STONE RESOURCES AUSTRALIA LTD ACN 100 727 491

NOTICE OF ANNUAL GENERAL MEETING

Notice is given that the Meeting will be held at:

TIME : 3.00PM (WST) DATE : 24 November 2017 PLACE : Metro Hotel 61 Canning Highway South Perth WA 6151

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

This Notice of Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Meeting are those who are registered Shareholders at 4.00pm (WST) on 22 November 2017.

BUSINESS OF THE MEETING

AGENDA

1. FINANCIAL STATEMENTS AND REPORTS

To receive and consider the annual financial report of the Company for the financial year ended 30 June 2017 together with the declaration of the directors, the director’s report, the Remuneration Report and the auditor’s report.

2. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

To consider and, if thought fit, to pass, with or without amendment, the following resolution as a non-binding resolution :

“That, for the purposes of section 250R(2) of the Corporations Act and for all other purposes, approval is given for the adoption of the Remuneration Report as contained in the Company’s annual financial report for the financial year ended 30 June 2017.”

Note: the vote on this Resolution is advisory only and does not bind the Directors or the Company.

Voting Prohibition Statement:

A vote on this Resolution must not be cast (in any capacity) by or on behalf of either of the following persons:

(a) a member of the Key Management Personnel, details of whose remuneration are included in the Remuneration Report; or
(b) a Closely Related Party of such a member.

However, a person (the voter ) described above may cast a vote on this Resolution as a proxy if the vote is not cast on behalf of a person described above and either:

(a) the voter is appointed as a proxy by writing that specifies the way the proxy is to vote on this Resolution; or

(b) the voter is the Chair and the appointment of the Chair as proxy:
(i) does not specify the way the proxy is to vote on this Resolution; and (ii) expressly authorises the Chair to exercise the proxy even though this Resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel.

3. RESOLUTION 2 – RE-ELECTION OF DIRECTOR – MR WILLIAM (BILL) HOBBA

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of clause 11.1.3 of the Constitution, ASX Listing Rule 14.4 and for all other purposes, William (Bill) Hobba, a Director, retires by rotation, and being eligible, is re-elected as a Director.”

4. RESOLUTION 3 – RE-ELECTION OF DIRECTOR – MR YONG HAN

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of clause 11.1.3 of the Constitution, ASX Listing Rule 14.4 and for all other purposes, Yong Han, a Director, retires by rotation, and being eligible, is re-elected as a Director.”

5. RESOLUTION 4 – RATIFICATION OF PRIOR ISSUE OF PLACEMENT SHARES

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of ASX Listing Rule 7.4 and for all other purposes, Shareholders ratify the issue of 30,303,030 Placement Shares on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by a person who participated in the issue and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

6. RESOLUTION 5 – RATIFICATION OF PRIOR ISSUE OF SHARES TO MR GUOFU ZU

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of ASX Listing Rule 7.4 and for all other purposes, Shareholders ratify the issue of 5,280,115 Shares on the terms and conditions set out in the Explanatory Statement.”

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:

(i) a member of the Key Management Personnel; or

(ii) a Closely Related Party of such a member; and (b) the appointment does not specify the way the proxy is to vote on this Resolution.

Provided the Chair is not a Resolution 14 Excluded Party, the above prohibition does not apply if: (a) the proxy is the Chair; and (b) the appointment expressly authorises the Chair to exercise the proxy even though this Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

7. RESOLUTION 6 – RATIFICATION OF PRIOR ISSUE OF SHARES MR TONY LAU

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of ASX Listing Rule 7.4 and for all other purposes, Shareholders ratify the issue of 5,280,115 Shares on the terms and conditions set out in the Explanatory Statement.”

8. RESOLUTION 7 – RATIFICATION OF PRIOR ISSUE OF SHARES TO MR SHENG HUI LU

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of ASX Listing Rule 7.4 and for all other purposes, Shareholders ratify the issue of 2,333,800 Shares on the terms and conditions set out in the Explanatory Statement.”

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:
(i) a member of the Key Management Personnel; or

(ii) a Closely Related Party of such a member; and (b) the appointment does not specify the way the proxy is to vote on this Resolution.

Provided the Chair is not a Resolution 14 Excluded Party, the above prohibition does not apply if:

(a) the proxy is the Chair; and

(b) the appointment expressly authorises the Chair to exercise the proxy even though this Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

9. RESOLUTION 8 – APPROVAL FOR ISSUE OF SHARES TO MR TONY LAU

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Company to issue up to 3,650,592 Shares on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by any person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

10. RESOLUTION 9 – APPROVAL FOR ISSUE OF SHARES TO MR GUOFU ZU

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:
(i) a member of the Key Management Personnel; or

(ii) a Closely Related Party of such a member; and (b) the appointment does not specify the way the proxy is to vote on this Resolution.

Provided the Chair is not a Resolution 14 Excluded Party, the above prohibition does not apply if:

(a) the proxy is the Chair; and

(b) the appointment expressly authorises the Chair to exercise the proxy even though this Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

11. RESOLUTION 10 – APPROVAL FOR ISSUE OF DIRECTOR SHARES TO MR YONGJI DUAN

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of section 195(4) of the Corporations Act, ASX Listing Rule 10.11 and for all other purposes, approval is given for the Company to issue 19,895,952 Shares to Yongji Duan (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion Statement : The Company will disregard any votes cast on this Resolution by Yongji Duan (or his nominee) and any of their associates. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:

(i) a member of the Key Management Personnel; or

(ii) a Closely Related Party of such a member; and

(b) the appointment does not specify the way the proxy is to vote on this Resolution. However, the above prohibition does not apply if:

(a) the proxy is the Chair; and (b) the appointment expressly authorises the Chair to exercise the proxy even though this Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

12. RESOLUTION 11 – APPROVAL FOR ISSUE OF DIRECTOR SHARES TO MR YONG HAN

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of section 195(4) of the Corporations Act, ASX Listing Rule 10.11 and for all other purposes, approval is given for the Company to issue 7,336,000 Shares to Yong Han (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion Statement : The Company will disregard any votes cast on this Resolution by Yong Han (or his nominee) and any of their associates. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:

(i) a member of the Key Management Personnel; or (iii) a Closely Related Party of such a member; and (b) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

13. RESOLUTION 12 – ISSUE OF DIRECTOR SHARES TO MS SANDRA WHEELER (WIFE OF MR WILLIAM HOBBA)

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of section 195(4) of the Corporations Act, ASX Listing Rule 10.11 and for all other purposes, approval is given for the Company to issue 4,660,000 Shares to Sandra Wheeler (or her nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion Statement : The Company will disregard any votes cast on this Resolution by William Hobba, Sandra Wheeler (or their nominee(s)) and any of their associates. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:

(i) a member of the Key Management Personnel; or (ii) a Closely Related Party of such a member; and (b) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

14. RESOLUTION 13 – ISSUE OF DIRECTOR SHARES TO DR KAIYE SHUAI

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of section 195(4) of the Corporations Act, ASX Listing Rule 10.11 and for all other purposes, approval is given for the Company to issue 3,691,900 Shares to Kaiye Shuai (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion Statement : The Company will disregard any votes cast on this Resolution by Kaiye Shuai (or his nominee) and any of their associates. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:

(i) a member of the Key Management Personnel; or

(ii) a Closely Related Party of such a member; and (b) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

15. RESOLUTION 14 – ISSUE OF SHARES TO STONE RESOURCES (H.K.) LIMITED

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of ASX Listing Rule 10.11 and for all other purposes, approval is given for the Company to issue 15,151,515 Shares to Stone Resources (H.K) Limited ( SRL HK ) (or its nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by SRL HK (or its nominee) and any of their associates ( Resolution 14 Excluded Party ). However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, provided the Chair is not a Resolution 14 Excluded Party, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if:

(a) the proxy is either:

(i) a member of the Key Management Personnel; or

(ii) a Closely Related Party of such a member; and

(b) the appointment does not specify the way the proxy is to vote on this Resolution.

Provided the Chair is not a Resolution 14 Excluded Party, the above prohibition does not apply if:

(a) the proxy is the Chair; and
(b) the appointment expressly authorises the Chair to exercise the proxy even though this Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

16. RESOLUTION 15 – APPROVAL OF 10% PLACEMENT CAPACITY

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

“That, for the purposes of Listing Rule 7.1A and for all other purposes, approval is given for the Company to issue up to that number of Equity Securities equal to 10% of the issued capital of the Company at the time of issue, calculated in accordance with the formula prescribed in ASX Listing Rule 7.1A.2 and otherwise on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by any person who may participate in the issue of Equity Securities under this Resolution and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed and any associates of those persons. However, the Company will not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

17. RESOLUTION 16 – REPLACEMENT OF CONSTITUTION

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

“That, for the purposes of section 136(2) of the Corporations Act and for all other purposes, approval is given for the Company to repeal its existing Constitution and adopt a new constitution in its place in the form as signed by the chairman of the Meeting for identification purposes.

Dated: 16 October 2017

By order of the Board

Tony Lau Company Secretary

Voting in person

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

Voting by proxy

To vote by proxy, please complete and sign the enclosed Proxy Form and return by the time and in accordance with the instructions set out on the Proxy Form.

In accordance with section 249L of the Corporations Act, Shareholders are advised that:

each Shareholder has a right to appoint a proxy;
the proxy need not be a Shareholder of the Company; and
a Shareholder who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member’s votes, then in accordance with section 249X(3) of the Corporations Act, each proxy may exercise one-half of the votes.

Shareholders and their proxies should be aware that changes to the Corporations Act made in 2011 mean that:

if proxy holders vote, they must cast all directed proxies as directed; and
any directed proxies which are not voted will automatically default to the Chair, who must vote the proxies as directed.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on +61 8 9277 6008.

EXPLANATORY STATEMENT

This Explanatory Statement has been prepared to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions.

1. FINANCIAL STATEMENTS AND REPORTS

In accordance with the Constitution, the business of the Meeting will include receipt and consideration of the annual financial report of the Company for the financial year ended 30 June 2017 together with the declaration of the directors, the directors’ report, the Remuneration Report and the auditor’s report.

The Company will not provide a hard copy of the Company’s annual financial report to Shareholders unless specifically requested to do so. The Company’s annual financial report is available on its website at www.stoneral.com.au.

2. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

2.1 General

The Corporations Act requires that at a listed company’s annual general meeting, a resolution that the remuneration report be adopted must be put to the shareholders. However, such a resolution is advisory only and does not bind the company or the directors of the company.

The remuneration report sets out the company’s remuneration arrangements for the directors and senior management of the company. The remuneration report is part of the directors’ report contained in the annual financial report of the company for a financial year.

The chair of the meeting must allow a reasonable opportunity for its shareholders to ask questions about or make comments on the remuneration report at the annual general meeting.

2.2 Voting consequences

A company is required to put to its shareholders a resolution proposing the calling of another meeting of shareholders to consider the appointment of directors of the company ( Spill Resolution ) if, at consecutive annual general meetings, at least 25% of the votes cast on a remuneration report resolution are voted against adoption of the remuneration report and at the first of those annual general meetings a Spill Resolution was not put to vote. If required, the Spill Resolution must be put to vote at the second of those annual general meetings.

If more than 50% of votes cast are in favour of the Spill Resolution, the company must convene a shareholder meeting ( Spill Meeting ) within 90 days of the second annual general meeting.

All of the directors of the company who were in office when the directors' report (as included in the company’s annual financial report for the most recent financial year) was approved, other than the managing director of the company, will cease to hold office immediately before the end of the Spill Meeting but may stand for re-election at the Spill Meeting.

Following the Spill Meeting those persons whose election or re-election as directors of the company is approved will be the directors of the company.

2.3 Previous voting results

At the Company’s previous annual general meeting the votes cast against the remuneration report considered at that annual general meeting were less than 25%. Accordingly, the Spill Resolution is not relevant for this Annual General Meeting.

3. RESOLUTION 2 – RE-ELECTION OF DIRECTOR – MR WILLIAM (BILL) HOBBA

3.1 General

ASX Listing Rule 14.4 provides that, other than a managing director, a director of an entity must not hold office (without re-election) past the third AGM following the director’s appointment or 3 year, whichever is the longer. However, where there is more than one managing director, only one is entitled not to be subject to re-election.

The Constitution sets out the requirements for determining which Directors are to retire by rotation at an annual general meeting.

William (Bill) Hobba, who has served as a director since 3 September 2012 and was last re-elected on 28 November 2014, retires by rotation and seeks re-election.

3.2 Qualifications and other material directorships

Mr Hobba supervised CPC Engineering’s renovation and assembly of the Brightstar gold plant for the company. He has recently assumed an advisory responsibility for operational matters at the mine site. He has over 40 years’ experience in gold and nickel mines including 10 years as a consultant in a mine management consultancy and 5 years supplying resources to mill operations.

Mr Hobba holds no directorships in other listed companies.

3.3 Independence

If elected the board considers that Mr Hobba will be an independent director.

3.4 Board recommendation

The Board supports the re-election of Mr Hobba and recommends that Shareholders vote in favour of Resolution 2.

4. RESOLUTION 3 – RE-ELECTION OF DIRECTOR – MR YONG HAN

4.1 General

The Constitution sets out the requirements for determining which Directors are to retire by rotation at an annual general meeting.

Yong Han, who has served as a director since 24 January 2014 and was last re-elected on 30 October 2015, retires by rotation and seeks re-election.

4.2 Qualifications and other material directorships

Mr Han joined the company management team in November 2011. Prior to his appointment as CEO, Mr Han was the executive vice president of Stone Resources (H.K.) Limited, the parent entity.

He was appointed President of Shaanxi Ma’angiao & Mine Industry Co., Ltd., in 1993. Since 1998, he has been Tenure Researcher at China Academy of Management Science. He held the position of Vice Chairman of Shaanxi Gold Association in 2005.

Mr Han is a senior economist and a Chinese certified professional manager.

Mr Han holds no other directorships in other listed companies in Australia.

4.3 Independence

If elected the board does not consider Mr Han will be an independent director.

4.4 Board recommendation

The Board supports the re-election of Mr Han and recommends that Shareholders vote in favour of Resolution 3.

5. RESOLUTION 4 - RATIFICATION OF PRIOR ISSUE OF PLACEMENT SHARES

5.1 General

On 20 December 2016, the Company issued 30,303,030 Shares at an issue price of $0.033 per Share to raise $1,000,000.

Resolution 4 seeks Shareholder ratification pursuant to ASX Listing Rule 7.4 for the issue of those Shares ( Ratification ).

ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to issue more equity securities during any 12 month period than that amount which represents 15% of the number of fully paid ordinary securities on issue at the commencement of that 12 month period.

ASX Listing Rule 7.4 sets out an exception to ASX Listing Rule 7.1. It provides that where a company in general meeting ratifies the previous issue of securities made pursuant to ASX Listing Rule 7.1 (and provided that the previous issue did not breach ASX Listing Rule 7.1) those securities will be deemed to have been made with shareholder approval for the purpose of ASX Listing Rule 7.1.

By ratifying this issue, the Company will retain the flexibility to issue equity securities in the future up to the 15% annual placement capacity set out in ASX Listing Rule 7.1 without the requirement to obtain prior Shareholder approval.

5.2 Technical information required by ASX Listing Rule 7.4

Pursuant to and in accordance with ASX Listing Rule 7.5, the following information is provided in relation to the Ratification:

(a) 30,303,030 Shares were issued;
(b) the issue price was $0.033 per Share;

(c) the Shares issued were all fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;
(d) the Shares were issued to a sophisticated investor. None of these subscribers are related parties of the Company; and
(e) the funds raised from this issue were used for general working capital purposes.

6. RESOLUTION 5, 6 & 7 - RATIFICATION OF PRIOR ISSUE OF SHARES

6.1 General

On 20 December 2016, the Company issued a total of 12,984,030 Shares comprised of:
(a) 5,280,115 Shares to Mr Goufu Zu ( Resolution 5 );
(b) 5,280,115 Shares to Mr Tony Lau ( Resolution 6 ); and
(c) 2,333,800 Shares to Mr Sheng Hui Lu ( Resolution 7

The Shares were issued for nil consideration to executives of the Company as part of their executive remuneration packages.

6.2 Resolution 5

(a) General

Resolution 5 seeks Shareholder ratification pursuant to ASX Listing Rule 7.4 for the issue of those 5,280,115 Shares to Mr Goufu Zu ( Zu Ratification ).

A summary of ASX Listing Rules 7.1 and 7.4 is set out in section 5.1

(b) Technical information required by ASX Listing Rule 7.4

Pursuant to and in accordance with ASX Listing Rule 7.5, the following information is provided in relation to the Zu Ratification:

(i) 5,280,115 Shares were issued;
(ii) the issue price was nil per Share;
(iii) the Shares issued were all fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;
(iv) the Shares were issued to Mr Goufu Zu. Mr Zu is not a related party of the Company; and
(v) the Shares were issued for nil consideration. Accordingly, no funds were raised from the issue.

6.3 Resolution 6

(a) General

Resolution 6 seeks Shareholder ratification pursuant to ASX Listing Rule 7.4 for the issue of those 5,280,115 Shares to Mr Tony Lau ( Lau Ratification ).

A summary of ASX Listing Rules 7.1 and 7.4 is set out in section 5.1

(b) Technical information required by ASX Listing Rule 7.4

Pursuant to and in accordance with ASX Listing Rule 7.5, the following information is provided in relation to the Lau Ratification:

(i) 5,280,115 Shares were issued;
(ii) the issue price was nil per Share;
(iii) the Shares issued were all fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;
(iv) the Shares were issued to Mr Tony Lau. Mr Lau is not a related party of the Company; and
(v) the Shares were issued for nil consideration. Accordingly, no funds were raised from the issue.

6.4 Resolution 7

(a) General

Resolution 7 seeks Shareholder ratification pursuant to ASX Listing Rule 7.4 for the issue of those 2,333,800 Shares to Mr Sheng Hui Lu ( Lu Ratification ).

A summary of ASX Listing Rules 7.1 and 7.4 is set out in section 5.1

(b) Technical information required by ASX Listing Rule 7.4

Pursuant to and in accordance with ASX Listing Rule 7.5, the following information is provided in relation to the Lu Ratification:

(i) 2,333,800 Shares were issued;
(ii) the issue price was nil per Share;
(iii) the Shares issued were all fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;

(iv) the Shares were issued to Mr Sheng Hui Lu. Mr Lu is not a related party of the Company; and
(v) the Shares were issued for nil consideration. Accordingly, no funds were raised from the issue.

7. RESOLUTION 8 – APPROVAL FOR ISSUE OF SHARES TO MR TONY LAU

7.1 General

Resolution 8 seeks Shareholder approval for the issue of up to 3,650,592 Shares at an issue price of nil per Share to Mr Tony Lau (or his nominee) ( Lau Shares ). Mr Lau is Company Secretary of the Company. The Directors, who do not have a material personal interest in this Resolution, consider that the agreement to issue the Lau Shares was made on arm’s length terms.

A summary of ASX Listing Rule 7.1 is set out in section 5.1 above.

The effect of Resolution 8 will be to allow the Company to issue the Shares to Mr Lau during the period of 3 months after the Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

7.2 Technical information required by ASX Listing Rule 7.1

Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to the Placement:

(a) the maximum number of Shares to be issued is 3,650,592;
(b) the Shares will be issued no later than 3 months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that issue of the Shares will occur on the same date;
(c) the issue price will be nil per Share;
(d) the Shares will be issued to Mr Tony Lau (or his nominee). Mr Lau is not a related party of the Company;
(e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares; and
(f) no funds will be raised from the issue of the Lau Shares as they are being issued for nil consideration.

8. RESOLUTION 9 – APPROVAL FOR ISSUE OF SHARES TO MR GUOFU ZU

8.1 General

Resolution 9 seeks Shareholder approval for the issue of up to 3,650,592 Shares at an issue price of nil per Share to Mr Guofu Zu (or his nominee) ( Zu Shares ). Mr Zu is Chief Executive Officer of the Company. The Directors, who do not have a material personal interest in this Resolution, consider that the agreement to issue the Zu Shares was made on arm’s length terms.

A summary of ASX Listing Rule 7.1 is set out in section 5.1 above.

The effect of Resolution 9 will be to allow the Company to issue the Shares to Mr Zu during the period of 3 months after the Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

8.2 Technical information required by ASX Listing Rule 7.1

Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to the Placement:

(a) the maximum number of Shares to be issued is 3,650,592;
(b) the Shares will be issued no later than 3 months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that issue of the Shares will occur on the same date;
(c) the issue price will be nil per Share;
(d) the Shares will be issued to Mr Guofu Zu (or his nominee). Mr Zu is not a related party of the Company;
(e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares; and
(f) no funds will be raised from the issue of the Zu Shares as they are being issued for nil consideration.

9. RESOLUTION 10 TO 13 – ISSUE OF SHARES TO DIRECTORS

9.1 General

The Company has agreed, subject to obtaining Shareholder approval, to issue 35,583,852 Shares ( Director Shares ) comprising:

(a) 19,895,952 Director Shares to Yongji Duan ( Resolution 10
(b) 7,336,000 Director Shares to Yong Han ( Resolution 11 );
(c) 4,660,000 Director Shares to Sandra Wheeler (Wife of William Hobba) ( Resolution 12 );
(d) 3,691,900 Director Shares to Kaiye Shuai ( Resolution 13

(together the Related Parties ) (or their nominee) on the terms and conditions set out below.

Resolutions 10, 11, 12 and 13 seeks Shareholder approval for the issue of the Director Shares to the Related Parties (or their nominee).

9.2 Chapter 2E of the Corporations Act

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

(a) obtain the approval of the public company’s members in the manner set out in sections 217 to 227 of the Corporations Act; and

(b) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in sections 210 to 216 of the Corporations Act.

The grant of Director Shares constitutes giving a financial benefit and the Related Parties are related parties of the Company by virtue of being a Director.

The Directors consider that Shareholder approval pursuant to Chapter 2E is not required in respect of the issue of Director Shares because the agreement to issue the Director Shares, reached as part of the remuneration package for the Related Parties, is considered reasonable remuneration in the circumstances and was negotiated on an arm’s length basis.

9.3 ASX Listing Rule 10.11

ASX Listing Rule 10.11 also requires shareholder approval to be obtained where an entity issues, or agrees to issue, securities to a related party, or a person whose relationship with the entity or a related party is, in ASX’s opinion, such that approval should be obtained unless an exception in ASX Listing Rule 10.12 applies.

As the issue of Director Shares involves the issue of securities to a related party of the Company, Shareholder approval pursuant to ASX Listing Rule 10.11 is required unless an exception applies. It is the view of the Directors that the exceptions set out in ASX Listing Rule 10.12 do not apply in the current circumstances.

9.4 Technical Information required by ASX Listing Rule 10.13

Pursuant to and in accordance with ASX Listing Rule 10.13, the following information is provided in relation to Resolutions 10 - 13:

(a) The related parties to be issued Director Shares are Messrs Duan, Han, Hobba and Shuai and they are related parties by virtue of being directors of the Company;
(b) a total of 35,583,852 Director Shares will be granted to the Related Parties comprising:
(i) 19,895,952 Shares to Yongji Duan pursuant to Resolution 10;
(ii) 7,336,000 Shares to Yong Han pursuant to Resolution 11;
(iii) 4,660,000 Shares to Sandra Wheeler (Wife of William Hobba) pursuant to Resolution 12; and
(iv) 3,691,900 Shares to Kaiye Shuai pursuant to Resolution 13.
(c) the Director Shares will be granted no later than 1 month after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that issue of the Options will occur on the same date;
(d) the Director Shares will be issued for nil cash consideration, accordingly no funds will be raised; and

(e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares.

Approval pursuant to ASX Listing Rule 7.1 is not required for the issue of Director Shares as approval is being obtained under ASX Listing Rule 10.11. Accordingly, the issue of Director Shares to the Related Parties (or his nominee) will not be included in the use of the Company’s 15% annual placement capacity pursuant to ASX Listing Rule 7.1.

10. RESOLUTION 14 – APPROVAL FOR ISSUE OF SHARES TO STONE RESOURCES (H.K) LIMITED PURSUANT TO CONVERTIBLE LOAN AGREEMENT

10.1 Background

As announced on 11 October 2017 the Company entered into a $500,000 unsecured convertible loan agreement ( Convertible Loan Agreement ) with Stone Resources (H.K.) Limited ( SRL HK ). SRL HK is a related party of the Company by virtue of being a wholly owned subsidiary of Stone Resources Limited ( SRL ), the Company’s controlling Shareholder. As at the date of this Notice, SRL has a relevant interest in the Company of 57.02% (424,688,422 Shares); should the Conversion Shares (defined below) be issued, this relevant interest will increase to 57.26% (459,735,889 Shares), assuming Resolutions 8 to 14 are also passed by Shareholders.

The key terms of the Convertible Loan Agreement are as follows:

(a) (Conversion of Shares) If this Resolution is passed, the convertible loan will automatically convert into Shares, being 15,151,515 Shares in the Company ( Conversion Shares ) equal to the loan funds divided by the conversion price of A$0.033 per Share.
(b) (Conversion Price) The conversion price under the Convertible Loan Agreement is $0.033 per Share ( Conversion Price ). The Conversion Price was determined by reference to the average price per Share that SRL paid to acquire control of the Company in 2011.
(c) (Shareholder Approval) The conversion of the Loan into Shares is subject to obtaining Shareholder Approval for the issue of the Conversion Shares to SRL HK, including approval required under ASX Listing Rule 10.11.
(d) (Repayment) In the event the Loan has not been converted or otherwise repaid, repayment of all outstanding monies owing under the Loan is to be made on a date that is 2 years from the date of execution of the Convertible Loan Agreement.
(e) (Interest) No interest is payable unless Shareholder approval is not obtained in which case interest will be charged at a rate of 8.53% per annum.

As outlined above, the Company has agreed, subject to obtaining Shareholder approval, to issue 15,151,515 Conversion Shares to SRL HK (or its nominee) on the terms and conditions set out below.

Resolution 14 seeks Shareholder approval for the issue of the Conversion Shares to SRL HK (or his nominee).

10.2 Chapter 2E of the Corporations Act

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

(a) obtain the approval of the public company’s members in the manner set out in sections 217 to 227 of the Corporations Act; and
(b) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in sections 210 to 216 of the Corporations Act.

The issue of Conversion Shares constitutes giving a financial benefit and SRL HK is a related party of the Company by virtue of being controlled by SHK.

The Directors consider that Shareholder approval pursuant to Chapter 2E of the Corporations Act is not required in respect of the issue of Conversion Shares because the Convertible Loan Agreement was negotiated on an arm’s length basis.

10.3 ASX Listing Rule 10.11

As the issue of Conversion Shares involves the issue of securities to a related party of the Company, Shareholder approval pursuant to ASX Listing Rule 10.11 is required unless an exception applies. It is the view of the Directors that the exceptions set out in ASX Listing Rule 10.12 do not apply in the current circumstances.

10.4 Technical information required by ASX Listing Rule 10.13

Pursuant to and in accordance with ASX Listing Rule 10.13, the following information is provided in relation to Resolution 14:

(a) the Conversion Shares will be granted to SRL HK (or its nominee). SRL HK is a wholly owned subsidiary of SRL. SRL is the controlling shareholder of the Company;
(b) the number of Conversion Shares to be issued is 15,151,515 Shares;
(c) the Conversion Shares will be issued no later than 1 month after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that issue of the Options will occur on the same date;
(d) the Conversion Shares will be issued for nil cash consideration, accordingly no funds will be raised; and
(e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares.

Approval pursuant to ASX Listing Rule 7.1 is not required for the issue of the Conversion Shares as approval is being obtained under ASX Listing Rule 10.11. Accordingly, the issue of the Conversion Shares to SRL HK (or its nominee) will not be included in the use of the Company’s 15% annual placement capacity pursuant to ASX Listing Rule 7.1.

11. RESOLUTION 15 – APPROVAL OF 10% PLACEMENT CAPACITY

11.1 General

ASX Listing Rule 7.1A provides that an Eligible Entity (as defined below) may seek shareholder approval by special resolution passed at an annual general meeting to have the capacity to issue up to that number of Equity Securities (as defined below) equal to 10% of its issued capital ( 10% Placement Capacity ) without using that company’s existing 15% annual placement capacity granted under ASX Listing Rule 7.1.

An Eligible Entity is one that, as at the date of the relevant annual general meeting:

(a) is not included in the S&P/ASX 300 Index; and
(b) has a maximum market capitalisation (excluding restricted securities and securities quoted on a deferred settlement basis) of $300,000,000.

As at the date of this Notice, the Company is an Eligible Entity as it is not included in the S&P/ASX 300 Index and has a current market capitalisation of $1,489,681.292 (based on the number of Shares on issue and the closing price of Shares on the ASX on 9 October 2017).

An Equity Security is a share, a unit in a trust, a right to a share or unit in a trust or option, an option over an issued or unissued security, a convertible security, or, any security that ASX decides to classify as an equity security.

Any Equity Securities issued under the 10% Placement Capacity must be in the same class as an existing class of quoted Equity Securities.

As at the date of this Notice, the Company currently has one class of quoted Equity Securities on issue, being the Shares (ASX Code: SHK).

If Shareholders approve Resolution 10, the number of Equity Securities the Company may issue under the 10% Placement Capacity will be determined in accordance with the formula prescribed in ASX Listing Rule 7.1A.2.

Resolution 15 is a special resolution. Accordingly, at least 75% of votes cast by Shareholders present and eligible to vote at the Meeting must be in favour of Resolution 15 for it to be passed.

11.2 Technical information required by ASX Listing Rule 7.1A

Pursuant to and in accordance with ASX Listing Rule 7.3A, the information below is provided in relation to this Resolution 15:

(a) Minimum Price

The minimum price at which the Equity Securities may be issued is 75% of the volume weighted average price of Equity Securities in that class, calculated over the 15 ASX trading days on which trades in that class were recorded immediately before:

(i) the date on which the price at which the Equity Securities are to be issued is agreed; or
(ii) if the Equity Securities are not issued within 5 ASX trading days of the date in section 9.2(a)(i), the date on which the Equity Securities are issued.

(b) Date of Issue

The Equity Securities may be issued under the 10% Placement Capacity commencing on the date of the Meeting and expiring on the first to occur of the following:

(i) 12 months after the date of this Meeting; and
(ii) the date of approval by Shareholders of any transaction under ASX Listing Rules 11.1.2 (a significant change to the nature or scale of the Company’s activities) or 11.2 (disposal of the Company’s main undertaking) (after which date, an approval under Listing Rule 7.1A ceases to be valid),

( 10% Placement Capacity Period ).

(c) Risk of voting dilution

Any issue of Equity Securities under the 10% Placement Capacity will dilute the interests of Shareholders who do not receive any Shares under the issue.

If Resolution 15 is approved by Shareholders and the Company issues the maximum number of Equity Securities available under the 10% Placement Capacity, the economic and voting dilution of existing Shares would be as shown in the table below.

The table below shows the dilution of existing Shareholders calculated in accordance with the formula outlined in ASX Listing Rule 7.1A(2), on the basis of the market price of Shares and the number of Equity Securities on issue as at 9 October 2017.

The table also shows the voting dilution impact where the number of Shares on issue (Variable A in the formula) changes and the economic dilution where there are changes in the issue price of Shares issued under the 10% Placement Capacity.

Number of Shares on Issue (Variable ‘A’ in ASX Listing Rule 7.1A2)		Dilution	Dilution
	Issue Price (per Share)	0.001 50% decrease in Issue Price	0.002 Issue Price	0.003 50% increase in Issue Price
802,877,197 (Current Variable A)	Shares issued - 10% voting dilution	80,287,719 Shares	80,287,719 Shares	80,287,719 Shares
	Funds raised	$80,288	$160,575	$240,863
1,204,315,796 (50% increase in Variable A)	Shares issued - 10% voting dilution	120,431,579 Shares	120,431,579 Shares	120,431,579 Shares
	Funds raised	$120,432	$240,863	$361,295
1,605,754,394 (100% increase in Variable A)	Shares issued - 10% voting dilution	160,575,439 Shares	160,575,439 Shares	160,575,439 Shares
	Funds raised	$160,575	$321,152	$481,726

*The number of Shares on issue (Variable A in the formula) could increase as a result of the issue of Shares that do not require Shareholder approval (such as under a prorata rights issue or scrip issued under a takeover offer) or that are issued with Shareholder approval under Listing Rule 7.1.

The table above uses the following assumptions:

There are currently 802,877,197 Shares on issue comprising:
(a) 744,840,646 existing Shares as at the date of this Notice of Meeting;
(b) 7,301,184 Shares which will be issued if Resolutions 8 and 9 are passed at this Meeting; and
(c) 50,735,367 Shares which will be issued if Resolutions 10 -- 14 are passed at this Meeting.
The issue price set out above is the closing price of the Shares on the ASX on 9 October 2017.
The Company issues the maximum possible number of Equity Securities under the 10% Placement Capacity.
The Company has not issued any Equity Securities in the 12 months prior to the Meeting that were not issued under an exception in ASX Listing Rule 7.2 or with approval under ASX Listing Rule 7.1.
The issue of Equity Securities under the 10% Placement Capacity consists only of Shares. It is assumed that no Options are exercised into Shares before the date of issue of the Equity Securities.
The calculations above do not show the dilution that any one particular Shareholder will be subject to. All Shareholders should consider the dilution caused to their own shareholding depending on their specific circumstances.
This table does not set out any dilution pursuant to approvals under ASX Listing Rule 7.1.
The 10% voting dilution reflects the aggregate percentage dilution against the issued share capital at the time of issue. This is why the voting dilution is shown in each example as 10%.
The table does not show an example of dilution that may be caused to a particular Shareholder by reason of placements under the 10% Placement Capacity, based on that Shareholder’s holding at the date of the Meeting.

Shareholders should note that there is a risk that:

(i) the market price for the Company’s Shares may be significantly lower on the issue date than on the date of the Meeting; and
(ii) the Shares may be issued at a price that is at a discount to the market price for those Shares on the date of issue.

(d) Purpose of Issue under 10% Placement Capacity

The Company may issue Equity Securities under the 10% Placement Capacity for the following purposes:

(i) as cash consideration in which case the Company intends to use funds raised for the acquisition of new resources, assets and investments (including expenses associated with such an acquisition), continued exploration on the Company’s current assets and general working capital purposes; or
(ii) as non-cash consideration for the acquisition of new resources, assets and investments in such circumstances the Company will provide a valuation of the non-cash consideration as required by listing Rule 7.1A.3.

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

(e) Allocation policy under the 10% Placement Capacity

The recipients of the Equity Securities to be issued under the 10% Placement Capacity have not yet been determined. However, the recipients of Equity Securities could consist of current Shareholders or new investors (or both), none of whom will be related parties of the Company.

The Company will determine the recipients at the time of the issue under the 10% Placement Capacity, having regard to the following factors:

(i) the purpose of the issue;
(ii) alternative methods for raising funds available to the Company at that time, including, but not limited to, an entitlement issue or other offer where existing Shareholders may participate;
(iii) the effect of the issue of the Equity Securities on the control of the Company;
(iv) the circumstances of the Company, including, but not limited to, the financial position and solvency of the Company;
(v) prevailing market conditions; and
(vi) advice from corporate, financial and broking advisers (if applicable).

Further, if the Company is successful in acquiring new resources, assets or investments, it is likely that the recipients under the 10% Placement Capacity will be vendors of the new resources, assets or investments.

(f) Previous approval under ASX Listing Rule 7.1A

The Company previously obtained approval from its Shareholders pursuant to ASX Listing Rule 7.1A at its annual general meeting held on 25 November 2016 ( Previous Approval ).

The Company has not issued any Equity Securities pursuant to the Previous Approval.

During the 12 month period preceding the date of the Meeting, being on and from 24 November 2016, the Company otherwise issued a total of 43,197,060 Shares represents approximately 6.1% of the total diluted number of Equity Securities on issue in the Company on 24 November 2016, which was 701,643,586 Equity Securities.

Further details of the issues of Equity Securities by the Company during the 12 month period preceding the date of the Meeting are set out in Schedule 1.

(g) Compliance with ASX Listing Rules 7.1A.4 and 3.10.5A

When the Company issues Equity Securities pursuant to the 10% Placement Capacity, it must give to ASX:

(i) a list of the recipients of the Equity Securities and the number of Equity Securities issued to each (not for release to the market), in accordance with Listing Rule 7.1A.4; and
(ii) the information required by Listing Rule 3.10.5A for release to the market.

11.3 Voting Exclusion

A voting exclusion statement is included in this Notice. As at the date of this Notice, the Company has not invited any existing Shareholder to participate in an issue of Equity Securities under ASX Listing Rule 7.1A. Therefore, no existing Shareholders will be excluded from voting on Resolution 10.

12. RESOLUTION 16 – REPLACEMENT OF CONSTITUTION

12.1 General

A company may modify or repeal its constitution or a provision of its constitution by special resolution of Shareholders.

Resolution 16 is a special resolution which will enable the Company to repeal its existing Constitution and adopt a new constitution ( Proposed Constitution ) which is of the type required for a listed public company limited by shares updated to ensure it reflects the current provisions of the Corporations Act and ASX Listing Rules.

This will incorporate amendments to the Corporations Act and ASX Listing Rules since the current Constitution was adopted in December 2013.

The Directors believe that it is preferable in the circumstances to replace the existing Constitution with the Proposed Constitution rather than to amend a multitude of specific provisions.

The Proposed Constitution is broadly consistent with the provisions of the existing Constitution. Many of the proposed changes are administrative or minor in nature including but not limited to:

(a) updating the name of the Company;
(b) updating references to bodies or legislation which have been renamed (e.g. references to the Australian Settlement and Transfer Corporation Pty Ltd, ASTC Settlement Rules and ASTC Transfer); and
(c) expressly providing for statutory rights by mirroring these rights in provisions of the Proposed Constitution.

The Directors believe these amendments are not material nor will they have any significant impact on Shareholders. It is not practicable to list all of the changes to the Constitution in detail in this Explanatory Statement, however, a summary of the proposed material changes is set out below.

A copy of the Proposed Constitution is available for review by Shareholders at the Company’s website www.stoneral.com.au and at the office of the Company. A copy of the Proposed Constitution can also be sent to Shareholders upon request to the Company Secretary (+61 8 9277 6008). Shareholders are invited to contact the Company if they have any queries or concerns.

12.2 Summary of material proposed changes

Minimum Shareholding (clause 3)

Clause 3 of the Constitution outlines how the Company can manage shareholdings which represent an “unmarketable parcel” of shares, being a shareholding that is less than $500 based on the closing price of the Company’s Shares on ASX as at the relevant time.

The Proposed Constitution is in line with the requirements for dealing with “unmarketable parcels” outlined in the Corporations Act such that where the Company elects to undertake a sale of unmarketable parcels, the Company is only required to give one notice to holders of an unmarketable parcel to elect to retain their shareholding before the unmarketable parcel can be dealt with by the Company, saving time and administrative costs incurred by otherwise having to send out additional notices.

Clause 3 of the Proposed Constitution continues to outline in detail the process that the Company must follow for dealing with unmarketable parcels.

Fee for registration of off market transfers (clause 8.4(c))

On 24 January 2011, ASX amended ASX Listing Rule 8.14 with the effect that the Company may now charge a “reasonable fee” for registering paper-based transfers, sometimes referred to “off-market transfers”.

Clause 8.4 of the Proposed Constitution is being made to enable the Company to charge a reasonable fee when it is required to register off-market transfers from Shareholders. The fee is intended to represent the cost incurred by the Company in upgrading its fraud detection practices specific to off-market transfers.

Before charging any fee, the Company is required to notify ASX of the fee to be charged and provide sufficient information to enable ASX to assess the reasonableness of the proposed amount.

Dividends (clause 22)

Section 254T of the Corporations Act was amended effective 28 June 2010.

There is now a three-tiered test that a company will need to satisfy before paying a dividend replacing the previous test that dividends may only be paid out of profits.

The amended requirements provide that a company must not a pay a dividend unless:

(a) the company’s assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend;
(b) the payment of the dividend is fair and reasonable to the company’s shareholders as a whole; and
(c) the payment of the dividend does not materially prejudice the company’s ability to pay its creditors.

The existing Constitution reflects the former profits test and restricts the dividends to be paid only out of the profits of the Company. The Proposed Constitution is updated to reflect the new requirements of the Corporations Act. The Directors consider it appropriate to update the Constitution for this amendment to allow more flexibility in the payment of dividends in the future should the Company be in a position to pay dividends.

Partial (proportional) takeover provisions (new clause 36)

A proportional takeover bid is a takeover bid where the offer made to each shareholder is only for a proportion of that shareholder’s shares.

Pursuant to section 648G of the Corporations Act, the Company has included in the Proposed Constitution a provision whereby a proportional takeover bid for Shares may only proceed after the bid has been approved by a meeting of Shareholders held in accordance with the terms set out in the Corporations Act.

This clause of the Proposed Constitution will cease to have effect on the third anniversary of the date of the adoption of last renewal of the clause.

Information required by section 648G of the Corporations Act

Effect of proposed proportional takeover provisions

Where offers have been made under a proportional off-market bid in respect of a class of securities in a company, the registration of a transfer giving effect to a contract resulting from the acceptance of an offer made under such a proportional off-market bid is prohibited unless and until a resolution to approve the proportional off-market bid is passed.

Reasons for proportional takeover provisions

A proportional takeover bid may result in control of the Company changing without Shareholders having the opportunity to dispose of all their Shares. By making a partial bid, a bidder can obtain practical control of the Company by acquiring less than a majority interest. Shareholders are exposed to the risk of being left as a minority in the Company and the risk of the bidder being able to acquire control of the Company without payment of an adequate control premium. These amended provisions allow Shareholders to decide whether a proportional takeover bid is acceptable in principle, and assist in ensuring that any partial bid is appropriately priced.

Knowledge of any acquisition proposals

As at the date of this Notice of Meeting, no Director is aware of any proposal by any person to acquire, or to increase the extent of, a substantial interest in the Company.

Potential advantages and disadvantages of proportional takeover provisions

The Directors consider that the proportional takeover provisions have no potential advantages or disadvantages for them and that they remain free to make a recommendation on whether an offer under a proportional takeover bid should be accepted.

The potential advantages of the proportional takeover provisions for Shareholders include:

(a) the right to decide by majority vote whether an offer under a proportional takeover bid should proceed;
(b) assisting in preventing Shareholders from being locked in as a minority;
(c) increasing the bargaining power of Shareholders which may assist in ensuring that any proportional takeover bid is adequately priced; and
(d) each individual Shareholder may better assess the likely outcome of the proportional takeover bid by knowing the view of the majority of Shareholders which may assist in deciding whether to accept or reject an offer under the takeover bid.

The potential disadvantages of the proportional takeover provisions for Shareholders include:

(a) proportional takeover bids may be discouraged;
(b) lost opportunity to sell a portion of their Shares at a premium; and
(c) the likelihood of a proportional takeover bid succeeding may be reduced.

Recommendation of the Board

The Directors do not believe the potential disadvantages outweigh the potential advantages of adopting the proportional takeover provisions and as a result consider that the proportional takeover provision in the Proposed Constitution is in the interest of Shareholders and unanimously recommend that Shareholders vote in favour of Resolution 16.

GLOSSARY

$ means Australian dollars.

10% Placement Capacity has the meaning given in Section 11.1.

Annual General Meeting or Meeting means the meeting convened by the Notice.

ASIC means the Australian Securities & Investments Commission.

ASX means ASX Limited (ACN 008 624 691) or the financial market operated by ASX Limited, as the context requires.

ASX Listing Rules means the Listing Rules of ASX.

Board means the current board of directors of the Company.

Business Day means Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day.

Chair means the chair of the Meeting.

Closely Related Party of a member of the Key Management Personnel means:

(a) a spouse or child of the member;
(b) a child of the member’s spouse;
(c) a dependent of the member or the member’s spouse;
(d) anyone else who is one of the member’s family and may be expected to influence the member, or be influenced by the member, in the member’s dealing with the entity;
(e) a company the member controls; or
(f) a person prescribed by the Corporations Regulations 2001 (Cth) for the purposes of the definition of ‘closely related party’ in the Corporations Act.

Company means Stone Resources Australia Ltd (ACN 100 727 491).

Conversion Share means a fully paid ordinary share in the capital of the Company issued pursuant to Resolution 9.

Convertible Loan Agreement means the agreement between the Company and SRL HK executed 11 October 2017.

Constitution means the Company’s constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the current directors of the Company.

Eligible Entity means an entity that, at the date of the relevant general meeting:

(a) is not included in the S&P/ASX 300 Index; and
(b) has a maximum market capitalisation (excluding restricted securities and securities quoted on a deferred settlement basis) of $300,000,000.

Equity Securities includes a Share, a right to a Share or Option, an Option, a convertible security and any security that ASX decides to classify as an Equity Security.

Explanatory Statement means the explanatory statement accompanying the Notice.

Key Management Personnel has the same meaning as in the accounting standards issued by the Australian Accounting Standards Board and means those persons having authority and responsibility for planning, directing and controlling the activities of the Company, or if the Company is part of a consolidated entity, of the consolidated entity, directly or indirectly, including any director (whether executive or otherwise) of the Company, or if the Company is part of a consolidated entity, of an entity within the consolidated group.

Notice or Notice of Meeting means this notice of meeting including the Explanatory Statement and the Proxy Form.

Option means an option to acquire a Share.

Optionholder means a holder of an Option.

Ordinary Securities has the meaning set out in the ASX Listing Rules.

Proxy Form means the proxy form accompanying the Notice.

Remuneration Report means the remuneration report set out in the Director’s report section of the Company’s annual financial report for the year ended 30 June 2017.

Resolutions means the resolutions set out in the Notice, or any one of them, as the context requires.

Section means a section of the Explanatory Statement.

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

Shareholder means a registered holder of a Share.

SRL HK means Stone Resources (H.K.) Limited, a private company limited by Shares and registered in Hong Kong.

Variable A means “A” as set out in the formula in ASX Listing Rule 7.1A(2).

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

SCHEDULE 1 – ISSUES OF EQUITY SECURITIES SINCE 24 NOVEMBER 2016

Date	Quantity	Class	Recipients	Issue price and discount to Market Price (if applicable)1	Form of consideration
Issue – 20 December 2016 Appendix 3B – 20 December 2016	30,303,030	Shares2	Sophisticated investor known to the Company	$0.033 per Share (being a 450% premium to the Shares closing price on the date of issue)	Amount raised = $1,000,000 Amount spent = $1,000,000 Use of funds = general working capital purposes Amount remaining = nil
Issue – 20 December 2016 Appendix 3B – 20 December 2016	12,894,030	Shares2	Mr Goufu Zu, Mr Tony Lau and Mr Sheng Hui Lu	Issued for nil consideration to executives of the Company as part of their remuneration arrangements	Consideration: nil consideration Current value = $25,788

Notes:

Market Price means the closing price on ASX (excluding special crossings, overnight sales and exchange traded option exercises). For the purposes of this table the discount is calculated on the Market Price on the last trading day on which a sale was recorded prior to the date of issue of the relevant Equity Securities.
Fully paid ordinary shares in the capital of the Company, ASX Code: SHK (terms are set out in the Constitution).
This is a statement of current intentions as at the date of this Notice. As with any budget, intervening events and new circumstances have the potential to affect the manner in which the funds are ultimately applied. The Board reserves the right to alter the way the funds are applied on this basis.
In respect of quoted Equity Securities the value is based on the closing price of the Shares ($0.002) as the context requires on the ASX on 9 October 2017.

S T O N E R E S O U R C E S A U S T R A L I A L I M I T E D

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BRIGHTSTAR RESOURCES LIMITED — AGM Information 2017

64581_rns_2017-10-22_adaa16b8-bd73-490f-a8c0-997740516442.pdf

STONE RESOURCES AUSTRALIA LTD ACN 100 727 491

NOTICE OF ANNUAL GENERAL MEETING

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

AGENDA

1. FINANCIAL STATEMENTS AND REPORTS

2. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

Note: the vote on this Resolution is advisory only and does not bind the Directors or the Company.

Voting Prohibition Statement:

3. RESOLUTION 2 – RE-ELECTION OF DIRECTOR – MR WILLIAM (BILL) HOBBA

4. RESOLUTION 3 – RE-ELECTION OF DIRECTOR – MR YONG HAN

5. RESOLUTION 4 – RATIFICATION OF PRIOR ISSUE OF PLACEMENT SHARES

6. RESOLUTION 5 – RATIFICATION OF PRIOR ISSUE OF SHARES TO MR GUOFU ZU

Voting Prohibition Statement:

7. RESOLUTION 6 – RATIFICATION OF PRIOR ISSUE OF SHARES MR TONY LAU

8. RESOLUTION 7 – RATIFICATION OF PRIOR ISSUE OF SHARES TO MR SHENG HUI LU

Voting Prohibition Statement:

9. RESOLUTION 8 – APPROVAL FOR ISSUE OF SHARES TO MR TONY LAU

10. RESOLUTION 9 – APPROVAL FOR ISSUE OF SHARES TO MR GUOFU ZU

Voting Prohibition Statement:

11. RESOLUTION 10 – APPROVAL FOR ISSUE OF DIRECTOR SHARES TO MR YONGJI DUAN

Voting Prohibition Statement:

12. RESOLUTION 11 – APPROVAL FOR ISSUE OF DIRECTOR SHARES TO MR YONG HAN

Voting Prohibition Statement:

13. RESOLUTION 12 – ISSUE OF DIRECTOR SHARES TO MS SANDRA WHEELER (WIFE OF MR WILLIAM HOBBA)

Voting Prohibition Statement:

14. RESOLUTION 13 – ISSUE OF DIRECTOR SHARES TO DR KAIYE SHUAI

Voting Prohibition Statement:

15. RESOLUTION 14 – ISSUE OF SHARES TO STONE RESOURCES (H.K.) LIMITED

Voting Prohibition Statement:

16. RESOLUTION 15 – APPROVAL OF 10% PLACEMENT CAPACITY

17. RESOLUTION 16 – REPLACEMENT OF CONSTITUTION

By order of the Board

Voting in person

Voting by proxy

EXPLANATORY STATEMENT

1. FINANCIAL STATEMENTS AND REPORTS

2. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

2.1 General

2.2 Voting consequences

2.3 Previous voting results

3. RESOLUTION 2 – RE-ELECTION OF DIRECTOR – MR WILLIAM (BILL) HOBBA

3.1 General

3.2 Qualifications and other material directorships

3.3 Independence

3.4 Board recommendation

4. RESOLUTION 3 – RE-ELECTION OF DIRECTOR – MR YONG HAN

4.1 General

4.2 Qualifications and other material directorships

4.3 Independence

4.4 Board recommendation

5. RESOLUTION 4 - RATIFICATION OF PRIOR ISSUE OF PLACEMENT SHARES

5.1 General

5.2 Technical information required by ASX Listing Rule 7.4

6. RESOLUTION 5, 6 & 7 - RATIFICATION OF PRIOR ISSUE OF SHARES

6.1 General

6.2 Resolution 5

(a) General

(b) Technical information required by ASX Listing Rule 7.4

6.3 Resolution 6

(a) General

(b) Technical information required by ASX Listing Rule 7.4

6.4 Resolution 7

(a) General

(b) Technical information required by ASX Listing Rule 7.4

7. RESOLUTION 8 – APPROVAL FOR ISSUE OF SHARES TO MR TONY LAU

7.1 General

7.2 Technical information required by ASX Listing Rule 7.1

8. RESOLUTION 9 – APPROVAL FOR ISSUE OF SHARES TO MR GUOFU ZU

8.1 General

8.2 Technical information required by ASX Listing Rule 7.1

9. RESOLUTION 10 TO 13 – ISSUE OF SHARES TO DIRECTORS

9.1 General

9.2 Chapter 2E of the Corporations Act

9.3 ASX Listing Rule 10.11

9.4 Technical Information required by ASX Listing Rule 10.13

10. RESOLUTION 14 – APPROVAL FOR ISSUE OF SHARES TO STONE RESOURCES (H.K) LIMITED PURSUANT TO CONVERTIBLE LOAN AGREEMENT

10.1 Background

BRIGHTSTAR RESOURCES LIMITED AGM Information 2017

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