CODEIFAI LIMITED — Regulatory Filings 2006

Jan 15, 2006

AUSTRALIS MINING CORPORATION LIMITED

ABN 68 108 649 421

Level 35, Northpoint Tower, 100 Miller Street, North Sydney NSW 2060 Phone: (02) 8908 5988 Fax: (02) 8908-5977

13 January 2006

Mr R Elliott Administrator, Australis Mining Corporation Limited c/ - Hall Chadwick Level 29, St Martins Tower 31 Market Street Sydney NSW 2000

Dear Mr Elliott

Proposed Deed of Company Arrangement between Australis Mining Corporation Limited and Nikiticorp Limited

I am writing to you on behalf of the Board of Australis Mining Corporation Limited ("Company") and provide for your consideration and submission to the Company's creditors, a proposal for a Deed of Company Arrangement ("DOCA") to be entered into between the Company and Nikiticorp Limited ("Nikiticorp"). Approval of the DOCA by the creditors (and in due course by the Company's shareholders) will result in the termination of the administration and the return of the control of the Company to its directors and shareholders.

The objective of the proposed DOCA is to have the suspension of the Company's shares from the ASX official quotation lifted, and for the Company to resume trading debt free.

Executive summary

The directors of the Company, jointly with and supported by Nikiticorp, propose that a DOCA be entered into between the Company and Nikiticorp, the performance of which will result in the payment of all proven unrelated unsecured creditors in full. and Nikiticorp assuming the obligations to pay all debts due by the Company to related creditors.

The proposed DOCA is predicated on the acquisition by Nikiticorp from the Company of all the issued capital in Australis Mining Operations (QLD) Pty Limited ("Australis Operations") and the contemporaneous transfer by Australis Operations to the Company of all mining tenements and mining tenements applications ("Tenements") held by Australis Operations. The transactions will, therefore, be conditional upon the approval of the Company's shareholders and (to the extent necessary) by the

Australian Stock Exchange as soon as practicable after the creditors' approval of the DOCA.

Acquisition of Australis operations by Nikiticorp

• Nikiticorp enters into a Sale of Shares Agreement ("SS Agreement") with the $1.$ Company to acquire all of the issued share capital of Australis Operations.
• $\overline{2}$ . The SS Agreement will be subject to the conditions precedent that:
• the Company's creditors approve the DOCA; and $(a)$
• $(b)$ the shareholders of the Company approve the SS Agreement. In this respect, each of the Company and Nikiticorp must use its best endeavours to procure the shareholders' approval within 45 days but in any event, no later than 90 days of the creditors' approval of the DOCA.
• 1. The key terms of the SS Agreement will be as follows:
• In consideration of the Company transferring all of the Australis $(a)$ Operations shares to Nikiticorp:
  • $(i)$ on completion Nikiticorp will pay to the Company an amount equal to the total of the Company's liabilities to its proven unsecured creditors, excluding related party creditors (being Nikiticorp, Tzovaras Legal and Ted Tzovaras);
  • $(ii)$ on or prior to completion, Nikiticorp must provide a loan to Australis Operations, the proceeds of which it will pay to the Deed Administrator, for an amount sufficient to meet the costs of the administration and the proven unrelated unsecured creditors:
  • $(iii)$ on completion Nikiticorp will pay all fees and expenses payable to the administrators of the Company of and incidental to the administration of both companies; and
  • $(iv)$ on completion Nikiticorp procures that Australis Operations transfers to the Company the Tenements.

• $(b)$ On completion:

  • the Company will transfer to Nikiticorp, 100 ordinary shares $(i)$ each of \$1 in the share capital of Australis Operations, being the whole of the issued share capital of Australis Operations;
  • $(ii)$ the Company shall procure and provide to Nikiticorp letters of resignation from JG, AD and RC as directors of Australis Operations and RC as director of the Company:
  • $(iii)$ Nikiticorp will provide to the Company a discharge of company charge no. 019690802 over AMC's undertaking;

• $(iv)$ Nikiticorp will procure the passing of a resolution for the change of name of Australis Operations corporate name to a name which shall not include the name "Australis" and

• the parties procure that Australis Operations transfers to the $(v)$ Company the Tenements.
• By way of further consideration, immediately after completion, $(c)$ Australis Operations as grantor and the Company as grantee, and Nikiticorp as guarantor will enter into a Mining Rights Deed pursuant to which:
• $(i)$ the Company will grant to Australis Operations exclusive rights to explore, mine and treat any minerals on the Tenements and sole ownership of all minerals extracted from the Tenements for the life of the Nardoo sapphire mine ("Term");
• $(ii)$ for the purpose of paragraph 4(c)(i), Australis Operations and its nominees shall have exclusive rights to construct all such mining plants and other facilities, operate all such equipment and undertake all such activities as Australis Operations determines ("Mining Rights");
• in consideration of the grant of the Mining Rights, Australis $(iii)$ Operations shall pay to the Company for the Term, monthly rovalty payments calculated at the rate of \$1 per gram of rough sapphire of merchantable quality produced each calendar month and payable monthly:
• Australis Operations must carry on mining operations $(iv)$ continuously for the Term in accordance with good mining practice and in full compliance with all applicable laws and requilations:
• $(v)$ Australis Operations must provide to the Company a statement of its production by the 15^th of each month in respect of the previous calendar month;
• the Company will be entitled at any time upon the giving of $(v_i)$ reasonable notice to Australis Operations to conduct an audit of Australis Operations' production and inspect the Tenements for the purpose of verifying compliance by Australis Operations with its obligations under the Mining Rights Deed;
• $(vii)$ during the Term, the Company shall not transfer or otherwise dispose of any of the Tenements, except with the prior approval of Australis Oeprations and provided that any intended transferee enters into a deed with Australis Operations upon the same terms and conditions as are contained in the Mining Rights Deed;

• $(viii)$ the Mining Rights shall be of proprietary nature in respect of which Australis Operations will be entitled to lodge and have registered a caveat on the title of the Tenements:

• upon execution of the Mining Rights Deed, Australis $(ix)$ Operations must pay to the Company \$300,000 as an advance payment against future royalties payable.

• $(d)$ In further consideration of the transfer of shares by the Company to Nikiticorp, effective upon completion:
• $(i)$ all debts due to Nikiticorp by the Company shall be set off and be fully discharged as partial consideration of the purchase of the Australis Operations shares by Nikiticorp; and
• Nikiticorp will assume all of Australis' liabilities in respect of the $(ii)$ debts due to Tzovaras Legal and Ted Tzovaras, and procure from such creditors in favour of Australis a complete discharge of such debts.
• $(e)$ In further consideration of Nikiticorp paying the Company's creditors in full, assuming all of the Company's debts to the related parties and procuring the payment of Australis Operations Creditors, on completion the Company shall allot to Nikiticorp 10 million fully paid ordinary shares each of \$0.20.
• 1. Australis Operations and Nikiticorp (as the holding company) will assume all the financial and other responsibilities for the exploration, mining, marketing and sales of rough sapphires from the Nardoo property to the exclusion of the Company.
• Promptly after the approval of DOCA by the creditors, the Company shall 5. convene an Extraordinary General Meeting of its shareholders for the passing of resolutions to the following effect:
• $(a)$ approving the entering into of:
  • $(i)$ the SS Agreement by the Company and Nikiticorp; and
  • $(ii)$ the Mining Rights Deed by the Company and Australis Operations; and
• $(b)$ ratifying the directors' prior decision concerning the sale of all rough sapphire previously produced by the Company being made exclusively to Nikiticorp and the terms thereof.

Benefits to the Company

• 1. All creditors of the Company and Australis Operations will be paid in full.
• 1. The Company will cease to be under external administration.
• $\overline{7}$ . The Company will have as its sole assets the Tenements and no liabilities.
• 1. The Company will have \$300,000 in cash,

• The Company's running expenses are unlikely to be in excess of \$600,000 $9.$ per annum, being essentially in respect of:

• $(i)$ directors fees for 3 directors:
• $(ii)$ office rent:
• $(iii)$ CEO, CFO and Company Secretary;
• a full time secretary and an office junior; and $(iv)$
• $(v)$ listing, registry and compliance costs.
• $10.$ The Company will be substantially a risk free undertaking.
• $11.$ The Company will have a substantial revenue stream with comparatively low expenses, and be able to operate profitably for the life of the Nardoo mine.
• $12.$ The restructure of the Company will enable it to be again a going concern and there will be certainty that it will remain so in the future, as it will no longer be affected by the fluctuations in the production of rough sapphire in Nardoo.
• Therefore, there will no longer be any basis for ASIC to continue with the $13.$ current proceedings in the Supreme Court for the winding up of the Company. Upon the DOCA being fully performed, the proceedings can be dismissed.
• Finally, the suspension of the Company shares from the ASX will be lifted and $14.$ its shares will be quoted on the ASX and be capable of being traded.

While the Company remains under Administration and until the DOCA has been fully performed, the board of the Company has been assured by Nikiticorp that Nikiticorp will continue to fund the operations of both Australis Operations and the Company as it has done in the past.

Yours faithfully Australis Mining Corporation Limited

Anthony Damianos Chief Executive Officer

AUSTRALIS MINING OPERATIONS PTY LIMITED

ACN 081 347 891

Level 35, Northpoint Tower, 100 Miller Street, North Sydney NSW 2060 Phone: (02) 8908 5988 Fax: (02) 8908-5977

13 January 2006

Mr R Elliott Administrator, Australis Mining Operations (QLD) Pty Limited c/- Hall Chadwick Level 29, St Martins Tower 31 Market Street Sydney NSW 2000

Dear Mr Elliott

Proposed Deed of Company Arrangement between Australis Mining Operations (QLD) Pty Limited and Nikiticorp Limited

The Directors of Australis Mining Operations (QLD) Pty Limited ("the Company") jointly with and supported by Nikiticorp Limited ("Nikiticorp"), propose that a Deed of Company Arrangement ("DOCA") be entered into between the Company and Nikiticorp, the performance of which will result in the payment of all external creditors in full, with all debts due by the Company to related party creditors being deferred.

Essentially, the key terms of the proposed DOCA will be as follows:

• the DOCA will be subject to the following conditions precedent: 1.
• the creditors of Australis Mining Corporation Limited ("Australis") $(a)$ approving a Deed of Company Arrangement ("Australis DOCA") to be entered into between Australis and Nikiticorp which (amongst other things) will provide for:
  • the acquisition by Nikiticorp from Australis of all the shares $(i)$ issued in the share capital of the Company; and
  • the transfer by the Company to Australis of all mining $(ii)$ tenements and mining tenements applications ("Tenements") held by the Company:

• Australis and Nikiticorp entering into and performing the Australis $(b)$ DOCA:

• the shareholders of Australis approving the transfer of the Company's $(c)$ shares by Australis to Nikiticorp and the transfer of the Tenements by the Company to Australis pursuant to the Australis DOCA no later than 90 days from the date of Australis' creditors approving the Australis DOCA

• As soon as practicable, after the approval of the transfer of shares and $2.$ Tenements by Australis' shareholders, Nikiticorp must perform all of its remaining obligations under the Australis DOCA including the payment of Australis' unrelated creditors.
• On or before the transfer of the Company's shares by Australis to Nikiticorp, 3. and the transfer of the Tenements by the Company to Australis, Nikiticorp must provide a loan to the Company for an amount sufficient to pay all of the debts due to proven unrelated unsecured creditors of the Company and the costs of the administration, and the Company must immediately upon receiving such loan pay the advanced money to the Deed Administrator for the purpose of meeting such debts and costs.

Thus, after the acquisition by Nikiticorp of the shares and the acquisition by Australis of the Tenements, all of the proven unrelated unsecured creditors of the Company will be paid in full, and payment of the debts due by the Company to related creditors will be deferred.

The board of the Company has been assured by Nikiticorp that while the Company remains under administration and until the DOCA has been fully performed, Nikiticorp will continue to fund the operations of both Australis and the Company as it has done in the past.

Yours sincerely Australis Mining Corporation Limited Anthony Damianos Chief Executive Officer