CHALLENGER GOLD LIMITED — Proxy Solicitation & Information Statement 2020

Mar 15, 2020

CHALLENGER EXPLORATION LIMITED

ACN 123 591 382

NOTICE OF GENERAL MEETING

Notice is given that the Meeting will be held at:

TIME : 2.30pm WST DATE : 17 April 2020 PLACE : Level 1 1205 Hay Street WEST PERTH WA 6005

The business of the Meeting affects your shareholding and your vote is important.

This Notice of Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on +61 8 6380 9235.

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Meeting are those who are registered Shareholders at 5PM on 15 April 2020.

ASX takes no responsibility for the contents of this Notice of Meeting.

BUSINESS OF THE MEETING

AGENDA

1. RESOLUTION 1 – APPROVAL TO CHANGE OF SCALE OF ACTIVITIES

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

• “That, for the purposes of Listing Rule 11.1.2 and for all other purposes, approval is given for the Company to change the scale of its activities by undertaking the Proposed Transaction on the terms and conditions set out in the Explanatory Statement accompanying this Notice."

Short Explanation: Shareholder approval is sought under Listing Rule 11.1.2 to allow the Company to undertake the Proposed Transaction and thereby make a significant change to the scale of its activities.

Voting Exclusion Statement:

The Company will disregard any votes cast in favour of this Resolution by or on behalf of a counterparty to the transaction that, of itself or together with one or more transactions, will result in a significant change to the nature and scale of the entity’s activities and any other person who will obtain a material benefit as a result of the transaction (except a benefit solely by reason of being a Shareholder), or an associate of that person or those persons. However, this does not apply to a vote cast in favour of a resolution by:

• (a) a person as proxy or attorney for a person who is entitled to vote on the resolution, in accordance with directions given to the proxy or attorney to vote on the resolution in that way; or

• (b) the chair of the meeting as proxy or attorney for a person who is entitled to vote on the resolution, in accordance with a direction given to the chair to vote on the resolution as the chair decides; or

• (c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:

• (i) the beneficiary provides written confirmation to the holder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting, on the resolution; and

• (ii) the holder votes on the resolution in accordance with directions given by the beneficiary to the holder to vote in that way.

2. RESOLUTION 2 – RATIFICATION OF PRIOR ISSUE OF SHARES

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

• “That, for the purposes of ASX Listing Rule 7.4 and for all other purposes, Shareholders ratify the issue of 51,800,000 Shares on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast in favour on the resolution by or on behalf of a person who participated in the issue or any associates of those persons. However, this does not apply to a vote cast in favour of a resolution by:

• (a) a person as a proxy or attorney for a person who is entitled to vote on the resolution, in accordance with the directions given to the proxy or attorney for a person who is entitled to vote on the resolution in that way; or

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• (b) the Chair of the meeting as proxy or attorney for a person who is entitled to vote on the resolution, in accordance with a direction given to the chair to vote on the resolution as the chair decides; or

• (c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:

• (i) the beneficiary provides written confirmation to the holder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting, on the resolution; and

• (ii) the holder votes on the resolution in accordance with directions given by the beneficiary to the holder to vote in that way.

3. RESOLUTION 3 – APPROVAL TO ISSUE SHARES TO A RELATED PARTY – MR FLETCHER QUINN

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

“That for the purposes of section 195(4) of the Corporations Act, ASX Listing Rule 10.11 and for all other purposes, approval is given for the Company to issue up to 13,000,000 Shares to Fletcher Quinn (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion Statement : The Company will disregard any votes cast in favour of the resolution by or on behalf of the person who is to receive the securities in question and any other person who will obtain a material benefit as a result of the issue of the securities (except a benefit solely by reason of being a holder of ordinary securities in the entity) or an associate of those persons. However, this does not apply to a vote cast in favour of a resolution by:

• (a) a person as a proxy or attorney for a person who is entitled to vote on the resolution, in accordance with the directions given to the proxy to vote on the resolution in that way; or

• (b) the Chair of the meeting as proxy or attorney for a person who is entitled to vote on the resolution, in accordance with a direction given to the chair to vote on the resolution as the chair decides; or

• (c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:

• (i) the beneficiary provides written confirmation to the holder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting, on the resolution; and

• (ii) the holder votes on the resolution in accordance with directions given by the beneficiary to the holder to vote in that way.

4. RESOLUTION 4 – APPROVAL TO ISSUE SHARES TO A RELATED PARTY – MR SCOTT FUNSTON

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

“That for the purposes of section 195(4) of the Corporations Act, ASX Listing Rule 10.11 and for all other purposes, approval is given for the Company to issue up to 200,000 Shares to Scott Funston (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion Statement : The Company will disregard any votes cast in favour of the resolution by or on behalf of the person who is to receive the securities in question and any other person who will obtain a material benefit as a result of the issue of the securities (except a benefit solely by reason of being a holder of ordinary securities in the entity) or an associate of those persons.

However, this does not apply to a vote cast in favour of a resolution by:

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• (a) a person as a proxy or attorney for a person who is entitled to vote on the resolution, in accordance with the directions given to the proxy to vote on the resolution in that way;

• (b) or the Chair of the meeting as proxy or attorney for a person who is entitled to vote on the resolution, in accordance with a direction given to the chair to vote on the resolution as the chair decides; or

• (c) a holder acting solely in a nominee, trustee, custodial or other fiduciary capacity on behalf of a beneficiary provided the following conditions are met:

• (i) the beneficiary provides written confirmation to the holder that the beneficiary is not excluded from voting, and is not an associate of a person excluded from voting, on the resolution; and

• (ii) the holder votes on the resolution in accordance with directions given by the beneficiary to the holder to vote in that way.

Dated: 12 March 2020

By order of the Board

Scott Funston Director & Company Secretary Challenger Exploration Limited

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Voting in person

To vote in person, attend the Meeting at the time, date and place set out above.

Voting by proxy

To vote by proxy, please complete and sign the enclosed Proxy Form and return by the time and in accordance with the instructions set out on the Proxy Form.

In accordance with section 249L of the Corporations Act, Shareholders are advised that:

• each Shareholder has a right to appoint a proxy;

• the proxy need not be a Shareholder of the Company; and

• a Shareholder who is entitled to cast two (2) or more votes may appoint two (2) proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member’s votes, then in accordance with section 249X(3) of the Corporations Act, each proxy may exercise one-half of the votes.

Shareholders and their proxies should be aware that changes to the Corporations Act made in 2011 mean that:

• if proxy holders vote, they must cast all directed proxies as directed; and

• any directed proxies which are not voted will automatically default to the Chair, who must vote the proxies as directed.

Further details on these changes are set out below.

Proxy vote if appointment specifies way to vote

Section 250BB(1) of the Corporations Act provides that an appointment of a proxy may specify the way the proxy is to vote on a particular resolution and, if it does :

• the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed); and

• if the proxy has two (2) or more appointments that specify different ways to vote on the resolution, the proxy must not vote on a show of hands; and

• if the proxy is the chair of the meeting at which the resolution is voted on, the proxy must vote on a poll, and must vote that way (i.e. as directed); and

• if the proxy is not the chair, the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed).

Transfer of non-chair proxy to chair in certain circumstances

Section 250BC of the Corporations Act provides that, if:

• an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a meeting of the Company's members; and

• the appointed proxy is not the chair of the meeting; and

• at the meeting, a poll is duly demanded on the resolution; and

• either of the following applies:

• ➢ the proxy is not recorded as attending the meeting; or ➢ the proxy does not vote on the resolution,

the chair of the meeting is taken, before voting on the resolution closes, to have been appointed as the proxy for the purposes of voting on the resolution at the meeting.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on +61 8 6380 9235. .

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EXPLANATORY STATEMENT

This Explanatory Statement has been prepared to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions.

1. INFORMATION ABOUT THE TRANSACTION

1.1 ASX Listing Rule 11.1

ASX Listing Rule 11.1 provides that where an entity proposes to make a significant change, either directly or indirectly, to the nature or scale of its activities, it must provide full details to ASX as soon as practicable (and before making the change) and comply with the following:

• (a) provide to ASX information regarding the change and its effect on future potential earnings, and any information that ASX asks for;

• (b) if ASX requires, obtain the approval of holders of its shares and comply with any requirements of ASX in relation to the notice of meeting; and

• (c) if ASX requires, meet the requirements of Chapters 1 and 2 of the ASX Listing Rules as if the entity were applying for admission to the Official List.

Following consultation with ASX, ASX has advised that the entry into the farm-in agreements whereby the Company will, subject to Shareholder approval, have the right to farm-in to the Colorado V tenement ( Colorado V Tenement ) and the El Guayabo 2 tenement ( El Guayabo 2 Tenement ) (together, the Tenements ) (together, the Farm-In Agreements ) ( Farm In’s ) ( Transaction ), the subject of Resolution 1, will result in a significant change to the nature or scale of its activities.

In accordance with ASX Listing Rule 11.1.2 if ASX requires, the entity must get approval of holders of its ordinary securities and must comply with any requirements of ASX in relation to the notice of meeting (including the inclusion of a voting inclusion statement).

The Transaction will involve a significant change to the nature or scale of the Company’s activities for these purposes and, as is its usual practice, ASX has imposed a requirement under Listing Rule 11.1.2 that the Company obtain shareholder approval to the Transaction.

Resolution 1 seeks the required shareholder approval to the Transaction under and for the purposes of Listing Rule 11.1.2.

If resolution 1 is passed, the Company will be able to proceed with the Transaction and the change to the nature and scale of the Company’s activities will occur.

If resolution 1 is not passed, the Companywill not be able to proceed with the Transaction and there will be no change to the nature and scale of the Company’s activities and the Company will continue its focus on its existing projects.

1.2 Company and existing projects

The Company has a continuing focus on a Gold Project in Argentina (the Hualilan Gold Project). This project is in good standing and the Company is continuing to work towards its maximum earn in interest of 75%.

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For more details on the Company’s existing projects, please refer to the Company’s website www.challengerex.com .

1.3

General

As announced on 8 and 28 January 2020, the Company has entered into farm-in agreements whereby the Company will, subject to Shareholder approval, have the right to farm-in to the Colorado V tenement ( Colorado V Tenement ) and the El Guayabo 2 tenement ( El Guayabo 2 Tenement ) (together, the Tenements ) (together, the Farm-In Agreements ) ( Farm In’s ). As such, the Company is required to obtain approval from its shareholders pursuant to ASX Listing Rule 11.1.2.

In the event the Company does not obtain shareholder approval for the Farm In’s, the Farm In’s will not proceed, and the Company will continue with its current operations and its existing projects.

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1.4 Colorado V Tenement

The Colorado V Tenement covers 2,331 hectares adjoining the Company’s El Guayabo Project in Ecuador. The El Guayabo 2 Tenement covers 957 hectares and is located on the southern margin of the Company’s existing El Guayabo tenement n Ecuador.

Background

The Colorado V Tenement has the same geology as the Company’s existing El Guayabo Gold and Copper Project. The Geology comprises a metamorphic basement intruded by intermediate alkaline intrusives which range in age from 40 – 10 million years age (Ma). The intrusions are commonly overprinted by late porphyry dykes and intrusion breccia suggesting deeper, evolving magmatic systems are feeding shallower systems. The current gold production comes from a combination of veins and intrusive breccias similar to those identified at the El Guayabo Copper and Gold Project.

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Goldking (defined below) has undertaken extensive and high-quality exploration which includes a multi element soil geochemistry survey covering approximately 20 square kilometres, 21,500 metres of core drilling and a yet to be defined number of kilometres of underground exploration drives and workings. The core was intermittently sampled with the sampling program focussed on identifying additional high-grade vein/breccia hosted gold mineralisation to be processed at their plant. Those sections of the core which were sampled were assayed, for gold only, in Goldking's on site laboratory. The core is stored on site and is currently being moved to the Company’s core storage facility at the El Guayabo Gold and Copper Project for logging and sampling (where warranted).

Limited reconnaissance field work undertaken by the Company during initial due diligence has identified porphyry and bulk gold and copper mineralisation in a number of locations in both underground adits and outcrop with due diligence indicating that Goldking encountered porphyry mineralisation in a number of drill holes. This porphyry mineralisation was bypassed and not systematically logged or sampled as drilling was designed specifically to identify additional high-grade mill feed for Goldking's existing operations.

Core Logging/Sampling

Core logging of JDH-13 over 90-150m (assay 1.4 g/t gold, 2.6 g/t silver 0.1% copper) reported intercalated flow banded silica breccias, intrusive breccias and lesser dacite porphyry) and pervasive Phyllic and silica alteration with lesser potassic alteration with 1-3% pyrite and minor chalcopyrite.

Core logging of GY-02 over the interval 10-166m (assay 2.6 g/t gold, 9.7g/t silver 0.2 copper) reported intercalated clast supported intrusive breccias, intrusive breccias, and lesser flow banded silica breccias consisting of pervasive Phyllic and silica alteration with lesser potassic alteration with 2-7% pyrite and up to 2% chalcopyrite.

Core logging of ZK1-3 reported a 350-metre interval from 74 metres downhole consisting of intercalated flow banded silica breccias, intrusive breccias and lesser dacite porphyry and pervasive Phyllic and silica alteration with lesser potassic alteration with 1-2% pyrite and trace chalcopyrite.

Core logging of ZK1-5 reported a 152-metre interval from 243 metres downhole consisting of intercalated clast supported intrusive breccias, intrusive breccias, and lesser flow banded silica breccias consisting of pervasive Phyllic and silica alteration with lesser potassic alteration with 2-5% pyrite and up to 1% chalcopyrite.

Core logging of ZK1-6 reported the following significant intervals which are believed to potentially be the outer halo of a gold-copper porphyry system:

281.0 m to 490 m: Within this interval, Diorite, fine to medium grained with some Type 1 Breccia intervals and continuous diorite intervals with some brecciation (metamorphic clasts) showing moderate to strong silicification + weak sericite / illites with locally pyrite disseminated / veinlets +/ mgt +/- pyrrhotite, , some vein/veinlets with sulphides / sulphides + chlorite halo veinlets (late and late “D” veinlets), and early quartz + biotite +/- sulphides veinlets.

490.0 m to 605.0 m : Within this interval, Diorite, fine to medium grained with some Type 1 Breccia intervals and continuous diorite intervals with some brecciation (metamorphic clasts) , some volcanic rock thin (like – sills) intrusions, the intrusive rocks usually shows moderate to strong silicification + weak sericite / illites with abundant pyrite disseminated / veinlets +/ mgt +/- pyrrhotite, , some vein/veinlets

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with sulphides / sulphides + chlorite halo veinlets (late and late “D” veinlets), and early quartz + biotite +/- sulphides +/- mgt veinlets ; biotite +/- magt veinlets + early “A” veinlets crosscutting foliation planes and irregular distributed along the intrusive intervals. Some locally KF developing in a biotitized matrix.

Underground Mapping/Sampling

The geological mapping was conducted along the main Humedo’s adit which is approximately 400 metres in length. In this adit a 300-metre exposure of intrusive containing Porphyry style B veins with pyrite + molybdenite + chalcopyrite + pyrrhotite and late pyrite veinlets. The exposure is interpreted as the potential outer halo of a gold-copper porphyry system given the veining density is variable with the stockwork not overly well developed with B veins mapped as occurring at intervals of 1-5 metres. Detailed channel sampling of this adit exposure is underway.

Note - quantitative estimates of mineral abundance have not been provided so as not to cause the market to be misled on the elemental abundance in the absence of chemical assays. Visual observations may also not include guidance on elemental abundance that may not be evident with the naked eye.

Surface Mapping/Sampling

Reconnaissance surface mapping/sampling was conducted in two creeks which run north-south across the - Colorado V concession. In the first creek mineralized diorites, dacites and metamorphic rocks occurs along the creek mainly as outcrops showing varying degrees of mineralization including Py, Cpy, Po, Mo / sulphides mineralization) as well as varying hydrothermal alteration patterns including phyllic and likely potassic alteration which irregularly distributed.

In the second creek travers altered Diorites with K style of alteration was observed showing moderate to strong biotite – magnetite alteration and a cross cutting Dacite intrusive with strong phyllic alteration. Early and transitional veinlets are typical occurring as slight moderate – stockworks with porphyry style M-A-B and some D veinlets containing quartz, chalcopyrite, biotite and molybdenite.

A total of 16 rock chip samples were collected and submitted to S.G.S Lab for its respective assaying with results pending.

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1.5 Terms of the Colorado V Farm-In Agreement – Colorado V Tenement

The Company, via its wholly owned subsidiary, Ecuador Mining E-M, S.A. (a company incorporated and registered under the laws of Ecuador) is a party to a farm-in agreement with Goldking Mining Company S.A. (a company incorporated and registered under the laws of Ecuador) pursuant to which the Company, is to be granted the exclusive right to acquire an interest of up to 50% of Goldking’s right, title and interest in, and to, the concession named Colorado V ( Colorado V Farm-In Agreement ).

The farm-in covers a period of 5 years and comprises a 3-year exploration stage followed by a 2-year resource definition stage. During this 5-year period, The Company may earn up to a 50% interest in any discovery by the Company of a Resource greater than 200,000 Oz (Discovery). The existing high-grade gold resource and current production operation of Goldking are excluded from the Colorado V Farm-In Agreement.

Exploration Stage

During the initial 3-year exploration stage, the Company will fund 100% of its exploration program on the Colorado V Tenement. At any time before the end of the Exploration Stage, the Company must declare a Discovery. Once the Company declares a Discovery an additional period of 2 years shall apply (the Resource Definition Stage ).

The declaration of Discovery shall be made by the Company through a written notice to Goldking at the Company’s discretion. In the event that the Company does not declare a Discovery on, or before the end of the Exploration Stage, the Agreement shall automatically terminate after the initial 3 years with no consequence for the Company, except for the Company’s obligation, to return (at the expense of the Company) originals of all exploration data to Goldking, including transporting all core and pulps to Goldking's core storage facility on the Tenement.

Resource Definition Stage

The Company, at its sole discretion, may execute additional investments in the Tenement during the Resource Definition Stage. In the Resource Definition Stage the Company shall define a Resource so as to earn its interest under the Agreement. With the interest earned as follows:

• (a) ownership will remain 100% with Goldking if the mineral deposit is less than 200,000 oz. gold;

• (b) the Company shall earn a 30% interest if the mineral deposit is between 200,001 and 600,000 oz. gold; and

• (c) the Company shall earn a 50% interest if the mineral deposit is greater than 600,000 oz. gold.

Separate smaller Resources discovered by the Company can be combined into the one larger Resource, for the purposes of the Agreement, provided that the Resources are at least 200,000 oz. and either:

• (a) the Resources have the same source; or

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• (b) the Resources can be mined jointly.

The mineral deposits identified by the Company must also meet the following criteria based on grade as follows:

• (a) a Resource grade in excess of 0.7 g/t gold equivalent; or

• (b) a Resource grade of less than 0.7 g/t gold equivalent so long as the Feasibility Study demonstrates that the mineral deposit can be commercially exploited.

A Resource with a grade of less than 0.7 g/t gold equivalent may be combined into the one larger Resource, for the purposes of this Agreement, with Resources of greater than 0.7 g/t gold equivalent provided that the Resources are at least 200,000 Oz and either:

• (a) the Resources have the same source; or

• (b) the Resources can be mined jointly.

In this case the Resource grade for the purposes of the Agreement shall be deemed to be the grade of the higher-grade portion of the deposit.

During the Exploration and Resource Definition stages the Company shall make a minimum expenditure of US$8,000,000 (the Minimum Expenditures ). However, the Minimum Expenditures are contingent on the Company achieving positive exploration results, provided that the Company uses its best endeavours to undertake a full and proper exploration program. If, at the end of the Resource Definition stage, the company has not incurred expenditures of $8 million then the Company may, at its sole discretion, make up any shortfall in the $8 million expenditure by making a one-off cash payment to Goldking.

Compensation in the event of a discovery underlying Goldking current Operations

Should any discovery adjoin or underly the existing operations, the Company will compensate Goldking by delivering the currently identified high-grade gold ore to its exiting run of mind stockpile as part of the stripping. Additionally, should any porphyry or bulk gold deposit underly Goldking’s existing camp, the Company will pay for the relocation of Goldking's Camp.

Refund of Goldking Drilling Costs and use of Drill Rig

The Company will refund Goldking the cost of drilling conducted by Goldking, at a rate of US$126 per metre, for any intervals where re-assaying by the Company confirms a grade of greater than 0.7 g/t gold equivalent. The Company and Goldking may agree on the terms and conditions for the Company to use the existing infrastructure of Goldking including Goldking’s two (2) drill rigs for the Company’s own operations and activities.

Mutual Farm-in and Pre-emptive Rights

Under the terms of the Agreement Goldking and the Company will have mutual rights to participate in any farm-in negotiated by the other party on an adjoining tenement on a 50:50 joint basis.

Both Parties have the right of first refusal on the other parties interest under the Agreement. Upon the Company earning an interest under the Agreement, the

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Parties will enter into a shareholders agreement with industry standard dilution clauses and pre-emptive rights.

1.6 El Guayabo 2 Tenement

(a) Background

The El Guayabo 2 Tenement comprises 957 hectares which are adjacent to the existing El Guayabo Project.

Limited historical exploration has been undertaken on the El Guayabo 2 tenement, with the work that has been done undertaken by local Ecuadorian groups that targeted high-grade gold. Historical exploration reports record sericitic, argillic and propylitic alteration in diorites and quartz diorites with the mineralisation associated with this alteration described as containing minor pyrite with lesser chalcopyrite in parts. Historical assays also report anomalous gold in the intrusives.

Note - quantitative estimates of mineral abundance have not been provided so as not to cause the market to be misled on the elemental abundance in the absence of chemical assays. Visual observations may also not include guidance on elemental abundance that may not be evident with the naked eye.

(b) Terms of the El Guayabo 2 Farm-In Agreement

The Company, via its wholly owned subsidiary, Ecuador Mining E-M, S.A. (a company incorporated and registered under the laws of Ecuador) is a party to a farm-in agreement with Angel Marin Gomez Y Hermida Adelina Freire Jaramillo. A summary of the key terms and conditions of the El Guayabo Tenement 2 Farm-In Agreement is set out below:

• (i) Due Diligence: The agreement is subject to the completion of due diligence by the Company with a 90-day period allowed for completion of due diligence.

• (ii) Collaboration: The agreement covers an initial period of 5 years during which the Company can earn up to a 50% interest in the project by exploration expenditure of US$2 million. The Company can then acquire up to 80% by the completion of a definitive feasibility review, with the option to acquire the final 20% of the project. The Company will be responsible for the costs of keeping the concession in good standing during this period. The Company has the right to withdraw from the agreement at any time.

• (iii) Stage 1 - Option to acquire a 25% interest: The Company will pay a US$20,000 option fee and have a 3-month period to conduct due diligence. Following due diligence, the Company will have a period of 5-years to earn an initial 25% in the El Guayabo 2 concession by spending US$1 million on exploration. Should the Company not spend a minimum of US$1 million over this 5-year period, it will reimburse the current concession owner US$92,500 for historical exploration expenditure.

• (iv) Stage 2 - Option to acquire a further 25% interest: The Company at its sole discretion can elect to spend an additional US$1 million

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during this 5-year period to increase its interest in the El Guayabo 2 concession from 25% to 50%.

• (v) Stage 3 - DFS to acquire a further 30% interest: After moving to 50% of the El Guayabo concession, The Company can, at its sole discretion, elect to sole fund a definitive feasibility study ( DFS ) to earn up to an additional 30% interest in the concession. For every US$2 million sole funded on the DFS (up to a total expenditure of US$6 million), the Company will earn an additional interest of 10% in the concession. There is no set time for completion of a DFS.

• (vi) Stage 4 - Option to acquire the final 20% interest: The Company will have the option to acquire the final 20% interest in the concession at its sole discretion. If the Company elects to move to 100% ownership of the concession, then the following will apply:

• (A) the Company will appoint an independent expert to value the remaining 20% of the concession;

• (B) the concession owner will be compelled to sell its remaining 20% interest in the concession to the Company at a discount of 20% to the valuation of this 20% interest as determined by the independent expert, and in any event for a sum no less than US$4 million. This consideration will be paid in either all cash or 50% in cash and 50% in Shares at the election of the Company (and if Shares are elected this will be subject to the receipt of any required approvals);

• (C) should the Company not elect to acquire the final 20% interest for the price in Section 1.4(b)(vi)(B)above, then the concession holder will be free to sell its 20% interest to a third party. In this event, the Company will have a 30-day period where it can match any sale price agreed for this 20% interest and move to 100% ownership of the concession; and

• (D) if no offer suitable to the owner of the residual 20% interest is received, then the concession holder can elect to either:

  • (I) negotiate the conversion of this 20% interest into a net smeltery royalty in which case the Company will move to 100% ownership of the project;

  • (II) contribute to development on a pro-rata basis to maintain its 20% interest in the project; or

  • (III) elect to dilute its interest in which case the value of the 80:20 joint venture will be deemed to be US$10 million for the purposes of dilution.

1.7 Competent Persons Statement

The information in this Notice that relates to sampling techniques and data, exploration results and geological interpretation has been compiled by Dr Stuart

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Munroe , BSc (Hons), PhD (Structural Geology), GDip (AppFin&Inv) who is a fulltime employee of the Company. Dr Munroe is a Member of the AusIMM. Dr Munroe has over 20 years’ experience in the mining and metals industry and qualifies as a Competent Person as defined in the JORC Code (2012).

Dr Munroe has sufficient experience of relevance to the styles of mineralisation and the types of deposits under consideration, and to the activities undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results. Dr Munroe consents to the inclusion in this Notice of the matters based on information in the form and context in which it appears. The Australian Securities Exchange has not reviewed and does not accept responsibility for the accuracy or adequacy of the information in this Notice.

1.8 Financial effect of the Farm In’s

UNAUDITED PROFORMA BALANCE SHEET AS AT 31 DECEMBER 2019

	Notes	Company 31 December 2019		Adjustment		Pro-Forma 31 December 2019
CURRENT ASSETS		$		$		$
Cash and cash equivalents	1,2	1,911,136		5,666,052		7,577,188
Trade and other receivables		64,295		-		64,295
Other financial assets		10,893		-		10,893
TOTAL CURRENT ASSETS		1,986,324		5,666,052		7,652,376
NON-CURRENT ASSETS
Exploration and evaluation	2	5,467,448		520,000		5,987,448
Property, Plant and Equipment		21,821		-		21,821
TOTAL NON-CURRENT ASSETS		5,489,269		520,000		6,009,269
TOTAL ASSETS		7,475,593		6,186,052		13,661,645
CURRENT LIABILITIES
Trade and other payables		813,316		-		813,316
Provisions		5,049		-		5,049
TOTAL CURRENT LIABILITIES		818,365		-		818,365
TOTAL LIABILITIES		818,365		-		818,365
NET ASSETS		6,657,228		6,186,052		12,843,280
EQUITY
Issued capital	1	13,194,054		6,186,052		19,380,106
Reserves		(14,684)		-		(14,684)
Accumulated losses		(6,522,142)		-		(6,522,142)
TOTAL EQUITY		6,657,228		6,186,052		12,843,280

Notes:

1. 65,000,000 Shares placed to raise $6,500,000 at $0.10 per share less the placement capital raising costs completed on 17 January 2020. Refer Resolutions 2, 3 and 4 for further details.

2. The $500,000 exploration expenditure on the Colorado V concession is an estimate only as the exploration expenditure is dependent on results and if the results do not justify the expenditure, the Company is likely to exercise its withdrawal rights. The $20,000 exploration expenditure on El Guayabo 2 is the up-front payment for the transaction. It is currently unknown how much exploration expenditure will be spent on the concessions. All expenditure on the Farm In’s will be from existing cash reserves.

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As noted above, the initial funding for the Farm-In’s will be from existing cash reserves, and by its nature, expenditure on exploration is dependent on results.

1.9

Business model

The Farm In’s fit within the Company’s historic position of being a mineral exploration company with gold and copper projects in South America. The location of the Tenements is seen as complementary to its existing projects in Ecuador ( Existing Projects ).

The Farm In’s will therefore maintain a continuation of the Company’s existing business strategy.

Subject to the settlement of the Farm In’s, the Company intends to continue the exploration programmes at its current exploration Projects.

Exploration programmes on all projects at the date of this Notice of Meeting include; a significantly larger drilling program over the next 6 months at Hualilan; an extensive program of re-assaying the historical Colorado V drill core, follow up geophysics and drilling at the El Guayabo Gold/Copper Project; further expanding our tenement position at both projects; and general working capital. Additionally, the Company will undertake a geophysical survey and metallurgical test work at Hualilan.

1.10 Proposed change to Capital Structure

	Minimum Subscription
Current Shares on issue prior to placement shares being issued	470,680,960
Shares Issued in Placement	51,800,000
Proposed issue of Placement Shares to related parties (Resolutions 3 and 4)	13,200,000
El Guayabo 2 Tenement Holder Issue1	58,823,530
TOTAL2	594,504,490

Notes:

1. Pursuant to 1.5 (b)(vi)(B) above the Company may elect to issue shares to the Tenement holder of the El Guayabo 2, however the number and value cannot be determined at this time. The value cannot be less than $4,000,000 USD. The number of shares has been calculated at the current placement price of $0.10 per share, an exchange rate of 1AUD to 0.68USD and an Australian dollar value of $5,882,353. These shares may never be issued and are subject to change.

2. There will be no shares issued as a result of entering into the Farm-In Agreements.

1.11 Effect on the Board and senior personnel

The Farm In’s will have no effect on the composition of the Board.

As announced on 28 January 2020, the Company will appoint two additional geologists in Ecuador to advance work on the El Guayabo 2 Tenement.

1.12 Timetable

A timetable for the Farm-In’s is set out below:

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Event	Date
Notice of General Meeting to approve the Farm In’s sent to Shareholders	16 March 2020
General Meeting to approve the Farm In’s	17 April 2020
Farm In’s are in force and effect	17 April 2020

*Please note that this timetable is indicative only and the Directors of the Company reserve the right to amend the timetable as required.

2. RESOLUTION 2 – RATIFICATION OF PRIOR ISSUE OF SHARES

2.1 General

On 13 January 2019, the Company announced that it had received commitments from investors for the issue of 65,000,000 Shares at an issue price of $0.10 per Share to raise $6,500,000 ( Placement ) ( Placement Shares ).

On 17 January 2019, the Company issued 51,800,000 Placement Shares, the balance of the Placement Shares, being 13,200,000 Shares, to be issued, subject to Shareholder approval, to the Company’s directors, Messrs Fletcher Quinn and Scott Funston, by virtue of their participation in the Placement. The purpose of this Resolution 2, is to ratify the issue of the 51,800,000 Placement Shares issued to unrelated parties who participated in the Placement pursuant to ASX Listing Rule 7.4 ( Ratification ).

ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to issue more equity securities during any 12 month period than that amount which represents 15% of the number of fully paid ordinary securities on issue at the commencement of that 12 month period.

ASX Listing Rule 7.4 sets out an exception to ASX Listing Rule 7.1. It provides that where a company in general meeting ratifies the previous issue of securities made pursuant to ASX Listing Rule 7.1 (and provided that the previous issue did not breach ASX Listing Rule 7.1) those securities will be deemed to have been made with shareholder approval for the purpose of ASX Listing Rule 7.1.

By ratifying this issue, the Company will retain the flexibility to issue equity securities in the future up to the 15% annual placement capacity set out in ASX Listing Rule 7.1 without the requirement to obtain prior Shareholder approval.

2.2 Technical information required by ASX Listing Rule 7.4

Pursuant to and in accordance with ASX Listing Rule 7.5, the following information is provided in relation to the Ratification:

• (a) the Shares were issued to strategic investors and domestic institutions. None of these subscribers are related parties of the Company;

• (b) 51,800,000 Shares were issued;

• (c) the Shares issued are fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;

• (d) the issue price of the Shares is $0.10 per Share; (e) the funds raised from the Placement will be used:

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• (i) on a significantly larger drilling program over the next 6 months at the Hualilan Gold Project;

• (ii) an extensive program of re-assaying the historical Colorado V drill core, follow up geophysics and drilling at the El Guayabo Gold/Copper Project;

(iii) further expanding the Company’s tenement position at both Projects; and

(iv) general working capital.

3. RESOLUTIONS 3 AND 4 – APPROVAL TO ISSUE SHARES TO RELATED PARTIES – MESSERS FLETCHER QUINN AND SCOTT FUNSTON

3.1 General

As set out in Section 2.1 above, the Company received commitments from investors, to raise $6,5000,000 via a placement of 65,000,000 Shares at an issue price of $0.10 per Share. Messrs Quinn and Funston, each a related party of the Company by virtue of being a director, wish to participate in the Placement.

The purpose of Resolutions 3 and 4 is to seek Shareholder approval for the proposed issue of 13,200,000 Shares to Messrs Quinn and Funston ( Issue , or together, the Issues ) by virtue of their participation in the Placement ( Participation ).

3.2 Chapter 2E of the Corporations Act

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

• (a) obtain the approval of the public company’s members in the manner set out in sections 217 to 227 of the Corporations Act; and

• (b) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in sections 210 to 216 of the Corporations Act.

The Participation will result in the issue of Shares which constitutes giving a financial benefit and Fletcher Quinn and Scott Funston are related parties of the Company by virtue of being Directors.

The Directors (other than the Directors who have a material personal interest in the relevant Resolution) consider that Shareholder approval pursuant to Chapter 2E of the Corporations Act is not required in respect of the Participation because the Shares will be issued to the Directors on the same terms as Shares issued to non-related party participants in the Placement and as such the giving of the financial benefit is on arm’s length terms.

3.3

ASX Listing Rule 10.11

The Company is proposing to issue a total of 13,200,000 Shares to Messrs Quinn and Funston as noted above in Section 3.1.

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ASX Listing Rule 10.11 provides that unless one of the exceptions in Listing Rule 10.12 applies, a listed Company must not issue or agree to issue equity securities to:

• (a) a related party;

• (b) a person who is, or was at any time in the 6 months before the issue or agreement, a substantial (30%+) holder in the Company;

• (c) a person who is, or was at any time in the 6 months before the issue or agreement, a substantial (10%+) holder in the Company and who has nominated a director to the board of the Company pursuant to a relevant agreement which gives them a right or expectation to do so;

• (d) an associate of a person referred to in Listing Rues 10.11.1 to 10.11.3; or

• (e) a person whose relationship with the Company or a person referred to in Listing Rules 10.11.1 to 10.11.4 is such that, in ASX’s opinion, the issue or agreement should be approved by its shareholders.

unless it obtains approval of its shareholders.

The Issue falls within Listing Rule 10.11.1 and does not fall within any of the exceptions in Listing Rule 10.12. It therefore requires the approval of the Company’s shareholders under Listing Rule 10.11.

Resolutions 3 and 4 seek the required shareholder approval for the Issues under and for the purposes of Listing Rule 10.11.

If Resolutions 3 and 4 are passed, the Company will be able to proceed with the Issue and Messrs Funston and Quinn will be able to participate in the Placement and Mr Funston interest in the Company will increase from 4,604,167 Shares to 4,804,167 and Mr Quinn’s interest in the Company will increase from 10,328,637 to 23,328,637.

If Resolutions 3 and 4 are not passed, the Company will not be able to proceed with the Issues and Messrs Funston and Quinn will not be able to participate in the Placement and each of their holdings in the Company will remain the same.

3.4 Technical Information required by ASX Listing Rule 10.13

Pursuant to and in accordance with ASX Listing Rule 10.13, the following information is provided in relation to the Participation:

• (a) the Shares will be issued to Fletcher Quinn and Scott Funston (or their nominees);

• (b) Messrs Quinn and Funston both fall within the parameters of ASX Listing Rule 10.11.1, as they are each a related party of the Company by virtue of being directors of the Company;

• (c) the maximum number of Shares to be issued is 13,200,000 to be issued as follows:

• (i) 13,000,000 Shares are to be issued to Fletcher Quinn (or his nominee); and

• (ii) 200,000 Shares are to be issued to Scott Funston (or his nominee).

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• (d) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;

• (e) the Shares will be issued no later than 1 month after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules);

• (f) the issue price will be $0.10 per Share, being the same as all other Shares issued under the Placement; and

• (g) the funds raised will be used for the same purposes as all other funds raised under the Placement as set out in Section 2.2(e).

Approval pursuant to ASX Listing Rule 7.1 is not required for the Participation as approval is being obtained under ASX Listing Rule 10.11. Accordingly, the issue of Shares to Fletcher Quinn and Scott Funston (or their nominees) will not be included in the use of the Company’s 15% annual placement capacity pursuant to ASX Listing Rule 7.1.

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GLOSSARY

$ means Australian dollars.

AEDT means Australian Eastern Daylight Time.

Agreement means the farm-in agreement pursuant to which the Company has the right to farm-in to the Tenement.

ASIC means the Australian Securities & Investments Commission.

ASX means ASX Limited (ACN 008 624 691) or the financial market operated by ASX Limited, as the context requires.

ASX Listing Rules means the listing rules of ASX.

Board means the current board of directors of the Company.

Business Day means Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day.

Chair means the chair of the Meeting.

Colorado V Farm-In Agreement means the farm-in agreement between the Company and Goldking pursuant to which the Company has the right to farm-in to the Colorado V Tenement.

Colorado V Tenement means the Colorado V tenement in Ecuador, covering 2,331 hectares adjoining the Company’s El Guayabo Project in Ecuador.

Company or Challenger means Challenger Exploration Limited (ACN 123 591 382).

Constitution means the Company’s constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Directors mean the current directors of the Company.

Discovery means a discovery by the Company of a resource greater than 200,000 Oz.

El Guayabo Gold and Copper Project means the El Guayabo Project located in Ecuador.

Equity Securities includes a Share, a right to a Share or Option, an Option, a convertible security and any security that ASX decides to classify as an Equity Security.

Explanatory Statement means the explanatory statement accompanying the Notice.

Farm In’s has the meaning set out in Section 1.1.

General Meeting or Meeting means the meeting convened by the Notice.

Minimum Expenditures has the meaning set out in Section 2.1.

Notice or Notice of Meeting means this notice of meeting, including the Explanatory Statement and the Proxy Form.

Participation has the meaning set out in Section 3.1.

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Placement has the meaning set out in Section 2.1.

Projects is a reference the Company’s existing projects, the El Guayabo Gold and Copper Project in Ecuador and the Hualilan Project in Argentina.

Proposed Transaction means the transactions set out in the respective Farm-In’s which are subject to the receipt of Shareholder approval as set out in Resolution 1.

Proxy Form means the proxy form accompanying the Notice.

Resolutions means the resolutions set out in the Notice, or any one of them, as the context requires.

Resource Definition Stage means the 2-year period following the date on which the Company declares a Discovery as defined in Section 2.1.

Schedule means a schedule to this Notice.

Section refers to a section of the Explanatory Statement.

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

Shareholder means a registered holder of a Share.

Transaction has the meaning set out in Section 1.1 of this Notice.

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