AUDALIA RESOURCES LIMITED

ACN 146 035 690

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prospectus

A prospectus for the issue of 7,500,000 fully paid ordinary shares at an issue price of 20 cents each to raise $1,500,000. For every two New Shares issued there will be granted for no additional consideration one New Option, exercisable at $0.20 each with an expiry date of 28 April 2014.

Oversubscriptions of up to a further 5,000,000 fully paid ordinary shares at an issue price of 20 cents each to raise a further $1,000,000 may be accepted.

Lead Manager to the Issue: CK Locke and Partners Pty Ltd

Important Notice

Applicants should read the entire Prospectus for the purposes of making an informed assessment of the assets and liabilities, financial position and prospects of the Company and the rights and liabilities attaching to the Securities offered pursuant to this Prospectus. If you do not understand this Prospectus you should consult your accountant, stockbroker or other financial advisor about its contents. The Securities offered under this Prospectus should be considered speculative and potential investors should consider the risk factors outlined in Section 9.0 of this Prospectus.

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DIRECTORS & SECRETARY

Executive Chairman Executive Director Non-Executive Director Non-Executive Director

Dato Soo Kok Lim Mr Siew Swan Ong Mr Brent Butler Mr Anthony Ho Ms Karen Logan Mr Noel Ong

Company Secretary Technical Consultant

REGISTERED OFFICE

and principal place of business

79 Broadway NEDLANDS WA 6009 Telephone: (61 8) 6389 2688 Facsimile: (61 8) 6389 2588 Email: [email protected]

INVESTIGATING ACCOUNTANT

BDO Corporate Finance (WA) Pty Ltd 38 Station Street SUBIACO WA 6008

INDEPENDENT GEOLOGIST

Geologica Pty Ltd 23 Ghost Gum Road WILLETTON WA 6155

SHARE REGISTRY*

Computershare Investor Services Pty Ltd Level 2, 45 St George’s Terrace PERTH WA 6000 Telephone: (61 8) 9323 2000 Facsimile: (61 8) 9323 2033

LEAD MANAGER*

CK Locke and Partners Pty Ltd Level 1, Atlas Building 8 The Esplanade PERTH WA 6000

SOLICITORS

Steinepreis Paganin Level 4, The Read Buildings 16 Milligan Street PERTH WA 6000

AUDITOR

BDO Audit (WA) Pty Ltd 38 Station Street SUBIACO WA 6008

PROPOSED ASX CODE

ACP – Shares ACPO – Options

WEBSITE

www.audalia.com.au

These entities are included for information purposes only and have not been involved in the preparation of this Prospectus.

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CORPORATE DIRECTORY	CORPORATE DIRECTORY	inside front cover
TABLE	OF CONTENTS	1
IMPORTANT INFORMATION		2
CHAIRMAN’S LETTER		4
1.0	INVESTMENT SUMMARY	5
2.0	DETAILS OF THE OFFER	7
3.0	COMPANY AND PROJECT OVERVIEW	9
4.0	DIRECTORS, COMPANY SECRETARY AND MANAGEMENT	11
5.0	INDEPENDENT GEOLOGIST’S REPORT	19
6.0	INVESTIGATING ACCOUNTANT’S REPORT	31
7.0	SOLICITOR’S REPORT ON TENEMENTS	47
8.0	CORPORATE GOVERNANCE	64
9.0	RISK FACTORS0	67
10.0	ADDITIONAL INFORMATION	70
11.0	DIRECTORS’ STATEMENT AND CONSENT	76
12.0	GLOSSARY	77
13.0	APPLICATION FORMS	79

Audalia Resources Limited

IMPORTANT INFORMATION

Prospectus

This Prospectus is issued by Audalia Resources Limited (ACN 146 035 690) (the Company or Audalia Resources) and relates to an offer of Securities in the Company.

Lodgement and listing

This Prospectus is dated 28 April 2011 and was lodged with the ASIC on 28 April 2011. Neither ASIC nor ASX takes any responsibility for the contents of this Prospectus or for the merits of the investment to which this Prospectus relates.

Expiry date

No Securities will be issued on the basis of this Prospectus later than 13 months after the date of this Prospectus. The Company will apply to ASX for admission of the Company to the Official List of ASX and quotation of its Securities on ASX within 7 days of the date of this Prospectus.

Foreign jurisdictions

This Prospectus does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make an offer or invitation. No action has been taken to register or qualify the Securities in any jurisdiction outside Australia. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus outside Australia should seek advice and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities law. Applicants who are resident in countries other than Australia should consult their professional advisers as to whether any governmental or other consents are required or whether any other formalities need to be considered and followed.

Note to Applicants – professional advice

The information in the Prospectus is not financial product advice and does not take into account your investment objectives, financial status or particular needs. Applicants should read this document in its entirety and, if in any doubt, consult with their professional advisors before deciding whether to apply for Securities. There are risks associated with an investment in Audalia Resources and the Securities offered under this Prospectus must be regarded as a speculative investment. The Securities offered under this Prospectus carry no guarantee with respect to return on capital investment, payment of dividends or future value. Details of some of the risk factors associated with investing in Securities offered by this Prospectus are set out in Section 9.0 of this Prospectus.

Disclaimer

No person is authorised to give any information or make any representation in connection with the Offer which is not contained in this Prospectus. You should rely only on information in this Prospectus. Any information or representation not contained in this Prospectus may not be relied on as having been authorised by the Issuer, the Directors or the Lead Manager.

Future performance

Except as required by law, and only to the extent so required, none of the Company or any other person warrants or guarantees the future performance of the Company, or any return on any investment made pursuant to this Prospectus.

Defined terms and abbreviations

Certain abbreviations and other defined terms are used throughout this Prospectus. Defined terms are generally identifiable by the use of an upper case first letter. Details of the definitions and abbreviations used are set out in Section 12.0 of this Prospectus. Unless otherwise stated or implied, references to times in this Prospectus are to Western Standard Time (WST). All financial amounts contained in this Prospectus are expressed in Australian dollars unless otherwise stated. Any discrepancies between totals and sums and components in tables contained in this Prospectus are due to rounding.

Electronic Prospectus

This Prospectus will be issued as an Electronic Prospectus and may be accessed on the internet at www.audalia.com.au. The Offer pursuant to an Electronic Prospectus is only available to Australian residents receiving an electronic version of this Prospectus within Australia. The Corporations Act prohibits any person from passing to another person the Application Form unless it is attached to or accompanies the complete and unaltered version of this Prospectus. See Section 10.13 of this Prospectus for further important information in this regard.

Obtaining a paper copy

During the Offer Period, any person may obtain a hard copy of the Prospectus free of charge by contacting the Company.

Exposure period

The Corporations Act prohibits the Company from processing Applications in the seven day period after the date of lodgement of this Prospectus (Exposure Period). This period may be extended by ASIC for a further period of up to 7 days. The purpose of the Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds. If this Prospectus is found to be deficient, Applications received during the Exposure Period will be dealt with in accordance with Section 724 of the Corporations Act. Applications received prior to the expiration of the Exposure Period will not be processed until after the expiry of the Exposure Period. No preference will be conferred on Applications received during the Exposure Period.

Photographs and diagrams

Photographs and diagrams in this Prospectus do not depict assets or equipment owned or used by the Company unless otherwise indicated. Diagrams used in this Prospectus are illustrative only and may not be drawn to scale. Unless otherwise stated, all data contained in charts, graphs and tables is based on information available at the date of this Prospectus.

Reporting on Exploration Results

The information contained in the Independent Geologist’s Report (Section 5.0) was compiled by Geologica Pty Ltd. Otherwise, information in the Prospectus that relates to exploration results has been compiled by the Company and is based on information provided by Mr Noel Ong as Technical Consultant of the Company. All information of this type is expressed in the terms of the JORC Code. Mr Ong has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a competent person as defined in the JORC Code.

Risk Factors

Prospective investors should read this Prospectus in its entirety and, in particular, before deciding on whether to apply for Shares under this Prospectus, consider the risk factors set out in the Investment Overview and Section 9.0, which include, but are not limited to, the key risks outlined below.

Investment Highlights

Audalia Resources Limited is an Australian-based exploration company established primarily to acquire, explore, evaluate and exploit lead, zinc and copper deposits and explore prospective tenements for other minerals.
The Board has a broad range of experience in the commercial dealings and minerals exploration industry including detailed knowledge of corporate, legal, financial and technical aspects of managing and promoting exploration companies.
The Company has entered into a Tenement Sale Agreement with Kingsfield Pty Ltd to acquire 3 tenements in the Gascoyne region of Western Australia, covering over up to 335 km2. The tenements to be acquired from Kingsfield Pty Ltd are in close proximity to the Company’s current exploration licence applications.

PROSPECTUS

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The Company is the current holder of two exploration licence applications for licences located in the Gascoyne region of Western Australia.
Previous drilling on the tenements to be acquired from Kingsfield Pty Ltd has defined two areas of base metal mineralisation 9 kms apart.
In addition to the exploration activities planned for the Gascoyne tenements, the Company intends to pursue new projects in the resources sector, both in Australia and overseas, by way of acquisition or investment. These projects may include other types of minerals, including, without limitation, lead, zinc and copper. At this stage, the Company intends to focus on the evaluation of projects in the region of South East Asia.

*Risk Area*	*Risks*
Tenement Sale	The Company’s right to acquire the Kingsfeld Tenements is conditional on the Company paying Kingsfeld Pty Ltd
Agreement	$150,000 in cash once the Company has obtained conditional ASX approval for offcial quotation (the Condition).
	The Tenement Sale Agreement provides that if the Company fails to satisfy the Condition and list on the ASX by 30
	June 2011, the Company will be deemed to have withdrawn from the Tenement Sale Agreement. While the Company
	anticipates listing before this date, it cannot guarantee that this will occur.
	If the Company fails to satisfy the condition, the Tenement Sale Agreement will terminate and the Company will lose
	all its rights to acquire an interest in the Tenements. The Company’s proposed indicative timetable is designed to
	meet this Condition but future events may prevent this condition being satisfed.
	The Company’s ability to acquire the Kingsfeld Tenements is dependent on Kingsfeld Pty Ltd honouring its obligations
	under the Tenement Sale Agreement and not creating any encumbrances over the Tenements that would affect the
	Company’s rights. On 18 April 2011 the Company lodged caveats to protect its interest in the Kingsfeld Tenements
	in the interim period.
Liquidity	The Shares to be issued pursuant to this Prospectus (if full Oversubscriptions are accepted) will comprise of less
	than 14% of the Company’s issued Share capital.
	There can be no guarantee that an active market in the Company’s securities will develop or that the price of the
	securities will increase. There is no guarantee that there will be an ongoing liquid market for the Company’s securities.
	Accordingly, there is a risk that, should the market for the Company’s securities become illiquid, Shareholders and
	Option holders will be unable to realise their investment in the Company.
Resources Estimates	The Tenements do not currently contain any JORC compliant mineral resources. Should a JORC compliant mineral
	resource be delineated in the future, any resource estimate will be an expression of judgement based on knowledge,
	experience and industry practice. Estimates which were valid when originally calculated may alter signifcantly when
	new information or techniques become available. In addition, by their very nature, mineral resource estimates are
	imprecise and depend to some extent on interpretations, which may prove to be inaccurate.
Failure to Satisfy	The Tenements will be subject to a number of specifc legislative conditions including payment of rent and
Expenditure	meeting minimum annual expenditure commitments. The inability to meet these conditions in relation to the
Commitments	Tenements could affect the standing of Tenements or restrict its ability to be renewed, adversely affecting the
	operations, fnancial position and performance of the Company.
Title and Native Title	Although the Company has investigated title to all of the Tenements (as detailed in the Solicitor’s Report on Tenements
	in Section 7 of this Prospectus), the Company cannot give any assurance that title to the Tenements will not be
	challenged or impugned. The Tenements may be subject to prior unregistered agreements or transfers or title may
	be affected by undetected defects or native title claims.
Exploration Success	There are inherent risks associated with mineral exploration and there is no assurance that recoverable mineral
	resources will be identifed.
Operating Risks	No assurances can be given that the Company will achieve commercial viability through the successful exploration
	and/or mining of any Tenements.
Commodity and	If the Company achieves success leading to mineral production, the revenue it will derive through the sale
Currency Volatility	of commodities exposes the potential income of the Company to commodity price and currency exchange
	rate risks, in particular the global price of minerals and the $US:$AUD exchange rate. This may affect the
	viability of exploration and production from the Tenements and adversely affect the performance and fnancial viability of
	the Company.
Additional	The funds raised under the Offer are considered suffcient to meet the exploration and evaluation objectives of
Requirements	the Company. However, additional funding may be required in the event exploration costs exceed the Company’s
for Capital	estimates. If the Company is unable to obtain additional fnancing as needed, it may be required to reduce the
	scope of its operations, including scaling back its exploration programmes.
	In addition, to effectively implement its business and operations plans in the future, to take advantage of opportunities
	for acquisitions, joint ventures or other business opportunities, and to meet any unanticipated liabilities or expenses
	which the Company may incur, additional fnancing will be required.

The above list of risk factors ought not to be taken as exhaustive of the risks faced by the Company or by investors in the Company and investors should refer to the risk factors set out in full in Section 9.0 of this Prospectus before making a decision to subscribe for Securities under this Prospectus.

Audalia Resources Limited

CHAIRMAN’S LETTER

28 April 2011

Dear Investor

It is my pleasure to extend this invitation to you to become a shareholder in Audalia Resources Limited ( Audalia Resources or the Company ).

Audalia Resources is a lead, zinc and copper exploration company with interests in three exploration licences and two applications for exploration licences (Tenements), covering over 335 km2 in a new base metal province in Western Australia.

The Company’s tenements are located in the Gascoyne region of Western Australia, about 100 kms from the township of Gascoyne Junction. This region is recognised as a highly prospective mining region with good infrastructure which facilitates efficient and effective exploration.

Previous drilling on the Tenements has identified two areas of base metal mineralisation approximately 9 kms apart. The tenements in which the Company has an interest support its geological model of base metal mineralisation being associated with coincident soil and include encouraging geochemistry and magnetic anomalies.

The Company has allocated up to $1.9 million of exploration for the Gascoyne Project in the first two years. Exploration work will initially focus on a geophysical survey and reconnaissance RAB/RC drilling during the first year. In the second year, RC and Diamond drilling is proposed to test priority geochemical and conductivity anomalies determined from the mapping, geochemical and geophysical surveys.

Audalia Resources is focussed on achieving success from its current exploration project. However, in addition to the Gascoyne exploration project, the Board will also actively review and assess other projects in the resource sector, both in and outside Australia by way of acquisition or investment/joint venture.

The Company’s Board and management brings a blend of expertise to the Company, with significant experience in mineral exploration, development of mining projects and engagement with capital markets.

I encourage you to consider this Prospectus in its entirety, and in particular, the detailed information about the Offer and Audalia Resources’ activities, as well as the risks of investing in the Company.

My fellow Directors and I hope that you will favourably assess this investment opportunity and join us in an exciting future as an ASX-listed exploration company.

Yours sincerely

Dato Soo Kok Lim

Chairman

PROSPECTUS

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1.0 INVESTMENT SUMMARY

1.1 Important Notice

This summary is selective only and is not intended to provide full information for investors considering an investment in the Company. Investors should read this Prospectus in its entirety and not rely solely on this summary. Particular attention is drawn to the risk factors described in the Important Information Section and Section 9.0 of this Prospectus.

1.2 Summary of the Offer

By this Prospectus, the Company invites investors to apply for up to 7,500,000 Shares at an issue price of $0.20 each in order to raise $1,500,000, with one (1) free attaching Option for every two (2) Shares issued.

Oversubscriptions of up to a further 5,000,000 Shares at an issue price of $0.20 each, with one (1) free attaching Option for every two (2) Shares issued, to raise up to $1,000,000 may be accepted.

1.3 Important Dates

1.3 Important Dates
Date of Prospectus:		28 April 2011
Offer opens: Offer closes:	6 May 2011 5.00pm WST on 27 May 2011
Allotment of Securities
under this Prospectus (anticipated) Expected despatch of holding statements:		3 June 2011 4 June 2011
Securities expected to begin trading	on ASX:	10 June 2011

The dates and times above are indicative only and may change without notice. The Company reserves the right to vary any of the above dates and times, withdraw the Offer at any time prior to the allotment of Securities and to close the Offer early or extend

the Closing Date.

Applicants are encouraged to apply as soon as possible after the Offer opens as the Offer may close prior to the Closing Date.

1.4 Effect of the Offer

The principal effect of the Offer will be to:

(a) increase cash reserves by approximately $1,260,571 (minimum subscription) or $2,198,571 (maximum subscription) after deducting estimated expenses of the Offer;
(b) increase the number of Shares on issue as at the date of this Prospectus to 80,000,001 Shares (minimum subscription) or to 85,000,001 Shares (if the full amount of Oversubscriptions is accepted); and
(c) increase the number of Options on issue as at the date of this Prospectus to 6,750,000 Options (minimum subscription) or to 9,250,000 Options (if the full amount of Oversubscriptions is accepted).

1.5 Purposes of the Offer and use of proceeds

The proceeds raised under the Offer will be applied to:

finance the exploration and evaluation activities on the Company’s projects in accordance with the work programmes (as set out below and referred to in the Independent Geologist’s Report in Section 5.0 of this Prospectus);
meet the costs of the Offer and general operating and administrative costs; and
provide working capital.

Details of the breakdown of the proposed use of funds are as follows:

	Minimum subscription Maximum subscription1 $ $

Funds raised pursuant to this Prospectus Cash balance prior to the issue of this Prospectus Total funds available Application of funds Exploration expenditure2 Payments to Vendors Expenses of the Offer3 Total proposed expenditure Amount available as working capital4 Total application of funds	1,500,000 2,500,000 1,133,287 1,133,2 2,633,287 3,633,287 1,521,250 1,898,750 150,000 150,000 249,429 311,429 1,920,679 2,360,179 712,608 1,273,108 2,633,287 3,633,287

The above table is a statement of current intentions as at the date of lodgement of this Prospectus with the ASIC. As with any budget, intervening events (including exploration success or failure) and new circumstances have the potential to affect the ultimate way funds will be applied. The Board reserves the right to alter the way funds are applied on this basis.

Notes:

Assumes the Offer is fully oversubscribed and that the maximum number of Oversubscriptions are accepted. 2. Assumes the exploration expenditure will be allocated to the projects as follows:

	Minimum subscription	Maximum subscription
Tenements	Year 1 Year 2 Total $ $ $	Year 1 Year 2 Total $ $ $
E9/1568 E9/1569 E9/1570 ELA9/1824 ELA9/1825	221,250 236,250 457,500 216,250 256,875 473,125 211,250 246,875 458,125 43,125 23,125 66,250 43,125 23,125 66,250	231,250 357,500 588,750 231,250 357,500 588,750 231,250 357,500 588,750 43,125 23,125 66,250 43,125 23,125 66,250 780,000 1,118,750 1,898,750
TOTAL	735,000 786,250 1,521,250

Audalia Resources Limited

1.0 INVESTMENT SUMMARY (continued)

These expenses of the Offer exclude amounts already paid by the Company totalling $13,571 and an amount of $150,000, being the fair value ascribed to the 3,000,000 Options to be issued to the Lead Manager. The valuation of these Options is set out in Note 6 of the Independent Accountant’s Report contained in Section 6.0 of this Prospectus. For further details relating to expenses of the Offer, refer to Section 10.11 of this Prospectus.
The amount available as working capital will be applied to corporate and administrative expenses, costs associated with the review and assessment of new project opportunities where applicable.
If the Company accepts oversubscriptions of up to a further $1 million, the additional funds will be applied first towards additional broker costs of up to $60,000, then additional exploration expenditure, and lastly to working capital.
Funds raised in excess of the minimum subscription amount (but less than the maximum subscription) will be applied towards any additional broker costs, and then proposed exploration and evaluation program.

1.6 Pro-forma capital structure

SHARES	Number Minimum With
	Subscription% Over-Subscription%
Shares currently on issue Shares now offered for subscription TOTAL SHARES ON ISSUE AT COMPLETION OF THE OFFER (without Oversubscriptions) Shares offered for Oversubscription TOTAL SHARES ON ISSUE AT COMPLETION OF THE OFFER (with Oversubscriptions)	72,500,001 90.6% 85.3% 7,500,000 9.4% 8.8% 80,000,001 100.0% 94.1% 5,000,000 5.9% 85,000,001 100.0%
OPTIONS	Number Minimum With Subscription% Over-Subscription%
Options currently on issue Options now offered for subscription Lead Manager Options to be issued1 TOTAL OPTIONS ON ISSUE AT COMPLETION OF THE OFFER (without Oversubscriptions) Options offered as part of Oversubscription TOTAL OPTIONS ON ISSUE AT COMPLETION OF THE OFFER (with Oversubscriptions)	- - - 3,750,000 55.6% 40.5% 3,000,000 44.4% 32.4% 6,750,000 100.0% 73.0% 2,500,000 27.0% 9,250,000 100.0%

Notes:

3,000,000 Options to be granted to the Lead Manager pursuant to the Agreement to act as Lead Manager to the Offer.
The Shares currently on issue at the date of the Prospectus were issued progressively between August 2010 and April 2011 as follows:
1 Share issued as an incorporation share;
30,500,000 Shares issued as promoter shares at $0.0001 each; and
24,500,000 Shares issued to directors and their related parties of the Company at $0.0001;
7,500,000 Shares issued to directors and their related parties of the Company at $0.04;
10,000,000 Shares issued to seed investors at $0.10.
In determining the issue price of these Shares, the Directors, in complying with their fiduciary obligation to act in the best interests of the Company, took into account the different stages of development of the Company at various points and the following factors:
the level of risk associated with the establishment of the Company and its capital raising activities; and
the Company’s position and cash requirements at those times.
On the basis of these considerations, the Directors issued Shares progressively and at a proportion of the IPO issue price.

PROSPECTUS

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2.0 DETAILS OF THE OFFER

2.1 Description of the Offer

By this Prospectus, Audalia Resources invites investors to apply for a total of 7,500,000 Shares at an issue price of 20 cents each to raise $1,500,000. Every two Shares issued will come with one free attaching Option.

Oversubscriptions of up to a further 5,000,000 Shares at an issue price of $0.20 each to raise up to an additional $1,000,000 may be accepted.

All Shares offered pursuant to this Prospectus will rank equally in all respects with the Shares currently on issue.

Options issued pursuant to this Prospectus will be exercisable at $0.20 each with an expiry date of 28 April 2014.

2.2 Oversubscriptions

Oversubscriptions of up to 5,000,000 Shares at an issue price of 20 cents per Share (with free attaching Options on a one for two basis) to raise up to a further $1,000,000 may be accepted at the Company’s discretion.

The maximum amount that may be raised under this Prospectus is $2,500,000.

2.3 How to apply

Applications for Securities under the Offer can only be made on the Application Form issued with and attached to this Prospectus in Section 13.0.

The Application Form must be completed in accordance with the instructions set out on the back of the Application Form.

By making an Application, Applicants declare that they were given access to this Prospectus together with an Application Form.

The completed Application Form and accompanying cheque(s) should be posted or delivered, at any time after the issue of the Prospectus, to:

By mail:

2.4 Allotment and allocation of Securities

Completing and lodging an Application Form for the Offer is an offer by the Applicant to Audalia Resources to subscribe for Securities in the amount specified in the Application Form at the issue price of $0.20 per Share with free attaching Options on the terms and conditions set out in this Prospectus and the Application Form.

An Application may be accepted in respect of the full amount, or any amount less than that specified in the Application Form, without further notice to the applicant. Acceptance of an Application will give rise to a binding contract with acceptance to take place after the quotation of Securities on ASX.

The Company reserves the right to reject any Application Form which is not correctly completed or which is submitted by a person whom they believe to be an ineligible Applicant, or to waive or correct any errors made by an Applicant in completing the Application Form.

Audalia Resources expects to allocate all Securities on or about 3 June 2011. It reserves the right to allocate Securities in full for any Application, to allocate any lesser number, or to decline any Application. Where no allocation is made or the number of Securities allocated is less than the number for which Application is made, surplus Application monies will be returned to the Applicant as soon as practicable. Interest will not be paid on any monies refunded and any interest earned on Application monies pending the allocation or refund will become an asset of Audalia Resources.

2.5 Minimum subscription

The minimum subscription for the Offer is 7,500,000 Shares at an issue price of 20 cents each (with one (1) free attaching Option for every two (2) Shares issued) to raise $1,500,000 (before expenses of the Offer).

No Securities will be issued pursuant to this Prospectus unless and until the minimum subscription is reached. Should the minimum subscription not be reached within four (4) months after the date of this Prospectus, all Applications will be dealt with in accordance with section 724 of the Corporations Act.

c/- Computershare Investor Services Pty Ltd GPO Box D182

PERTH WA 6840

OR

By hand:

AUDALIA RESOURCES LIMITED

c/- Computershare Investor Services Pty Ltd

Level 2, Reserve Bank Building 45 St George’s Terrace

PERTH WA 6000

Cheques must be made payable to “Audalia Resources IPO Account” and crossed “Not Negotiable”. No brokerage or stamp duty is payable by Applicants. Completed Application Forms and accompanying cheques must reach one of the above addresses by no later than 5pm WST on the Closing Date. The Company reserves the right to close the Offer early. Applicants are therefore encouraged to submit their Application Forms as soon as possible after the Offer opens.

Applications must be for a minimum of 10,000 Shares at 20 cents per Share (a minimum subscription of $2,000). Applications for more than 10,000 Shares must be in multiples of 100 Shares.

2.6 Working capital adequacy

The Directors are of the opinion that if the minimum subscription of $1,500,000 is raised from the Offer, the Company will have sufficient working capital to carry out its stated objectives.

2.7 Underwriting

The Offer is not underwritten.

2.8 Lead Manager

CK Locke and Partners Pty Ltd (CK Locke) has been appointed as Lead Manager to the Offer on the terms and conditions of the letter agreement summarised in Section 10.1.2.

2.9 Commissions on Application Forms

The Company reserves the right to pay a commission of up to 5% (exclusive of goods and services tax) of amounts subscribed to any licensed securities dealers or Australian Financial Services licensee in respect of valid applications lodged and accepted by the Company and bearing the stamp of the licensed securities dealer or Australian Financial Services licensee. Payments will be subject to the receipt of a proper tax invoice from the licensed securities dealer or Australian Financial Services licensee.

Audalia Resources Limited

2.0 DETAILS OF THE OFFER (continued)

2.10 Non-resident investors

This Prospectus does not, and is not intended to, constitute an offer or invitation in any jurisdiction where, or to any person to whom, it would not be lawful to issue this Prospectus or make the Offer. No action has been taken to register or qualify the Securities in any jurisdiction outside Australia. The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and, therefore, persons who come into possession of this Prospectus outside Australia should seek advice and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. Applicants who are resident in countries other than Australia should consult their professional advisers as to whether any governmental or other consents are required or whether any other formalities need to be considered and followed.

2.11 ASX listing

Within 7 days from the date of this Prospectus, application will be made for the Company to be admitted to the Official List of the ASX and for quotation of the Securities offered by this Prospectus on the ASX.

If approval for quotation is not granted within 3 months after the date of this Prospectus, or such longer period permitted by the Corporations Act, any issue of Securities under this Prospectus will be void and all Application monies will be returned without interest to the Applicant within the time prescribed by the Corporations Act.

The ASX takes no responsibility for the contents of this Prospectus. The fact that ASX may grant quotation of the Securities is not to be taken in any way as an indication of the merits of the Company or the Securities offered pursuant to this Prospectus.

2.12 Restricted securities

ASX may classify certain existing Shares on issue in the Company (as opposed to those to be issued under this Prospectus) as being subject to the restricted securities provisions of the Listing Rules. If so classified, such Shares would be required to be held in escrow for a period determined by ASX and would not be able to be sold, mortgaged, pledged, assigned or transferred for that period without the prior approval of ASX.

2.13 CHESS

Audalia Resources proposes to participate in the Clearing House Electronic Sub-register System (CHESS), operated by ASX Settlement and Transfer Corporation Pty Ltd (ASTC) a wholly owned subsidiary of ASX, in accordance with the Listing Rules and ASTC Settlement Rules. On admission to CHESS, the Company will operate an electronic Issuer-Sponsored sub-register and an electronic subregister. The two sub registers together will make up the Company’s principal register of securities.

2.14 Privacy Act

The Company collects information about each Applicant from an Application Form for the purposes of processing the Application and, if the Application is successful, to administer the Applicant’s security holding in the Company.

By submitting an Application Form, each Applicant agrees that the Company may use the information in the Application Form for the purposes set out in this privacy disclosure statement and may disclose it for those purposes to the share registry, the Company’s related bodies corporate, agents, contractors and third party service providers, (including mailing houses), the ASX, ASIC and other regulatory authorities.

If an Applicant becomes a security holder of the Company, the Corporations Act requires the Company to include information about the security holder (including their name, address and details of the securities held) in its public register. This information must remain in the register even if that person ceases to be a security holder of the Company. Information contained in the Company’s registers is also used to facilitate distribution payments and corporate communications (including the Company’s financial results, annual reports and other information that the Company may wish to communicate to its security holders) and compliance by the Company with legal and regulatory requirements.

If Applicants do not provide the information required on the Application Form, the Company may not be able to accept or process the Application.

2.15 Withdrawal

The Directors have the right, at any time, to withdraw this Prospectus and the Offer. In this event, the Company will return all Application monies received without interest within 28 days of giving the notice of withdrawal.

2.16 Forecasts

The Directors have considered the matters set out in ASIC Regulatory Guide 170 and believe that they do not have a reasonable basis to forecast future earnings on the basis that the Company is a recently incorporated exploration company. Given the speculative nature of exploration, mineral development and production, there are significant uncertainties associated with forecasting future revenues.

Under this system, the Company will not issue certificates to investors. Instead, Shareholders will receive a statement of their holdings in the Company. If an investor is broker sponsored, ASTC will send them a CHESS statement.

The CHESS statement will set out the number of Securities allotted to each holder under the Prospectus and give details of their Holder Identification Number, in the case of a holding on the CHESS subregister.

In the case of an Issuer Sponsored sub-register, the statement will contain the number of Securities allotted under the Prospectus and the Shareholder’s Security Holder Reference Number.

A CHESS statement or Issuer Sponsored statement will routinely be sent to holders at the end of any calendar month during which the balance of their holding changes. A holder may request a statement at any other time; however a charge may be incurred for additional statements

PROSPECTUS

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3.0 COMPANY AND PROJECT OVERVIEW

3.1 Introduction

The Company was incorporated on 27 August 2010 as a private company for the purposes of developing interests in exploration and mining projects. On 8 March 2011, the Company converted its status to a public company limited by shares.

Audalia Resources has brought together a Board and management team having the technical and commercial expertise capable of recognising and developing mining projects.

The Board’s primary objective is the advancement of Shareholders’ interests and asset values through well defined exploration programmes in areas that can be readily assessed for their mineral potential.

Audalia Resources has secured rights to explore five prospective tenements in the Gascoyne region of Western Australia. The area is located about 100 kms north of Gascoyne Junction.

Further technical information on the tenements is set out in the Independent Geologist’s Report in Section 5.0 of this Prospectus.

Further information about the relevant tenements is set out in the Solicitor’s Report on Mining Tenements in Section 7.0 of this Prospectus.

3.2 Gascoyne Project – History and Technical Summary

The Gascoyne Project is located approximately 100kms north of Gascoyne Junction east of the Lyons River and tributaries. The tenements consist of three granted Exploration Licences and two exploration tenement applications. The total area occupied by the tenements (including applications) is 108 blocks. The tenements are listed in the summary Table 1 below:

Table 1: Summary of Tenements

Tenement	Holder	Exploration/Mineral Rights	Grant Date	Expiry date	Blocks	Area km2
E9/1568	Kingsfeld	100%	23/10/2009	22/10/2014	6 Blocks	18.66
E9/1569	Kingsfeld	100%	23/10/2009	22/10/2014	15 Blocks	46.65
E9/1570	Kingsfeld	100%	23/10/2009	22/10/2014	9 Blocks	27.99
ELA9/1824	Audalia	100%	pending		11 Blocks	34.21
ELA9/1825	Audalia	100%	pending		67 Blocks	208.37
				TOTAL	108 blocks	335.88

The regional setting is near the western edge of the Neo-Proterozoic Morrissey Metamorphic Suite rocks with overlying PermoCarboniferous sediments of the Carnarvon Basin. The metamorphic belt acts as a buffer zone between the Archaean Yilgarn shield and the overlying cratonic Proterozoic Basins and is orientated WNWESE with well developed schists, shears and intrusives parallel to this dominant strike. Therefore the area is a complex juxtaposition of sediments, granitoids and mafics with accompanying structures such as shears and faults.

The region was explored for gold, base metals and diamonds by large companies such as BHP, MIM, Western Mining and Rio Tinto using regional stream sediment, soil and rock chip sampling. These explorers considered the Gascoyne Province to be prospective for Broken Hill Type (BHT) Ag-Pb-Zn mineralisation based on a study of Zn-bearing spinels (gahnites) in the late 1990s.

A gahnite study by BHP Billiton (“BHP”) in 2003 highlighted the BHT Ag-Pb-Zn potential of the Proterozoic Morrissey Metamorphic Suite.

Audalia Resources has allocated up to $1.9 million of exploration for this project in the first two years. Exploration work on the Gascoyne Project will initially focus on a geophysical survey and reconnaissance RAB/RC drilling during the first year. In the second year, RC and Diamond drilling is proposed to test priority geochemical and conductivity anomalies determined from the mapping, geochemical and geophysical surveys. Pending results from the initial phase of drilling, or if the VTEM survey detects deeper conductivity anomalies below the weathering profile, a programme of deeper drilling may be warranted.

The Gascoyne Project represents a new province for lead-zinc exploration. Little work has been done on the project since last owner and the results support the view that lead-zinc mineralisation exists. All geological factors such as host rock, structure and age of rocks are present.

The discovery of the mineralisation opens this area up as a new exploration district. The RC drilling results vindicate the theory that the magnetic thumbprints are closely associated. IP dipole-diople surveys have added to the strength that the area is mineralised.

Other attributers of the project include:

Tested Conceptual targets
° RC drilling of magnetic targets identified massive sulphides.
° Base metal mineralisation at Golden Grove and the recent discovery of Zn mineralisation at Erayinia (ABM) is spatially associated with thumbprint magnetic anomalies. A detailed interpretation of the airborne magnetic data also highlighted a number of theses thumbprint anomalies.
Two prospective areas about 9 kms apart have been identified by aeromagnetic survey. IP (Induced polarisation) geophysics over one area has shown targets below 100m. More IP surveys required to further test these zones.
Excellent infrastructure, well maintained roads.
Two hours from Carnarvon (250 kms).
Data collected is consistent with a BHP study showing good potential of Ag-Pb-Zn mineralisation.
Several magnetic targets still untested.
A follow up IP Programme and detailed field geological mapping is proposed prior to further follow up drilling of this base metal target.
Tenements cover good area of mineralisation.

Audalia Resources Limited

3.0 COMPANY AND PROJECT OVERVIEW (continued)

3.3 Gascoyne Project – Previous Exploration

3.3.1 Gravity Survey

A gravity survey was conducted by BHP in 2004 with 6 small anomalies identified that were interpreted as BHT (Broken Hill Type) targets.

3.3.2 Soil Sampling

Gahnite (zinc aluminium oxide) identified in the northwest of the Province was interpreted to be shedding from the Proterozoic Morrissey Metamorphic Suite, which was considered prospective for BHT mineralisation.
Initial field reconnaissance in the northwest corner of the Gascoyne Province was completed in 2003 by BHP. The field work consisted of soil sampling, rock sampling and geological traversing, including the collection of 17 soil and 15 rock samples within the project area.
This reconnaissance work defined a 6 kms long Pb-Zn-Cu soil anomaly coincident with gahnite-bearing and Pb-anomalous drainages. In order to adequately test the soil and rock anomalism, a ground geophysical survey was planned to delineate targets for further exploration.
In the course of its regional diamond-search Programme in 2003 numerous alluvial/colluvial bulk samples were collected by BHP in a locality in the western part of the area. Numerous

gahnite grains were recovered in the heavy mineral fraction. This mineral, together with fundamental geology (age and lithology) were reminiscent of the Broken Hill SEDEX massive sulphide mineralising environment and reconnaissance exploration for that model was initiated. Fifteen rock chip samples taken from the licence were assayed for a suite of elements including Cu, Pb, Zn, Co, Ag, Au, Mn and Ni.

Follow-up exploration included the collection of 17 soil samples along station tracks in the vicinity of the anomalous samples, which were re-assayed.

Further technical information on the tenements is set out in the Independent Geologist’s Report in Section 5.0 of this Prospectus.

3.4 Competent Person’s Statement

The information contained in this Section 3.0 as it relates to Exploration Results, Mineral Resources and Ore Reserves (as those terms are defined in the JORC Code) was compiled by Mr Noel Ong, who is the Technical Consultant of the Company. Mr Ong is a member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. He has sufficient experience that is relevant to the style of mineralisation and types of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the JORC Code. Mr Ong consents to the inclusion in this Section 3 of information compiled by him in the form and context in which it appears.

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Figure 1 : Tenement location and Regional Geology

PROSPECTUS

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4.0 DIRECTORS, COMPANY SECRETARIES AND MANAGEMENT

4.1 Directors

Dato Soo Kok Lim

Executive Chairman

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.

Mr Siew Swan Ong

Executive Director

Mr Ong is an advocate & solicitor with over more than 15 years of experience including managing his legal practice in Malaysia. He is a graduate in law from Bond University, Australia. He provides legal advice to a wide range of clients including clients in the mining industry in Malaysia and Indonesia.
He has extensive knowledge of the mining industry in Malaysia having involved as legal counsel in joint ventures and acquisition of mining transactions and dispute resolution between clients and State Governments.

4.2 Company Secretary

Ms Karen Logan

Ms Logan graduated with a Bachelor of Commerce majoring in Accounting and Business Law from Curtin University in Western Australia. After completing a Graduate Diploma in Applied Corporate Governance, she qualified as a Chartered Secretary in 2009. Ms Logan is an Associate of the Institute of Chartered Secretaries and Administrators and a Fellow of the Financial Services Institute of Australasia.

She has been a partner of a public practice since 2006 and has significant experience in capital raising projects and ASX listings. She is currently the secretary of a number of ASX-listed companies and provides corporate and accounting advice and services to those clients.

4.3 Technical Consultant

Mr Noel Ong

Mr Ong is a geologist with over 18 years experience in the resource industry with the last 12 years in his own geological consultancy. He has extensive mineral exploration and project management experience in the gold, lithium, iron ore (hematite and magnetite), tantalum and the diamond industry. Since 1992, he has worked predominantly in the goldfields of Western Australia, Pilbara iron ore fields and the Northern Territory. Mr Ong is a graduate of the University of Western Australia with a degree in geology and is a member of the Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists.

He has served as a director and company secretary on several companies in Malaysia and Hong Kong.

Mr Brent Butler

Non-Executive Director

Mr Butler is a geologist with over 25 years experience in the resource industry. He has a geology degree from Otago University and is a member of the Australasian Institute of Mining and Metallurgy. Mr Butler is also a Fellow of the Society of Geology (USA) and a member of Prospectors Development of Canada. He is currently the President of ATW Gold Corp (Canada) and Managing Director of its Australian subsidiary. He has significant international exploration and mining experience in the gold industry, having worked in the United States, Brazil, Chile, Argentina, Africa and Australia.

Mr Anthony Ho

Non-Executive Director

Mr Ho is a commerce graduate of the University of Western Australia. He qualified as a Chartered Accountant in 1983 with Deloittes and is presently the principal of a public practice, Anthony Ho and Associates, specialising in providing corporate and financial services to ASX-listed companies.

Prior to establishing his practice in 1991, he spent 7 years in a senior corporate role with a major investment and resource group in Western Australia. He is currently a director of a number of companies listed on ASX.

Audalia Resources Limited

THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY

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5.0 Independent Geologist’s Report

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GEOLOGICA Pty Ltd ACN 083 800 300

INDEPENDENT CONSULTING GEOLOGIST’S REPORT

for the properties of Audalia Resources Limited

Brian Davis B.Sc., Dip.Ed. RPGeo (AIG), MAusIMM

February 2011

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Audalia Resources Limited PROSPECTUS

INDEPENDENT CONSULTING GEOLOGIST’S REPORT

1. Introduction

Geologica Pty Ltd (‘Geologica’) has been commissioned by Audalia Resources Limited (‘ARL’) to provide an Independent Consulting Geologist’s Report (“Report”) on mineral exploration properties located in Western Australia. This report is to form part of a Prospectus to be lodged with the Australian Securities & Investment Commission (‘ASIC’) offering subscription to 7,500,000 fully paid ordinary shares, at an issue price of 20 cents per Share to raise a total of $1,500,000. For every two New Shares issued there will be granted for no additional consideration one New Option, exercisable at $0.20 each with an expiry date of 28 April 2014. Oversubscriptions of up to a further 5,000,000 fully paid ordinary shares at an issue price of 20 cents each to raise a further $1,000,000 may be accepted. The funds raised will be used for the purpose of exploration and evaluation of the mineral properties.

This is not an independent evaluation report, and as such, serves only to comment on the geological setting and proposed exploration programs on the properties. Geologica Pty Ltd has not been asked to comment on the potential economic value or financial considerations pertaining to the value of shares or assets held by ARL in relation to these properties.

This report is based upon data from previous company exploration reports, government geological survey maps and publications, on-line databases and maps with the Department of Minerals and Petroleum in Western Australia as well as from various published papers, books and journals. A site visit was organized for the purpose of this review, as it was considered necessary to validate the mineral occurrences and verify property ownership consistent with the information supplied.

This report is prepared by Brian Davis who has over 39 years experience as an exploration, development and mining geologist and has worked in Australia, Africa, Fiji, Indonesia and the Philippines. His technical involvement with large resource projects include Selebi-Phikwe, Botswana (Nickel-Copper), The Granites, NT (Gold), Plutonic, Bronzewing and Jundee, WA (Gold), Cawse, WA (Nickel laterite) and Acoje, Philippines (Nickel, PGM and Chromite).

Brian has also been associated with evaluation or development of several smaller projects such as Peak Hill and Ant Hill, WA (Manganese), Madagascar (Chromite, Rare Earths, Diamonds, Uranium, Mineral Sands) and at Sumbawa Island, Kalimantan and Sumatra, Indonesia (Gold, Copper, Coal and Iron Sands).

This Independent Consulting Geologist’s Report has been prepared to comply with the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports 2005 Edition (‘The Valmin Code’) as well as the Code for Reporting of Exploration Results and Mineral Resources 2004 (‘The JORC Code’). These codes and guidelines are binding upon members of the Australian Institute of Mining & Metallurgy (‘AusIMM’) and the Australian Institute of Geoscientists (‘AIG’) as well as being part of the legal framework for the ASX Listing Rules.

Brian Davis B.Sc. Dip.Ed is a Registered Practising Geoscientist of the AIG (RPGeo number 10015), a corporate member of the AusIMM and is considered a “Competent Person” as defined by the 2004 JORC Code as incorporated in the ASX Listing Rules.

Geologica Pty Ltd has concluded to its satisfaction that the mineral properties reviewed have exploration and mineral rights owned by ARL as in Table 1 below:

Table 1 : Tenement List

Tenement
Holder
Exploration/Mineral Rights
Grant Date
Expiry date
Blocks
Area km2
E9/1568
Kingsfeld
100%
23/10/2009
22/10/2014
6 Blocks
18.66
E9/1569
Kingsfeld
100%
23/10/2009
22/10/2014
15 Blocks
46.65
E9/1570
Kingsfeld
100%
23/10/2009
22/10/2014
9 Blocks
27.99
ELA9/1824
Audalia
100%
pending
11 Blocks
34.21
ELA9/1825
Audalia
100%
pending
67 Blocks
208.37
TOTAL
108
335.88

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INDEPENDENT GEOLOGIST’S REPORT

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The proposed budgets as stated in this Report are summarised in Table 2 below:

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Table 2 : Proposed Budgets for ARL exploration and development programs based on a minimum subscription
Tenement Year 1 Year 2 Total (2 Years)
E9/1568 221,250 236,250 457,500
E9/1569 216,250 256,875 473,125
E9/1570 211,250 246,875 458,125
ELA9/1824 43,125 23,125 66,250
ELA9/1825 43,125 23,125 66,250
$735,000 $786,250 $1,521,250 * assumes that the tenement is granted within the first year
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Table 3 : Proposed Budgets for ARL exploration and development programs based on a maximum subscription
Tenement Year 1 Year 2 Total (2 Years)
E9/1568 231,250 357,500 588,750
E9/1569 231,250 357,500 588,750
E9/1570 231,250 357,500 588,750
ELA9/1824 43,125 23,125 66,250
ELA9/1825 43,125 23,125 66,250
$780,000 $1,118,750 $1,898,750 * assumes that the tenement is granted within the first year
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Geologica concludes that ARL has a satisfactory and clearly defined exploration and expenditure program which is reasonable with regard to its stated objectives. Due diligence conducted by Geologica on the exploration and ownership history and confirmation of the tenement geology is sufficient to justify the budgeted exploration and expenditure programs

Figure 1 : Project Location Map

Audalia Resources Limited PROSPECTUS

DECLARATION

This is a true and independent record of the reviewed and verified geological data and, as such represents the status of the projects at the time of writing (February 2011). Any interpretations of the data are opinions of the writer and should not be construed as representing a legal opinion or the opinion of ARL or any of its directors or employees.

For the purpose of Sections 731 to 733 of the Corporations Law, Geologica was involved in the preparation of the Report included in this Prospectus and has authorised or caused the issue of this part of the Prospectus only. Geologica has given consent in writing to the issue of the Prospectus with this Report included in the form and context it is included and has not withdrawn that consent before the lodgement of the Prospectus with the ASIC.

The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Brian Davis BSc. Dip Ed, who is a Member of The Australian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. Brian Davis is employed by Geologica Pty Ltd.

Brian Davis has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Brian Davis consents to the inclusion in the report of the matters on his information in the form and context in which it appears.

Brian Davis BSc, DipEd, RPGeo (AIG), MAusIMM Principal Consultant GEOLOGICA PTY LTD

25th February 2011

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2. Summary and Regional Context

ARL has secured rights to explore five prospective tenements in the Gascoyne region of Western Australia. The area is located about 100 kilometres north of Gascoyne Junction.

A gahnite study by BHP Billiton (“BHP”) in 2003 highlighted the BHT Ag-Pb-Zn potential of the Proterozoic Morrissey Metamorphic Suite. However, the ARL tenements have limited coverage of stream sediment and rock chip sampling by BHP.

A detailed airborne magnetometer survey by ABM Resources NL in 2007 showed that the Gascoyne Project area was dominated by a west-northwest striking domal antiform showing several thumbprint anomalies.

Base metal mineralisation at Golden Grove and the recent discovery of Zn mineralisation at Erayinia is spatially associated with similar thumbprint magnetic anomalies.

Five target zones were identified from a geochemical auger drilling program following up some of the previous anomalous geochemistry and magnetic anomalies.

The RC drilling program results confirmed the potential for base metal deposit discovery with significant results of up to 2.3% Pb and 0.9% Cu in two areas of base metal mineralisation 9 km apart. Mineralisation remains to be tested between these areas.

At the sites of the significant drill results limited ground geophysics traverses were completed using Induced Potential (IP – Resistivity Dipole-Dipole) and Mise-a-la Masse surveys. These confirmed good, untested conductors at depth.

In addition there are several untested geophysical and geological targets that are considered to be potentially mineralised.

Follow-up geophysics programs and detailed geological mapping and sampling is proposed to further explore this extensive geochemically anomalous corridor.

This supports the Company’s current geological model of base metal mineralisation being associated with coincident soil geochemistry and “thumbprint” magnetic anomalies

INDEPENDENT GEOLOGIST’S REPORT

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Figure 2 : Tenement location and Regional Geology

Audalia Resources Limited PROSPECTUS

3. Exploration Potential

The Proterozoic rocks of the Gascoyne region can be interpreted to host parallel mineralisation styles similar to the Proterozoic Mount Isa Inlier of Queensland, which contains some of the largest copper and lead-zinc ore bodies in the world. Mt Isa style deposits are sedimenthosted lead-zinc-copper-silver mineralisation (e.g. Mount Isa, Century and Cannington) as well as copper-gold mineralisation associated with iron oxide-rich hydrothermal breccias and other structures (e.g. Ernest Henry and Eloise).

Similar Mt Isa style mineralization in the Gascoyne region has been described at the Abra and DeGrussa deposits.

The Abra deposit, owned by Abra Mining Limited (Abra) is within Proterozoic Jillawarra, Kiangi Creek and Irregully Formations north of Milgun. Mineralisation is dominated by high grade lead and silver, along with significant copper and gold within carbonaceous to arenaceous sediments associated with widespread hydrothermal alteration and breccias.

The Abra mineralisation is within a banded, massive and brecciated, silica-barite-hematite-magnetite-dolomite sequence. An underlying chlorite altered hydrothermal breccia occurs immediately below the disconformity separating the Gap Well Formation from the overlying West Creek Formation. This sequence trends east-west and dips at 10° to 30° south. The top of the deposit is 250 metres below surface.

Abra mineralisation shows strong similarities with major base metal deposits world-wide, including those in the Mt Isa district in Queensland, Red Dog in Alaska and the Sullivan deposit in Canada.

The Mineral Resource quoted by Abra at May 2008 for each of the mineralised domains at the Abra deposit (from 14 historic and 26 recent diamond core drillholes) was:

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ABRA DEPOSIT - Indicated and Inferred Mineral Resource
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Domain
Cutoff Grade
Category
Million Tonnes
Pb(%)
Ag (g/t)
Cu(%)
Au(g/t)
Zn(%)
Lead
2.5% Pb
Indicated
33
4.1
10
0.13
0.06
0.1
Inferred
60
3.9
10
0.12
0.04
0.1
Total
93
4.0
10
0.12
0.05
0.1
Copper-Gold
0.4% Cu
Indicated
4
0.4
5
0.59
0.56
0.0
Inferred
10
0.3
4
0.63
0.47
0.0
Total
14
0.3
4
0.62
0.49
0.0
The lead and silver mineralisation interpretation was constructed using a 2.5% lead cutoff and the estimation was completed using Ordinary Kriging.
The copper and gold mineralisation interpretation was constructed using a 0.4g/t copper cutoff and the estimation was completed using Ordinary Kriging.
Mineral Resource Statement as at 14 May 2008. Completed by MacDonald Speijers

The DeGrussa deposit near Doolgunna was identified by Sandfire Resources NL in 2009 within the Jenkin Fault Zone (JFZ) covering approximately 40 km in strike length and 5 km width. The JFZ is a complex system and forms the boundary between the Yerrida basin to the south and the Padbury and Bryah basins to the north. Four mineral deposits have been discovered along a 1500m strike length of the JFZ namely DeGrussa, Conductor 1, Conductor 4 and Conductor 5. There were several significant intersections of high-grade gold and copper mineralisation at the DeGrussa Prospect. Several RC drill holes returned significant high-grade copper intersections from within an interpreted steeply-dipping massive sulphide body. Reported results included:

47m at 5.3% Cu, 20.1 g/t Ag and 1.0% Zn from 93m (DGRC105), 22m at 3.6% Cu, 3.8 g/t Au and 13.4 g/t Ag from 96m (DGRC101) and

18m at 2.9% Cu, 13.0g/t Ag, 2.1% Zn, 1.0g/t Pd from 126m (DGRC101).

The DeGrussa deposit has been defined by 148 Diamond Drill holes and 8 RC holes to a depth of approximately 500m. As at July 2010 the published resource for the DeGrussa deposit is:

This was completed by Coffee Mining consultants and used a 1.0% Cu cutoff value. (See Sandfire Website)

There is significant additional potential for hosting similar world-class polymetallic deposits in the Gascoyne since the following elements of classic sediment-hosted large mineral deposits are present in the Gascoyne Project tenements e.g.

There is widespread hydrothermal alteration of the sediments in the area
The area has thermal aureoles of a large intrusive bodies
Historic sampling confirms the presence of anomalous gold and copper
Brecciated sediment horizons, shears and vein structures form suitable pathways for hydrothermal fluid movements
The Morrissey Metamorphic Suite with well developed foliation and intruded mafics, granites and other felsics as well as faults and thrusts is a strong, active deformational environment conducive to forming mineral deposits.

9.62 million tonnes at 5.5% Cu, 1.8g/t Au and 14g/t Ag

INDEPENDENT GEOLOGIST’S REPORT

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A detailed airborne magnetic and radiometric survey was carried out in 2007 by UTS for ABM Resources. Geological interpretation indicated a west northwest striking domal feature and lithologies of siliciclastic and other sediments. The southern margin of the dome is transected by a west northwest striking shear, whilst the western part has undergone a later stage folding regime and the intrusion of a granitoid (Figure 3).

Magnetic imagery also shows the dome to be cut by several northnorth east trending faults and mafic dykes whilst the north western area (the region of possible intrusion and complex folding) is separated by northwest striking faults. On the northern flank of the dome, in the area of magnetic quiescence, subtle stratigraphy-parallel linear anomalies can be discerned. Along some of these features are weak but definite magnetic highs or “thumbprint” anomalies.

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Figure 3 : Airborne Magnetic Image

4. Location and Tenure

The Gascoyne Project is located approximately 100km North of Gascoyne Junction east of the Lyons River and tributaries.

Access to the tenement area is via the good quality gravel roads from Carnarvon to Gascoyne Junction and thence northwards on good all-weather tracks.

The tenements consist of three granted Exploration Licences and two exploration tenement applications. The total area occupied by the tenements (including applications) is 108 blocks. The tenements are listed in the summary Table 4 below:

	Table 4 : Tenement Holdings
	Tenement Holder Exploration/Mineral Rights Grant Date Expiry date Blocks Area km2 E9/1568 Kingsfeld 100% 23/10/2009 22/10/2014 6 Blocks 18.66 E9/1569 Kingsfeld 100% 23/10/2009 22/10/2014 15 Blocks 46.65 E9/1570 Kingsfeld 100% 23/10/2009 22/10/2014 9 Blocks 27.99 ELA9/1824 Audalia 100% pending 11 Blocks 34.21 ELA9/1825 Audalia 100% pending 67 Blocks 208.37 TOTAL 108 Blocks 335.88

Table 4 : Tenement Holdings

Audalia Resources Limited PROSPECTUS

5. Local Geology

The geological units on the Gascoyne Project tenements described and mapped by the Geological Survey of Western Australia are as follows:

Recent

Alluvium/colluvium

This mainly relates to floodplains and drainages of the Arthur River and Gascoyne River tributaries and is represented by alluvial silt, channel sands, floodplain silts, sands and gravels. There is also widespread colluvim and red-earth soils derived from the breakdown and sheetwash associated with alluvial deposits.

Carboniferous to Permian

Lyons Group sediments

This sedimentary group is represented by diamictite, sandstone, shale and boulder beds (tillite) and is considered to be glacial in origin.

The sediments form part of the Carnarvon Basin and have a major disconformity with the underlying pre-Carboniferous metamorphic and igneous rocks. The basal boundary of this major unit occurs on the western side of tenement ELA9/1825 and may also be sheared or faulted. It is possible that the disconformity may act as a fluid conduit and will therefore be the focus for base metal exploration.

Proterozoic to Devonian

Durchaler Supersuite

The Durlacher Supersuite comprises foliated and gneissic granites probably intruded through the Proterozoic metamorphics and caught up in the late Devonian - early Carboniferous orogeny.

The Durlacher suite ranges in age from Palaeo-Proterozoic to Devonian. Some parts of the Supersuite are radiogenic granites others are a mixture of granites and gabbros.

Palaeo-Proterozoic to Proterozoic

Durlacher Supersuite

As described above the Durlacher Supersuite has a considerable age range as well as variations in lithology from granite and gneiss to gabbro.

Moorarie Supersuite

This suite is characterized by granite and gabbro and is the host to the Arthur River tin-tantalum-lithium mineralization 5 kilometres south of the Gascoyne Project tenements.

Pooranoo Metamorphics

Represented by pelitic schist, gneiss, granofels, fespathic sandstone and conglomerate this varied unit occurs through the centre of the tenement area and is the host of the current base metal geochemical and geophysical anomalies.

Morrissey Metamorphics

This unit is variable in lithology and contains pelitic schist, psammite, calc-silicate rocks and minor amphibolite. Both the schist and the psammite can be micaceous with the common mineral being muscovite. However some units also have biotite, particularly those adjacent to amphibolite or more mafic intercalations.

The Proterozoic metamorphic rocks within the Project area consist of four main units:

1 Quartz-microcline-oligoclase-biotite-muscovite paragneiss and schist (interpreted protolith is an arkose). This unit is widespread within the Mt Phillips 1:250,000 sheet area and belongs to the Pooranoo Metamorphics.
2 Quartz-biotite-muscovite-feldspar-garnet paragneiss-schist with intercalated quartzite and micaceous quartzite probably representing the Morrissey Metamorphics.
3 Migmatite and gneissic granodiorite belonging to the Durlacher Supersuite
4 Quartz-felspar-muscovite granite and some gabbro or dolerite intrusions (probably belonging to the Moorarie Supersuite)

There are outcrops of pegmatites, quartz veins and dolerite intrusions throughout the Gascoyne Project tenements interpreted from regional magnetics and from air photographs.

Pegmatite veins tend to be quartz rich and are intimately associated with the northwest trending shears. Quartz veins or lenses occur as sinuous outcrops parallel to the regional strike or as en echelon sets almost orthogonal to the northwest shear direction. The veins at Nardoo Hill Well are of the second type and are less than 100m in length and 1-8m in thickness.

Dolerite, microgabbro or amphibolite occurs as intrusive bodies both parallel to and traversing the dominant foliation. Some are highly magnetic and show up well on airborne magnetic images.

Further geological mapping and rock chip sampling of the tenements is planned so that the role of pegmatites, quartz veins and mafic bodies with respect to mineralisation can be better understood.

INDEPENDENT GEOLOGIST’S REPORT

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Figure 4 : Geology & Tenements of the Gascoyne Project

Audalia Resources Limited PROSPECTUS

6. Exploration History

Historically the region has been explored for gold, base metals and diamonds by large companies such as BHP, MIM, Western Mining and Rio Tinto using regional surface geochemistry such as stream sediment, soil and rock chip sampling. These explorers had assessed the Gascoyne Province to be prospective for Broken Hill Type (BHT) Ag-Pb-Zn mineralisation. A study of Zn-bearing spinels (gahnites) in the late 1990s highlighted the potential of the Gascoyne Province for this style of mineralisation. The presence of gahnites is interpreted to be related to Proterozoic BHT mineralisation.

A gahnite study by BHP Billiton (“BHP”) in 2003 highlighted the BHT Ag-Pb-Zn potential of the Gascoyne Province, particularly the prospectivity of the Proterozoic Morrissey Metamorphic Suite.

However, large areas were not covered by this regional work due to the lack of access tracks and a focus at that time on areas of perceived prospective lithology that conformed to certain base metal models. The ARL tenements have limited stream sediment and rock chip sampling by BHP which returned base metal and gold values at background or at weakly anomalous levels.

A detailed airborne magnetometer survey by ABM Resources NL in 2007 showed that the structure of the Gascoyne Project area was dominated by a west northwest striking domal antiform feature as well as a number of thumbprint anomalies (magnetic highs).

Base metal mineralisation at Golden Grove and the recent discovery of Zn mineralisation at Erayinia is spatially associated with similar thumbprint magnetic anomalies.

A geochemical auger drilling program following up the previous BHP anomalous geochemistry and thumbprint magnetic anomalies from the airborne magnetic survey highlighted five target zones worthy of follow-up RC drill testing.

The RC drilling program results confirmed the potential for base metal deposit discovery with significant results of up to 2.3% Pb

and 0.9% Cu in two areas of base metal mineralisation 9 km apart. Mineralisation remains to be tested between these areas.

At the sites of the significant drill results a few ground geophysics traverses were completed using Induced Potential (IP – Resistivity Dipole-Dipole) and Mise-a-la Masse surveys.

There are also several untested airborne (magnetic and gravity) and ground (IP and Mise-a-la-Masse) geophysical targets as well as untested iron/manganese-stained outcrops that are considered to be potential gossans of geological interest.

7. Mineralisation

A systematic auger drilling geochemistry program was completed for a total of 397 holes/samples at the project by Snap Geochem Drilling.

This targeted two areas where previous reconnaissance geochemistry had returned anomalous Pb and Zn values (953 ppm Pb and 487 ppm Zn in rock chip samples and 408 ppm Pb and 156 ppm Zn in soil samples) coincident with “thumbprint” magnetic anomalies.

Samples were analysed for Pb-Cu-Zn-As-Ba-Cr-Ni by mixed acid digest and determined by Inductively Coupled Plasma (ICP) Mass Spectrometry and Inductively Coupled Plasma (ICP) Optical Emission. Only Pb-Zn-Cu-Ba were considered to be relevant. Anomalous Zn and Pb values of up to 566 ppm and 1150 ppm respectively were received and the results highlighted that at least five zones/targets of the geochemical program were worthy of follow-up RC drill testing.

Anomalous (above background values) multi element results with coordinates of the drill holes and samples are set out in Table 5.

Table 5 : Auger soil geochemistry anomalous results

Expected Background
Maximum 50
Maximum 50
Maximum 50
Maximum 50
Sample No.
East
North
Pbppm
Znppm
Cuppm
Bappm
GPMB16
370289
7284252
184
466
GPMB49
370469
7285357
357
1550
GPMB50
370492
7285297
92
204
GPMB64
370712
7284945
1150
398
GPMB65
370692
7285000
95
GPMB77
370704
7285601
212
178
264
GPMB154
368704
7284904
341
284
GPMB153
368698
7284851
1140
GPMB324
377992
7281744
90
386
GPMB338
378985
7282298
102
444
GPMB354
378620
7281801
117
380
GPMB353
378607
7281753
1080
GPMB355
378607
7281849
432
GPMB372
378372
7281950
246
1610
GPMB373
378373
7281900
87
184
1434
GPMB371
378376
7281997
93

The above values are considered highly anomalous with several, particularly lead and zinc commonly occurring at 2 to 3 times, and occasionally up to 30 times the expected background levels

INDEPENDENT GEOLOGIST’S REPORT

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A rock chip sampling program was completed in the vicinity of the project area within neighbouring tenement E09/1266 that has a similar structure and geology to ELA 09/1824. A total of 20 rock chip samples were collected. The sample locations, geology and assay results are detailed in Table 6 and Figure 5.

The assay results showed that some samples stand out as having greater concentrations of several elements than others; in particular,

CW 007, CW011 and CW016, which are ferruginous (lateritic, gossanous). All have significantly elevated levels of one or more of Cu, Pb, Zn and Mo. CW011 also has traces of Ag (0.4) probably associated with the high (690ppm) Pb. These, and a few other samples, have elevated Ba and Mn levels (as much as 4100ppm Ba and 12600ppm Mn) which are typical “gangue elements” at Broken Hill.

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Table 6 : Rock chip sampling – lithologies and assays
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Sample No.
Lithology
Ag ppm Bappm Cuppm Mnppm
Moppm Pbppm Znppm
CW 001
Ferruginousquartz vein
X
62
33
176
6.1
13
44
CW 002
ferruginous foat over biolite schist
X
193.9
228
1487
2
82
366
CW 003
biolite schist, qtz eyes,60-80m wide
X
377.9
69
12623
2.5
11
81
CW 004
qtz veined biotite schist
X
380
23
3000
0.3
32
80
CW 005
ferruginousqtz veinlets/coarse biolite schist
X
48.7
11
201
4.1
6
8
CW 006
ferruginousqtz,biotite schist
X
70.6
17
170
0.3
7
12
CW 007
laterite/ferruginous foat
X
235.2
490
1509
4.8
107
424
CW 008
ferruginousqtz feldspar biotite vein
X
297.8
15
107
0.4
17
10
CW 009
qtz veined dragfolded biotite schist
X
483.2
35
1035
2
40
142
CW 010
qtz vein in biotite schist/gneiss
X
20.1
9
83
0.3
5
4
CW 011
gossanousqtz vn in basic schist/gneiss
0.4
343.6
66
154
5.5
693
50
CW 012
ferruginousqtz ingneiss
X
26
13
91
0.8
33
7
CW 013
qtz vn,biotite schist,ferruginous
X
607.8
15
830
1.8
58
58
CW 014
pelite rocks
X
111.6
17
2349
0.4
6
14
CW 015
qtz vein
X
94.1
27
1265
4.4
43
67
CW 016
ferruginous foat
X
2790.5
214
8251
3.6
176
315
CW 017
ferruginousqtz veinlets/coarse biolite schist
X
4105.7
10
192
2.2
51
4
CW 018
qtz vein
X
301.8
18
299
0.6
12
14
CW 019
qtz feldspar biotite vein
X
263.7
11
74
2.8
27
7
CW 020
qtz vein,ferruginous,inparts
X
87.4
10
93
0.3
11
2
214 = values considered anomalous

An RC drilling program to follow up the auger soil geochemistry which identified coincident Pb-Zn anomalism in several discrete zones was carried out on two areas during March 2008. A total of 30 drill holes for 2136m were completed.

Four anomalies within 300m of each other in the northwest of the project area (Area 1) were tested by 16 inclined RC holes for a total of 1128m with most holes extended to approximately 60m vertical depth. The host lithologies in this area are predominantly high grade metamorphics (quartz-biotite-garnet gneiss) probably derived from greywacke-type sediments. Amphibolites present may have been derived from intercalated mafic volcanic or possibly from late stage doleritic intrusions. The area has been complexly folded by more than one phase of deformation and subsequently intruded by granitoid phases.

Significant base metal values intersected in three holes (GRC004, 014 and 016) at Area 1 which were drilled on three traverses (nominally) 50m apart. Lead sulphide (galena) was identified in RC drill chips from GRC004 and copper sulphides (chalcopyrite) from GRC016. In each hole these sulphides are associated with evidence of hydrothermal alteration including hematite-silica-magnetite (i.e iron and silicon addition) together with quartz and carbonate veining. Anomalous gold, silver and zinc values are also present.

These intersections at Area 1 strike NE-SW and are parallel to the palaeo-stratigraphy (Figure 5). The alteration and sulphide mineralisation outlined at Area 1 may be peripheral to more significant metal deposition. Table 7 lists significant base metal values intersected in Area 1

Table 7 : Significant RC drill intersections – Area 1

Drill Hole
North
East
Dip degrees
Azimuth degrees
Interval metres
Pbppm
Cuppm
Znppm
GRC004
7285330
370550
-60
180
59-62
4890
2310
790
65-66
2.3%
0.6%
0.3%
GRC014
7285345
370600
-60
180
67-70
1440
800
1060
GRC016
7285320
370510
-60
180
56-59
130
5040
450
inc
58-59
0.9%
Samples were analysed for Pb-Cu-Zn-Au-Ag using Mixed acid digest and Aqua Regia digest. Results were determined by Inductively Coupled Plasma (ICP) Mass Spectrometry
and Inductively Coupled Plasma (ICP) Optical Emission.

Audalia Resources Limited PROSPECTUS

Area 2 about 9km to the southeast of Area 1, is a 1200m long stratiform Pb-Zn in soil anomaly that is in part, coincident with an airborne-magnetic “thumbprint” anomaly. Fourteen inclined RC holes for 1008m were drilled on four traverses 200m apart into this zone. Anomalous Zn values were returned (max. 1m value of 0.17% Zn) associated with anomalous Pb and Au values (see Table 8 below). Further sampling will be carried out to determine continuity or trend of mineralisation. The host rocks are similar to those encountered at Area 1 to the northwest

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Table 8 : Significant RC drill intersections – Area 2
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	Drill Hole North East Dip degrees Azimuth degrees Interval metres Pbppm Cuppm Znppm GRC020 7281890 378600 -60 180 70-71 75 39 1690

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Figure 5 : Location of Samples and Anomalies

Interpretation of satellite images and air photographs indicated that the eastern end of the antiform (on ELA9/1824) has zones of chlorite-rich sediments or schists which could represent relict areas of hydrothermal alteration. In addition this area shows several ironstained and manganese-stained outcrops. These could be potentially gossanous material and could highlight locations where sulphidebearing (and potentially base metal-bearing) minerals are found at surface. Often sulphide gossans are good indicators of base metal mineralisation below surface. This area is yet to be sampled and mapped on the ground and is a good exploration target.

INDEPENDENT GEOLOGIST’S REPORT

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8. Exploration Program and Budget

Exploration work on the Gascoyne Project should initially focus on a geophysical survey and reconnaissance RAB/RC drilling during the first year.

A VTEM (Versatile Time Domain Electro-Magnetic) geophysical survey over the project is proposed in the first year to locate any additional conductive primary sulphide deposits located beneath weathered oxide mineralization. VTEM is an advanced airborne geophysical technique designed for deep penetration and high spatial resolution, enabling detection of even weakly conductive bodies commonly missed by conventional surveys. If logistics are such that a helicopterborne VTEM survey cannot be conducted this can be replaced by a ground EM survey for similar costs.

In the second year, RC and Diamond drilling is proposed to test priority geochemical and conductivity anomalies determined from the mapping, geochemical and geophysical surveys. Pending results from the initial phase of drilling, or if the VTEM survey detects deeper conductivity anomalies below the weathering profile, a program of deeper drilling may be warranted.

The proposed exploration budget is set out in Table 2 and Table 3 in this Report. That level of expenditure is considered reasonable given the high prospectivity of the area.

Audalia Resources Limited PROSPECTUS

Principal sources of information

Publications

Berkman, DA (1989) Field Geologist’s Manual. Third Edition. 1989. AusIMM Monograph No.9

Solomon M. and Groves D.I. (1994). The Geology and Origin of Australia’s Mineral Deposits.

Stewart, A.J. and Blake, D.H., (Eds.) (1992). Detailed studies of the Mount Isa Inlier, Bureau of Mineral Resources, Australia, Bulletin, 243, 374pp.

Wyborn, L.A.I. and Heinrich, C.A (1993). The relationship between late-tectonic felsic intrusives and Cu-Au mineralisation in the Eastern Fold Belt, Mount Isa Inlier. Australian Institute of Geoscientists, Bulletin, 13, 27-30.

JORC Committee (2004) Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. 2004 Edition

Valmin Code (2005) Code for the Technical Assessment and Valuation of Mineral and Petroleum Committee Assets and Securities for Independent Expert Reports. 2005 Edition

Report 59 Geology and Mineralisation of the Palaeoproterozoic Bryah and Fraser Basins, Western Australia. F. Pirajno, SA Occhipinti and CP Swager. GSWA Report 59. Perth 2000. (Includes 1:250,000 scale Geology Map)

Elias, M Bunting, JA Wharton, PH Glengarry Sheet SG50-12 1: 250,000 Explanatory Notes GSWA, 1982

Gleneagle Gold Prospectus 2003 and various 2004 Stock Exchange Announcements

Abra Mining Limited Website www.abramining.com.au

Sandfire Resources NL Website www.sandfire.com.au

WAMEX REPORTS

A1705 Griffin Coal Mining Co., Peak Hill Gold & Base Metal Exploration for TR 4851H. 1968. (Source of pre-1967 production data.) A35514 Sons of Gwalia NL/Western Reefs JV, Labouchere JV Report, March 1991 Harrods/Wilthorpe/Sachs anomalies. MW Kellow.
A35519 Sons of Gwalia NL/Western Reefs JV, Labouchere JV Annual Report, 1992-1993 Harrods & Sachs anomalies. MW Kellow.
A53778 Plutonic Operations Ltd, Milgun Joint Venture Project E52/782 Surrender Report. February 1998. Bactrian anomalies. N Vickery. A26886 Homestake Australia Ltd E52/168 Report Milgun Project 1987-1989 A29577 Homestake Australia Ltd E52/168 Report Milgun Project 1989-1990 A21476 Forrest Gold Pty Ltd E52/162 Annual Report 1986-1987 A38115 Annual Report Mt Padbury Project 1992-1993 Afmeco Pty Ltd. Feb 1993 A31103 Geochemex Australia (for Barrack Exploration) Aquarius Prospect - Progress Report on BLEG Soil Programs. BH McCrow, RD Binell. August 1989. A24603 Barrack Mines, Report on Aquarius Project. I Prentice. October 1987. A3852 Pacminex Pty Ltd Progress Report on uranium exploration in the Gascoyne and Ashburton areas. April 1973
A16401 BHP Minerals Final Report on ELs E9/81 and E9/82. June 1985
A21350 BHP Minerals Final Report M4824 Crawford Well Cu-Zn exploration 1987 A31231 Metana Minerals NL Yanrey Mineral Sands Project August 1990

INTERNAL REPORTS

Davis, B An overview of Peak Hill Gold Occurrences. January 2003 Davis, B Ranking of Gold Exploration Targets in the Peak Hill District. March 2003 Davis, B Peak Hill District – a Review of Geology and Structures and Evaluation of Regional Exploration Targets for Gold & Manganese. Oct 2003 Davis, B Desert Resources Ltd, Geological Structures, oxidation & alteration patterns from Landsat TM-7 data. April 2004 Davis, B Cadetta Resources Ltd, Report on the Geology & Gold Prospectivity of the Peak Hill Project Tenements E52/1751, 1752, 1740 and P52/1034. May 2004
Davis, B Update on Desert Resources Ltd tenements at Peak Hill. June 2004 Davis, B Sampling Program Mt Beasley Gold Lease M52/251. RER Pty Ltd August 2003 Davis, B Independent Geology Appraisal Report on the Tuzo Molybdenum Prospect, British Columbia, Canada. Geologica Pty Ltd. April 2007 Davis, B Geology Appraisal Report Sumbawa Gold-Copper Porphyry Project, Indonesia for Hercules Energy. Geologica Pty Ltd. March 2008 K. Ridge Horseshoe Project Summary. Exodus Minerals Ltd. Internal Report. Feb. 2001

Morgan, WR Horseshoe Prospect, Peak Hill Mineral Field, WA. (WR Morgan & Associates) 21st March 1994

Voermans, FM Geological Report on Horseshoe Prospect E52/1561. FM Voermans April 2002

INDEPENDENT GEOLOGIST’S REPORT

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Glossary

Glossary
Aerial photograph	A photograph of the earth’s surface taken from an aircraft.
Aeromagnetic	Measurement of the earth’s magnetic feld from a surveying aircraft, for the purpose of recording the magnetic characteristics of rocks.
Airborne	A term applied to surveys conducted from an aircraft.
Ag	Chemical symbol for silver.
Alluvium/alluvial	Recent surfcial water-lain sediments.
Alteration zone	Zone within which rock-forming minerals have been chemically changed.
Andesite	A volcanic or intrusive rock of intermediate composition
Anomalies	Said of geochemical and geophysical data which deviates from regularity.
Arsenopyrite	A common iron and arsenic sulphide mineral (FeAsS).
Assays	The testing and quantifcation of metals of interest in a sample.
Au	Chemical symbol for gold.
Auriferous	Gold-bearing.
Banded Iron Formation	A rock composed of fnely alternating layers of silica and iron oxide.
Basalt/metabasalt	A fne-grained rock composed of feldspar and pyroxene or amphibole.
Base metals	The more common and chemically active metals, e.g. lead, copper, zinc, nickel.
Bedrock	Solid rock underlying surfcial deposits or weathered rock units.
Biotite	A potassium iron magnesium aluminium hydroxide silicate mineral.
Breccia	A rock containing angular fragments of rock.
Brittle	Deformation of rocks involving breaking or fracturing.
Cainozoic	A time period approximately 65 million years ago to present.
Calcite	A calcium carbonate mineral.
Carbonate	A group of minerals containing primarily calcium, magnesium or iron and CO3.
Carboniferous	A time period approximately 354-298 million years ago.
Chalcopyrite	A copper iron sulphide mineral (CuFeS2).
Chert	A fne-grained rock composed of cryptocrystalline silica.
Chlorite	A group of hydrated aluminium iron magnesium silicate minerals.
Colluvium/colluvial	A loose mass of soil and rock material deposited by slope processes.
Conglomerate	A sedimentary rock type containing pebbles, cobbles or boulders.
Costean	A trench to expose rock for sampling.
Cross-fault	A fault oriented at a high-angle to the general pattern of rock layering.
Cu	Chemical symbol for copper.
Cumulate	Rock texture of igneous rocks which appear to have formed by the accumulation of crystals.
Diamond drilling	A method of obtaining cylindrical core of rock by drilling with a diamond-set or diamond-impregnated bit.
Diorite	A plutonic igneous rock of intermediate to basic composition
Disseminated	A term used to describe fne particles of a mineral dispersed through the enclosing rock.
Dolerite	A medium-grained mafc intrusive rock composed mainly of plagioclase and pyroxene or amphibole.
Ductile	Deformation of rocks involving stretching or bending without much breaking.
Dyke	A tabular intrusive body of igneous rock crosscutting the host strata.
Electromagnetic	A geophysical exploration technique whereby transmitted
EM Survey	electromagnetic felds are used to energise and detect conductive material beneath the earth’s surface.
Extrusive	Pertaining to igneous rocks ejected at the earth’s surface.
Fault	A fracture in rock along which there has been relative displacement of the two sides either vertically or horizontally.
Feldspar	A group of silicate minerals containing calcium, potassium, sodium and aluminium.
Felsic	Descriptive of light coloured rocks containing an abundance of feldspar and quartz.
Gabbro	A plutonic rock consisting of calcic plagioclase.
Geochemistry	The study of the abundance of elements in rocks by chemical methods.
Geophysics	Exploration methods which seek to locate mineral deposits by direct or indirect measurements of a large range of physical properties
	of the deposits or the rocks associated with them.
Gossan	A rock composed of hydrated oxides of iron that has developed over sulphides of iron and other metals.
Granite	A plutonic rock consisting essentially of alkalic feldspar and quartz.
Granitoid	A general term for plutonic rocks consisting mainly of feldspar and quartz.
Gravity survey	A type of survey that measures the spatial variation of the earth’s gravity feld to determine the distribution of different rock masses.
Greenstone	A feld term for metamorphosed mafc and ultramafc igneous rocks.
Greywacke	A type of sedimentary rock.
Ground magnetic	Measurement of the earth’s magnetic feld from a ground-based survey, for the purpose of recording the magnetic characteristics
	of rocks.
Ha	Hectares
Host rock	The rocks containing a mineral or mineral deposit.
Hydrothermal	Pertaining to heated water associated with the formation of mineral deposits or the alteration of rocks.

Audalia Resources Limited PROSPECTUS

Indicated	An ‘Indicated Mineral Resource” is that part of a Mineral Resource for Mineral Resource which tonnage, densities, shape, physical
	characteristics, grade and mineral content can be estimated with a reasonable level of confdence. It is based on exploration, sampling
	and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill
	holes. The locations are too widely or inappropriately spaced to confrm geological and/or grade continuity but are spaced closely enough
	for continuity to be assumed.
Induced polarisation	A geophysical exploration method which measures changes in magnetic and electrical felds induced in the earth by the application of an
	electrical current.
Inferred	An ‘Inferred Mineral Resource” is that part of a Mineral Resource for Mineral Resource which tonnage, grade and mineral content can
	be estimated with a low level of confdence. It is inferred from geological evidence and assumed but not verifed from geological and/or
	grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits,
	workings and drill holes which may be limited or of uncertain quality and reliability.
Intrusion	A body of igneous rock that invades older rocks.
Intrusive	Pertaining to igneous rocks emplaced below the earth’s surface.
Komatiite	Ultramafc igneous rocks characterized by high magnesium content.
Mafc	Descriptive of dark coloured rocks composed dominantly of magnesium and iron silicate minerals.
Magnetite	An iron oxide mineral (Fe3O4).
Measured	A ‘Measured Mineral Resource” is that part of a Mineral Resource for Mineral Resourcewhich tonnage, densities, shape, physical
	characteristics, grade and mineral content can be estimated with a high level of confdence. It is based on detailed and reliable exploration,
	sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and
	drill holes. The locations are spaced closely enough to confrm geological and grade continuity.
Mesothermal	A hydrothermal mineral deposit formed at considerable depth and in the temperature range of 250o-450oC.
Mesozoic	A time period between 251-65 million years ago.
Metamorphism	The mineralogical, structural and chemical changes induced within solid rocks through the actions of heat, pressure or the introduction of new
	chemicals.
Milligal	A unit of measurement for gravity (gravitational acceleration) referring to one thousandth of a gal (or 10 gravity units). 1 gravity unit is
	equivalent to 10-6m/s2or 0.1 mgal
Mineralisation	The concentration of metals and their chemical compounds within a body of rock.
Mudstone	A sedimentary rock usually composed essentially of mud-sized grains.
Muscovite	A potassium aluminium hydroxide silicate mineral.
Neoproterozoic	A time period approximately 1,000-545 million years ago.
Open cut	A mine working or excavation open to surface.
Ore	Mineral-bearing rocks that may be mined and treated at a proft.
Outcrop	Surface expression of underlying rocks.
Palaeozoic	A time period between 545-251 million years ago.
Pb	Chemical symbol for lead.
Pentlandite	An iron nickel sulphide mineral ((Fe, Ni)9S8).
Percussion drilling	A percussion drilling technique in which the cuttings are recovered outside the drill rods. This drilling method may be subject to sample
	losses and contamination.
Pluton/plutonic	A body of igneous rock that has formed beneath the earth’s surface by consolidation from a magma.
Polymetallic	Said of mineral deposits containing a range of precious and/or base metals of interest.
ppb	Parts per billion (1000 million).
ppm	Parts per million.
Proterozoic	A time period approximately 2,500-545 million years ago.
Pyrite	A common iron sulphide mineral (FeS2).
Pyrrhotite	An iron sulphide mineral which is magnetic (Fe1-xS).
Quartz	A mineral composed of silicon dioxide.
Quaternary	A time period approximately 2 million years ago to present.
Quartzite	A metamorphic rock composed predominantly of quartz.
RAB drilling	A rotary air blast (RAB) drilling technique in which sample is returned to surface outside the rod string by compressed air.
Radiometric survey	A type of survey that measures the spatial distribution of potassium, thorium and uranium in the top 30-45 cm of the earth’s crust.
RC drilling	A reverse circulation percussion drilling technique in which the cuttings are recovered through the drill rods with compressed air, thus
	minimising sample losses and contamination.
Reconnaissance	A general examination or survey of a region with reference to its main features, usually as a prelude to more detailed surveys.
Regolith	The layer of unconsolidated material and weathered rock which overlies bedrock.
Rock chip sampling	The collection of representative samples of rock fragments from outcrops within a limited area.
Sandstone	A sedimentary rock usually composed essentially of sand-sized grains.
Saprolite	Weathered rock in which the original rock textures are still recognizable.
Schist/schistose	A metamorphic rock with a platy or foliated texture.
Sediment	Unconsolidated rock particles formed by the erosion of older rocks.
Sedimentary	A term describing rocks formed from sediment.
Sericite	Fine-grained white mica of similar composition to muscovite.
Serpentinite	A rock derived from the alteration of ultramafc rocks, and composed of hydrous iron magnesian silicate minerals.
Shale	A laminated fne-grained sedimentary rock formed by the consolidation of mud or silt.
Shear zone	A fracture in rock similar to a fault.
Schist	A foliated metamorphic rock easily split into sheets.
Silica	Silicon dioxide.
Sill	A tabular intrusive body of igneous rock oriented parallel to the host strata.

INDEPENDENT GEOLOGIST’S REPORT

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Soil geochemistry The determination of relative or absolute abundances of elements in soil. Strike The course or bearing of a bed or layer of rock. Stream sediment The determination of relative or absolute abundances of elements in geochemistry sediments collected along streams. Structural Pertaining to geological structure, including faults, folds and shear zones. Sulphide A general term to describe minerals containing sulphur commonly associated with mineralisation. Syncline A fold in rock strata that is concave upwards with a core of younger rocks. Synform A fold in rock strata that is concave upwards, but may not be cored by the youngest rocks. Topography The physical features of a region. Tuff A rock formed of compacted volcanic fragments, generally less than 4mm in diameter. Ultramafic Igneous or metamorphic rocks containing virtually no quartz or feldspar and composed essentially of ferromagnesium silicates, including olivine, pyroxene, amphibole, talc and/or serpentine minerals. Unconformity A geological surface marked by angular differences in the disposition of younger and older rock units. Vein A thin infill of a fissure or crack. Volcanic Rocks originating from volcanic activity. Volcaniclastic Pertaining to clastic rock containing volcanic material. Volcano-sedimentary Mixed sequences of volcanic and sedimentary rocks. Weathering A process of change to rocks brought about by exposure to oxygen and water. Zn Chemical symbol for zinc.

Audalia Resources Limited PROSPECTUS

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6.0 Independent Accountant’s Report

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Audalia Resources Limited PROSPECTUS

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Our ref: SA:AM

BDO Corporate Finance (WA) Pty Ltd 38 Station Street SUBIACO WA 6008 PO Box 700 West Perth WA 6872

Phone 61 63382 4600 Fax 61 6382 4601 [email protected] www.bdo.com.au

ABN 27 124 031 045 AFS Licence No 316158

21 April 2011

The Directors Audalia Resources Limited 79 Broadway Nedlands WA 6009

Dear Sirs

INVESTIGATING ACCOUNTANT’S REPORT

1. Introduction

We have prepared this Investigating Accountant’s Report (“ Report ”) on historical financial information of Audalia Resources Limited (“ Audalia ” or “ the Company ”) for inclusion in the Prospectus. Broadly, the Prospectus will offer up to 12,500,000 shares at an issue price of $0.20 each to raise $2,500,000 before costs (“ the Offer ”). The minimum subscription for the Offer is $1,500,000.

2. Basis of Preparation

This Report has been prepared to provide investors with information on the historical statement of comprehensive income, statement of financial position and statement of changes in equity and the pro-forma statement of financial position and statement of changes in equity, as noted in Appendices 1, 2 and 3.

This Report does not address the rights attaching to the shares to be issued in accordance with the Prospectus, nor the risks associated with the investment, and has been prepared based on the complete Offer being achieved. Neither BDO Corporate Finance (WA) Pty Ltd nor its related entities (“ BDO ”) has not been requested to consider the prospects for the Company, the shares on offer and related pricing issues, nor the merits and risks associated with becoming a shareholder and accordingly has not done so, and does not purport to do so. BDO accordingly takes no responsibility for these matters or for any matter or omission in the Prospectus, other than responsibility for this Report. Risk factors are set out in Section 9.0 of the Prospectus.

Expressions defined in Section 12.0 of the Prospectus have the same meaning in this Report.

INDEPENDENT ACCOUNTANT’S REPORT

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3. Background

Audalia Resources Pty Ltd was incorporated on 27 August 2010 to identify and evaluate opportunities in the resources sector suitable for a public company. The Company currently has entered into a tenement sale agreement dated 16 November 2010 to acquire three mining tenements ( “Kingsfield Tenements”) from Kingsfield Pty Ltd. The Company has also made applications for the additional exploration licences in the area adjacent to the Kingsfield Tenements.

4. Scope

You have requested BDO to prepare an Investigating Accountant's Report covering the following financial information:

the historical statement of financial position as at 31 December 2010, and the income statement and statement of changes in equity for the period ended on that date;
the pro-forma statement of financial position as at 31 December 2010, and the pro-forma statement of changes in equity for the period ended on that date, reflecting the actual position as at that date, major transactions between that date and the date of our report and the proposed capital raising under the Prospectus;
the accounting policies applied by Audalia in preparing its financial statements.

The historical financial information set out in the appendices to this Report has been extracted from the financial statements of the Company for the period from incorporation to 31 December 2010.

The Directors are responsible for the preparation of the historical financial information including determination of the adjustments.

We have conducted our review of the historical financial information in accordance with the Australian Auditing and Assurance Standard ASRE 2405 “Review of Historical Financial Information Other than a Financial Report”. We made such inquiries and performed such procedures as we, in our professional judgment, considered reasonable in the circumstances including:

a review of work papers, accounting records and other documents pertaining to balances in existence at 31 December 2010;
a review of the assumptions used to compile the pro-forma statement of financial position;
a review of the adjustments made to the pro-forma historical financial information;
a comparison of consistency in application of the recognition and measurement principles in Accounting Standards and other mandatory professional reporting requirements in Australia, and the accounting policies adopted by the Company disclosed in the appendices to this Report; and
enquiry of Directors and others.

These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Our review was limited primarily to an examination of the historical financial information, the pro-forma financial information, analytical review procedures and discussions with both management and directors. A review of this nature provides less assurance than an audit and, accordingly, this Report does not express an audit opinion on the historical information or proforma financial information included in this Report or elsewhere in the Prospectus.

Audalia Resources Limited PROSPECTUS

In relation to the information presented in this Report:-

support by another person, corporation or an unrelated entity has not been assumed;
the amounts shown in respect of assets do not purport to be the amounts that would have been realised if the assets were sold at the date of this Report; and
the going concern basis of accounting has been adopted.

5. Conclusion

Statement on Historical Financial Information

Based on our review, which was not an audit, nothing has come to our attention which would cause us to believe the historical financial information as set out in the Appendices to this Report does not present fairly the financial performance for the period ended 31 December 2010 or the financial position as at 31 December 2010 in accordance with the measurement and recognition requirements (but not all of the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia.

Statement of Pro-forma Financial Information

Based on our review, which was not an audit, nothing has come to our attention which would cause us to believe the pro-forma financial information does not present fairly the financial position of the Company as at 31 December 2010, in accordance with the measurement and recognition requirements (but not all of the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia as if the proforma transactions had occurred on that date.

6. Subsequent Events

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

The pro-forma Statement of Financial Position reflects the following events that have occurred subsequent to 31 December 2010:

The issue of 10,000,000 shares at an issue price of $0.10 per share to raise $1,000,000 as seed capital on 20 April 2011.

7. Assumptions Adopted in Compiling the Pro-forma Statement of Financial Position

The pro-forma Statement of Financial Position post offer is shown in Appendix 2. This has been prepared based on the reviewed financial statements as at 31 December 2010 and the transactions and events relating to the issue of shares under this Prospectus:

The issue of 12,500,000 shares at an issue price of $0.20 per share to raise $2,500,000 pursuant to the Prospectus;
Capital raising costs incurred of $301,429;
Deferred capital raising costs of $13,571 to be offset against share capital;

INDEPENDENT ACCOUNTANT’S REPORT

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Final payment of $150,000 to Kingsfield Pty Ltd pursuant to the Tenement Sale Agreement and in relation to exploration and evaluation assets; and
The issue of 3,000,000 options to the Lead Manager, exercisable at $0.20 each expiring on 28 April 2014.

8. Disclosures

BDO Corporate Finance (WA) Pty Ltd is the corporate advisory arm of BDO in Perth.

Neither BDO Corporate Finance (WA) Pty Ltd nor BDO, nor any director or executive or employee thereof, has any financial interest in the outcome of the proposed transaction except for the normal professional fee due for the preparation of this Report.

Consent to the inclusion of the Investigating Accountant’s Report in the Prospectus in the form and context in which it appears, has been given. At the date of this Report, this consent has not been withdrawn.

Yours faithfully

BDO Corporate Finance (WA) Pty Ltd

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Sherif Andrawes

Director

Audalia Resources Limited PROSPECTUS

APPENDIX 1 AUDALIA RESOURCES LIMITED

STATEMENT OF COMPREHENSIVE INCOME

		Reviewed 31 Dec 10 $
Interest income		2,949
Travel expenses		(11,869)
Consultants		(4,609)
Secretarial and accounting		(10,900)
Other expenses		(2,582)

Loss from continuing activities before tax		(27,011)
Income tax expense / (benefit)		-

Net Loss for the period		(27,011)


Other comprehensive income for the period		-

Total comprehensive income for the period		(27,011)

The Statement of Comprehensive Income is to be read in conjunction with the notes to and forming part of the historical financial information set out in Appendix 4.

INDEPENDENT ACCOUNTANT’S REPORT

APPENDIX 2 AUDLAIA RESOURCES LIMITED

STATEMENT OF FINANCIAL POSITION

	Reviewed	Subsequent	Pro-forma	Pro-forma
	31 Dec 10	Events	Adjustments	After Issue
Notes	$	$	$	$
CURRENT ASSETS
Cash and cash equivalents 2	173,034	1,000,000	2,048,571	3,221,605
Trade and other receivables	658	-	-	658
Other current assets 3	13,571	-	(13,571)	-

TOTAL CURRENT ASSETS	187,263	1,000,000	2,035,000	3,222,263


NON-CURRENT ASSETS
Exploration and evaluation expenditure 4
	101,631	-	150,000	251,631
TOTAL NON-CURRENT ASSETS	101,631	-	150,000	251,631

TOTAL ASSETS	288,894	1,000,000	2,185,000	3,473,894


CURRENT LIABILITIES
Trade and other payables	10,405	-	-	10,405

TOTAL CURRENT LIABILITIES	10,405	-	-	10,405

TOTAL LIABILITIES	10,405	-	-	10,405



NET ASSETS	278,489	1,000,000	2,185,000	3,463,489


EQUITY
Contributed equity 5	305,500	1,000,000	2,035,000	3,340,500
Reserves 6	-	-	150,000	150,000
Accumulated losses	(27,011)	-	-	(27,011)

TOTAL EQUITY	278,489	1,000,000	2,185,000	3,463,489

The pro-forma Statement of Financial Position after Issue is as per the Statement of Financial Position before Issue adjusted for the transactions relating to the issue of shares pursuant to this Prospectus. The Statement of Financial Position is to be read in conjunction with the notes to and forming part of the historical financial information set out in Appendix 4.

Audalia Resources Limited PROSPECTUS

APPENDIX 3 AUDALIA RESOURCES LIMITED

STATEMENT OF CHANGES IN EQUITY

	Reviewed 31 Dec 10 $ Subsequent Events S	Pro-forma Adjustments $ Pro-forma After Issue $
Total equity at the beginning of the period	- -	- -


Comprehensive income for the period
Loss for the period	(27,011) -	- (27,011)
Other comprehensive income for the period	- -	- -

Total comprehensive income for the period
	(27,011) -	- (27,011)

Transactions with equity holders in their capacity as equity holders: Contributions of equity, net of transaction costs


	305,500 1,000,000	2,035,000 3,340,500
Options issued	- -	150,000 150,000

Total transactions with equity holders	305,500 1,000,000	2,185,000 3,490,500


Total equity at the end of the period	278,489 1,000,000	2,185,000 3,463,489

The Statement of Changes in Equity is to be read in conjunction with the notes to and forming part of the historical financial information set out in Appendix 4.

INDEPENDENT ACCOUNTANT’S REPORT

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APPENDIX 4 AUDALIA RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE HISTORICAL FINANCIAL INFORMATION

FOR THE PERIOD ENDED 31 DECEMBER 2010

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted in the preparation of the historical financial information included in this Report have been set out below.

(a) Basis of preparation of historical financial information

The historical financial information has been prepared in accordance with the recognition and measurement, but not all the disclosure requirements of the Australian equivalents to International Financial Reporting Standards (“ AIFRS ”), other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act 2001.

The financial report has been prepared on a historical cost basis.

Compliance with AIFRS ensures that the historical financial information complies with International Financial Reporting Standards.

(b) Going Concern

The financial report has been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business.

The ability of the Company to continue as a going concern is dependent on the Company being able to raise additional funds as required to meet ongoing commitments and for working capital. The Directors may need to raise additional capital or realise assets as required to further explore and evaluate the current opportunities. The Directors believe that the Company will continue as a going concern. As a result the financial report has been prepared on a going concern basis. However should the Company be unsuccessful in undertaking additional raisings or realising assets, the entity may not be able to continue as a going concern. No adjustments have been made relating to the recoverability and classification of liabilities that might be necessary should the Company not continue as a going concern.

(c) Revenue Recognition

Interest

Revenue is recognised as interest accrues using the effective interest method. The effective interest method uses the effective interest rate which is the rate that exactly discounts the estimated future cash receipts over the expected life of the financial asset.

(d) Income Tax

The income tax expense for the period is the tax payable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for all temporary differences, between carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases,

Audalia Resources Limited PROSPECTUS

at the tax rates expected to apply when the assets are recovered or liabilities settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. Exceptions are made for certain temporary differences arising on initial recognition of an asset or a liability if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit.

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

Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities, associates and interests in joint ventures where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

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

(e) Impairment of Assets

At each reporting date the Company assesses whether there is any indication that individual assets are impaired. Where impairment indicators exist, recoverable amount is determined and impairment losses are recognised in the Statement of Comprehensive Income where the asset's carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purpose of assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Where it is not possible to estimate recoverable amount for an individual asset, recoverable amount is determined for the cash-generating unit to which the asset belongs.

(f) Cash and Cash Equivalents

“Cash and cash equivalents” includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the Statement of Financial Position.

(h) Fair value estimation

The fair value of trade receivables and payables is their nominal value less estimated credit adjustments.

(i) Payables

Trade and other payables represent liabilities for goods and services provided to the Company prior to the year end and which are unpaid. These amounts are unsecured and have 30-60 day payment terms.

(j) Employee Benefits

Wages and Salaries, Annual Leave and Sick Leave

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of Statement of Financial Position date are recognised in respect of employees' services rendered up to Statement of Financial Position date and measured at amounts expected to be paid when the liabilities are

INDEPENDENT ACCOUNTANT’S REPORT

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settled. Liabilities for non-accumulating sick leave are recognised when leave is taken and measured at the actual rates paid or payable. Liabilities for wages and salaries are included as part of Other Payables and liabilities for annual and sick leave are included as part of Employee Benefit Provisions.

(k) Contributed Equity

Ordinary shares are classified as equity.

Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit. Costs directly attributable to the issue of new shares or options associated with the acquisition of a business are included as part of the purchase consideration.

(l) Exploration and evaluation expenditure

Exploration and evaluation expenditure encompasses expenditures incurred by the Company in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.

Exploration and evaluation expenditure incurred by the Company is accumulated for each area of interest and recorded as an asset if:

1. the rights to tenure of the area of interest are current; and

2. at least one of the following conditions is also met:

a. the exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; and
b. exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

For each area of interest, expenditure incurred in the acquisition of rights to explore is capitalised, classified as tangible or intangible, and recognised as an exploration and evaluation asset. Exploration and evaluation assets are measured at cost at recognition. Exploration and evaluation expenditure incurred by the Company subsequent to acquisition of the rights to explore is expensed as incurred.

A provision for unsuccessful exploration and evaluation is created against each area of interest by means of a charge to the Statement of Comprehensive Income.

The recoverable amount of each area of interest is determined on a bi-annual basis and the provision recorded in respect of that area adjusted so that the net carrying amount does not exceed the recoverable amount. For areas of interest that are not considered to have any commercial value, or where exploration rights are no longer current, the capitalised amounts are written off against the provision and any remaining amounts are charged against profit.

Recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.

(m) Goods and Services Tax

Revenues, expenses and assets are recognised net of GST except where GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item.

Audalia Resources Limited PROSPECTUS

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position.

Cash flows are included in the cash flow statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

INDEPENDENT ACCOUNTANT’S REPORT

NOTE 2. CASH AND CASH EQUIVALENTS Reviewed 31 Dec 10 $	Pro-forma After Issue $
Cash and cash equivalents 173,034	3,221,605


Adjustments arising in the preparation of the pro-forma cash and cash equivalents balance are summarised as follows:


Reviewed balance at 31 Dec 10	173,034



Subsequent Events:

Proceeds from seed capital	1,000,000



Pro-forma adjustments:

Proceeds from shares issued under this Prospectus	2,500,000

Capital raising costs	(301,429)
Final payment to Kingsfield Pty Ltd in relation to exploration and evaluation assets
	(150,000)

	3,048,571


Pro-forma balance	3,221,605

NOTE 3. OTHER CURRENT ASSETS Reviewed 31 Dec 10 $	Pro-forma After Issue $
Other current assets 13,571	-


Adjustments arising in the preparation of the pro-forma other current assets balance are summarised as follows:


Reviewed balance at 31 Dec 10	13,571



Pro-forma adjustments:

Deferred capital raising costs to be offset against share capital	(13,571)


Pro-forma balance	-

Audalia Resources Limited PROSPECTUS

NOTE 4. EXPLORATION AND EVALUATION EXPENDITURE Reviewed 31 Dec 10 $	Pro-forma After Issue $
Exploration and evaluation assets 101,631	251,631


Adjustments arising in the preparation of the pro-forma exploration and evaluation assets balance are summarised as follows:


Reviewed balance at 31 Dec 10	101,631

Pro-forma adjustments:
Final payment to Kingsfield Pty Ltd in relation to exploration and evaluation assets
	150,000


Pro-forma balance	251,631

NOTE 5. CONTRIBUTED EQUITY	Reviewed 31 Dec 10 $ Pro-forma After Issue $
Contributed Equity	305,500 3,340,500


*Ordinary Share Capital*	Number $
Adjustments arising in the preparation of the pro-forma contributed equity balance are summarised as follows:


Reviewed balance at 31 Dec 10	62,500,001 305,500

Pro-forma adjustments:

Proceeds from seed capital	10,000,000 1,000,000

Proceeds from shares issued under this Prospectus	12,500,000 2,500,000

Capital raising costs	- (301,429)

Deferred capital raising costs to be offset against share capital	- (13,571)

Issue of options for services performed by the Lead Manager	- (150,000)

	22,500,000 3,035,000

Pro-forma balance	85,000,001 3,340,500

INDEPENDENT ACCOUNTANT’S REPORT

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

Reviewed Pro-forma
NOTE 6. RESERVES (OPTION PREMIUM)
31 Dec 10 After Issue
$ $
Reserves (Option Premium) - 150,000
Adjustments arising in the preparation of the reserves balance are
summarised as follows:
Reviewed balance at 31 Dec 10 -
Pro-forma adjustments:
Issue of 3 million options exercisable at 20 cents each expiring
on 28 April 2014 for services performed by the Lead Manager 150,000
Pro-forma balance 150,000
----- End of picture text -----

The options issued to the Lead Manager have been valued using the Black Scholes Model.

The key assumptions used in the valuation are:

Underlying share price of 10 cents representing the seed capital price at the time the agreement was entered into;
Exercise price 20 cents;
Volatility 100%; and
Expiry date of 28 April 2014.

NOTE 7: RELATED PARTY DISCLOSURES

Transactions with Related Parties and Directors Interests are disclosed in Section 10.5 of the Prospectus.

NOTE 8: COMMITMENTS AND CONTINGENCIES

Commitments under Employment and Service Agreements

The Company has also entered into a two year employment agreement with its Executive Chairman, Dato Soo Kok Lim, effective from the admission of the Company to the Official List of ASX for a salary of $20,000 per annum exclusive of superannuation.

The Company has also entered into a two year employment agreement with its Executive Director, Mr Siew Swan Ong, effective from the admission of the Company to the Official List of ASX for a salary of $20,000 per annum exclusive of superannuation.

The Company has entered into a company secretarial services agreement with Townshend York Pty Ltd for the provision of Ms Karen Logan to act as Secretary of the Company for a three year

Audalia Resources Limited PROSPECTUS

term with effect from the admission of the Company to the Official List of ASX for fees as follows:

$48,000 per annum exclusive of GST during year 1;

$54,000 per annum exclusive of GST during year 2; and

$60,000 per annum exclusive of GST during year 3.

The Company has also entered into an accounting services agreement with Townshend York Pty Ltd for a three year term with effect from the admission of the Company to the Official List of ASX for a fee of $24,000 per annum exclusive of GST.

These agreements and their terms and conditions are set out in Section 10.2 of the Prospectus.

Exploration and project commitments

The Company has various commitments and obligations under agreements relating to the Tenement Sale Agreement (as defined in the Prospectus). Based on discussions with the Directors and legal advisors, to our knowledge, the Company has no other material commitment or contingent liabilities not otherwise disclosed in this Investigating Accountant’s Report (refer Background Section 3) and in the Prospectus. Investors should read the Independent Geologist’s Report (Section 5.0 of this Prospectus) and the Summary of Material Contracts (Section 10.2 of this Prospectus) for further details of possible contingencies and commitments.

For details on proposed exploration commitments on mineral tenements, refer to the Independent Geologist’s Report (Section 5.0 of this Prospectus) and Section 2.4 of the Prospectus.

Apart from this, at the date of the Report there are no other material commitments or contingent liabilities that we are aware of, other than those disclosed in the Prospectus.

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7.0 Solicitor’s Report

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Solicitor’s Report on Tenements April 2011

Audalia Resources Limited PROSPECTUS

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21 April 2011

Audalia Resources Limited 79 Broadway NEDLANDS WA 6009

Dear Sirs,

SOLICITOR’S REPORT ON TENEMENTS

This Report is prepared for inclusion in a prospectus for the issue of up to 7,500,000 shares in the capital of Audalia Resources Limited (ACN 146 035 690) (Company) at an issue price of 20 cents per share to raise up to $1,500,000 (with the ability to accept oversubscriptions of a further 5,000,000 Shares at an issue price of 20 cents each to raise up to a further $1,000,000) (Prospectus). For every two Shares issued under the Prospectus, shareholders will receive a free attaching option, exercisable at 20 cents per option with an expiry date of 28 April 2014.

1. SCOPE

We have been requested to report on the Tenements. The Tenements are located in Western Australia.

A schedule of the Tenements is attached to and forms part of this report (Schedule). Part I of the Schedule contains a list of the Tenements. Part II of the Schedule contains a summary of the material contracts affecting the Tenements. Part III of the Schedule contains a summary of the status of the native title claims existing over the Tenements.

On 16 November 2010, the Company entered into a tenement sale agreement (Tenement Sale Agreement) with Kingsfield Pty Ltd to acquire three mining tenements located in Western Australia (Kingsfield Tenements).

We note that the Company will not acquire the Kingsfield Tenements until the Tenement Sale Agreement reaches completion and the Kingsfield Tenements are transferred. Completion is conditional on the Company completing its initial public offer and obtaining conditional ASX approval to list on the Australian Securities Exchange (ASX).

498638_21

SOLICITOR’S REPORT

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The Company has also made applications for two additional exploration licences in the area adjacent to the Kingsfield Tenements (Applications).

The Kingsfield Tenements and the Applications are referred to together in this report as the Tenements.

2. SEARCHES

For the purposes of this Report, we have conducted searches and made enquiries in respect of all of the Tenements as follows:

(a) we have obtained searches of the Tenements from the registers maintained by the Western Australian Department of Mines and Petroleum (DMP). These searches were conducted on 2 March 2011, 11 April 2011 and 21 April 2011. Key details on the status of the Tenements are set out in Part I of the Schedule;
(b) we have obtained extracts of registered native title claims and native title determinations that apply to the Tenements, as determined by the National Native Title Tribunal (NNTT). This material was obtained on 2 March 2011. Details of native title claims and determinations are set out in Section 7 of this Report and Part III of the Schedule;
(c) we have obtained searches from the online Aboriginal Heritage Enquiry System maintained by the Western Australian Department of Indigenous Affairs (DIA) for Aboriginal sites recorded in the Register of Aboriginal sites that overlap the Tenements. This material was obtained on 3 March 2011. No Aboriginal sites were identified as a result of our searches; and
(d) we have reviewed all material agreements relating to the Tenements provided to us or registered as dealings against the Tenements as at the date of the DMP searches and have summarised the material terms (details of which are set out in Part II of the Schedule).

3. OPINION

As a result of our searches and enquiries, but subject to the assumptions and qualifications set out in this Report, we are of the view that, as at the date of the relevant searches:

(a) (Company’s Interest): this Report provides an accurate statement as to the Company’s interest in the Tenements;
(b) (Good Standing): this Report provides an accurate statement as to the validity and good standing of the Tenements; and
(c) (Third party interests): this Report provides an accurate statement as to third party interests, including encumbrances, in relation to the Tenements.

4. EXECUTIVE SUMMARY

Subject to the qualifications and assumptions in this Report, we consider the following to be material issues in relation to the Tenements:

(a) Company’s Interest: The Company does not have a registered interest in Tenements E09/1568, E09/1569 or E09/1570. However, the Company holds an equitable interest in these Tenements pursuant to the

498638_2

Audalia Resources Limited PROSPECTUS

Tenement Sale Agreement. The material terms of the Tenement Sale Agreement are provided in Part II of the Schedule.

(b) Applications for Forfeiture: As shown in Part I of the attached Schedule, on 19 January 2011 applications for forfeiture were made in respect of E09/1568, E09/1569 or E09/1570. Subsequent to the forfeiture applications, the expenditure reports relating to the Kingsfield Tenements were lodged and searches of the Tenements show a compliance date of 23 February 2011.

Searches of the Kingsfield Tenements conducted on 11 April 2011 show that fines were paid by Kingsfield in relation to the non-compliance of 2010 expenditure obligations. These matters were finalised in relation to all of the Kingsfield Tenements on 8 April 2011.

Caveats: Pursuant to the Tenement Sale Agreement, the Company is entitled to acquire the Kingsfield Tenements. As at the date of this Report, settlement of the Tenement Sale Agreement has not completed and is pending the Company receiving conditional approval for quotation on ASX. Accordingly, the Company’s interest in the Kingsfield Tenements has not yet been registered and is not reflected in Part I of the Schedule to this Report. There is a risk that the transfers may not be registered either at all or for an extended period; however we note that on 18 April 2011 the Company lodged caveats to protect its interest in the Kingsfield Tenements in the interim period.

(c) Native Title: Native Title claims are registered against a number of the Tenements. Further details are provided in Parts I and III of the Schedule.

(d) Pastoral Lease: Certain of the Tenements encroach to varying degrees on pastoral lease land. Under the Mining Act 1978 (WA) (Mining Act), a granted tenement will not give access to the area of that tenement that is 30 metres from the natural surface of private or pastoral lease land and is within a specified distance of certain infrastructure or improvements on that land without the consent of the private land owner or occupier or occupier of the pastoral lease (as applicable).

A tenement application can still be granted without that consent but access will be limited to the area that is below a depth of 30 metres from the natural surface of the land in the relevant areas and the tenement register will be endorsed accordingly. The consent is commonly given under the terms of an access agreement whereby the tenement holder also agrees to pay compensation to the owner and/or occupier for losses including damage or disturbance caused to the surface of the land, damage to improvements or (in the case of private land) loss of earnings.

5. DESCRIPTION OF THE TENEMENTS

The Tenements comprise Exploration Licences granted under the Mining Act. Schedule I provides a list of the Tenements. The following provides a description of the nature and key terms of these types of mining tenements as set out in the Mining Act.

5.1 Exploration Licence

Application: A person may lodge an application for an exploration licence and the Minister decides whether to grant the application. An application for an

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exploration licence (unless a reversion application) cannot be legally transferred and continues in the name of the applicant.

Rights: The holder of an exploration licence is entitled to enter the land and undertake operations for the purposes of exploration for minerals.

Term: An exploration licence has a term of 5 years from the date of grant. The Minister may extend the term where:

the exploration licence was granted before 10 February 2006, by a further period or periods of 1 or 2 years; and
the exploration licence was granted after 10 February 2006, by a further period of 5 years followed by a further period or periods of 2 years.

Where an exploration licence is transferred before a renewal application has been determined, the transferee is deemed to be the applicant.

Retention Status: The holder of an exploration licence granted after 10 February 2006 may apply for approval of retention status for the exploration licence. The Minister may approve the application where there is an identified mineral resource within the exploration licence but it is impractical to mine the resource for prescribed reasons. Where retention status is granted, the minimum expenditure requirements are reduced in the year of grant and cease in future years. However, the Minister has the right to impose a programme of works or require the holder to apply for a mining lease. The holder of an exploration licence applied for or granted before 10 February 2006, can apply for a retention licence (see below).

Conditions: Exploration licences are granted subject to various standard conditions, including conditions relating to minimum expenditure, the payment of prescribed rent and royalties and observance of environmental protection and reporting requirements. A failure to comply with these conditions may lead to forfeiture of the exploration licence.

Forfeiture On Grounds Of Non-Compliance: Any person may apply to the warden for the forfeiture of an exploration licence where there is, or has been, non-compliance with the prescribed expenditure conditions. However, a recommendation for forfeiture may not be made unless the warden is satisfied that the non-compliance is, in the circumstances of the case, of sufficient gravity to justify the forfeiture.

An application for forfeiture may be made during the expenditure year in relation to which the requirement is not complied with or within 8 months after the commencement of the following expenditure year.

Relinquishment: The holder of an exploration licence granted or applied for before 10 February 2006 must relinquish not less than half of the blocks comprising the licence at the end of the third year. A further relinquishment of not less than half of the remaining blocks is required at the end of the fourth year. The holder of an exploration licence applied for and granted after 10 February 2006 must relinquish not less than 40% of the blocks comprising the licence at the end of the fifth year.

Priority to apply for Mining Lease: The holder of an exploration licence has priority to apply for a mining lease over any of the land subject to the exploration licence. Any application for a mining lease must be made prior to the expiry of the exploration licence. The exploration licence remains in force until the application for the mining lease is determined.

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Audalia Resources Limited PROSPECTUS

Conversion to mining lease: An application for conversion of an exploration licence to one or more mining leases must be accompanied by a notice of intent to commence productive mining operations or a “mineralisation report” prepared by a qualified person and a statement setting out information about proposed mining operations. A mining lease accompanied by a “mineralisation report” will only be approved where the Director Geological Survey considers that there is a reasonable prospect that the mineralisation identified will result in a mining operation. Upon grant, a mining lease remains in force for a period of 21 years and may be renewed for successive periods of 21 years.

Transfer: No legal or equitable interest in an exploration licence can be transferred or otherwise dealt with during the first year of its term without the prior written consent of the Minister. Thereafter, there is no restriction on transfer or other dealing.

Reversion Application: The Mining Act allowed the holder of an exploration licence who had applied for a mining lease before 10 February 2006 to lodge an application between 11 February 2006 and 10 February 2007 for an exploration licence or prospecting licence in lieu of the grant of the mining lease. The Mining Act provides that reversion applications are deemed to be transferred to a transferee of the underlying exploration licence.

6. ABORIGINAL HERITAGE

There may be areas or objects of Aboriginal heritage located on the Tenements.

Our searches from the database of registered Aboriginal sites maintained by the DIA in respect of Aboriginal sites reveal that there are no Aboriginal sites registered against the Tenements.

However, as there is no obligation under the relevant legislation to register sites or objects, we cannot confirm that there are no Aboriginal sites located on the Tenements.

The Company must ensure that it does not breach the Commonwealth and applicable State legislation relating to Aboriginal heritage as set out below. To ensure that it does not contravene such legislation, it would be prudent for the Company (and it would accord with industry practice and Aboriginal expectations) to conduct heritage surveys to determine if any Aboriginal sites or objects exist within the area of the Tenements. Any interference with these sites or objects must be in strict conformity with the provisions of the relevant legislation. It may also be necessary for the Company to enter into separate arrangements with the traditional owners of the sites.

6.1 Commonwealth Legislation

The Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth) (Commonwealth Heritage Act) is aimed at the preservation and protection of any Aboriginal areas and objects that may be located on the Tenements.

Under the Commonwealth Heritage Act, the Minister for Aboriginal Affairs may make interim or permanent declarations of preservation in relation to significant Aboriginal areas or objects, which have the potential to halt exploration activities. Compensation is payable by the Minister for Aboriginal Affairs to a person who is, or is likely to be, affected by a permanent declaration of preservation.

It is an offence to contravene a declaration made under the Commonwealth Heritage Act.

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6.2 Western Australian Legislation

Tenements are granted subject to a condition requiring observance of the Aboriginal Heritage Act 1972 (WA) (WA Heritage Act).

The WA Heritage Act makes it an offence to alter or damage sacred ritual or ceremonial Aboriginal sites and areas of significance to Aboriginal persons.

The Minister’s consent is required where any use of land is likely to result in the excavation, alteration or damage to an Aboriginal site or any objects on or under that site.

Aboriginal sites may be registered under the WA Heritage Act. However, there is no requirement for a site to be registered and the WA Heritage Act protects all registered and unregistered sites.

7. NATIVE TITLE

7.1 Introduction

This section of the Report examines the effect of native title on the Tenements.

The existence of native title rights held by indigenous Australians was first recognised in Australia in 1992 by the High Court in the case Mabo v. Queensland (no.2) (1992) 175 CLR 1 (Mabo no.2).

Mabo no. 2 held that certain land tenure existing as at the date of that case, including mining tenements, where granted or renewed without due regard to native title rights, were invalid.

As a result of Mabo no. 2, the Native Title Act 1993 (Cth) (NTA) was passed to:

(a) provide a process for indigenous people to lodge claims for native title rights over land, for those claims to be registered by the National Native Title Tribunal (NNTT) and for the Courts to assess native title claims and determine if native title rights exist. Where a Court completes the assessment of a native title claim, it will issue a native title determination that specifies whether or not native title rights exist;
(b) provide (together with associated State legislation) that any land tenures granted or renewed before 1 January 1994 were valid despite Mabo no. 2. This retrospective validation of land tenure was subsequently extended by the NTA to include freehold and certain leasehold (including pastoral leases) granted or renewed before 23 December 1996; and
(c) provide that an act that may affect native title rights (such as the grant or renewal of a mining tenement) carried out after 23 December 1996 (a Future Act) must comply with certain requirements for the Future Act to be valid under the NTA. These requirements are called the Future Act Provisions.

The Future Act Provisions are summarised in Section 7.2 below, following which the Report identifies:

(a) native title claims and determinations that are registered against the Tenements (see Section 7.3);

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Audalia Resources Limited PROSPECTUS

(b) Tenements which have been retrospectively validated under the NTA as being granted before 23 December 1996 (see Section 7.4);

(c) Tenements which have been granted after 23 December 1996 and as such will need to have been granted following compliance with the Future Act Provisions to be valid under the NTA. This Report assumes that the Future Act Provisions have been complied with in relation to these Tenements (see Section 7.4); and

(d) Tenements which are yet to be granted and which may need to comply with the Future Act Provisions in order to be valid under the NTA (see Section 7.4).

Note that the grant of a Tenement does not need to comply with the Future Act Provisions if in fact native title has never existed over the land covered by the Tenement, or has been validly extinguished prior to the grant of the Tenement. We have not undertaken the extensive research needed to determine if in fact native title does not exist, or has been validly extinguished in relation to the Tenements.

Unless it is clear that native title does not exist, the usual practice of the State is to comply with the Future Act Provisions when granting a Tenement. This ensures the grant will be valid in the event a court determines that native title rights do exist over the land subject to the Tenement and as such, the Future Act Provisions apply.

Where a Tenement has been retrospectively validated or validly granted under the NTA, the rights under the Tenement prevail over any inconsistent native title rights.

7.2 Future Act Provisions

The Future Act Provisions vary depending on the Future Act to be carried out. In the case of the grant of a mining tenement, typically there are three alternatives: the Right to Negotiate, an Indigenous Land Use Agreement (ILUA) and the Expedited Procedure. These are summarised below.

Right to Negotiate

The Right to Negotiate involves a formal negotiation between the State, the applicant for the Tenement and any registered native title claimants and holders of native title rights. The aim is to agree the terms on which the Tenement can be granted. The applicant for the Tenement is usually liable for any compensation that the parties agree to pay to the registered native title claimants and holders of native title. The parties may also agree on conditions that will apply to activities carried out on the Tenement (eg in relation to heritage surveys).

If agreement is not reached to enable the Tenement to be granted, the matter may be referred to arbitration before the NNTT, which has six (6) months to decide whether the Tenement can be granted and if so, on what conditions. The NNTT usually requires the parties to have had at least 6 months of negotiations before it will accept a referral for arbitration.

ILUA

An ILUA is a contractual arrangement governed by the NTA. Under the NTA, an ILUA must be negotiated with all registered native title claimants for a relevant area. The State and the applicant for the Tenement are usually the other parties to the ILUA.

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SOLICITOR’S REPORT

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An ILUA must set out the terms on which a tenement can be granted. An ILUA will also specify conditions on which activities may be carried out within the tenement. The applicant for a tenement is usually liable for any compensation that the parties agree to pay to the registered native title claimants and holders of native title in return for the grant of the Tenement being approved. These obligations pass to a transferee of the tenement.

Once an ILUA is agreed and registered, it binds the whole native title claimant group and all holders of native title in the area (including future claimants), even though they may not be parties to it.

Expedited Procedure

The NTA establishes a simplified process for the carrying out of a Future Act that is unlikely to adversely affect native title rights (Expedited Procedure). The grant of a tenement can occur under the Expedited Procedure if:

(a) the grant will not interfere directly with the carrying on of the community or social activities of the persons who are the holders of native title in relation to the land;
(b) the grant is not likely to interfere with areas or sites of particular significance, in accordance with their traditions, to the persons who are holders of native title in relation to the land; and
(c) the grant is not likely to involve major disturbance to any land or waters concerned or create rights whose exercise is likely to involve major disturbance to any land.

If the State considers the above criteria are satisfied, it commences the Expedited Procedure by giving notice of the proposed grant of the Tenement in accordance with the NTA. Persons have until three (3) months after the notification date to take steps to become a registered native title claimant or native title holder in relation to the land to be subject to the Tenement.

If there is no objection lodged by a registered native title claimant or a native title holder within four (4) months of the notification date, the State may grant the Tenement.

If one or more registered native title claimants or native title holders object within that four (4) month notice period, the NNTT must determine whether the grant is an act attracting the Expedited Procedure. If the NNTT determines that the Expedited Procedure applies, the State may grant the Tenement. Otherwise, the Future Act Provisions (eg Right to Negotiate or ILUA) must be followed before the Tenement can be granted.

The State of Western Australia currently follows a policy of granting prospecting and exploration licenses under the Expedited Procedure where the applicant has entered into a standard aboriginal heritage agreement with the relevant registered native title claimants and native title holders. The standard heritage agreement (and ancillary agreements) usually provide for payment of compensation by the applicant for the tenement and conditions that apply to activities carried out within the tenement.

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Audalia Resources Limited PROSPECTUS

7.3 Registered Native Title Claims and Determinations

Our searches indicate that the Tenements are subject to the following registered native title claims and determinations.

Tenement	Native Title Claim	Native Title Determination	ILUA
E09/1568	WC97/28	-	None
E09/1569	WC97/28	-	None
E09/1570	WC97/28	-	None
E09/1824	WC97/28	-	None
E09/1825	WC97/28	-	None

The status of the native title claims is summarised in Part II of the Schedule.

The native title claimants and holders of native title under the determinations are entitled to certain rights under the Future Act Provisions.

7.4 Validity of Tenements under the NTA

The sections below examine the validity of the Tenements under the NTA.

Tenements granted before 23 December 1996

Our searches indicate that none of the Tenements were granted before 1 January 1994

Our searches indicate that none of the Tenements were granted after 1 January 1994 but before 23 December 1996.

Tenements granted after 23 December 1996

Our searches indicate that the following Tenements were granted after 23 December 1996.

Tenement	Date of Grant
E09/1568	23 October 2009
E09/1569	23 October 2009
E09/1570	23 October 2009

We have assumed that these Tenements were granted in accordance with the Future Act Provisions and as such are valid under the NTA.

Tenements renewed after 23 December 1996

Renewals of mining tenements made after 23 December 1996 must comply with the Future Act Provisions in order to be valid under the NTA.

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An exception is where the renewal is the first renewal of a mining tenement that was validly granted before 23 December 1996 and the following criteria are satisfied:

the area to which the mining tenement applies is not extended;
the term of the renewed mining tenement is not longer than the term of the old mining tenement; and
the rights to be created are not greater than the rights conferred by the old mining tenement.

In such cases, the mining tenement can be renewed without complying with the Future Act Provisions. It is currently uncertain whether this exemption applies to a second or subsequent renewal of such a mining tenement.

Our searches indicate that none of the Tenements were renewed after 23 December 1996.

Renewals of Tenements in the future will need to comply with the Future Act Provisions in order to be valid under the NTA. The registered native title claimants and holders of native title identified in Section 7.3 of this Report will need to be involved as appropriate under the Future Act Provisions.

Valid grant of Applications for Tenements

The Future Act Provisions must be complied with when granting any of the Tenements that are currently applications. This will ensure that the newly granted Tenements are valid under the NTA be assured.

The following Tenements are currently applications and as such will need to satisfy the Future Act Provisions.

Applicant	Tenement
Audalia Resources Limited	E09/1824
Audalia Resources Limited	E09/1825

The registered native title claimants and holders of native title identified in Section 7.3 of this Report will need to be involved as appropriate under the Future Act Provisions.

Note that the grant of any tenements in the future in relation to the Tenements (eg the grant of a mining lease from an exploration licence) will also need to comply with the Future Act Provisions.

8. QUALIFICATIONS AND ASSUMPTIONS

This Report is subject to the following qualifications and assumptions:

(a) we have assumed the accuracy and completeness of all Tenement searches, register extracts and other information or responses which were obtained from the relevant department or authority including the NNTT;
(b) we assume that the registered holder of a Tenement has valid legal title to the Tenement;

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Audalia Resources Limited PROSPECTUS

(c) this Report does not cover any third party interests, including encumbrances, in relation to the Tenements that are not apparent from our searches and the information provided to us;
(d) we have assumed that any agreements provided to us in relation to the Tenements are authentic, were within the powers and capacity of those who executed them, were duly authorised, executed and delivered and are binding on the parties to them;
(f) with respect to the granting of the Tenements, we have assumed that the State and the applicant for the Tenements complied with the applicable Future Act Provisions;
(g) we have assumed the accuracy and completeness of any instructions or information which we have received from the Company or any of its officers, agents and representatives;
(h) unless apparent from our searches or the information provided to us, we have assumed compliance with the requirements necessary to maintain a Tenement in good standing;
(i) with respect to the application for the grant of a Tenement, we express no opinion as to whether such application will ultimately be granted and that reasonable conditions will be imposed upon grant, although we have no reason to believe that any application will be refused or that unreasonable conditions will be imposed;
(j) references in the Schedule to any area of land are taken from details shown on searches obtained from the relevant department. It is not possible to verify the accuracy of those areas without conducting a survey; and
(k) the information in the Schedule is accurate as at the date the relevant searches were obtained. We cannot comment on whether any changes have occurred in respect of the Tenements between the date of the searches and the date of the Prospectus.
CONSENT

This report is given solely for the benefit of the Company and the directors of the Company in connection with the issue of the Prospectus and is not to be relied on or disclosed to any other person or used for any other purpose or quoted or referred to in any public document or filed with any government body or other person without our prior consent.

Yours faithfully

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STEINEPREIS PAGANIN

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SOLICITOR’S REPORT

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NOTES	1 – 9 and 10	1 – 9 and 11
NATIVE TITLE CLAIMS / DETERMINATIONS / ILUAs	WC97/28 – Gnulli (Registered)	WC97/28 – Gnulli (Registered)
BONDS	-	-
ENCUMBRANCES/ DEALINGS	Extension of Time 300884 – Approved 10/10/2008 Forfeiture 363576 – Complied with 23/2/2011 Application to Amend 366217 – 22/2/2011 Caveat 370128 - 18 April 2011.	Extension of Time 300884 – Approved 10/10/2008 Forfeiture 363576 – Complied with 23/2/2011 Application to Amend 366218 – 22/2/2011 Caveat 370129 - 18 April 2011.
SATISFACTION OF EXPENDITURE CONDITIONS TO DATE	Expended in full	Expended in full
MINIMUM ANNUAL EXPENDITURE	$20,000.00	$20,000.00
ANNUAL RENT (NEXT RENTAL YEAR)	$726.66	$1,816.65
AREA SIZE (Blocks)	6	15
EXPIRY DATE	22/10/2014	22/10/2014
GRANT DATE	23/10/2009	23/10/2009
SHARES HELD	100	100
REGISTERED HOLDER / APPLICANT	Kingsfield Pty Ltd	Kingsfield Pty Ltd
TENEMENT	E 09/1568	E 09/1569

Audalia Resources Limited PROSPECTUS

TENEMENT
REGISTERED
HOLDER /
APPLICANT
SHARES
HELD
GRANT DATE
EXPIRY DATE
AREA
SIZE
(Blocks)
ANNUAL RENT
(NEXT RENTAL
YEAR)
MINIMUM
ANNUAL
EXPENDITURE
SATISFACTION
OF
EXPENDITURE
CONDITIONS
TO DATE
ENCUMBRANCES/
DEALINGS
BONDS
NATIVE TITLE
CLAIMS /
DETERMINATIONS
/ ILUAs
NOTES
E 09/1570
Kingsfield
Pty Ltd
100
23/10/2009
22/10/2014
9
$1,089.99
$20,000.00
Expended
in full
Extension of Time
300884 –
Approved
10/10/2008
Forfeiture 363576 –
Complied with
23/2/2011
Application to
Amend 366219 –
22/2/2011
Caveat 370130 -
18 April 2011.
-
WC97/28 –
Gnulli
(Registered)
1 – 9
and 12
ELA
09/1824
Audalia
Resources
Limited
100
12/10/2010
(Application
Date)
-
11
-
-
-
-
-
WC97/28 –
Gnulli
(Registered)
-
ELA
09/1825
Audalia
Resources
Limited
100
12/10/2010
(Application
Date)
-
67
-
-
-
-
-
WC97/28 –
Gnulli
(Registered)
-
Key to Tenement Schedule
E
–
Exploration Licence
ELA -
Application for Exploration Licence
All of the native title claims listed in the Schedule have been accepted and entered on the Register of Native Title Claims. Please refer to Part III of this Report for the status of the native title claims.
Unless otherwise indicated, capitalised terms have the same meaning given to them in the Prospectus.
References to numbers in the “Notes” column refers to the notes following this table.

SOLICITOR’S REPORT

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In respect of the Tenements the following Endorsements apply:	1. The Licensee's attention is drawn to the provisions of the Aboriginal Heritage Act 1972 and any Regulations thereunder.	2. The Licensee's attention is drawn to the Environmental Protection Act 1986 and the Environmental Protection (Clearing of Native Vegetation) Regulations 2004, which provides for the	protection of all native vegetation from damage unless prior permission is obtained.	In respect of the Tenements the following Conditions apply:	3. All surface holes drilled for the purpose of exploration are to be capped, filled or otherwise made safe immediately after completion.	4. All costeans and other disturbances to the surface of the land made as a result of exploration, including drill pads, grid lines and access tracks, being backfilled and rehabilitated to the	satisfaction of the Environmental Officer, Department of Industry and Resources (DoIR). Backfilling and rehabilitation being required no later than 6 months after excavation unless otherwise	approved in writing by the Environmental Officer, DoIR.	5. All waste materials, rubbish, plastic sample bags, abandoned equipment and temporary buildings being removed from the mining tenement prior to or at the termination of exploration	program.	6. Unless the written approval of the Environmental Officer, DoIR is first obtained, the use of drilling rigs, scrapers, graders, bulldozers, backhoes or other mechanised equipment for surface	disturbance or the excavation of costeans is prohibited. Following approval, all topsoil being removed ahead of mining operations and separately stockpiled for replacement after backfilling	and/or completion of operations.	7. The Licensee notifying the holder of any underlying pastoral or grazing lease by telephone or in person, or by registered post if contact cannot be made, prior to undertaking airborne	geophysical surveys or any ground disturbing activities utilising equipment such as scrapers, graders, bulldozers, backhoes, drilling rigs; water carting equipment or other mechanised	equipment.	8. The Licensee or transferee, as the case may be, shall within thirty (30) days of receiving written notification of:-	• the grant of the Licence; or	• registration of a transfer introducing a new Licensee;	advise, by registered post, the holder of any underlying pastoral or grazing lease details of the grant or transfer.	9. In respect of the area covered by this licence if the Gnulli People (being the applicants in Federal Court Application No. WAD6161 of 1998 (WC97/28) send a request by pre-paid post to the	licensee's or agent's address, not more than ninety days after the grant of this licence, the licensee shall within thirty days of the request execute in favour of Gnulli People the Regional	Standard Heritage Agreement (RSHA) endorsed by the peak industry groups and the Yamatji Marlpa Aboriginal Corporation.	10. Caveat 370128 lodged 16:12 on 18 April 2011.	11. Caveat 370129 lodged 16:12 on 18 April 2011.	12. Caveat 370130 lodged 16:12 on 18 April 2011.	14

Audalia Resources Limited PROSPECTUS

PART II – MATERI AL CONTRACT SUMMARIES

Tenement Sale Agreement

On 16 November 2010, the Company and Kingsfield Pty Ltd (Kingsfield) entered into a sale agreement pursuant to which Kingsfield agreed to sell and the Company agreed to purchase the following WA Tenements: E09/1568, E09/1569 and E09/1570 (Kingsfield Tenements) (Tenement Sale Agreement). The Company was entitled to possession of each of the Kingsfield Tenements from 16 November 2010.

Settlement of the Tenement Sale Agreement (Settlement) is subject to the Company receiving in-principle approval from ASX to be admitted on the ASX on or before 30 June 2011. The Company will pay the remaining consideration of $150,000 to Kingsfield on Settlement.

The Tenement Sale Agreement otherwise contains terms standard for an agreement of this nature, including (but not limited to) in relation to the termination events, access rights prior to completion, standard warranties and confidentiality.

On 15 April 2011, the Company and Kingsfield entered into a deed of variation (Deed of Variation) to vary the Tenement Sale Agreement. The Deed of Variation grants the Company the right to lodge caveats against the Kingsfield Tenements, to protect those interests granted pursuant to the Tenement Sale Agreement.

SOLICITOR’S REPORT

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PART III

STATUS OF NATIVE TITLE CLAIMS

TRIBUNAL NUMBER	FEDERAL COURT NUMBER	APPLICATION NAME	REGISTERED	IN MEDIATION	STATUS
WC 97/28	WAD 6161/98	Gnulli	14/04/1997	Yes	Active

ILUAs

None

SOLICITOR’S REPORT

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In respect of the Tenements the following Endorsements apply:	1. The Licensee's attention is drawn to the provisions of the Aboriginal Heritage Act 1972 and any Regulations thereunder.	2. The Licensee's attention is drawn to the Environmental Protection Act 1986 and the Environmental Protection (Clearing of Native Vegetation) Regulations 2004, which provides for the	protection of all native vegetation from damage unless prior permission is obtained.	In respect of the Tenements the following Conditions apply:	3. All surface holes drilled for the purpose of exploration are to be capped, filled or otherwise made safe immediately after completion.	4. All costeans and other disturbances to the surface of the land made as a result of exploration, including drill pads, grid lines and access tracks, being backfilled and rehabilitated to the	satisfaction of the Environmental Officer, Department of Industry and Resources (DoIR). Backfilling and rehabilitation being required no later than 6 months after excavation unless otherwise	approved in writing by the Environmental Officer, DoIR.	5. All waste materials, rubbish, plastic sample bags, abandoned equipment and temporary buildings being removed from the mining tenement prior to or at the termination of exploration	program.	6. Unless the written approval of the Environmental Officer, DoIR is first obtained, the use of drilling rigs, scrapers, graders, bulldozers, backhoes or other mechanised equipment for surface	disturbance or the excavation of costeans is prohibited. Following approval, all topsoil being removed ahead of mining operations and separately stockpiled for replacement after backfilling	and/or completion of operations.	7. The Licensee notifying the holder of any underlying pastoral or grazing lease by telephone or in person, or by registered post if contact cannot be made, prior to undertaking airborne	geophysical surveys or any ground disturbing activities utilising equipment such as scrapers, graders, bulldozers, backhoes, drilling rigs; water carting equipment or other mechanised	equipment.	8. The Licensee or transferee, as the case may be, shall within thirty (30) days of receiving written notification of:-	• the grant of the Licence; or	• registration of a transfer introducing a new Licensee;	advise, by registered post, the holder of any underlying pastoral or grazing lease details of the grant or transfer.	9. In respect of the area covered by this licence if the Gnulli People (being the applicants in Federal Court Application No. WAD6161 of 1998 (WC97/28) send a request by pre-paid post to the	licensee's or agent's address, not more than ninety days after the grant of this licence, the licensee shall within thirty days of the request execute in favour of Gnulli People the Regional	Standard Heritage Agreement (RSHA) endorsed by the peak industry groups and the Yamatji Marlpa Aboriginal Corporation.	10. Caveat 370128 lodged 16:12 on 18 April 2011.	11. Caveat 370129 lodged 16:12 on 18 April 2011.	12. Caveat 370130 lodged 16:12 on 18 April 2011.	14

Audalia Resources Limited PROSPECTUS

PART II – MATERI AL CONTRACT SUMMARIES

Tenement Sale Agreement

SOLICITOR’S REPORT

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PART III

STATUS OF NATIVE TITLE CLAIMS

TRIBUNAL NUMBER	FEDERAL COURT NUMBER	APPLICATION NAME	REGISTERED	IN MEDIATION	STATUS
WC 97/28	WAD 6161/98	Gnulli	14/04/1997	Yes	Active

ILUAs

None

Audalia Resources Limited

8.0 CORPORATE GOVERNANCE

Details of the Directors as at the date of this Prospectus are set out in Section 4.0 of this Prospectus.

The Board is responsible for the operational and financial performance of the Company, including its corporate governance. The Board has adopted a corporate governance framework for the Company which is underpinned by the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations with 2010 Amendments (2nd Edition) (the Recommendations) applicable to ASX-listed entities.

For ease of comparison to the Recommendations, the following Section addresses each of the Corporate Governance Principles and, where the Company has not followed a Recommendation, this is identified with the reasons for not following the Recommendation.

Audalia Resources’ corporate governance policies are available on the Company’s website: www.audalia.com.au.

Principle 1: Lay solid foundations for management and oversight

Recommendation 1.1: Companies should establish those functions reserved to the board and those delegated to senior executives and disclose those functions.

The Board is accountable to shareholders for the performance of the Company. The Board operates under the Board charter that details its functions, responsibilities and powers and those delegated to management. Broadly, the key responsibilities of the Board are:
reviewing and approving corporate strategies, the annual budget and financial plans;
overseeing and monitoring organizational performance and the achievement of the Company’s strategic goals and objectives;
monitoring financial performance and liaising with the Company’s external auditor;
appointing and assessing the performance of the Managing Director (or equivalent), and overseeing succession plans for the senior executives;
ratifying the appointment and the removal of senior executives and the company secretary;
approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestures;
reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct and legal compliance;
enhancing and protecting the reputation of the Company; and
reporting to and communicating with shareholders.
All Directors of the Company will, on appointment, receive a letter of appointment which sets out the terms and conditions of their appointment.

Recommendation 1.2: Companies should disclose the process for evaluating the performance of senior executives.

The Board reviews the performance of the Managing Director (or equivalent) and executives to ensure they execute the Company’s strategy through the efficient and effective implementation of the business objectives. The Managing Director and executives are assessed against the performance of the Company and individual performance.

Recommendation 1.3: Companies should provide the information indicated in the Guide to reporting on Principle 1.

The Company will include the disclosure required by Recommendation 1.3 in its future annual reports. In accordance with the guide to reporting on Principle 1, the Company’s Board charter will be available on the Company’s corporate governance section of its website.

Principle 2: Structure the Board to add value

Recommendation 2.1: A majority of the board should be independent Directors.

The Board consists of two executive directors and two nonexecutive directors. Details of each Board member’s experience, expertise and qualifications are set out in Section 4.0 of the Prospectus.

The Board has assessed the independence of the nonexecutive directors using defined criteria of independence and materiality consistent with the guidance and commentary for Recommendation 2.1. The Board has determined that one of the two non-executive Directors is independent as defined under Recommendation 2.1.

The Company is at variance with Recommendation 2.1 in that the majority of Directors are not independent. Mr Ho is a director and shareholder of Townshend York Pty Ltd. As set out in Section 10.1.5 of this Prospectus, Townshend York Pty Ltd is a party to agreements with Audalia Resources to provide accounting and company secretarial services to the Company. Accordingly, Mr Ho is not considered by the Board to be an independent director as defined in Recommendation 2.1.

The Board has nevertheless determined that the composition of the current Board represents the best mix of directors that have an appropriate range of qualifications and expertise, can understand and competently deal with current and emerging business issues and can effectively review and challenge the performance of management. Furthermore, each individual member of the Board is satisfied that whilst the Company may not comply with Recommendation 2.1, all directors bring an independent judgment to bear on Board decisions.

Recommendation 2.2: The chair should be an independent Director.

The Company is at variance with Recommendation 2.2 in that the Chairman is not independent.

Recommendation 2.3: The roles of chair and chief executive officer should not be exercised by the same individual.

The roles of Chairman and the Managing Director are not exercised by the same individual. The Board charter summarises the roles and responsibilities of the Chairman, Dato Lim and the Executive Director, Mr Ong.

Recommendation 2.4: The board should establish a nomination committee.

The Nomination and Remuneration Committee consists of two members, Mr Anthony Ho and Mr Brent Butler, who is the chairman.
The Nomination and Remuneration Committee Charter sets out its role, responsibilities and membership requirements and reflects the matters set out in the commentary and guidance for Recommendation 2.4.

Recommendation 2.5: Companies should disclose the process for evaluating the performance of the board, its committees and individual Directors.

The Board reviews its performance each year to ensure individual directors and the Board as a whole work efficiently in achieving their functions as set out in the Board charter.
The Board as a whole discusses and analyses its own performance during the year including suggestions for change or improvement. The Board may also utilise the services of an external party to review the performance of the Board.

Recommendation 2.6: Companies should provide the information indicated in the guide to reporting on Principle 2.

The Company will include the disclosure required by Recommendation 2.6 in its 2011 Annual Report.

PROSPECTUS

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In accordance with the guide to reporting on Principle 2, a description of the procedure for the selection appointment of new Directors and the re-election of current Directors will be available from the corporate governance section of the Company’s website.

Principle 3: Promote ethical and responsible decision making

Recommendation 3.1: Companies should establish a code of conduct and disclose the code or a summary of the code as to:

the practices necessary to maintain confidence in the Company’s integrity;
the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders; and
the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
The Board has adopted a Code of Conduct which applies to all directors and officers of the Company. It sets out Audalia Resources’ commitment to successfully conducting the business in accordance with all applicable laws and regulations while demonstrating and promoting the highest ethical standards. The Code of Conduct reflects the matters set out in the commentary and guidance for Recommendation 3.1.

Recommendation 3.2: Companies should establish a policy concerning trading in Company securities by Directors, senior executives and employees, and disclose the policy or a summary of that policy.

The Securities Trading Policy sets out the rules relating to dealings by employees and directors in securities issued by the Company. Directors and employees may only trade in Audalia Resources securities during prescribed trading windows and only then if they are not in possession of inside information. All directors and employees are required to seek approval before trading in Audalia Resources securities during the trading windows.
The Dealing Rules reflect the matters set out in the commentary and guidance for Recommendation 3.2.

Recommendation 3.3: Companies should provide the information indicated in the Guide to reporting on Principle 3.

The Company will include the disclosure required by Recommendation 3.3 in its 2011 Annual Report.
In accordance with the guide to reporting on Principle 3, the Company’s Code of Conduct and Dealing Rules for Employees and Directors will be available from the corporate governance section of the Company’s website.

Principle 4: Safeguard integrity in financial reporting

Recommendation 4.1: The board should establish an audit committee.

The Audit and Risk Committee consists of three members, Dato Soo Kok Lim, Mr Brent Butler and Mr Anthony Ho, who is the chairman.

Recommendation 4.2: The audit committee should be structured so that it:

consists only of non-executive Directors;
consists of a majority of independent Directors;
is chaired by an independent chair who is not chair of the board; and
has at least three members.
The Company is at variance with Recommendation 4.2 in that a majority of members of the Audit and Risk Committee are not independent.

Recommendation 4.3: The audit committee should have a formal committee charter.

responsibilities and membership requirements and reflects the matters set out in the commentary and guidance for Recommendation 4.3.

Consistent with the Company’s Audit and Risk Committee Charter, the Audit and Risk Committee reviews the external auditor’s terms of engagement and audit plan, and assesses the independence of the external auditor. The current practice, subject to amendment in the event of legislative change, is for the rotation of the engagement partner to occur every five years.

Recommendation 4.4: Companies should provide the information indicated in the Guide to reporting on Principle 4.

The Company will include the disclosure required by Recommendation 4.4 in its 2011 Annual Report.
In accordance with the guide to reporting on Principle 4, the Company’s Audit and Risk Committee charter will be available from the corporate governance section of the Company’s website.

Principle 5: Make timely and balanced disclosure

Recommendation 5.1: Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.

The Company’s Continuous Disclosure Policy sets out the key obligations of the Directors and employees in relation to continuous disclosure as well as the Company’s obligations under the Listing Rules and the Corporations Act. The Policy also provides procedures for internal notification and external disclosure, as well as procedures for promoting understanding of compliance with the disclosure requirements for the monitoring of Company compliance.
The Policy reflects the matters set out in the commentary and guidance for Recommendation 5.1.

Recommendation 5.2: Companies should provide the information indicated in the Guide to reporting on Principle 5.

The Company will include the disclosure required by Recommendation 5.2 in its 2011 Annual Report.
In accordance with the guide to reporting on Principle 5, the Company’s Continuous Disclosure Policy will be available from the corporate governance section of the Company’s website.

Principle 6: Respect the rights of Shareholders

Recommendation 6.1: Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.

The Shareholder Communications Policy sets out the Company’s aims and practices in respect of communicating with both current and prospective Shareholders. The Policy reinforces the Company’s commitment to promoting investor confidence and reflects the matters set out in the commentary and guidance for Recommendation 6.1.
Recommendation 6.2: Companies should provide the information indicated in the Guide to reporting on Principle 6.
The Company will include the disclosure required by Recommendation 6.2 in its 2011 Annual Report.

In accordance with the guide to reporting on Principle 6, the Company’s Continuous Disclosure Policy and Shareholder Communication Policy will be available from the corporate governance section of the Company’s website.

The Audit and Risk Committee charter sets out its role,

Audalia Resources Limited

8.0 CORPORATE GOVERNANCE (continued)

Principle 7: Recognise and manage risk

Recommendation 7.1: Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.

Audalia Resources recognises that risk is inherent to any business activity and that managing risk effectively is critical to the immediate and future success of the Company. As a result, the Board has adopted a Risk Management Policy which sets out the Company’s system of risk oversight, management of material business risks and internal control.

Recommendation 7.2: The board should require management to design and implement the risk management and internal control system to manage the Company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the Company’s management of its material business risks.

Audalia Resources’ risk management framework is supported by the Board of Directors, management and the Audit and Risk Committee. The Board is responsible for approving and reviewing the Company’s risk management strategy and policy. Management are responsible for monitoring that appropriate processes and controls are in place to effectively and efficiently manage risk. The Audit and Risk Committee also has delegated responsibilities in relation to risk management and the financial reporting process as set out in the Company’s Audit and Risk Committee Charter.

Recommendation 7.3: The board should discuss whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating efficiently in all respects in relation to financial reporting risks.

Principle 8: Remunerate fairly and responsibly

Recommendation 8.1: The board should establish a remuneration committee.

The Nomination and Remuneration Committee has delegated responsibilities in relation to the Company’s remuneration policies as set out in the Company’s Nomination and Remuneration Committee Charter. The charter reflects the matters set out in the commentary and guidance for Recommendation 8.1.

Recommendation 8.2: Companies should clearly distinguish the structure of non-executive Directors’ remuneration from that of executive Directors and senior executives.

The structure of non-executive directors’ remuneration is clearly distinguished from that of executive directors and senior executives. Remuneration for non-executive directors is fixed. Total remuneration for all non-executive directors, last voted upon by shareholders at the 2011 General Meeting, is not to exceed $300,000 per annum.
Neither the non-executive directors nor the executives of the Company receive any retirement benefits, other than superannuation.
Executive directors are employed pursuant to employment agreements, which are summarised in Section 10.1.

Recommendation 8.3: Companies should provide the information indicated in the Guide to reporting on Principle 8.

The Company will include the disclosure required by Recommendation 8.3 in its 2011 Annual Report.

In accordance with the guide to reporting on Principle 8, the Company’s Nomination and Remuneration Committee Charter will be available from the corporate governance section of the Company’s website.

When considering the Audit and Risk Committee’s review of financial reports, the Board will receive a written statement declaration in accordance with section 295A of the Corporations Act, signed by the Managing Director and Chief Financial Officer, stating whether, amongst other things, the Company’s financial reports give a true and fair view, in all material respects, with the Company’s financial position and performance and comply with relevant accounting standards. This statement will also confirm whether the Company’s financial reports are founded on a sound system of risk management and internal control and whether the system is operating effectively in relation to financial reporting risks.

Similarly, in a separate written statement the Managing Director and the Chairman of the Audit and Risk Committee will also confirm to the Board whether the Company’s risk management and internal control systems are operating effectively in relation to material business risks for the period, and that nothing has occurred since period-end that would materially change the position.

Recommendation 7.4: Companies should provide the information indicated in the Guide to reporting on Principle 7.

The Company will include the disclosure required by Recommendation 7.4 in its 2011 Annual Report.

In accordance with the guide to reporting on Principle 7, the Company’s Audit and Risk Committee Charter will be available from the corporate governance section of the Company’s website.

PROSPECTUS

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9.0 RISK FACTORS

The Securities offered under this Prospectus should be considered speculative because of the nature of the exploration activities of the Company. Potential investors should be aware that an investment in the Company involves risks which may be higher than the risks associated with other investments. Whilst the Directors recommend the Offer, potential investors should consider whether the Securities offered is a suitable investment having regard to their own personal investment objectives and financial circumstances and the specific and general risk factors set out below.

Some of the major risks associated with an investment in the Company are outlined below. These risk factors are largely beyond the control of the Company and its Directors because of the nature of the proposed business of the Company.

The following list is not intended to be an exhaustive list of the risk factors to which the Company is exposed. The Securities to be issued pursuant to his Prospectus carry no guarantee with respect to the payment of dividends, return on capital or the market value of those Securities. Potential investors should consider that the investment in the Company is speculative and consult their professional advisor before deciding whether to apply for Securities under this Prospectus.

9.1 Risks specific to the Company

The current and future operations of the Company, including exploration, appraisal and production activities, may be affected by a range of factors, including:

9.1.1 Contractual Risk – Tenement Sale Agreement

The Company’s right to acquire the Kingsfield Tenements is conditional on the Company paying Kingsfield Pty Ltd $150,000 in cash once the Company has obtained conditional ASX approval for official quotation (the Condition).

The Tenement Sale Agreement provides that if the Company fails to satisfy the Condition and list on the ASX by 30 June 2011, the Company will be deemed to have withdrawn from the Tenement Sale Agreement. While the Company anticipates listing before this date, it cannot guarantee that this will occur.

If the Company fails to satisfy the condition, the Tenement Sale Agreement will terminate and the Company will lose all its rights to acquire an interest in the Tenements. The Company’s proposed exploration program is designed to meet this condition but future events may prevent this condition being satisfied.

The Company’s ability to acquire the Kingsfield Tenements is dependent on Kingsfield Pty Ltd honouring its obligations under the Tenement Sale Agreement and not creating any encumbrances over the Tenements that would affect the Company’s rights.

9.1.2 Liquidity Risk

The Shares to be issued pursuant to this Prospectus (if full Oversubscriptions are accepted) will comprise of less than 14% of the Company’s issued Share capital.

There can be no guarantee that an active market in the Company’s securities will develop or that the price of the Securities will increase. There is no guarantee that there will be an ongoing liquid market for the Company’s securities. Accordingly, there is a risk that, should the market for the Company’s securities become illiquid, Shareholders and Option holders will be unable to realise their investment in the Company.

9.1.3 Resource Estimates

The Tenements do not currently contain any JORC compliant mineral resources. Should a JORC compliant mineral resource be delineated in the future, any resource estimate will be an expression of judgement based on knowledge, experience and industry practice. Estimates

which were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their very nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional fieldwork and analysis, the estimates are likely to change. This may result in alterations to development and mining plans which may, in turn, adversely affect the Company’s operations.

9.1.4 Limited history

The Company was incorporated on 27 August 2010 and therefore has a limited operating history on which an evaluation of its prospects can be made. The prospects of the Company must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly in the mineral exploration sector which has a high level of inherent uncertainty.

Although many of the Company’s projects have undergone previous exploration, much of the work was only preliminary in nature. Further exploration is required to determine whether the Company’s projects contain any economically viable mineral deposits. Even if an apparently viable mineral deposit is identified, there is no guarantee that it can be profitably exploited.

9.1.5 Dependence on key personnel

Audalia Resources’ future depends, in part, on its ability to attract and retain key personnel. It may not be able to hire and retain such personnel at compensation levels consistent with its existing compensation and salary structure. Its future also depends on the continued contributions of its executive management team and other key management and technical personnel, the loss of whose services would be difficult to replace. In addition, the inability to continue to attract qualified personnel could have a material adverse effect on Audalia Resources’ business.

9.1.6 No prior market for Securities

Prior to this Offer, there has been no public market for Audalia Resources Securities and there can be no assurance regarding the future development of the market for Audalia Resources Securities. The Offer price of $0.20 per Share and one free attaching Option for every two Shares has been determined after taking into consideration a number of factors, including but not limited to, the Company’s financial history and operating conditions, the future prospects of the Company and the prospects for the industry in which Audalia Resources operates, the management of the Company and prevailing market conditions.

There can be no assurance that the Offer price for Securities will correspond with the price at which Audalia Resources Securities will trade on the ASX upon its listing or that an active market for Audalia Resources Securities will develop or, if developed, that such a market will be sustained.

9.1.7 Insurance

The Company, where economically feasible, may insure its operations in accordance with industry practice. However, even if insurance is taken out, in certain circumstances, the Company’s insurance may not be of a nature or level to provide adequate insurance cover. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the business, financial condition and results of the Company.

Insurance of all risks associated with mineral exploration and production is not always available and where available the costs can be prohibitive.

Audalia Resources Limited

9.0 RISK FACTORS (continued)

9.2 General mineral industry risks

9.2.1 Exploration risks

Exploration is a high risk activity that requires large amounts of expenditure over extended periods of time. Currently there are no defined mineral resources on any of the mining tenements in which the Company has an interest and there can be no guarantee that the planned exploration programmes will lead to successful exploration results and the discovery of a commercial deposit or further, a commercial mining operation.

There is no assurance that exploration and development of the mineral interests owned by the Company, or any other projects that may be acquired by the Company in the future can be commercially exploited.

9.2.2 Metallurgy

Mineral recoveries are dependent upon metallurgical processes which contain certain inherent risks such as:

identifying a metallurgical process through testwork to produce a saleable mineral and/or concentrate;
developing an economic process to produce a viable mineral and/or concentrate product; and
changes in mineralogy in an ore deposit which may result in inconsistent recovery affecting the economic viability of a project.

9.2.3 Development and mining

The operations of the Company may be affected by various factors including, but not limited to, failure to acquire and/or delineate economically recoverable ore bodies; failure to achieve predicted grades in exploration and mining; unfavourable geological conditions; failing to receive the necessary approvals from all relevant authorities and parties; unseasonal weather patterns; unanticipated technical and operational difficulties encountered in extraction and production activities; mechanical failure of operating plant and equipment; unanticipated metallurgical problems which may affect extraction costs; unexpected shortages or increase in the price of consumables, spare parts and plant and equipment; cost overruns; risk of access to the required level of funding and contracting risk from any third parties providing essential services.

In the event that the Company commences production, its operations may be disrupted by a variety of risks and hazards which are beyond its control, including environmental hazards, industrial accidents, technical failures, labour disputes, lack of skilled labour, unusual or unexpected rock formations, flooding and extended interruptions due to inclement or hazardous weather conditions and fires, explosions and other accidents.

9.2.4 Native Title and access risk

The mining tenements in which the Company holds an interest extend over areas in which legitimate native title rights of indigenous Australians exist. The ability of the Company to gain access to some or all of the mining tenements and to conduct exploration development and mining operations remains subject to native title rights and the terms of registered native title agreements.

Further information regarding native title generally and registered and unregistered claims affecting the mining tenements is set out in the Solicitor’s Report on mining tenements in Section 7.0 of this Prospectus.

9.2.5 Environmental risk

Exploration and mining is an industry that has become subject to increasing environmental responsibility and liability. The Company’s projects are subject to Western Australian and Australian Federal laws and regulations regarding environmental matters and the discharge of hazardous wastes and materials. As with all mining projects, the Company’s projects would be expected to have a variety of environmental impacts should development proceed.

Audalia Resources intends to conduct its activities in an environmentally responsible manner and in accordance with applicable laws and industry standards.

9.2.6 Title risks

Pursuant to the terms of the granted mining tenements and other contractual agreements to which the Company is or may in the future become a party, the Company is or may become subject to payment and other obligations. In particular, the Company has an obligation to meet the prescribed expenditure conditions on the granted mining tenements. Failure to meet these expenditure commitments will render the licence liable to be forfeited unless a total or partial exemption is granted in accordance with the provisions of the Mining Act 1978 (WA).

The Company is also subject to a risk that, where the Company itself is not required to meet expenditure conditions of a mining tenement in which it holds an interest, the relevant third party holder of the particular mining tenements may not comply with the minimum expenditure conditions. Should this occur, the Company may lose its rights in respect of those tenements in the event that the relevant tenement is forfeited.

In addition, the Company cannot guarantee that those mining tenements that are applications will ultimately be granted in whole or in part.

For more details on the issue of title to the mining tenements, refer to the Solicitor’s Report in Section 7.0 of this Prospectus.

9.2.7 Competition

The Company competes with other companies, including major mineral exploration and production companies. Some of these companies have greater financial and other resources than Audalia Resources and, as a result, may be in a better financial position to compete for future business opportunities. Many of the Company’s competitors not only explore for and produce minerals, but also carry out refining operations and other productions on a worldwide basis. There can be no assurance that the Company can compete effectively with these companies.

9.3 General Risks

9.3.1 Economic factors

Factors such as inflation, currency fluctuation, interest rates, supply and demand and industrial disruption have an impact on operating costs, commodity prices and stock market processes. The Company’s operation and Share prices can be affected by these factors, which are beyond the control of the Company and its Directors. Domestic and world economic conditions may affect the performance of the Company. Factors such as rising or slowing demand for goods, inflation or interest rates could impact on sales, revenues and costs. In addition, exchange rate movements will affect revenues and expenses incurred in other currencies.

PROSPECTUS

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9.3.2 Stock market conditions

Stock market conditions may affect the value of listed securities, regardless of the operating performance of the Company. Share market conditions are affected by many factors such as:

general economic outlook;
movements in, or outlook on, interest rates and inflation rates;
currency fluctuation;
commodity prices;
changes in investor sentiment towards particular market sectors;
the demand for, and supply of, capital;
liquidity of the Company’s Shares; and
terrorism or other hostilities.

Investors should recognise that once the Securities are listed on ASX, the price of the Securities may fall as well as rise. In addition, recent world events have affected the price of shares in various sectors. Such events are unpredictable and their impact on individual companies or markets is beyond the control of the Company. Neither the Company nor the Directors warrant the future performance of the Company or any return on an investment in the Company.

9.3.3 Government factors

The introduction of new legislation or amendments to existing legislation by governments, and the decisions of courts and tribunals, can impact adversely on the assets, operations and, ultimately, the financial performance of the Company.

Any adverse developments in political and regulatory conditions in the countries in which the Company could conduct business, could materially affect the Company’s prospects. Political changes, such as changes in both monetary and fiscal policies, expropriation, methods and rates of taxation and currency exchange controls may impact the performance of the Company as a whole.

9.3.4 Future capital needs and additional funding

The future capital requirements of the Company will depend on many factors including its business development activities. The Company believes its available cash and the net proceeds of this Offer should be adequate to fund its business development activities, exploration programme and other Company objectives in the short term as stated in this Prospectus.

Should the Company require additional funding there can be no assurance that additional financing will be available on acceptable terms, or at all. Any inability to obtain additional finance, if required, would have a material adverse effect on the Company’s business and its financial condition and performance.

9.3.5 Potential acquisitions

As part of its business strategy, the Company may make acquisitions of or significant investments in companies, products, technologies or resource projects. Any such future transaction would be accompanied by the risks commonly encountered in making acquisitions of companies, products, technologies or resource projects.

Audalia Resources Limited

10.0 ADDITIONAL INFORMATION

10.1 Summary of material contracts

Set out below is a summary of certain key contracts to which Audalia Resources is a party and which may be material in terms of the operation of the Audalia Resources’ business, or otherwise may be relevant to a potential investor in Audalia Resources.

10.1.1 Agreement –Tenement Sale Agreement

10.1.2 Lead Manager Mandate

On or about 25 January 2011 the Company entered it an agreement with CK Locke & Partners Pty Ltd (CKL) whereby CKL will act as lead manager to, and provide corporate advisory services for, the proposed initial public offering of Shares of the Company in conjunction with listing on ASX (Corporate Mandate).

CKL’s fees will comprise the following:

a) 6% (plus GST ) of all funds raised pursuant to the Prospectus, which includes a 1% lead management fee and 5% share placement fee, payable in cash; and
b) $10,000 management fees, satisfied by the issue of 3,000,000 Options.

The Corporate Mandate may be terminated by CKL or the Company by giving 30 days prior written notice to the other party to terminate CKL’s appointment.

10.1.3 Employment Agreement with Soo Kok Lim

The Company has entered into an Employment Agreement with Soo Kok Lim (Executive) in relation to his appointment as Executive Chairman of the Company. The material terms of the agreement are:

a) (Term) The agreement has a term of 2 years commencing on the date the Company is admitted on the ASX (Commencement Date).
b) (Remuneration) The Company will pay the Executive a salary of $20,000 per year (exclusive of statutory superannuation), on the basis that the Executive commits, on average, 40 hours per week to the performance of his services. The Company will reimburse the Executive for all reasonable expenses incurred by the Executive in connection with his engagement by the Company and provision of his services properly evidenced.
c) (Incentive Benefits) Appropriate incentive benefits will be negotiated after the Commencement Date between the Company and the Executive.
d) (Termination) The agreement may be terminated by either party at any time by giving to the other party 3 months’ written notice.

10.1.4 Employment Agreement with Siew Swan Ong

The Company has entered into an Employment Agreement with Siew Swan Ong (Executive) in relation to his appointment as Executive Director of the Company. The material terms of the agreement are:

a) (Term) The agreement has a term of 2 years commencing on the date the Company is admitted on the ASX (Commencement Date).
b) (Remuneration) The Company will pay the Executive a salary of $20,000 per year (exclusive of statutory superannuation), on the basis that the Executive commits, on average, 40 hours per week to the performance of his services. The Company will reimburse the Executive for all reasonable expenses incurred by the Executive in connection with his engagement by the Company and provision of his services properly evidenced.
c) (Incentive Benefits) Appropriate incentive benefits will be negotiated after the Commencement Date between the Company and the Executive.
d) (Termination) The agreement may be terminated by either party at any time by giving to the other party 3 months’ written notice.

The Corporate Mandate also contains a number of indemnities, representations and warranties from the Company to CKL that are considered standard for an agreement of this type.

PROSPECTUS

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10.1.5 Accounting Services Agreement with Townshend York Pty Ltd

The Company has entered into a services agreement with Townsend York Pty Ltd (Townshend) pursuant to which Townshend agreed to provide various accounting services to the Company (Accounting Services Agreement)

Pursuant to the Accounting Services Agreement, Townsend will provide the Company with the establishment and maintenance of accounting records, processing of creditor payments, payroll and superannuation administration for all employees and providing other general accounting services. Townshend will be paid a fee of $2,000 per month (exclusive of GST) for the provision of the services under the Accounting Services Agreement.

The Accounting Services Agreement runs for 3 years, unless terminated pursuant to the agreement earlier, and will be deemed to be automatically renewed for a further 1 year term at the end of the 3 years unless 3 months’ written notice is provided by the Company to Townshend prior to the end of the 3 year term.

10.1.6 Company Secretarial Services Agreement with Townshend York Pty Ltd

The Company has entered into a services agreement with Townsend pursuant to which Townshend agreed to provide various company secretarial services to the Company (Secretarial Services Agreement)

Pursuant to the Secretarial Services Agreement, Townsend will provide the Company with a Ms Karen Logan to act as Company Secretary of the Company and services including lodgement of quarterly reports required by ASX, assistance to directors in relation to their respective reporting requirements to ASX and the ASIC, preparation and lodgement of ASX documents and general company secretarial services.

Townshend will be paid an initial fee of $4,000 per month (exclusive of GST) for the provision of the services under the Secretarial Services Agreement (Fee). The Fee will increase to $4,500 per month (exclusive of GST) for the second year of the agreement and then $5,000 per month (exclusive of GST) for the third year of the agreement.

The Secretarial Services Agreement runs for 3 years unless terminated pursuant to the agreement earlier, and will be deemed to be automatically renewed for a further 1 year term at the end of the 3 years unless 3 months’ written notice is provided by the Company to Townshend prior to the end of the 3 year term.

10.1.7 Deeds of Indemnity with Siew Swan Ong, Anthony Ho, Brent Butler and Soo Kok Lim (Directors)

The Company has entered into a deed of indemnity with each of its Directors. Under these deeds, the Company agrees to indemnify each Director to the extent permitted by the Corporations Act against any liability arising as a result of the Director acting in the capacity as a director of the Company. The Company is also required to maintain insurance policies for the benefit of the Directors and must also allow the Directors to inspect Company documents in certain circumstances.

10.1.8 Deed of Indemnity with Karen Logan (Company Secretary)

The Company has entered into a deed of indemnity with the Company Secretary. Under this deed, the Company agrees to indemnify the Company Secretary to the extent permitted by the Corporations Act against any liability arising as a result of the Company Secretary acting in the capacity as company secretary of the Company. The Company is also required to maintain an insurance policy for the benefit of the Company Secretary and must also allow the Company Secretary to inspect Company documents in certain circumstances.

10.2 Top 20 Shareholders

As set out in Section 1.5, the Shares issued pursuant to this Prospectus will comprise of 9.4% of the Company’s issued Share capital in the event the Minimum Subscription is raised (or 14.7% if all Oversubscriptions are accepted).

The current Shareholders of the Company consist predominately of the Directors (as set out in Section 10.4 below) and overseas Shareholders.

At the date of this Prospectus, the Company’s top 15 Shareholders are as follows:

1.	Name Everwin Proft Investment Ltd	No. of Shares 17,000,000
2.	Soo Kok Lim	15,750,000
3.	Siew Swan Ong	15,750,000
4.	Miss Bee Khim Lim	10,000,000
5. 6.	Anna Moi Chin Chong Serng Yee Liew	4,000,000 4,000,000
7.	Wai Heng Ho	1,700,000
8.	Silver Capital Pty Ltd
		1,250,000
9.	Kah Hui & Irene Soi Khim Tan	1,250,000
10.	Sheryl Hogg	500,000
11. 12.	Miss Karen Teresa Logan Megan Holdings Pty Ltd	500,000 500000
13. 14.	Lili Jiang Matthew Luke Mark Logan	150,000 150,000
15.	GiapCh’ngOoi	1
		72,500,001

10.3 Litigation

The Company is not involved in any material litigation or arbitration proceedings, nor, so far as the Directors are aware, are any such proceedings pending or threatened against the Company.

Audalia Resources Limited

10.0 ADDITIONAL INFORMATION (continued)

10.4 Interests of Directors of the Company

Shareholding qualifications

The Directors are not required to hold any Shares in the Company under the Constitution.

Directors’ Share holdings

At the date of this Prospectus the relevant interest of each of the Directors in Shares of the Company are as follows:

Director	Shares
Dato S K Lim	15,750,000
Mr S S Ong	15,750,000
Mr B Butler	500,000
Mr A Ho TOTAL	- 32,000,000

These Shares held by the Directors are held both directly and indirectly. The Directors may apply for Securities pursuant to this Prospectus. Each of the Directors has indicated that it is not their present intention to apply for Securities pursuant to the Offer.

Directors’ remuneration

Non-executive directors’ fees not exceeding an aggregate of $300,000 per annum have been approved by the Company in general meeting. The level of these fees may be varied by the Company in general meeting in accordance with its Constitution and the ASX Listing Rules.

Non-executive directors’ fees to be paid by Audalia Resources, upon admission to the Official List of ASX, are as follows:

Director	Directors’ feesper annum
Mr B Butler	$20,000
Mr A Ho	$20,000

Non-executive Directors are entitled to be paid additional remuneration on commercial terms for any extra services undertaken by them at the request of the Board of Directors.

The following contractual arrangements (further details of which are set out in Section 10.1 of the Prospectus) have been entered into with Directors (or companies associated with Directors):

(a) Employment Agreements between the Company and Dato Soo Kok Lim and Mr Siew Swan Ong;
(b) Accounting Services Agreement between the Company and Townshend York Pty Ltd (Mr Anthony Ho);
(c) Company Secretarial Services Agreement between the Company and Townshend York Pty Ltd (Mr Anthony Ho); and
(d) Deeds of Indemnity and Access – with each Director.

Pursuant to a services agreement dated 7 October 2010 (Pre IPO Services Agreement), the Company has agreed to pay a total of $55,271 exclusive of GST) to Townshend York Pty Ltd (a company associated with Mr Anthony Ho) for company secretarial and administrative services relating to the preparation of the Prospectus and the Company’s application for quotation on ASX. The Company has paid $32,008 of this amount to date.

Additional services provided pursuant to the Pre IPO Services Agreement between the date of this Prospectus and the Company’s quotation on ASX will be charged at normal commercial rates.

Interests of Directors

Other than as set out above or elsewhere in this Prospectus, no Director or proposed Director has, or had within two years before lodgement of this Prospectus with the ASIC, any interest in:

(a) the promotion or formation of the Company;
(b) property acquired or proposed to be acquired by the Company in connection with its promotion or formation or the Offer; or
(c) the Offer.

Except as set out above, no amounts have been paid or agreed to be paid and no benefits have been given or agreed to be given to any Director or proposed Director:

(a) to induce them to become, or to qualify them as, a Director; or
(b) f or services rendered by them in connection with the formation or promotion of the Company, or the Offer.

10.5 Interests of persons named

Except as disclosed in this Prospectus, neither the Lead Manager, nor any promoter or other person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus, holds, or held within two years before lodgement of this Prospectus with ASIC, any interest in:

(a) the formation or promotion of the Company;
(b) any property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer; or
(c) the Offer,

and no amounts have been paid or agreed to be paid and no benefits have been given or agreed to be given to any of those persons for services rendered by them in connection with the formation or promotion of the Company or the Offer.

BDO Corporate Finance (WA) Pty Ltd will receive professional fees of approximately $6,000 (exclusive of GST) for preparation of the Investigating Accountant’s Report included in this Prospectus.

Geologica Pty Ltd will receive professional fees of approximately $11,000 (exclusive of GST) for the preparation of the Independent Geologist’s Report included in this Prospectus.

Steinepreis Paganin has acted as solicitors to the Company in providing general advice in relation to the Offer and this Prospectus and the preparation of the Solicitor’s Report on Tenements. In respect of Steinepreis Paganin’s work, the Company has paid or will pay approximately $25,000 (exclusive of GST) for these services. Subsequently, fees will be charged in accordance with its time based charges.

CK Locke & Partners Pty Ltd is the lead manager to the Issue and will be paid fees as disclosed in Section 10.1.2 of this Prospectus.

10.6 Consents

Each of the parties referred to in this Section 10.6:

(a) does not make, or purport to make, any statement in this Prospectus or on which a statement made in the Prospectus is based, other than as specified in this Section 10; and
(b) to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any statement in, or omissions from, this Prospectus other than a reference to its name and a statement included in this Prospectus with the consent of that party as specified in this Section 10.6.

BDO Corporate Finance (WA) Pty Ltd has given its written consent to the inclusion in this Prospectus of its Investigating Accountant’s Report and to all statements referring to that report in the form and context in which they are included and has not withdrawn such consent before lodgement of this Prospectus with ASIC.

Geologica Pty Ltd has given its written consent to the inclusion in this Prospectus of its Independent Geologist’s Report and to all statements referring to that report in the form and context in which they are included and has not withdrawn such consent before lodgement of this Prospectus with ASIC.

PROSPECTUS

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Steinepreis Paganin has given their written consent to the inclusion in this Prospectus of its Solicitor’s Report on Tenements and to all statements referring to that report in the form and context in which they are included and has not withdrawn such consent before lodgement of this Prospectus with ASIC.

Each of the following has consented to being named in the Prospectus in the capacity as noted below and have not withdrawn such consent prior to the lodgement of this Prospectus with ASIC:

(a) Steinepreis Paganin as the Company’s solicitors;
(b) BDO Audit (WA) Pty Ltd as the Company’s auditor;
(c) BDO Corporate Finance (WA) Pty Ltd as the Company’s investigating accountant;
(d) Geologica Pty Ltd as the Company’s independent geologist;
(e) CK Locke & Partners Pty Ltd as the lead manager to the Issue;
(f) Mr Noel Ong as the Company’s technical consultant; and
(g) Computershare Investor Services Pty Limited as the Company’s share registry.

10.7 Rights and liabilities attaching to Shares

There is only one class of share on issue in the Company, being fully paid ordinary shares. The rights attaching to Shares are:

(a) set out in the Constitution; and
(b) in certain circumstances, regulated by the Corporations Act, the Listing Rules, the ASTC Settlement Rules and the general law.

The following is a broad summary of the rights, privileges and restrictions attaching to all Shares and of certain provisions of the Constitution. This summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of Shareholders.

All Shares issued pursuant to this Prospectus will from the time they are issued, rank equally in all respects with all the Company’s existing Shares.

Voting

Subject to any restriction on voting imposed due to a breach of the Listing Rules relating to restricted shares or any escrow agreement entered into by the Company and a member, every holder of Shares present in person or by proxy, attorney or representative at a meeting of Shareholders has one vote on a vote taken by a show of hands, and, on a poll every holder of Shares who is present in person or by proxy, attorney or representative has one vote for every Share held by him or her, but, in respect of partly-paid shares, shall have a fraction of a vote for each partly-paid share.

A poll may be demanded before a vote is taken, or before or immediately after the declaration of the result of the show of hands by the chairperson of the meeting, by at least five Shareholders present in person or by proxy, attorney or representative, or by any one or more Shareholders who are together entitled to not less than 5% of the total voting rights of all those Shareholders having the right to vote on the resolution.

Dividends

Subject to the Corporations Act, the Constitution, the ASX Listing Rules and any rights or restrictions attached to a class of shares, the Company may, as resolved by the Directors, pay dividends out of the Company’s profits. The Directors may determine the method and time for payment of the dividend.

Transfer of Shares

Generally, shares are freely transferable, subject to satisfying the requirements of the ASX Listing Rules, ASTC Settlement Rules and the Corporations Act.

A Shareholder may transfer Shares by a market transfer in accordance with any computerised or electronic system established or recognised by ASX or the Corporations Act for the purpose of

facilitating transfers in shares or by an instrument in writing in a form approved by ASX or in any other usual form or in any form approved by the Directors.

The Directors may refuse to register any transfer of Shares, other than a market transfer, where permitted or required by the Listing Rules, the ASTC Settlement Rules, the Corporations Act or under the Constitution. The Company must comply with such obligations as may be imposed on it by the Listing Rules and where appropriate the ASTC Settlement Rules in connection with any market transfer and may not prevent, delay or in any way interfere with the registration of a market transfer where to do so would be contrary to the provisions of any of the Listing Rules or the ASTC Settlement Rules.

Meetings and Notice

Each Shareholder is entitled to receive notice of and to attend general meetings of the Company and to receive all notices, accounts and other documents required to be sent to Shareholders under the Constitution, the Corporations Act and the Listing Rules.

Under the Corporations Act, a notice must currently be provided to the shareholders of a listed entity at least 28 days in advance of a meeting.

Further issues of Shares

Subject to any restrictions on the allotment of Shares imposed by the Corporations Act, the Listing Rules or any special rights of the holders of Shares or a class of Shares, the allotment and issue of Shares is under the control of the Directors, who may issue and cancel shares on such terms and conditions as they see fit.

In addition, the Board has the power to grant to any person an option over unissued Shares for such consideration as it determines.

Winding Up

Subject to the Corporations Act, the ASX Listing Rules, the Constitution and any rights and restrictions attached to a class of Shares, on a winding up of the Company any surplus must be divided among the Shareholders in proportion to the Shares held by them.

A liquidator may, with the sanction of a special resolution of the Company, divide among the Shareholders in kind the whole or any part of the property of the Company, and may for that purpose set such value as the liquidator considers fair on any property to be divided, and may determine how the division is to be carried out as between the Shareholders. The liquidator may, with the sanction of a special resolution of the Shareholders, vest the whole or any part of the property in trustees on such trusts for the benefit of contributories as the liquidator thinks fit, but so that no Shareholder is compelled to accept any shares or other securities in respect of which there is any liability.

Shareholder Liability

As the Shares under the Prospectus are fully paid shares, they are not subject to any calls for money by the Directors and will, therefore, not become liable for forfeiture.

Alteration to the Constitution

The Constitution can only be amended by a special resolution passed by at least three quarters of Shareholders present and voting at a general meeting. At least 28 days written notice specifying the nature of the resolution must be given.

Indemnity

The Company (except as may be prohibited by Part 2D of the Corporations Act) indemnifies every officer, auditor and agent of the Company against any liability incurred by him or her in his or her capacity as officer, auditor or agent of the Company or any related corporation in respect of any act or mission whatsoever and howsoever occurring, or in defending any proceedings, whether civil or criminal.

Audalia Resources Limited

10.0 ADDITIONAL INFORMATION (continued)

10.8 Terms and Conditions of Options

a) Exercise Price

The exercise price of each Option is 20 cents.

b) Entitlement

Each Option shall entitle the holder the right to subscribe (in cash) for one Share in the capital of the Company.

c) Option Period

The Options will expire at 5.00pm WST on 28 April 2014 (Expiry Date). Subject to clause (g), Options may be exercised at any time prior to the expiry date and Options not exercised shall automatically expire on the Expiry Date.

d) Ranking of Share Allotted on Exercise of Option

Each Share allotted as a result of the exercise of any Option will, subject to the Constitution of the Company, rank in all respects pari passu with the existing Shares in the capital of the Company on issue at the date of allotment.

e) Voting

A registered owner of an Option (Option Holder) will not be entitled to attend or vote at any meeting of the members of the Company unless they are, in addition to being an Option Holder, a member of the Company.

f) Transfer of an Option

Options are transferrable at any time prior to the Expiry Date. This right is subject to any restrictions on the transfer of Options that may be imposed by the ASX in circumstances where the Company is listed on the ASX.

g) Method of Exercise of an Option
(i) The Company will provide to each Option Holder a notice that is to be completed when exercising the Options (Notice of Exercise of Options). Options may be exercised by the Option Holder by completing the Notice of Exercise of Options and forwarding the same to the Company Secretary to be received prior to the Expiry Date. The Notice of Exercise of Options must state the number of Options exercised and the consequent number of ordinary shares in the capital of the Company to be allotted; which number of Options must be a multiple of 2,500 if only part of the Option Holder’s total Options are exercised, or if the total number of Options held by an Option Holder is less than 2,500, then the total of all Options held by that Option Holder must be exercised.
(ii) The Notice of Exercise of Options by an Option Holder must be accompanied by payment in full for the relevant number of shares being subscribed, being an amount of 20 cents ($0.20) per Share.
(iii) Subject to paragraph (g)(i) above, the exercise of less than all of an Option Holder’s Options will not prevent the Option Holder from exercising the whole or any part of the balance of the Option Holder’s entitlement under the Option Holder’s remaining Options.
(iv) Within 14 days from the date the Option Holder properly exercises Options held by the Option Holder, the Company shall issue and allot to the Option Holder that number of Shares in the capital of the Company so subscribed for by the Option Holder.
(v) If the Company is listed on the ASX, the Company will within 3 business days from the date of issue and allotment of Shares pursuant to the exercise of an Option, apply to the ASX for, and use its best endeavours to obtain, Official Quotation of all such Shares, in accordance with the Corporations Act and the Listing Rules of the ASX.
(vi) The Company will generally comply with the requirements of the Listing Rules in relation to the timetables imposed when quoted Options are due to expire. Where there shall be any inconsistency between the timetables outlined herein regarding the expiry of the Options and the timetable outlined in the Listing Rules, the timetable outlined in the Listing Rules shall apply.

(h) ASX Quotation

The Company will apply for quotation of the Options on the ASX.

(i) Reconstruction

In the event of a reconstruction (including consolidation, sub-division, reduction or return) of the issued capital of the Company, all rights of the Option Holder will be changed to the extent necessary to comply with the Listing Rules applying to the reconstruction of capital, at the time of the reconstruction.

(i) Participation in New Share Issues

There are no participating rights or entitlements inherent in the Options to participate in any new issues of capital which may be made or offered by the Company to its shareholders from time to time prior to the expiry date unless and until the Options are exercised. The Company will ensure that during the exercise period, the record date for the purposes of determining entitlements to any new such issue, will be at least seven (7) business days after such new issues are announced (or such other date if required under the Listing Rules) in order to afford the Option Holder an opportunity to exercise the Options held by the Option Holder.

(k) No Change of Options’ Exercise Price or Number of Underlying Shares

There are no rights to change the exercise price of the Options or the number of underlying Shares if there is a bonus issue to the holders of ordinary shares. If the Company makes a pro rata issue of securities (except a bonus issue) to the holders of ordinary shares (other than an issue in lieu or in satisfaction of dividends or by way of dividend reinvestment) the Option exercise price shall be reduced according to the formula specified in the Listing Rules.

10.9 Dividend Policy

The Directors will develop a suitable dividend policy at an appropriate stage. The Directors can give no assurance as to the extent, timing or actual payment of future dividends or the availability or level of franking credits. The level of dividends payable will depend upon a number of factors including future earnings, capital requirements and the overall financial condition of the Company. The Company has not declared or paid any dividends before the issue of this Prospectus.

10.10 Taxation

The financial year of the Company ends on 30 June annually.

The acquisition and disposal of Shares in Audalia Resources will have tax consequences, which will differ depending on the individual financial affairs of each Shareholder. All potential investors in Audalia Resources are urged to take independent financial advice about the consequences of acquiring Shares from a taxation viewpoint and generally.

To the maximum extent permitted by law, Audalia Resources, its officers and each of their respective advisors accept no liability or responsibility with respect to the taxation consequences of subscribing for Shares under this Prospectus.

PROSPECTUS

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10.11 Expenses of the Offer

It is estimated that approximately $403,000 (minimum subscription) or $465,000 (maximum subscription) will be payable by the Company in respect of Lead Manager’s fees, experts’ fees, legal, accounting and other fees, design and printing costs, ASIC and ASX fees and other costs arising from this Prospectus and the Offer. The estimated expenses of the Offer set out above include amounts totalling $13,571 that have already been paid by the Company and an amount of $150,000, being the fair value ascribed to the non-cash consideration to be issued to the Lead Manager in the form of 3,000,000 Options. The valuation of these Options is set out in Note 6 of the Independent Accountant’s Report contained in Section 6.0 of this Prospectus.

10.12 Distribution of Prospectus

The Prospectus has been prepared by the Company. In preparing the Prospectus, the Company has taken reasonable steps to ensure that the information in the Prospectus is not false or misleading. In doing so, the Company has had regard to the prospectus requirements of the Corporations Act.

Prospective investors should read the full text of the Prospectus as the information contained in individual sections is not intended to, and does not, provide a comprehensive review of the business and financial affairs of the Company nor the securities offered pursuant to the Prospectus.

The Prospectus provides information to assist investors in deciding whether they wish to invest in the Company and should be read in its entirety. If you have any questions about its contents or investing in the Company you should contact your stockbroker, accountant or other financial or professional adviser.

10.13 Electronic Prospectus

10.14 Continuous Disclosure

The Company will be required to comply with the reporting and disclosure obligations under the Corporations Act and Listing Rules. Copies of the Company’s announcements to ASX may be viewed on the ASX’s website.

The Company’s Continuous Disclosure Policy sets out the key obligations of the Directors and employees in relation to continuous disclosure as well as the Company’s obligations under the Listing Rules and the Corporations Act. The Policy also provides procedures for internal notification and external disclosure, as well as procedures for promoting understanding of compliance with the disclosure requirements for the monitoring of Company compliance.

The continuous disclosure obligations under the Listing Rules and the Corporations Act will include notifying ASX immediately of any information concerning the Company of which it is, or becomes, aware, and which a reasonable person would expect to have a material impact on the price or value of the Company’s securities. There are limited exceptions for certain information which does not need to be disclosed.

The Company will also be required to lodge reports within a prescribed period with ASX including:

(a) annual audited financial statements;

(b) half yearly financial statements subject to review by its auditor; and

10.15 Governing law

This Prospectus and contracts that arise from the acceptance of Applications under this Prospectus are governed by the law applicable in Western Australia and each Applicant submits to the exclusive jurisdiction of the courts in Western Australia

This Prospectus is available to Australian resident investors in electronic form at www.audalia.com.au. The Offer constituted by this Prospectus in electronic form is available only to persons in Australia accessing the website from Australia. Pursuant to Class Order 00/44 ASIC has exempted compliance with certain provisions of the Corporations Act to allow distribution of an Electronic Prospectus on the basis of a paper prospectus lodged with ASIC and the issue of Shares in response to an electronic Application Form, subject to compliance with certain provisions.

Persons who access this Prospectus as an Electronic Prospectus should ensure that they download and read the entire Prospectus accompanied by the Application Form. If they have not, they should contact Audalia Resources (at email: [email protected]; or telephone (61 8) 6389 2688) and Audalia Resources will send for free, either a hard copy or a further electronic copy of the Prospectus or both.

The Corporations Act prohibits any person from passing an Application Form to another person unless it is attached to, or accompanied by, a hard copy of this Prospectus, or to the complete and unaltered electronic version of this Prospectus.

Audalia Resources reserves the right not to accept an Application Form from a person if it has reason to believe that when that person was given access to the electronic Application Form, it was not provided together with the Electronic Prospectus and any relevant supplementary or replacement prospectus or any of those documents were incomplete or altered. In such a case, the application monies received will be dealt with in accordance with section 722 of the Corporations Act.

Audalia Resources Limited

11.0 DIRECTORS’ STATEMENT AND CONSENT

The Directors state that they have made all reasonable enquiries and on that basis have reasonable grounds to believe that any statements made by the Directors in this Prospectus are not misleading or deceptive and that in respect to any other statements made in the Prospectus by persons other than Directors, the Directors have made reasonable enquiries and on that basis have reasonable grounds to believe that persons making the statement or statements were competent to make such statements, those persons have given their consent to the statements being included in this Prospectus in the form and context in which they are included and have not withdrawn that consent before lodgement of this Prospectus with the ASIC, or to the Directors’ knowledge, before any issue of Shares pursuant to this Prospectus.

The Prospectus is prepared on the basis that certain matters may be reasonably expected to be known to likely investors or their professional advisers.

In accordance with Section 720 of the Corporations Act, each Director has consented to the lodgement of this Prospect us with the ASIC and has not withdrawn that consent.

Dated: 28 April 2011

Signed for and on behalf of the Company:

Brent Butler

Non-Executive Director

PROSPECTUS

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12.0 GLOSSARY

“$A” means Australian Dollars.

“Applicant” means a person who submits an Application.

“Application” means a valid application to subscribe for Securities in the Company.

“Application Form” means the Application Form attached to or accompanying this Prospectus.

“ASIC” means the Australian Securities and Investments Commission.

“ASTC” means ASX Settlement and Transfer Corporation.

“ASTC Settlement Rules” means the ASTC Settlement Rules (formerly known as the SCH Business Rules).

“ASX” means ASX Limited (ACN 008 624 691).

“Auditor” means BDO Audit (WA) Pty Ltd.

“Board” means the Board of Directors of Audalia Resources unless the context indicates otherwise.

“Business Day” means a day other than a Saturday or Sunday on which banks are open for business in Perth, Western Australia.

“CHESS” means ASX Clearing House Electronic Sub-registry System.

“Closing Date” means 27 May 2011 (unless closed earlier).

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

“Constitution” means the constitution of the Company.

“Corporations Act” and “Act” means the Corporations Act 2001 (Cth).

“Directors” means the board of directors of the Company as it is constituted from time to time.

“Electronic Prospectus” means the electronic version of this Prospectus.

“Exposure Period” means the period of seven (7) days after lodgement of this Prospectus which may be extended by ASIC by not more than seven (7) days pursuant to section 727(3) of the Corporations Act.

“Independent Geologist” means Geologica Pty Ltd.

“Independent Geologist’s Report” means the report contained in Section 5.0 of this Prospectus.

“Investigating Accountant” means BDO Audit (WA) Pty Ltd.

“Investigating Accountant’s Report” means the report contained in Section 6.0 of this Prospectus.

“IPO” means initial public offer.

“JORC Code” means the 2004 Edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves, prepared by the Join Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia.

“Kingsfield Tenements” means exploration licences E09/1568, E09/1569 and E09/1570.

“Lead Manager” means CK Locke & Partners Pty Ltd (AFSL 222 440).

“Listing Rules” means the Listing Rules of the ASX.

“Offer” means the offer to the public of 7,500,000 Shares at an issue price of $0.20 per Share to raise $1,500,000, and any Oversubscriptions.

“Offer Period” means the period commencing on the Opening Date and ending on the Closing Date.

“Official List” means the Official List of the ASX.

“Official Quotation” means quotation of the Shares on the Official List.

“Opening Date” means 6 May 2011.

“Option” means an option to subscribe for one Share in Audalia Resources at $0.20 on or before 28 April 2014.

“Oversubscriptions” means the acceptance of additional Applications for up to 5,000,000 Shares at an issue price of $0.20 per Share to raise up to $1,000,000.

“Prospectus” means this prospectus dated 28 April 2011 in relation to the Offer, including the Electronic Prospectus.

“Quotation” means quotation of the Shares on ASX.

“RAB” means rotary air blast.

“RC” means reverse circulation.

“Section” means a section of this Prospectus.

“Securities” mean Shares and Options.

“Share” means a fully paid ordinary share in Audalia Resources.

“Shareholder” means a holder of Shares.

“Tenements” means the exploration licence applications for E09/1824 and E09/1825, and the Kingsfield Tenements.

“Tenement Sale Agreement” means the agreement between the Vendor and the Company, dated 16 November 2010 (as varied by a deed of variation dated 15 April 2011) for the sale of the Kingsfield Tenements.

“Vendor” means Kingsfield Pty Ltd.

“WST” means Western Standard Time, Perth, Western Australia.

“Issue” means the issue of 7,500,000 Shares pursuant to this Prospectus.

“Issuer Sponsored” means shares issued by an issuer that are held in uncertificated form without the holder entering into a sponsorship agreement with a broker or without the holder being admitted as an institutional participant in CHESS.

Audalia Resources Limited

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PROSPECTUS

Audalia Resources Limited ACN 146 035 690

13.0 APPLICATION FORM

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This Application Form relates to a prospectus dated 28 April 2011 ( “the Prospectus” ) and the instructions overleaf. No Securities will be issued pursuant to the Prospectus later than 13 months after the date of the Prospectus.

Share Registrar Use Only	Share Registrar Use Only	Share Registrar Use Only	Share Registrar Use Only	Share Registrar Use Only
C A B D E F H G

	Joint applicant #2

	Joint applicant #3

	Suburb/town State Postcode Postal address Street number Street name Contact name Home telephone no. Work telephone no. ABN/ARBN(for companies only) Email address Tax File Number or exemption Applicant #2 Applicant #3 Holder Identifcation Number (HIN) CHESS Participant x Please note that if you supply a CHESS HIN but the name and address details on your form do not correspond exactly with the registration details held at CHESS, your application will be deemed to be made without the CHESS HIN, and any securities issued as a result of the Offer will be held on the Issuer Sponsored Subregister.
	PAYMENT DETAILS(Cheques to be payable to “Audalia IPO Account”) Cheque details
I	Drawer	Bank	BSB & Account number	Amount of cheque

DECLARATION

I/We declare that by lodging this Application Form, I/we represent and acknowledge that I/we have received, read and understood the Prospectus to which this Application Form relates. I/We hereby authorise Audalia to complete and execute any document necessary to effect the allotment and issue of any Shares to me/us.
By lodging this Application Form, I/we declare that this Application is completed and lodged according to the Prospectus and that all statements made by me/us are complete and accurate.
I/We also declare that this Application Form is completed according to this declaration and agree to be bound by the terms and conditions set out in the Prospectus and the Constitution of Audalia.
I/We acknowledge that returning the Application Form with the application monies will constitute my/our offer to subscribe for Securities in Audalia and that no notice of acceptance of the application will be provided.

NO SIGNATURE IS REQUIRED

TO MEET THE REQUIREMENTS OF THE CORPORATIONS ACT, THIS FORM MUST NOT BE HANDED TO ANY PERSON UNLESS IT IS ATTACHED TO OR ACCOMPANIED BY THE PROSPECTUS DATED 18 FEBRUARY 2010.

Audalia Resources Limited

TREATMENT OF APPLICATION

The return of an Application Form with your payment of the application money will constitute your offer to purchase or subscribe for Securities. If your Application Form is not completed correctly, or if the accompanying payment is for the wrong amount, it may still be treated as valid.

The decision of Audalia as to whether to treat your Application as valid, and how to construe, amend or complete it, shall be final. The decision on the number of Securities to be allocated to you shall also be final. You will not, however, be treated as having offered to purchase more Securities than is indicated on the Application Form.

Investors whose Application is not accepted, or is accepted in respect of a lower number of Securities than the number applied for, will receive a refund of all or part of their applicationmoney without interest, as applicable.

CORRECT FORMS OF REGISTRABLE NAMES

Only legal entities may be registered as holders of the Securities. Applications must be in the full name(s) of natural persons, companies or other legal entities. Securities cannot be registered in the name of a trust and no trust can be implied. The name of a beneficiary or any other registrable name may be included by way of account description if completed exactly as described in the examples of correct forms of registrable names below.

TYPE OF INVESTOR	CORRECT FORM	EXAMPLE OF INCORRECT
		FORM
Individuals	JOHN FRED WILLIAMS	J. F. Williams
Give full name - not initials
Persons under the age of 18	MICHAEL JOHN WILSON &	Andrew Wilson
Do not use the name of the minor, use name(s) of parent(s)/guardian(s)	SARAH JANE WILSON

Companies	JOHN WILLIAMS PTY LTD	J. Williams Co.
Use company title, not abbreviations		John Williams P/L
Trusts	JOHN FRED WILLIAMS	John Williams Family Trust
Donot use the name of the trust, use name(s) of trustee(s)
Deceased Estates	JANE MARY MCDONALD	Estate of the Late John Smith
Do not use the name of deceased, use personal names of executor(s)
Partnerships	SARAH JANE WILSON &	Sarah Wilson & Son
Do not use the name of partnership, use personal names of partners	MICHAEL JOHN WILSON

Clubs/Unincorporated Bodies	JOHN FRED WILLIAMS	ABC Tennis Association
Do not use name of clubs etc, use personal names of offce bearer(s)
Superannuation Fund	SARAH WILSON PTY LTD	Sarah Wilson Pty Ltd
Do not use name of fund use name(s) of trustee(s)		Superannuation Fund

HOW TO COMPLETE THE APPLICATION FORM

Please complete all relevant sections of the Application Form in BLOCK LETTERS. These instructions are cross-referenced to each section of the Form.

A Insert the Number of Shares you wish to apply for in Section A. The Application must be for a minimum of 10,000 Shares and thereafter must be in multiples of 100 Shares.
B Insert your application money be multiplying the number of Shares by 20 cents per share in Section B.
C Enter the Full Name(s) and Title(s) of all legal entities that are to be recorded as the registered holder(s) of the Shares. You should refer to the back of the Application Form for the correct forms of name which can be registered. Applications using the wrong form of name may be rejected.
Up to three joint Applicants may register. An account designation may be entered on the last line of this section. It should be contained within <> brackets with A/C at the end eg .
D Enter your Postal Address for all correspondence. All communications to you from Audalia Resources Limited will be mailed to the person(s) and address as shown. For joint applications, only one address can be entered.
E Please insert your Telephone Number(s) and contact name in case there are irregularities with your Application.
F If the applicant is a company, insert A.C.N. or A.R.B.N
G Audalia will apply to ASX Limited to participate in the Clearing House Electronic Subregister System ( “CHESS” ), operated by ASX Settlement and Transfer Corporation Pty Ltd, a wholly owned subsidiary of ASX Limited. In CHESS, Audalia will operate an electronic CHESS Subregister of security holdings and an electronic Issuer Sponsored Subregister of security holdings. Together the two Subregisters will make up the principal register of securities. Audalia will not be issuing certificates to applicants in respect of Shares allotted. If you are a CHESS participant (or are sponsored by a Chess participant) and you wish to hold Shares allotted to you under this Application on the CHESS Subregister, enter your CHESS Holder Identification Number or “HIN”. Otherwise, leave this section blank and on allotment, you will be sponsored by the Company and allotted a Securityholder Reference Number or “SRN”.
H Enter the tax file number(s) or exemption category of the Applicants. With a joint holding, only the tax file number ( “TFN” ) of two holders are required. An Applicant is not obliged to quote their TFN, however in cases where no TFN is quoted, Audalia must deduct from any dividends payable (to the extent they are not franked) at the top personal marginal tax rate (including the Medicare levy).
I • Make your cheque(s) or bank draft(s) payable to “Audalia Resources IPO Account” in Australian currency. Your cheque(s) or bank draft(s) must be drawn on an Australian bank and should be crossed “Not Negotiable”. Cash should not be forwarded.
Attach your cheque(s) or bank draft(s) to the Application Form where indicated. Complete the details of your cheque(s) or bank draft(s) in this section.

LODGEMENT OF APPLICATIONS

Return your completed Application Form and cheque(s) or bank draft(s) to: By mail: Audalia Resources Limited

c/- Computershare Investor Services Pty Ltd OR GPO Box D182

PERTH WA 6840

By hand:

Audalia Resources Limited c/- Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building, 45 St George’s Terrace PERTH WA 600

Applications must be received at the above address by 5.00pm WST time on 27 May 2011 (subject to the right of Audalia to vary this date)

PROSPECTUS

Audalia Resources Limited ACN 146 035 690

13.0 APPLICATION FORM

==> picture [35 x 35] intentionally omitted <==

Share Registrar Use Only	Share Registrar Use Only	Share Registrar Use Only	Share Registrar Use Only	Share Registrar Use Only
C A B D E F H G

	Joint applicant #2

	Joint applicant #3

	Suburb/town State Postcode Postal address Street number Street name Contact name Home telephone no. Work telephone no. ABN/ARBN(for companies only) Email address Tax File Number or exemption Applicant #2 Applicant #3 Holder Identifcation Number (HIN) CHESS Participant x Please note that if you supply a CHESS HIN but the name and address details on your form do not correspond exactly with the registration details held at CHESS, your application will be deemed to be made without the CHESS HIN, and any securities issued as a result of the Offer will be held on the Issuer Sponsored Subregister.
	PAYMENT DETAILS(Cheques to be payable to “Audalia IPO Account”) Cheque details
I	Drawer	Bank	BSB & Account number	Amount of cheque

DECLARATION

I/We declare that by lodging this Application Form, I/we represent and acknowledge that I/we have received, read and understood the Prospectus to which this Application Form relates. I/We hereby authorise Audalia to complete and execute any document necessary to effect the allotment and issue of any Shares to me/us.
By lodging this Application Form, I/we declare that this Application is completed and lodged according to the Prospectus and that all statements made by me/us are complete and accurate.
I/We also declare that this Application Form is completed according to this declaration and agree to be bound by the terms and conditions set out in the Prospectus and the Constitution of Audalia.
I/We acknowledge that returning the Application Form with the application monies will constitute my/our offer to subscribe for Securities in Audalia and that no notice of acceptance of the application will be provided.

NO SIGNATURE IS REQUIRED

TO MEET THE REQUIREMENTS OF THE CORPORATIONS ACT, THIS FORM MUST NOT BE HANDED TO ANY PERSON UNLESS IT IS ATTACHED TO OR ACCOMPANIED BY THE PROSPECTUS DATED 18 FEBRUARY 2010.

Audalia Resources Limited

TREATMENT OF APPLICATION

CORRECT FORMS OF REGISTRABLE NAMES

TYPE OF INVESTOR	CORRECT FORM	EXAMPLE OF INCORRECT
		FORM
Individuals	JOHN FRED WILLIAMS	J. F. Williams
Give full name - not initials
Persons under the age of 18	MICHAEL JOHN WILSON &	Andrew Wilson
Do not use the name of the minor, use name(s) of parent(s)/guardian(s)	SARAH JANE WILSON

Companies	JOHN WILLIAMS PTY LTD	J. Williams Co.
Use company title, not abbreviations		John Williams P/L
Trusts	JOHN FRED WILLIAMS	John Williams Family Trust
Donot use the name of the trust, use name(s) of trustee(s)
Deceased Estates	JANE MARY MCDONALD	Estate of the Late John Smith
Do not use the name of deceased, use personal names of executor(s)
Partnerships	SARAH JANE WILSON &	Sarah Wilson & Son
Do not use the name of partnership, use personal names of partners	MICHAEL JOHN WILSON

Clubs/Unincorporated Bodies	JOHN FRED WILLIAMS	ABC Tennis Association
Do not use name of clubs etc, use personal names of offce bearer(s)
Superannuation Fund	SARAH WILSON PTY LTD	Sarah Wilson Pty Ltd
Do not use name of fund use name(s) of trustee(s)		Superannuation Fund

HOW TO COMPLETE THE APPLICATION FORM

Please complete all relevant sections of the Application Form in BLOCK LETTERS. These instructions are cross-referenced to each section of the Form.

A Insert the Number of Shares you wish to apply for in Section A. The Application must be for a minimum of 10,000 Shares and thereafter must be in multiples of 100 Shares.
B Insert your application money be multiplying the number of Shares by 20 cents per share in Section B.
C Enter the Full Name(s) and Title(s) of all legal entities that are to be recorded as the registered holder(s) of the Shares. You should refer to the back of the Application Form for the correct forms of name which can be registered. Applications using the wrong form of name may be rejected.
Up to three joint Applicants may register. An account designation may be entered on the last line of this section. It should be contained within <> brackets with A/C at the end eg .
D Enter your Postal Address for all correspondence. All communications to you from Audalia Resources Limited will be mailed to the person(s) and address as shown. For joint applications, only one address can be entered.
E Please insert your Telephone Number(s) and contact name in case there are irregularities with your Application.
F If the applicant is a company, insert A.C.N. or A.R.B.N
G Audalia will apply to ASX Limited to participate in the Clearing House Electronic Subregister System ( “CHESS” ), operated by ASX Settlement and Transfer Corporation Pty Ltd, a wholly owned subsidiary of ASX Limited. In CHESS, Audalia will operate an electronic CHESS Subregister of security holdings and an electronic Issuer Sponsored Subregister of security holdings. Together the two Subregisters will make up the principal register of securities. Audalia will not be issuing certificates to applicants in respect of Shares allotted. If you are a CHESS participant (or are sponsored by a Chess participant) and you wish to hold Shares allotted to you under this Application on the CHESS Subregister, enter your CHESS Holder Identification Number or “HIN”. Otherwise, leave this section blank and on allotment, you will be sponsored by the Company and allotted a Securityholder Reference Number or “SRN”.
H Enter the tax file number(s) or exemption category of the Applicants. With a joint holding, only the tax file number ( “TFN” ) of two holders are required. An Applicant is not obliged to quote their TFN, however in cases where no TFN is quoted, Audalia must deduct from any dividends payable (to the extent they are not franked) at the top personal marginal tax rate (including the Medicare levy).
I • Make your cheque(s) or bank draft(s) payable to “Audalia Resources IPO Account” in Australian currency. Your cheque(s) or bank draft(s) must be drawn on an Australian bank and should be crossed “Not Negotiable”. Cash should not be forwarded.
Attach your cheque(s) or bank draft(s) to the Application Form where indicated. Complete the details of your cheque(s) or bank draft(s) in this section.

LODGEMENT OF APPLICATIONS

Return your completed Application Form and cheque(s) or bank draft(s) to: By mail: Audalia Resources Limited

c/- Computershare Investor Services Pty Ltd OR GPO Box D182

PERTH WA 6840

By hand:

Audalia Resources Limited c/- Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building, 45 St George’s Terrace PERTH WA 600

Applications must be received at the above address by 5.00pm WST time on 27 May 2011 (subject to the right of Audalia to vary this date)

PROSPECTUS

Audalia Resources Limited ACN 146 035 690

13.0 APPLICATION FORM

==> picture [35 x 35] intentionally omitted <==

Share Registrar Use Only	Share Registrar Use Only	Share Registrar Use Only	Share Registrar Use Only	Share Registrar Use Only
C A B D E F H G

	Joint applicant #2

	Joint applicant #3

	Suburb/town State Postcode Postal address Street number Street name Contact name Home telephone no. Work telephone no. ABN/ARBN(for companies only) Email address Tax File Number or exemption Applicant #2 Applicant #3 Holder Identifcation Number (HIN) CHESS Participant x Please note that if you supply a CHESS HIN but the name and address details on your form do not correspond exactly with the registration details held at CHESS, your application will be deemed to be made without the CHESS HIN, and any securities issued as a result of the Offer will be held on the Issuer Sponsored Subregister.
	PAYMENT DETAILS(Cheques to be payable to “Audalia IPO Account”) Cheque details
I	Drawer	Bank	BSB & Account number	Amount of cheque

DECLARATION

I/We declare that by lodging this Application Form, I/we represent and acknowledge that I/we have received, read and understood the Prospectus to which this Application Form relates. I/We hereby authorise Audalia to complete and execute any document necessary to effect the allotment and issue of any Shares to me/us.
By lodging this Application Form, I/we declare that this Application is completed and lodged according to the Prospectus and that all statements made by me/us are complete and accurate.
I/We also declare that this Application Form is completed according to this declaration and agree to be bound by the terms and conditions set out in the Prospectus and the Constitution of Audalia.
I/We acknowledge that returning the Application Form with the application monies will constitute my/our offer to subscribe for Securities in Audalia and that no notice of acceptance of the application will be provided.

NO SIGNATURE IS REQUIRED

TO MEET THE REQUIREMENTS OF THE CORPORATIONS ACT, THIS FORM MUST NOT BE HANDED TO ANY PERSON UNLESS IT IS ATTACHED TO OR ACCOMPANIED BY THE PROSPECTUS DATED 18 FEBRUARY 2010.

Audalia Resources Limited

TREATMENT OF APPLICATION

CORRECT FORMS OF REGISTRABLE NAMES

TYPE OF INVESTOR	CORRECT FORM	EXAMPLE OF INCORRECT
		FORM
Individuals	JOHN FRED WILLIAMS	J. F. Williams
Give full name - not initials
Persons under the age of 18	MICHAEL JOHN WILSON &	Andrew Wilson
Do not use the name of the minor, use name(s) of parent(s)/guardian(s)	SARAH JANE WILSON

Companies	JOHN WILLIAMS PTY LTD	J. Williams Co.
Use company title, not abbreviations		John Williams P/L
Trusts	JOHN FRED WILLIAMS	John Williams Family Trust
Donot use the name of the trust, use name(s) of trustee(s)
Deceased Estates	JANE MARY MCDONALD	Estate of the Late John Smith
Do not use the name of deceased, use personal names of executor(s)
Partnerships	SARAH JANE WILSON &	Sarah Wilson & Son
Do not use the name of partnership, use personal names of partners	MICHAEL JOHN WILSON

Clubs/Unincorporated Bodies	JOHN FRED WILLIAMS	ABC Tennis Association
Do not use name of clubs etc, use personal names of offce bearer(s)
Superannuation Fund	SARAH WILSON PTY LTD	Sarah Wilson Pty Ltd
Do not use name of fund use name(s) of trustee(s)		Superannuation Fund

HOW TO COMPLETE THE APPLICATION FORM

Please complete all relevant sections of the Application Form in BLOCK LETTERS. These instructions are cross-referenced to each section of the Form.

A Insert the Number of Shares you wish to apply for in Section A. The Application must be for a minimum of 10,000 Shares and thereafter must be in multiples of 100 Shares.
B Insert your application money be multiplying the number of Shares by 20 cents per share in Section B.
C Enter the Full Name(s) and Title(s) of all legal entities that are to be recorded as the registered holder(s) of the Shares. You should refer to the back of the Application Form for the correct forms of name which can be registered. Applications using the wrong form of name may be rejected.
Up to three joint Applicants may register. An account designation may be entered on the last line of this section. It should be contained within <> brackets with A/C at the end eg .
D Enter your Postal Address for all correspondence. All communications to you from Audalia Resources Limited will be mailed to the person(s) and address as shown. For joint applications, only one address can be entered.
E Please insert your Telephone Number(s) and contact name in case there are irregularities with your Application.
F If the applicant is a company, insert A.C.N. or A.R.B.N
G Audalia will apply to ASX Limited to participate in the Clearing House Electronic Subregister System ( “CHESS” ), operated by ASX Settlement and Transfer Corporation Pty Ltd, a wholly owned subsidiary of ASX Limited. In CHESS, Audalia will operate an electronic CHESS Subregister of security holdings and an electronic Issuer Sponsored Subregister of security holdings. Together the two Subregisters will make up the principal register of securities. Audalia will not be issuing certificates to applicants in respect of Shares allotted. If you are a CHESS participant (or are sponsored by a Chess participant) and you wish to hold Shares allotted to you under this Application on the CHESS Subregister, enter your CHESS Holder Identification Number or “HIN”. Otherwise, leave this section blank and on allotment, you will be sponsored by the Company and allotted a Securityholder Reference Number or “SRN”.
H Enter the tax file number(s) or exemption category of the Applicants. With a joint holding, only the tax file number ( “TFN” ) of two holders are required. An Applicant is not obliged to quote their TFN, however in cases where no TFN is quoted, Audalia must deduct from any dividends payable (to the extent they are not franked) at the top personal marginal tax rate (including the Medicare levy).
I • Make your cheque(s) or bank draft(s) payable to “Audalia Resources IPO Account” in Australian currency. Your cheque(s) or bank draft(s) must be drawn on an Australian bank and should be crossed “Not Negotiable”. Cash should not be forwarded.
Attach your cheque(s) or bank draft(s) to the Application Form where indicated. Complete the details of your cheque(s) or bank draft(s) in this section.

LODGEMENT OF APPLICATIONS

Return your completed Application Form and cheque(s) or bank draft(s) to: By mail: Audalia Resources Limited

c/- Computershare Investor Services Pty Ltd OR GPO Box D182

PERTH WA 6840

By hand:

Audalia Resources Limited c/- Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building, 45 St George’s Terrace PERTH WA 600

Applications must be received at the above address by 5.00pm WST time on 27 May 2011 (subject to the right of Audalia to vary this date)

AI assistant

AUDALIA RESOURCES LIMITED — Capital/Financing Update 2011

64291_rns_2011-05-05_d0891a66-df75-4619-ae97-0aa3eb4b560d.pdf

prospectus

Important Notice

DIRECTORS & SECRETARY

REGISTERED OFFICE

INVESTIGATING ACCOUNTANT

INDEPENDENT GEOLOGIST

SHARE REGISTRY*

LEAD MANAGER*

SOLICITORS

AUDITOR

PROPOSED ASX CODE

WEBSITE

Table of Contents

IMPORTANT INFORMATION

Prospectus

Lodgement and listing

Expiry date

Foreign jurisdictions

Note to Applicants – professional advice

Disclaimer

Future performance

Defined terms and abbreviations

Electronic Prospectus

Obtaining a paper copy

Exposure period

Photographs and diagrams

Reporting on Exploration Results

Risk Factors

Investment Highlights

CHAIRMAN’S LETTER

Dear Investor

Dato Soo Kok Lim

1.0 INVESTMENT SUMMARY

1.1 Important Notice

1.2 Summary of the Offer

1.3 Important Dates

1.4 Effect of the Offer

1.5 Purposes of the Offer and use of proceeds

Notes:

1.0 INVESTMENT SUMMARY (continued)

1.6 Pro-forma capital structure

Notes:

2.0 DETAILS OF THE OFFER

2.1 Description of the Offer

2.2 Oversubscriptions

2.3 How to apply

By mail:

2.4 Allotment and allocation of Securities

2.5 Minimum subscription

AUDALIA RESOURCES LIMITED

OR

By hand:

AUDALIA RESOURCES LIMITED

2.6 Working capital adequacy

2.7 Underwriting

2.8 Lead Manager

2.9 Commissions on Application Forms

2.0 DETAILS OF THE OFFER (continued)

2.10 Non-resident investors

2.11 ASX listing

2.12 Restricted securities

2.13 CHESS

2.14 Privacy Act

2.15 Withdrawal

2.16 Forecasts

3.0 COMPANY AND PROJECT OVERVIEW

3.1 Introduction

3.2 Gascoyne Project – History and Technical Summary

3.0 COMPANY AND PROJECT OVERVIEW (continued)

3.3 Gascoyne Project – Previous Exploration

3.3.1 Gravity Survey

3.3.2 Soil Sampling

3.4 Competent Person’s Statement

4.0 DIRECTORS, COMPANY SECRETARIES AND MANAGEMENT

4.1 Directors

Dato Soo Kok Lim

Executive Chairman

AUDALIA RESOURCES LIMITED Capital/Financing Update 2011