AUDALIA RESOURCES LIMITED — AGM Information 2012

Oct 18, 2012

ABN 49 146 035 690

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NOTICE OF ANNUAL GENERAL MEETING EXPLANATORY MEMORANDUM

PROXY FORM

Date of Meeting Monday, 26 November 2012

Time of Meeting 11.00 am (WST)

Place of Meeting Studio Two Crown Perth Great Eastern Highway Burswood, Western Australia 6100

ANNUAL REPORT

The 2012 Annual Report is available from the Company’s website via the following link: www.audalia.com.au.

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NOTICE OF ANNUAL GENERAL MEETING

The Annual General Meeting of Audalia Resources Limited ( Company or Audalia ) is to be held at Studio Two, Crown Perth, Great Eastern Highway, Burswood, Western Australia 6100 on Monday, 26 November 2012 commencing at 11.00 am (WST).

The Explanatory Statement that accompanies and forms part of this Notice describes the matters to be considered at this meeting.

BUSINESS

Financial Report – Year Ended 30 June 2012

To receive and consider the financial report and the reports of the Directors and of the Auditor for the financial year ended 30 June 2012.

Resolution 1 – Non-Binding Resolution to Adopt Remuneration Report

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

“To adopt the Remuneration Report as set out in the Annual Report for the year ended 30 June 2012."

Voting Exclusion Statement: The Company will disregard any votes cast on Resolution 1 (in any capacity, whether as proxy or as shareholders) by any of the following persons:

• (a) Key Management Personnel; and

• (b) Closely Related Parties of Key Management Personnel.

However, the Company need not disregard a vote if:

• (c) it is cast by a person as a proxy appointed in accordance with the directions of the proxy form that specifies how the proxy is to vote on the resolution contained in Resolution 1; and the vote is not cast on behalf of a person described in subparagraphs (a) and (b) above; or

• (d) it is cast by the chair of the meeting as proxy appointed in accordance with the directions of the proxy form for a person who is entitled to vote, and such appointment on the proxy form expressly authorises the chair to exercise the proxy even if the resolution is connected directly with the remuneration report; and the vote is not cast on behalf of a person described in subparagraphs (a) and (b) above.

Resolution 2 – Re-election of Director – Dato Soo Kok Lim

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

“That Dato Soo Kok Lim, who retires by rotation in accordance with clause 13.2 of the Company’s Constitution, be re-elected as a Director of the Company."

Resolution 3 – Approval of Additional 10% Placement Capacity

To consider and, if thought fit to pass, the following resolution as a specia l resolution :

“That, for the purpose of ASX Listing Rule 7.1A and for all other purposes, Shareholders approve the issue of Equity Securities up to 10% of the issued capital of the Company (at the time of issue) calculated in accordance with the formula prescribed in Listing Rule 7.1A.2 and on the terms and conditions set out in the Explanatory Statement."

Voting Exclusion Statement: The Company will disregard any votes cast on Resolution 3 by any person who may participate in the proposed issue and any person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities if the resolution is passed, and any person associated with those persons.

However, the Company will not disregard a vote if it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or the vote is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

BY ORDER OF THE BOARD

Karen Logan Company Secretary

Dated: 19 October 2012

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I M P O R T A N T N O T E S

1. A member entitled to attend and vote is entitled to appoint not more than two proxies to attend and vote on behalf of the member. A proxy need not be a member of the Company, but must be a natural person (not a corporation). A proxy may also be appointed by reference to an office held by the proxy (eg “the Company Secretary”).

2. Where more than one proxy is appointed, each proxy may be appointed to represent a specified proportion of the member’s voting rights. If no such proportion is specified, each proxy may exercise half of the member’s votes.

3. A proxy form is enclosed. A separate form must be used for each proxy. An additional form can be obtained by writing to the Company at PO Box 3438, Nedlands WA 6909 or by fax to (61 8) 6389 2588. Alternatively, you may photocopy the enclosed form.

4. A duly completed proxy form and (where applicable) any power of attorney or a certified copy of the power of attorney must be received by the Company at its registered office or the address or fax number set out below, not less than 48 hours before the time for commencement of the meeting. Please send by post to PO Box 3438, Nedlands WA 6909 or by fax to (61 8) 6389 2588.

5. The Company will accept proxy appointments by a corporate member executed in accordance with either section 127(1) (not under seal) or section 127(2) (under seal) of the Corporations Act.

6. For the purposes of section 1074E(2) of the Corporations Act and regulation 7.11.37 of the Corporations Regulations 2001, the Company determines that members holding ordinary shares at 11.00 am WST on Saturday, 24 November 2012 will be entitled to attend and vote at the Annual General Meeting.

7. The Explanatory Memorandum attached to this Notice forms part of this Notice.

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E X P L AN AT O R Y M E M O R AN D U M

This Explanatory Memorandum has been prepared to provide shareholders with material information to enable them to make an informed decision on the business to be conducted at the Annual General Meeting of Audalia Resources Limited ( Company or Audalia ).

The directors recommend shareholders read this Explanatory Memorandum in full before making any decision in relation to the resolutions.

Financial Statements and Report

Under the Corporations Act, the directors of the Company must table the financial report, the directors’ report and the auditor’s report for Audalia for the year ended 30 June 2012 at the meeting.

These reports are set out in the 2012 Annual Report. Shareholders who elected to receive a printed copy of annual reports should have received the 2012 Annual Report with this Notice of Annual General Meeting. In accordance with section 314 (1AA)(c) of the Corporations Act, the Company advises the 2012 Annual Report is available from the Company’s website (www.audalia.com.au).

Shareholders will be given reasonable opportunity at the meeting to ask questions and make comments on the financial report, the directors’ report and the auditor’s report.

Resolution 1 – Adoption of Remuneration Report

Under the Corporations Act, the Company is required to include, in the directors’ report, a detailed Remuneration Report setting out the prescribed information in relation to the remuneration of directors and executives of Audalia and the Company’s remuneration practices.

Shareholders will be given reasonable opportunity at the meeting to ask questions and make comments on the Remuneration Report.

The Remuneration Report is required to be submitted for adoption by a resolution of Shareholders at the meeting. The vote on this resolution is advisory only and does not bind the directors or the Company. However, the Board will take the outcome of the vote into consideration when reviewing remuneration practices and policies.

Board recommendation

As all Directors are excluded from voting on this Resolution, no recommendation is made.

Resolution 2 – Re-election of Director – Dato Soo Kok Lim

Clause 13.2 of the Constitution requires that at every annual general meeting, one-third of the Directors for the time being, or if their number is not a multiple of 3, then such number as is appropriate to ensure that no director other than Managing Director holds office for more than 3 years, shall retire from office. A retiring director is eligible for re-election.

Dato Lim retires by rotation in accordance with the Company’s Constitution and, being eligible, offers himself for reelection.

Dato Lim is a graduate in Law with Honours from The University of Kent at Canterbury, England in 1989. In 1990, he obtained the degree of Utter Barrister Gray’s Inn, England. He was called to the Bar in Malaysia in 1991. After a brief career in a local law firm in Kuala Lumpur, he established his own practice in 1993 and operated it until 1999. He was appointed a Commissioner for Oaths by the Chief Justice of Malaysia in 1999. Dato Lim is also a Notary Public appointed by the Attorney General of Malaysia.

He is also currently a director of a number of companies listed on Bursa Malaysia (formerly known as the Kuala Lumpur Stock Exchange). Dato Lim is actively involved with the management of significant family investments in property development, hotel management and other commercial interests. He has substantial business and legal experience in investments in Malaysia, Australia, China and other South East Asian countries.

Board recommendation

The Board (other than Dato Lim) recommends Shareholders vote in favour of the Resolution.

Voting intention

The Chairman of the meeting intends to vote all undirected proxies in favour of Resolution 2.

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Resolution 3 – Approval of Additional 10% Placement Capacity

Background

Listing Rule 7.1A enables eligible entities to issue Equity Securities up to 10% of their issued share capital over a 12 month period after the annual general meeting at which a resolution for the purposes of Listing Rule 7.1A is passed by special resolution ( Additional 10% Placement Capacity ). The Additional 10% Placement Capacity is in addition to the Company’s 15% placement capacity under Listing Rule 7.1.

An entity will be eligible to seek approval under Listing Rule 7.1A if:

• (a) the entity has a market capitalisation of $300 million or less (excluding restricted securities and securities quoted on deferred settlement basis); and

• (b) the entity is not included in the S&P ASX 300 Index.

The Company is an eligible entity for the purposes of Listing Rule 7.1A.

The number of Equity Securities to be issued under the Additional 10% Placement Capacity will be determined in accordance with the formula set out in Listing Rule 7.1A.2.

The Company is putting Resolution 3 to Shareholders to seek approval to issue additional Equity Securities under the Additional 10% Placement Capacity. It is anticipated that funds raised by the issue of Equity Securities under the Additional 10% Placement Capacity would be applied towards general working capital.

Listing Rule 7.1A

The effect of Resolution 3 will be to permit the Company to issue the Equity Securities under Listing Rule 7.1A during the Additional Placement Period (as defined below) without using the Company’s 15% placement capacity under Listing Rule 7.1.

Equity Securities issued under the Additional 10% Placement Capacity must be in the same class as an existing quoted class of Equity Securities of the Company. As at the date of this Notice the Company has two classes of quoted securities on issue: Shares (ASX: ACP) and Listed Options (ACP: ACPO).

Based on the number of shares on issue at the date of this Notice, the Company will have 80,160,001 Shares on issue and therefore, subject to Shareholder approval being sought under Resolution 3, 8,016,000 Equity Securities will be permitted to be issued in accordance with Listing Rule 7.1A. Shareholders should note that the calculation of the number of Equity Securities permitted to be issued under the Additional 10% Placement Capacity is a moving calculation and will be based on the formula set out in Listing Rule 7.1A at the time of issue of the Equity Securities. The table below demonstrates various examples as to the number of Equity Securities that may be issued under the Additional 10% Placement Capacity.

Resolution 3 is a special resolution, requiring approval of 75% of the votes cast by Shareholders present and eligible to vote (in person, by proxy, by attorney or, in the case of a corporate shareholder, by a corporate representative) in order to be passed.

Specific Information required by Listing Rule 7.3A

The following information in relation to the Shares to be issued is provided to Shareholders for the purposes of Listing Rule 7.3A:

• (a) The Equity Securities will be issued at an issue price of not less than 75% of the volume weighted average price for the Company’s Equity Securities over the 15 Trading Days immediately before:

• i. the date on which the price at which the Equity Securities are to be issued is agreed; or

• ii. if the Equity Securities are not issued within 5 Trading Days of the date in paragraph (i) above, the date on which the Equity Securities are issued.

• (b) If Resolution 6 is approved by shareholders and the Company issues Equity Securities under the Additional 10% Placement Capacity, the existing Shareholders’ economic and voting interests in the Company will be diluted. There is also a risk that:

• i. the market price for the Company’s Equity Securities may be significantly lower on the date of the issue of the Equity Securities than on the date of the meeting; and

• ii. the Equity Securities may be issued at a price that is at a discount to the market price for the Company’s Equity Securities on the issue date,

which may have an effect on the amount of funds raised by the issue of the Equity Securities.

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The table below shows the dilution of existing Shareholders of the issue of the maximum number of Equity Securities under the Additional 10% Placement Capacity using variables for the number of ordinary securities for variable “A” (as defined in Listing Rule 7.1A) and the market price of Shares. It is noted that the variable “A” is based on the number of ordinary securities the Company has on issue at the time of the proposed issue of Equity Securities.

The table shows:

• i. examples where variable “A” is at its current level and where variable “A” has increased by 50% and 100%;

• ii. examples of where the issue price of ordinary securities is the current market price as at close of trade on 8 October 2012, being $0.16, ( current market price ), where the issue price is halved, and where it is doubled; and

• iii. the dilutionary effect will always be 10% if the maximum number of Equity Securities that may be issued under the Additional 10% Placement Capacity are issued.

Variable "A"	Number of Shares issued and funds raised under the Additional 10% Placement Capacity and dilution effect	Dilution	Dilution	Dilution
		$0.08 Issue Price at half the current marketprice	$0.16 Issue Price at current marketprice	$0.32 Issue Price at double the current marketprice
Current Variable A 80,160,001 Shares	Shares issued	8,016,000	8,016,000	8,016,000
	Funds raised	$641,280	$1,442,880	$2,885,762
	Dilution	10%	10%	10%
50% increase in current Variable A 120,240,002Shares	Shares issued	12,024,000	12,024,000	12,024,000
	Funds raised	$961,920	$1,923,840	$3,847,680
	Dilution	10%	10%	10%
100% increase in current Variable A 160,320,002shares	Shares issued	16,032,000	16,032,000	16,032,000
	Funds raised	$1,282,560	$2,565,120	$5,130,240
	Dilution	10%	10%	10%

Note this table assumes:

• i. No Options are exercised before the date of the issue of the Equity Securities;

• ii. The issue of Equity Securities under the Additional 10% Placement Capacity consists only of Shares.

• (c) Approval of the Additional 10% Placement Capacity will be valid from the date of the Annual General Meeting and will expire on the earlier of:

• i. the date that is 12 months after the date of the Annual General Meeting; and

• ii. the date of the approval by Shareholders of a transaction under Listing Rule 11.1.2 (a significant change to that nature of scale of activities) or Listing Rule 11.2 (disposal of main undertaking),

or such longer period if allowed by ASX ( Additional Placement Period ).

• (d)

• The Company may seek to issue the Equity Securities for the following purposes:

• i. cash consideration. If Equity Securities are issued for cash consideration, the Company intends to use the funds raised towards acquisition of new assets or investments (including expenses associated with such acquisitions), continued exploration of the Company’s Gascoyne, Medcalf and Lake Johnston Projects and for general working capital purposes.

• ii. non-cash consideration for the acquisition of new assets and investments in the resource sector. If Equity Securities are issued for non-cash consideration, the Company will comply with Listing Rule 7.1A.3 in relation to such issue and will release the valuation of the non-cash consideration to the market.

The Company will comply with the disclosure obligations under Listing Rule 7.1A.4 and 3.10.5A upon issue of any Equity Securities.

• (e) The Company’s allocation policy for the issue of Equity Securities under the Additional 10% Placement Capacity will be determined having regard to the prevailing market conditions at the time of the proposed issue.

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The identity of the allottees under the Additional 10% Placement Capacity will be determined on a case-bycase basis having regard to factors which may include the following:

• i. the methods of raising funds that are available to the Company, including the time and market exposure associated with various methods of raising capital applicable at the time of raising;

• ii. the dilutionary effect of the proposed issue of the Equity Securities on existing Shareholders at the time of proposed issue of Equity Securities;

• iii. the financial situation and solvency of the Company; and

• iv. advice from professional advisers, including corporate, financial and broking advisers (if applicable).

The Company notes that:

• i. any funds raised from the issue of Shares under the Additional 10% Placement Capacity are likely to be applied towards continued exploration of the Company’s Gascoyne, Medcalf and Lake Johnston Projects and for general working capital purposes;

• ii. it is not possible to determine whether any existing Shareholders, or class of Shareholders, would be invited to apply for any Shares to be issued under the Additional 10% Placement Capacity, or to determine the category of any new investors that may be invited to participate in such a fundraising;

• iii. prior to undertaking any fundraising, the Board will have regard to whether it is in the Company’s best interests to structure such a fundraising as an entitlements issue to all of the Company’s existing Shareholders at that time; and

• iv. the reasons for undertaking any particular issue under the Additional 10% Placement Capacity would be announced at the time the Company sought to issue shares under that Additional 10% Placement Capacity.

As at the date of this Notice, the allottees under the Additional 10% Placement Capacity have not been determined. They may, however, include substantial Shareholders and/or new Shareholders who are not related parties or associates of related parties of the Company.

Furthermore, if the Company is successful in acquiring new assets or investments, it is likely that the allottees under the Additional 10% Placement Capacity will be the vendors of the new resource assets or investment.

• (f) The Company has not previously obtained shareholder approval under Listing Rule 7.1A.

• (g) A voting exclusion statement is included in the Notice. At the date of the Notice, the Company has not determined its allocation policy for the issue of Equity Securities under the Additional 10% Placement Capacity. The Company has not, and has not yet determined to approach, any particular existing security holders or an identifiable class of existing security holders to participate in an offer under the Additional 10% Placement Capacity, and therefore no Shareholder will be excluded from voting on Resolution 3.

Board recommendation

The Board recommends Shareholders vote in favour of Resolution 3.

Voting intention

The Chairman of the meeting intends to vote all undirected proxies in favour of Resolution 3.

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DEFINITIONS

$ means an Australian dollar.

Annual General Meeting means the annual general meeting the subject of this Notice.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited (ACN 008 624 691) and, where the context permits, the Australian Securities Exchange operated by ASX Limited.

ASX Listing Rules and Listing Rules mean the official listing rules of ASX.

Board means the board of directors of the Company.

Closely Related Parties has the meaning given to that term in the Corporations Act.

Company or Audalia means Audalia Resources Limited (ACN 146 035 690).

Constitution means the Company’s constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Director means a Director of the Company and Directors means the directors of the Company.

Equity Securities has the same meaning as in the ASX Listing Rules.

Explanatory Memorandum means this explanatory memorandum accompanying the Notice of Annual General Meeting .

Key Management Personnel has the meaning given to that term in the Australian Accounting Standards.

Listed Options means the Company’s listed Options, each Option having an exercise price of $0.20 and an expiry date of 28 April 2014.

Notice or Notice of Meeting means the notice of annual general meeting accompanying this Explanatory Memorandum.

Option means an option to acquire a Share.

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

Shareholder means a shareholder of the Company.

Trading Day means a day determined by ASX to be a trading day in accordance with the Listing Rules.

WST means Western Standard Time.

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P R O X Y F O R M

MR SAM SAMPLE UNIT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE WA 6060

1. Appointment of Proxy

I/We being a member/s of Audalia Resources Limited hereby appoint

the Chairman PLEASE NOTE : Leave this box blank if of the Meeting OR you have selected the Chairman of the Meeting. Do not insert your own name(s).

or, failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the Annual General Meeting of Audalia Resources Limited to be held at Studio Two, Crown Perth, Great Eastern Highway, Burswood, Western Australia 6100 at 11.00 am (WST) on Monday, 26 November 2012 and at any adjournment of that meeting.

The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business.

Chairman authorised to exercise proxies on remuneration-related matters: If I/we appoint the Chairman of the Meeting as my/our proxy (or the Chairman of the Meeting becomes your proxy by default), I/we expressly authorise the Chairman of the Meeting to exercise my/our proxy in respect of Item 1 even though that item is connected directly or indirectly with the remuneration of a member of key management personnel of Audalia Resources Limited, which includes the Chairman. I/we acknowledge that if the Chairman of the Meeting is my/our proxy and I/we have not marked any of the boxes opposite Item 1, the Chairman of the Meeting intends to vote my/our proxy in favour of Item 1.

You can direct the Chairman how to vote by marking the boxes in Section 2 below (for example if you wish to vote against or abstain from voting).

2. Items of Business

Please mark to indicate your voting directions.

		FOR	AGAINST	ABSTAIN
1.	Adoption of Remuneration Report			
2.	Re-election of Director – Dato Soo Kok Lim			
3.	Approval of Additional 10% Placement Capacity			

PLEASE NOTE : If you mark the Abstain box for an item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority.

3. Signature of Securityholder(s)

This section must be signed in accordance with the instructions overleaf to enable your directions to be implemented.

Individual or Securityholder 1 Securityholder 2 Securityholder 3 Individual/ Sole Director and Director Director/ Company Secretary Sole Company Secretary Contact Name Contact Daytime Telephone Date

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H O W T O C O M P L E T E T H E P R O X Y F O R M

1. Appointment of Proxy

Voting 100% of your holding: Direct your proxy how to vote by marking one of the boxes opposite each item of business. If you do not mark a box your proxy may vote as they choose. If you mark more than one box on an item your vote will be invalid on that item.

Voting a portion of your holding: Indicate a portion of your voting rights by inserting the percentage or number of securities you wish to vote in the For, Against or Abstain box or boxes. The sum of the votes cast must not exceed your voting entitlement or 100%.

Appointing a second proxy: You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you appoint two proxies you must specify the percentage of votes or number of securities for each proxy, otherwise each proxy may exercise half of the votes. When appointing a second proxy write both names and the percentage of votes or number of securities for each in Section 1.

A proxy need not be a securityholder of the Company.

2. Items of Business

You may direct your proxy how to vote by placing a mark in one of the three boxes opposite each item of business. All your securities will be voted in accordance with your directions. If you do not mark any of the boxes on a given item, your proxy may vote as he or she chooses. If you mark more than one box on an item your vote on that item will be invalid.

3. Signing Instructions

You must sign this form as follows in the spaces provided:

Individual: Where the holding is in one name, the securityholder must sign.

Joint Holding: Where the holding is in more than one name, all of the securityholders must sign.

Power of Attorney: If you have not previously lodged the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: Where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001 ) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please sign in the appropriate place to indicate the office held. Delete titles as applicable.

Lodgement of a Proxy

This Proxy Form (and any Power of Attorney under which it is signed) must be received at the address given below no later than 48 hours before the commencement of the meeting at 11.00 am (WST) on Monday, 26 November 2012. Any Proxy Form received after that time will not be valid for the scheduled meeting.

Documents may be lodged by posting, delivery or facsimile to Audalia Resources Limited:-

PO Box 3438 Nedlands, WA 6909

Fax: (08) 6389 2588

Attending the Meeting

Bring this form to assist registration. If a representative of a corporate securityholder or proxy is to attend the meeting you will need to provide the appropriate "Certificate of Appointment of Corporate Representative" prior to admission. A form of the certificate may be obtained from the Company Secretary.