CAZALY RESOURCES LIMITED — Capital/Financing Update 2017

Dec 28, 2017

==> picture [188 x 69] intentionally omitted <==

==> picture [69 x 6] intentionally omitted <==

----- Start of picture text ----- ABN 23 101 049 334----- End of picture text -----

29th December 2017

CONVERTIBLE NOTES AND ASX LISTING RULE 7.1

Cazaly Resources Limited (ASX: CAZ)(‘Cazaly’ or ‘the Company’) has been advised by the ASX that it considers a breach of ASX Listing Rule 7.1 has occurred in relation to the $750,000 unsecured convertible note capital raising announced on 14 December 2017. The notes can convert into shares in accordance with their terms of issue. The ASX advised the Company that it considers an issue of convertible notes without shareholder approval, with no fixed floor price and with a variable exchange rate, as breaching Listing Rule 7.1 due to the fact that the number of shares that the convertible notes convert into cannot be determined. ASX advised:

• a) The Company has exceeded its capacity to issue equity securities without security holder approval under listing rule 7.1 through the issue of the Convertible Notes on 14 December 2017.

• b) That the Company would need to retain the number of shares that the Convertible Notes were calculated to convert into in “C” for calculating capacity in accordance with listing rule 7.1 for the 12 month period commencing on the date that the Convertible Notes were issued (14 December 2017).

The Company maintains that the terms contained in the Unsecured Convertible Note Deed (‘ Deed ’) are sufficient to ensure compliance with Listing Rule 7.1 as:

• the Company has at no time issued more securities than it has available capacity under Listing Rule 7.1;

• the Company would only issue securities under the Deed if it had Listing Rule 7.1 capacity; and

• despite any other provision of the Deed, the Deed expressly provides that in the event that the execution of the Deed or the issue of any shares arising from a conversion of notes under the Deed would require shareholder or regulatory approval for any purpose including to secure compliance with the Corporations Act 2001 (Cth) or the listing rules of the ASX, or would require the consent of a third party for any purpose, ,

  • the Company will use its best endeavours to procure such approval or

  • consent;

  • a conversion of notes under the Deed is suspended until such approval

  • or consent is obtained; and

  • if such approval or consent is not obtained within 90 days of the date

  • of the Deed or the date of a conversion notice, then the notes, or the notes the subject of that conversion notice, will become immediately due and payable.

The Company has had several discussions with ASX and, despite the Company’s contrary view, agreed to address its concerns by making this announcement and retaining the number of shares that the Convertible Notes were calculated to convert into in its calculation of used capacity under Listing Rule 7.1 for a period of 12 months.

Level 2, 38 Richardson St, West Perth 6005 Australia Phone: +61 8 9322 6283 | Fax: +61 8 9322 6398 www.cazalyresources.com.au

This means that the estimated 17,441,860 shares calculated as being issued as a result of the issue of unconverted convertible notes (conversion at the ASX market price of $0.043 on 14 December 2017), need to remain in its calculation of used capacity under Listing Rule 7.1 for 12 months from the date that the convertible notes were issued (14 December 2017) and cannot be ratified by shareholders.

A general meeting of Company shareholders will be convened and held by 13 March 2018 to approve the conversion of the Convertible Notes, otherwise the notes under the Deed will become immediately due and payable.

The Company believes ASX’s decision will not impact the implementation of the Company’s business strategy.

For further enquiries please contact:

Nathan McMahon/Clive Jones Joint Managing Directors

2