CAZALY RESOURCES LIMITED — Capital/Financing Update 2004

Jan 6, 2004

CAZALY RESOURCES LIMITED ABN 23 101 049 334

SHORT FORM PROSPECTUS

For a non renounceable entitlements issue of 1 New Option for every 3 Shares held by Shareholders at an issue price of 1 cent per New Option.

Important Notice

This Prospectus is a short form prospectus issued in accordance with Section 712 of the Corporations Act 2001. 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 another document the information of which is deemed to be incorporated in this Prospectus.

CORPORATE DIRECTORY

TABLE OF CONTENTS

SECTION 1	CORPORATE DIRECTORY	5.
SECTION 2	MANAGING DIRECTOR'S LETTER	6
SECTION 3	TIMETABLE AND IMPORTANT DATES	$\overline{7}$
SECTION 4	DETAILS OF THE OFFER	8
SECTION 5	INFORMATION DEEMED TO BE INCORPORATED IN THIS PROSPECTUS	11
SECTION 6	COMPANY OVERVIEW	14
SECTION 7	EFFECT OF THE ENTITLEMENTS ISSUE ON THE COMPANY	17
SECTION 8	OVERSEAS PARTICIPANTS	17
SECTION 9	TERMS AND CONDITIONS OF NEW OPTIONS AND RIGHTS ATTACHING TO SHARES	17
	SECTION 10 ADDITIONAL INFORMATION	20
SECTION 11	MATERIAL CONTRACTS	22
SECTION 12	CONSENTS	22
	SECTION 13 AUTHORITY OF DIRECTORS	23
	SECTION 14 DEFINITIONS	24

Important Notice

This Prospectus is dated 18 December 2003.

A copy of this Prospectus was lodged with the ASIC on 18 December 2003. The ASIC takes no responsibility for the contents of this Prospectus.

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

Applicants should read this document in its entirety and, if in any doubt, consult with their professional advisors before deciding whether to apply for New Options. There are risks associated with an investment in Cazaly and the New Options offered under this Prospectus must be regarded as a speculative investment. The New Options offered under this Prospectus carry no guarantee with respect to return on capital investment, payment of dividends or the future value of the New Options.

Certain abbreviations and other defined terms are used throughout this Prospectus. Defined terms are generally identifiable by the use of an upper case first letter. Details of the definitions and abbreviations used are set out in Section 14 of this Prospectus.

Short Form Prospectus

This Prospectus is a short form prospectus issued in accordance with Section 712 of the Corporations Act 2001. 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. Rather, the Prospectus incorporates by reference information contained in a document that has been lodged with the ASIC.

This Prospectus refers to the disclosure document lodged by the Company with the ASIC on 14 October 2003 for the offer of 17,500,000 Shares at an issue price of 20 cents each to raise a total of \$3,500,000 (oversubscriptions of up to a further 2,500,000 Shares at an issue price of 20 cents each to raise a further \$500,000 were offered). In referring to the October 2003 Prospectus, the Company:

• identifies the October 2003 Prospectus as being relevant to the offer of New Options $(a)$ under this Prospectus and containing information that will provide investors and their professional advisers information to assist them in making an informed assessment of:
• the rights and liabilities attaching to: $(i)$
  • (a) the New Options; and
  • (b) the underlying securities;
• (ii) the capacity of the Company to issue the underlying securities; and

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

• $(b)$ refers investors and their professional advisers to Section 5 of this Prospectus which summarises the information in the October 2003 Prospectus deemed to be incorporated in this Prospectus;

• $(c)$ informs investors and their professional advisers that they are able to obtain, free of charge, a copy of the October 2003 Prospectus by contacting the Company at its registered office during normal business hours during the Offer Period; and
• $(d)$ advises that the information in the October 2003 Prospectus will be primarily of interest to investors and their professional advisers or analysts.

SECTION 1 CORPORATE DIRECTORY

DIRECTORS

• Nathan Bruce McMahon Managing Director Clive Bruce Jones
• Kent Michael Hunter
• Non Executive Director
• Non-Executive Director

COMPANY SECRETARY

Kent Michael Hunter

REGISTERED OFFICE

Level 1, 22 Oxford Close LEEDERVILLE WA 6007

LAWYERS TO THE COMPANY

Príce Sierakowski Level 24, St Martin's Tower 44 St George's Terrace PERTH WA 6000

AUDITORS

Rix, Levy Fowler Level 1 12 Kings park Road WEST PERTH WA 6005

SHARE REGISTRY

Advanced Share Registry Services Level 7, 200 Adelaide Terrace PERTH WA 6000

CONTACT DETAILS

Website: www.cazalyresources.com.au

Email: admin@cazalyresources.com.au

Cazaly Resources Ltd Telephone: $(08)$ 9380 4600

Share Registry $(08)$ 9221 7288

Facsimile: Cazaly Resources Ltd $(08)$ 9381 5911

Share Registry $(08)$ 9221 $7869$

SECTION 2 MANAGING DIRECTOR'S LETTER

18 December 2003

Dear Shareholder

The Board is pleased to offer Shareholders the opportunity to participate in a 1 for 3 non-renounceable entitlements issue as proposed in the October 2003 Prospectus.

All Shareholders (except Vendors in relation to Vendor Shares) registered as at 5.00pm WST on Wednesday, 31 December 2003 will be entitled to participate in a non-renounceable entitlements issue of New Options on the basis of 1 New Option for every 3 Shares then held.

The Closing Date for acceptances is 5.00pm WST on Friday 23 January 2004.

The Board recommends all Shareholders take up their entitlement.

The Board takes this opportunity to thank all Shareholders for their support since listing and looks forward to your continued support in the future.

Yours faithfully,

Nathan McMahon Managing Director

SECTION 3

TIMETABLE AND IMPORTANT DATES

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Prospectus lodged with ASIC and ASX	18 December 2003
Record Date for determining entitlements	31 December 2003
Dispatch Prospectus	6 January 2004
Closing Date	23 January 2004
Deferred settlement trading commences	27 January 2004

SECTION 4

DETAILS OF THE OFFER

$4.1$ Purpose of the Entitlements issue

The funds raised by the Offer of up to \$103,833 will be applied to working capital and also to meet issue expenses of approximately \$5,000.

$4.2$ The Entitlements issue

The Company is making a pro-rata non-renounceable entitlements issue to Shareholders who are registered at 5.00pm WST on 31 December 2003 of up to 10,383,333 New Options at an issue price of 1 cent each to raise up to \$103,833 (before costs of the Issue).

The New Options will be offered on the basis of one (1) New Option for every three (3) Shares then held.

The entitlements issue may have to be increased by up to 2,333,333 New Options (raising up to a further \$23,333) if existing February 2005 Options and/or June 2005 Options are exercised prior to the Record Date.

The maximum number of New Options which could therefore be issued under this Prospectus is 12,716,666.

However, the market price of Shares at the date of this Prospectus is such that it is unlikely any of the existing February 2005 Options or June 2005 Options will be exercised. It has been assumed for the purposes of this Prospectus that:

• no existing February 2005 Options or June 2005 Options will be exercised prior to the $\circ$ Record Date; and
• $\circ$ the maximum number of New Options that will be issued is 10.383.333.

4.3 Entitlement

The number of New Options to which each Shareholder is entitled ("Entitlement") is shown on the enclosed Acceptance Form.

Shareholders may accept their entitlement in full or part by returning a completed Acceptance Form to the Company's Share Registry by 5.00 pm WST, 23 January 2004.

4.4 Minimum Subscription

There is no minimum subscription.

$4.5$ Oversubscriptions

Oversubscriptions will not be accepted.

SECTION 4

DETAILS OF THE OFFER

4.6 Issue Price

The issue price is 1 cent for each New Option payable in full in Australian currency on the acceptance of the Entitlements issue as follows:

• Cheque drawn on and payable at any Australian bank: $\circ$ .
• Money Order; or $\circ$
• Bank draft drawn on and payable at any Australian bank. $\sim$

4.7 Acceptance

This Offer may be accepted in whole or in part. Acceptance and payment in full of 1 cent per New Option must be received before 5.00pm WST on 23 January 2004. Instructions for completion and lodgement of acceptances are set out on the back of the enclosed Acceptance Form.

4.8 Action Required

If you wish to take up all of your entitlement, complete the enclosed Acceptance Form in accordance with the instructions set out and lodge the form together with your cheque for the amount shown on the form so that it reaches the Company's share registry:

Advanced Share Registry Services Level 7, 200 Adelaide Terrace Perth WA 6000

by no later than 5.00pm WST on 23 January 2004.

Cheques and drafts should be made payable to "Cazaly Resources Ltd - Option Issue" and crossed "Not Negotiable".

If you wish to take up part of your entitlement, complete the enclosed Acceptance Form in respect of the New Options you wish to take up in accordance with the instructions set out in the form and lodge the form together with your cheque for the relevant amount (being the number of New Options you wish to take up multiplied by 1 cent per New Option) so that it reaches the Company's share registry by no later than 5.00pm WST on 23 January 2004.

If you do not wish to take up any of your entitlement, you do not need to take any action and your entitlement to the New Options will lapse.

SECTION 4

DETAILS OF THE OFFER

4.9 Underwriting

This Offer is not underwritten. The Directors reserve the right to place with parties selected by them any New Options not taken up by the Shareholders. These New Options will be placed within 3 months of the Closing Date on the same terms as are being offered to Shareholders pursuant to this Prospectus. New Options not taken up by Shareholders will not be placed to the Directors or any associates of Directors.

4.10 Closing Date

The Closing Date for the Entitlements issue is 5.00 pm WST on 23 January 2004.

4.11 Offer Period

The Prospectus will be dispatched to Shareholders on 6 January 2004. The Entitlements issue closes on 23 January 2004.

4.12 Allotment

The New Options will be allotted and issued as soon as practicable after 23 January 2004.

Statements of holding for the New Options will be mailed as soon as possible after the Closing Date.

No New Options will be allotted and issued on the basis of this Prospectus later than thirteen (13) months after the date of this Prospectus.

4.13 Stock Exchange Quotation

Application for official quotation of the New Options by the ASX will be made by the Company within seven (7) days of the date of this Prospectus. Application for official quotation of Shares allotted and issued as a result of the exercise of New Options issued under this Prospectus will be made within three (3) business days of allotment and issue.

4.14 Overseas Shareholders

Shareholders resident outside Australia should consult their professional advisers as to whether any governmental or other consents are required, or other formalities need to be observed to enable them to accept or deal with their entitlements.

This Prospectus does not constitute an offer in any place in which or to any person whom it would not be lawful to make such an offer.

4.15 Enquiries

If you have any questions concerning your entitlement, please contact the Company Secretary, Mr Kent Hunter on (618) 9380 4600, or fax (618) 9381 5911 or contact your professional adviser.

SECTION 5 INFORMATION DEEMED TO BE INCORPORATED IN THIS PROSPECTUS

$5.1$ Short Form Prospectus

This Prospectus is a short form prospectus issued in accordance with Section 712 of the Corporations Act 2001. 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 a document that has been lodged with the ASIC.

The information to be incorporated by reference into this Prospectus is summarised below in subsection 5.2 and will primarily be of interest to investors and their professional advisers or analysts.

The Company informs investors and their professional advisers that they are able to obtain, free of charge, a copy of the October 2003 Prospectus by contacting the Company at its registered office during normal business hours during the Offer Period. The October 2003 Prospectus will also be available by searching ASIC's records in relation to Cazaly, or by visiting the Company's website at www.cazalyresources.com.au.

Summary of Information Deemed to be Incorporated $5.2$

Set out below is a summary of the information contained in the October 2003 Prospectus that is deemed to be incorporated in this Prospectus to assist investors and their professional advisers to determine whether, for the purposes of making an informed investment decision in relation to the New Options, they should obtain a copy of the October 2003 Prospectus.

The Sections referred to below are a reference to sections in the October 2003 Prospectus.

Section 2 - Project Review

This section contains a summary of the projects and tenements acquired by Cazaly Resources since its incorporation on 20 June 2002. It details the objectives and strategies of the Company and provides information relating to the mineral exploration tenements which are divided into six (6) main projects and several other projects. The main projects are the:

• Kunanalling Project;
• East Kalgoorlie Project: $\bullet$
• Mt Vetters Nickel Project: $\bullet$
• Quartz Circle Project; $\bullet$
• Mount Carrington Project; and $\bullet$
• Greater Bardoc Tectonic Zone ("GBTZ") Project.

Section 2 also summarises the intended exploration expenditure in regard to each of the projects noted above.

SECTION 5 INFORMATION DEEMED TO BE INCORPORATED IN THIS PROSPECTUS

Section 3 - Board and Management

Section 3 contains information relating to each of the three directors of the Company and also refers to the corporate governance policies adopted by the Board.

Section 4 - Risk Factors

Section 4 notes that an investment in Cazaly Resources has risks reasonably expected of an investment in a business of its type. It details a number of factors that may impact on the success and future profitability of Cazaly Resources. The factors referred to are Exploration Success, Operating Risks, Resource Estimates, Commodity Price Volatility and Exchange Rate Risks, Environmental Risks, Title Risks and Native Title, Share Market Conditions, General Investment Risks and Specific Risks associated with the Company.

Section 5 - Independent Geologist's Report

Section 5 consists of the report prepared by the Independent Geologist. Al Maynard and Associates. The report describes in detail the geological setting and historical mining and exploration on the mining tenements of Cazaly. The Report also sets out details of proposed exploration programs on the mining exploration tenements.

Section 6 - Investigating Accountant's Report

This comprises the Investigating Accountant's Report prepared by Rix Levy Fowler. Chartered Business Advisers, dated 14 October 2003. The report was included in the October 2003 Prospectus to assist investors and their financial advisers in making an assessment of the financial position of the Company.

The Investigating Accountant's Report contains the unaudited statement of financial performance for the period from incorporation to 8 October 2003, statement of financial position of the Company as at 8 October 2003 and pro-forma statement of financial position as at that date reflecting the position of the Company on the basis that various transactions, including the issue of all the Shares offered under the October 2003 Prospectus (excluding over-subscriptions), and the final settlement of the acquisition of all the mineral exploration tenements comprising the various projects by the Company, have been completed.

Based on their review, the Investigating Accountant stated that nothing had come to their attention that caused them to believe that:

the historical financial information, as set out in Appendix 1 of their report $(i)$ is not presented fairly in accordance with generally accepted accounting principles as applied in Australia for reporting on financial information in a public offer document.

SECTION 5 INFORMATION DEEMED TO BE INCORPORATED IN THIS PROSPECTUS

$(ii)$ the pro-forma financial information, as set out in Appendix 1 and 2 of their report is not properly drawn up in accordance with the basis of preparation and the assumptions set out in Appendix 1 and 2 to their report and with generally accepted practice as applied in Australia for presenting pro-forma financial information in a public offer document.

Section 7 - Solicitor's Report on Tenements

Section 7 consists of a report prepared by Price Sierakowski, Lawyers, on the mining tenements acquired, or which may be acquired or in which an interest may earned by Cazaly. The report details the titleholders of the mining tenements and the agreements entered into by the Company with the various parties.

Section 8 - Additional Information

Section 8 sets out additional information required to be disclosed in the prospectus including:

• Rights Attaching to Shares; $\bullet$
• Summary of Material Contracts to which the Company is a party (other than those summarised in Section 7) that the Directors considered were material in enabling investors to make an informed assessment of the offer of shares under the October 2003 Prospectus:
• Interests of Directors of the Company; ٠
• Interests of Persons Named in the October 2003 Prospectus;
• Details of the Consents of persons named in the October 2003 Prospectus;
• Expenses of the Issue:
• Taxation:
• Exposure Period:
• A statement that the Company is not involved in any material litigation or arbitration proceedings, nor are any proceedings pending or threatened against the Company;
• Availability of an Electronic Prospectus;
• A statement that the Company does not believe that reliable forecasts can be prepared and that accordingly it has not included forecasts in the October 2003 Prospectus:
• Terms and Conditions of Options; and
• Details of the Employee Incentive Scheme.

SECTION 6

COMPANY OVERVIEW

$6.1$ Overview and Reference to October 2003 Prospectus

A comprehensive overview of the Company is set out in the October 2003 Prospectus that was lodged with ASIC on 14 October 2003 for the initial public offering of 17,500,000 Shares (oversubscriptions of up to a further 2,500,000 Shares were offered). Persons considering subscribing for New Options under this Prospectus should refer to Section 5 of this Prospectus for a summary of the information contained in the October 2003 Prospectus deemed to be incorporated in this Prospectus.

As detailed in Section 2.10 of the October 2003 Prospectus, Cazaly had proposed an exploration budget of \$1,875,000 over 24 months on the six (6) main projects and other projects acquired by Cazaly. To date, approximately \$78,000 has been expended with the balance proposed to be spent in the next $18 - 24$ months.

The actual manner in which the exploration expenditure is incurred may vary having regard to numerous factors, including the results of ongoing exploration activities and other matters as outlined in Section 4 of the October 2003 Prospectus.

On 27 October 2003, the Directors resolved to allot and issue 20,000,000 Shares at an issue price of 20 cents each pursuant to applications received under the October 2003 Prospectus. On 24 October 2003 the Directors resolved to allot and issue 1,800,000 Shares required to complete the acquisition of mining tenements under the various agreements as detailed in Section 7 of the October 2003 Prospectus. Settlement of these acquisitions has now been effected.

The Company now has 32,950,002 Shares on issue, and 3,500,000 February 2005 Options and 3,500,000 June 2005 Options on issue.

Cazaly was admitted to the Official List on 29 October 2003 with official quotation of its shares commencing on 31 October 2003.

Under the ASX Listing Rules, 11.700,000 Shares and 7,000,000 Options were subject to escrow restrictions. Accordingly, the Company's share registry has implemented holding locks on the relevant holdings and will not release them without ASX approval. The numbers and periods of escrow are as follows:

• 8.650,000 Shares for 24 months from 31 October 2003: $\blacksquare$
• 1.800.000 Shares for 12 months from 24 October 2003:
• 1.015,000 Shares for 12 months from 7 October 2003:
• 235,000 Shares for 12 months from 12 September 2003; and $\blacksquare$
• 3,500,000 February 2005 options and 3,500,000 June 2005 Options for 24 months from 31 October 2003.

The balance of the issued capital of the Company, being 21,250,000 Shares, are quoted on ASX.

6.2 Circumstances or Matters subsequent to the October 2003 Prospectus

Other than as stated below and elsewhere in this Prospectus, the Company is not aware of any material matter or circumstance that would impact on the contents of the October 2003 Prospectus or the activities and prospects of the Company and be relevant to assist investors or their professional advisers making an informed assessment of relevant matters:

SECTION 6

COMPANY OVERVIEW

Kunanalling PDAP Purchase

As released to the market on 10 December 2003, Cazaly has acquired from Placer Dome Asia Pacific Ltd ("Placer") the Kunanalling Gold Project and formed a strategic alliance with Placer. The Kunanalling project is located 30 kilometres north of Coolgardie in Western Australia and the acquisition of the project containing approximately 78,000 ounces in resources (non-iorc Compliant) further complements Cazaly's regional holdings.

The resources acquired include:

• Catherwood:	484,000t @ 2.16 g/t gold
• Premier:	164,000t @ 1.99 g/t gold
Emu	260,000t @ 2.46 g/t gold
Blue Bell	118,000t @ 2.00 g/t gold

Significantly, these resources exist on granted mining leases, which will enable Cazaly to expedite any development opportunities.

Promising drill results on the Project requiring follow-up include 7m @ 142 g/t from 24m, 7m @ 12.4 g/t from 11m, and 14m @ 3.02 g/t from 24m at the Emu Prospect and 17m @ 2.22 g/t from 13m and 10m @ 5.85 g/t from 80m at the Catherwood Prospect.

The Project covers an area of approximately 40 km2 and is contiguous to the west of Cazaly's current 90 km2 tenement holding. The regionally significant and under-explored Kunanalling Shear transects the tenement holding and is the focus for most gold mineralisation. Cazaly now has access to more than 20 kilometres of this highly prospective Shear, which contains numerous old pits and workings.

Two phases of historical production have been recorded from the Proiect area with 88,000t $\omega$ 24.4 g/t for 69,000 oz produced pre-1954 and 210,000t @ 3.02 g/t for 20,400 oz between 1987-1994.

As consideration for the Project, Cazaly has agreed to pay Placer \$57,000, with the first installment of \$25,000 paid today and the balance payable within 90 days.

Placer retains:

• a once-off right to claw-back a 70% interest within 60 days of being notified of the a) establishment of a 500,000 ounce resource on the Project by paying Cazaly 2.5 times the expenditure (including acquisition costs) incurred with the resource discovery. The buy-back relates only to the resource area;
• the right to explore for conceptual targets within a declared area of the Project at b) Placer's expense. Any resource discovery of 500,000 ounces or more would be deemed to be owned 70% by Placer and 30% by Cazaly, and if less than 500,000 ounces to be owned 100% by Cazaly;

SECTION 6

COMPANY OVERVIEW

• c) the option to acquire or process any ore produced from the Project or from tenements owned or acquired by Cazaly within 100 kilometres of Placer's Paddington mill, at best commercial rates; and
• d) a 2% Net Smelter Royalty on all gold produced from the Project, except where a pre-existing royalty exists.

For a six month period. Placer has the exclusive right to negotiate joint ventures with Cazaly over Cazaly's existing tenements. Upon Cazaly acquiring any additional tenements, Placer has an exclusive right for one month to negotiate a joint venture over these tenements.

The strategic alliance with Placer provides Cazaly with the opportunity to greatly expedite the development of any resource discoveries. If Placer elects not to acquire or process ore through the Paddington mill, Cazaly's Kunanalling Project still has strong infrastructure advantages.

The enlarged Project area is located within trucking distance of three other mills, the closest of which is approximately 15 kilometres away at the $+7$ million ounce Kundana mining centre. The all weather road from Coolgardie to Ora Banda runs through the centre of the Project with mills located at either end.

This Agreement continues the corporate philosophy of focusing on gold assets with near term cash flow potential while consolidation of projects to a regional scale allows for maximum leverage to exploration success.

EFFECT OF THE ENTITLEMENTS ISSUE ON THE COMPANY SECTION 7

Under the Offer, up to 10.383.333 New Options are available for issue and will be issued if the Offer is fully subscribed (either by Shareholders accepting the offer under this Prospectus or pursuant to the Directors' discretion to place any shortfall referred to in Section 4.9 of this Prospectus).

The Company has 3,500,000 February 2005 Options and 3,500,000 June 2005 Options on issue and upon completion of the Entitlements Issue, the issued capital of the Company will comprise 32,950,002 Shares, 10,383,333 New Options, 3,500,000 February 2005 options and 3,500,000 June 2005 Options.

After expenses of the Offer, the proceeds from the issue of New Options will be approximately \$98,000. These funds will be applied to the general working capital requirements of the Company.

SECTION 8 OVERSEAS PARTICIPANTS

The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

This Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make an offer.

SECTION 9 TERMS AND CONDITIONS OF NEW OPTIONS AND RIGHTS ATTACHING TO SHARES

Terms and Conditions of New Options $9.1$

The options will entitle the holders to subscribe for fully paid ordinary shares in the Company on the following terms:

1. Each Option entitles the holder to acquire one fully paid ordinary share in the Company.

2. The Options may be exercised at any time until 31 January 2006. 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 twenty cents (20c) per Option exercised. The Options will lapse at 5.00pm WST on 31 January 2006.

3. 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 31 January 2006. 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.

SECTION 9 TERMS AND CONDITIONS OF NEW OPTIONS AND RIGHTS ATTACHING TO SHARES

$4₁$ Optionholders shall be permitted to participate in new issues of securities on the prior exercise of options in which case the Optionholders shall be afforded the period of at least nine (9) business days prior to and inclusive of the record date (to determine entitlements to the issue) to exercise the Option.

1. Shares issued on the exercise of Options will be issued not more than fourteen (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 ordinary shares of the Company in all respects. If the Company is listed on ASX it will, pursuant to the exercise of an Option, apply to ASX for Quotation of the Shares issued as a result of the exercise, in accordance with the Corporations Law and the Listing Rules.

2. 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.

$7₁$ If there is a bonus issue to shareholders, the number of shares over which the Option is exercisable may be increased by the number of shares which the holder of the Option would have received if the Option had been exercised before the record date for the bonus issue.

In the event that a pro rata issue (except a bonus issue) is made to the holders of the 8. underlying securities in the Company, the exercise price of the Options may be reduced in accordance with Listing Rule 6.22.

9.2 Rights attaching to Shares upon Conversion of New Options

Full details of the rights attaching to Shares are set out in the Company's Constitution a copy of which can be inspected, free of charge, at the Company's registered office during normal business hours.

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

All Shares issued pursuant to this Prospectus will from the time they are issued, rank pari passu with all the Company's existing Shares.

Voting Rights

Subject to any rights or restrictions for the time being attached to any class or classes of Shares (at present there are none), at meetings of shareholders of Cazaly:

• a) each shareholder entitled to vote may vote in person or by proxy, attorney or representative;
• b) on a show of hands, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder has one vote; and

SECTION 9 TERMS AND CONDITIONS OF NEW OPTIONS AND RIGHTS ATTACHING TO SHARES

c) on a poll, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder shall, in respect of each fully paid Share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for the Share, but in respect of partly paid Shares, shall have such number of votes as bears the same proportion which the amount paid (not credited) is of the total amounts paid and payable (excluding amounts credited).

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 assets that may be legally distributed among members will be distributed in proportion to the number of fully paid shares held by them (and a partly paid share is counted as a fraction of a fully paid share equal to the amount paid on it, divided by the total issue price of the share).

Transfer of Shares

Subject to the Constitution of the Company, the Corporations Act 2001, and any other laws and SCH Business Rules and ASX Listing Rules, Shares are freely transferable.

Future Increases in Capital

The allotment and issue of any Shares is under the control of the Directors. Subject to restrictions on the allotment of Shares to Directors or their associates, the ASX Listing Rules, the Constitution of the Company and the Corporations Act 2001, the Directors may allot or otherwise dispose of Shares on such terms and conditions as they see fit.

Variation of Rights

Under the Corporations Act 2001, the Company may, with the sanction of a special resolution passed at a meeting of shareholders vary or abrogate the rights attaching to shares. If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of the issue of the shares of that class), whether or not the Company is being wound up may be varied or abrogated with the consent in writing of the holders of three quarters of the issued shares of that class, or if authorised by a special resolution passed at a separate meeting of the holders of the shares of that class.

Dividend Rights

Subject to the rights of holders of shares issued with special, preferential or qualified rights (at present there are none), the profits of the Company which the Directors determine to distribute by way of dividend are divisible among the Shareholders in proportion to the number of Shares held by them.

SECTION 10 ADDITIONAL INFORMATION

$10.1$ Market Prices of Ordinary Shares

Official quotation of the Company's Shares commenced on 31 October 2003 and consequently, the trading history on ASX as at the date of this Prospectus is limited to that period.

The highest and lowest recorded market sale prices of the Company's Shares guoted on ASX during the period from commencement of official quotation to the date of this Prospectus were 27 cents and 22 cents respectively.

The last market sale price of the Company's Shares on ASX on the last day that trading took place in these shares prior to the date of this Prospectus was 25.5 cents on 17 December 2003.

The Company has no options over Shares currently quoted on ASX.

$10.2$ Taxation

It is the responsibility of all persons to satisfy themselves of the particular taxation treatment that applies to them by consulting their own professional tax advisers before investing in the New Options. Taxation consequences will depend on particular circumstances. Neither Cazaly nor any of its officers accept any liability or responsibility in respect of the taxation consequences of the matters referred to above or any other taxation consequences connected with an investment in the New Options in Cazaly or dealing with an entitlement in this Entitlements issue.

$10.3$ Legal Proceedings

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

$10.4$ 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 2001. 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 October 2003 Prospectus referred to in Section 5 of this Prospectus.

SECTION 10

ADDITIONAL INFORMATION

The Company will provide a copy of all documents used to notify the ASX of information relating to the Company under the provisions of the Listing Rules since official quotation on 31 October 2003. As at the time of lodging this Prospectus the only such documents were:

Date	Number	Details
06/11/2003	1	RAB Drilling Starts at Mt Vetters Nickel Project
12/11/2003	2	Initial Director's Interest Notice x3
17/11/2003	3	Change of Director's Interest Notice x2
19/11/2003	4	Change of Director's Interest Notice
19/11/2003	5	Notice of General Meeting
03/12/2003	6	Change of Director's Interest Notice
10/12/2003		Acquisition of Placer Dome's
		Kunanalling Gold Project / Strategic Alliance
18/12/2003	8	Drilling Results from the Kunanalling Gold project

$10.5$ Interests of Directors and Experts

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 October 2003 Prospectus are set out in Section 8.3 of the October 2003 Prospectus and other than as set out below or elsewhere in this Prospectus, that information and disclosure remains current.

The interest of the Directors in the securities of the Company at the date of this Prospectus are as follows:

Directors	Shares	February 2005 Options	January 2005 Options
Nathan Bruce McMahon	3.122.700	1.500.000	1.500.000
Clive Bruce Jones	3.150.000	1.000.000	1.000.000
Kent Michael Hunter	827.300	$\mathbf{m}$	$\mathbf{m}$

$10.6$ Expenses of the issue

The total expenses of the Issue are estimated to be \$5,000 comprising legal and due diligence costs of \$1,000, and printing and other administrative expenses, including ASX quotation fee of \$4,000.

SECTION 11

MATERIAL CONTRACTS

Section 8.2 of the October 2003 Prospectus which is referred to in Section 5.2 of this Prospectus, sets out contracts to which the Company is a party which were considered by the Directors as being material to enable investors to make an informed assessment of the shares being offered under that Prospectus. Investors and their professional advisers are referred to that section of the October 2003 Prospectus in relation to material contracts.

A true copy of each of the material contracts referred to in the October 2003 prospectus will be available for inspection at the Company's registered office during office hours.

SECTION 12

CONSENTS

The following persons have each consented to the inclusion of the following statements and statements identified in this Prospectus as being based on statements made by those persons, in the form and context in which they are included, and have not withdrawn that consent before lodgement of this Prospectus with the ASIC:

Rix Levy Fowler in relation to the Investigating Accountant's Report in Section 6 of the October 2003 Prospectus and the reference to that report in this Prospectus. Rix Levy Fowler have also consented to be named in this Prospectus as Auditors of the Company Rix Levy Fowler has not authorised or caused the issue of any other part of this Prospectus.

Price Sierakowski in relation to the Solicitor's Report set out in Section 7 of the October 2003 Prospectus and the reference to that report in this Prospectus. Price Sierakowski have also consented to be named in this Prospectus as Lawyers to the Company. Price Sierakowski has not authorised or caused the issue of any other part of this Prospectus.

Al Maynard and Associates in relation to the Independent Geologist's Report set out in Section 5 of the October 2003 Prospectus and the reference to that report in this Prospectus. Al Maynard and Associates has not authorised or caused the issue of any other part of this Prospectus.

SECTION 13 AUTHORITY OF DIRECTORS

Each of the Directors of Cazaly Resources Limited has consented to the lodgement of this Prospectus in accordance with section 720 of the Corporations Act 2001:

Dated the 18^th day of December 2003.

Signed for and on behalf of CAZALY RESOURCES LIMITED By Nathan Bruce McMahon (Managing Director)

SECTION 14

DEFINITIONS

Acceptance Form means the application form enclosed with this Prospectus.

Applicant means a person who submits an Application.

Application means a valid application to subscribe for New Options.

October 2003 Prospectus means the prospectus lodged by the Company with the ASIC and dated 14 October 2003.

ASIC means Australian Securities and Investments Commission.

ASX means Australian Stock Exchange Limited (ACN 008 624 691).

Auditors means Rix Levy Fowler.

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.

CHESS means ASX Clearing House Electronic Subregistry System.

Closing Date means the date on which the Offer closes.

Company means Cazaly.

Corporations Act 2001 means the Corporations Act 2001 of Australia.

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

Dollars or \$ means Australian dollars unless otherwise stated.

February 2005 Option means an option to subscribe for one Share in Cazaly exercisable at 35 cents on or before 28 February 2005 and issued on the terms and conditions set out in Section 8.12.2 of the October 2003 Prospectus.

Glossary means this glossary.

Investigating Accountant means Rix Levy Fowler

Investigating Accountant's Report means the report contained in Section 6 of the October 2003 Prospectus.

Independent Geologist means AI Maynard and Associates.

SECTION 14

DEFINITIONS

Independent Geologist's Report means the report contained in Section 6 of the October 2003 Prospectus.

Issue means the issue of New Options pursuant to this Prospectus.

Cazaly means Cazaly Resources Limited (ABN 23 101 049 334).

June 2005 Option means an option to subscribe for one Share in Cazaly exercisable at 40 cents on or before 30 June 2005 and issued on the terms and conditions set out in Section 8.12.3 of the October 2003 Prospectus.

Listing Rules or ASX Listing Rules means the official Listing Rules of ASX.

New Option means an option to subscribe for one Share in Cazaly exercisable at 20 cents on or before 5:00pm WST on 31 January 2006 and issued on the terms and conditions set out in this Prospectus.

Offer means the offer of New Options pursuant to this Prospectus.

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

Official List means the Official List of ASX.

Opening Date means the date on which the Offer opens.

Option Holders means those parties holding options to acquire Shares in Cazaly.

Prospectus means this prospectus dated 18 December 2003 for the issue of up to 10,383,333 New Options, including any electronic or online version.

Quotation means quotation of the Shares or New Options on ASX.

Share means 1 fully paid ordinary share in Cazaly Resources Limited.

Shareholder means a holder of Shares.

WST means Western Standard Time, Perth, Western Australia.