CAZALY RESOURCES LIMITED — Proxy Solicitation & Information Statement 2005

Mar 9, 2005

ACN 101 049 334

NOTICE OF GENERAL MEETING

PROXY FORM

AND

EXPLANATORY MEMORANDUM

Date of Meeting 12 April 2005

Time of Meeting 11.00am WST

Place of Meeting Celtic Club 48 Ord Street, West Perth Western Australia 6005

CAZALY RESOURCES LIMITED ACN 101 049 334

NOTICE OF GENERAL MEETING

NOTICE IS HEREBY GIVEN that a General Meeting of shareholders of Cazaly Resources Limited ACN 101 049 334 ("Company") will be held at Celtic Club, 48 Ord Street, West Perth, Western Australia 6005 on 12 April 2005 at 11.00am, Western Standard Time, for the purpose of transacting the following business referred to in this Notice of General Meeting:

An Explanatory Memorandum containing information in relation to each of the following Resolutions accompanies this Notice of General Meeting.

AGENDA

Resolution 1 - Return of Capital - In-specie Distribution of Graynic Shares

To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

"That pursuant to sections 256B and 256C of the Corporations Act 2001 (Cth), the Company's Constitution, the Listing Rules of Australian Stock Exchange Limited and all other purposes, the Directors be authorised, at their discretion, to effect the reduction in capital of the paid share capital of the Company by an amount equal to the value of the Graynic Shares on the Entitlement Date as determined by the directors (estimated to be \$2,000,000) and that such resolution be effected and satisfied by distributing 10,000,000 Gravnic Shares in-specie and on a pro rata basis to the Shareholders who are registered as members on the Entitlement Date (ignoring fractions and rounding down entitlement and otherwise on the terms and conditions set out in the Explanatory Memorandum accompanying this Notice of General Meeting "

Ordinary Resolution 2: "Ratification and Approval of Previous Allotment and Issue of Shares"

To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

"That for the purposes of ASX Listing Rule 7.4 and for all other purposes, this meeting approves and ratifies the prior issue and allotment of 2.000.000 Shares at an issue price of 40 cents each".

$\ddagger$ . Prior to making a decision with respect to Resolution 2, members should refer to Section 2 of the Explanatory Statement which accompanies this Notice of Meeting.

$\overline{2}$ . In accordance with ASX Listing Rule 7.5.6 the Company will disregard any votes cast on Resolution 2 by Fiske Plc or any associate of Fiske plc. However, the Company will not disregard a vote if it is cast by Fiske plc as proxy for a person who is entitled to vote in accordance with the directions on the proxy form; or if it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

PROXIES

• $\mathbf{1}$ . A member entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies to attend and vote instead of the member. If two proxies are appointed, and a member does not specify the proportion or number of the member's votes each proxy may exercise, each proxy may exercise half the votes. A proxy need not be a member of the Company.
• $\overline{2}$ . In order to vote on behalf of a company that is a shareholder of Cazaly, a valid Power of Attorney in the name of the attendee, must be either lodged with the Company prior to the Meeting, or be presented at the Meeting before registering on the attendance register for the Meeting.
• $\overline{3}$ . Forms to appoint proxies, and the Power of Attorney (if any) under which they are signed, must be lodged at the registered office of the Company, at Level 1, 22 Oxford Close, West Leederville, Western Australia or by facsimile (61 8) 9381 5911 not less than 48 hours before the time of the Meeting or resumption of an adjourned meeting at which the person named in the instrument proposes to vote.
• $\overline{4}$ . An instrument appointing a proxy:
• a) shall be in writing under the hand of the appointor or of his attorney, or if the appointor is a corporation, either under seal or under the hand of a duly authorised officer or attorney;
• b) may specify the manner in which the proxy is to vote in respect of a particular resolution and, where an instrument of proxy so provides, the proxy is not entitled to vote on the resolution except as specified in the instrument;
• c) shall be deemed to confer authority to demand or join in demanding a poll;
• d) shall be in such form as the Directors determine and which complies with Section 250A of the Corporations Act 2001:
• proxies appointing the Chairman which do not specify the way in which the proxy $e$ is to vote on a particular resolution will be recorded as voting in favour of the resolutions

ATTENDANCE AND VOTING ELIGIBILITY

For the purpose of regulation 7.11.37 of the Corporations Regulations 2001, the Directors have determined that Shares held at 5.00pm WST on Friday, 8 April 2005 will be taken, for the purposes of this General Meeting, to be held by the persons who held them at that time.

BY ORDER OF THE BOARD

Kent M. Hunter Director/Company Secretary Dated: 4 March 2005

CAZALY RESOURCES LIMITED ACN 101 049 334

EXPLANATORY MEMORANDUM

This Explanatory Memorandum has been prepared for the information of the shareholders of Cazaly Resources Ltd ('Cazaly" or "Company") in connection with the business to be transacted at the General Meeting of shareholders of Cazaly to be held at the Celtic Club, 48 Ord Street. West Perth Western Australia on 12 April 2005 at 11.00am Western Standard Time.

The Directors recommend shareholders read the accompanying Notice of General Meeting ("Notice") and this Explanatory Memorandum in full before making any decision in relation to the resolutions.

Certain terms and abbreviations used in this Explanatory Memorandum have defined meanings which are explained in the Glossary appearing at the end of this Explanatory Memorandum.

Background

As announced to ASX on 17 February 2005, the Board of Cazaly has resolved to implement an equal reduction of capital by way of an in-specie distribution to its shareholders of all of the shares it will receive in Graynic pursuant to an agreement dated 21 February 2005 whereby Cazaly has agreed to transfer a 20% interest, and further grant to Graynic the sole and exclusive right to earn a further 60% interest (for a total of 80%) of Cazaly's interests in its Quartz Circle, Jutson Rocks and Northampton Projects ("the Agreement").

The Entitlement Date for determining Cazaly shareholders' entitlement to Graynic Shares is yet to be decided but will be announced in due course. The In-Specie distribution to Cazaly shareholders will be on a pro-rata basis.

Graynic is currently an un-related public company with 500,003 fully paid ordinary shares on issue.

Proposed ASX Listing of Gravnic

It is proposed that following the in-specie distribution of Graynic Shares to Cazaly shareholders, Graynic will make an initial public officering (IPO) of up to 12,500,000 Graynic Shares at an issue price of \$0.20 each to raise up to \$2.500.000 pursuant to a prospectus**.

Gravnic proposes to raise "seed capital" of \$150,000 at an issue price of 10 cents per share to fund the initial costs of the IPO.

The funds raised in the IPO will be used to explore and develop Graynic's tenements and facilitate further acquisition and development of prospects. The directors of Cazaly and Graynic believe achievement of listed status by Graynic will provide a more appropriate structure and sufficient funding to maximise the value of the exploration assets to be acquired pursuant to the Agreement.

**A prospectus will be made available by Gravnic when the Graynic Shares are offered. Anyone who wishes to acquire Gravnic Shares will need to complete an application form that will accompany that prospectus.

Resolution 1 - Reduction of Capital and In-specie Distribution of Graynic Shares

In-specie Distribution of Graynic Shares

As noted above, it is proposed that the Company will make an in-specie distribution of the 10,000,000 Graynic Shares to Cazaly shareholders recorded on the members' register on the Entitlement Date, on a pro rata basis pursuant to an equal capital reduction under section 256B of the Corporations Act. Under the reduction of capital, Cazaly shareholders will be entitled to approximately one Graynic Share for every four (4) Cazaly Shares held on the Entitlement Date. Cazaly shareholders will not be required to pay any consideration for the Graynic Shares as Cazaly will make an appropriate capital reduction in its books to reflect this distribution. This proposal to reduce the capital in Cazaly and distribute 10,000,000 Graynic Shares in-specie is subject to the approval of Cazaly shareholders (which is being sought by Resolution 1 in this Notice).

Although shareholders may pass Resolution 1, the final decision to proceed with the in-specie distribution will be made by the Directors of the Company, in their absolute discretion.

In any event, notice of the Entitlement Date will be given by the Company at least 7 business days prior to the Entitlement Date.

Cazaly does not make any prediction as to what the value of the Graynic Shares will be at the time of distribution to Cazaly shareholders or subsequently. The amount of the proposed return of capital could be considered to be an amount equal to the value on the Entitlement Date of the Graynic Shares to be distributed to Cazaly shareholders.

The terms of the return of capital are the same for each holder of Cazaly Shares (subject to rounding).

The Directors consider the proposed return of capital will have no material adverse effect on the interests of shareholders or the Company's ability to pay its creditors. However, shareholders should be aware that there is no quarantee that Graynic will be admitted to the Official List of ASX and accordingly, shareholders may have a limited market in which to dispose of their Gravnic Shares, once the in-specie distribution is completed.

The proportionate ownership interest of each shareholder in Cazaly remains the same before and after the return of capital.

Although the capital of Cazaly will be reduced, the Directors do not consider that the extent of the return of capital will materially prejudice the interests of Cazaly's creditors. Net assets of Cazaly will remain positive at \$6.504,497.

A pro-forma statement of financial position for Cazaly as at 31 December 2004 is attached to this Explanatory Memorandum as Annexure A which shows the financial impact of Resolution 1, if passed, on Cazaly assuming that no further ordinary shares are issued.

Legal Requirements

Section 256B (1) of the Corporations Act provides that a company may reduce its share capital if the reduction:

• Is fair and reasonable to the company's shareholders as a whole:
• Does not materially prejudice the company's ability to pay its creditors; and $\bullet$
• Is approved by shareholders under section 256C of the Corporations Act.

The proposed capital reduction is an equal reduction as it relates only to ordinary Shares, it applies to each holder of ordinary Shares in proportion to the number of ordinary Shares they hold and the terms of the reduction are the same for each holder of ordinary Shares.

Accordingly, as the reduction is an equal reduction, section 256C of the Corporations Act requires approval of the proposed reduction by way of an ordinary resolution.

The Directors consider the proposed reduction of capital by distribution in-specie of 10,000,000 Graynic Shares on a pro rata basis to the existing shareholders of Cazaly does not materially prejudice Cazaly's ability to pay it creditors. Further, the Directors advise that the reduction of capital will not result in Cazaly being insolvent at the time of the capital reduction or become insolvent as a result of the capital reduction. Further, the Directors consider that the proposed in-specie distribution is fair and reasonable to Cazaly's shareholders as a whole because they are all treated in the same manner given that the distribution of Graynic Shares is on a pro rata basis.

Effect of Capital Reduction and In-specie Distribution

Effect on Shares

Cazaly currently has 40.190.876 Shares on issue. The number of Cazaly Shares on issue will remain unchanged as a result of the proposed capital reduction.

Effect on Options

Cazaly currently has on issue:

• 9,092,637 listed options with an exercise price of \$0.20 expiring on 31 January 2006 ('Listed Options"):
• 3,500,000 unlisted options with an exercise price of \$0.40 expiring on 30 June 2005 ("Options Jun2005")
• 400,000 unlisted options with an exercise price of \$0.30 expiring on 2 July 2009 ("Options Jul2009")
• 2,250,000 unlisted options with an exercise price of \$0.40 expiring on 31 August 2007 ("Options Aug2007")

In accordance with Rule 7.22.3 of the Listing Rules, the number of options on issue will remain the same however; the options are required to have their exercise price per option reduced by the same amount as the amount returned in respect to each Cazaly Share.

Based upon an estimated capital reduction of 5.0 cents (Refer to Case 1 on page 8):

• the exercise price of Listed Options will be reduced to 15.0 cents;
• the exercise price of Options Jun2005 will be reduced to 35.0 cents;
• the exercise price of Options Jul2009 will be reduced to 25.0 cents: and
• Exercise price of Options Aug2007 will be reduced to 35.0 cents.

Based upon an estimated capital reduction of 4.0 cents (Refer to Case 2 on page 9):

• the exercise price of Listed Options will be reduced to 16.0 cents:
• the exercise price of Options Jun2005 will be reduced to 36.0 cents;
• the exercise price of Options Jul2009 will be reduced to 26.0 cents; and
• Exercise price of Options Aug2007 will be reduced to 36.0 cents.

The exact amount of the reduction to the exercise price of the Options will be calculated upon a final determination of the amount of the capital reduction,

Taxation Implications

The following comments are based on the application of Australian taxation laws in force at the date of this Explanatory Memorandum.

It should be emphasised that these comments are general in nature and you should seek and rely on your own taxation advice in relation to the taxation consequences of the return of capital. Neither Cazaly nor any officers accept liability or responsibility with the respect to such consequences.

Shareholders will not be considered to have disposed of their shares in Cazaly as a consequence of the return of capital, although taxation consequences can still arise depending upon the circumstances of each individual shareholder.

Generally, the mere receipt of the Graynic Shares should not give rise to any immediate taxable gain to any shareholder, although a net capital gain may arise where the value of the Gravnic Shares received exceeds the cost base of the Cazaly Shares held (discussed in detail below). However all shareholders should note that for capital gains tax purposes and subsequent capital gains tax calculations, the cost base of the Gravnic Shares will be equal to their market value at the time they are transferred to you.

The Australian tax consequences pertaining to Cazaly Shares and associated with the return of capital may, in general terms be summarized as follows.

• The return of capital is to be made from Cazaly's share capital account. Accordingly, $\mathbf{1}$ . the return of capital should not be considered to be an assessable dividend for the purposes of section 44 of the Income Tax Assessment Act 1936. Sections 45A and 45B of the Income Tax Assessment Act 1936 contain provisions dealing with the streaming of dividends and capital benefits. Neither of these anti- avoidance provisions should apply in this instance.
• $\overline{2}$ . If you have acquired, or are deemed by the taxation legislation to have acquired, vou're Cazaly Shares on or after 21 September 1999, the following taxation consequences will apply.
• If you have held your Cazaly Shares for more than 12 months prior to the $(a)$ return of capital, the consideration received on the return of capital, will be treated as a reduction in the cost base or reduced cost base of your Cazaly Shares and in the event that the value of the Graynic Shares exceeds that cost base or reduced cost base a taxable capital gain that is subject to a further 50% discount will arise.

Alternatively, if you have held your Cazaly Shares for less than 12 months $(b)$ prior to the return of capital, the consideration received on the return of capital, will be treated as a reduction in the cost base or reduced cost base of your Cazaly Shares and in the event that the value of the Gravnic Shares exceeds that cost base or reduced cost base a taxable capital gain will arise.

• 1. If you are a non-resident of Australia for taxation purposes, you will not be subject to capital gains tax unless your Cazaly shareholding has a 'necessary connection' with Australia. This will only be the case where you (or you and your associates together) held 10% or more of the value of Cazaly's issued share capital at any time in the last 5 years. Furthermore, if a tax treaty exists between your county and Australia, the resulting capital gain may be exempt from Australian income tax. Non-resident shareholders are advised to seek their own specific advice in this area.
• $4.$ The taxation consequences to Cazaly shareholders (resident and non-resident) who may hold Cazaly Shares on revenue account or through a company or superannuation fund will depend on their specific circumstances and accordingly shareholders such as banks, insurance companies, share traders, and professional investors should seek their own advice.

Overseas Shareholders

Distribution of the Graynic Shares to Cazaly shareholders under the return of capital will be subiect to legal and regulatory requirements in their relevant jurisdictions. If the requirements of any jurisdiction where a shareholder is resident are held to restrict or prohibit the distribution of shares as proposed or would impose on Cazaly an obligation to prepare a prospectus or other similar disclosure document or otherwise impose on Cazaly an undue burden, the Graynic Shares to which the relevant Cazaly shareholder is entitled will be sold by Cazaly on their behalf as soon as practicable after the Entitlement Date and Cazaly will then account to those shareholders for the net proceeds of sale after deducting the costs and expenses of the sale. As the return of capital is being represented and satisfied by the distribution to Cazaly shareholders of Gravnic Shares and security prices may vary from time to time (assuming a liquid market is available), the net proceeds of sale to such shareholders may be more or less than the notional dollar value of the return of capital as set out in this Explanatory Memorandum.

Impact of Proposed Capital Reduction

The impact of Resolution 1 on Cazaly shareholders will depend on the number (if any) of Options exercised prior to the Entitlement Date. At the date of this Notice of Meeting, the Company has the following Options on issue:

• 9,092,637 listed options with an exercise price of \$0.20 expiring on 31 January 2006 ('Listed Options"):
• 3,500,000 unlisted options with an exercise price of \$0.40 expiring on 30 June 2005 ("Options Jun2005")
• 400,000 unlisted options with an exercise price of \$0.30 expiring on 2 July 2009 ("Options Jul2009")
• 2,250,000 unlisted options with an exercise price of \$0.40 expiring on 31 August 2007 ("Options Aug2007")

The Directors have received commitments from all of the holders of the Options Jun2005 and Options Aug2007 that they will not exercise their Options prior to the Entitlement Date.

The Options Jul2009 are unable to be converted prior to the Entitlement Date in accordance with the terms of their issue

The Directors therefore believe the maximum number of Options that could be exercised prior to the Entitlement Date is 9,092,637 (Maximum Number).

The impact can be shown using a hypothetical case example of a Cazaly shareholder who owns 100,000 Cazaly Shares on the Entitlement Date.

Case 1: Should there be no Options converted prior to the Entitlement Date the Cazaly shareholder will receive a distribution in-specie of the following Graynic Shares on the prorata entitlement calculation of:

$D = A \times C$	$=$ $-$	$100.000 \times 10.000.000$ 40.190.876
$D =$		24,881 (representing an approximate 1 for 4 distribution)

Where:

$D =$ the number of Graynic Shares being distributed to the shareholder in satisfaction of the capital reduction.

$A =$ the number of Cazaly Shares held by the shareholder on the Entitlement Date:

$B =$ the total number of Cazaly Shares on the Entitlement date;

$C =$ the total number of Graynic Shares which are being distributed to Cazalv Shareholders

The reduction of capital for each Cazaly Share on issue and the value of the reduction of the exercise price of each option is calculated as follows:

$R = RSV$ $\equiv$ \$2,000,000 B. 40.190.876

$=$ \$0.0498

Where

• $R =$ the reduction of capital per Cazaly Share;
• RSV = the value of the 10,000,000 Graynic Shares at 20 cents each; and
• $B =$ the total number of Cazaly Shares on issue.

Case 2: Should the Maximum Number of Options be converted prior to the Entitlement Date the Cazaly shareholder will receive a distribution in-specie of the following Graynic Shares on the pro rata entitlement calculation of:

$D = \underline{A} \times C$	-	100,000 x 10,000,000
		49.283.513

$D =$ 20,291 (representing an approximate 1 for 5 distribution).

Where:

$D =$ the number of Graynic Shares being distributed to the shareholder in satisfaction of the capital reduction.

$A =$ the number of Cazaly Shares held by the shareholder on the Entitlement Date;

$B =$ the total number of Cazaly Shares on the Entitlement date;

$C =$ the total number of Graynic Shares which are being distributed to Cazalv Shareholders

The reduction of capital for each Cazaly Share on issue and the value of the reduction of the exercise price of each option is calculated as follows:

$$
R = RSV = \frac{$2,000,000}{$B$} = \frac{$2,000,000}{$49,283,513$}
$$
$$
= \$0.0406
$$

Where

$R =$ the reduction of capital per Cazaly Share:

RSV = the value of the 10,000,000 Gravnic Shares at 20 cents each: and

$B =$ the total number of Cazaly Shares on issue.

Listing Rule 7.20

In accordance with Listing Rule 7.20, the following information is provided:

• The Directors are of the view that the proposed transaction contemplated in $(a)$ Resolution 1 will not be likely to decrease the price of Cazaly's shares. The Directors view is based on the following grounds:
• The projects to be divested and the Graynic Shares to be distributed are not the major portion of Cazalys assets and do not represent Cazaly's core business; and
• The proposed divestment of the Projects to Gravnic from Cazaly, will allow Cazaly to further focus on developing its major projects, the Kunanalling/West Kalgoorlie projects which may have a positive impact on the market price of Cazaly's shares.
• $(b)$ Fractions arising on the reduction of capital will be rounded down.
• Holders of options (listed and unlisted) in Cazaly will not be entitled to participate $(c)$ in the proposed reduction of capital however, options may be exercised prior to the entitlement date to participate in the in-specie distribution.

ASX Waiver

Cazaly will be making an application to the ASX to seek waivers from the following Listing Rules:

• $(a)$ Listing Rule 9.1 to the extent necessary to permit Cazaly to do the following:
• not apply the restrictions in Appendix 9B of the Listing Rules to the $(i)$ Graynic Shares issued to Cazaly Shareholders other than related parties and promoters (the "Distributed Shares"); and
• $(ii)$ Not enter into restriction agreements in relation to the Distributed Shares.
• Listing Rule 1.1 condition 7 to the extent necessary to reduce the number of new $(b)$ shareholders Graynic will need to obtain via its prospectus from 400.

RESOLUTION 2 - RATIFICATION OF PREVIOUS ALLOTMENT AND ISSUE OF $2.$ SHARES

Resolution 2 seeks Shareholder approval for the issue of 2,000,000 Shares.

ASX Listing Rule 7.4

ASX Listing Rule 7.1 provides that (subject to certain exceptions, none of which is relevant here) prior approval of Shareholders is required for an issue of securities if the securities will. when aggregated with the securities issued by the Company during the previous 12 months, exceed 15% of the number of the shares on issue at the commencement of that 12 month period.

ASX Listing Rule 7.4 provides that where a company ratifies an issue of securities, the issue will be treated as having been made with approval for the purpose of Listing Rule 7.1, thereby replenishing that company's 15% capacity and enabling it to issue further securities up to that limit.

Resolution 2 proposes the ratification and approval of the allotment and issue of Shares for the purpose of satisfying the requirements of ASX Listing Rule 7.4.

The information required to be provided to shareholders to satisfy ASX Listing Rule 7.4 is specified in ASX Listing Rule 7.5.

In compliance with the information requirements of ASX Listing Rule 7.5, members are advised of the following particulars in relation to the allotment and issue:

a. Date of Allotment and Issue of the Shares:	4 February 2005.
b. Number of Shares allotted and issued:	2.000.000.
c. Price at which Shares were allotted and issued:	40 cents each.

• d. The Shares rank equally in all respects with the existing ordinary shares on issue.
• e. The Shares were issued to Fiske plc. Fiske plc is neither a related party nor an associate of Cazaly Resources Limited.
• $f_{\perp}$ The allotment and issue was made to provide funds for further exploration of the Company's flagship Kunanalling Project.

GLOSSARY

"ASIC" means the Australian Securities and Investments Commission.

"ASX" means Australian Stock Exchange Limited ACN 008 624 691.

"Business Dav" means Monday to Friday inclusive except New Years Day, Good Friday, Easter Monday, Christmas Day, Boxing Day and any other day that the Australian Stock Exchange Limited declares is not a business day.

"Company" or "Cazaly" means Cazaly Resources Limited ACN 101 049 334.

"Corporations Act" means Corporations Act 2001 (Cth).

"Director" means a director of Cazaly.

"Entitlement Date" means a date to be announced by the Company, by at least 7 business Day's notice.

'IPO" means the proposed initial public offering of up to 12,500,000 Graynic Shares at an issue price of \$0.20 each to raise up to \$2.500.000 pursuant to a prospectus to be issued by a Graynic.

"Listing Rules" means the Listing Rules of ASX.

"Graynic" means Graynic Metals Ltd ACN 112 898 825.

"Graynic Share(s)" means ordinary full paid shares in the capital of Graynic.

"Notice" means the notice of meeting accompanying the Explanatory Memorandum.

"Official List" means the Official List of the ASX.

"Shareholder" means a holder or shares.

"Share(s)" or "Cazaly Share(s)" means ordinary full paid shares in the capital of Cazaly Resources Limited.

ANNEXURE A CAZALY RESOURCES LIMITED PRO FORMA STATEMENT OF FINANCIAL POSITION

	Unaudited Reviewed 31 December 2004 S	Proforma Unaudited 31 December 2004 \$
CURRENT ASSETS
Cash assets Receivables	1,665,820 107,028	3,340,820 107,028
Total Current Assets	1,772,848	3,447,848
NON CURRENT ASSETS
Investments in other companies Property, plant and equipment Exploration expenditure	165,933 354,400 3,053,775	165,933 354,400 2,978,793
Total Non Current Assets	3,574,108	3,499,126
TOTAL ASSETS	5,346,956	6,946,974
CURRENT LIABILITIES
Payables Provisions	435,644 6,833	435,644 6,833
Total Current Liabilities	442,477	442,477
TOTAL LIABILITIES	442,477	442,477
NET ASSETS	4,904,479	6,504,497
EQUITY
Contributed equity Accumulated losses	4,961,224 (56, 745)	4,636,224 1,868,273
TOTAL EQUITY	4,904,479	6,504,497

Assumptions:

On 4 February 2005, the Company completed the placement of 2,000,000 fully paid ordinary shares at $\bullet$ an issue price of \$0.40 to a UK based institutional investor, raising a total of \$800,000.

On 21 February 2005, the Company agreed to divest an 80% interest in Quartz Circle, Jutsons Rock and $\bullet$ Northampton Projects to Graynic Metals Limited for a consideration of 10,000,000 Graynic Shares.

On 18 February the two Managing Directors of the Company exercised a total of 2,500,000 options to subscribe for fully paid shares at \$0.35 each raising \$875,000 for Cazaly.

At a date to be determined, the Company will distribute a total of 10,000,000 Graynic Shares to its × Shareholders by way of an in-specie distribution.

PROXY FORM

The Secretary Cazaly Resources Limited PO Box 396 WEST PERTH WA 6872

being a member/members of Cazaly Resources Limited (the "Company") hereby appoint

Print proxy's name in full

of

print proxy's address

and (if you wish to appoint two proxies)

print second proxy's name in full

of

print second proxy's address

or, in the proxy's/proxies' absence or if no other appointee is mentioned, the Chairman of the meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the General Meeting of the Company to be held at the Celtic Club, 48 Ord Street, West Perth, Western Australia 6005, at 11.00am, Tuesday 12 April 2005 and at any adjournment of that meeting in respect of ................................... number being specified, ALL of my/our shares.

If you do not wish to direct your proxy how to vote, please place a mark in the box.
By marking this box, you acknowledge that the Chairman may exercise your proxy even if he
has an interest in the outcome of the resolution and votes cast by him other than as proxy holder will be disregarded because of that interest.
		Proxies appointing the Chairman which do not specify the way in which the proxy is to vote on a
		particular resolution will be recorded as voting in favour of the resolutions.
		If you wish to indicate how your proxy is to vote, please tick the appropriate places below. If no indication is
		given on a resolution, the proxy may abstain or vote at his or her discretion.
		I/We direct my/our proxy to vote as indicated below:
ORDINARY BUSINESS				ABSTAIN
RESOLUTION FOR AGAINST
1.		Return of Capital - In-specie Distribution of
		Graynic Shares
2.		Ratification and Approval of Previous Allotment and Issue of Shares
Note:	$\mathbf{1}$ .	If you have appointed two proxies the proportion of your voting rights allocated to each proxy is: Proxy No. 1 _% Proxy No. 2 _%.
	$\mathfrak{D}$ .	If the appointment of a proxy is signed by the appointor's attorney, this form must be accompanied by the authority under which the appointment was signed, or a certified copy of the authority.
		The completed Form of proxy may be:
	Mailed to the address on this form; or Faxed to the Company on (08) 9381 5911

PROXY FORM

Signed this	day of	2005
If a natural person:
SIGNED by in the presence of:			(Signature)
(Signature of Witness)
(Name of Witness in full)
If a Company: THE COMMON SEAL of
ACN was affixed in the presence of:
(Signature of Secretary/other Director)			(Signature of Director/Sole Director)
	(Name of Secretary/other Director in full)		(Name of Director/Sole Director in full)

PROXY VOTES

A vote given in accordance with the terms of an instrument or proxy is valid not withstanding the previous death or unsoundness of mind of the principal, the revocation of the instrument (or the authority under which the instrument was executed), or the transfer of the Share in respect of which the instrument or power is given, if no intimation in writing of the death, unsoundness of mind, revocation or transfer has been received by the Company at the Registered Office before the commencement of the Meeting or adjourned Meeting at which the instrument is used or the power is exercised.

REPRESENTATIVES OF CORPORATE SHAREHOLDERS

A body corporate ("the Appointor") that is a Shareholder may authorise, in accordance with Section 250D of the Corporations Act 2001, by resolution of its Directors or other governing body such person or persons as it may determine to act as its Representative at any Meeting of the Company or of any class of Shareholders. A person so authorised shall be entitled to exercise all the rights and privileges of the Appointor as a Shareholder. When a Representative is present at a Meeting of the Company, the Appointor shall be deemed to be personally present at the Meeting unless the Representative is otherwise entitled to be present at the Meeting.