and where bauxite could be loaded on train if the Armidale Guyra line is rehabilitated. Alternatively the bauxite can be trucked another 30 km to Armidale where the rail is still active. Railway distance from Armidale to Newcastle is approximately 450 km.

Due to relatively long trucking distance from Inverell to Armidale and by rail from Armidale to Newcastle port, the cost of rail transport is relatively high. Beneficiation to remove of some of the grains rich in iron oxide is being investigated using low cost grinding and inexpensive ‘mechanical’ methods.

Due to good quality and large tonnage potential Inverell EL is high priority.

Exploration Programme

Geological mapping and systematic sampling of outcrop and of the lateritic weathering profile exposures will be undertaken to obtain samples for analysis. After preliminary testing [excavator or drill rig], follow up work will involve systematic grid drill testing to obtain data for analyses for alumina, silica, iron oxide and loss on ignition, followed by specialist analyses to determine total and available alumina, total and reactive quartz, loss on ignition and other analyses as required in bauxite search. Preliminary resource estimation will then be possible.

PINDAROI EL 7268

Introduction

Pindaroi, of 138 sq km, covers a number of widely spaced outcrops of massive cemented bauxite layers similar to those found on EL 6997 [Inverell]. These are developed in the upper part of a thick lateritic profile on Tertiary volcanics. Due to the EL’s proximity to EL 6997 [Inverell], similar conclusions with respect to grade, transport and marketing will probably apply. Tertiary basalt flows are preserved on remnants of old surfaces which form larger plateaux or smaller ‘mesas’. Formed by deep weathering of these flows during the Tertiary and under protective cover of later flows, large tonnages of bauxite may have been preserved.

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Table. Summary of Pindaroi Bauxite Data

Location	Geological Description	Al2O3	Fe2O3	SiO2	LOI
Pindaroi	A number of widely spaced outcrops	30–57%		2.5–
EL 7268	of massive cemented bauxite layers in a Tertiary Volcanic area - similar to those in EL 6997 (Inverell).	total 27 - 52%	4– 26%	12% total 2–9%	19– 28%
		available		reactive

Assays of samples received to date indicate the presence of bauxite with medium silica [7 - 9% SiO2] to high silica [13 – 16% SiO2]; iron is relatively low [as low as 13% Fe2O3] so that alumina is relatively high [up to 44% Al2O3]. A major target [4 km by 3 km] for traversing is located in the central and southern part of the western half of the EL.

Location

The EL is close to Inverell EL 6997 and has the same logistical advantages as the Inverell tenement.

Bauxite Mineralisation

Only preliminary field work has been completed to date. Bauxite is present in the southwest part of the EL on the Glenorchy Plateau. The southwest edge of the plateau is marked by a ‘chain’ of cemented bauxite outcrops in which a thickness of up to 12m of a bauxite layer has been observed with reasonable assay values. Assays results are better further east and include values with up to 52% available alumina and 2 % reactive silica. The potential for unusually thick bauxite coupled with the indicated high quality make this a medium-high priority area.

Due to the EL’s proximity to EL 6997 [Inverell], similar conclusions with respect to grade, transport and marketing will probably apply. Tertiary basalt flows are preserved on remnants of old surface which form larger plateaux or smaller ‘mesas’. Formed by deep weathering of these flows during the Tertiary and under protective cover of later flows, large tonnages of bauxite may have been preserved.

32 AUSTRALIAN BAUXITE LIMITED

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Exploration Programme

GUYRA EL 7361

Introduction

The Guyra EL, of 300 sq km covers deeply weathered Tertiary basalts that in areas such as the explored Inverell tenement are known to contain numerous deposits of quality bauxite. Beyond some preliminary prospecting as summarised below, no serious exploration has yet been carried out.

Table. Summary of Guyra Bauxite Data

Location	Geological Description	Al2O3	Fe2O3	SiO2	LOI
Guyra	To date, one group of outcrops of a			2.3–
EL 7361	massive cemented bauxite layer in	38–45%		2.4%
	Tertiary Volcanic areas has been found - similar to those EL 6997 [Inverell].	total 36–42%	23–33%	total 1.8–	22– 25%
		available		1.9%
	No systematic exploration to date.			reactive

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Location

The Guyra EL is connected by a bitumen highway to Armidale – 30 km to the south and Glenn Innes – 60 km to the north. Inverell is 90 km to the northwest and there are a range of services and a skilled workforce in Guyra itself. A disused railway that could be rehabilitated, connects Guyra to Armidale, Tamworth and Newcastle or Glenn Innes and Brisbane.

Bauxite Mineralisation

No bauxite occurrence has been reported in literature near the Guyra tenement but Tertiary ‘plateau basalt’ volcanics in the area are similar to those occurrences at Inverell and other Hudson ELs, which have been shown to be highly prospective for bauxite, due to extensive weathering in the Tertiary.

Hudson has not yet carried out systematic exploration for bauxite in the area, but reconnaissance along public roads located exposure of bauxite and the underlying weathered older Tertiary volcanics [probably tuffs] with high feldspar content and no quartz and overlain by younger Tertiary volcanics.

Assays of samples from this exposure show low reactive silica and medium to high available alumina. In this exposure 2m thickness of bauxite is visible but it is likely that a thicker layer would be found by drilling. Interpretation of satellite imagery indicates potential for discovery of extensive bauxite deposits in all parts of EL of which a proportion may be available under a thin layer of younger Tertiary volcanics or a thin cover of black soil cover, such as has been found at Inverell.

Exploration Programme

As the geological setting is similar to that in Inverell EL 6997, a similar exploration programme is proposed: Geological mapping and systematic sampling of outcrop and of the lateritic weathering profile exposures will be undertaken to obtain samples for analysis. After preliminary testing [excavator or drill rig], follow up work will involve systematic grid drill testing to obtain data for analyses for alumina, silica, iron oxide and loss on ignition, followed by specialist analyses to determine total and available alumina, total and reactive quartz, loss on ignition and other analyses as required in bauxite search. Preliminary resource estimation will then be possible.

YARROWITCH EL 7344

34 AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Introduction

The EL of 279 sq km covers areas with Tertiary basalts although no bauxite occurrences have been reported in literature. As the setting is similar to the Inverell Region the area is considered to be prospective. No systematic exploration has been carried out but preliminary sampling of two bauxite outcrops [four samples], indicates relatively high Al2O3 and encouragingly low assays of reactive silica.

Table. Summary of Yarrowitch Bauxite Data

Location	Geological Description	Al2O3	Fe2O3	SiO2	LOI
Yarrowitch	To date, two groups of
EL 7344	outcrops of a massive
	cemented bauxite layer in Tertiary Volcanic areas have been found - similar to those	44–46% total Al2O3		2.7–8% total
	EL 6997 [Inverell]. No systematic exploration to date.	36–39% available Al2O3	17–23%	1.6–6% reactive	24–25%
	Assays quoted here are for the
	group with better quality only.

Location

Yarrowitch is conveniently located, with Wauchope and Port Macquarie containing a full range of services and skilled workforce 70 km and 90 km to the east respectively. Armidale, the regional centre is 120 km to the northwest. A bitumen highway connects to the Pacific Highway and Newcastle while the railway line connecting to Brisbane and Newcastle is 70 km to the east.

The Hastings River estuary has a potential port for barges and is 85 km to the east, while the railway [connected to Newcastle via Tamworth] is 60 km to the west. In addition, the Guyra bauxite project is located 30 km north of Armidale [150 km from Yarrowitch] so that synergies between Yarrowitch and Guyra projects can be achieved.

Bauxite Mineralisation

Tertiary basalts are present although no bauxite occurrence have been reported in literature. As the setting is similar to the Inverell Region the area is considered to be prospective. Two outcrops of massive cemented bauxite - similar to those found at Inverell – have been located in the upper part of a thick lateritic profile developed on Tertiary Volcanics.

The bauxite layer is overlain by younger Tertiary volcanics and assays of samples from the natural outcrop show low to medium reactive silica and medium available alumina. In this outcrop a 3m thickness of bauxite is visible and interpretation of satellite imagery indicates potential for discovery of extensive bauxite deposits in all parts of EL.

Exploration Programme

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

MERRIWA ELA3626

Introduction

The tenement, of 1,272 sq km covers three outcrops of massive cemented bauxite developed on Tertiary Volcanics in a similar setting to the bauxite at Inverell and Pindaroi. No systematic exploration has yet been carried out to date.

Table. Summary of Merriwa Bauxite Data

Location Geological Description Al2O3 Fe2O3 SiO2 LOI Merriwa Three outcrops of massive ELA 3626 cemented bauxite layer in Tertiary Volcanic areas - similar to those EL 6997 [Inverell] 36 – 41% 24 – 29% 7 – 9% 20 – 23% No systematic exploration to date. Assays quoted here are for the group with better quality only.

Location

The Merriwa EL is in proximity of three railway lines. Infrastructure in Merriwa area is good. A Skilled workforce is available in local towns or and major centres less than one hour drive away.

Bauxite Mineralisation

The tenement covers three outcrops of massive cemented bauxite in upper part of a thick lateritic profile developed on Tertiary Volcanics. No systematic exploration has been completed to date. Reconnaissance along public roads located an exposure of bauxite 4m thick overlain by younger Tertiary volcanics. Assays gave encouraging total silica and total alumina values. Interpretation of satellite imagery indicates potential for discovery of extensive bauxite deposits in all parts of EL.

36 AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Two other exposures of lateritic profile have been sampled in the western part of EL.

Exploration Programme

The following exploration programme will be undertaken in the area of the application; detailed geological mapping, including geomorphological mapping, to define the areas with best potential for bauxite. This will be followed by systematic sampling of natural outcrops and exposures in road cuts of the laterite weathering profile to obtain samples for detailed chemical analyses. Detailed work will including specialist analyses to determine total and available alumina, total and reactive quartz, loss on ignition and other analyses as required. Prospective bauxite zones will be tested by a small tractor mounted excavator drill testing of zones with best potential to get samples representing the whole lateritic weathering profile [from the upper-most iron rich zone through the alumina rich zone and down into the mottled and pallid saprolite zone].

NEW SOUTH WALES PORT KEMBLA ZONE [100% ABx2 ]

TRUNDLE EL7360

Introduction

The EL, of 300 sq km covers small outcrops of pisolitic and massive cemented bauxite surrounded by extensive areas of red soil in the upper part of the lateritic weathering profile. This is a rather flat area with poor outcrop. The area was selected on basis of study of Landsat and Digital Terrain imagery to select areas covered by soil, which could be underlain by paleo-channels in which ancient deposits of bauxite are likely to be preserved. Potential for thick paleo-channel bauxite also exists.

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Table. Summary of Trundle Bauxite Data

Location	Geological Description	Al2O3	Fe2O3	SiO2	LOI
Trundle		Pisolitic
ELA		bauxite		Pisolitic
7360		44–49%		bauxite
		total		14–23%
	Small outcrops of pisolitic and non-pisolitic bauxite surrounded by extensive areas of red soil in upper part of lateritic weathering profile in a	30–35% available Non-	Pisolitic bauxite 14– 15%	total 7–12% reactive	25-28%
	rather flat area with poor outcrop. Potential for paleo-channels exists.	pisolitic bauxite 53–57% total /42– 53%	Non- pisolitic bauxite 9–14%	Non- pisolitic bauxite 2–6.5% total	31%
		available		1.6–4.7%
				reactive

Location

Trundle is connected by a branch rail to the railway line that goes through Parkes to Sydney and the port of Port Kembla. There are also good roads connecting to the railway. Parkes offers a full range of services and skilled workforce.

Geological Setting

Bauxite occurrences in the area 15 km north east of Trundle are located in a flat to gently undulating terrain covered by red soil. BMR Bulletin no 24, Bauxite in Australia, 1954 records ten separate laterite occurrences in an area of 12 sq km and the bauxite potential was investigated in 1970 by CRA Exploration using an auger drill. Reconnaissance prospecting by Hudson along public roads located a small bauxite exposure in road drains and the assays are similar to those reported, confirming that there is potential for defining a resource of high quality bauxite

Interpretation of satellite imagery also indicates potential for discovery of paleo-channels which may contain extensive bauxite deposits. The total length of paleo-channel could be of the order of 35 km and the width of the order of 0.25 km to 2.5 km. Known bauxite occurrences may be located on the fringes of paleo-channel system so that in the middle of paleo-channel system a thicker bauxite profile could be expected.

Exploration Programme

Geological mapping and systematic sampling of outcrop and of the lateritic weathering profile exposures will be undertaken to obtain samples for analysis. After preliminary testing [excavator or drill rig], follow up work will involve systematic grid drill testing to obtain data for analyses for alumina, silica, iron oxide and loss on ignition, followed by specialist analyses to determine total and available alumina, total and reactive quartz, loss on ignition and other analyses as required in bauxite search. Drill testing will start at known bauxite occurrences and progress toward the axis of paleo-channel system.

TARALGA EL 7357

Introduction

The EL, of 300 sq km, covers prospective bauxite areas overlain by younger Tertiary volcanics. Only a preliminary reconnaissance has been made of the area. Assays of samples from the road drains where bauxite had been protected from weathering gave consistent very low reactive silica values, ranging from 0.6 - 2.1%; total alumina 38 to 49%; available alumina 34 - 44%; LOI 21 - 27%. Interpretation of satellite imagery indicates potential for discovery of modest size bauxite deposits in the central to northeastern part of EL.

38 AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Summary Table

Table . Summary of Taralga Bauxite Data

Location	Geological Description	Al2O3	Fe2O3	SiO2	LOI
Taralga	Two groups of outcrops of
EL 7357	pisolitic bauxite underlain by	38–49%		1.8–6%
	non-pisolitic bauxite in Tertiary Volcanic areas.	total 27–44%	18–36%	total 0.6–2.1%	17– 27%
		available		reactive

Reconnaissance sample results show that total silica is low in all samples [generally 1.3 – 2.6% to SiO2] and – that reactive silica is very low in all samples [0.6 2.1%]. Slightly elevated total silica is due to the presence of quartz [probably due to contamination with wind-blown dust because samples were collected at surface]. – Similarly low loss on ignition [12 22%] is indicative of dehydration due to prolonged exposure available alumina is high. The iron content indicates that Taralga bauxites are similar to bauxites from other projects in Eastern NSW and south east Queensland .

Location

The EL is well located, being close to Goulburn. It is connected by a bitumen highway to the Goulburn freeway and main railway line 40 km to the south. Port Kembla is located 110 km east of Goulburn and is – connected by heavy duty double track railway being the main Melbourne Sydney line.

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Bauxite Mineralisation

No bauxite occurrence has been reported in literature but bauxite outcrops and cobbles are exposed in road cuts and are very similar to samples from the Inverell tenement. Tertiary Volcanics are preserved on the plateaux, which can be considered as remnants of old surfaces on which a Tertiary weathering profile was developed with bauxite. The eastern part of the Taralga plateau with preserved old lateritic weathering profile and Tertiary basaltic volcanics has been covered by the Taralga EL application and is prospective for bauxite preserved from later erosion.

Exploration Programme

Geological mapping and systematic sampling of outcrop and of the lateritic weathering profile exposures will be undertaken to obtain samples for analysis. After preliminary testing [excavator or drill rig], follow up work will involve systematic grid drill testing to obtain data for analyses for alumina, silica, iron oxide and Loss on Ignition, followed by specialist analyses to determine total and available alumina, total and reactive quartz, loss on ignition and other analyses as required in bauxite search.

WINDELLAMA EL 7269;BUNGONIA ELA 3740

Introduction

The Windellama EL, of 270 sq km covers several outcrops of bauxite associated with lateritic weathering of Tertiary basalt. Samples were initially collected from natural outcrops in a small – medium size mesa [erosional remnants] with encouraging results. A preliminary drilling programme has now been completed.

The Bungonia ELA covers 276 sq km of similarly prospective ground but currently only reconnaissance exploration has been undertaken.

40 AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Table. Summary of Windellama/Bungonia Bauxite Data

Location	Licence	Geological Description	Al2O3	Fe2O3	SiO2	LOI
	Application
Windellama	EL 7269	Several groups outcrops of
		pisolitic bauxite underlain by
Bungonia	ELA3740	non-pisolitic bauxite in Tertiary
		Volcanic areas.	38 - 57%		3–8% total
			total Al2O3		SiO2
		Range of assays quoted here is for selected samples of non- pisolitic bauxite from	34 - 51% available Al2O3	6–18%	0.8–2.6% reactive silica	22–31%
		Windellama EL 7269.

At Windellama, over 80 samples were collected and analysed for alumina, silica, iron and other major elements. These indicate the mean reactive [Rx] silica is 2% SiO2, the mean available alumina about 40% Al2O3 and LOI above 22%.

Samples from the pisolitic upper part of bauxite layer contain higher iron and lower total alumina because iron has migrated upward during lateritic weathering; available alumina and LOI are also lower, probably due to prolonged exposure to sun on old surfaces which caused dehydration of gibbsite.

Some samples from pale coloured non-pisolitic lower part of bauxite layer contain about 50% available alumina [determined by leaching in NaOH at 150 deg C], indicating potential for finding high quality bauxite.

The mean reactive silica of some samples is about 2% Rx SiO2, and the mean available alumina about 40% available Al2O3 and LOI above 22%, which means that these samples probably meet the criteria for ‘Direct Shipping’ [no beneficiation required] Export Bauxite. These samples represent the lower part of the bauxite profile which is characterised by its massive / tubular texture.

Location

The two tenements adjoin and are well located with respect to being in the immediate proximity of the Tarago railway station [Tarago railway station is used by Veolia (waste management) to unload trains with rubbish from Sydney to be placed into the disused Woodlawn mine; the trains with wagons suitable for bulk load like bauxite are going back empty so that bauxite could be back-loaded to Sydney / Port Botany or Port Kembla]. A workforce is available in towns like Goulburn

Bauxite Mineralisation, Windellama

A study of the literature identified one bauxite occurrence. Following the interpretation of the Digital Terrain Model and Satellite imagery, field work was undertaken to make observations and collect samples of bauxitic material.

The field programme was conducted on public roads and traversing on foot. 20 outcrops or exposures of bauxite were identified in 4 areas. Bauxite is present in a 2 to 6m thick layer. The upper part of the bauxite is cemented, and pisolitic bauxite is common [with shiny black pisolites in pale matrix]. This is underlain by porous pale coloured bauxite.

Subsequent work outlined several bauxite target areas and drilling programs are currently in progress over identified bauxite areas. The overall objective of the first drilling programme was to demonstrate that the thickness of bauxite layer is substantial [at least 3m, but possibly up to 10m] and demonstrate that the quality of lower part of bauxite layer is high [the quality of upper part which is pisolitic is probably low due to high iron content].

The objective of the second drilling programme will be to prove up a resource of at least 10 million t of high quality bauxite.

The ‘Push-Tube’ drilling method was used because undisturbed samples can be extracted.

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Summary of Targets for the first drilling programme:

					Potential
TARGET	No	Holes	Holes	Meters	tonnes
			second
NAME	Holes	first Stage	Stage	Total	Million
Bald Hill	4	4	0	40	0.25
Hawkes Lane Hill	6	3	3	60	0.5
Cows - Firewood–
One Tree Hill	25	12	13	250	1.5
Silage	9	4	5	90	0.75
Doctor’s Bush	9	9	0	90	2
Norm’s Bush	7	4	3	70	0.75
Dead Tree	9	6	3	90	0.75
Ploughed Field	6	4	2	60	1
	75	46	29	750	7.5

Wet screening of low-grade bauxite gave recoveries of +85% and indicated that the ratio of available alumina to reactive silica could improve. Current ratios of 6 to12 which are “low price”, can possibly be stepped up to 12 to 20 “excellent price”. +20 would be “premium price”.

From the first drilling programme the total thickness of bauxite layer is estimated to be at least 6.5m and the thickness of non-pisolitic bauxite with low iron / high available alumina will be at least 5m.

It would appear that in lower part of bauxite layer [and in what could be a transition zone between the bauxite layer and the saprolite layer below], there is a mixture of larger gibbsite particles [or small lumps of cemented gibbsite] and much smaller clay particles so that by sieving [= screening] at 0.6 mm, the gibbsite particles [or lumps] can be separated from much smaller clay particles.

Exploration Programme

A shallow reconnaissance drilling programme will be undertaken consisting of a number of exploratory holes to a depth of no more than 10m to determine the distribution and quality of bauxite previously identified at surface.

Field geological observations and sampling of natural outcrops and artificial exposures [in road-cuts or existing pits] of bauxitic layer will continue. Samples will be analysed for alumina, silica, iron and other major elements.

Metallurgical testing will consist of several stages and will include beneficiation by wet screening, determination of total and reactive silica, total and available alumina and other specialist chemical analyses, optical and electron microscope studies and assessment of beneficiated product quality.

A systematic drilling programme to define a JORC compliant resource will be considered.

Further surface exploration is planned for other parts of the licence to identify additional targets.

AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

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PENROSE ELA 3774, WINGELLO WEST ELA 7279
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Introduction

The Wingello West EL, of 21 sq km, is southwest of Mossvale. Only limited reconnaissance work has been carried out but it has located bauxite areas that require follow up exploration. The Penrose application, of 42 sq km and located 10 km northeast of Wingello West.

Table. Summary of Wingello Bauxite Data

Location	Geological Description	Al2O3	Fe2O3	SiO2	LOI
Wingello	A number of outcrops of pisolitic and non-
EL 7279	pisolitic bauxite in Tertiary Volcanic
	areas.
Penrose		45–50%	9–22%	4–8%	15–27%
EL3774	Assays quoted here are for selected
	samples with low iron.

Initial field reconnaissance resulted in 19 samples analysed for alumina, silica, iron and other major elements. The best result was obtained from samples from a small mesa / remnant of bauxitic laterite (35-39% Al2O3, 36-41% Fe2O3, 5-8% SiO2).

Location

The Wingello and the Penrose areas are well located being on main railway 120 km from Sydney and 80 km from Port Kembla - closer to Sydney than any other bauxite area.

Bauxite Mineralisation

On the Wingello EL, a number of widely spaced outcrops of massive cemented bauxite and pisolitic bauxite layers are present in the upper part of a thick lateritic profile developed on Tertiary Volcanics. The bauxite – occurrences in Wingello and Sutton Forest Penrose area are located in the immediate proximity of small remnants of Tertiary basalt.

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

A study of geomorphology based on the Digital Terrain Model indicated that Tertiary basalt flows are preserved on remnants of old surface which form larger plateaux or smaller ‘mesas’, Bauxite has formed during Tertiary period, in the upper part of the lateritic / saprolitic weathering profile. Systematic exploration over the entire extent of the flat-lying areas should locate other bauxite occurrences related to this Tertiary profile. There is the possibility that bauxite extends under the later protective Tertiary basalt flows in the area and the proposed drilling program will test for this possibility, which could prove up large tonnages.

On the Penrose application there are several known bauxite occurrences including an old BHP pit. As is found in Windellama, the samples of the lower, non-pisolitic bauxite profile gave better results with higher more alumina and less iron. In the northeast part of application, there is a very small PLL [no. 1236] for bauxite and also a large Mining Reserve MR3226 for bauxite held by the government. The company has applied for the surrounding ground.

Exploration Programme

The exploration programme for the Wingello/Penrose tenements will include detailed geological / geomorphological mapping; systematic sampling of natural outcrops and exposures of the lateritic weathering profile and testing of prospective zones by small tractor mounted excavator and follow-up systematic grid drill testing to obtain data for preliminary resource estimations.

QUEENSLAND TENEMENTS [100% ABx3]

HILLGROVE EPM 17831; HADEN EPM 17830

44 AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Introduction

The Hillgrove EPM, of 267 sq km and the Haden EPM, of 264 sq km cover prospective bauxite development over basalts subjected to extensive weathering and laterisation during the Tertiary. Sampling from sites on public roads has shown that bauxite is present and that there are areas for priority follow-up where low total silica and high to moderate total alumina assays are located. Two field trips have been completed that indicate the area to be a of medium priority for ground follow-up work and subsequent drill testing as the question of tonnage potential currently remains open due to younger Tertiary basalt overlying the bauxite.

Table. Summary of Hillgrove / Haden Bauxite Data

Location	Geological Description	Al2O3	Fe2O3	SiO2
Hillgrove	A ‘chain’ of outcrops of a massive cemented
EPM 17831	bauxite layer in a Tertiary Volcanic area–
	similar to the bauxite layer in EL 6997
Haden	(Inverell)	35–55%		1.5–7%
EPM 17830	No systematic exploration to date.	total	15–37%	total
	Range of assays quoted here is for spot samples across the entire thickness of	30–50% available		1.0–6% reactive
	massive cemented bauxite outcrops.

Location

The tenements are only 40 km north from Toowoomba which offers a full range of services. A transport route by trucking 60 km to Kingaroy and then by rail to main Brisbane - Gladstone railway is an alternative. The coal mines at Ackland are 25 km away; an alumina plant could be considered in the vicinity in the longer term.

A further option would be selling beneficiated bauxite product with low reactive silica and high tri-hydrate [gibbsite] content to the existing alumina plants in Gladstone for blending with bauxite from Weipa.

Bauxite Mineralisation

Significant portions of the tenements are covered by Tertiary Volcanics. Geological and Digital Terrain Model / Landsat images led to conclusion that prospective bauxite areas extend into the Haden and Hillgrove EPMs however there appears to be significant younger Tertiary cover, which, while protecting the older bauxite horizon, may create problems if it is too thick. All samples taken were from sites on public roads. Apart from one bauxite occurrence at Pinelands, in the northeast part of the Haden EPM, there are no bauxite occurrences reported in literature for either Haden or Hillgrove EPM’s.

Field work located bauxite outcrops and boulders in several areas:

The area northwest of Haden returned low total silica and high to moderate total alumina assays.
The area south of Haden gave low to moderate total silica and mostly moderate total alumina assays.
The area north-east of Haden [including the area called ‘Pinelands – northwest part’] gave low to moderate total silica and mostly moderate total alumina assays and several samples gave low total silica and high to moderate total alumina assays so that this area is higher priority for follow-up.

Exploration Programme

Geological mapping of younger Tertiary Volcanic cover is required to determine the thickness of cover overlying the bauxite in this area. This is a medium priority target area for ground follow-up work and subsequent drill testing, but the question of tonnage potential remains open due to younger Tertiary basalt cover.

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

RED HILL. EPM 17800; RED HILL SOUTH EPM 17800

Introduction

The EPMs, each of 300 sq km, cover a number of good exposures of bauxite and the underlying weathered older Tertiary volcanics [probably tuffs with high feldspar content and no quartz], from which the bauxite was derived. The geological setting and the position of the bauxite layer is similar to that in the Haden and Hillgrove EPMs with bauxite overlain by younger Tertiary volcanics which preserves the bauxite but may limit access. A series of new bauxite exposures have been located in a zone 2 km long, 1 km wide over which limited sampling suggests that this is a low priority area due to possible limitations from an unknown thickness of overlying younger Tertiary basalt cover.

Table. Summary of Red Hill / Red Hill South Bauxite Data

Location	Geological Description	Al2O3	Fe2O3	SiO2
Red Hill	Two groups of outcrops of massive cemented
EPM 17800	bauxite layers in a Tertiary Volcanic area -
	similar to those EL 6997 (Inverell).	35–46%		3–8% total
Red Hill South	No systematic exploration to date.	total	19–33%	3–7% reactive
EPM 17801		25–41%
		available

Alumina values are consistently high and silica values are consistently low [32 to 46% Al2O3 and 3 to 5% SiO2], except for two samples. Iron values are consistently elevated [27 to 34% Fe2O3],

46 AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Location

The EPMs are well located 40 km south of Toowoomba. The transport route is by bitumen road 30 km to Gatton, which is on the main railway 80 km from the Brisbane port. Subject to the expansion of the power industry in the Surat Basin, an alumina plant could be built in the vicinity.

Bauxite Mineralisation

Significant portions of the EPMs are covered by Tertiary volcanics. These are underlain by sedimentary strata of Jurassic Walloon Coal Measures, which are part of extensive Jurassic sedimentary system of south east Queensland. Digital Terrain Model and Landsat images suggest that the volcanics have been deposited and are preserved on old peneplained surface.

The contact between Tertiary Volcanics and underlying sedimentary strata of Jurassic Walloon Coal Measures is close to horizontal therefore in every valley there may be exposures of Jurassic Walloon Coal Measures and on every rise / ridge, Tertiary volcanics may be preserved.

No systematic exploration for bauxite has been undertaken. There are known bauxite occurrences in the area. The West Haldon Bauxite and the Maryvale Bauxite and the geological setting appears to be analogous to that in Inverell area. The volcanics are probably tuffs with high feldspar content and no quartz. The bauxite is overlain by younger Tertiary volcanics. Recent field work located bauxite at West Halden, and also as outcrops in a broad zone 10 km long by 3 km wide. Assaying indicates low reactive silica but available alumina was mostly at lower limit for economic viability.

Based on observations from distance and interpretation of satellite images, an extensive target, 8 km by 6 km, with potential for extensions toward south, east, north and west has been identified.

Exploration Programme

Being similar to other tenements in the area, further work will include geological mapping of younger Tertiary Volcanic cover to determine the thickness of cover overlying the bauxite in this area. This is a medium priority target area for ground follow-up work and subsequent drill testing.

HAMPTON EPM 17790

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Introduction

The tenement, of 336 sq km, is 25 km north of Toowoomba and covers ground similar to that found in the Haden / Hampton area which is prospective for the development of bauxite on Tertiary Volcanics. Loose lumps of bauxite occur in the thick red soil in the upper part of the lateritic profile and at least 20 bauxite occurrences have previously been noted, including a number of outcrops of massive cemented bauxite layers. No systematic exploration has yet taken place.

This is a high priority area for drill testing because of good location, large tonnage potential and good quality. One option would be selling beneficiated bauxite product with low reactive silica content and high tri-hydrate [gibbsite] content to existing alumina plants in Gladstone for blending with bauxite from Weipa.

Table. Summary of Hampton Bauxite Data

Location	Geological Description	Al2O3	Fe2O3	SiO2
	Loose lumps of bauxite in thick red soil in upper
Hampton	part of lateritic profile developed on a 3km wide
EPM 17790	Tertiary Volcanic plateau.	38–52%		2–7%
		total		total
	No systematic exploration to date. Range of assays quoted here are for hand selected lumps of bauxite.	28–45% available	15-33%	1.5–5% reactive

The assays are from samples of bauxite lumps after removal of friable red soil by screening as well as representative samples across the entire thickness of massive cemented bauxite outcrops. Preliminary grab samples suffer from soil contamination that can raise reactive silica levels and surface weathering that can reduce the Al2O3 content, but the results indicate low reactive silica assays and available alumina content within economic range. The yield of beneficiated product after wet screening is not known as no drilling has been undertaken but visual estimates of some exposures are that bauxite lumps represent 25 to 50% of total volume.

Location

The tenement is 25 km from Toowoomba close to existing infrastructure, rail, highway, power, water and coal mines with large reserves. Should sufficient resources of bauxite be proved up, it may be possible to consider a new alumina plant in the region.

The Toowoomba – Brisbane rail link is fully utilized so that transport by trucking 40 km to Gatton and then by railway would be the best option, or trucking 135 km to Brisbane port during the first phase of production.

Bauxite Mineralisation

Road-cuts and drains on side-roads, in red soil, reveal small to large lumps of bauxite with most known bauxite occurrences being located in southern part of the EPM where terrain is more dissected and road cuts are deeper. The best exploration potential is on the higher parts of the plateaus where the full lateritic profile could be preserved and may have substantial thickness of bauxite.

The EPM covers several red-soil plateaux underlain by weathered Tertiary volcanics [probably tuffs] with high – feldspar content and no quartz. The plateaux cover an extensive area the Pechey State Forest alone – covers 16 sq km and bauxite development from prolonged weathering in the Tertiary could be considerable as there are exposures with bauxite lumps well below the top of plateaux. The bauxite remained exposed to weathering.

The largest plateau is almost entirely covered by the Pechey State Forest and the plateau edge, with its partly preserved old lateritic weathering profile is well defined on the east side because of sharp drop-off due to rapid erosion by streams of Brisbane River catchment.

48 AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Field inspection and limited sampling indicates that in general terms the Pechey/Geham State Forest Targets have low iron enrichment and show:

low total SiO2 [3 to 4%] and reactive SiO2 [2 to 3%]
total Al2O3 [about 47%].
high LOI in bauxite that has not been affected by surficial dehydration.
available Al2O3 [about 38%] in large lumps that have not been affected by surficial dehydration.
Fe2O3 [about 24%] possibly in discrete iron mineral grains that can be removed by centrifuge or magnetic separation
a large area, all in State Forest with a grid of existing forestry roads available for access.

Exploration Programme

– The Pechey Geham Plateau laterites will be drill tested. Drilling 200mm diameter auger holes through the “mechanical weathering zone” characterised by friable/dusty red soil with lumps of bauxite, should locate thick cemented layers of bauxite such as has been found at the Holder-Lockwood and Wimbledon Plateaux, where the typical thickness of cemented bauxite is about 6m.

The Pechey/Geham target areas, each with dimensions of around 10 to16 sq km, could host more than 50 million cubic metres of bauxite and can be tested by about 20 holes drilled to a depth of 10m, to obtain data for analyses for alumina, silica, iron oxide and loss on ignition, followed by specialist analyses to determine total and available alumina, total and reactive quartz, loss on ignition and other analyses as required in bauxite search. Preliminary resource estimation will then be possible.

Various future options are available if sufficient bauxite is located. Subject to the expansion of the power industry in the Surat Basin, an alumina plant could be built in the vicinity. There is also the possible option of selling beneficiated bauxite product with low reactive silica content and high tri-hydrate [gibbsite] content to existing alumina plants in Gladstone for blending with bauxite from Weipa.

BINJOUR EPMA 18014

Introduction

Only a preliminary reconnaissance along public road exposures has been completed and two exposures of bauxite have been sampled. The Binjour application covers extensive plateaux with Tertiary volcanics and old weathered profiles preserved that are prime targets for bauxite. Bauxite occurrence have been noted in the Geological Survey data base and loose lumps of bauxite occur in the thick lateritic red soil profile developed on the volcanics.

This is a high priority area for drill testing because of good location and quality with the option of selling beneficiated bauxite product with low reactive silica and high tri-hydrate [gibbsite] content to existing alumina plants in Gladstone for blending with bauxite from Weipa.

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

Table. Summary of Binjour Bauxite Data

	Location	Geological Description	Al2O3	Fe2O3	SiO2	LOI
	Binjour EPM 18014	Loose lumps of bauxite in thick lateritic red soil profile developed on a Tertiary Volcanic plateau. No systematic exploration to date.	35 - 50% total 40% available	17–36%	3–8 % total 1.2–6 % reactive silica	15–23%

The limited sample programme located some higher quality bauxite with reactive SiO2 at 3 to 6%; total Al2O3 at 48 to 50%; available Al2O3 at 40 to 41%; and LOI 17 to 23%.

Location

The EPM, of 150 sq km, is well positioned near the towns of Gayndah and Mundubbera and close to power, sealed highway and water. The distance to Gladstone by rail is 200 km. A railway is located on southern boundary of EPM, which is currently not in use however there is a plan to re-start mining of coal in Mulgildie Basin located 60 km to north-west and the railway may be used again.

Bauxite Mineralisation

Only one known bauxite occurrences has been noted in the area of the Binjour tenement, however significant portions of the EPMA cover Tertiary volcanics that have been deposited as a thin package of near-horizontal strata resting on an old peneplained surface. The volcanics are preserved as a series of plateaux. A thick lateritic weathering profile is visible as red soil, and the potential for extensive bauxite development is indicated by road cuttings where lumps of bauxite are exposed.

Assays from initial samples show low reactive silica and high available alumina. Our 20 samples of bauxite were later collected from red soil at two new sites on two main plateaux [assays pending], and based on evidence from other tenements, drilling here should intersect a substantial thickness of bauxite.

AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

There are several plateaux within the tenement representing remnants of old lateritic weathering surfaces and exploration will be directed to laterites developed over the volcanics. The high parts of the plateaux are of greatest interest as the full lateritic profile may be preserved, and thickness in the order of 10m would result in a significant tonnage.

The southeastern Binjour Plateau has dimensions of 9 km by 2 km, which means a prospective area of more than 10 sq km. If half of the target area is underlain by a 5m layer of cemented bauxite, a potential for more than 50 million cubic metres of bauxite may exist.

Exploration Programme

Geological mapping and systematic sampling of outcrop and of the lateritic weathering profile exposures will be undertaken to obtain samples for analysis. After preliminary testing [excavator or drill rig], follow-up work will involve systematic grid drill testing to obtain data for analyses for alumina, silica, iron oxide and loss on Iinition, followed by specialist analyses to determine total and available alumina, total and reactive quartz, loss on ignition and other analyses as required in bauxite search. Preliminary resource estimation will then be possible.

QUALIFICATIONS

TWA is a Mining Engineering Consultancy which has had considerable experience in the valuation of mining interests and investments, and in advising both prospective purchasers and sellers of such interests and investments. The person responsible for this report is:

T V Willsteed BE[Min]Hons BA FAusIMM MMICA MSME Consulting Mining Engineer

Mr Willsteed is the Principal of TWA. He has had extensive experience in the mining industry over 50 years, the last 40 years of which have been as a consultant to the industry. He has participated in the management, planning and development of a number of mining projects and in the investment supervision and exploration of substantial number of mineral resource projects. He has been extensively involved in mineral project evaluation and management.

R C Pyper BSc FAusIMM

Consulting Geologist

Mr Pyper is a geologist with 47 years of industry experience and 25 years of consulting practice in precious metal, base metals, gemstones, clays and mineral sands. He has extensive experience in ore reserves assessment and the valuation of mining operations and mineral exploration properties.

DECLARATION

This report has been prepared to support an Independent Expert Report for inclusion in an Offer document to be issued by Hudson. This report is designed to assist shareholders to assess the geological potential of the Hudson mineral interests and was not prepared for any other purpose. The reserves does not provide an opinion as to share or corporate value.

The statements and opinions contained in this report are given in good faith but, in the preparation of this report, TWA has relied substantially on information provided by the Directors and Management and Independent Consultants of Hudson. We do not have reason to doubt the information so provided.

Neither the whole nor any part of this report, nor any references thereto, may be included in or with or attached to any document, circular, resolution, letter or statement without the prior written consent of TWA.

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

DISCLAIMER OF INTERESTS

At the date of this report, TWA and Terence Willsteed do not have, nor have had any relationship with Hudson.

TWA has no relevant interest in, nor any interest in the acquisition or disposal of any securities or assets of Hudson. TWA have no pecuniary or other interest that could be regarded as being capable of affecting its ability to give an unbiased opinion in relation to the valuation of the mineral interest of Hudson.

Neither TWA nor T V Willsteed or R C Pyper have received or may receive any pecuniary or other benefits, whether direct or indirect or in connection with the preparing of this report other than normal consultancy fees based on fee time at normal professional rates plus out-of-pocket expenses.

Yours faithfully,

TERENCE WILLSTEED & ASSOCIATES

T V WILLSTEED Principal

52 AUSTRALIAN BAUXITE LIMITED

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

GLOSSARY OF TECHNICAL TERMS

Alumina Aluminium oxide

Anatase TiO2 Basalt Dark, extrusive, volcanic rock

Bauxite A mixture of aluminium oxides and hydroxides

Boehmite Hydrous aluminium oxide contains up to 85% alumina. The alumina in bauxite is liberated at 180 deg digestion

Diaspore Hydrous aluminium oxide, similar to boehmite Gibbsite Aluminium hydroxide with up to 64.5% alumina. The alumina in gibbsite is liberated at 143 deg digestion

Kaolinite Type of clay Laterite Weathered subsoil rich in oxides of iron and aluminium Loss on Ignition The loss of volatiles, mostly water, in bauxite during heating Mesa Flat topped plateau Palaeo-channel Ancient drainage channel Reactive Silica Silica in bauxite that reacts with caustic soda in the refining process Saprolite Highly weathered rock that preserves some of the original structures Surat Basin Very large zone of coal and gas resources west of Toowoomba – Tertiary A period spanning a time frame from 2 65 million years ago Tuff A general term for all consolidated pyroclastic rocks Volcanic Extrusive rocks or rocks related to volcanic activity.

8. InDEpEnDEnT TEChnICAl (GEOlOGIsT) REpORT

TECHNICAL REFERENCES

General References:

ASX release on 16 bauxite ELs, EPMs 12 March 09 Bauxite Overview Map and Plan for 2009 18 Jan 09 Bauxite samples from drill holes (plus samples from outcrops and pits) Comments on Bauxite potential in Hudson Exploration Tenements 27 Sep 09 Hudson transport economics Quality of Bauxite for export 5 June 09

Project Areas:

Red Hill West EPM 17799 First and Final Report 24may09 Taralga Assays from First Reconnaissance Trip ELA 3648 13 June09 Taralga Bauxite Reconnaissance Trip 15 -16 Jan 09 Trundle Assays for Samples from Bauxite Reconnaissance Trip l3 Apr09 Trundle Bauxite Reconnaissance Trip 24 Feb 09. Windellama Field Trips 25-26 March and 8-9April 09 Windellama EL 7269 - Interim Report - 22 June 09 Windellama New Application 19 Aug O8 Windellama Planning of 1st Drilling Programme, EL 7269 - updated 24 Jul 09 Windellama Review of Assay Results for Samples WA 001-64 EL7269, NSW with photos 8 June 09 Wingello New Application Moss Vale - maps 15 Aug 09, Wingello West Bauxite Interim Report 30 August 09 Yarrowitch Assays of Bauxite First Reconnaissance Trip 13 June 09 Inverell and Windellama - Preliminary Review of new assays May 09 Inverell Assays of Bauxite from Cherry Tree Area (NW Part of EL 6997), 17/6/09 Inverell Bauxite - Discussion or Economic Potential 11/7/08 Inverell Bauxite Potential EL6997 29/9/08 Inverell Context for EL 6997 Drilling Completion Report of GeoDiscovery 12/6/08 Inverell Draft ASX HRL EL 6997 Bauxite v2 suggestions Jacob 29/10/08 Inverell EL6997 First Ann Rept. Dec 08 Inverell EL 6997-200812-Complete Report Inverell EL 6997 Bauxite Interim Report – 24/6/09 Inverell Resource estimation issues Draft 15 July 09 Inverell Screening Tests on Drill Cores Windellama Aug 09 Merriwa New Application 17 Nov 08 Merriwa Review of Assays of Bauxite Samples from First Reconnaissance Trip EL 3626 NSW 14/7/08 Pindaroi EL 7268 showing tat-gets 7/4/09 Red Hill EPM Applications 17798-17801- Assays 27/10/08 Binjour Bauxite Reconnaissance 22/2/09 Binjour Project Application Support Statement 22/2/09 Binjour EPM Application support material Guyra New Application 13/3/09 Guyra Reconnaissance Trip 5-6 Feb 09 Guyra Review of Assays, First Recon Trip EL3664 NSW June 09 Haden Hampton Application 15/9/08 Hampton and Haden Assay results Hampton Application Statement 1 2/8/08 Hampton Assays from Pechey State Forest 13/6/09 Hampton Haden Assay doc Hampton Haden Assays samples TW310-390 Inverell 3rd Progress Report EL 6997 Drilling Program and Discussion of strategy Inverell A4COA- BR09081904-38460-9210860 holes NR101-135 total sample assays 11/9/09.

54 AUSTRALIAN BAUXITE LIMITED

9. fInAnCIAl InfORmATIOn

9.1 hIsToRICAL AND PRo-foRMA BALANCE shEET

Given the nature of the Company, the Directors believe that forecast financial results cannot be accurately determined at this point in time. Therefore no financial forecasts have been included in this Prospectus. Set out below is the historical balance sheet of ABx as at the incorporation date and the pro-forma consolidated balance sheet of ABx post IPO.

==> picture [337 x 396] intentionally omitted <==

----- Start of picture text -----

Balance sheet Australian Bauxite Limited
Historical as Pro-Forma Post IPO
at 23/09/09 (unaudited)
(unaudited)
CURRENT ASSETS
Cash and cash equivalents 1 3,582,991
Total Current Assets 1 3,582,991
NON-CURRENT ASSETS
Interest in ABx Project Tenements - 2,400,000
Total Non-Current Assets - 2,400,000
tOtAl ASSEtS 1 5,982,991
NON-CURRENT LIABILITIES
Convertible Note - 2,400,000
Total Non-Current Liabilities - 2,400,000
tOtAl liAbilitiES - 2,400,000
NEt ASSEtS 1 3,582,991
EQUITY
Contributed equity 1 3,582,991
tOtAl EQuitY 1 3,582,991
----- End of picture text -----

The Financial information set out above:

Has been prepared in accordance with the recognition and measurement criteria of Australian Accounting Standards, the accounting policies adopted and used by ABx, the transaction and adjustments as detailed in section 9.2 in addition to the accounting policies set out in section 9.5;

ABx proposes to raise $4,000,000 through the issue of 20,000,000 Shares to the public. ABx proposes to use the funds raised less the expenses of the offer to carry out bauxite exploration programs.

The consideration for the acquisition of the interest in the exploration tenements is the Convertible Note of $2,400,000. The asset was reviewed for impairment in accordance

with (or having regard to) AASB 136 paragraphs 12-14. No impairment of the asset exists at this stage. Please refer to section 13.12 for information regarding consideration for the Note.

The offer costs are offset against contributed equity.

Is presented in an abbreviated form and does not contain all the disclosures usually provided in an Annual Report prepared in accordance with the Corporations Act 2001; and
Has been reviewed by K.S. Black & Co as Investigating Accountants. K.S. Black & Co’s Investigating Accountant’s Report is presented in section 10 of this Prospectus.

The pro-forma consolidated balance sheet set out should be read in conjunction with the Directors’ best estimate assumptions in section 9.1 and the risk factors in section 12.

9.2 DIRECToRs’ AssuMPTIoNs

In preparing the Pro-Forma Consolidated Balance Sheet of ABx set out in section 9.1, the Directors have used their best endeavours to correctly reflect the financial position of ABx after the capital raising. In carrying out this task, the Directors have made the following assumptions:

a. ABx will issue a Convertible Note to Hudson in consideration of Hudson transferring the ABx Project Tenements (such transfer being subject to the Minster’s consent) to ABx which requires that ABx-
» (i) pay Hudson the sum of $2.4 million within 36 months; or
» (ii) issue $2.4 million worth of shares in ABx to Hudson on the basis of an issue price of $0.30 per share (8,000,000 shares).

The Convertible Note will carry an interest rate equal to 6% per annum payable upon redemption of the Note.

9. fInAnCIAl InfORmATIOn

Conversion of the Note to shares is subject to the approval of the Directors at the time of conversion. It is likely that shareholder approval will be required as Hudson is likely to have a voting power in ABx of approximately 70% at the time shares are issued pursuant to the convertible note.

b. A minimum of 20,000,000 Shares being issued to the public at $0.20 less issue costs of $417,010 under this Prospectus. Hudson Resources Limited has already 50,000,000 Shares in ABx.
c. As at the date of this Prospectus, the Directors have issued 7,200,000 Options to management. These options are exercisable at 30 cents at any time within three years of the Official Quotation of ABx on ASX The remaining 1,800,000 Options will be issued as and when the Directors determine. There will not be any material changes to the proposed terms. The fair value of these Options will be recognised over the vesting period in accordance with the Australian Accounting Standards.

3,000,000 Success Options are to be issued to consultants and advisors for services provided in relation to the IPO. Success Options will be issued only upon the Official Quotation of ABx on the ASX. These options are exercisable at 30 cents at any time within three years of the Official Quotation of ABx on ASX.

d. State One is entitled to a sponsoring broker and management fee of 5% on all IPO funds raised under State One’s allotment of $1,750,000.
e. The costs associated with the Offer, including Independent Technical (Geologist) Report, legal fees, investigating accountant’s report, preparation and printing costs and other costs relating to the compilation of the Prospectus, are estimates and will be offset against the Offer proceeds in accordance with UIG Abstract 23. Apart from these costs, there will not

be any other material costs incurred in association with the Offer.

f. There will be no significant event that will materially and adversely impact on the environment in which ABx operates.
g. There will be no legislative, taxation or regulatory changes in Australia or in any other markets in which the ABx proposes to operate, that would materially and adversely affect ABx.
9.3 CoMMITMENTs AND CoNTINGENCIEs a. ABx Project Tenements and capital expenditure commitments. As at the date of this Prospectus, the Directors are not aware of any material commitments for the ABx Project Tenements and capital expenditure contracted by ABx that are not otherwise disclosed in this Prospectus.
b. Contingencies: As at the date of this Prospectus, the Directors are not aware of any contingent liabilities relating to ABx.

9.4 suMMARy of MATERIAL ACCouNTING PoLICIEs

The significant accounting policies adopted in the preparation of the historical and pro-forma financial information included in this section have been set out below.

Basis of preparation

The measurement of financial information has been prepared in accordance with Australian Accounting Standards (including Australian Interpretations), and the Corporations Act 2001.

The financial information has also been prepared on a historical cost basis.

b. Income Tax

The income tax expense or revenue for the period is the tax payable on

the current period’s taxable income based on the income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

56 AUSTRALIAN BAUXITE LIMITED

9. fInAnCIAl InfORmATIOn

c.

Impairment of Assets

ABx assesses at each reporting date whether there is an indication that an asset may be impaired, if any such indication exists, or when annual impairment testing for an asset is required, ABx makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cashgenerating unit to which it belongs. When the carrying amount of an asset or cash-generation unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing the value in use, the estimate future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to the continuing operations are recognised in those expenses categories consistent wit the function of the impaired asset unless the asset is carried at re-valued amount in which case the impairment loss is treated as a revaluation decrease.

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed

only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at a re-valued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

d. Cash and Cash Equivalents

“Cash and cash equivalent” includes deposits held at cash with financial institutions and other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Share Based Payments

e.

Share based payments may be provided to Directors, employees, consultants and other advisors.

The fair value of Options granted is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which Option holders become unconditionally entitled to the Options.

Under the ESOP, Shares issued by ABx to Directors for no consideration vest immediately on grant date. On this date the market value of the Shares

issued is recognised as an employee benefits expense with a corresponding increase in equity.

f. Critical Accounting Estimates and Judgements

The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic date, obtained both externally and within ABx.

g. Key Estimates - Impairment

ABx assesses impairment at each reporting date by evaluating conditions specific to ABx that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

10. InvEsTIGATInG ACCOunTAnT’s REpORT

12th October 2009

The Directors Australian Bauxite Limited Level 2 131 Macquarie Street SYDNEY NSW 2000

Dear Sirs,

INVESTIGATING ACCOUNTANT’S REPORT ON PRO-FORMA BALANCE SHEET

1. INTRODUCTION

In accordance with your request, this Investigating Account’s Report ( Report ) on the pro-forma consolidated financial information of Australian Bauxite Limited has been prepared for inclusion in a Prospectus to be dated on or about 19 October 2009 in connection with the proposed initial public offering on the Australian Stock Exchange.

The expressions defined in the Glossary of the Prospectus have the same meaning in this Report.

2. SCOPE

You have engaged K.S. Black & Co to prepare a report on the pro-forma consolidated balance sheet of Australian Bauxite Limited which assumes completion of the contemplated transactions ( Pro-Forma Transactions ) disclosed in the Financial Information Section of the Prospectus ( Pro-Forma Balance Sheet ).

The Pro-Forma Balance Sheet in the Prospectus is presented in an abbreviated form insofar as it does not include all of the disclosures required by Australian Accounting Standards applicable to annual financial reports prepared in accordance with the Corporations Act 2001.

This Report has been prepared for inclusion in the Prospectus. We disclaim any assumption of responsibility for any reliance on this Report or on the Pro-Forma Balance Sheet to which it relates, for any purpose other than for which it was prepared.

Review of Pro-Forma Balance Sheet

Our review of the best-estimate assumptions underlying Australian Bauxite Limited’s Pro-Forma Balance Sheet was conducted in accordance with Australian Auditing and Assurance Standard AUS 902 Review of Financial Reports.

58 AUSTRALIAN BAUXITE LIMITED

10. InvEsTIGATInG ACCOunTAnT’s REpORT

The Directors of Australian Bauxite Limited are responsible for the preparation and presentation of the Pro-Forma Balance Sheet, including the determination of the best-estimate assumptions, which include Pro-Forma Transactions, on which it is based.

The Pro-Forma Balance Sheet is based on Australian Bauxite Limited unaudited balance sheet as at incorporation date (i.e. 23 September 2009) and taking into account the Pro-Forma Transactions.

Our procedures consisted primarily of enquiry and comparison and such other analytical review procedures we considered necessary. These procedures included discussion with the Directors of Australian Bauxite Limited and have been undertaken to form an opinion whether anything has come to our attention which causes us to believe that:

the Pro-Forma Transactions do not provide a reasonable basis for the preparation of the ProForma Balance Sheet and;
in all material respects the Pro-Forma Balance Sheet is not properly prepared on the basis of the measurement principles prescribed in Australian Accounting Standards including Australian Accounting Interpretations and accounting policies of Australian Bauxite Limited disclosed in the Financial Information Section of the Prospectus.

The Pro-Forma Balance Sheet has been prepared by Australian Bauxite Limited to provide investors with a guide to Australian Bauxite Limited’s potential future financial performance based upon the achievement of certain economic, operating, development and trading assumptions about future events and actions that have not yet occurred and may not necessarily occur.

There is a considerable degree of subjective judgement involved in the preparation of the ProForma Balance Sheet. Actual results may vary materially from the Pro-Forma Transactions and the variation may be materially positive or negative. Accordingly, investors should have regard to the investment risks set out in the Risk Factors Section of the Prospectus.

Our review of the Pro-Forma Balance Sheet that is based on best-estimate assumptions is substantially less in scope than an audit examination conducted in accordance with Australian Auditing and Assurance Standards. A review of this nature provides less assurance than an audit. We have not performed an audit and we do not express an audit opinion on the Pro-Forma Balance Sheet included in the Prospectus.

3. REVIEW STATEMENT ON THE PRO-FORMA BALANCE SHEET

Based on our review of the Pro-Forma Balance Sheet, which is not an audit, and based on an investigation of the reasonableness of Australian Bauxite Limited’s best-estimate assumptions giving rise to the Pro-Forma Balance Sheet, nothing has come to our attention that causes us to believe that:

the Pro-Forma Balance Sheet has not been properly prepared on the basis of the Pro-Forma Transactions; and
the measurement principals and accounting policies as set out in the Financial Information Section of the Prospectus do not provide reasonable grounds for the preparation of the ProForma Balance Sheet.

10. InvEsTIGATInG ACCOunTAnT’s REpORT

The underlying assumptions are subject to significant uncertainties and contingencies often outside the control of Australian Bauxite Limited. If events do not occur as assumed, actual results and distribution achieved by Australian Bauxite Limited may vary significantly from the Pro-Forma Balance Sheet. Accordingly, we do not confirm or guarantee the achievement of the Pro-forma Balance sheet, as future events, by their very nature, are not capable of independent substantiation.

4. SUBSEQUENT EVENTS

Apart from the matters dealt with in this Report, and having regard to the scope of our Report, to the best of our knowledge and belief no material transactions or events outside the ordinary course of business have come to our attention that would require comment on, or adjustment to, the information referred to in our Report that would cause such information to be misleading or deceptive.

5. INDEPENDENCE AND DISCLOSURE OF INTERESTS

K.S. Black & Co does not have any interest in the outcome of this Offer other than the right to receive normal professional fees for the preparation of this Report and other related advice.

Except for the above, K.S. Black & Co has not received, no will receive, any pecuniary or other benefit, whether direct or indirect, for or in connection with the making of this report.

K.S. Black & Co was not involved in the preparation of any other part of this Prospectus and did not authorise or cause the issue of any other part of the Prospectus. Accordingly, K.S. Black & Co makes no representations or warranties as to the completeness or accuracy of the information contained in any other part of the Prospectus.

K.S. Black & Co consents to the inclusion of this Report in the Prospectus in the form and context in which it is included. At the date of this Report, this consent has not been withdrawn.

6. GENERAL ADVICE WARNING

This Report has been prepared, and included in the Prospectus, to provide Investors with general information only and does not take into account the objectives, financial situation or needs of any specific Investor. It is not intended to take the place of professional advice and Investors should not make specific investment decisions in reliance on the information contained in this report. Before acting or relying on any information, an Investor should consider whether it is appropriate for their circumstances having regard to their objectives, financial situation or needs.

Yours sincerely, K.S. BLACK & CO Chartered Accountants

Stuart H. Cameron Partner

60 AUSTRALIAN BAUXITE LIMITED

11. lEGAl REpORT On ABx pROjECT TEnEmEnTs

Our Ref: AJ:368019

16 October 2009

The Directors

Australian Bauxite Limited Level 2 131 Macquarie Street Sydney NSW 2000

Dear Directors

Legal Report on Exploration Licences (NSW) and Exploration Permits (QLD)

This legal report ( Report ) is being prepared for inclusion in a Prospectus dated on or about 19 October 2009 ( Prospectus ) to be issued by Australia Bauxite Limited ( ABx ). The Prospectus relates to an offer of 20,000,000 shares at an issue price of $0.20 per share to raise $4,000,000.

Definitions

In this report:

Lawyers ABN 42 843 327 183 Level 23 Governor Macquarie Tower 1 Farrer Place Sydney NSW 2000 Telephone +61 2 9253 9999 Facsimile +61 2 9253 9900 DX 10216 Sydney Stock Exchange www.piperalderman.com.au

Sydney  Melbourne Brisbane  Adelaide

ABx means Australian Bauxite Limited;

ABx1 means ABx1 Pty Ltd ACN 139 790 364;

Partner: Alan Jessup

ABx2 means ABx2 Pty Ltd ACN 139 791 478;

ABx3 means ABx3 Pty Ltd ACN 139 792 073;

ABx1 Project Tenements means EL 6997, EL 7268, EL 7361, EL 7344;

ABx2 Project Tenements means EL 7269, EL 7279, EL 7357 and EL 7360;

ABx3 Project Tenements means EPM 17790, EPM 17800, EPM 17801, EPM 17830, EPM 17831 and EPM 18014.

DII means the NSW Department of Industry & Investment, including the Minerals & Energy Division which administers exploration and resource development in NSW (formerly the NSW Department of Primary Industries Mineral Resources) or any department of the NSW Government that replaces such department from time to time;

Director-General means the person administering the relevant Mineral Legislation or such similar administrative post within the NSW State Government that replaces that position from time to time;

Liability limited by a scheme approved under Professional Standards Legislation (for matters conducted in NSW)

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DME means the Department of Employment, Economic Development and Innovation, Queensland Mines and Energy (formerly the Queensland Department of Mines and Energy) or any department of the Queensland Government that replaces such department from time to time;

EL means an exploration permit issued by the DII pursuant to the Mineral Legislation;

ELA means an application for an exploration permit issued by the DII pursuant to the Mineral Legislation;

EPM means a mineral exploration permit issued by the DME pursuant to the Mineral Legislation;

EPMA means an application for a mineral exploration permit (other than coal) issued by the DME pursuant to the Mineral Legislation;

HRS means Hudson Resources Limited;

Mineral Legislation means:

(a) in relation to any act matter or thing concerning EPM or EPMA, Mineral Legislation 1989 of Queensland; or
(b) in relation to any act matter or thing concerning EL and ELA , Mining Legislation of New South Wales,

as is required by the context, including any amendments thereto made from time to time or any legislation that replaces the same;

Minister means whichever of the:

(a) Queensland State Government's Minister for Natural Resources, Mines and Energy or such similar ministerial post within the Queensland State Government that replaces that position from time to time; or
(b) NSW Minister administering the relevant Mineral Legislation or such similar ministerial post within the NSW State Government that replaces that position from time to time,

as is required by the context;

NEB means North Eastern Bauxite Pty Limited.
Scope of Instructions
We have been instructed to:
2.1 Advise on the status of the ELs located in New South Wales ( NSW ).
2.2 Advise on the status of the EPMs located in Queensland ( QLD ).
2.3 Advise on the effect of registered dealings and any unregistered dealings which may affect the interests of ABx1 and ABx2 in the relevant ELs if the transfers to them from HRS or NEB, as the case may be, are approved and registered and

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in the case of EPMs the interests of ABx3 in the relevant EPM upon registration of the transfer from HRS to ABx3.

2.4 Conduct searches and summarise the impact of such EL and EPM on any registered "Native Title Claims" over the land to which the EL and EPM relate.
2.5 Conduct searches and summarise the impact of such EL and EPM on any Aboriginal Heritage sites on the land to which the EL and EPM relate.
Executive Summary

On the basis of the assumptions and qualifications set out in sections 4 and 10 as at the date of this Report, we confirm that:

3.1 The registered holder of the following ELs is HRS:

EL 7361, EL 7344 and all of the ABx2 Project Tenements;

3.2 The registered holder of the following ELs is NEB: EL 6997 and EL 7268;
3.3 The applicant for the following ELAs is HRS:
ELA 3626, ELA 3740 and ELA 3774;
3.4 There are no unregistered dealings which affect HRS and NEB's respective interests in the ABx1 Project Tenements.
3.5 There are no unregistered dealings which affect HRS interest in the ABx2 Project Tenements.
3.6 Once the Minister has approved the Application for Approval of the Transfer of an Authority lodged by HRS and NEB respectively with the DII with respect to the ABx1 Project Tenements pursuant to section 121 of the Mining Legislation and the Application for Registration of the transfer of an Authority has been registered pursuant to section 122 of the Mining Legislation then provided there is no change in the status of those ELs at the relevant date, ABx1 will obtain good title to the ABx1 Project Tenements.
3.7 Once the Minister has approved the Application for Approval of the Transfer of an Authority lodged by HRS with the DII with respect to the ABx2 Project Tenements pursuant to section 121 of the Mining Legislation and the Application for Registration of the transfer of an Authority has been registered pursuant to section 122 of the Mining Legislation, then provided there is no change in the status of those ELs at the relevant date, ABx2 will obtain good title to the ABx2 Project Tenements.
3.8 There are no unregistered dealings which affect the interest of HRS in ELA 3626, ELA 3740 and ELA 3774.

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3.9 HRS has nominated ABx1 and ABx2 as the holder of ELA 3626, ELA 3740 and ELA 3774 respectively. Once the Minister has granted the ELs, ABx1 and ABx2 will obtain good title in those ELs.

3.10 Subject to the requirements as to registration of the transfers of the ABx3 Project Tenements under the Mining Legislation and in particular the consent of the Minister, upon registration of the transfers from HRS to ABx3 of its interest in the ABx3 Project Tenements, ABx3 will have good title to the EPMs; 3.11 There are existing native title claims over certain areas covered by the ABx1 Project Tenements, the Port Kembla ELs and the ABx3 Project Tenements. In these cases, these claimants have a right to be consulted or to be involved in future acts or negotiations with the Minister and ABx1, ABx2 or ABx3, as the case may be, on proposed developments or activities while their native title applications are underway; 3.12 There are existing Aboriginal heritage sites over each of the ABx1 Project Tenements, the Port Kembla ELs and the ABx3 Project Tenements which may have an impact on the level of exploration work to be carried out by ABx1, ABx2 or ABx3, as the case may be. 4. Proposed Acquisition of Interests in Tenements 4.1 ABx1 Project Tenements ABx1 currently does not hold an interest in the ABx1 Project Tenements. These are currently registered in the name of HRS or NEB. We have been provided with copies of the following documents that purport to transfer a 100% legal and beneficial interest currently held by HRS and NEB respectively in the ABx1 Project Tenements to ABx1: (a) Form 12 – Application for Approval of the Transfer of an Authority; (b) Form 13 - Application for Registration of the Transfer of an Authority, (c) Acquisition Agreement. The Minister has a discretion to approve or refuse the application for approval to transfer. However once the application for approval to transfer is approved, the Director-General must register the transfer unless there is any caveat preventing registration. 4.2 ABx2 Project Tenements ABx2 currently does not hold an interest in the ABx2 Project Tenements. These are currently registered in the name of HRS.

We have been provided with copies of the following documents that purport to transfer a 100% legal and beneficial interest currently held by HRS in the ABx2 Project Tenements to ABx2:

(a) Form 12 – Application for Approval of the Transfer of an Authority;

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To: Directors Date: 16 October 2009 Our Ref AJ:368019 Page: 5 (b) Form 13 - Application for Registration of the Transfer of an Authority, (c) Acquisition Agreement. The Minister has a discretion to approve or refuse the application for approval to transfer. However once the application for approval to transfer is approved, the Director-General must register the transfer unless there is any caveat preventing registration. 4.3 ABx3 Project Tenements We have been provided with copies of assignment documents lodged by HRS with the DME pursuant to which HRS has transferred to ABx3 a 100% legal and beneficial interest in the EPMs free of encumbrances.

The Minister has a discretion not to register the assignment documents and in particular the Minister must not approve the transfer unless the Minister is satisfied the transferee has the human, technical and financial resources to comply with the conditions of the exploration permit. Therefore there is a risk that ABx3 may not be able to get good title to the EPMs.

This Report must be read subject to the above qualifications . 5. Background on ELs and EPMs Exploration Licences (NSW)

5.1 Exploration for minerals in NSW are dealt with under the Mining Legislation and accompanying Regulations.

5.2 To obtain an EL, an applicant must apply to the Director-General. Applications must be made for a specific group of minerals, in an approved form and supported by plans, a proposed work programme and evidence of financial standing. A lodgement fee is also payable on each application. While an application for an EL is pending, the Minister will issue the applicant with a ELA number. 5.3 A EL takes effect on the date specified in the title for a specified period of time (not exceeding 5 years). On granting of the EL, the holder is required to provide a security deposit for the fulfilment of the holder's obligations under the Mining Legislation. The security deposit will be held until these obligations are fulfilled or no longer apply.

5.4 The following areas are generally excluded from the ELs areas:
(a) land subject to any assessment lease, mining lease or mineral claim at the date of the grant of the EL;
(b) land subject to any residence area or business areas as at the date of the grant of the EL;

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To: Directors
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Our Ref AJ:368019
Page: 6
(c) land subject to any pending applications for assessment lease, mining
lease or mineral claim under the Mining Legislation made prior to a date
set by the Minister;
(d) land subject to pending applications for any mining lease, mining
purposes ease or claim under the previous Mining Act 1973 (NSW) or
any application for a coal lease under the Coal Mining Act 1973 (NSW)
made prior a date set by the Minister
(e) land subject to any prospecting licence taken to be an exploration
licence pursuant to Clause 31 of the Transitional Provisions and
Savings to the Mining Act 1973 (NSW);
(f) land subject to any exploration licence continuing to have effect,
pursuant to the provisions of section 29(2) of the Mining Legislation;
(g) land on which mining operations are being carried out by the owner of
the mineral or some person with has consent and over which an
exploration licence may not be granted by virtue of the provisions of
section 20 of the Mining Legislation;
(h) land vested in the Commonwealth of Australia; and
(i) land subject to any national park, regional park, historic site, nature
reserve, karst conservation reserve or Aboriginal area at the date of this
renewal.
5.5 Further, the EL does not apply to any minerals in land vested in or owned by an
Aboriginal Land Council under the provisions of the Aboriginal Land Rights Act
1983.
5.6 Each EL is subject to conditions which must be complied with. These
conditions include:
(a) carrying out prospecting operations in accordance with access
arrangements with each landholder;
(b) notifying the "Environmental Officer" of the DII before certain
exploration activities may commence;
(c) compensating any persons whose estate or interest is detrimentally
affected by ABx1 or ABx2, as the case may be, operations over the EL;
(d) completing the work programme nominated in the ELA and incurring a
minimum amount of expenditure; and
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(e) reporting conditions.

We have not undertaken any due diligence as to whether there has been compliance with all of these conditions as our report is not intended to cover whether or not this has occurred.

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5.7 The Minister may also impose certain restrictions on the EL. For example, the holder of the EL must not, except with the consent of the Minister, exercise any rights conferred by the EL in an "exempted area". An "Exempted area" includes State Forests, Travelling Stock Reserves for any Public Purpose, Permanent Commons and Crown Roads.
5.8 Other restrictions include prospecting activities over native title land which will require the Minster's consent (discussed further under native title issues in section 8.1) and prospecting activities which must not damage any Aboriginal objects or Aboriginal Places except in accordance with a consent issued under the National Parks and Wildlife Act 1974 .
5.9 If these conditions are not met, the EL may be cancelled.
5.10 The holder of a EL may apply for a renewal of the EL for an unspecified period not exceeding five years. The renewal application must be applied no earlier than 2 months and no later than 1 month before the expiry of the EL. The renewed EL could be granted for a shorter term than the original EL.
5.11 If a significant mineral deposit is identified in any of the ELs, but mining of the deposit is not commercially viable in the short term and there is a reasonable prospect that it will be viable in the longer term, then the holder may apply for an assessment lease if it can fulfil DII's requirements. An assessment lease confers similar rights on a holder as an EL.
5.12 If the decision is made to mine minerals discovered in the area covered by the EL, the holder may apply for a mining lease. A mining lease may be granted for period not exceeding 21 years except with the Premier's concurrence. A mining lease confers on the holder general rights to extract minerals from the ground and ownership of the minerals so extracted.
Exploration Permits (QLD)
5.13 Broadly, an exploration permit is issued for the purpose of exploration and allows the holder to take action to determine the existence, quality and quantity of minerals on, in or under land by methods which include prospecting, geophysical surveys, drilling, and sampling and testing of materials to determine mineral bearing capacity or properties of mineralisation.
5.14 Applications must be made for a specific minerals, in an approved form and supported by evidence of financial standing. A lodgement fee is also payable on each application.
5.15 Where an application for EPM (other than coal) is successful, the Minister will grant an EPM under section 137 of the Mining Legislation for a specified period which will be subject to rental on each anniversary of the date of the grant.
5.16 EPMs are also subject to a number of stringent conditions under the Mining Legislation which include (but is not limited to) the following:
(a) The holder must only carry out programs and studies for the purposes for which the EPM is granted;

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(b) The holder must provide written notice to a landowner whose land is
covered by the EPM and compensate the landowners for loss or
damage caused over the land;
(c) The holder must comply with the Aboriginal Cultural Heritage Act 2003
and undertake an assessment of the proposed activities against the
gazetted cultural heritage duty of care guidelines to determine whether
or to what extent Aboriginal cultural heritage may be harmed by the
activities. The holder must then liase with the Cultural Heritage
Coordination Unit and obtain the necessary consents;
(d) The holder must ensure that the safety of everyone on the mine site is
maintained according the relevant Mining and Quarrying Safety and
Health Act 1999 and Mining and Quarrying Safety and health
regulations 2001 ';
(e) The holder must carry out improvement restoration over the land;
(f) The holder must submit the necessary reports to the Minister within the
timeframes required under the EPM; and
(g) The holder must not assign the EPM without the consent in writing of
the Minister.
6. Exploration Licences (NSW) in detail
6.1 EL 6997
(a) EL 6997 was granted by the DII to NEB on 24 December 2007 and will
expire on 24 December 2009. Security of $10,000 has been provided.
EL 6997 applies to "Group 2" (non-metallic minerals) which includes
bauxite and covers 99 units of area.
(b) The minimum expenditure required under EL 6997 is $34,750 per
annum.
(c) EL 6997 has been granted subject to 2 other ELs which will have
priority over EL 6997.
6.2 EL 7268
(a) EL 7268 was granted by the DII to NEB on 23 December 2008 and will
expire on 23 December 2010. Security of $10,000 has been provided.
EL 7268 applies to "Group 2" (non-metallic minerals) which includes
bauxite and covers 47 units of area.
(b) The minimum expenditure required under EL 7268 is $21,500 per
annum.
6.3 EL 7269
(a) EL 7269 was granted by the DII to HRS on 23 December 2008 and will
expire on 23 December 2010. Security of $10,000 has been provided.
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EL 7269 applies to "Group 2" (non-metallic minerals) which includes bauxite and covers 90 units of area.

(b) The minimum expenditure required under EL 7269 is $32,500 per annum.

6.4 EL 7279
(a) EL 7279 was granted by the DII to HRS on 30 January 2009 and will expire on 30 January 2011. Security of $10,000 has been provided. EL 7279 applies to "Group 2" (non-metallic minerals) which includes bauxite and covers 7 units of area.
(b) The minimum expenditure required under EL 7279 is $11,750 per annum.
(c) EL 7279 has been granted subject to 1 other EL which will have priority over EL 7279.
(d) EL 7279 contains a special condition which requires ABx to report (and provide copies of English and geophysical downhole logs) to "Coal Advice" where any drilling is undertaken within the area of EL 7279.
6.5 EL 7344
(a) EL 7344 was granted by the DII to HRS on 20 May 2009 and will expire on 20 May 2011. Security of $10,000 has been provided. EL 7344 applies to "Group 2" (non-metallic minerals) which includes bauxite and covers 93 units of area.
(b) The minimum expenditure required under EL 7344 is $33,250 per annum.
6.6 EL 7357
(a) EL 7357 was granted by the DII to HRS on 1 July 2009 and will expire on 1 July 2011. Security of $20,000 has been provided. EL 7357 applies to "Group 2" (non-metallic minerals) which includes bauxite and covers 100 units of area.
(b) The minimum expenditure required under EL 7357 is $35,000 per annum.
(c) EL 7357 has been granted subject to 1 other EL which will have priority over EL 7357.
6.7 EL 7360
(a) EL 7360 was granted by the DII to HRS on 17 July 2009 and will expire on 17 July 2011. Security of $20,000 has been provided. EL 7360

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applies to "Group 2" (non-metallic minerals) which includes bauxite and covers 84 units of area.

(b) The minimum expenditure required under EL 7360 is $62,000 per annum.
(c) EL 7360 has been granted subject to 3 other EL which will have priority over EL 7360.
(d) EL 7360 contains a special condition which requires ABx to ensure that prospecting operations that utilise methods which are likely to cause interference with the Parkes Radio Telescope during its operational hours are conducted in co-operation and consultation with CSIRO.
6.8 EL 7361
(a) EL 7361 was granted by the DII to HRS on 17 July 2009 and will expire on 17 July 2011. Security of $20,000 has been provided. EL 7361 applies to "Group 2" (non-metallic minerals) which includes bauxite and covers 100 units of area.
(b) The minimum expenditure required under EL 7361 is $35,000 per annum.
(c) EL 7361 has been granted subject to 2 other EL which will have priority over EL 7361.
6.9 ELA 3626
(a) HRS lodged an ELA on 27 November 2008 with the DII for "Group 2" (non-metallic minerals) which includes bauxite and covers 424 units of area.
(b) The application is still pending.
(c) HRS has lodged a written notice with the Director-General nominating ABx1 as the holder of the EL once granted by the Minister.
6.10 ELA 3740
(a) HRS lodged an ELA on 9 July 2009 with the DII for "Group 2" (nonmetallic minerals) which includes bauxite and covers 92 units of area.
(b) The application is still pending. However if granted, the conditions of the ELA will include the following:
- (1) The EL would be granted for a period of 2 years;
- (2) The Minister's consent will be required to prospect on native title land; and

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(3) The minimum expenditure over 2 years is $50,000. (c) HRS has lodged a written notice with the Director-General nominating ABx2 as the holder of the EL once granted by the Minister.

6.11 ELA 3774

(a) HRS lodged an ELA on 31 August 2009 with the DII for "Group 2" (nonmetallic minerals) which includes bauxite and covers 14 units of area.

(b) The application is still pending. However if granted, the conditions of the ELA will include the following:

     - (1) The EL would be granted for a period of 2 years;

     - (2) The Minister's consent will be required to prospect on native title land; and

  - (3) The minimum expenditure over 2 years is $40,000.

  - (c) HRS has lodged a written notice with the Director-General nominating ABx2 as the holder of the EL once granted by the Minister..

Exploration Permits (QLD) in detail
7.1 EPM 17790
- (a) EPM 17790 was granted on 28 April 2009 and will expire on 27 April 2011.
- (b) The annual rent payable under EPM 17790 is $14,660.80.
- (c) The are 112 prescribed sub-blocks to which EPM 17790 applies.
- (d) EPM 17790 is exclusive of:
  - (1) any current mining claims, mineral development licence or mining lease at the time of lodgement of the EPM;
  - (2) Sterile Land – 1511 Geham National Park;
  - (3) Sterile Land – 1558 Hampton National Park;
  - (4) Sterile Land – NP666 Crows Nest National Park; and
  - (5) Land which is set aside for the benefit of and occupied by Aboriginal people or Torres Strait Islanders

other than the following:

(6) Land where native title is extinguished;

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To: Directors Date: 16 October 2009 Our Ref AJ:368019 Page: 12 (7) All validly dedicated road services; and (8) Railway land containing current or past constructed railways and/or associated infrastructure. (e) An additional condition has been imposed under EL 17790 relating to excavating trenches which HRS must comply with. 7.2 EPM 17800 (a) EPM 17800 was granted on 25 February 2009 and will expire on 25 February 2011. (b) The annual rent payable under EPM 17800 is $13,090.00. (c) The are 100 prescribed sub-blocks to which EPM 17800 applies. (d) EPM 17800 is exclusive of land which is set aside for the benefit of and occupied by Aboriginal people or Torres Strait Islanders other than the following: (1) Land where native title is extinguished; (2) All validly dedicated road services; and (3) Railway land containing current or past constructed railways and/or associated infrastructure. 7.3 EPM 17801 (a) EPM 17801 was granted on 12 March 2009 and will expire on 11 March 2011. (b) The annual rent payable under EPM 17801 is $13,090.00 (c) The are 100 prescribed sub-blocks to which EPM 17801 applies. (d) EPM 17801 is exclusive of: (1) Sterile Land – EP705 Environmental Park; and (2) Land which is set aside for the benefit of and occupied by Aboriginal people or Torres Strait Islanders other than the following: (3) Land where native title is extinguished; and (4) All validly dedicated road services; (e) An additional condition has been imposed under EL 17801 relating to excavating trenches which HRS must comply with. 25741819v6

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7.4 EPM 17830

(a) EPM 17830 was granted on 25 February 2009 and will expire on 24 February 2011.
(b) The annual rent payable under EPM 17830 is $11,519.20. (c) The are 88 prescribed sub-blocks to which EPM 17830 applies. (d) EPM 17830 is exclusive of: (1) any current mining claims, mineral development licence or mining lease at the time of lodgement of the EPM; and
(2) Land which is set aside for the benefit of and occupied by Aboriginal people or Torres Strait Islanders
other than the following: (3) Land where native title is extinguished; (4) All validly dedicated road services.
(e) An additional condition has been imposed under EL 17830 relating to excavating trenches which HRS must comply with.
7.5 EPM 17831 (a) EPM 17831 was granted on 25 February 2009 and will expire on 24 February 2011.
(b) The annual rent payable under EPM 17831 is $11,650.10. (c) The are 89 prescribed sub-blocks to which EPM 17831 applies. (d) EPM 17831 is exclusive of land which is set aside for the benefit of and occupied by Aboriginal people or Torres Strait Islanders other than the following:
- (1) Land where native title is extinguished;
(2) All validly dedicated road services.
(e) An additional condition has been imposed under EL 17831 relating to excavating trenches which HRS must comply with.
7.6 EPM 18014
(a) EPM 18014 was granted on 9 October 2009 and will expire on 8 October 2011.
(b) The annual rent payable under EPM 18014 is $6,620.
(c) The are 50 prescribed sub-blocks to which EPM 18014 applies.

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To: Directors Date: 16 October 2009 Our Ref AJ:368019 Page: 14 (d) EPM 18014 is exclusive of land which is set aside for the benefit of and occupied by Aboriginal people or Torres Strait Islanders other than the following:

(1) Land where native title is extinguished;

(2) All validly dedicated road services; and (3) Railway land containing current or past constructed railways and/or associated infrastructure. 8. Native Title Issues 8.1 Background (a) The decision of the High Court of Australia in Mabo and Others v The State of Queensland (No.2) (1992) 175 CLR 1 held that the common law of Australia recognises a form of title to land which reflects the entitlements of Aboriginal people to their traditional lands in accordance with their traditional laws and customs. It called this title to land ‘native title’ and the Commonwealth Parliament attempted to clarify issues surrounding and involving it by passing the Native Title Act 1993 (Cth) ( NTA ) together with subsequent amendments. (b) The NTA enabled States to pass legislation providing for the validation of certain acts attributable to it. The New South Wales parliament passed the Native Title (New South Wales) Act 1994 and the Queensland Parliament passed the Native Title (Queensland) Act 1993 . Together, the NTA and State legislation operate to confirm the extinguishment of native title for certain interests in land or for certain acts which occurred in relation to the land. (c) As a result, within each native title claim area there are parcels and pockets of land where native title has been extinguished. Past acts such as the grant of freehold title to land and certain terms of lease and other tenure may have had the effect of extinguishing native title. A detailed analysis (beyond the scope of this Report) of land tenure status for each area of the ELs and EPMs which fall within a native title claim area is required to determine whether native title has been extinguished in the whole or in part in these areas. 8.2 Native Title Claims

(a) Persons claiming to hold native title may lodge an application for determination of native title with the Federal Court. (b) The application must then undergo a registration test to determine if it meets certain registration requirements. Once satisfied the application is assigned ‘registered’ status and is registered on the Register of Native Title Claims maintained by the National Native Title Tribunal. Once registered, claimants then have certain procedural rights set out in the NTA including the right to be consulted on or be involved in future

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acts or negotiations about certain proposed developments or activities in the claim area while their native title application is underway. 8.3 Native Title Determinations Once a claim has been determined it is recorded on the National Native Title Register. The determination will indicate whether native title exists or does not exist over the application area. 8.4 Specific issues and search results (a) Exploration Licences (NSW) (1) EL 7269, EL 7279, EL 7269, EL 7357 and ELA 3774 are partially within the Gundungurra Tribal Council Aboriginal Corporation #6 area. This claim is currently registered. Therefore any activities to be conducted over the claim area would be subject to negotiations with native title claimants pursuant to the NTA. (2) EL 7269 is partially within an area the subject of an unregistered claim by the Ngunawal People. If this becomes registered then any activities to be conducted over the claim area would be subject to negotiations with native title claimants pursuant to the NTA. (b) Explorations Permits (QLD)

(1) EPM 17790 is partially within the Jagera People #2 claim area. These claims are currently registered. Therefore any activities to be conducted over the claim area would be subject to negotiations with native title claimants pursuant to the NTA. (2) EPM 18014 is partially within the Wakka Wakka People #2 area. These claims are currently registered. Therefore any activities to be conducted over the claim area would be subject to negotiations with native title claimants pursuant to the NTA

9. Aboriginal Cultural Heritage issues

9.1 The National Parks and Wildlife Services ( NPWS ) is the main Government agency dealing with the protection of Aboriginal sites and heritage in New South Wales. The NPWS maintains the Aboriginal Heritage Information Management System ( AHIMS ) which is a database including details of Aboriginal places and heritage values that have been reported to them. These records are not conclusive but are the only publicly available record of these matters. Before any prospecting work is carried out on a EL, detailed searches and analysis of Aboriginal Heritage issues will need to be undertaken and satisfactorily addressed in any notifications required to be made to the DII under each EL.

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9.2 A search of the AHIMS for each EL has revealed significant numbers of recorded sites as follows:-
- (a) EL 6997: 4 sites (b) EL 7268: 19 sites (c) EL 7269: 37 sites (d) EL 7279: 68 sites (e) EL 7344: 5 sites (f) EL 7357: 62 sites (g) EL 7360; 81 sites (h) EL 7361: 39 sites (i) ELA 3626: information not available (j) ELA 3740: information not available (k) ELA 3774: information not available
9.3 The number of sites are only approximates and cannot be accurately determined at this stage due to the large areas which have been searched.
9.4 Detailed locations and descriptions of each of these sites are recorded in AHIMS.
Assumptions and Qualifications

Our preparation of this Report has relied upon:

10.1 information available from the NSW Department of Industry and Investment as and the QLD Department of Mines and Energy at 23 September 2009.
10.2 information available from the NSW National Parks and Wildlife Services as at 14 October 2009;
10.3 results of searches on the Register of Native Title Claims at the National Native Title Tribunal at 23 September 2009 and 1 October 2009 for NSW and QLD respectively; and
10.4 information obtained from the Company including ownership at the land which is affected by the ELs and EPMs,

(which information we have not sought to independently verify).

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11. Consent

For the purpose of section 716 of the Corporations Act 2001, Piper Alderman, consents to being named as legal advisers to the offer in the Prospectus (including for the purposes of this consent the electronic form of the Prospectus) and for the inclusion of the Report in the Prospectus, in the form and context in which it is named.

Piper Alderman has not authorised or caused the issue of the Prospectus and to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any other part of the Prospectus.

Piper Alderman has not withdrawn this consent prior to lodgement of the Prospectus with the Australian Securities & Investments Commission.

Yours faithfully Piper Alderman Per: Alan Jessup Partner

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12. RIsK fACTORs

12.1 INTRoDuCTIoN

An investment in ABx involves various risks and should be considered speculative, particularly having regard to the stage of ABx's business.

There are a number of factors that may have a material adverse effect on ABx's future operating and financial performance.

ABx's business activities are subject to risk factors both specific to its business activities and that of a general nature. If any of the risks associated with ABx materialised, ABx's business, results of operations, financial condition and prospects could be materially and adversely affected, which could result in the loss of all or part of your investment. The principal risk factors are described below. While some of these risks can be mitigated by the use of appropriate safeguards and systems, many are outside the control of ABx and cannot be mitigated.

In particular the exploration for and development of natural resources such as bauxite is a speculative activity that involves a high degree of financial risk.

Before deciding whether to invest in ABx’s Shares, prospective investors should carefully consider the risk factors described below, together with all other information contained in this Prospectus. If any of these risks and uncertainties, together with the possible additional risks and uncertainties of which the Directors are currently unaware or which they consider not to be material in relation to ABx’s business, actually occur, ABx’s business, financial position, the amount of work able to be performed with the funds raised from the Offer or operating results could be materially and adversely affected.

In addition, potential investors should be aware that the value of ABx's Shares on ASX may rise and fall depending on a range of factors that affect the market price of Shares. These include local,

regional and global economic conditions and sentiment towards equity markets in general. The Shares issued under this Prospectus carry no guarantee with respect to the profitability, the payment of dividends, return of capital or the price at which the Shares may trade on the ASX.

It should be noted that this list is not exhaustive and that certain other risk factors may apply.

You should carefully consider the risks and uncertainties set out below and the information contained elsewhere in this Prospectus before you decide whether to apply for Shares. You should also seek your own professional advice in relation to the risks associated with an investment in ABx and should make your own assessment as to whether to invest in ABx.

12.2 RIsks AssoCIATED wITh ThE CAPITAL sTRuCTuRE

If you accept the Offer and subscribe for shares in ABx you should note that you will be a minority shareholder and that Hudson will hold at least 71% of ABx (which will further increase if 8 million shares are issued pursuant to the Convertible Note). A number of directors of ABx are also directors of Hudson. Hudson's interests as a controlling shareholder of ABx may differ from the interests of minority shareholders. In these circumstances, Hudson may cause ABx's affairs to be conducted in a way that favours Hudson's interests over minority shareholders (where not prevented by the law or ASX listing rules from doing so). The presence of Hudson as a 71% shareholder is likely to significantly reduce the chance of a takeover bid for ABx shares and therefore the opportunity of realising a takeover premium for ABx shares.

According to the Listing Rules, the shares held by Hudson will be subject to escrow for a period of two years after which time the shares allotted under the Offer may be thinly traded.

You should also note that in the future ABx may need to issue a further 8,000,000 shares pursuant to Hudson's Convertible Note and 12,000,000 shares pursuant to the options. If so this will dilute your shareholding in ABx.

12.3 sPECIfIC RIsks - ExPLoRATIoN AND DEvELoPMENT RIsk

The future profitability of ABx and the value of its Securities are directly related to the results of exploration and any subsequent project development. There are inherent risks in exploration and development activities. No assurances can be given that funds spent on exploration will result in discoveries of new reserves that will be commercially viable.

12.4 BusINEss RIsks

a. ABx Project Tenements

The following table presents the Licences and Applications for Licences forming the ABx Project Tenements at 23 September 2009.

All tenements in Australia are governed by the respective state legislation and are evidenced by the granting of licences or leases. Each licence or lease is for a specific term and carries with it annual expenditure and reporting commitments, as well as other conditions requiring compliance. Consequently, ABx could lose title to or its interest in the ABx Project Tenements if licence conditions are not met or if insufficient funds are available to meet expenditure commitments.

Native Title land exists in some of the arrears covered by ABx Project Tenements. The holders have been granted access to those areas in the exploration phase subject to Native Title Protection Conditions. If the holders do not comply with the Native Title Protection Conditions, the risk is that the ABx Project Tenements may be revoked. Therefore, the Directors will continually monitor

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Abx1 project tenements

Abx1 project tenements	Abx1 project tenements	Abx1 project tenements	Abx1 project tenements	Abx1 project tenements	Abx1 project tenements	Abx1 project tenements	Abx1 project tenements	Abx1 project tenements
licence No	project	Status	Date granted	Expiry Date	units / Sub-blocks	Area Ha	Sq km	Holder
EL 6997	Inverell	Granted	24-12-07	24-12-09	99	29,700	297	NEB
EL 7268	Pindaroi	Granted	23-12-08	23-12-10	46	13,800	138	NEB
EL 7361	Guyra	Granted	17-07-09	17-07-11	100	30,000	300	Hudson
EL 7344	Yarrowitch	Granted	20-05-09	20-05-11	93	27,900	279	Hudson
ELA 3626	Merriwa	Application			424	127,200	1,272	Hudson
Abx2 project tenements
licence No	project	Status	Date granted	Expiry Date	units / Sub-blocks	Area Ha	Sq km	Holder
EL 7269	Windellama	Granted	23-12-08	23-12-10	90	27,000	270	Hudson
EL 7279	Wingello West	Granted	30-01-09	30-01-11	7	2,100	21	Hudson
EL 7357	Taralga	Granted	01-07-09	01-07-11	100	30,000	300	Hudson
EL 7360	Trundle	Granted	17-07-09	17-07-11	84	25,200	252	Hudson
ELA 3740	Bungonia	Application			92	27,600	276	Hudson
ELA 3774	Penrose	Application			14	7,200	42	Hudson
total NSW					824	347,700	3,477
Abx3 project tenements
licence No	project	Status	Date granted	Expiry Date	units / Sub-blocks	Area Ha	Sq km	Holder
EPM 17790	Hampton	Granted	28-04-09	28-04-11	112	33,600	336	Hudson
EPM 17800	Red Hill	Granted	25-02-09	25-02-11	100	30,000	300	Hudson
EPM 17801	Red Hill South	Granted	12-03-09	12-03-11	100	30,000	300	Hudson
EPM 17830	Haden	Granted	25-02-09	25-02-11	88	26,400	264	Hudson
EPM 17831	Hillgrove	Granted	25-02-09	25-02-11	89	26,700	267	Hudson
EPMA 18014	Binjour	Application			50	15,000	150	Hudson
total QlD					539	161,700	1,617
total					1,363	509,400	5,094

compliance with the Native Title Conditions to ensure that any risks of this nature is minimised.

Further, ABx may decide to surrender or relinquish areas of the ABx Project Tenements as priorities change and to meet budgetary requirements.

Investors should have regard to the Legal Report on Tenements at Section 11 of this Prospectus.

b. Transfer of title to ABx

Applications for the transfer of 100% legal and beneficial interest in the

ABx Project Tenements have been lodged under the applicable Mineral Legislation. Pending transfer of title these tenements are registered in the name of the holders identified above.

The Minister has a discretion not to approve transfer of title and in particular the Minister must not approve the transfer unless the Minister is satisfied the transferee has the human, technical and financial resources to comply with the conditions of the exploration permit. Therefore there is a risk that ABx may not be able to get good title to all the ABx Project Tenements.

Applications for transfer of titles to the NSW ABx Project Tenements were made 14th October 2009 and on 15th October 2009 with respect to the QLD ABx Project Tenements. The applications are considered by the relevant government department and recommendation is made to the Minister as to whether or not the application should be granted. The assessment is made using the same criteria as the original application granted to Hudson. On the basis that there has been no change with respect to the proposed exploration program, technical expertise or financial resources there is a strong likelihood

12. RIsK fACTORs

==> picture [162 x 215] intentionally omitted <==

Pindaroi EL 7268 Main Pindaroi Target sample NE 93

==> picture [162 x 215] intentionally omitted <==

Inverell EL 6997 central part of Target A sample site NE 231

c.

that the applications will be granted; however, there is a risk that they may not.

The Acquisition Agreement provides that pending transfer of title ABx shall be deemed to hold the 100% beneficial interests in each of the ABx Project Tenements free and clear of all encumbrances upon a constructive trust and if a relevant Government Agency does not consent to the transfer of a tenement the Hudson will hold that tenement on trust for ABx.

Please refer to the Legal Report on ABx Project Tenements in section 11A for a more detailed description of the status of the ABx Project Tenements.

Mining leases

The ABx Project Tenements consist only of exploration permits. There is a risk that even if economic quantities of bauxite are discovered, that an application for a mineral development licence or mining lease with respect to the areas of bauxite discovered on the ABx Project Tenements to enable the Company to carry out the development and mining of the bauxite may not be granted.

IP Risk

Hudson has lodged an Australian provisional application for a patent entitled 'Bauxite Beneficiation'. No provisional number has been issued as yet. There is a risk that the provisional application may not be accepted. There is also a risk that the patent may not be granted. Therefore the technology of bauxite beneficiation the subject of the IP Licence Heads of Agreement referred to in section 13.6(b) may not be the

subject of any patent protection in the future.

Bauxite prices

e.

Bauxite prices received will depend on the availability of markets and transport and marketing costs. Any substantial decline in the prices of bauxite or an increase in transport and marketing costs could have a material adverse effect on ABx.

f. On 14 May 2009, the Federal Government introduced the Carbon Pollution Reduction Scheme Bill (CPRS) into Parliament.

The key features of the CPRS Bill are:

The Act, if passed, will set up a scheme to reduce pollution caused by emissions of carbon dioxide and other greenhouse gases. The scheme begins on 1 July 2011, and operates on a financial year basis. The scheme is administered by the Australian Climate Change Regulatory Authority.
A person who is responsible for greenhouse gas emitted from the operation of a facility must surrender one eligible emissions unit for each tonne of carbon dioxide equivalent of the gas.
A person who imports, manufactures or supplies synthetic greenhouse gas must surrender one eligible emissions unit for each tonne of carbon dioxide equivalent of the gas.
A person who imports, produces or supplies eligible upstream fuel must surrender one eligible emissions unit for each tonne

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12. RIsK fACTORs

Therefore there is uncertainty as to whether there will be increased obligations or operational costs as a result of this enactment.

of carbon dioxide equivalent of the potential greenhouse gas emissions embodied in the fuel.

Each of the following units are eligible emissions units:
g. Operating risks

A. Australian emissions ABx could be adversely affected by units issued under disruptions to operations caused this Act; by adverse climatic, geological, seismic and mining conditions, B. certain Kyoto units; breakdown of equipment, industrial accidents and labour disputes. The C. certain non-Kyoto occurrence of operating risks can international result in increased costs for ABx emissions units. and may materially impact on ABx’s competitive position or ability 6. Most Australian emissions units to derive profits. In particular, will be issued as the result of mining costs may be materially impacted by adverse mining and geological conditions.

Most Australian emissions units will be issued as the result of an auction.
A national scheme cap limits the total number of auctioned h. Transport risks and costs Australian emissions units. Some Australian emissions units may Access to sufficient capacity of be issued free of charge or for a efficient and reliable transport fixed charge. Australian emissions infrastructure will be a key factor in units are generally transferable. any development of ABx’s resources. Transportation costs are likely to The Federal Government has represent a significant proportion announced a one year fixed price of the total cost of bauxite to export phase will apply between 1 July 2011 customers. Key transport risks and 30 June 2012. During the fixed include restrictions on rail access price phase, each carbon pollution to ports, restrictions on the use of permit will cost $10. From 1 July public roads for bauxite haulage, 2012, businesses covered by the dependency on contractors and scheme will need to purchase permits other third parties for bauxite at the prevailing market price. haulage and ship loading, delays in loading bauxite at ports resulting in At this time, it is difficult for ABx to demurrage penalties and reliance accurately determine how the CPRS on shipping operators to deliver may impact on ABx and its business bauxite to overseas customers. In activities. There may be a risk that view of proximity to railways and ABx and its subsidiaries be subject ports, these risks are likely to be to requirements to obtain carbon lesser for other projects located further inland.

The Federal Government has announced a one year fixed price phase will apply between 1 July 2011 and 30 June 2012. During the fixed price phase, each carbon pollution permit will cost $10. From 1 July 2012, businesses covered by the scheme will need to purchase permits at the prevailing market price.

At this time, it is difficult for ABx to accurately determine how the CPRS may impact on ABx and its business activities. There may be a risk that ABx and its subsidiaries be subject to requirements to obtain carbon pollution permits (and incur the associated costs of obtaining those carbon pollution permits) unless they are able to take steps under the CPRS to minimise any adverse impact.

==> picture [161 x 215] intentionally omitted <==

Inverell EL 6997 Central part of Target A sample NE 231

==> picture [161 x 215] intentionally omitted <==

Inverell EL 6997

Outcrop of bauxite layer on southern edge of Target A

12. RIsK fACTORs

i. Environmental risks

Bauxite exploration represents a minor enviornmental risk. In the event of discovery of a commercial bauxite deposit, the risk on the environment will need to be addressed by an environmental impact study as required by the mining and development approval process.

j. Reliance on third parties

ABx will be reliant on third parties for certain key services including resource and reserve calculation, mine planning, mining, drilling, blasting and other services, industrial disputes, natural disasters, financial failure or default or inadequate performance in the provision of services, or the inability to provide services by such third parties has the potential to cause a financial loss to ABx.

k. Insurance

Insurance of all risks associated with bauxite exploration and production is not always available and, where available, the cost can be high. ABx will have insurance in place considered appropriate for ABx’s needs. ABx will not be insured against all possible losses, whether because of the unavailability of cover or because the premiums may be excessive relative to the benefits that would accrue.

l. Adequacy of capital resources

While ABx has a capital raising strategy in place, there is no guarantee that acceptable resources or funds will be found in the future. The lack of capital could have a material adverse affect on ABx and its prospects.

m. Potential acquisitions

As part of its business strategy, ABx may make acquisitions of significant investments in complementary companies, products or assets. Any such future transactions would be accompanied by the risks commonly encountered in making acquisitions of companies, products or assets.

12.5 GENERAL RIsks

General investment risks

a.

There are general risks associated with any investment and the share market. The price of Shares may rise or fall depending upon a range of factors beyond ABx’s control and which are unrelated to ABx’s financial performance. Movements on international stock markets, interest rates and exchange rates, together with domestic and international economic conditions, inflation rates, commodity supply and demand, government taxation and royalties, legislation and other policy changes may affect the stock market generally and the market for ABx’s Shares in particular.

b.

Possible volatility of Share price

The price of Shares listed on ASX may also be affected by a range of factors including ABx’s financial performance and by changes in the business environment in which ABx operates. The value of Shares can increase or decrease. Economic factors such as changes in interest rates, exchange rates, inflation rates, tax rates and governmental regulation; industry factors such as the development of new and competing resources and products by ABx’s competitors; changing commodity supply and demand and commercial factors such as the loss of key staff can also affect the value of the Shares. Similarly the level of dividends paid on Shares (if any) could rise or fall.

c. Changes in laws and government policy

Changes in laws, regulations and government policy may affect ABx and the attractiveness of an investment in ABx.

d. Government actions

The impact of actions by government may affect ABx’s activities including such matters as infrastructure, compliance with environmental regulations, taxation and royalties. Bauxite exports could also be impacted by regulatory change in countries where potential customers have operations.

Taxation

e.

There may be tax implications arising from Applications for Securities, the receipt of dividends (both franked and unfranked (if any) from ABx, participation in any on market Share buy back and on the disposal of Shares.

f. Key personnel and management

ABx’s success is closely linked to the ability of ABx to recruit and train high quality personnel with experience in the bauxite industry. The inability to attract and retain the services of a sufficient number of suitably qualified personnel could be disruptive to ABx’s development and could materially adversely affect its operating results.

g. Application of and changes to accounting policies

Accounting standards and policies may change in the future especially in relation to the application of the International Financial Reporting Standards. Such changes may have an adverse impact on future reported financial results.

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13. ADDITIOnAl InfORmATIOn

13.1 CoNsTITuTIoN

Immediately on listing there will be only one class of ABx Shares. The Shares issued under this Prospectus will be fully paid shares. Detailed provisions relating to the rights attaching to Shares are set out in ABx's constitution and the Corporations Act 2001. ABx has adopted a constitution of the kind usually adopted by a public company listed on the ASX. The following is a broad summary of the key provisions in the constitution and the rights attaching to Shares.

General meetings

a.

Each shareholder is entitled to receive notice of and be present, to vote and speak at general meetings of ABx.

b. Voting rights

At a general meeting every shareholder present (in person or by proxy, attorney or representative) has one vote on a show of hands. Every shareholder present (in person or by proxy, attorney or representative) has one vote per fully paid Share on a poll, except in respect of each partly paid Share held by a shareholder, where the shareholder has a fraction of a vote for each partly paid Share they hold. This is subject to any other rights or restrictions attached to any Shares.

Dividend rights

c.

Subject to any special rights or restrictions attached to a Share, each holder of a fully paid Share will participate in all dividends declared after their issue and rank equally with all existing Shares. Dividends are declared by the Directors at their discretion and, subject to any special rights, are payable on all Shares in proportion to the amount of capital for the time being paid up or credited as paid up on those Shares.

d. Rights on winding up

Subject to any special rights and restrictions attached to Shares, on a winding up any surplus must be divided among the shareholders in the proportion that the amount paid up on the Shares bears to the total amount paid up on all Shares on issue. Subject to any special rights and restrictions attached to Shares, on a winding up, a liquidator of ABx may, with the sanction of a special resolution of shareholders, divide among shareholders the whole or any part of the property of ABx and may decide how to distribute the property as between the shareholders.

Transfer of shares

e.

Subject to the constitution of ABx, the Corporations Act 2001 and the Listing Rules, generally, Shares are freely transferable.

Future changes in capital

f.

Subject to the Listing Rules and the constitution of ABx, the Directors may issue, grant options over, or otherwise dispose of Shares on such conditions, at such times and with the preferred, deferred or other special rights or restrictions as the Directors think fit. Subject to the Corporations Act 2001 and the Listing Rules, ABx may by resolution, consolidate and divide its share capital or reduce its share capital and buy back its Shares.

Variation of rights

g.

ABx may only vary or cancel the rights attaching to any class of shares, or convert shares from one class to another, by a special resolution of ABx and a special resolution passed at a meeting of the holders of shares in that class or the written consent of shareholders with at least 75% of the votes in that class.

h. Marketable parcels

Subject to certain conditions ABx may sell non-marketable parcels on issue as agent for the holders of those parcels.

Shareholders will be provided at least six weeks notice with preliminary notice provided at least four weeks earlier (a total of ten weeks) enabling the shareholder to elect not to have their shares sold.

In the event the shareholder does not elect to retain their shares the shares may be sold and the proceeds held in trust on behalf of the shareholder.

Proportional takeover

i.

The constitution of ABx contains a proportional takeover provision which may be renewed from time to time in accordance with the Corporations Act 2001.

A copy of the constitution of ABx will be accessible on the website of ABx and may be inspected at the registered office of ABx during normal business hours by appointment with ABx's Secretary.

13.2 CoRPoRATE GovERNANCE

The business and affairs of ABx are vested in the Directors who have responsibility for the management and control of ABx.

The Board will pursue best practice in corporate governance. The best practice platforms of governance will apply to:

a. Establishing the roles of management and the Board with a balance of skills, experience and independence appropriate to the nature and extent of corporate operations;

13. ADDITIOnAl InfORmATIOn

b. Ensuring levels of integrity are maintained among those who can influence ABx's strategy and financial performance, together with responsible and ethical decision making;
c. Ensuring that ABx meets the appropriate information needs of our modern investment community;
d. Ensuring the safety and rights of shareholders and all stakeholders;
e. In presenting ABx's financial and non financial position, the Board will ensure the adoption of a process that safeguards, both internally and externally, the integrity of ABx and its disclosure standards; and
f. Ensuring that environment best practice will at all times be a key focus of the ABx Board, its management team, suppliers and consumers of its products.

The Board considers that its membership should comprise directors with an appropriate mix of skills, knowledge, experience and personal attributes that allow the directors individually and the Board collectively, to:

» discharge their duties and responsibilities under the law efficiently and effectively;
» understand the business of ABx and the environment within which ABx operates so as to be able to provide sound stewardship for management and ABx’ objectives, goals and strategic direction to maximise shareholder value; and
» assess the performance of management in meeting those objectives.

In addition to ensuring that the Board has a broad range of necessary skills, knowledge and experience to govern ABx and understand the

challenges that ABx faces, the Board ABx’s auditors; and considers that its membership should » overseeing, reviewing and represent an appropriate balance ratifying systems of governbetween directors with experience ance, management processes, and knowledge of ABx and directors risk management, internal with an external perspective. compliance and controls, codes of conduct and legal and regulatory
The Board also considers that its compliance to ensure appropriate size should be conducive to effective compliance frameworks and discussion and efficient decisioncontrols are in place.

The Board also considers that its size should be conducive to effective discussion and efficient decisionmaking. The Board believes that its current composition meets these requirements.

The Board has delegated to executive management, responsibility for a number of matters including:

board responsibilities

» managing ABx's day to day operations in accordance with the Board approved authorisations, policies and procedures;

The principal role of the Board is to ensure the long term prosperity of ABx by setting broad corporate governance policies and ensuring that they are effectively implemented by management. The Board carries out this role principally by:

» developing ABx’s annual budget and recommending it to the Board for approval and managing the day-to-day operations within the budget; and
» setting the strategic direction of ABx and providing strategic guidance to management;
» providing input into and approval of management’s development of corporate strategy and performance objectives;
» reviewing and approving business plans for ABx;
» implementing corporate strategy and making recommendations on significant corporate strategic initiatives.

Executive management reports directly to the Managing Director. A formal charter of delegated functions and authorities to management approved by the Board and a summary will be included on the ABx website.

» approval of annual budget, financial plans including available resources and major capital expenditure and initiatives;
» overseeing and monitoring progress against budget via the establishment and reporting of both financial and non financial key performance indicators, organisational performance, the achievement of strategic goals and objectives and compliance with ABx’s Code of Conduct;

board meetings

The Board plans to meet at least six times a year, both as a Board and in conjunction with executive management, to discuss the short and long term strategy of ABx.

The Board receives a monthly report, which provides current information concerning ABx. The monthly Board report includes salient financial details, together with information on the performance of operations, major initiatives, as well as legal, governance, risk management and compliance issues that may arise.

» appointing and assessing the performance and the removal (where appropriate) of senior executives of ABx;
» monitoring the financial performance including approval of the half year and annual financial reports and liaison with

84 AUSTRALIAN BAUXITE LIMITED

13. ADDITIOnAl InfORmATIOn

The Board convenes by email and by telephone conference call to discuss matters of urgency and importance with management, make recommendations to management and discuss strategy.

Chairman and Managing Director

The Chairman is responsible for leading the Board, ensuring directors are properly briefed in all matters relevant to their roles and responsibilities, facilitating Board discussions and managing the Board’s relationship with ABx’s executive management.

The Managing Director is responsible for implementing ABx’s strategies and policies. The roles of the Chairman and Managing Director are separate roles which are undertaken by separate people.

Audit Committee (AC)

ABx will not be in the top 300 of the S&P All Ordinaries Index (Index) on listing. Therefore it does not presently have an audit committee. Upon completion of the Transactions, the Board will consider whether a separate audit committee is required given the size of the Board and ABx’s circumstances.

Remuneration Committee

A remuneration committee, which presently consists of the whole Board, will serve to determine the remuneration levels of any Executive Directors. Peter Meers is the Chairman of the remuneration committee. When decisions are made concerning the remuneration of a Board member, that Board member must not be present while the remuneration decision is being discussed or voted upon.

Review of board and executive performance

In order to ensure that the Board continues to discharge its duties effectively, the performance of all directors is reviewed annually by the Chairman. The performance of the Chairman will be reviewed during each reporting period by his fellow directors.

The Board undertakes an annual assessment of its collective performance and the performance of the AC in accordance with ABx’s performance evaluation process for directors and executives.

The Board also annually reviews the performance of the executive management team.

identifying and managing business risks

There are a variety of risks that exist in the mineral exploration industry in which ABx operates and there are a range of factors, some of which are beyond the control of ABx and which may impact on ABx’ performance.

The Board:

» reviews and approves the parameters under which such risks are managed including the responsibility for internal control systems;
» compliance and the procedure for identifying business risks and the methods to control their financial impact on ABx.

The Managing Director and the executive management team are instructed and empowered by the Board to:

» implement risk management strategies in co-operation with it and the AC;
» report to the Board and the AC on developments related to risk, and
» suggest to the Board new and revised strategies for mitigating and resolving risk.

independent advice

ABx permits any Director to obtain advice about transactions or matters of concern at ABx’s cost. Approval for directors seeking independent advice is subject to the approval of the Chairman acting reasonably. Where appropriate, directors share such independent advice with other directors.

Security Holder communications

The Board aims to ensure that Security Holders are informed of all information necessary to assess the performance of ABx.

Information is communicated to the shareholders through:

» the annual report, which is distributed to all shareholders (other than those who elect not to receive it);
» the AGM and other shareholder meetings called to obtain approval for Board action as appropriate;
» making available all information released to the ASX on ABx’s website immediately following confirmation of receipt by the ASX;
» ensuring all press releases issued by ABx are posted on the ABx website as soon they are disclosed to the ASX;
» encouraging active participation by shareholders at shareholder meetings;
» encouraging all shareholders who are unable to attend general meetings to communicate issues or ask questions by writing to ABx.

13. ADDITIOnAl InfORmATIOn

Company Commitment to Continuous Disclosure

The Board has approved a continuous disclosure policy to ensure the fair and timely disclosure of price sensitive information to the investment community as required by applicable law.

The Company secretary of ABx has been appointed the disclosure officer of ABx and is required to keep abreast of all material information and where appropriate, ensure disclosure of share price sensitive information.

External Audit independence

ABx’s policy is to appoint external auditors who demonstrate quality and independence. The performance of the auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into account an assessment of performance, existing value and tender costs. The Board or if there is an audit committee, the audit committee will meet with the external auditor of ABx, independently of executive management, at least twice a year.

The external auditor will be requested to attend the AGM and be available to answer shareholder questions about the conduct of the audit and the preparation of the content of the audit report.

All Directors are expected to act with the utmost integrity and objectivity in the performance of their duties, striving at all times to enhance the reputation and performance of ABx.

Management will review ABx’s corporate governance policies and practices in light of the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations. Following this review, the Board

will consider the suitability of any recommendations having regard to ABx’s size and operations.

Company policy and practice for dealing in Shares

The freedom of directors and senior executives to deal in the Shares is restricted in a number of ways namely by statute, by common law and by the requirements of the Listing Rules. In addition to these restrictions, ABx has adopted an insider trading policy for dealing in Shares. The insider trading policy provides that directors and senior executives may deal in company Shares provided that, at all times, they are not in possession of material non-public information, in the 30 days following ABx’ halfyear and full-year financial results announcements and, if relevant, any shareholders’ meeting. Directors and senior executives may only deal in Company Shares outside of these times with the express prior approval of the Chairman or the Managing Director.

13.3 LITIGATIoN

ABx is not involved in any actual or threatened litigation which could have a material effect on ABx. ABx has also carried out searches in relation to the interest in the ABx Project Tenements to reduce the risk of any litigation concerning its interest in the ABx Project Tenements to which see the report of Piper Alderman at section 11 of this Prospectus.

13.4 AsIC AND Asx ExEMPTIoNs, MoDIfICATIoNs AND wAIvERs

ABx is relying on ASIC Class Order 99/790 Electronic Prospectus. Broadly, the Class Order permits ABx to enable the display and printing of this Prospectus and Application Form on a website, to include hypertext links on the Online Prospectus which allows investors to link directly to the Internet sites which are external to and do not form part of this Prospectus and to make other

specified information in relation to the Prospectus available on the website.

Hudson sought and received ASX comfort that listing rule 11.4 did not apply to the transfer of the ABx Project Tenements by Hudson to ABx. ASX confirmed that listing rule 11.4 did not apply to the transaction.

13.5 BRokERAGE

13.6 MATERIAL CoNTRACTs

Acquisition Agreement

In consideration of the acquisition of the ABx Project Tenements (which is subject to the Minister’s approval), upon Official Quotation of ABx on ASX, ABx will issue a Convertible Note to Hudson which provides that ABx:

pay Hudson the sum of $2.4 million within 36 months; or
issue $2.4 million worth of shares in ABx to Hudson on the basis of an issue price of $0.30 per share (8,000,000 shares).

The Convertible Note will carry an interest rate equal to 6% per annum payable upon redemption of the Note.

Other than on the maturity date, ABx may at its sole discretion refuse to allow the Noteholder to convert the Note or part of the Note.

On the maturity date ABx must at it sole discretion either redeem the Note for the Note face value or a llot to the Noteholder (or its nominee as notified) the convertible number of shares.

86 AUSTRALIAN BAUXITE LIMITED

13. ADDITIOnAl InfORmATIOn

The Acquisition Agreement further provides that pending transfer of title ABx shall be deemed to hold the 100% beneficial interests in each of the ABx Project Tenements free and clear of all Encumbrances upon a constructive trust and if a relevant Government Agency does not consent to the transfer of a tenement the Hudson will hold that tenement on trust for ABx.

b. IP Licence Agreement

ABx has entered into a Heads of Agreement (HOA) with Hudson which provides that Hudson grant ABx a non-exclusive right to use the IP.

ABx must continue to provide bauxite samples to Hudson at no cost to Hudson, but only under its normal sampling program.

The HOA does not provide for participation by Hudson in any capital expenditure, such costs will be borne by ABx.

The amount payable by ABx to Hudson for use of the IP is 5% per annum of the Net Return to ABx attributable to the use of the IP.

c. Sponsoring Broker and Lead Manager Agreement

ABx and State One Stockbroking Ltd (State One) holder of Australian Financial Services License 247100 have entered into a sponsoring broker and lead manager agreement in relation to the Offer.

The services provided by State One as sponsoring broker and lead manager in connection with the Offer include:

» Promoting the ABx IPO to the public, appropriate resource

writers in the media and other brokers;

» Preparing a detailed research report on ABx, to be completed by one of State One’s investment analysts;
» Preparing and distributing investment research on an ongoing basis, so as to keep investors informed about the developments in and the merits of ABx.
» Web-hosting of the ABx prospectus and any research which State One prepares on ABx.
» Providing appropriate corporate advice.

ABx must pay State One:

A sponsoring broker and management fee of $87,500 being 5% on all IPO funds raised under State One’s allotment of $1.75M (8.75 million Shares).

Upon the Official Quotation of ABx on ASX, State One or its nominees will be allotted 750,000 Success Options. These Success Options will be exercisable at 30 cents at any time within three years of the Official Quotation of ABx on ASX.

State One has also been awarded 250,000 additional Success Options to allocate to other parties in consideration of their assistance achieving a successful IPO.

All Success Options will be exercisable at 30 cents at any time within three years of the Official Quotation of ABx on ASX.

ABx will also pay reasonable legal costs (to a maximum of $5,000) as well as out of pocket expenses (to a maximum of $5,000) incurred by State One in connection with the Offer.

The terms of the agreement are otherwise what ABx considers to be standard commercial terms for an agreement of this type.

d. Executive Services Agreement

ABx has entered into a management agreement with Hudson pursuant to which Hudson has agreed to provide its management, registered offices, administrative, accounting and secretarial services to ABx (Executive Agreement).

The term of the Executive Agreement is for a period of two years from the date of the Executive Agreement and the fee payable to Hudson pursuant to the Executive Agreement is that amount agreed between ABx and Hudson from time to time.

Under the terms of the Executive Agreement, Hudson shall act in accordance with the directions of the Board and in the event that Hudson is entitled to undertake services of a kind not specifically referred to in the Executive Agreement, Hudson shall be entitled to charge a separate fee in respect of those services, provided that the fees are agreed between Hudson and the Board before the services are provided.

Hudson shall supply suitable executive personnel to ABx as and when warranted according to the then needs of ABx. At the date of this Prospectus, those personnel are Ian Levy, David Hughes, Henry Kinstlinger and Francis Choy.

ABx has agreed with Hudson that Ian Levy’s services as Managing Director will be provided to ABx at an agreed rate of $200,000 for the calendar year 2010.

Hudson has further agreed to allow ABx access to records relating

13. ADDITIOnAl InfORmATIOn

to services provided under the Executive Agreement.

The Executive Agreement contains a termination clause which provide, amongst other termination events, for termination of the agreement in the event Hudson is in default of its obligations under the terms of the Executive Agreement or enters into liquidation or voluntary administration.

e. Current Directors’ Indemnity Agreements

ABx has entered into an Indemnity and Access Agreement with each current Director. The terms of the agreement provide for ABx:

to indemnify the Director against all liabilities incurred as an officer of ABx or any other ABx group company;
to ensure that ABx use its best commercial endeavours to maintain Directors and Officers insurance for the benefit of the Director in relation to acts and omissions of the Officer in his capacity as an officer of ABx; and
to give access to a Director to documents (excluding a document created after the Director ceased to be an officer of ABx) for the purposes of any claims where the Director is a party, witness or otherwise and the Director is involved because they are or were an officer of ABx or any other ABx group company.

13.7 suMMARy of oPTIoNs

Upon completion of this Offer, the Company will have the following Options on Issue:

==> picture [337 x 138] intentionally omitted <==

----- Start of picture text -----

Description Exercise No of Expiry Date
price Options
Options issued under $0.30 7,200,000 15 October 2012
the ESOP
Unallocated Options 1,800,000 3 years from date of issue
under the ESOP
Success Options $0.30 3,000,000 3 years from the Official
Quotation of ABx
on ASX
Total upon completion of this Offer 12,000,000
----- End of picture text -----

Options have been issued pursuant to the terms of the ESOP to Directors and employees as listed in section 13.8.

Unallocated Options under the ESOP will be allocated to Directors and employees of the ABx in accordance with the terms of the ESOP.

Success Options will be issued to consultants and advisors who have provided services in connection with the IPO as follows:

==> picture [337 x 126] intentionally omitted <==

----- Start of picture text -----

State One Stock Broking 750,000
State One (other parties) 250,000
Anything Communcations Pty Ltd 350,000
Terry Carson 150,000
Andrew White 250,000
Meridian Corporate Advisory Pty Ltd 250,000
Sing Capital Pty Ltd 1,000,000
total 3,000,000
----- End of picture text -----

*Terry Carson was the founder of the Carson Group. He has local and international experience in project management and has provided extensive management support in the development of the bauxite business.

All Success Options to be issued have an exercise price of $0.30 and must be exercised at any time up until 5.00 pm 3 years from the Official Quotation of ABx on the ASx.

13.8 EMPLoyEE shARE oPTIoN PLAN

ABx has adopted an ESOP for its employees. A person is an employee of ABx if that person is an executive Director, non-executive Director or considered by the Board to be employed by ABx or a related party of ABx.

The purpose of the ESOP is to provide an opportunity for all eligible employees of ABx to participate in the growth and development of ABx through participation in the equity of ABx. ABx believes it is important to provide incentives to employees in the form of Options which provide the opportunity to participate in the share capital of ABx. ABx expects to apply the proceeds of exercise of the Options to working capital needs, asset or business acquisitions and general corporate purposes. All Options to be issued must be consistent with any applicable Listing Rules and having regard to regulatory constraints under the Corporations Act 2001, ASIC policy or any other law applicable to ABx.

88 AUSTRALIAN BAUXITE LIMITED

13. ADDITIOnAl InfORmATIOn

The Directors have issued the following eligible employees with the following Options:

==> picture [337 x 158] intentionally omitted <==

----- Start of picture text -----

Eligible Employee No of Options
Peter Meers 1,000,000
Ian Warwick Levy 2,000,000
Vincent Tan 1,000,000
Rado Jacob Rebek 1,000,000
Wei Huang 1,000,000
Henry Kinstlinger 1,000,000
David Hughes 100,000
Francis Choy 100,000
total 7,200,000
----- End of picture text -----

All Options issued under the ESOP have an exercise price of $0.30 and must be exercised at any time up until 5.00 pm 3 years from the date of issue (15 October 2012).

13.9 INTEREsTs of DIRECToRs

Other than set out below or elsewhere in this Prospectus:

a. No Director or proposed Director of ABx and no firm in which a Director of ABx is or was at the relevant time a partner has, or has had in the 2 years before lodgement of this Prospectus, any interest in the promotion of, or in any property proposed to be acquired by, ABx; and
b. No amounts, whether in cash or Shares or otherwise, have been paid or agreed to be paid to any Director or proposed Director of ABx (or any firm in which he or she is or was a partner) either to induce him or her to become, or to qualify him or her as, a Director, or otherwise for services rendered by him or her or by the firm in connection with the promotion or formation of ABx.

13.10 shAREhoLDINGs of DIRECToRs AND AssoCIATEs

Hudson holds 50,000,000 Shares in ABx. Hudson Investment Group Limited has a 32.4% equity interest Hudson. Directors are not required under the constitution of ABx to hold any Shares in ABx. Associated company directorships are as listed below.

Directors hold the following shares directly or indirectly through their associates in Hudson and Hudson Investment Group Limited; no shares are held directly in ABx.

==> picture [337 x 107] intentionally omitted <==

----- Start of picture text -----

Hudson Hgl
Abx Director Direct indirect Direct indirect
Peter J Meers Nil 8,552 Nil Nil
Ian Levy Nil 1,000,000 Nil Nil
Wei Huang Nil Nil Nil Nil
Rado J Rebek 5,000,000 Nil Nil Nil
Vincent SY Tan Nil 11,424,034 4,140,580 129,762,176
----- End of picture text -----

13.11 DIRECToRs’ fEEs

The constitution of ABx provides that the Directors are entitled to remuneration as the Directors determine, but the remuneration of the Non Executive Directors must not exceed, in aggregate, a maximum amount fixed by ABx in general meeting of shareholders for that purpose. The initial maxiumum amount has been set at $200,000. No fees have been paid to Directors as at the date of this Prospectus.

The remuneration not exceeding $200,000 payable to the Managing Director are detailed in section 13.6.

13.12 ACQuIsITIoN CoNsIDERATIoN - ABx PRojECT TENEMENTs

The consideration to be paid to Hudson for the ABx Project Tenements, represented by the 50,000,000 subscriber Shares and the Convertible Note was determined through an analysis of comparable transactions, the size and potential of the ABx Projects Tenements, exploration expenditure incurred from 2006 to date, origination / conceptualisation; the costs of strategic planning and development costs and negotiations with independent parties seeking a position in the ABx Project Tenements.

The Convertible Note is redeemable for $2.4 million or 8 million shares (at ABx’s discretion) in 3 years time.

The director’s are of the view that ABx’s prospects validate the price to be paid through the Convertible Note which is an arms length price, on the basis that it represents 29% of the ABx Project value in three years time.

In relation to the issue of voting shares on conversion of the Convertible Note, s606 of the Corporations Act 2001 basically prohibits a person from increasing their voting power above 20% unless exempt under s611.

The Directors will at the relevant time

13. ADDITIOnAl InfORmATIOn

determine whether or not to allow conversion of the Note to shares and will if necessary seek shareholder approval as provided for under Item 7 Section 611 which provides an exception to the prohibition in section 606, in circumstances where the shareholders of the company approve an acquisition of shares at a meeting at which no votes are cast by parties involved in the proposed acquisition, including their associates.

13.13 INTEREsTs of ExPERTs AND ADvIsERs

This section applies to persons named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus, promoters of ABx and stockbroker to the Offer (collectively Prescribed Persons). Other than as set out below or elsewhere in this Prospectus, no Prescribed Person has, or has had in the last 2 years, any interest in:

The formation or promotion of ABx;
a.
b. any property acquired or proposed to be acquired in connection with

the formation or promotion of ABx or the Offer; or

c. the of Shares under offer
this Prospectus.

Other than that as set out below or elsewhere in this Prospectus, no benefit has been given or agreed to be given to any Prescribed Person for services provided by a Prescribed Person in connection with the:

d. formation or promotion of ABx; and
e. of the Shares under Offer this Prospectus.

K.S. Black & Co has acted as Investigating Accountants to the Offer and has performed work in relation to due diligence enquiries, for which it will be paid $15,000 plus GST plus disbursements.

Piper Alderman has acted as legal advisors to the Offer for which it will be paid $30,000 plus GST plus disbursements.

State One has acted as Sponsoring Broker and Lead Manager to the Offer and has

performed work in relation to managing the Offer and will be paid $87,500 plus GST plus disbursements.

Terrence Willsteed & Associates has provided the Independent Technical (Geologist) Report on the ABx Project Tenements for which it will be paid $30,000 plus GST plus disbursements.

13.14 ExPENsEs of ThE offER

All expenses connected with the Offer are being borne by the proceeds from the issue. Please refer to section 2.5 for the breakdown of the expenses.

13.15 EsCRow ARRANGEMENTs

As at the date of this Prospectus, no escrow arrangements have been entered into between ABx and Hudson. However, it is anticipated that under the ASX Listing Rules, the ASX would require Hudson's shares in ABx to be escrowed for a maximum of two years.

The ASX may require other Securities issed persuant to this Prospectus to be escrowed for a period of time determined by the ASX.

90 AUSTRALIAN BAUXITE LIMITED

13. ADDITIOnAl InfORmATIOn

13.16 CoNsENTs AND DIsCLAIMERs

Piper Alderman has consented in writing to being named in this Prospectus and to the inclusion in this Prospectus of the Legal Report in the form and context in which it appears and at the time of lodgement of this Prospectus with ASIC have not withdrawn that consent. It takes no responsibility for any part of the Prospectus other than the Legal Report.

Terrence Willsteed & Associates has consented in writing to the inclusion in this Prospectus of the Independent Technical (Geologist) Report on the ABx Project Tenements in which ABx has an interest in the form and context in which it appears and at the time of lodgement of this Prospectus with ASIC have not withdrawn that consent. It takes no responsibility for any part of the Prospectus other than the Independent Technical (Geologist) Report.

K.S. Black & Co has consented in writing to the inclusion in this Prospectus of the Independent Accountant’s Report in the form and context in which it appears and at the time of lodgement of this Prospectus with ASIC have not withdrawn that consent. It takes no responsibility for any part of the Prospectus other than the Independent Accountant’s Report.

State One Stockbroking Ltd has given and, as at the date hereof, has not

withdrawn, its written consent to be named as Sponsoring Broker and Lead Manager in the form and context in which it is named.

State One Stockbroking Ltd has had no involvement in the preparation of any part of the Prospectus other than being named as Sponsoring Broker and Lead Manager.

State One Stockbroking Ltd has not authorised or caused the issue of, and expressly disclaims and takes no responsibility for, any part of the Prospectus.

K.S. Black & Co has consented in writing to the inclusionin this Prospectus of the Independent Accountant’s report in the form and context in which it appears and at the time of lodgement of this Prospectus with ASIC have not withdrawn that consent.

Computershare Investor Services Pty Limited has given an, and as the date here of, has no withdrawn, its written consent to be being names as Share Registrar in the form and context in which it is named.

Computershare Investor Services Pty Limited has had no involvement in the preparation of any part of the Prospectus other than being names as Share Registrar to the Company.

Computershare Investor Services Pty Limited has not authorised or caused the issue of, and expressly disclaims and takes no responsibility for, any part of the Prospectus.

Hudson has consented in writing to being named in this Prospectus in the form and context in which it appears and at the time of lodgement of this Prospectus with ASIC have not withdrawn that consent. Hudson has not caused or authorised the issue of this Prospectus or in anyway been involved in the making of this Offer and therefore do not accept any responsibility for any part of the Prospectus.

13.17 DoCuMENTs AvAILABLE foR INsPECTIoN

The following documents are available for inspection at the offices of ABx during business hours:

Constitution of ABx; and
a.
b. material contracts referred to in 13.6 above.

13.18 MAjoR shAREhoLDERs

As at the date of this Prospectus the only shareholder is Hudson which holds 50,000,000 Shares.

14. DIRECTORs’ sTATEmEnT

The Directors report that, in their opinion, since the date of the financial statements used in the preparation of the Investigating Accountant’s Report, no circumstances have arisen that materially affect or will materially affect the profitability of ABx or the value of ABx's assets and liabilities, except as disclosed in this Prospectus. The Directors have consented to the lodgement of this Prospectus with ASIC.

Signed by Peter Meers, a Director of ABx, pursuant to section 351 of the Corporations Act 2001, for the purposes of lodgement of this Prospectus with ASIC.

==> picture [100 x 52] intentionally omitted <==

Peter Meers Chairman

92 AUSTRALIAN BAUXITE LIMITED

15. GlOssARY

A$ oR $

an Australian dollar.

AsIC

Australian Securities and Investments Commission

ABx PRojECT TENEMENTs

means

licence No	project	Status
EPM 17790	Hampton	Granted
EPM 17800	Red Hill	Granted
EPM 17801	Red Hill South	Granted
EPM 17830	Haden	Granted
EPM 17831	Hillgrove	Granted
EPMA 18014	Binjour	Application
EL 6997	Inverell	Granted
EL 7268	Pindaroi	Granted
EL 7269	Windellama	Granted
EL 7279	Wingello West	Granted
EL 7344	Yarrowitch	Granted
EL 7357	Taralga	Granted
EL 7360	Trundle	Granted
EL 7361	Guyra	Granted
ELA 3626	Merriwa	Application
ELA 3740	Bungonia	Application
ELA 3774	Penrose	Application

Hudson is transferring its 100% interest in the ABx Project Tenements to ABx subject to the Minister's approval.

The ABx Project Tenements are current to 23rd September 2009. ABx continues to investigate new bauxite prospective areas in the normal course of business and may apply for exploration licenses over such areas. Such activity does not impact negatively on the value of the ABx Project Tenements.

ACQuIsITIoN AGREEMENT

the agreement dated 15 October 2009 between Hudson Resources, North Eastern Bauxite Pty Ltd, ABx, ABx1 Pty Ltd, ABx2 Pty Ltd and ABx3 Pty Ltd.

AEDT

Australian Eastern Daylight Time

APPLICANT

AssoCIATE

has the meaning given by Division 2 of the Corporations Act 2001

Asx

Australian Stock Exchange

AusTRALIAN BAuxITE oR ABx oR CoMPANy

Australian Bauxite Limited ACN 139 494 885 and where the context so permits includes and where the context requires includes any related body corporate including wholly owned subsidiaries.

BAuxITE

is a naturally occurring, heterogeneous material comprised primarily of one or more aluminium hydroxide minerals plus various mixtures of silica (SiO2), iron oxide (Fe2O3), titania (TiO2), aluminosilicates (clay, etc.), and other impurities in trace amounts. The principal aluminium hydroxide minerals found in varying proportions within bauxite are gibbsite [Al(OH)3] and the polymorphs, boehmite and diaspore [both AlO(OH)].

BoARD

board of Directors of ABx for the time being

BusINEss DAy

a day, other than a Saturday or Sunday, on which banks are open for general banking business in Sydney

a person who submits an Application

CLosING DATE

APPLICATIoN

an application for Shares under this Prospectus

APPLICATIoN foRM

the date by which valid acceptances must be received by the Share Registrar being (7 December 2008) or such other date determined by the Board

an application form in the form attached to this Prospectus

CoNsTITuTIoN

APPLICATIoN MoNIEs

the Application Price multiplied by the number of Shares applied for

Constitution of ABx as registered with ASIC and as amended from time to time

15. GlOssARY

==> picture [162 x 653] intentionally omitted <==

CoNvERTIBLE NoTE oR NoTE

the note maturing three years from the date of the Official Quotation of ABx on the ASX with a face value of $2.4 million, convertible at the Company’s option to Shares at an issue price of $0.30 per Share, attracting interest at the rate of 6% per annum

CoRPoRATIoNs ACT the Corporations Act 2001 (Cth).

DII

means the NSW Department of Industry & Investment, including the Minerals & Energy Division which administers exploration and resource development in NSW (formerly the NSW Department of Primary Industries Mineral Resources) or any department of the NSW Government that replaces such department from time to time;

DIRECToR

a Director of ABx

DME

means the Department of Employment, Economic Development and Innovation, Queensland Mines and Energy (formerly the Queensland Department of Mines and Energy) or any department of the Queensland Government that replaces such department from time to time

EBIT

earnings before interest and tax

EBITDA

earnings before interest, tax, depreciation and amortisation

EL

means an exploration licence issued by the DII pursuant to the Mineral Legislation;

ELA

means an application for an exploration licence issued by the DII pursuant to the Mineral Legislation;

EPM

means a mineral exploration permit issued by the DME pursuant to the Mineral Legislation

EPMA

means an application for a mineral exploration permit (other than coal) issued by the DME pursuant to the Mineral Legislation;

ExPosuRE PERIoD

the period commencing on the date of lodgement of this Prospectus with ASIC and ending 7 days after that date, or 14 days after that date if the period is extended by ASIC

hARD CoPy PRosPECTus

paper version of this Prospectus

huDsoN

Hudson Resources Limited ACN 008 720 965 and its wholly owned subsidiaries

IP

Hudson’s Intellectual Property described in provisional patent entitled 'Bauxite Beneficiation' lodged with the Australian Patent office including any improvement or modification with respect to the removal of iron from bauxite.

IPo

Initial Public Offer

IssuE

the issue of Shares in accordance with this Prospectus

94 AUSTRALIAN BAUXITE LIMITED

15. GlOssARY

IssuE PRICE

the issue price of the Shares to be issued in accordance with this Prospectus being $0.20 per Share

offER

the offer of 20,000,000 Shares pursuant to and in accordance with this Prospectus

RECoRD DATE

5:00pm AEDT, Thursday 22nd October 2009.

REGIsTER

kM

kilometre(s)

LIsTING RuLEs

the official listing rules of ASX

M

meter(s)

MARkETABLE PARCEL

a parcel of securities of not less than $500 based on the closing price on the Stock Exchange Automated Trading System providing for the trading of securities on ASX on the Record Date.

offER PERIoD

period from 3rd November 2009 to 14 December 2009 when the Offer is made

offICIAL LIsT

the official list of entities that ASX has admitted and not removed

offICIAL QuoTATIoN

quotation on the Official List

oNLINE PRosPECTus

the electronic version of this Prospectus which can be viewed at australianbauxite.com.au and also at www.stateone.com.au.

Company register of ABx

REsTRICTED sECuRITIEs

has the same meaning as in ASX Listing Rule 19.12

sECuRITIEs

has the same meaning as in section 92 of the Corporations Act 2001

sECuRITy hoLDERs of shAREhoLDERs

the shareholders of ABx from time to time

ordinary shares in the capital of ABx

MINERAL LEGIsLATIoN

means

a. in relation to any act matter or thing concerning EPM or EPMA, Mineral Legislation 1989 of Queensland; or
b. in relation to any act matter or thing concerning EL and ELA , Mining Act 1992 of New South Wales,

as is required by the context, including any amendments thereto made from time to time or any legislation that replaces the same

MINIMuM suBsCRIPTIoN

$4,000,000

MINIsTER

means the Minister admiinstering the Mineral Legislation.

oPENING DATE

3rd November 2009

oPTIoN

an option that may be exercised by the holder to acquire a Share

PRojECT

ABx Project being the exploration and development of bauxite mining in the ABx Project Tenements

PRosPECTus

this Prospectus dated 19 October 2009 as modified or varied by any replacement or supplementary Prospectus made by ABx and lodged with the ASIC from time to time and any electronic copy of this Prospectus, replacement prospectus and supplementary Prospectus

shARE REGIsTRy

Computershare Investor Services Pty Limited ACN 078 279 277

sQ kM

square kilometre(s)

suCCEss oPTIoNs

Options issued only upon the Official Quotation of ABx on ASX. These options are exercisable at 30 cents at any time within three years of the Official Quotation of ABx on ASX.

TEChnICAl TERms

ALuMINA

Aluminium oxide

Loss oN IGNITIoN

The loss of volatiles, mostly water, in bauxite during heating

ANATAsE

TiO2

MEsA

Flat topped plateau

BAsALT

Dark, extrusive, volcanic rock

PALAEo-ChANNEL

Ancient drainage channel

BAuxITE

A mixture of aluminium oxides and hydroxides

BoEhMITE

Hydrous aluminium oxide contains up to 85% alumina. The alumina in bauxite is liberated at 180 deg digestion

DIAsPoRE

Hydrous aluminium oxide, similar to boehmite

REACTIvE sILICA

Silica in bauxite that reacts with caustic soda in the refining process

sAPRoLITE

Highly weathered rock that preserves some of the original structures

suRAT BAsIN

Very large zone of coal and gas resources west of Toowoomba

GIBBsITE

Aluminium hydroxide with up to 64.5% alumina. The alumina in gibbsite is liberated at 143 deg digestion

TERTIARy

A period spanning a time frame from 2 – 65 million years ago

Tuff

kAoLINITE

Type of clay

LATERITE

Weathered subsoil rich in oxides of iron and aluminium

A general term for all consolidated pyroclastic rocks

voLCANIC

Extrusive rocks or rocks related to volcanic activity.

HUDSON SHAREHOLDER PRIORITY OFFER

As part of the Priority Offer, Hudson Shareholders will be guaranteed an allocation of 10,000 Shares if they hold at least a Marketable Parcel of Hudson Shares on the Record Date. Please enter your Hudson HIN / SRN in this box if you qualify for the Priority Offer and would like the first Hudson Holder Identification Number or Security Holder Reference Number 10,000 Shares of your application to be allocated under the Priority Offer.

==> picture [530 x 646] intentionally omitted <==

----- Start of picture text -----

ACN 139 494 885 10,000 Shares of your
Application Form application to be allocated
Replacement Prospectus dated 28 October 2009 under the Priority Offer.
This Application Form is important.
If you are in doubt as to how to deal with it please contact
Broker Code Adviser Code
contact your stockbroker or professional adviser without delay. You should
read the entire Prospectus carefully before completing this form. To meet the
requirements of the Corporations Act, this Application Form must not be
distributed unless included in, or accompanied by, the Prospectus.
A [I/we] [apply] [for]
B I/we lodge full Application Money
.
Number of shares in Australian Bauxite at $0.20 per share or such lesser A$
number of shares which may be allocated to me/us
C [Individual/Joint] [applications] [-] [refer] [to] [naming] [standards] [overleaf] [for] [correct] [forms] [of] [registrable] [title(s)]
Title or Company Name Given Name(s) Surname
Joint Applicant 2 or Account Designation
Joint Applicant 3 or Account Designation
D [Enter] [your] [postal] [address] [-] [Include] [State and] [Postcode]
Unit Street Number Street Name or PO Box /Other Information
City / Suburb / Town State Postcode
E [Enter] [your] [contact] [details]
Contact Name Telephone Number - Business Hours / After Hours
( )
F [CHESS] [Participant]
Holder Identification Number (HIN)
Please note that if you supply a CHESS HIN but the name and address details on your form do not
correspond exactly with the registration details held at CHESS, your application will be deemed to be made
X without the CHESS HIN, and any securities issued as a result of the IPO will be held on the Issuer Sponsored
subregister.
Payment details – Please note that funds are unable to be directly debited from your bank account
G [Drawer] Cheque Number BSB Number Account Number Amount of cheque
A$
----- End of picture text -----

Make your cheque or bank draft payable to ABx – Offer Account

By submitting this Application Form, I/we declare that this application is completed and lodged according to the Prospectus and the declarations/statements on the reverse of this Application form and I/we declare that all details and statements made by me/us (including the declaration on the reverse of this Application Form) are complete and accurate. I/we agree to be bound by the Constitution of the Company.

See back of form for completion guidelines

How to complete this form

A Shares Applied for

Enter the number of shares you wish to apply for. The application must be for a minimum of 10,000 shares. Applications for greater than 10,000 shares must be in multiples of 1,000 shares.

B Application Monies

Enter the amount of Application Monies. To calculate the amount, multiply the number of shares by the price per share.

C Applicant Name(s)

Enter the full name you wish to appear on the statement of share holding. This must be either your own name or the name of a company. Up to 3 joint Applicants may register. You should refer to the table below for the correct forms of registrable title. Applications using the wrong form of names may be rejected. Clearing House Electronic Subregister System (CHESS) participants should complete their name identically to that presently registered in the CHESS system.

D Postal Address

Enter your postal address for all correspondence. All communications to you from the Registry will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered.

E Contact Details

Enter your contact details. These are not compulsory but will assist us if we need to contact you.

F

G

CHESS

Australian Bauxite Limited (the Company) will apply to the ASX to participate in CHESS, operated by ASX Settlement and Transfer Corporation Pty Ltd, a wholly owned subsidiary of Australian Securities Exchange Limited. In CHESS, the company will operate an electronic CHESS Subregister of security holdings and an electronic Issuer Sponsored Subregister of security holdings. Together the two Subregisters will make up the Company’s principal register of securities. The Company will not be issuing certificates to applicants in respect of shares allotted. If you are a CHESS participant (or are sponsored by a CHESS participant) and you wish to hold shares allotted to you under this Application on the CHESS Subregister, enter your CHESS HIN. Otherwise, leave this section blank and on allotment, you will be sponsored by the Company and allocated a Securityholder Reference Number (SRN).

Payment

Make your cheque or bank draft payable to ABx – Offer Account in Australian currency and cross it Not Negotiable. Your cheque or bank draft must be drawn on an Australian Bank.

Complete the cheque details in the boxes provided. The total amount must agree with the amount shown in box B. Please note that funds are

unable to be directly debited from your bank account.

Cheques will be processed on the day of receipt and as such,

sufficient cleared funds must be held in your account as cheques returned unpaid may not be re-presented and may result in your Application being rejected. Paperclip (do not staple) your cheque(s) to the Application Form where indicated. Cash will not be accepted. Receipt for payment will not be forwarded .

Before completing the Application Form the applicant(s) should read this Prospectus to which this application relates. By lodging the Application Form, the Applicant agrees that this application for shares in Australian Bauxite Limited is upon and subject to the terms of the Prospectus and the Constitution of Australian Bauxite Limited, agrees to take any number of shares that may be allotted to the Applicant(s) pursuant to the Prospectus and declares that all details and statements made are complete and accurate. It is not necessary to sign the Application Form.

Hudson Shareholder Priority Offer

As part of the Priority Offer, Hudson Shareholders will be guaranteed an allocation of 10,000 Shares if they hold at least a Marketable Parcel of Hudson Shares on the Record Date. Please enter your Hudson HIN / SRN in the yellow box on the Application form if you qualify for the Priority Offer and would like the first 10,000 Shares of your application to be allocated under the Priority Offer.

Lodgement of Application

Application Forms must be received by Computershare Investor Services Pty Limited Melbourne by no later than 5.00pm (AEDT) on 14 December 2009. You should allow sufficient time for this to occur. Return the Application Form with cheque(s) attached to:

Computershare Investor Services Pty Limited GPO Box 2115

MELBOURNE VIC 8060

Neither Computershare nor the Company accepts any responsibility if you lodge the Application Form at any other address or by any other means. Privacy Statement

Personal information is collected on this form by Computershare Investor Services Pty Limited (“CIS”), as registrar for securities issuers (“the issuer”), for the purpose of maintaining registers of security holders, facilitating distribution payments and other corporate actions and communications. Your personal information may be disclosed to our related bodies corporate; to external service companies such as print or mail service providers, or as otherwise required or permitted by law. If you would like details of your personal information held by CIS, or you would like to correct information that is inaccurate, incorrect or out of date, please contact CIS. In accordance with the Corporations Act 2001, you may be sent material (including marketing material) approved by the issuer in addition to general corporate communications. You may elect not to receive marketing material by contacting CIS. You can contact CIS using the details provided on the front of this form or e-mail [email protected]

If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 850 505.

Correct forms of registrable title(s)

Note that ONLY legal entities are allowed to hold shares. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below.

If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 850 505. Correct forms of registrable title(s) Note that ONLY legal entities are allowed to hold shares. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below.	If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 850 505. Correct forms of registrable title(s) Note that ONLY legal entities are allowed to hold shares. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below.	If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 850 505. Correct forms of registrable title(s) Note that ONLY legal entities are allowed to hold shares. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below.

Type of Investor Correct Form of Registration Incorrect Form of Registration
Individual - Use given name(s) in full, not initials	Mr John Alfred Smith	J.A Smith
Joint - Use given name(s) in full, not initials	Mr John Alfred Smith & Mrs Janet Marie Smith	John Alfred & Janet Marie Smith
Company - Use company title, not abbreviations	ABC Pty Ltd	ABC P/L ABC Co
Trusts - Use trustee(s) personal name(s) - Do not use the name of the trust	Ms Penny Smith	Penny Smith Family Trust
Deceased Estates - Use executor(s) personal name(s) - Do not use the name of the deceased	Mr Michael Smith	Estate of Late John Smith
Minor (a person under the age of 18) - Use the name of a responsible adult with an appropriate designation	Mr John Alfred Smith	Peter Smith
Partnerships - Use partners personal name(s) - Do not use the name of the partnership	Mr John Smith & Mr Michael Smith	John Smith & Son
Clubs/Unincorporated Bodies/Business Names - Use office bearer(s) personal name(s) - Do not use the name of the club etc	Mrs Janet Smith	ABC Tennis Association
Superannuation Funds - Use the name of trustee of the fund - Do not use the name of the fund	John Smith Pty Ltd	John Smith Pty Ltd Superannuation Fund

HUDSON SHAREHOLDER PRIORITY OFFER

==> picture [530 x 646] intentionally omitted <==

Make your cheque or bank draft payable to ABx – Offer Account

See back of form for completion guidelines

How to complete this form

A Shares Applied for

Enter the number of shares you wish to apply for. The application must be for a minimum of 10,000 shares. Applications for greater than 10,000 shares must be in multiples of 1,000 shares.

B Application Monies

Enter the amount of Application Monies. To calculate the amount, multiply the number of shares by the price per share.

C Applicant Name(s)

D Postal Address

E Contact Details

Enter your contact details. These are not compulsory but will assist us if we need to contact you.

F

G

CHESS

Payment

Make your cheque or bank draft payable to ABx – Offer Account in Australian currency and cross it Not Negotiable. Your cheque or bank draft must be drawn on an Australian Bank.

Complete the cheque details in the boxes provided. The total amount must agree with the amount shown in box B. Please note that funds are

unable to be directly debited from your bank account.

Cheques will be processed on the day of receipt and as such,

Hudson Shareholder Priority Offer

As part of the Priority Offer, Hudson Shareholders will be guaranteed an allocation of 10,000 Shares if they hold at least a Marketable Parcel of Hudson Shares on the Record Date. Please enter your Hudson HIN / SRN in the yellow box on the Application form if you qualify for the Priority Offer and would like the first 10,000 Shares of your application to be allocated under the Priority Offer.

Lodgement of Application

Computershare Investor Services Pty Limited GPO Box 2115

MELBOURNE VIC 8060

Neither Computershare nor the Company accepts any responsibility if you lodge the Application Form at any other address or by any other means. Privacy Statement

If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 850 505.

Correct forms of registrable title(s)

If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 850 505. Correct forms of registrable title(s) Note that ONLY legal entities are allowed to hold shares. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below.	If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 850 505. Correct forms of registrable title(s) Note that ONLY legal entities are allowed to hold shares. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below.	If you have any enquiries concerning your application, please contact the Computershare Investor Services Pty Limited on 1300 850 505. Correct forms of registrable title(s) Note that ONLY legal entities are allowed to hold shares. Applications must be made in the name(s) of natural persons, companies or other legal entities in accordance with the Corporations Act. At least one full given name and the surname is required for each natural person. The name of the beneficial owner or any other registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms of registrable title(s) below.

Type of Investor Correct Form of Registration Incorrect Form of Registration
Individual - Use given name(s) in full, not initials	Mr John Alfred Smith	J.A Smith
Joint - Use given name(s) in full, not initials	Mr John Alfred Smith & Mrs Janet Marie Smith	John Alfred & Janet Marie Smith
Company - Use company title, not abbreviations	ABC Pty Ltd	ABC P/L ABC Co
Trusts - Use trustee(s) personal name(s) - Do not use the name of the trust	Ms Penny Smith	Penny Smith Family Trust
Deceased Estates - Use executor(s) personal name(s) - Do not use the name of the deceased	Mr Michael Smith	Estate of Late John Smith
Minor (a person under the age of 18) - Use the name of a responsible adult with an appropriate designation	Mr John Alfred Smith	Peter Smith
Partnerships - Use partners personal name(s) - Do not use the name of the partnership	Mr John Smith & Mr Michael Smith	John Smith & Son
Clubs/Unincorporated Bodies/Business Names - Use office bearer(s) personal name(s) - Do not use the name of the club etc	Mrs Janet Smith	ABC Tennis Association
Superannuation Funds - Use the name of trustee of the fund - Do not use the name of the fund	John Smith Pty Ltd	John Smith Pty Ltd Superannuation Fund

AI assistant

ABX GROUP LIMITED — Capital/Financing Update 2009

64283_rns_2009-10-28_692170be-f898-429f-b961-46582bf6e936.pdf

REPLACEMENT PRosPECTus

AUSTRALIAN BAUXITE LIMITED

ACN 139 494 885

ABx DIRECTORY

IssuER

LAwyERs

ExPERT GEoLoGIsT

shARE REGIsTRy

DIRECToRs

AuDIToRs

INvEsTIGATING ACCouNTANT

sPoNsoRING BRokER & LEAD MANAGER

TABlE Of COnTEnTs

ImpORTAnT InfORmATIOn

KEY pOInTs Of OffERInG

RIsKs

KEY DATEs fOR InvEsTORs

IMPoRTANT NoTICE

PRIoRITy offER

how To APPLy foR shAREs

ImpORTAnT InfORmATIOn

REPREsENTATIoN

ExPosuRE PERIoD

sPECuLATIvE INvEsTMENT

GLossARy

PRIvACy AND PERsoNAL INfoRMATIoN

1. lETTER TO InvEsTORs

2. InvEsTmEnT summARY

2.1 ThE offER

2.2 APPLICATIoNs foR shAREs

2.3 offER sTATIsTICs

2.4 ABx BusINEss AND PRojECT REvIEw

2.5 PuRPosE of ThE IssuE

2. InvEsTmEnT summARY

2.6 PRoCEEDs of ThE IssuE

2.7 DIvIDENDs

3. DETAIls Of ThE OffER

3.1 AusTRALIAN BAuxITE LIMITED

3. DETAIls Of ThE OffER

3.2 ExPosuRE PERIoD

3.3 how To APPLy foR shAREs priority Offer

public Offer

general terms

3. DETAIls Of ThE OffER

3.4 ALLoTMENT AND ALLoCATIoN

3.5 Asx LIsTING

3.6 ChEss

3.7 RANkING

3.8 uNDERwRITING

3.9 BRokERAGE

3.10 INvEsTMENT RIsks

3.11 TAxATIoN

3.12 ELECTRoNIC PRosPECTus

4. mARKET AnD InDusTRY OvERvIEw

The expanding market

4. mARKET AnD InDusTRY OvERvIEw

Monthly bauxite imports by China

4.1 BAuxITE TyPEs AND usEs

4. mARKET AnD InDusTRY OvERvIEw

bauxite production Flowchart

4.2 METALLuRGICAL BAuxITE foR ALuMINA & ALuMINIuM growth in aluminium demand

4. mARKET AnD InDusTRY OvERvIEw

global alumina

4. mARKET AnD InDusTRY OvERvIEw

Return on assets

Rising prices for metallurgical bauxite

4. mARKET AnD InDusTRY OvERvIEw

4.3 NoN-METALLuRGICAL BAuxITE

Calcined bauxite

uses

4.4 susTAINABILITy

5. ABx BusInEss AnD pROjECT REvIEw

5.1 BusINEss ovERvIEw

5.2 QuALITy

5.3 ThICkNEss of BAuxITE LAyER

5. ABx BusInEss AnD pROjECT REvIEw

5. ABx BusInEss AnD pROjECT REvIEw

ABX GROUP LIMITED Capital/Financing Update 2009