CAZALY RESOURCES LIMITED — Capital/Financing Update 2009

May 19, 2009

20th May 2009

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ASX Release

MT CAUDAN IRON RESOURCE UPGRADE Parker Range Iron Ore Project

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• Updated Iron Ore Resource Estimate to 23.5mt

• 20% increase in tonnes, 42% (9.8mt) Indicated category

• Low impurity ore suitable for DSO operation

• Excellent potential to increase resource remains

• Open in all directions

• Only 2.6km from 16km of enriched BIF drilled

• Metallurgical test work ongoing

Background

The Company is pleased to announce an upgraded Iron Ore Mineral Resource from its 80% owned Parker Range Iron Project, a joint venture with Gondwana Resources Ltd (ASX:GDA). The Project lies approximately 15 kilometres south-east of Marvel Loch and approximately 60 kilometres by road south of the Perth–Kalgoorlie railway near Southern Cross. The Company announced its Maiden Resource Estimate for Mount Caudan of 18.9mt @ 56.4% Fe in November 2008. This resource update is the result of further investigation of the geology of the deposit and refinement of the geological model.

May 2009 Resource Estimate

The resource contains two primary ore-types; a heamatite - goethite Banded Iron Formation (BIF) and smaller component of secondary Canga and Detrital ore. All ore types have low levels of deleterious elements and are suitable for Direct Shipping Ore (DSO).

Level 1, 22 Oxford Close, West Leederville WA 6007 PO Box 396, West Perth WA 6872

Telephone: (08) 9380 4600 Fax: (08) 9381 5911 Web: www.cazalyresources.com.au

The Indicated and Inferred Resource estimate was estimated by independent mining consultancy group Runge Limited is as follows:

MOUNT CAUDAN RESOURCES – MAY 2009

		MOUNT CAUDAN RESOURCES – MAY 2009
Type	Cut-off Fe %	Indicated
		Tonnes Fe Al2O3 P SiO2 LOI Mn S T % % % % % % %
Canga BIF	50 52	1,417,000 53.3 7.0 0.01 8.7 6.2 0.9 0.06 8,434,000 55.0 1.8 0.01 6.7 9.2 2.3 0.08
Total		9,851,000 54.8 2.6 0.01 7.0 8.8 2.1 0.08

Type	Cut-off Fe %	Inferred
		Tonnes Fe Al2O3 P SiO2 LOI Mn S T % % % % % % %
Canga BIF	50 52	1,247,000 51.3 8.6 0.01 9.8 6.5 1.1 0.06 12,392,000 56.3 2.8 0.03 6.1 9.2 0.8 0.06
Total		13,639,000 55.8 3.3 0.03 6.4 9.0 0.8 0.06

Type	Cut-off Fe %	Total
		Tonnes Fe Al2O3 P SiO2 LOI Mn S T % % % % % % %
Canga BIF	50 52	2,664,000 52.4 7.7 0.01 9.2 6.3 1.0 0.06 20,826,000 55.8 2.4 0.02 6.3 9.2 1.4 0.07
Total		23,490,000 55.4 3.0 0.02 6.6 8.9 1.3 0.07

See Appendix A for Resource Estimate Parameters.

The May 2009 Mineral Resource has been classified into both Inferred and Indicated Mineral Resource categories on the basis of continuity of mineralisation and drillhole spacing. The Indicated portion of the deposit is situated within the central area of the deposit where drill section spacing is less than 120m with relatively continuous mineralisation along strike and down dip.

There is considerable scope to greatly expand the resource through further exploration both along the known strike extent of the enriched BIF and at depth. Currently the deposit has only been drilled down to approximately 100m. The Company is confident infill drilling will confirm the consistency of mineralisation and enable the resource category to be raised to Measured and Indicated status. Meanwhile, further exploration programs are being planned to explore the remainder of the Parker Range Project. Only 2.6km of strike has been tested to date from the enriched BIF horizon that stretches over 16km within the Company’s land holding, providing excellent potential for further iron discoveries and resource expansion.

Development Update

Metallurgical test work has advanced on the Mount Caudan Deposit. Current test work involves ore characterisation including identifying the physical properties of the ore such as in-situ SG, Uniaxial Compressive Strength, Crusher Work and Abrasion Indices. Composite of the various ore types are also undergoing drop tower tests to determine the amount of lump and fines products. Various tests will then be conducted on these separate lump and fines products subject to results. Results are expected by the end of the month.

Environmental Baseline studies have been ongoing for sometime now with a fauna survey of the Project area currently underway.

Summary

The Mount Caudan Deposit has been upgraded with a new Resource Estimate of 23.5mt @ 55.4% Fe, 42 % of which is in the Indicated Category. The Company is confident that the resource will be increased through further exploration and the resource category will be able to be lifted to Measured and Indicated status once infill drilling is completed. There remains excellent potential for further iron discoveries along the 16km-long BIF horizon which has never been previously explored for Iron Ore.

The Company is progressing with its development work on the deposit with results of preliminary metallurgical test work imminent.

Recently the Company announced its intention to raise A$3.5m through a pro rata nonrenounceable share placement to existing shareholders. Funds raised from the issue will be used to continue exploration and development work at Parker Range as well as further exploring the Company’s other Iron and Gold assets in the Pilbara and West Kalgoorlie region.

Yours sincerely,

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Nathan McMahon Managing Director

The information that relates to exploration targets, exploration results and drilling data is based on information compiled by Gregory Miles who is a Member of The Australian Institute of Geoscientists and an employee of the Company. The information that relates to the Mineral Resource Estimate has been authorized by Mr Paul Payne who is a member of the Australasian Institute of Mining and Metallurgy and an employee of Runge Limited. Both Mr Miles and Mr Payne have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Persons as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Miles and Mr Payne consent to the inclusion in their names in the matters based on their information in the form and context in which it appears.

Appendix A. Resource Statement and Parameters

Type	Cut-off Fe %	Indicated
		Tonnes Fe Al2O3 P SiO2 LOI Mn S T % % % % % % %
Canga BIF	50 52	1,417,000 53.3 7.0 0.01 8.7 6.2 0.9 0.06 8,434,000 55.0 1.8 0.01 6.7 9.2 2.3 0.08
Total		9,851,000 54.8 2.6 0.01 7.0 8.8 2.1 0.08

Type	Cut-off Fe %	Inferred
		Tonnes Fe Al2O3 P SiO2 LOI Mn S T % % % % % % %
Canga BIF	50 52	1,247,000 51.3 8.6 0.01 9.8 6.5 1.1 0.06 12,392,000 56.3 2.8 0.03 6.1 9.2 0.8 0.06
Total		13,639,000 55.8 3.3 0.03 6.4 9.0 0.8 0.06

Type	Cut-off Fe %	Total
		Tonnes Fe Al2O3 P SiO2 LOI Mn S T % % % % % % %
Canga BIF	50 52	2,664,000 52.4 7.7 0.01 9.2 6.3 1.0 0.06 20,826,000 55.8 2.4 0.02 6.3 9.2 1.4 0.07
Total		23,490,000 55.4 3.0 0.02 6.6 8.9 1.3 0.07

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• The Mt Caudan estimate covers a 2,700m lateral extent from 6,497,400mN to

• 6,500,100mN and the vertical extent of the resource is 155m from surface at approximately 445mRL to 290mRL.

• Drill holes used in the resource estimate included a single diamond hole and 87 RC holes for a total of 3,938m within the resource wireframes.

• Holes in the resource were drilled at section spacings between approximately 70m and

• 230m, but commonly at 120m section spacings.

• RC holes were sampled at 1 metre intervals. The sampling method involved collecting a calico bagged sample from a rig mounted splitter, while the bulk reject was collected to enable further testwork to be conducted.

• Sample preparation and assay was carried out by Kalgoorlie Assay Laboratories in Perth. Comprehensive assaying of Fe, Al2O3, SiO2, Mn, P and S was carried out routinely using XRF.

• Quality control data for the recent drilling has been reviewed by Runge, and it is the view

• of Runge that the base data used in the estimate is accurate and unbiased.

• All holes were surveyed at the collar and 50m intervals with a single shot camera. Only minor records were noted where magnetic interference had been experienced.

• Collar surveys and topographic surveys were carried out using standard topographic

• survey techniques.

• Wireframes were constructed using cross sectional interpretations based on mineralised envelopes constructed at a nominal 50% Fe cut-off grade for high grade BIF mineralisation and 45% for the Canga mineralisation. Samples within the wireframes were composited to even 1.0m intervals.

• Statistical analysis indicated that no high grade cuts were required.

• A Surpac block model was used for the estimate with a block size of 60m NS by 12.5m

• EW by 10m vertical with sub-cells of 15m by 3.125m by 2.5m.

• OK grade interpolation used an oriented ‘ellipsoid’ search neighbourhood. Three passes

• were used to fill the model with 95% of the model being filled in the first pass.

• Bulk density values were assigned on the basis of material type – Canga mineralisation 2.56t/m[3] , Sedimentary Iron Formation Clay (Sifocy) mineralisation 1.45t/m[3] , low – mod grade Sedimentary Iron Formation (Sif) mineralisation 2.21t/m[3] , and high grade Lump Sedimentary Iron Formation (Sifq) 2.94t/m[3] . All bulk density testwork was completed by Amdel Laboratories using the wax coated water immersion technique.