AF LEGAL GROUP LTD — Proxy Solicitation & Information Statement 2011

Mar 28, 2011

==> picture [166 x 112] intentionally omitted <==

29 March 2011

The Manager Company Announcements Office Australian Stock Exchange Limited PO Box H224 Australia Square SYDNEY NSW 2000

Dear Sir/Madam

NOTICE OF GENERAL MEETING

Please find attached the Notice of General Meeting and Proxy Form for a meeting of Navigator Resources Limited to be held on 6 May 2011.

The Notice of Meeting and Proxy Form will be posted to shareholders on 5 April 2011 and will be accompanied by a copy of the prospectus for Kimberley Rare Earths Limited and a Priority Offer Form for all eligible Navigator shareholders registered as at 4 April 2011.

Yours sincerely

NAVIGATOR RESOURCES LTD

==> picture [101 x 37] intentionally omitted <==

Gerry Kaczmarek Company Secretary

==> picture [38 x 37] intentionally omitted <==

Ground Floor, 45 Richardson Street WEST PERTH WA 6005 PO Box 276 WEST PERTH WA 6872

Telephone: (08) 9226 5311 Facsimile: (08) 9226 5411 Email: navigator@navigatorresources.com.au Website: www.navigatorresources.com.au

ASX Code: NAV ACN: 063 366 487

ABN: 82 063 366 487

==> picture [216 x 143] intentionally omitted <==

NOTICE OF EXTRAORDINARY GENERAL MEETING

&

EXPLANATORY STATEMENT

A PROXY FORM IS ENCLOSED

Date: 6 May 2011

Time: 2.30pm (WST)

Place: The Celtic Club 48 Ord Street West Perth, Western Australia, 6005

THIS IS AN IMPORTANT DOCUMENT. PLEASE READ IT CAREFULLY.

If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

CONTENTS PAGE

CONTENTS PAGE
Notice of Extraordinary General Meeting	2
Agenda	2
Explanatory Statement	3
Glossary	21
Proxy Form

TIME AND PLACE OF MEETING AND HOW TO VOTE

VENUE

The Extraordinary General Meeting will be held at 2.30pm (WST) on Friday, 6 May 2011 at:

The Celtic Club 48 Ord Street West Perth, Western Australia, 6005

YOUR VOTE IS IMPORTANT

The business of the Extraordinary General Meeting affects your shareholding and your vote is important.

HOW TO VOTE

You may vote by attending the meeting in person, by proxy or by authorised representative.

VOTING IN PERSON

To vote in person, attend the Extraordinary General Meeting on the date and at the place set out above.

VOTING BY PROXY

To vote by proxy, please complete and sign the enclosed Proxy Form and return by:

• (a) hand delivery to the Company’s registered office at Ground Floor, 45 Richardson Street, West Perth WA 6005;

• (b) post to Navigator Resources Limited, PO Box 276, West Perth WA 6872;

• (c) facsimile to the Company on facsimile number (+61 8) 9226 5411; or

• (d) email to the Company at navigator@navigatorresources.com.au,

so that it is received not later than 2.30pm (WST) on Wednesday, 4 May 2011.

Proxy Forms received later than this time will be invalid.

1

NOTICE OF EXTRAORDINARY GENERAL MEETING

Notice is hereby given that an Extraordinary General Meeting of Shareholders will be held at 2.30pm (WST) on Friday, 6 May 2011 at The Celtic Club, 48 Ord Street, West Perth, Western Australia, 6005.

The Explanatory Statement to this Notice of Meeting provides additional information on matters to be considered at the Extraordinary General Meeting. The Explanatory Statement and the Proxy Form are part of this Notice of Meeting.

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Extraordinary General Meeting are those who are registered Shareholders of the Company at 2.30pm (WST) on Wednesday, 4 May 2011.

Terms and abbreviations used in this Notice of Meeting and Explanatory Statement are defined in the Glossary.

AGENDA

RESOLUTION – APPROVAL OF REDUCTION OF CAPITAL BY WAY OF ‘IN SPECIE’ DISTRIBUTION BY NAVIGATOR OF KRE SHARES TO ELIGIBLE DEMERGER SHAREHOLDERS

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

"That a reduction in Navigator’s share capital by way of an ‘in specie’ distribution by Navigator of KRE Shares to Eligible Demerger Shareholders, in the manner set out in the Explanatory Statement, be approved for the purposes of sections 256B and 256C of the Corporations Act."

BY ORDER OF THE BOARD

==> picture [103 x 46] intentionally omitted <==

==> picture [100 x 37] intentionally omitted <==

DF Hatch Managing Director Dated: 29 March 2011

GF Kaczmarek Company Secretary

2

NAVIGATOR RESOURCES LIMITED

ABN: 82 063 366 487

EXPLANATORY STATEMENT

This Explanatory Statement has been prepared for the information of Navigator Shareholders in connection with the business to be conducted at the Extraordinary General Meeting to be held at 2.30pm (WST) on Friday, 6 May 2011 at The Celtic Club, 48 Ord Street, West Perth, Western Australia, 6005.

The purpose of this Explanatory Statement is to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolution in the Notice of Meeting.

This Explanatory Statement should be read in conjunction with the accompanying Notice of Meeting.

1. INTRODUCTION

The Directors recommend that Navigator Shareholders read this Explanatory Statement in full before making any decision in relation to the Resolution set out in the Notice of Meeting.

Section 2 below provides an overview of the Demerger.

Section 3 contains information about the Resolution, and Sections 4 to 10 contain additional information about important aspects of the Demerger, including risks which you should consider.

If any Navigator Shareholder is in doubt as to how they should vote, they should seek advice from their professional adviser prior to voting.

2. THE PROPOSED DEMERGER

2.1 Overview of the proposal

• (a) On 22 October 2010, the Board announced a demerger of the Company’s rare earths asset, the Cummins Range Tenement ( Demerger Asset ), under which the Demerger Asset will become the focus of a new rare earths company to be known as Kimberley Rare Earths Limited ( KRE ).

• (b) KRE will focus initially on the exploration and future development of the Cummins Range rare earth oxide deposit, currently 100% held by Navigator, located in the Kimberley region of Western Australia. This will allow the Demerger Asset to be managed by a well funded, specialist rare earths company.

• (c) The Demerger will allow Navigator to conduct the return of capital to its shareholders who can then decide if they wish to have an interest in gold or rare earths or both.

• (d) KRE is a wholly owned subsidiary of Navigator and was incorporated in December 2010.

• (e) KRE entered into a sale agreement with Navigator on 14 March 2011 ( Sale Agreement ) to acquire an initial 25% interest in the Demerger Asset ( Demerger Interest ) in return for the issue of 34.4 million KRE Shares ( Vendor Shares ) and 3 million KRE Options ( Vendor Options ).

3

• (f) KRE also entered into a joint venture agreement with Navigator on 14 March 2011 ( Joint Venture Agreement ) under which KRE has the right to earn a further 30% interest in the Demerger Asset by spending a minimum of $10 million on the Demerger Asset within a period of 4 years commencing on the commencement date of the Joint Venture Agreement or during the period commencing on the commencement date of the Joint Venture Agreement and ending on the date on which KRE expends the $10 million, whichever is earlier.

After KRE has earned the additional 30%, it will have a 55% interest in the Demerger Asset. KRE will then have the right to elect to earn an additional 25% interest in the Demerger Asset (taking its ownership to 80%) by delivering a feasibility study (in bankable form) on mining the Cummins Range Tenement. At that point, Navigator can elect to enter a mining joint venture or convert its 20% interest to a royalty.

• (g) Navigator will continue to focus on the development and exploration of its gold assets whilst maintaining a direct interest in the Demerger Asset.

2.2 Demerger steps

The following steps will be required to implement the Demerger:

• (a) a priority offer of 46,549,035 KRE Shares (based on Navigator Shares currently on issue) and up to 66,184,269 KRE Shares (if all current Navigator Options on issue are exercised before the Priority Offer Record Date) to Eligible Priority Offer Shareholders on the basis of 1 KRE Share for every 10 Navigator Shares they hold on the Priority Offer Record Date, at an application price of 20 cents per KRE Share, to raise $9.31 million and up to $13.24 million (depending on the number of Navigator Shares on issue at the Priority Offer Record Date) ( Priority Offer );

• (b) a public offer of 25 million KRE Shares at an application price of 20 cents per KRE Share to raise up to $5 million, and the balance of any KRE Shares not applied for by Eligible Priority Offer Shareholders under the Priority Offer ( Public Offer ). The total amount raised under the Public Offer will depend upon the number of KRE Shares applied for under the Priority Offer, as any KRE Shares not applied for by Eligible Priority Offer Shareholders under the Priority Offer may be applied for under the Public Offer;

• (c) completion of the sale and purchase of the Demerger Interest under the Sale Agreement and the issue of Vendor Shares and Vendor Options to Navigator are subject to the satisfaction or waiver (to the extent applicable) of the following conditions:

• (i) the grant of any necessary ASX waiver to allow the Demerger Transaction to proceed in the manner proposed;

• (ii) the successful completion of the Priority Offer and Public Offer, which together raise a minimum of $8.5 million;

• (iii) KRE having received in principle approval from the ASX for admission of KRE’s securities to the Official List of the ASX and having satisfied any conditions to such approval (other than a condition that completion has occurred under the Sale Agreement); and

• (iv) written consent from RMB to the Demerger Transaction, including the earn‐in contemplated by the Joint Venture Agreement, as RMB holds a security interest over all the assets and undertaking of Navigator and each of its subsidiaries (other than KRE);

4

• (d) under the Joint Venture Agreement, KRE will have the right to earn a further 30% interest in the Demerger Asset by spending a minimum of $10 million on the Demerger Asset within a period of 4 years commencing on the commencement date of the Joint Venture Agreement, or during the period commencing on the commencement date of the Joint Venture Agreement and ending on the date on which KRE expends the $10 million, whichever is earlier. After KRE has earned the additional 30%, it will have a 55% interest in the Demerger Asset. KRE will then have the right to elect to earn an additional 25% interest in the Demerger Asset (taking its ownership to 80%) by delivering a feasibility study (in bankable form) on mining the Cummins Range Tenement. At that point, Navigator can elect to enter a mining joint venture or convert its 20% interest to a royalty;

• (e) the allotment of the KRE Shares pursuant to the Priority Offer and the Public Offer;

• (f) the approval of Navigator Shareholders to undertake an equal capital reduction of Navigator by way of an in specie distribution of Vendor Shares pursuant to section 256B of the Corporations Act ( Shareholder Approval );

• (g) the admission of KRE to the Official List of the ASX; and

• (h) the in specie distribution, at no cost, of 23,274,518 Vendor Shares (based on Navigator Shares currently issued) and up to 33,092,135 Vendor Shares (if all current Navigator Options on issue are exercised before the Demerger Record Date) ( Distribution Shares ) to Eligible Demerger Shareholders having a registered address in Australia or New Zealand, on the basis of 1 KRE Share for every 20 Navigator Shares held on the Demerger Record Date ( In Specie Distribution ), with Navigator to retain the balance of the Vendor Shares,

(the Demerger Transaction ).

All of the steps described in Sections 2.2(a) to (g) above must occur before the In Specie Distribution described in Section 2.2(h) occurs. It is the Directors’ intention that the In Specie Distribution will occur within 1 month after KRE Shares commence trading on ASX. Navigator will also give the market at least 1 month’s notice prior to the In Specie Distribution occurring.

The number of KRE Shares to be issued under the Priority Offer and distributed under the In Specie Distribution will potentially vary due to the exercise of any Navigator Options prior to the Demerger Record Date, which will cause the number of Navigator Shares on issue to increase.

2.3 Approvals required for the Demerger

• (a) The In Specie Distribution is subject to Shareholder Approval.

• (b) It is the Directors’ intention to only proceed with the Demerger if KRE obtains in principle approval from the ASX for admission of the KRE securities to the Official List of the ASX and having satisfied any conditions to such approval. If KRE fails to gain such approval, the Demerger Transaction will not proceed.

Navigator Shareholders should be aware that there is no guarantee that KRE will be admitted to the Official List of the ASX and accordingly, that the Demerger may not occur.

5

2.4 Timetable

The Demerger Transaction is expected to occur in accordance with the following timetable approved by the ASX:

Timetable The Demerger Transaction is expected to occur in accordance with approved by the ASX:	the following timetable
Event	Date
Public Offer opens	29 March 2011
Priority Offer opens	4 April 2011
Priority Offer Record Date	4 April 2011
KRE Prospectus and Notice of Meeting dispatched to Navigator Shareholders	5 April 2011
Priority Offer closes	21 April 2011
Public Offer closes	5 May 2011
Completion of the Sale Agreement and issue of the Vendor Shares and Vendor Options	6 May 2011
Meeting of Navigator Shareholders to approve the Equal Capital Reduction	6 May 2011
Notice given to Navigator Optionholders of Demerger Record Date	6 May 2011
Last day for trading of Navigator Shares on a “cum” return of capital basis (being the entitlement to receive KRE Shares) Last day for trading of Navigator Options on the existing exercise price basis	9 May 2011
Reset of the exercise price for Navigator Options	To be advised
Start of trading of Navigator Shares on an “ex” return of capital basis (being the entitlement to receive KRE Shares)	10 May 2011
Allotment of KRE Shares under the Priority Offer and the Public Offer	13 May 2011
Demerger Record Date	16 May 2011
Quotation date of KRE Shares and KRE Options	18 May 2011
Navigator distributes Distribution Shares to Eligible Demerger Shareholders	Approximately 1 (one) month after quotation of KRE’s securities
Expected date of dispatch of holding statements to KRE Shareholders	To be advised
Expected date of commencement of trading of Distribution Shares on ASX	To be advised

6

The above dates are indicative only and may change without notice.

Navigator Optionholders who wish to exercise their Navigator Options and acquire Navigator Shares and become entitled to Distribution Shares must ensure that a valid option exercise notice together with cleared funds is received by the Share Registry no later than 16 May 2011 in order to ensure that they are on the Navigator register of shareholders by the Demerger Record Date.

Before exercising their Navigator Options, Navigator Optionholders should be aware of the risk that Navigator Shareholders may not approve the In Specie Distribution or that KRE may not be admitted to the Official List of the ASX and accordingly, that the Demerger may not occur. See Section 2.3 for further information.

3. RESOLUTION – APPROVAL OF REDUCTION OF CAPITAL BY WAY OF ‘IN SPECIE’ DISTRIBUTION BY NAVIGATOR OF KRE SHARES TO ELIGIBLE DEMERGER SHAREHOLDERS

3.1 Overview

• (a) Navigator has entered into the Sale Agreement with its wholly owned subsidiary, KRE, to acquire the Demerger Interest in return for the issue of the Vendor Shares and the Vendor Options.

• (b) Following the successful completion of the Priority Offer and Public Offer, completion of the sale and purchase of the Demerger Interest under the Sale Agreement and the admission of KRE to the Official List of the ASX, Navigator proposes to undertake an equal capital reduction pursuant to sections 256B and 256C of the Corporations Act.

• (c) The Equal Capital Reduction will be effected by way of the In Specie Distribution of the majority of the Vendor Shares held by Navigator to Eligible Demerger Shareholders.

3.2 The In Specie Distribution

• (a) Subject to Shareholder Approval, Navigator will distribute 23,274,518 Vendor Shares (based on Navigator Shares currently issued) and up to 33,092,135 Vendor Shares (if all current Navigator Options on issue are exercised before the Demerger Record Date) to Eligible Demerger Shareholders having a registered address in Australia or New Zealand.

• (b) Under the In Specie Distribution, Eligible Demerger Shareholders will automatically receive 1 KRE Share for every 20 Navigator Shares held on the Demerger Record Date, at no cost. Fractional entitlements to participate in the In Specie Distribution will be rounded up or down to the nearest share.

7

3.3 Effect of the proposed Equal Capital Reduction on Navigator

The Equal Capital Reduction (if approved) would result in Navigator Shareholders receiving from Navigator a pro rata distribution of KRE Shares on the basis of 1 KRE Share for every 20 Navigator Shares held on the Demerger Record Date.

Before the Equal Capital Reduction, the corporate structure of Navigator and KRE is as shown in the diagram below:

==> picture [162 x 129] intentionally omitted <==

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

Navigator Shareholders
100%
Navigator Resources Limited
100%
Kimberley Rare Earths Limited
----- End of picture text -----

After the Equal Capital Reduction (if approved) and based on the current number of Navigator Shares on issue, the corporate structure of Navigator and KRE will be as shown in the diagram below:

==> picture [409 x 185] intentionally omitted <==

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

Navigator Shareholders
100% 65.9%
10.5%
Navigator Resources Kimberley Rare New shareholders
Limited Earths Limited under Public Offer
23.6%
75% 25%
Demerger Asset
----- End of picture text -----

The Demerger’s effect on Navigator’s capital structure, including a pro‐forma Balance Sheet, is detailed in Sections 6.2 and 6.3 below.

3.4

Effect of the Equal Capital Reduction on Navigator Shareholders

If the Equal Capital Reduction is approved and implemented, the value of a Navigator Share before the Equal Capital Reduction will be split and shared between:

• (a) a KRE Share; and

• (b) a Navigator Share.

This may result in a fall in the price of a Navigator Share following the Equal Capital Reduction’s implementation. However, Navigator Shareholders will also hold KRE Shares and an indirect holding in KRE through their shares in Navigator.

8

3.5 The Demerger’s key advantages

The Demerger’s key advantages are:

• (a) Navigator Shareholders will retain their current percentage ownership interest in Navigator’s share capital;

• (b) Navigator Shareholders will retain an interest in the Demerger Asset through their individual pro rata shareholdings in KRE and indirectly through Navigator’s holding in KRE;

• (c) the separation of the rare earths asset allows Navigator to focus on its gold activities and KRE to focus on rare earths activities;

• (d) future capital raisings should be more easily achieved by each individual entity as the purpose of the funding will be either gold or rare earths;

• (e) KRE Shares will be quoted on the ASX, so will be transferable subject to the ASX escrow requirements described in paragraph 3.10 below; and

• (f) the value of the Demerger Asset will be determined by the market.

3.6 The Demerger’s disadvantages

The Demerger’s disadvantages are:

• (a) KRE Shares will be separately quoted on the ASX from the Navigator Shares, and may rise or fall in price;

• (b) KRE will be exposed to the risks set out in Section 10 of the KRE Prospectus;

• (c) there is a taxation consequence in respect of the distribution of the KRE Shares to Navigator Shareholders pursuant to the In Specie Distribution. Details of the general taxation effects of the In Specie Distribution are set out in Annexure A of this Explanatory Statement; and

• (d) Navigator Shareholders will incur additional transaction costs if they wish to dispose of their holding in KRE (ie. brokerage).

Navigator cannot and does not make any prediction as to what the value or price of KRE Shares will be at the time of the In Specie Distribution of KRE Shares to Navigator Shareholders or subsequently.

3.7 Equal Capital Reduction and the requirements of the Corporations Act

The In Specie Distribution of KRE Shares by Navigator to Eligible Demerger Shareholders is an “ Equal Capital Reduction ” for the purposes of the Corporations Act.

The capital being reduced is the KRE Shares being distributed by Navigator to Eligible Demerger Shareholders.

Section 256B of the Corporations Act provides that a company may only reduce its capital if the reduction:

• (a) is fair and reasonable to shareholders as a whole;

9

• (b) does not materially prejudice the company’s ability to pay its creditors; and

• (c) is approved by shareholders in accordance with section 256C of the Corporations Act.

3.7.1 “Fair and reasonable to shareholders as a whole”

• The Directors are of the view that the Equal Capital Reduction is fair and reasonable to Navigator Shareholders as a whole, because the reduction will apply equally to all Navigator Shareholders having regard to the number of Navigator Shares each Shareholder holds on the Demerger Record Date. Each Eligible Demerger Shareholder will receive 1 KRE Share for every 20 Navigator Shares held by them on the Demerger Record Date. Fractional entitlements arising from the Equal Capital Reduction will be rounded up or down to the nearest whole share.

The Directors believe that the Equal Capital Reduction is fair and reasonable to Navigator Shareholders for the reasons set out in this Explanatory Statement and that the Equal Capital Reduction will not prejudice Navigator’s ability to pay its creditors.

• 3.7.2 “Does not materially prejudice the company’s ability to pay its creditors” The Directors have reviewed the Company’s assets and liabilities (including contingent liabilities) and believe that the reduction of capital will not materially prejudice the Company’s ability to pay its creditors.

• 3.7.3 “Approved by shareholders in accordance with section 256C of the Corporations Act” Navigator is seeking approval from Navigator Shareholders, as required by section 256C of the Corporations Act.

Approval must be obtained by way of an ordinary resolution.

In accordance with section 256C of the Corporations Act, copies of this Notice of Meeting and Explanatory Statement were lodged with the ASIC.

3.8 Directors’ Recommendation

After considering all relevant factors, the Directors recommend Navigator Shareholders vote in favour of the Resolution to approve the Equal Capital Reduction for the following reasons:

• (a) following a full and proper assessment of all available information, the Directors believe that the Demerger is in the best interests of Navigator Shareholders; and

• (b) in the opinion of the Directors, the advantages of the Demerger outweigh the disadvantages referred to in Section 3.6.

3.9 Directors’ Interests

No Director will receive any payment or benefit of any kind as a consequence of the Equal Capital Reduction contemplated by the Resolution other than as an existing shareholder or an existing optionholder in the Company.

Dr Allan Trench (Navigator’s chairman) and Mr Ian Macpherson (Navigator’s deputy chairman) are directors of KRE (among others), and will receive fees of $40,000 and $60,000 per annum respectively commencing on the date of admission of KRE’s securities to the Official List of the ASX.

10

The number of Navigator Shares which each Director holds (directly and indirectly) as at the date of this Notice of Meeting and the number of KRE Shares which each Director is likely to hold if the Resolution is passed and the Demerger Transaction proceeds, is set out below:

Director	Navigator Shares held at date of this Notice of Meeting	Expected entitlement to KRE Shares under Priority Offer	Expected entitlement to KRE Shares under In Specie Distribution	Total potential holding in KRE post In Specie Distribution
Allan Trench	2,542,610	254,261	127,130	381,391
David Hatch	1,777,500	177,750	88,875	266,625
Matt Healy	200,000	20,000	10,000	30,000
Ian Macpherson	2,070,444	207,044	103,522	310,566
John Shipp	1,124,574	112,458	56,229	168,687

The table assumes that each Director does not increase or decrease their holding in Navigator prior to the Demerger Record Date (including through the exercise of Navigator Options), and that each Director takes up their full entitlement to KRE Shares under the Priority Offer.

3.10 ASX Escrow

ASX has provided KRE with “in‐principle” advice in relation to ASX Listing Rule 9.7 with respect to the Distribution Shares to be distributed in specie to Navigator Shareholders. The Distribution Shares will not be restricted from being traded on ASX (other than the Distribution Shares distributed to related parties or promoters of KRE or Navigator, or any of their associates).

The Vendor Shares and Vendor Options issued to Navigator pursuant to the Sale Agreement will be escrowed (and therefore restricted from trading) for 24 months from the date of official quotation of the KRE securities. However, the “in‐principle” advice states that the ASX would be likely to waive that escrow requirement to permit Navigator to undertake the In Specie Distribution to Navigator Shareholders. Upon completion of the In Specie Distribution, only those Distribution Shares distributed to related parties or promoters of KRE or Navigator (or any of their associates) would remain restricted for the balance of that 24 month period. The Vendor Shares and Vendor Options retained by Navigator (and not distributed under the In Specie Distribution) remain escrowed for that 24 month period.

The “in‐principle” decision is conditional upon, among other things, Navigator obtaining Shareholder Approval for the In Specie Distribution and, after the listing of KRE, Navigator providing the market with at least 1 month’s notice of the proposed dispatch date of the Distribution Shares the subject of the In Specie Distribution.

4. OVERVIEW OF KRE

The following information is an overview of KRE. All information required to be disclosed under section 710 of the Corporations Act is contained in the KRE Prospectus. Navigator Shareholders should read the KRE Prospectus in its entirety and if necessary seek advice from their accountant, solicitor or other professional adviser without delay.

11

4.1 Background

KRE was incorporated on 2 December 2010 and has not traded since incorporation. It has 2 shares on issue, both of which are held by Navigator. KRE was incorporated for the purpose of purchasing the Demerger Interest from Navigator and then listing on the ASX.

4.2 Purchase of Demerger Interest and farm in by KRE

KRE and Navigator have entered into the Sale Agreement under which KRE agrees to purchase the Demerger Interest in return for 34.4 million KRE Shares and 3 million KRE Options.

KRE and Navigator have entered into the Joint Venture Agreement pursuant to which KRE will have the right to earn a further 30% interest in the Demerger Asset by spending a minimum of $10 million on the Demerger Asset within a period of 4 years commencing on the commencement date of the Joint Venture Agreement, or the period commencing on the commencement date of the Joint Venture Agreement and ending on the date on which KRE expends the $10 million, whichever is earlier.

After KRE has earned the additional 30%, it will have a 55% interest in the Demerger Asset. KRE will then have the right to elect to earn an additional 25% interest in the Demerger Asset (taking its ownership to 80%) by delivering a feasibility study (in bankable form) on mining the Cummins Range Tenement. At that point, Navigator can elect to enter a mining joint venture or convert its 20% interest to a royalty.

4.3 Priority Offer by KRE

KRE proposes to undertake a Priority Offer of 46,549,035 KRE Shares (based on Navigator Shares currently on issue) and up to 66,184,269 KRE Shares (if all current Navigator Options on issue are exercised before the Priority Offer Record Date) to Eligible Priority Offer Shareholders, on the basis of 1 KRE Share for every 10 Navigator Shares they will hold on the Priority Offer Record Date, at an application price of 20 cents per new KRE Share to raise $9.31 million and up to $13.24 million (depending on the number of Navigator Shares on issue at the Priority Offer Record Date).

4.4 Public Offer by KRE

KRE proposes to undertake a Public Offer consisting of 25 million KRE Shares at 20 cents per KRE Share to raise $5 million, together with the balance of any KRE Shares not applied for by Eligible Priority Offer Shareholders under the Priority Offer. The total amount raised under the Public Offer will depend upon the number of KRE Shares applied for under the Priority Offer, as any KRE Shares not applied for by Eligible Priority Offer Shareholders under the Priority Offer may be applied for under the Public Offer.

4.5 Directors of KRE

Whilst it is appropriate that in the period prior to and immediately following the admission of KRE to the Official List of the ASX Navigator has a majority representation on the KRE Board, the KRE Board will act independently of Navigator.

At the date of this Notice of Meeting, KRE has appointed an independent director, Mr Peter Rowe, who has specific rare earths industry experience. A formal executive search is underway for the appointment of a Chief Executive Officer / Managing Director of KRE and further executive management appointments will be considered following the admission of KRE to the Official List of the ASX.

12

The KRE Board is currently comprised of:

The KRE Board is currently comprised of:
Board Member	Position
Ian MacphersonBComm, CA	Chairman and Non‐Executive Director
	(currently a Non‐Executive Director of
	Navigator)
Allan TrenchBSc (Hons. Geology), PhD (Geophysics), MSc	Non‐Executive Director (currently the
(Mineral Economics), MBA (Oxon), GAICD, MAusIMM	Non‐Executive Chairman of Navigator)
Gerry KaczmarekBEc (Accounting), CPA, MAICD	Non‐Executive Director (currently the
	Chief Financial Officer of Navigator)
Peter RoweBSc (Chem. Eng.), FAusIMM, FAICD	Non‐Executive Director

The profile of each KRE Director is contained in Section 4 of the KRE Prospectus.

The Company Secretary of KRE is Darren Crawte.

4.6 Information on KRE Shares

A summary of the rights attaching to ordinary fully paid shares in KRE is contained in Section 11.2 of the KRE Prospectus.

4.7 Operation of KRE

Navigator has agreed to provide KRE with premises and administrative support for a reasonable period of time following the Demerger. KRE will reimburse Navigator for direct costs incurred on KRE’s behalf.

4.8 Effect of the Demerger on KRE

The effect of the Demerger on KRE is described in Section 7 of this Explanatory Statement.

4.9 KRE Prospectus

KRE will lodge with ASIC and make available the KRE Prospectus for the Priority and Public Offers. Persons wishing to acquire KRE Shares under the Priority or Public Offers will need to complete the application forms that will accompany the KRE Prospectus.

5. DEMERGER INTEREST TO BE ACQUIRED BY KRE

5.1 Acquisition of Demerger Interest and Joint Venture

Navigator has entered into the Sale Agreement to transfer the Demerger Interest to KRE. Completion of the sale and purchase of the Demerger Interest and the issue of the Vendor Shares and Vendor Options pursuant to the Sale Agreement are subject to certain conditions, which are summarised in Section 2.2(c) of this Explanatory Statement.

13

KRE has also entered into a Joint Venture Agreement with Navigator under which KRE has the right to earn a further 30% interest in the Demerger Asset by spending a minimum of $10 million on the Demerger Asset within a period of 4 years commencing on the commencement date of the Joint Venture Agreement or during the period commencing on the commencement date of the Joint Venture Agreement and ending on the date on which KRE expends the $10 million, whichever is earlier.

After KRE has earned the additional 30%, it will have a 55% interest in the Demerger Asset. KRE will then have the right to elect to earn an additional 25% interest in the Demerger Asset (taking its ownership to 80%) by delivering a feasibility study (in bankable form) on mining the Cummins Range Tenement. At that point, Navigator can elect to enter a mining joint venture or convert its 20% interest to a royalty.

5.2 Cummins Range Tenement

The Cummins Range Tenement is located 130 kilometres southwest of Halls Creek in the East Kimberley region of Western Australia, on the northern margin of the Great Sandy Desert and comprises one granted Exploration Licence (E80/2232) with an area of 48.5 square kilometres.

The Cummins Range Project to be conducted on the Cummins Range Tenement is described in more detail in Section 3 of the KRE Prospectus.

6. EFFECT OF THE DEMERGER ON NAVIGATOR

6.1 Principal Effect of the Demerger

The principal effect of the Demerger on Navigator will be that:

• (a) Navigator will acquire the Vendor Shares and the Vendor Options, and then distribute between approximately 66% and 96% of the Vendor Shares to Eligible Demerger Shareholders (depending on the number of Navigator Shares on issue at the Demerger Record Date due to the exercise of Navigator Options) and retain the balance of the Vendor Shares and all of the Vendor Options;

• (b) Navigator’s share capital will reduce by the dollar amount of the return of capital; and

• (c) the exercise price of Navigator Options which remain unexercised after the Demerger Record Date will be reduced.

6.2 Impact of the Proposed Demerger on Navigator’s capital structure

At the date of this Notice of Meeting, Navigator has:

• (a) 465,490,350 Navigator Shares on issue;

• (b) 121,450,685 listed Navigator Options on issue which have not been exercised; and

• (c) 74,901,657 unlisted Navigator Options on issue which have not been exercised.

14

The details of Navigator Options on issue are:

Number of Navigator Options	ASX Quotation	Expiry	Current Exercise Price
121,450,685	NAVO	30/11/2011	25 cents
250,000 500,000 150,000 500,000 1,000,000 250,000 500,000 150,000 500,000 2,675,000 7,500,000 1,000,000 500,000 500,000 500,000 4,500,000 1,780,882 8,024,464 6,018,348 14,774,158 19,962,963 1,500,000 500,000 500,000 250,000 250,000 73,168 109,753 182,921	Unlisted	5/12/2011 28/4/2012 19/5/2012 21/7/2012 30/6/2011 5/12/2012 28/4/2012 19/5/2012 21/7/2012 1/06/2011 30/09/2014 30/11/2011 25/05/2013 25/05/2014 25/05/2015 30/10/2014 27/01/2013 7/05/2015 28/05/2015 30/11/2011 1/12/2015 24/02/2014 2/06/2014 1/02/2015 16/11/2014 8/03/2015 24/02/2014 24/02/2014 24/02/2014	22.38 cents 22.38 cents 22.38 cents 22.38 cents 30.00 cents 16.00 cents 22.10 cents 20.50 cents 19.80 cents 30.00 cents 19.50 cents 30.00 cents 25.00 cents 18.07 cents * 19.50 cents 19.50 cents 12.50 cents 12.50 cents 25.00 cents 12.50 cents 29.50 cents 29.50 cents 29.50 cents 29.50 cents 29.50 cents 1.0 cent 1.0 cent 1.0 cent

• Price to be determined based on 5 day VWAP four years before expiry date

The pro‐forma capital structure of Navigator following the Demerger (assuming no Navigator Options are exercised) is set out below:

Options are exercised) is set out below:
Navigator Issued Capital	Number
Navigator Shares before the Demerger	465,490,350
New Navigator Shares to be issued under the Demerger	Nil
Total Navigator Shares on issue following the Demerger	465,490,350
Navigator options on issue – Listed – Unlisted	121,450,685 74,901,657

15

6.3 Pro‐forma Historical Statement of Financial Position of Navigator as at 31 December 2010

The Pro‐forma Historical Statement of Financial Position as at 31 December 2010 has been prepared to show the financial effects on Navigator as if the following transactions had taken place at 31 December 2010:

• (a) The receipt of 34,399,998 KRE Shares at an issue price of 20 cents per share and 3 million KRE Options in exchange for an initial 25% interest in the Demerger Asset. The value of the KRE Shares is recognised as $6,880,000 and the KRE Options as $280,000.

• (b) The sale of a 25% interest in the Demerger Asset with a book cost of $508,000.

• (c) The recognition of a profit on disposal of the Demerger Asset of $6,652,000.

• (d) The number of Navigator Shares on issue is 465,490,350 and no Navigator Options are issued between the date of this Notice of Meeting and the Demerger Record Date.

• (e) The In Specie Distribution of 23,274,518 KRE Shares at a deemed value of 20 cents per share to Navigator Shareholders is recognised at $4,655,000.

• (f) The retention of 11,125,483 KRE Shares at a deemed value of 20 cents per KRE Share and the 3 million KRE Options with a combined value of $2,505,000.

• (g) The In Specie Distribution is deemed by the ATO to be a return of capital and no portion of the In Specie Distribution is treated as being a dividend.

	Audited Pro forma Adjustments 31 Dec‐2010 $ million $million	Pro forma 31 Dec 2010 $million
Current Assets Cash and cash equivalents Trade and other receivables Deferred mining expenditure Inventories Total Current Assets Non‐Current Assets Plant and equipment Mining and development properties Exploration and evaluation Other financial assets Total Non‐Current Assets Total Assets Current Liabilities Trade and other Payables Borrowings Provisions Total Current Liabilities	13,706 2,264 4,674 7,911 28,555 13,332 2,689 23,520 (508) 6,828 2,505 46,369 74,924 7,001 13,218 1,083 21,302	13,706 2,264 4,674 7,911
		28,555
		13,332 2,689 23,012 9,333
		48,366
		76,921
		7,001 13,218 1,083
		21,302

16

Non‐Current Liabilities Borrowings Provisions Total Non‐Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity	696 5,382 6,078 27,380 47,544 71,936 (4,655) 7,976 (32,368) 6,652 47,544	696 5,382
		6,078
		27,380
		49,541
		67,281 7,976 (25,716)
		49,541

7. EFFECT OF THE DEMERGER ON KRE

7.1 Principal effect

The principal effect of the Demerger on KRE (assuming that no Navigator Options are exercised prior to the Demerger Record Date) will be that:

• (a) cash reserves of KRE will increase by up to $13.5 million being the amount raised pursuant to the Priority Offer and the Public Offer prior to KRE being listed on the ASX, less the estimated costs of the Offers;

• (b) non‐current assets will increase from nil to $7.2 million being the fair value of the Demerger Interest transferred from Navigator to KRE;

• (c) the number of fully paid KRE Shares on issue will increase from 2 to 105.9 million;

• (d) the number of KRE Options on issue will increase from nil to up to 6 million; and

• (e) contributed equity will increase by $20.7 million before the expenses of the Offers.

7.2 Impact on KRE ‘s capital structure

The pro‐forma capital structure of KRE following the Demerger is set out in Section 1.8 of the KRE Prospectus.

7.3 Pro‐forma Historical Statement of Financial Position of KRE as at 31 December 2010

A Pro‐forma Historical Statement of Financial Position as at 31 December 2010 has been prepared to show the financial effects on KRE following the Demerger and ASX listing and is set out in Section 8 of the KRE Prospectus.

8. INFORMATION ON NAVIGATOR POST COMPLETION OF THE EQUAL CAPITAL REDUCTION

On completion of the Equal Capital Reduction, Navigator’s focus will be on the ongoing exploration and development of its gold interests.

Details of Navigator’s gold production and exploration interests are set out below.

17

8.1 Projects

Bronzewing Gold Project

The Bronzewing Gold Project ( BGP ) is located approximately 83km northeast of Leinster in Western Australia and comprises the Bronzewing and McClure group of mines within a semi‐ contiguous landholding of approximately 1,000km[2] .

Navigator Resources completed the acquisition of the BGP on 30 September 2009 following which fundraising activities were concluded during the December 2009 quarter. Mining commenced in March 2010 and the processing plant was commissioned and first gold poured in April 2010. During the December 2010 quarter the BGP produced 22,667 ounces of gold. Annualised production capacity will be around 100,000oz, operating initially for five years from seven open pits – the existing Central, Success, Challenger and Cockburn Pits and from new developments at Challenger South, Challenger North and Corboys.

Leonora Gold Project

The 306km[2] Leonora Gold Project ( LGP ) is located 35km northeast of the town of Leonora, and approximately 250km north of Kalgoorlie, Western Australia. In July 2009, Navigator reached agreement with St Barbara Limited ( SBM ) to undertake a trial mining program, with the objective of further advancing feasibility work at Leonora. SBM agreed to batch treat the ore through its Gwalia mill at Leonora for a fixed price per tonne processing charge and this treatment commenced in April 2010. Mining was completed there in early June 2010 and milling of the mined ore was completed in August 2010.

The Company is also undertaking a preliminary engineering study into the cost and potential economic benefits of building a specialised stand alone milling facility to treat the supergene material from the LGP.

8.2 Information concerning Navigator Shares

The rights attaching to the Navigator Shares will not change. However, the net assets of Navigator will change. This effect on net assets is set out in the pro forma balance sheet of Navigator in Section 7.3.

The highest and lowest market sale prices of Navigator Shares on ASX during the 12 months immediately preceding the date of this Notice of Meeting and the respective date of those sales were:

immediately preceding the date were:	of this Notice of Meeting and th	e respective date of those sales
	Price	Date
Highest	25.0 cents	21 October 2010
Lowest	14.5 cents	29 March 2010
Last	20.5 cents	28 March 2011

Navigator Shares are not currently listed for quotation on any other stock exchange.

8.3 Disclosure to ASX

As a disclosing entity, the Company is subject to regular reporting and disclosure obligations. Copies of documents lodged with ASIC in relation to the Company may be obtained for a fee from, or inspected at, an ASIC office.

18

9. ADDITIONAL INFORMATION FOR SHAREHOLDERS

9.1 Overseas Shareholders

Distribution of the KRE Shares to Eligible Demerger Shareholders under the In Specie Distribution will be subject to legal and regulatory requirements in the relevant overseas jurisdictions of Eligible Demerger Shareholders.

If, in the Directors’ opinion, the requirements of any jurisdiction where a Eligible Demerger Shareholder is resident will restrict or prohibit the distribution of KRE Shares proposed, or would impose on Navigator an obligation to prepare a prospectus or other similar disclosure document or otherwise impose on Navigator an undue burden, the KRE Shares to which the relevant Eligible Demerger Shareholder is entitled will be sold by Navigator on their behalf as soon as practicable after their issue and Navigator will account to those Eligible Demerger Shareholders for the net proceeds of sale after deducting the costs and expenses of sale.

As the reduction of capital is represented by the In Specie Distribution of KRE Shares to Eligible Demerger Shareholders and securities prices may vary from time to time (assuming a liquid market is available), the net proceeds of sale to such Eligible Demerger Shareholders may be more or less than the notional dollar value of the reduction of capital as set out in this Explanatory Statement.

9.2 Taxation

Annexure A of this Explanatory Statement contains a general description of the tax consequences that could arise for Eligible Demerger Shareholders as a consequence of the In Specie Distribution. It does not purport to contain a complete analysis of all potential tax implications and is not intended as specific advice to Eligible Demerger Shareholders. The application of tax legislation may vary according to the individual circumstances. It should be emphasised that these comments are general in nature, may not be applicable to your individual circumstances and cannot be relied upon for accuracy or completeness. Eligible Demerger Shareholders should seek their own independent tax advice for their individual circumstances.

In addition to the general information provided in Annexure A, the Company has applied to the Commissioner of Taxation for a specific ruling on the value being distributed in the KRE Shares. This advice will be provided to all Navigator Shareholders upon receipt.

Navigator Shareholders who are not residents of Australia for tax purposes should also seek their own guidance in relation to the likely taxation consequences arising from the In Specie Distribution under the laws of the country of their residence.

9.3 Lodgement with the ASIC

The Company has lodged with the ASIC a copy of this Notice of Meeting in accordance with section 256C(5) of the Corporations Act.

9.4 Indicative Timetable

If the Resolution is passed, the Equal Capital Reduction will take effect in accordance with the timetable set out in Appendix 7A (paragraph 5) of the ASX Listing Rules. An indicative timetable is set out in Section 2.4.

19

9.5 Offers that require disclosure under a prospectus and Secondary Trading

The Corporations Act restricts:

• (a) Navigator from distributing the Distribution Shares to the Navigator Shareholders by way of the In Specie Distribution, without issuing a prospectus; and

• (b) Navigator Shareholders from on‐selling their Distribution Shares within 12 months of receiving them under the In Specie Distribution.

Accordingly, this Notice of Meeting is accompanied by the KRE Prospectus which will allow:

• (a) Navigator to distribute the Distribution Shares to the Navigator Shareholders, subject to Shareholder Approval; and

• (b) Navigator Shareholders to on‐sell their Distribution Shares within 12 months of receiving them under the In Specie Distribution unless the ASX escrow described in paragraph 3.10 above applies.

9.6 Other Material Information

There is no information material to the making of a decision by a Navigator Shareholder whether or not to approve the Resolution (being information that is known to any of the Directors and which has not been previously disclosed to Navigator Shareholders) other than as disclosed in this Explanatory Statement.

10. RISK FACTORS

If the Demerger proceeds then KRE’s activities will be subject to a number of risks which may impact respective future financial performance and the market price at which KRE securities trade. Some of these risks can be mitigated by the use of safeguards and appropriate controls. However, others are outside KRE’s control and cannot be mitigated. Therefore, investors who acquire KRE securities may be exposed to a number of risks. These risks can be broadly classified as risks general to investing in the share market and the risks specific to an investment in KRE’s securities and KRE’s underlying business.

Section 10 of the KRE Prospectus sets out the identified major risks associated with holding KRE securities. That list is not exhaustive and Shareholders should read that document in its entirety before making a decision. Investors should also have regard to their own investment objectives and financial circumstances, and should consider seeking appropriate independent financial advice.

20

GLOSSARY

$ means Australian dollars.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited ACN 008 624 691 or as applicable, the Australian Securities Exchange.

ASX Listing Rules means the Listing Rules of ASX.

Board means the board of directors of the Company.

Company means Navigator Resources Limited ABN 82 063 366 487.

Corporations Act means the Corporations Act 2001 (Cth) .

Cummins Range Project means the exploration and potential development of the Cummins Range Tenement.

Cummins Range Tenement means tenement E80/2232 located in the East Kimberley region of Western Australia, and includes any renewal, extension, variation or other substitution of that tenement.

Demerger means the proposed demerger referred to in Section 2.

Demerger Asset means the Cummins Range Tenement.

Demerger Interest is defined in Section 2.1(e).

Demerger Record Date means 5.00pm Perth time on 16 May 2011.

Demerger Transaction means the transaction described in Section 2.2(a) to (h) inclusive.

Directors means the current directors of the Company.

Distribution Shares is defined in Section 2.2(h).

Eligible Demerger Shareholder means a registered holder of Navigator Shares on the Demerger Record Date.

Eligible Priority Offer Shareholder means a registered holder of Navigator Shares on the Priority Offer Record Date with a registered address in Australia.

Equal Capital Reduction means the reduction of capital by Navigator referred to in Section 3.

Explanatory Statement means the explanatory statement accompanying the Notice of Meeting.

Extraordinary General Meeting means the meeting convened by the Notice of Meeting.

In Specie Distribution is defined in Section 2.2(h).

Joint Venture Agreement is defined in Section 2.1(f).

KRE means Kimberley Rare Earths Limited ACN 147 678 779.

21

KRE Board means the board of directors of KRE.

KRE Directors means the current directors of KRE.

KRE Option means an option to acquire a KRE Share with an exercise price of 25 cents, an expiry date being 3 years after completion of the transfer of the Demerger Interest in accordance with the Sale Agreement and otherwise on terms set out in Section 11.5 of the KRE Prospectus.

KRE Prospectus means the replacement prospectus dated 25 March 2011 to be issued by KRE in respect of the Priority Offer and the Public Offer and which accompanies this Notice of Meeting.

KRE Share means a fully paid ordinary share in the capital of KRE.

KRE Shareholder means a holder of a KRE Share.

Navigator means Navigator Resources Limited ABN 82 063 366 487.

Navigator Option means an option to acquire a Navigator Share.

Navigator Optionholder means the registered holder of a Navigator Option.

Navigator Share means a fully paid ordinary share in the capital of the Company.

Navigator Shareholder means a holder of a Navigator Share.

Notice of Meeting or Notice of Extraordinary General Meeting means this notice of general meeting including the Explanatory Statement.

Offers mean the Priority Offer and the Public Offer.

Priority Offer is defined in Section 2.2(a).

Priority Offer Record Date has the meaning given in the timetable set out in Section 2.4.

Public Offer is defined in Section 2.2(b).

Resolution means the resolution set out in the Notice of Meeting.

RMB means RMB Australia Holdings Limited ACN 003 201 214 or RMB Resources Limited ACN 074 930 715, as applicable.

Sale Agreement is defined in Section 2.1(e).

Shareholder Approval is defined in Section 2.2(f).

Vendor Options is defined in Section 2.1(e).

Vendor Shares is defined in Section 2.1(e).

WST means Western Standard Time as observed in Perth, Western Australia.

22

ANNEXURE A

TAX IMPLICATIONS FOR NAVIGATOR SHAREHOLDERS

The information in this Annexure A should not be viewed as specific tax advice and is intended as a general guide only. Each Navigator Shareholder should obtain specific taxation advice on the treatment of the In Specie Distribution, taking into account their particular circumstances.

The summary in this section contains a general description of the tax consequences that could arise for Eligible Demerger Shareholders as a consequence of the In Specie Distribution. It does not purport to contain a complete analysis of all potential tax implications and is not intended as specific advice to Eligible Demerger Shareholders. The application of tax legislation may vary according to the individual circumstances. It should be emphasised that these comments are general in nature, may not be applicable to your individual circumstances and cannot be relied upon for accuracy or completeness. Eligible Demerger Shareholders should seek their own independent tax advice for their individual circumstances.

Navigator Shareholders who are not residents of Australia for tax purposes should also seek their own guidance in relation to the likely taxation consequences arising from the In Specie Distribution under the laws of the country of their residence. The general description in this Annexure A is only relevant in relation to the Australian taxation position of Eligible Demerger Shareholders who hold Navigator Shares on capital account and does not apply to Eligible Demerger Shareholders who hold Navigator Shares on revenue account or as trading stock.

An In Specie Distribution or part of an In Specie Distribution can in certain circumstances be treated as a dividend for Australian tax purposes. In view of this, the value of the KRE Shares to be distributed in specie will comprise the following components:

• return of shareholder capital; and

• dividend.

The dividend component will be that amount of the In Specie Distribution by which the Company does not reduce share capital. The Company is in the process of obtaining a determination from the Commissioner of Taxation ( Commissioner ) regarding what it considers an appropriate division of the value of the KRE Shares between return of shareholder capital and dividend. This will be communicated to Navigator Shareholders in due course. However, the Commissioner, upon a review of the In Specie Distribution, may make a determination under section 45B of the Income Tax Assessment Act 1936 that some or all of the reduction in capital is in substitution of a dividend. This would result in this additional amount being treated as an assessable unfranked dividend.

To provide certainty for Navigator Shareholders, the Company will make an application to the Commissioner for a Class Ruling. The purpose of this is to confirm that the tax implications will be as set out below and that the Commissioner will not seek to apply section 45B to the decided apportionment of the value of the KRE Shares allocated as a reduction in capital.

Any Class Ruling issued by the Commissioner will apply only to Navigator Shareholders who are Australian residents for taxation purposes and who hold their shares as a capital asset. The Company cannot provide any assurances that the requested Class Ruling will in fact be issued, or that it will confirm the position set out below. The tax implications from the In Specie Distribution may therefore differ from that set out below.

The Company will make the Class Ruling available on its website (www.navigatorresources.com.au).

23

Treatment of Dividend Component of In Specie Distribution

• (a) The Company will not have the ability to attach franking credits to that portion of the In Specie Distribution that is a dividend.

• (b) Australian resident Eligible Demerger Shareholders will be taxed at marginal rates on the value of the dividend.

• (c) For Australian resident Eligible Demerger Shareholders who have not advised the Company of their tax file number (TFN) prior to the In Specie Distribution, the Company will have an obligation to remit withholding tax to the Australian Taxation Office ( ATO ) based on the value of the dividend.

• (d) The Company reserves the right to retain from each Eligible Demerger Shareholder such number of KRE Shares as equates to the amount of withholding tax that has to be withheld and paid to the ATO on behalf of that Eligible Demerger Shareholder which will be done as soon as practicable after the Demerger Record Date as follows:

• (i) The Company will calculate the amount of withholding tax that has to be withheld and paid to the ATO on behalf of that Eligible Demerger Shareholder by reference to the value of the KRE Shares as at the Demerger Record Date.

• (ii) The Company will calculate the number of KRE Shares it has to retain and sell to pay withholding tax to the ATO on behalf of that Eligible Demerger Shareholder.

• (iii) The Company will retain and sell on behalf of that Eligible Demerger Shareholder such number of KRE Shares as required for the Company to pay withholding tax to the ATO on behalf of that Eligible Demerger Shareholder. The price of the KRE Shares may vary from time to time (assuming a liquid market is available) and as such the Company will retain for sale such number of KRE Shares as it shall in its absolute discretion determine necessary to sell to pay all of the withholding tax to the ATO.

• (iv) On completion of the sale of the retained KRE Shares and the payment of the withholding tax to the ATO on behalf of that Eligible Demerger Shareholder the Company will account to the Eligible Demerger Shareholder for the sale and payment to the ATO and pay the net proceeds of sale after the payment to the ATO to the Eligible Demerger Shareholder.

• (v) The In Specie Distribution is being represented and satisfied by the distribution to Eligible Demerger Shareholders of KRE Shares the prices for which may vary from time to time (assuming a liquid market is available) and as such the net proceeds of sale payable to Eligible Demerger Shareholders, after the payment to the ATO, may be more or less than the notional dollar value of the In Specie Distribution as in this Explanatory Statement.

• (e) If the Company retains and sells KRE Shares on behalf of an Eligible Demerger Shareholder then such a sale may give rise to a tax liability to Eligible Demerger Shareholders depending on their specific circumstances.

Treatment of Return of Shareholder Capital Component of In Specie Distribution

• (a) Eligible Demerger Shareholders will not be entitled to roll‐over relief from capital gains tax with respect to the receipt of KRE Shares by way of In Specie Distribution.

24

• (b) If the return of capital component of the value of the KRE Shares received by an Eligible Demerger Shareholder is less than the cost base of the Eligible Demerger Shareholder’s Shares, then the receipt of the return of capital should not be subject to tax.

• (c) For the purpose of calculating any capital gain or loss on the future disposal of Navigator Shares, the cost base of each Navigator Share will be reduced by the return of capital component of value of the KRE Shares received.

• (d) If the return of capital component of the value of the KRE Shares received by an Eligible Demerger Shareholder is greater than the existing cost base of the Eligible Demerger Shareholder’s Navigator Shares, then a taxable capital gain may arise at the time of the In Specie Distribution becoming effective. Also, for the purpose of calculating any capital gain or loss on the future disposal of Navigator Shares, the cost base of each Navigator Share will be reduced to nil.

25

==> picture [42 x 42] intentionally omitted <==

NAVIGATOR RESOURCES LIMITED ABN: 82 063 366 487 PROXY FORM

Company Secretary, Navigator Resources Limited PO Box 276, WEST PERTH WA 6872 Ph: +61 8 9226 5311; Fax: +61 8 9226 5411

EXTRAORDINARY GENERAL MEETING

I/We

being a member(s) of Navigator Resources Limited and entitled to attend and vote at the Extraordinary General Meeting, hereby appoint

(Name of proxy)

or failing the person/body corporate so named or, if no person/body corporate is named, the Chair of the Extraordinary General Meeting, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, as the proxy sees fit, at the Extraordinary General Meeting of the Company to be held at 2.30pm (WST) on Friday, 6 May 2011 at The Celtic Club, 48 Ord Street, West Perth, Western Australia (and at any adjournment thereof) (Meeting). If no directions are given, the Chair will vote in favour of all of the Resolutions.

Voting on Business of the Extraordinary General Meeting

Please indicate your voting intentions by placing an X in the appropriate box.

FOR AGAINST ABSTAIN

Resolution 1 – Approval of Reduction of Capital by way of “In Specie Distribution” of KRE Shares

OR

Place an X in the box if the Chair of the Extraordinary General Meeting is appointed as your proxy, or may be appointed by default, and you do not wish to direct your proxy how to vote as your proxy in respect of the Resolution.

By marking this box, you acknowledge that the Chair of the Extraordinary General Meeting may exercise your proxy even if he has an interest in the outcome of the Resolution and that votes cast by the Chair of the Extraordinary General Meeting for the Resolution other than as proxy holder will be disregarded because of that interest.

If you do not mark this box, and you have not directed your proxy how to vote, the Chair will not cast your votes on the Resolution and your votes will not be counted in calculating the required majority if a poll is called on the Resolution.

If you mark the abstain box for a particular Resolution, you are directing your proxy not to vote on the Resolution on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

If two proxies are being appointed, the proportion of voting rights this proxy represents is ___ %.

Signed this day of 2011

By: Individuals and joint holders Signature Signature Signature

==> picture [226 x 117] intentionally omitted <==

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

Companies (affix common seal if appropriate)
Director
Sole Director &
Sole Company Secretary
Director/
Company Secretary
----- End of picture text -----

INSTRUCTIONS FOR COMPLETING ‘PROXY FORM’

1. A member entitled to attend and vote at a general meeting is entitled to appoint not more than two (2) proxies to attend and vote on a poll on their behalf. The appointment of a second proxy must be done on a separate copy of the Proxy Form. If two (2) proxies are appointed, each proxy must be allocated a proportion of the member’s voting rights. If a member appoints two (2) proxies and the appointment does not specify this proportion, each proxy may exercise half (½) the votes. A duly appointed proxy need not be a member of the Company.

2. Where a member’s holding is in one (1) name the holder must sign the Proxy Form. Where the holding is in more than one (1) name, all members should sign.

3. Where a Proxy Form or form of appointment of corporate representative is lodged and is executed under a power of attorney, the power of attorney must be lodged in like manner as this Proxy Form.

4. Corporate members should comply with the execution requirements set out on the Proxy Form or otherwise with the provisions of section 127 of the Corporations Act. Section 127 of the Corporations Act provides that a company may execute a document without using its common seal if the document is signed by:

5. two (2) directors of the company;

6. a director and a company secretary of the company; or

7. for a proprietary company that has a sole director who is also the sole company secretary – that director.

For the Company to rely on the assumptions set out in section 129(5) and (6) of the Corporations Act, a document must appear to have been executed in accordance with section 127(1) or (2). This effectively means that the status of the persons signing the document or witnessing the affixing of the seal must be set out and conform to the requirements of section 127(1) or (2) as applicable. In particular, a person who witnesses the affixing of a common seal and who is the sole director and sole company secretary of the company must state that next to his or her signature.

1. Completion of a Proxy Form will not prevent individual members from attending the Extraordinary General Meeting in person if they wish. Where a member completes and lodges a valid Proxy Form and attends the Extraordinary General Meeting in person, then the proxy’s authority to speak and vote for that member is suspended whilst the member is present at the Extraordinary General Meeting.

2. To vote by proxy, please complete and sign the enclosed Proxy Form and return by:

3. hand delivery to the Company’s registered office at Ground Floor, 45 Richardson Street, West Perth 6005; or

4. post addressed to Navigator Resources Limited, PO Box 276, West Perth WA 6872; or

5. facsimile at +61 8 9226 5411; or

6. email to navigator@navigatorresources.com.au,

so that it is received not later than 2.30pm (WST) on 4 May 2011.

Proxy forms received later than this time will be invalid.