CARNAVALE RESOURCES LIMITED — Capital/Financing Update 2007

Oct 28, 2007

CARNAVALE RESOURCES LIMITED

ABN 49 119 450 243

PROSPECTUS

For a non-renounceable entitlement offer of 1 Option for every 1 Share held by Shareholders on the Record Date at an issue price of 1 cent per Option

AND

For 1 Share only at an issue price of $1.00 to raise $1.00

The Offer is not underwritten

IMPORTANT NOTICE

This Prospectus is a short form prospectus issued in accordance with section 712 of the Corporations Act. This Prospectus does not of itself contain all the information that is generally required to be set out in a document of this type but refers to other documents containing information which is deemed to be incorporated in this Prospectus.

This document (and those documents incorporated by reference) should be read in its entirety. If you are in any doubt as to the contents of this document (and those documents incorporated by reference) you should consult your stockbroker or other professional adviser without delay.

Securities offered by this Prospectus are considered speculative in nature.

TABLE OF CONTENTS

1.	CORPORATE DIRECTORY & IMPORTANT DATES	1
2.	CHAIRMAN'S LETTER	2
3.	DETAILS OF THE OFFER	3
4.	INFORMATION DEEMED TO BE INCORPORATED IN PROSPECTUS	6
5.	ADDITIONAL INFORMATION	10
6.	AUTHORITY OF DIRECTORS	22
7.	DEFINITIONS	23
APPLICATION FORMS AND INSTRUCTIONS

Important Notice

This Prospectus is dated 29 October 2007.

A copy of this Prospectus was lodged with the ASIC on 29 October 2007. The ASIC and ASX take no responsibility for the contents of this Prospectus.

No Securities will be issued on the basis of this Prospectus later than 13 months after the date of this Prospectus. Application will be made within 7 days after the date of this Prospectus for permission for the Securities offered by this Prospectus to be listed for Quotation.

Applicants should read this document (and those documents incorporated by reference) in their entirety and, if in any doubt, consult with their professional advisers before deciding whether to apply for the Securities. There are risks associated with an investment in the Company 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 the future value of the Securities.

Details of the definitions and abbreviations used in this Prospectus are set out in Section 7.

Short Form Prospectus

This Prospectus is a short form prospectus issued in accordance with section 712 of the Corporations Act. This means this Prospectus alone does not contain all the information that is generally required to satisfy the disclosure requirements of the Corporations Act. Instead the Prospectus incorporates all other necessary information by reference to information contained in the January 2007 Prospectus and certain announcements made by the Company to ASX under its continuous disclosure obligations (collectively referred to as the "Specified Documents" in this Prospectus).

In referring to the Specified Documents, the Company:

• (a) identifies the Specified Documents as being relevant to the Offer that will assist Shareholders and their professional advisers in making an informed assessment of:

• (i) the rights and liabilities attaching to the Options and the underlying Shares;

• (ii) the capacity of the Company to issue the underlying Shares;

• (iii) the rights and liabilities attaching to the Offer Share; and

• (iv) the assets and liabilities, financial position and performance, profits and losses and prospects of the Company;

• (b) refers Shareholders and their professional advisers to Section 4 which summarises the information in the Specified Documents deemed to be incorporated in this Prospectus;

• (c) informs Shareholders and their professional advisers that they are able to obtain, free of charge, a copy of the Specified Documents by contacting the Company at its registered office during normal business hours during the Offer Period.

1. CORPORATE DIRECTORY & IMPORTANT DATES

Board of Directors

Legal Advisers

Adam Sierakowski Non-Executive Chairman Australia Hans Biener Executive Director - Brazil Cullen Babington Hughes Pty Ltd Ron Gajewski Executive Director - Australia 229 Stirling Highway Peter Christie Non-Executive Director Claremont, Western Australia 6010

Company Secretary

Brazil

Paul Jurman

Luis Mauricio F Azevedo Av. das Americas. 700 Citta America Bloco 8 – Loja 215A Barra da Tijuca Rio de Janeiro RJ-CEP 22640-100 Brazil

Registered and Principal Office Rio de Janeiro RJ-CEP 22640-100 Brazil 30 Ledgar Road Balcatta, Western Australia 6021 Telephone: (61 8) 9240 6876 Auditors Facsimile: (61 8) 9240 2406 HLB Mann Judd Website: www.carnavaleresources.com 15 Rheola Street West Perth Western Australia 6005

Share Registry Security Transfer Registrars Pty Ltd 770 Canning Highway ASX Codes Applecross Western Australia 6153 Shares: CAV Telephone: (61 8) 9315 2333 Options: CAVO Facsimile: (61 8) 9315 2233

IMPORTANT DATES*

Announcement of Offer and Appendix 3B 22 October 2007 Lodgement of Prospectus 29 October 2007 Notice sent to Shareholders containing information required by Appendix 3B 30 October 2007 Shares commence trading ex Entitlement basis 31 October 2007 Record Date for determining Entitlements 7 November 2007 Prospectus despatch date and Opening Date 12 November 2007 Closing Date of the Offer 27 November 2007 Deferred settlement trading commences 28 November 2007 Notification to ASX of under subscriptions 30 November 2007 Issue of Options & despatch of holding statements 5 December 2007

*These dates are indicative only and are subject to change without notice, subject to the provisions of the Corporations Act and the Listing Rules. The Directors may extend the period of the Offer at their discretion. As such, the date the Options are expected to commence trading on ASX may vary.

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2. CHAIRMAN'S LETTER

Dear Shareholder,

As indicated in the January 2007 Prospectus your Directors committed to an offer of Options to Shareholders of the Company approximately three months after the Company's listing on ASX. As you will be aware, the Company has been presented with a number of exciting acquisitions broadening the base of its exploration opportunities in Brazil. The pursuit of these acquisitions has delayed the Option issue presented by this Prospectus.

All Shareholders registered as at 5pm WST on 7 November 2007 will be entitled to participate in this nonrenounceable entitlement offer of Options on the basis of 1 Option for every 1 Share held.

The closing date for acceptance of the Offer is 27 November 2007. The Board recommends all Shareholders take up their Entitlement however all Shareholders should consider this opportunity carefully before applying.

The Directors take this opportunity to thank Shareholders for their support since the Company's listing on ASX and look forward to your continued support in the future.

Yours sincerely

==> picture [154 x 39] intentionally omitted <==

Adam Sierakowski Chairman 29 October 2007

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3. DETAILS OF THE OFFER

3.1 Details of the Offer

Options

This Prospectus is for a pro-rata non-renounceable entitlement offer of Options at an issue price of one cent ($0.01) each to Shareholders on the basis of one Option for every one Share held at the Record Date. The principal purpose of the Offer is to provide a benefit to Shareholders who have retained their Shares through to the Record Date by enabling them to acquire Options to subscribe for additional Shares in the Company at an exercise price of 20 cents each and an expiry date of 30 June 2009.

Assuming all shareholders accept their full entitlements the Company will raise approximately $521,715 from the Offer (before costs of the Offer). These funds will be applied initially towards the costs of the Offer with the balance to be applied towards working capital.

If no funds are raised as a result of this portion of the Offer, the Company has sufficient working capital to meet its obligations as set out in the January 2007 Prospectus and as a result of subsequent acquisitions.

Offer Share

This Prospectus also relates to the issue of one ordinary fully paid share at an issue price of one dollar ($1.00). That issue and the inclusion of information in relation to that share is restricted to one applicant to be selected by the Board and is not made to, and may not be accepted by Shareholders generally.

The purpose of the inclusion of the Offer Share in this Prospectus is to provide adequate disclosure for those persons holding Placement Shares to enable those persons to sell their Placement Shares.

The Company will raise $1.00 from the issue of the Offer Share (before costs of the Offer). These funds will be applied initially towards the costs of the Offer with the balance to be applied towards working capital.

If no funds are raised as a result of this portion of the Offer, the Company has sufficient working capital to meet its obligations as set out in the January 2007 Prospectus and as a result of subsequent acquisitions.

3.2

Acting on your Entitlement

The number of Options to which you are entitled is calculated as at the Record Date and is shown on the Entitlement and Acceptance Form which accompanies this Prospectus.

As a Shareholder, you may accept your Entitlement in whole or in part only or do nothing (in which case you will receive no benefit from your Entitlement).

If you wish to take up all or part of your Entitlement, you will need to complete the Entitlement and Acceptance Form in accordance with the instructions set out in the form and lodge it with the appropriate payment no later than 5pm WST on the Closing Date at:

By Delivery: By Mail: Security Transfer Registrars Pty Ltd Security Transfer Registrars Pty Ltd 770 Canning Highway P O Box 535 Applecross, Western Australia 6153 Applecross, Western Australia 6953

Cheques should be made payable to "Carnavale Resources Limited" and crossed "Not Negotiable".

Your acceptance cannot exceed your Entitlement as shown on the Entitlement and Acceptance Form. If it does, your acceptance will be deemed to be for your maximum Entitlement and any surplus application monies will be returned.

This Offer is non-renounceable and Shareholders may not sell or transfer their Entitlements.

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Your completed Entitlement and Acceptance Form together with the application monies must be received no later than 5pm WST on the Closing Date, subject to the right of the Company to extend the Offer Period (in accordance with the Corporations Act and Listing Rules).

No interest will be payable to Applicants on application monies and any interest earned thereon will be retained by the Company irrespective of whether any Options are issued pursuant to the Offer.

If the Offer does not proceed, application monies will be refunded as soon as practicable after the Closing Date and in any event, no later than 14 days after the Closing Date.

3.3

Minimum subscription and over-subscriptions

There is no minimum subscription and over-subscriptions will not be accepted.

3.4

Stock Exchange quotation

The Company will apply to ASX within 7 days after the date for Official Quotation of the Securities offered under this Prospectus.

If ASX does not grant permission for Official Quotation of the Securities within 3 months after the date, or such longer period as may be allowed by ASIC, none of the Securities offered by this Prospectus will be allotted or issued and the Company will repay all application monies received (without interest).

The fact that ASX may grant Official Quotation of the Securities is not to be taken in any way as an indication of the merits of the Company or of the Securities now offered for subscription.

3.5 Closing Date of the Offer

The Closing Date for receipt of acceptances is 5pm WST on 27 November 2007. The Directors reserve the right, in their absolute discretion, to extend the Closing Date, subject to compliance with the Listing Rules which requires the Directors to give at least 6 Business Days notice to ASX prior to the Closing Date to extend the Closing Date.

3.6 Allotment and Issue of Securities

Allotment and issue of the Securities will take place on or around 5 December 2007. Application monies will be held in a subscription account until the issue of Securities has been made. This account has been established and will be kept by the Company in trust for each Applicant. Any interest earned on the application monies will be for the benefit of the Company and will be retained by the Company irrespective of whether the issue of Securities takes place.

If no issue of Securities is made, all application monies paid will be refunded, without interest, as soon as practicable.

3.7 Underwriting

This Offer is not underwritten.

3.8

Placement of Shortfall

In the event that there is a shortfall in the take up of Entitlements under the Offer, the Directors reserve the right, as allowed within the Listing Rules, to place the Shortfall at their absolute discretion within three months of the Closing Date to maximise the amount of funds raised from the Offer. The Shortfall, if any, will not be placed to Directors or any of their associates.

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3.9 Overseas Shareholders

The Offer constituted by this Prospectus is made to residents of Australia and New Zealand only.

The Company is of the view that it is unreasonable to make an offer under this Prospectus to Shareholders outside of Australia and New Zealand having regard to:

• (a) the number of Shareholders with registered addresses in countries outside of Australia and New Zealand;

• (b) the number and value of the securities to be offered to Shareholders outside of Australia and New Zealand; and

• (c) the cost of complying with the legal requirements and requirements of regulatory authorities in the relevant overseas jurisdictions.

The Company is not required to make offers under the Prospectus to Shareholders outside of Australia and New Zealand.

3.10 Enquiries

If you have any queries regarding your Entitlement, or how to apply for Options, please contact the Company on (08) 9240 6876.

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4. INFORMATION DEEMED TO BE INCORPORATED IN PROSPECTUS

4.1 Short Form Prospectus

This Prospectus is a short form prospectus issued in accordance with section 712 of the Corporations Act. This means that this Prospectus does not of itself contain all the information that is generally required to be set out in a document of this type, however, it incorporates by reference information contained in the following documents issued by the Company:

• (a) January 2007 Prospectus;

• (b) ASX announcement dated 3 April 2007, "Suspension from Official Quotation";

• (c) ASX announcement dated 10 April 2007, "Acquisition of Iron Ore Projects and Placement";

• (d) ASX announcement dated 13 April 2007, "Acquisition of third Iron Ore Project in Brazil;

• (e) ASX announcement dated 30 April 2007, "Third Quarter Activities & Cashflow Report;

• (f) ASX announcement dated 15 May 2007, "Completes due diligence on acquisition of Iron Ore projects in Brazil;

• (g) ASX announcement dated 25 May 2007, "Acquisition of Molybdenum project in Brazil;

• (h) ASX announcement dated 29 June 2007, "Completion of Due Diligence on acquisition of Molybdenum project in Brazil";

• (i) ASX announcement dated 31 July 2007, "Quarterly Report";

• (j) ASX announcement dated 20 August 2007, "Assays confirm significant high grade Iron enrichment at Parmegiana Project";

• (k) ASX announcement dated 5 September 2007, "Acquisition of additional Molybdenum project in Brazil";

• (l) ASX announcement dated 20 September 2007, "Further assays confirm significant high grade Iron enrichment at Parmegiana Project";

• (m) ASX announcement dated 28 September 2007, "Annual Report";

• (n) ASX announcement dated 10 October 2007, "New Iron Ore Exploration Projects"; and

• (o) ASX announcement dated 24 October 2007, "Research Report".

The information to be incorporated by reference into this Prospectus is that contained in the documents referred to above and summarised below in Sections 4.2 to 4.15. It is of interest to potential Applicants and professional advisers or analysts and is included to assist potential Applicants to determine whether they need to obtain a copy of those documents for the purposes of making an informed investment decision in relation to the Options offered pursuant to this Prospectus.

Any person may obtain a copy of the documents referred to above free of charge by contacting the Company at its registered office during normal business hours during the Offer Period. These documents are also available by searching ASIC and ASX records in relation to the Company, or by visiting the Company's website at www.carnavaleresources.com.

4.2 The January 2007 Prospectus

The Sections referred to in this Section 4.2 are references to Sections in the January 2007 Prospectus.

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Sections 3 & 4 – Investment Summary / Details of the Offer

Sections 3 and 4 contain an overview of the investment opportunity, details of the number of Shares offered, use of funds, proforma capital structure of the Company and other matters of an administrative nature. Section 3 also contains summary information about the Company's strategies to advance the Morro do Cobre Copper/Gold Project and the Toucanas Gold Project and to acquire further prospective exploration and mining projects in Brazil.

Section 5 – Directors

Section 5 contains information relating to each of the Directors of the Company as at the date of the January 2007 Prospectus. It also notes that the Directors have formally adopted a corporate governance policy and sets out the key features.

Section 6 – Project Overview

Section 6 contains a brief history of the Company and summary information about the Company's interest in the Morro do Cobre Copper/Gold Project and the Toucanas Gold Project in Brazil.

Section 7 – Independent Consulting Geologist's Report

Section 7 consists of a report prepared by Raylar Pty Ltd, Consulting Geologists on the Company's Morro do Cobre Copper/Gold Project and the Toucanas Gold Project in Brazil. The report provides details in respect of project location and access, the geology and mineralization of the project area, past exploration on the project area, mining activity in the region, and exploration potential and the proposed exploration and expenditure programs.

Raylar Pty Ltd concluded that Carnavale has in place satisfactory and clearly defined exploration and expenditure programs, which are reasonable, having regard to the stated objectives of the Company, and also that sufficient exploration work has taken place within the past two years including research and data review to justify the budgeted exploration and expenditure program.

Section 8 - Independent Accountant's Report

Section 8 comprises of a report prepared by HLB Mann Judd, ("Independent Accountant's Report"). The Independent Accountant's Report was included in the January 2007 Prospectus to assist investors and their financial advisers in making an assessment of the financial position of the Company.

The Independent Accountant's Report contains the unaudited balance sheet and an unaudited pro-forma balance sheet as at 30 November 2006 which reflected the position of the Company on the basis that various transactions, including the issue of the Shares offered under the January 2007 Prospectus, have been completed.

Section 9 – Solicitor's Report

Section 9 comprises of a report prepared by Cullen Babington Hughes Pty Ltd, the Company's solicitors on the mining tenements in which the Company has a legal interest. The report details the ownership and status of mining tenements, including the material contracts that impact upon those mining tenements. The report also summarises the two material contracts, which impact upon the Company:

• (a) the sale and purchase agreement in respect of the Morro do Cobre project; and

• (b) the sale and purchase agreement in respect of the Toucanas project.

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Section 10 – Investment Considerations and Risk Factors

Section 10 notes that an investment in Carnavale has risks reasonably expected of an investment in a mineral exploration business. It details a number of factors that may impact on the success and future profitability of the Company. The factors referred to include, amongst others, general securities risks (including share market conditions), risks specific to mineral exploration companies (including exploration and mining risks, infrastructure risks, environmental risks, economic and price risks and competition) and risks specific to the Company (including title, reliance on key personnel, retention of key business relationships, risk of international operations, sovereign risk, foreign exchange risk, exploration costs, insurance, future capital needs and funding, no history of mining operations or profitability, dividend policy, future sales of shares by existing shareholders and the speculative nature of the investment).

Section 11 - Additional Information

Section 11 sets out additional information including:

• (a) interests of Directors and experts, including share holdings and remuneration;

• (b) details of the consents of persons named in the January 2007 Prospectus;

• (c) rights attaching to the Shares offered by the January 2007 Prospectus;

• (d) expenses of the offer;

• (e) a statement that the Company is not involved in any legal proceedings, nor are any proceedings pending or threatened against the Company;

• (f) all amounts stated in the January 2007 Prospectus are exclusive of Goods and Services tax, unless otherwise stated;

• (g) an exchange rate assumed in the January 2007 Prospectus of $1.00 to 0.75 US dollar for the purposes of calculating acquisition costs of the mineral properties; and

• (h) the Directors' responsibility statement and consent.

4.3

Suspension of ASX Quotation

On 3 April 2007, the Company sought a voluntary suspension of quotation of its Shares on ASX. This suspension was put in place whilst the Company was in the process of re-negotiating the terms of and finalising the exercise of the acquisition of the Parmegiana and Ilha Redonda projects in Brazil. The Company's Shares were reinstated to ASX quotation on 10 April 2007 after it announced details of the acquisition referred to in Section 4.4.

4.4 Acquisition of Parmegiana and Ilha Redonda iron ore projects in Brazil

On 10 April 2007, the Company announced that it had signed a Letter of Intent with Tau Capital Brasil Mineracao Ltd to acquire 100% ownership of the "Parmegiana" and "Ilha Redonda" iron ore projects ("Projects") in Brazil. On 15 May 2007 the Company announced that it had successfully completed due diligence of the Projects and had reached a definitive agreement in respect of the purchase of full ownership of the Projects. Refer to Section 5.3(a) for further details of the terms and conditions of the acquisition.

4.5 Placement

On 10 April 2007, the Company announced that it had agreed to place 5 million shares at an issue price of 35 cents each to institutions and sophisticated investors to raise $1.75 million before costs. The placement was subject to the completion of satisfactory due diligence on the Projects. On 7 June 2007, after successfully completing due diligence on the Projects, the Company announced that it had placed 5,600,107 shares at an issue price of 35 cents each to raise $1.96 million before costs.

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4.6 Acquisition of Três Cores iron ore project in Brazil

On 13 April 2007, the Company announced to ASX that it had signed an agreement with Brasgeo – Geologia e Mineracao Ltda for the assignment to the Company of the "Três Cores" iron ore project in Brazil. Refer to Section 5.3(b) for further details of the terms and conditions of the acquisition.

4.7 Third Quarter Activity Report

On 30 April 2007, the Company lodged with ASX its exploration activity report and its cash flow report for the quarter ended 31 March 2007. The activity report provided details of the exploration activity at the Morro do Cobre Copper/Gold Project and the results of that activity.

4.8 Acquisition of Frei Martinho molybdenum project in Brazil

On 25 May 2007, the Company announced that it had signed an agreement with Metal Land Capital Brasil Mineracao Ltda ("Metal Land") to acquire full ownership of the Frei Martinho molybdenum project in Brazil subject to due diligence in respect of the Frei Martinho molybdenum project.

On 29 June 2007, the Company announced that it had completed its due diligence in respect of the acquisition of the "Frei Martinho" molybdenum project and would proceed to acquisition of that project. Refer to Section 5.3(c) for further details of the terms and conditions of the acquisition.

4.9 Fourth Quarter Activity Report

On 31 July 2007, the Company lodged with ASX its exploration activity report and its cash flow report for the quarter ended 30 June 2007.

4.10 Parmegiana Assay Report

On 20 August 2007, the Company announced the results of assays conducted at the Parmegiana Project.

4.11 Addition to Frei Martinho project in Brazil

On 5 September 2007, the Company announced that it had agreed with Metal Land Capital Brasil Mineracao Ltda ("Metal Land") to acquire full ownership of additional properties surrounding the Frei Martinho Molybdenum project. Refer to Section 5.3(d) for further details of the terms and conditions of the acquisition.

4.12

Parmegiana Assay Report

On 20 September 2007 the Company announced the results of further assays conducted at the Parmegiana Project.

4.13 Annual Report

On 28 September 2007, the Company lodged with ASX its Annual Report for the period ended 30 June 2007.

4.14 New Iron Ore Exploration Projects

On 10 October 2007, the Company announced that it had signed an agreement with Puma Metals Mineracao Ltda ("Puma") to acquire the "Maraba" and "Pancada" iron ore projects in Brazil. Refer to Section 5.3(e) for further details of the terms and conditions of the acquisition.

4.15

Research Report

On 24 October 2007, the Company announced that a research report on the Company was available on the Company's website.

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5. ADDITIONAL INFORMATION

5.1 Listing on ASX and Capital Structure

Carnavale was admitted to the Official List on 12 March 2007 with official quotation of its Shares commencing on 15 March 2007 following the issue of 20 million shares at 20 cents each in cash to raise $4 million.

Capital Structure

The capital structure of the Company following completion of the Offer is summarised below:

Securities on issue at present1, 2 Options offered by this Prospectus Shares offered by this Prospectus Total at completion of the Offer (assuming all Entitlements are taken up) *	Shares Options3 52,171,539 - - 52,171,539 1 -
	52,171,540 52,171,539

1. The Company is also required to issue Shares as a result of the acquisition of mineral projects. For further details refer to section 5.3.

2. Pursuant to chapter 9 of the Listing Rules a number of the Shares issued prior to ASX listing are subject to ASX escrow requirements.

Details of these Shares subject to escrow and the periods of escrow of those securities are as follows:

Escrow expiry date 22 November 2007 8 January 2008 15 March 2009 Total	Number 8,920,000 525,000 12,255,000
	21,700,000

As detailed in Section 5.3(a), 1,000,000 shares were allotted to the vendors of the Parmegiana and Ilha Redonda Iron Ore projects and in Section 5.3(c), 1,000,000 Shares were allotted to the vendors of the Frei Martinho Molybdenum project. Both issues were subject to a voluntary escrow for a period of up to 6 months from allotment.

Details of the balance of the Shares remaining subject to escrow and the periods of escrow of those Shares are as follows:

Escrow expiry date 18 November 2007 21 November 2007 18 December 2007 Total	Number 200,000 500,000 200,000
	900,000

The balance of the issued capital of the Company, being 29,571,539 Shares, is quoted and freely tradeable on ASX.

1. Options are exercisable at 20 cents each on or before 30 June 2009. Full terms and conditions of the Options are provided elsewhere in this Prospectus.

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5.2 Activities since issue of January 2007 Prospectus

Since the issue of January 2007 Prospectus, the Company has:

• (a) closed the offer and issued a total of 20,000,000 Shares at 20 cents each for a total of $4,000,000 pursuant to the January 2007 Prospectus;

• (b) acquired the Parmegiana and Ilha Redonda iron ore projects;

• (c) conducted exploration activity at the Morro do Cobre Copper/Gold project;

• (d) made a placement of 5,600,107 shares at an issue price of 35 cents each to raise $1.96 million before costs;

• (e) acquired the Três Cores iron ore project;

• (f) acquired the Frei Martinho molybdenum project and additional properties surrounding that project;

• (g) conducted exploration activity at the Frei Martinho molybdenum project.

• (h) conducted exploration activity at the Parmegiana Project and the Ilha Redonda Iron ore project.

• (i) acquired the "Maraba" and "Pancada" iron ore projects in Brazil.

Other than as stated in this Prospectus, the Company is not aware of any material matter or circumstance that would impact on the contents of the January 2007 Prospectus or the activities and prospects of the Company and be relevant to assist investors or their professional advisers in making an informed assessment of relevant matters.

5.3

Material Contracts

The Company has entered into the following material contracts in addition to those summarised in the January 2007 Prospectus.

• (a) Parmegiana and Ilha Redonda Agreement

Parties

By an "Agreement For The Purchase Of Mineral Rights and Other Covenants" made between Tau Capital Brasil Mineração Ltda (a Brazilian company) ( TAU ) and Carnavale Resources Mineração Ltda ( CRM ) a Brazilian subsidiary of the Company ( Parmegiana Sale Agreement ), CRM agreed to acquire from TAU a 100% interest in the Parmegiana mineral rights being claim numbers 866.568/06, 866.569/06, 866.570/06, 866.571/06, 866.590/06, 866.591/06, 866.833/06 and 858.010/07.

Material Terms

The material terms of the Parmegiana Sale Agreement are:

• (i) upon completion of due diligence (which has occurred) CRM:

• (A) paid US$100,000.00 to TAU; and

• (B) procured the issue of 1,000,000 Shares to TAU's nominee by the Company;

• (ii) on or before 14 November 2007 CRM must:

• (A) pay US$200,000 to TAU; and

• (B) expend US$200,000 on exploration and development of the Parmegiana project;

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• (iii) on or before 14 May 2008 CRM must:

• (A) pay US$200,000 to TAU;

• (B) procure the issue of a further 1,000,000 Shares to TAU or its nominee by the Company; and

• (C) expend a further US$400,000 on exploration and development of the Parmegiana project;.

• (iv) on or before 14 May 2009 CRM must:

• (A) define a resource estimate of iron ore at the Parmegiana project area to JORC; or

• (B) complete a Bankable Feasibility Study for the development of the project; or

• (C) pay US$200,000 to TAU;

• (v) on or before 14 May 2010 CRM must:

• (A) define a reserves estimate of iron ore at the Parmegiana project area to JORC; or

• (B) complete a Bankable Feasibility Study for the development of the project; or

• (C) pay US$200,000 to TAU;

• (vi) upon calculation of JORC standard mineable reserves or completion of a bankable feasibility study in respect of the Parmegiana project, CRM must pay TAU or its nominee a total amount of US$0.10 per ton of published reserves. This obligation will continue for the life of the Projects; and

• (vii) CRM must pay to TAU or its nominee a 1% Net Smelter Return of iron ore mined from the project area.

Escrow

TAU agreed to a voluntary escrow of the Shares issued to it for up to 6 months from allotment. TAU could not sell any of the Shares for the first month after the date of allotment and not more than 10% of the balance in any one month for the next 5 months. At the date of this Prospectus there are 500,000 Shares subject to this voluntary escrow.

Withdrawal

CRM may terminate the Parmegiana Sale Agreement at any time by notice in writing at least 30 days before any payment is due under the agreement. On termination CRM is not responsible for any of the terms and conditions set-forth in the Parmegiana Sale Agreement and full ownership of the mineral rights in the project revert to TAU.

• (b) Tres Cores Agreement

Parties

By an "Agreement For The Purchase Of Mineral Rights and Other Covenants" made between Brasgeo – Geologia e Mineração Ltda (a Brazilian company) ( Brasgeo ) and Carnavale Resources Mineração Ltda ( Tres Cores Agreement ), CRM agreed to acquire from Brasgeo a 100% interest in the Tres Cores mineral rights contained in claim numbers number 866.129/07, 866.130/07 and 866.131/07.

Material Terms

The material terms of the Tres Cores Agreement are:

• (i) CRM paid US$10,000.00 to Brasgeo on execution of the agreement;

• (ii) CRM paid US$20,000.00 to Brasgeo on or before 23 July 2007;

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• (iii) CRM must pay US$100,000.00 to Brasgeo on or before 23 March 2008;

• (iv) CRM must pay US$120,000.00 to Brasgeo on or before 23 March 2009;

• (v) CRM must pay US$150,000.00 to Brasgeo on or before 23 March 2010;

• (vi) CRM must pay US$200,000.00 to Brasgeo on or before 23 March 2011;

• (vii) CRM must pay US$400,000.00 to Brasgeo on or before 23 March 2012; and

• (viii) CRM must pay to Brasgeo or its nominee a 1% Net Smelter Return on iron ore produced from the project area. The net smelter return may be purchased by CRM for the equivalent in Brazilian Reals of US$2,000,000.

Exploration Expenditure

Until termination CRM is responsible for all exploration, tenement maintenance costs and other expenditure associated with the project

Withdrawal

CRM may terminate the Tres Core Agreement at any time by notice in writing. On termination CRM is not responsible for any of the terms and conditions set-forth in the Tres Core Agreement and full ownership of the mineral rights in the project revert to Brasgeo.

• (c) Frei Martinho First Agreement

Parties

By an "Agreement For the Purchase of Mineral Rights and Other Covenants" made between Metal Land Mineracao Ltda (a Brazilian company) ( Metal Land ) and Carnavale Resources Mineração Ltda ( Frei Martinho Agreement ), CRM agreed to acquire from Metal Land a 100% interest in the Frei Martinho mineral rights contained in claim number 848.184/04.

On execution of the original letter of intent CRM paid US$20,000.00 to Metal Land.

Material Terms

The material terms of the Frei Martinho Agreement are:

• (i) on execution of the agreement CRM:

• (A) paid US$50,000.00 to Metal Land; and

• (B) procured the issue of 1,000,000 Shares to Metal Land's nominee by the Company;

• (ii) CRM must pay US$100,000.00 to Metal Land on or before 26 June 2008;

• (iii) CRM must expend US$200,000 on exploration and development of the Frei Martinho project on or before 26 June 2008;

• (iv) CRM must pay US$130,000.00 to Metal Land on or before 26 June 2009;

• (v) CRM must expend a further US$100,000 on exploration and development of the Frei Martinho project on or before 26 June 2009;

• (vi) CRM must pay US$200,000.00 to Metal Land on or before 26 June 2010;

• (vii) CRM must expend a further US$100,000 on exploration and development of the Frei Martinho project on or before 26 June 2010;

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• (viii) CRM must pay US$450,000.00 to Metal Land on announcement of resources or ore reserves to JORC standards;

• (ix) CRM must pay US$1,000,000.00 to Metal Land on commencement of mining at the project area; and

• (x) CRM must pay to Metal Land or its nominee a 2.5% Net Smelter Return on molybdenum produced from the project area.

Escrow

Metal Land agreed to a voluntary escrow of the Shares issued to it for up to 6 months from allotment. Metal Land could not sell any of the Shares for the first month after the date of allotment and not more than 20% of the balance in any one month for the next 5 months. At the date of this Prospectus there are 400,000 Shares remaining in voluntary escrow.

Exploration Expenditure

Until termination CRM is responsible for all exploration, tenement maintenance costs and other expenditure associated with the project

Withdrawal

CRM may terminate the Frei Martinho Agreement at any time by notice in writing. On termination CRM is not responsible for any of the terms and conditions set-forth in the Frei Martinho Agreement and full ownership of the mineral rights in the project revert to Metal Land.

• (d) Frei Martinho Amending Agreement

Parties

By an "Amendment to the Agreement Mineral Rights Assignment" made between Metal Land and CRM ( Frei Martinho Amending Agreement ), CRM agreed to acquire from Metal Land a 100% interest in the mineral rights contained in claim numbers 846.260/07, 846.262/07, 846.263/07, 848.197/07, 848.198/07 and 848.201/07.

Material Terms

The material terms of the Frei Martinho Amending Agreement are:

• (i) on execution of the agreement CRM paid US$20,000.00 to Metal Land;

• (ii) CRM procured the issue of 500,000 Shares by the Company to Metal Land's nominee on 23 October 2007;

• (iii) CRM must pay US$40,000.00 to Metal Land on or before 23 January 2008;

• (iv) CRM must pay US$160,000.00 to Metal Land on or before 23 July 2008;

• (v) CRM must pay US$250,000.00 to Metal Land on or before 23 January 2009;

• (vi) CRM must pay US$350,000.00 to Metal Land on or before 23 July 2009;

• (vii) CRM must pay US$300,000.00 to Metal Land on or before 23 July 2010; and

• (viii) CRM must pay to Metal Land or its nominee a 1% Net Smelter Return on molybdenum produced from the project area. The net smelter return may be purchased by CRM for the equivalent in Brazilian Reals of US$1,000,000.

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Exploration Expenditure

Until termination CRM is responsible for all exploration, tenement maintenance costs and other expenditure associated with the project

Withdrawal

CRM may terminate the Frei Martinho Amending Agreement at any time by notice in writing. On termination CRM is not responsible for any of the terms and conditions set-forth in the Frei Martinho Amending Agreement and full ownership of the mineral rights in the project revert to Metal Land.

• (e) Maraba and Pancada Agreement

Parties

By an "Agreement for the purchase of Mineral Rights" made between Puma Metals Mineracao Ltda ( Puma ) and CRM ( Maraba and Pancada Agreement ) CRM agreed to acquire from Puma a 100% interest in the mineral rights contained in claim numbers 858.047/07, 868.238/07, 868.240/07, 868.243/07, 868.244/07, 868.245/07, 868.246/07, 868.247/07 and 868.249/07.

On execution of the original letter of intent CRM paid US$20,000.00 to Puma.

Material Terms

The material terms of the Maraba and Pancada Agreement are:

• (i) on execution of the agreement CRM paid US$48,000.00 to Puma;

• (ii) CRM must pay US$72,000.00 to Puma on confirmation of the transfer of the mineral rights to the Company;

• (iii) CRM must pay US$200,000.00 to Puma on or before 20 September 2008;

• (iv) CRM must pay US$305,000.00 to Puma on or before 20 September 2009;

• (v) CRM must pay US$460,000.00 to Puma on or before 20 September 2010;

• (vi) on calculation of JORC standard mineable reserves as defined by a completed bankable feasibility study CRM must pay US$1,500,000.00 to Puma;

• (vii) on the commencement of mining activities, CRM must pay US$1,400,000 to Puma; and

• (viii) CRM must pay Puma a 1% net smelter return on iron ore produced from the project area. The net smelter return can be purchased by CRM for US$4,000,000.

Withdrawal

CRM may terminate the Maraba and Pancada Agreement at any time by notice in writing. On termination CRM is not responsible for any of the terms and conditions set-forth in the Maraba and Pancada Agreement and full ownership of the mineral rights in the project revert to Puma.

5.4 Continuous Disclosure and Documents Available for Inspection

The Company is listed on ASX and its Shares are quoted on ASX. The Company is a "disclosing entity" for the purposes of the Corporations Act. As such, it is subject to regular reporting and disclosure obligations, which require it to disclose to ASX any information of which it is or becomes aware concerning the Company and which a reasonable person would expect to have a material effect on the price or value of securities of the Company.

Copies of documents lodged with the ASIC in relation to the Company may be obtained from or inspected at, an office of the ASIC. This includes the January 2007 Prospectus referred to in Section 4.1(a).

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The Company will provide a copy of all documents used to notify ASX of information relating to the Company under the provisions of the Listing Rules since official quotation on 15 March 2007. As at the time of lodging this Prospectus the only such documents were:

Date	Details
29/10/2007	Notice of Annual General Meeting / Proxy Form
24/10/2007	Research Report
23/10/2007	Appendix 3B
22/10/2007	Non-Renounceable Entitlement Offer of Options
16/10/2007	Appointment of Technical Consultant
10/10/2007	New Iron Ore Exploration Projects
05/10/2007	Notice of Annual General Meeting
28/09/2007	Annual Report 2007
20/09/2007	Further high grade assay results from Parmegiana
05/09/2007	Acquires new high grade Molybdenum Projects in Brazil
04/09/2007	Trading Halt
20/08/2007	Assays confirm significant high grade Iron enrichment
31/07/2007	Quarterly Report June 2007
18/07/2007	Appendix 3B
13/07/2007	Results of Annual General Meeting
10/07/2007	Completion of Escrow Period
29/06/2007	Completion of Due Diligence – Frei Martinho Moly Project
29/06/2007	Change in substantial holding
12/06/2007	Notice of Annual General Meeting
07/06/2007	Appendix 3B
29/05/2007	Investor Presentation
25/05/2007	Acquisition of high grade molybdenum project
23/05/2007	Change in substantial holding
23/05/2007	Company Request for Trading Halt
23/05/2007	Trading Halt
21/05/2007	Appendix 3B
15/05/2007	Completes Due Diligence
11/05/2007	Response to ASX Price Query
30/04/2007	Third Quarter Activities & Cashflow Report
13/04/2007	Audio Broadcast
13/04/2007	To acquire third iron ore project in Brazil
10/04/2007	Reinstatement to Official Quotation
10/04/2007	Acquisition of Iron Ore Projects & Placement
03/04/2007	Suspension from Official Quotation
29/03/2007	Trading Halt
23/03/2007	Becoming a substantial holder
20/03/2007	Initial Director's Interest Notice x4
16/03/2007	Becoming a substantial holder
12/03/2007	Appendix 1A - Application for admission to official list
12/03/2007	Escrowed Shares
12/03/2007	Distribution Schedule & Top 20 shareholders
12/03/2007	Pre-Quotation Disclosure
12/03/2007	Pre-Quotation Disclosure
12/03/2007	Commencement of Official Quotation
12/03/2007	Constitution

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12/03/2007 Admission to Official List 25/01/2007 Disclosure Document

5.5 Trading History

Official quotation of Shares commenced on 15 March 2007. The highest and lowest recorded market sale prices of Shares quoted on ASX during the period from commencement of Official Quotation to the date of this Prospectus were $1.90 on 20 July 2007 and $0.24 on 21 March 2007 respectively.

The last market sale price of the Shares on ASX on the last day that trading took place in these Shares prior to the date of this Prospectus was $1.52 on 26 October 2007.

The Company has no options (to subscribe for Shares) that are currently quoted on ASX.

5.6 Pro-Forma Balance Sheet

Set out below is an audited consolidated Balance Sheet of the Company as at 30 June 2007 and a pro-forma Balance Sheet illustrating the effect the issue of Securities offered by this Prospectus would have on that Balance Sheet if the issue was completed and had the funds (net of expenses) been received as at 30 June 2007.

PRO-FORMA BALANCE SHEETS AS AT 30 JUNE 2007

CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Exploration and evaluation expenditure TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued Capital Reserves Accumulated losses TOTAL EQUITY	CONSOLIDATED ENTITY AUDITED PROFORMA 30 JUNE 2007 30 JUNE 2007 $ $ 4,646,159 5,137,875 133,606 133,606 22,063 22,063
	4,801,828 5,293,544
	12,606 12,606 2,147,922 2,867,922
	2,160,528 2,880,528
	6,962,356 8,174,072
	1,188,740 188,740
	1,188,740 188,740
	1,188,740 188,740
	5,773,616 7,985,332
	6,286,195 8,036,196 4,174 495,889 (516,753) (546,753)
	5,773,616 7,985,332

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Proforma Transactions

The un-audited pro-forma consolidated balance sheet of the Company and its subsidiaries has been included for illustrative purposes only. The pro-forma balance sheet has been prepared by adjusting the audited balance sheet at 30 June 2007 to reflect the financial effects of the following transactions as if they had occurred at 30 June 2007:

The Proforma Balance Sheet presented above show the following:

• the effect of the maximum subscription amount of $521,716 being raised under this Offer, with $30,000 cash being expended on expenses of the Issue.

• On 18 July 2007 the Company issued 1,000,000 Shares at a price of $1.00 each as part consideration for 100% ownership of the Frei Martinho project in Brazil. This amount was previously included as "Trade and other payables" in the audited balance sheet at 30 June 2007.

• On 23 October 2007 the Company issued 500,000 Shares at a price of $1.44 each as part consideration for 100% ownership of additional projects surrounding the Company’s Frei Martinho project in Brazil.

• On 23 October 2007 the Company issued 21,429 Shares at a price of $1.40 each in consideration for consulting services provided to the Company.

The accounting policies adopted in preparation of the pro-forma statement of financial position are consistent with the policies adopted in the preparation of the 30 June 2007 annual report.

The cash and cash equivalents of the Company and its subsidiaries at 30 September 2007 is approximately $3.4 million. The difference between the cash and cash equivalents at 30 September 2007 and the cash and cash equivalents at 30 June 2007 in the Pro-forma Balance Sheet above is approximately $1.748 million. This amount has been expended during July to September 2007 on acquisition costs of new and existing projects, exploration undertaken on existing and new projects and general administration expenses of the Company at its head office in Australia and Brazil.

Events subsequent to 30 June 2007

The Directors are not aware of any material items, transactions or events outside of the ordinary business of the Company that would require comment on, or adjustment to the balance sheet as at 30 June 2007 or that would cause the information in the balance sheet to be misleading or deceptive, other than what has been disclosed above.

• 5.7 Terms and Conditions of Options

The Options offered pursuant to this Prospectus will be issued on the following terms:

• (a) Each Option entitles the holder to acquire one fully paid ordinary share in the Company.

• (b) The Options may be exercised at any time until 30 June 2009. Each Option may be exercised by forwarding to the Company at its principal office the exercise notice, duly completed together with payment of the sum of 20 cents per Option exercised.

• (c) The Options may be transferred by an instrument (duly stamped where necessary) in the form commonly used for transfer of Options at any time until 30 June 2009. This right is subject to any restrictions on the transfer of an Option that may be imposed by ASX in circumstances where the Company is listed on ASX. An application will be made to the ASX for Official Quotation of the Options.

• (d) Option holders are permitted to participate in new issues of securities on the prior exercise of options in which case the Option holders are given at least 9 business days prior to and inclusive of the record date (to determine entitlements to the issue) to exercise the Option.

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• (e) Shares issued on the exercise of Options will be issued not more than 14 days after receipt of a properly executed exercise notice and application moneys. Shares allotted pursuant to the exercise of an Option will rank equally with the then issued Shares. Pursuant to the exercise of an Option, the Company will apply to ASX for Quotation of the Shares issued as a result of the exercise, in accordance with the Corporations Act and the Listing Rules.

• (f) In the event of any 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.

• (g) There are no rights to a change in exercise price, or in the number of Shares over which the Options can be exercised, in the event of a bonus issue by the Company prior to the exercise of any Options.

• (h) The Company will, at least 20 business days before the Expiry Date, send notices to the optionholders stating the name of the optionholder, the number of Options held and the number of securities to be issued on exercise of the Options, the exercise price, the due date for payment and the consequences of nonpayment.

• 5.8

Rights Attaching to Shares

The rights attaching to Shares in the Company whether upon conversion of Options or otherwise are:

• (a) set out in the constitution of the Company, a copy of which is available for inspection at the registered office of the Company during normal business hours; and

• (b) in certain circumstances, regulated by the Corporations Act, the Listing Rules, the ASTC Settlement Rules and the general law.

There is only one class of shares on issue in the Company being fully paid ordinary shares.

The following is a summary of the principal rights of the holders of Shares in the Company.

Voting Rights

Subject to any special rights or restrictions for the time being attached to any class or classes of Shares in the Company (at present there are none), at a general meeting every shareholder present in person or by proxy, attorney or representative will have on a show of hands one vote and, on a poll, one vote for each Share held.

General Meetings

Each shareholder is entitled to receive notice of, and to attend and vote at, general meetings of the Company and to receive all notices, financial reports and other documents required to be furnished to shareholders under the Constitution or the Corporations Act and the Listing Rules.

Dividend Rights

Subject to the rights of holders of any Shares created or raised under any special arrangement as to dividends (at present there are none), any dividend as declared shall be payable on all Shares in proportion to the amount of capital for the time being paid up or credited as paid up in respect of such Shares.

Rights on Winding-up

Subject to the rights of holders of Shares with special rights in a winding-up (at present there are none), on a winding-up of the Company all monies and property that are to be legally distributed among holders of Shares will be distributed in proportion to the amounts paid up (or which at the commencement of the winding-up ought to have been paid up) on those Shares compared with the total paid-up capital of the Company.

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Transfer of Shares

Subject to the Constitution, the Corporations Act, the Listing Rules and any other applicable laws of Australia, and subject to any restrictions applicable to Shares which have been designated by the ASX as "restricted securities", Shares are freely transferable.

Listing Rules

Despite anything in the constitution of the Company, if the Listing Rules prohibit an act being done, the act must not be done. Nothing in the constitution prevents an act being done that the Listing Rules require to be done. If the Listing Rules require an act to be done or not to be done, authority is given for that act to be done or not to be done (as the case may be). If the Listing Rules require the constitution to contain a provision or not to contain a provision the constitution is deemed to contain that provision or not to contain that provision (as the case may be). If a provision of the constitution is or becomes inconsistent with the Listing Rules, the constitution is deemed not to contain that provision to the extent of the inconsistency.

5.9

Interests of Directors, Experts and Advisors

A full disclosure of the interests of Directors, experts and promoters of and to the Company for the period commencing on incorporation of the Company and to the date of issue of the January 2007 Prospectus are set out in section 11 of the January 2007 Prospectus and other than as set out below or elsewhere in this Prospectus, that information and disclosure remains current.

As at the date of this Prospectus, the Directors have relevant interests in Shares as set out in the table below:

Director Number Mr Sierakowski 750,000 Mr Gajewski 3,500,000* Mr Christie 370,001 Mr Biener

• 1,000,000 of these Shares are held by an entity in which Mr Gajewski has a 12.5% interest.

Interests of Experts and Advisors

Cullen Babington Hughes Pty Ltd has acted as legal adviser to the Offer pursuant to this Prospectus and in that capacity has provided legal advice to the Company in relation to the Offer. In respect of this work, the Company will pay approximately $5,000 for these services. Cullen Babington Hughes Pty Ltd has provided other professional services to the Company during the last two years totalling approximately $21,500.

Corporate Consultants Pty Limited, an entity of which Mr R Gajewski is a director and a shareholder, provides administration, accounting and company secretarial services to the Company and has assisted with the preparation of this Prospectus. Fees paid or payable to Corporate Consultants Pty Limited for the two year period ending on the date of this Prospectus are approximately $50,839.

HLB Mann Judd acted as Independent Accountant with respect to the January 2007 Prospectus and was paid a fee of $8,000 for the provision of the Independent Accountant's Report contained in the January 2007 Prospectus. HLB Mann Judd acted as Independent Auditor to the Company and fees paid or payable to HLB Mann Judd for audit services for the two year period ending on the date of this Prospectus are $11,700.

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5.10 Consents

Persons who make statements in this Prospectus or who made statements in the January 2007 Prospectus, which are incorporated by reference into this Prospectus need to provide their written consent for such use.

Each of the parties referred to in this Section 5.10:

• (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; and

• (b) to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any part other than a reference to its name and a statement included in this or the January 2007 Prospectus with the consent of that party as specified in this Section.

HLB Mann Judd has given its written consent to being named as the independent accountant to the Company in this Prospectus and to the inclusion by reference in this Prospectus of its Independent Accountant's Report set out in Section 8 of the January 2007 Prospectus, and to all statements referring to the Independent Accountant's Report, in the form and context in which they are included in the January 2007 Prospectus. HLB Mann Judd has not withdrawn its consent prior to lodgement of this Prospectus with the ASIC.

Raylar Pty Ltd has given its written consent to the inclusion by reference in this Prospectus of its Independent Consulting Geologist's Report set out in Section 7 of the January 2007 Prospectus, and to all statements referring to the Independent Consulting Geologist's Report, in the form and context in which they are included in the January 2007 Prospectus. Raylar Pty Ltd has not withdrawn its consent prior to the lodgement of this Prospectus with the ASIC.

Cullen Babington Hughes Pty Ltd has given its written consent to the inclusion by reference in this Prospectus of its Solicitor's Report set out in Section 9 of the January 2007 Prospectus, and to all statements referring to the Solicitor's Report, in the form and context in which they are included in the January 2007 Prospectus. Cullen Babington Hughes Pty Ltd has not withdrawn its consent prior to the lodgement of this Prospectus with the ASIC.

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

• (a) HLB Mann Judd as auditor to the Company;

• (b) Cullen Babington Hughes Pty Ltd and Luis Azevedo as legal advisers to the Company; and

• (c) Security Transfer Registrars Pty Ltd as the share registry of the Company.

5.11 Legal Proceedings

There is no litigation, arbitration or proceedings pending against or involving the Company as at the date.

5.12

Expenses of the Issue

The total expenses of the issue are estimated to be $30,000 comprising legal and due diligence costs, printing and other administrative expenses, including ASX quotation fees.

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6. AUTHORITY OF DIRECTORS

Each of the Directors has consented to the lodgement of this Prospectus in accordance with section 720 of the Corporations Act.

Dated: 29 October 2007

==> picture [154 x 39] intentionally omitted <==

Adam Sierakowski

For and on behalf of Carnavale Resources Ltd

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7. DEFINITIONS

In this Prospectus:

Applicant means a person who submits an Entitlement and Acceptance Form.

ASIC means Australian Securities and Investments Commission.

ASTC Settlement Rules means the settlement rules of ASX Settlement and Transfer Corporation Pty Ltd (formerly the SCH Business Rules).

ASX means ASX Limited (ACN 008 624 691).

Board means the board of Directors 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.

Closing Date means 5.00 pm WST on 27 November 2007 (unless extended).

Company or Carnavale means Carnavale Resources Limited (ACN 119 450 243).

Constitution means the constitution of the Company as amended from time to time.

Corporations Act means the Corporations Act 2001 (Cth).

Directors mean the directors of the Company from time to time.

Dollars or $ means Australian dollars unless otherwise stated.

Entitlement means the non-renounceable entitlement of a Shareholder to subscribe for a particular number of Options calculated on a 1 for 1 basis and on the other terms and conditions set out in this Prospectus.

Entitlement and Acceptance Form means the personalised entitlement and acceptance form for the Offer of Options attached to or accompanying this Prospectus.

January 2007 Prospectus means the prospectus lodged by the Company with the ASIC on 15 January 2007 for the offer of 20,000,000 Shares at an issue price of 20 cents each to raise up to $4,000,000.

Listing Rules means the official Listing Rules of ASX.

Offer means the offer of Options and the Offer Share pursuant to this Prospectus.

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

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

Official List means the official list of ASX.

Opening Date means 12 November 2007.

Option Holders means those parties holding Options.

Option means an option to acquire a Share on the terms set out in Section 5.7.

Placement means the placement of 5,600,107 Shares at an issue price of $0.35 referred to at Section 4.5.

Placement Shares means those Shares issued as a result of the Placement. Prospectus means this prospectus dated 29 October 2007. Quotation and Official Quotation means official quotation on ASX. Record Date means 5.00 pm WST on 7 November 2007. Securities means Options and the Offer Share.

Section means a section of this Prospectus or a section of the January 2007 Prospectus as the case may be.

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

Shareholder means a holder of Shares. Shortfall means the Options (if any) not taken up under the Offer of Options. US$ means United States dollars.

WST means Western Summer Time, Perth, Western Australia.

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