CORAZON MINING LIMITED — AGM Information 2007

Oct 3, 2007

GRAYNIC METALS LIMITED (ACN 112 898 825)

NOTICE OF ANNUAL GENERAL MEETING

– and –

EXPLANATORY STATEMENT

– and –

PROXY FORM

DATE AND TIME OF MEETING: 2 November 2007 at 1.30pm (WST)

VENUE: The Celtic Club 48 Ord Street WEST PERTH WA 6005

These documents should be read in their entirety. If shareholders are in any doubt as to how they should vote, they should seek advice from their accountant, solicitor or other professional advisor.

NOTICE OF MEETING

Notice is hereby given that the Annual General Meeting of the members of Graynic Metals Limited ( “Graynic” or the “Company” ) will be held at The Celtic Club, 48 Ord Street, West Perth, Western Australia at 1.30pm (WST) on 2 November 2007.

The Explanatory Statement that accompanies and forms part of this Notice of Meeting describes in more detail the matters to be considered.

AGENDA

ORDINARY BUSINESS

To receive and consider the annual financial report of the Company for the financial year ended 30 June 2007 together with the declaration of the directors, the directors’ report, the remuneration report and the auditor’s report.

To consider and, if thought fit, to pass, with or without modification, the following ordinary resolutions:

1. Ordinary Resolution 1: To re-elect Ms Bronwyn Barnes as a Director

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

“That, Ms Bronwyn Barnes, being a Director appointed on 10 July 2007, retires in accordance with clause 11.12 of the Constitution and, being eligible, is hereby reelected as a Director.”

2. Ordinary Resolution 2: To re-elect Mr Clive Jones as a Director

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

“That, Mr Clive Jones, being a Director, retires by rotation in accordance with clause 11.3 of the Constitution and, being eligible, is hereby re-elected as a Director.”

3. Ordinary Resolution 3: Approval of Issue of Directors Options to Ms Bronwyn Barnes

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 10.11, Chapter 2E and Section 208 of the Corporations Act and for all other purposes, approval is given for the Company to allot and issue:

(a) 4,000,000 Options,

to Ms Bronwyn Barnes (and/or her nominee(s)), for the purposes, on the terms and conditions in the manner described in the Explanatory Memorandum accompanying this Notice of Meeting. ”

Voting Exclusion : For the purposes of ASX Listing Rule 10.11 and section 224 of the Corporations Act, the Company will disregard any votes cast on Resolution 3 by Ms Bronwyn Barnes and any of her associates. However the Company need not disregard a vote if:

• (a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

• (b) 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.

4. Ordinary Resolution 4: Adoption of Remuneration Report

To consider and, if thought fit, to pass, with or without modification, the following resolution as a non-binding resolution:

“That, for the purposes of Section 250R(2) of the Corporations Act and for all other purposes, approval is given for the adoption of the remuneration report as contained in the Company’s annual financial report for the financial year ended 30 June 2007.”

Short Explanation: The Corporations Act provides that a Resolution that the remuneration report to be adopted must be put to vote at a listed company’s annual general meeting. The vote on Resolution 4 is advisory only and does not bind the Directors or the Company.

5. Resolution 5 - Approval of the Incentive Option Scheme

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

“That, for the purposes of Listing Rule 7.2 (Exception 9) of the ASX Listing Rules and for all other purposes, approval is given for the Directors to grant options to acquire Shares, pursuant to the Company’s Incentive Option Scheme (“Scheme”), a summary of which is set out in the Explanatory Statement accompanying this Notice.”

Voting Exclusion : The Company will disregard any votes cast on Resolution 5 by the Directors (except those who are ineligible to participate in any employee incentive scheme in relation to the Company), and any of their associates.

However the Company need not disregard a vote if:

• (a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

• (b) 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

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.

2. In order to vote on behalf of a company that is a Shareholder of Graynic, 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.

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, 350 Hays Street, West Perth, Western Australia 6007, or by facsimile (61 8) 6210 1872 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.

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; and

• 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 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 1.30pm WST on 31 October 2007 will be taken, for the purposes of this Annual General Meeting, to be held by the persons who held them at that time.

BY ORDER OF THE BOARD

David Round Company Secretary

Dated: 3 October 2007

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Graynic Metals Limited ACN 112 898 825 EXPLANATORY STATEMENT

INTRODUCTION

This Explanatory Statement has been prepared for the information of Shareholders of Graynic Metals Limited (“Graynic” or the “Company”) in connection with Resolutions 1 to 5 of the Annual General Meeting of members to be held at The Celtic Club, 48 Ord St, West Perth, Western Australia 6005, at 1.30pm WST on 2 November 2007.

This Explanatory Statement should be read in conjunction with the accompanying Notice of Meeting. Please refer to Section 6 of this Explanatory Statement for a glossary of terms.

1. FINANCIAL STATEMENTS AND REPORTS

In accordance with the Constitution, the business of the Annual General Meeting will include receipt and consideration of the annual financial report of the Company for the financial year ended 30 June 2007 together with the declaration of the directors, the directors’ report, the remuneration report and the auditor’s report.

2. RESOLUTION 1: TO RE-ELECT MS BRONWYN BARNES AS A DIRECTOR

Clause 11.1of the Constitution allows the Directors to appoint at any time a person to be a Director as an addition to the existing Directors, but only where the total number of Directors does not at any time exceed the maximum number specified by the Constitution.

Any Director so appointed holds office only until the next following annual general meeting and is then eligible for re-election.

Resolution 1 seeks approval for the election of Ms Bronwyn Barnes, who retires in accordance with Clause 11.12 of the Company's Constitution and, being eligible, offers herself for re-election as a Director of the Company, with effect from the end of the meeting.

Bronwyn has over 10 years experience in the resources sector most recently as Manager External Affairs with BHP Billiton’s Nickel West and previously WMC Resources. In addition she has held senior roles in the corporate divisions of ConocoPhillips, Methanex Australia, and Anaconda Nickel. Bronwyn holds a Bachelor of Arts from UWA and a Graduate Diploma of Business from Edith Cowan.

3. RESOLUTION 2: TO RE-ELECT MR CLIVE JONES AS A DIRECTOR

Clause 11.3 of the Constitution requires that if the Company has three or more Directors, one third (or the number nearest one-third) of those Directors must retire at each annual general meeting, provided always that no Director (except a Managing Director) shall hold office for a period in excess of 3 years, or until the third annual general meeting following his or her appointment, whichever is the longer, without submitting himself or herself for reelection.

Resolution 2 seeks approval for the election of Mr Clive Jones, who retires in accordance with Clause 11.3 of the Company's Constitution and, being eligible, offers himself for reelection as a Director of the Company, with effect from the end of the meeting.

Mr Jones has been involved in mineral exploration for over 20 years and has worked on the exploration for a range of commodities including gold, base metals, mineral sands, diamonds and industrial minerals. Clive is currently Joint Managing Director for Cazaly Resources Ltd which is listed on the ASX and is also a Non-Executive Director of Bannerman Resources Limited and Chairman of Cortona Resources Limited.

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Graynic Metals Limited ACN 112 898 825 EXPLANATORY STATEMENT

4. RESOLUTION 3 – APPROVAL OF ISSUE OF OPTIONS TO MS BRONWYN BARNES

4.1 Background to Resolution 3

Resolution 3 seeks Shareholder approval for the issue of 4,000,000 Options to Ms Bronwyn Bronwyn Barnes (and/or Nominee) as part of the terms of her employment by the Company.

The Company has entered an agreement with Ms Barnes for the provision of Ms Barnes as Managing Director of the Company. The key terms of the agreement are:

• (a) a consulting fee of $180,000 per annum, plus superannuation shall be paid by the Company in connection with Ms Barnes’ position as a Director;

• (b) subject to obtaining Shareholder approval, 4,000,000 Options (“ Director Options” ) be granted by the Company to Ms Barnes or her nominee as an incentive for her performance.

The ASX Listing Rules and the Corporations Act set out a number of regulatory requirements which must be satisfied in connection with the proposed issue of securities to Ms Barnes. These are summarised below.

4.1.1 ASX Listing Rule 10.11

ASX Listing Rule 10.11 requires a listed company to obtain shareholder approval by ordinary resolution prior to the issue of securities (including an option) to a related party of the company.

If Resolution 3 is passed, securities will be issued to Ms Barnes, who is a related party of the Company. Accordingly, approval for the proposed issue of Director Options to Ms Barnes is required pursuant to ASX Listing Rule 10.11.

Approval pursuant to ASX Listing Rule 7.1 is not required in order to issue the securities to Ms Barnes as approval is being obtained under ASX Listing Rule 10.11. Shareholders should note that the issue of securities to Ms Barnes will not be included in the 15% calculation for the purposes of ASX Listing Rule 7.1.

ASX Listing Rule 10.13 sets out a number of matters which must be included in a notice of meeting proposing an approval of an issue of securities under ASX Listing Rule 10.11. For the purposes of ASX Listing Rule 10.13, the following information is provided in relation to Resolution 3:

• (a) the maximum number of securities to be issued by the Company under this Resolution is 4,000,000 Director Options. The Director Options shall be issued in the following tranches:

• (i) Tranche 1 - 2,000,000 Director Options ( “Tranche 1 Options” );

• (ii) Tranche 2 - 1,000,000 Director Options ( “Tranche 2 Options” ); and

• (iii) Tranche 3 - 1,000,000 Director Options ( “Tranche 3 Options” ).

• (b) and the Director Options will be issued no later than one month after the date of the Meeting or such later date to the extent permitted by any ASX waiver. However, the Company may seek a waiver from ASX from the requirement to issue and allot the Director Options within one month of the date of the Meeting.

• (c) the Director Options will be issued for no cash consideration, accordingly no funds will be raised;

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Graynic Metals Limited ACN 112 898 825 EXPLANATORY STATEMENT

• (d) the Director Options are unlisted Options;

• (e) the Tranche 1 Options will have an exercise price of $0.30 each, the Tranche 2 Options will have an exercise price of $0.45 each and the Tranche 3 Options will have an exercise price of $0.65 each. The Tranche 1 Options shall be held in escrow for a period of one year from the date of issue and shall expire three years from issue. The Tranche 2 Options shall be held in escrow for a period of two years from the date of issue and expire four years from issue. The Tranche 3 Options shall be held in escrow for a period of three years from the date of issue and expire five years after issue;

• (f) the value of the Director Options and the pricing methodology is set out in section 4.2.

4.1.2

Section 208 of the Corporations Act

Under Chapter 2E of the Corporations Act, a public company cannot give a “financial benefit” to a “related party” unless one of the exceptions set out in sections 210 to 216 of the Corporations Act apply or shareholders have in a general meeting approved the giving of that financial benefit to the related party.

The proposed issue of 4,000,000 Director Options to Ms Barnes constitutes a “financial benefit” as defined the Corporations Act. Further, Ms Barnes is a “related party” of the Company as defined under the Corporations Act. Accordingly, the proposed issue of securities to Ms Barnes pursuant to Resolution 3 will constitute the provision of a financial benefit to a related party of the Company.

It is the view of the Directors that the exceptions under the Corporations Act to the provision of a financial benefit to a related party may not apply in the current circumstances. The Directors have determined to seek Shareholder approval under Section 208 of the Corporations Act to permit the issue of the securities to Ms Barnes on the terms of Resolution 3.

Sections 217 to 227 of the Corporations Act

Pursuant to Sections 217 to 227 of the Corporations Act, the Company provides the following information to Shareholders in respect of the proposed financial benefit to be given to Ms Barnes:

• (a) the related party to whom the financial benefit will be given is the Managing Director of the Company, Ms Bronwyn Barnes ;

• (b) the maximum number of securities (being the nature of the financial benefit to be provided) to be issued is 4,000,000 Director Options;

• (c) none of the Directors other than Ms Barnes has a material personal interest in the subject matter of Resolution 3. Each of the Directors other than Ms Barnes recommends that Shareholders vote in favour of Resolution 3;

• (d) Ms Barnes is currently paid $180,000 per annum (exclusive of superannuation) for her services as the Managing Director of the Company;

• (e) Ms Barnes currently has an interest in 222,500 Shares;

• (f) if Shareholders approve the issue of the Director Options to Ms Barnes and all of the Director Options are exercised, the effect will be to dilute the shareholding of existing Shareholders (after the Shares are issued under Resolutions 3 by approximately 7-8% on an undiluted basis and based on the number of Shares on issue as at 28 September 2007. The Company will, however, receive subscription monies (from the three tranches) totalling $1,500,000.

The market price for Shares during the term of the Director Options would normally determine whether or not Ms Barnes exercises the Director Options. If, at the time any

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Graynic Metals Limited ACN 112 898 825 EXPLANATORY STATEMENT

of the Director Options are exercised, the Shares are trading on ASX at a price that is higher than the exercise price of the Director Options, there may be a perceived cost to the Company.

The highest, lowest and last trading price of Shares on ASX during the last 12 months to the date of this Notice are as set out below:

	Date	Price
Highest	20 October 2006	$0.39
Lowest	30 March 2007 and 2 April 2007	$0.17
Last	4 October 2007	$0.33

(g) the primary purpose of the grant of Director Options to Ms Barnes is to provide a market linked incentive package in her capacity as Managing Director and for the future performance by her in that role. The Board (other than Ms Barnes considered the extensive experience and reputation of Ms Barnes within the resources industry, the current market price of Shares and current market practices when determining the number and exercise price of the Director Options to be issued to Ms Barnes. In addition, the Board considers the grant of the Director Options to Ms Barnes to be reasonable, given the necessity to attract the highest calibre of professionals to the Company whilst maintaining the Company’s cash reserves. The Board does not consider that there are any significant opportunity costs to the Company or benefits foregone by the Company in issuing the Director Options upon the terms proposed;

• (h) ASIC in reviewing documents lodged under section 218 relating to the giving of financial benefits to related parties of public companies requires explanatory information regarding the value of the Director Options proposed to be granted. The value of the Director Options has been calculated using the Black-Scholes pricing model and is set out in Section 3.2 below; and

• (i) additional information in relation to Resolutions 3 is set out throughout this Explanatory Memorandum. Shareholders should therefore read the Notice and Explanatory Memorandum in its entirety before making a decision as to how to vote on Resolution 3.

4.2 Valuation of the Director Options

It is a requirement of ASIC that a dollar value be placed on the Director Options proposed to be issued to Ms Barnes for inclusion in this Explanatory Memorandum. ASIC has indicated that the Black-Scholes Option Pricing Model is acceptable.

The Director Options have been valued using the Black-Scholes pricing model based upon the following assumptions:

• (a) the Director Options expire on 2 November 2010 (Tranche 1), 2 November 2011 (Tranche 2) and 2 November 2012 (Tranche 3) and are excisable for values of $0.30 (Tranche 1), $0.45 (Tranche 2) and $0.60 (Tranche 3) each;

• (b) a volatility factor of 70% based on the historical volatility of the Company’s Share price;

• (c) a risk free interest rate of 6.43% for tranche 1 and 6.38% for tranche 2 and 3;

• (d) the valuation date for the Director Options was 26 September 2006 and the trading price of the Shares on that date was $0.30; and

• (e) a discount of 30% has been applied due to the Director Options being unlisted.

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Graynic Metals Limited ACN 112 898 825 EXPLANATORY STATEMENT

Based on the above, the securities proposed to be issued to Mr Barnes pursuant to Resolution 3 have been valued as follows:

Tranche 1 Options - $340,000 Tranche 2 Options - $173,000 Tranche 3 Options - $178,000

4.3 Directors’ Recommendations

The Directors (other than Ms Barnes) do not have any personal interest in the outcome of Resolution 3. The Directors (other than Ms Barnes) believe that the proposed transaction is beneficial to the Company as it will provide appropriate incentives to Ms Barnes and is consistent with the philosophy held by the Directors that the future success of the Company will depend in large measure on the skills and motivation of the people engaged in and overseeing the management of the Company’s operations and that it is therefore important that the Company is able to attract and retain people of the highest calibre.

The Directors consider that the most appropriate means of achieving this is to reward Directors for their performance, to provide Directors with an opportunity to participate in the Company’s future growth and give them an incentive to contribute to that growth and to maximise returns to Shareholders.

The Directors (other than Ms Barnes) believe that the number and terms of the Director Options to be issued pursuant to Resolution 3 are commercial for the Company in light of the potential benefits, dilution effect and potential costs described is sections 4.1.2 and 4.2 above, and recommend Shareholders vote in favour of Resolution 3.

Ms Barnes declined to make a recommendation in relation to Resolution 3 due to the fact that she has a material personal interest in its outcome.

4.4 Terms and Conditions of Director Options

The material terms and conditions of the Director Options are as follows:

• a) each Director Option entitles the holder, on exercise, to one Share;

• b) the Director Options will expire at 5.00pm (WST) on 2 November 2010 (Tranche 1), 2 November 2011 (Tranche 2) and 2 November 2012 (Tranche 3) ( “Expiry Date” );

• c) the exercise price of the Director Options is $0.30 each for the Tranche 1 Options, $0.45 each for the Tranche 2 Options and $0.65 each for the Tranche 3 Options;

• d) the Director Options are exercisable at any time on or prior to the Expiry Date by completing an option exercise form and delivering it together with the payment for the number of Shares in respect of which the Director Options are exercised to the registered office of the Company;

• e) a Director Option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the Director Option can be exercised;

• f) the Director Options are not transferable;

• h) all Shares issued upon exercise of the Director Options will rank pari passu in all respects with the Company’s then issued Shares;

• i) the Company will not apply for quotation of the Director Options on ASX, however it will apply for quotation of all Shares issued upon exercise of the Director Options;

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Graynic Metals Limited ACN 112 898 825 EXPLANATORY STATEMENT

• j) there are no participating rights or entitlements inherent in the Director Options and the holders will not be entitled to participate in new issues of capital offered to shareholders during the currency of the Director Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 7 business days after the issue is announced. This will give Optionholders the opportunity to exercise their Director Options prior to the date for determining entitlements to participate in any such issue; and

• k) if at any time the issued capital of the Company is reconstructed, all rights of a Optionholder are to be changed in a manner consistent with the ASX Listing Rules.

5. RESOLUTION 4 - ADOPTION OF REMUNERATION REPORT

In accordance with Section 250R(2) of the Corporations Act, the Company must put to Shareholders a resolution that the Remuneration Report be adopted the Meeting. The vote on Resolution 4 is advisory only and does not bind the Directors or the Company.

The Remuneration Report is part of the Directors’ report contained in the annual financial report of the Company for the financial year ending 30 June 2007 and includes all of the information required by Section 300A of the Corporations Act, including:

• board policy for determining, or in relation to, the nature and amount (or value, as appropriate) of remuneration of directors, secretaries and senior managers of the Company;

• discussion of the relationship between such policy and the Company’s performance; and

• the prescribed details in relation to the remuneration of each Director and certain executives.

A reasonable opportunity will be provided for discussion of the Remuneration Report at the Meeting.

6. RESOLUTION 5 – APPROVAL OF THE EMPLOYEE INCENTIVE SCHEME

Background

Resolution 5 seeks the approval of Shareholders for the grant of IOS Options pursuant to the “Graynic Metals Limited Incentive Option Scheme” (“ Scheme” ).

Resolution 5 is placed before Shareholders in accordance with exception 9 of Listing Rule 7.2. If Resolution 5 is passed, the Company will be able to issue IOS Options under the Scheme over a period of 3 years without impacting on the Company’s ability to issue up to 15% of its total ordinary securities without Shareholder approval in any 12 month period.

Shareholders should note that no IOS Options have previously been issued under this Scheme and the objective of the Scheme is to attract, motivate and retain key employees. Shareholders should also note that Directors and other related parties of the Company will not be permitted to participate under the Scheme without further Shareholder approval.

It is considered by the Directors that the adoption of the Scheme and the future grant of IOS Options under the Scheme will provide selected employees with the opportunity to participate in the future growth of the Company.

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Graynic Metals Limited ACN 112 898 825 EXPLANATORY STATEMENT

A summary of the terms and conditions of the Scheme is set out below:

Introduction

The Scheme is designed to provide eligible participants with an ownership interest in the Company and to provide additional incentives for eligible participants to increase profitability and returns to Shareholders.

The summary of the Scheme is set out below for the information of potential investors in the Company. The detailed terms and conditions of the Scheme may be obtained free of charge by contacting the Company.

General

The Board may from time to time, in its absolute discretion, offer to grant IOS Options to eligible participants under the Scheme.

Each IOS Option will be issued for no consideration and will carry the right in favour of the Option holder to subscribe for one (1) Share in the capital of the Company.

The Board may determine the exercise price of the IOS Options in its absolute discretion. Subject to the Listing Rules, the exercise price may be nil but to the extent the Listing Rules specify or require a minimum price, the exercise price in respect of an offer made following the day on which Shares are first quoted on the Official List must not be less than any minimum price specified in the Listing Rules.

Eligible Participants

Full time employees, part time employees, Directors and consultants of the Company or an associated body corporate (“ Group” ) are eligible to participate in the Scheme.

Lapse of IOS Options

Unless the Board in its absolute discretion determines otherwise, IOS Options shall lapse immediately if:

• (a) the eligible participant ceases to be an employee or director of, or to render services to, a member of the Group for any reason whatsoever and the conditions of exercise of the IOS Options (“ Exercise Conditions” ) have not been met;

• (b) the Exercise Conditions of the IOS Options are unable to be met;

• (c) the date which is 2 years after the date of the grant of the IOS Options, or such other expiry date as the Board determines in its discretion at the time of grant of the IOS Option (“ Lapsing Date” ) has passed; or

• (d) the expiry of 60 days after the eligible participant ceases to be an employee or director of, or to render services to, a member of the Group for any reason whatsoever prior to the Lapsing Date where the Exercise Conditions have been met,

whichever is earlier.

Participation in Future Issues

There are no participating rights or entitlements inherent in the IOS Options and holders will not be entitled to participate in new issues of capital offered to Shareholders during the

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Graynic Metals Limited ACN 112 898 825 EXPLANATORY STATEMENT

currency of the IOS Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 7 business days after the issue is announced. This will give option holders the opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue.

If the Company makes a pro rata issue of securities (except a bonus issue) to the holders of Shares (other than an issue in lieu or in satisfaction of dividends or by way of dividend reinvestment) the exercise price of the Options shall be reduced in accordance with the formula in the Listing Rules.

In the event of a bonus issue of Shares being made pro-rata to Shareholders (other than an issue in lieu of dividends), the number of Shares issued on exercise of each IOS Option will include the number of bonus Shares that would have been issued if the IOS Option had been exercised prior to the record date for the bonus issue. No adjustment will be made to the exercise price per Share of the IOS Option.

Reorganisation

The terms upon which IOS Options will be granted will not prevent them being reorganised as required by the Listing Rules on the reorganisation of the capital of the Company.

Trigger Events

Upon the occurrence of certain trigger events (for example the receipt by the Company of a bidder’s statement in respect of the Company), the Directors may determine:

• (a) that the IOS Options may be exercised at any time from the date of such determination, and in any number until the date determined by the Directors acting bona fide so as to permit the holder to participate in any change of control arising from a trigger event, provided that the Directors will forthwith advise in writing each holder of such determination. Thereafter, the IOS Options shall lapse to the extent they have not been exercised; or

• (b) to use their reasonable endeavours to procure that an offer is made to holders of IOS Options on like terms (having regard to the nature and value of the IOS Options) to the terms proposed under the trigger event in which case the Directors shall determine an appropriate period during which the holder may elect to accept the offer and, if the holder has not so elected at the end of that period, the IOS Options shall immediately become exercisable and if not exercised within 10 days, shall lapse.

ACTION TO BE TAKEN BY SHAREHOLDERS

Shareholders should read this Explanatory Statement carefully before deciding how to vote on each Resolution.

Attached to the Notice of Meeting is a proxy form for use by Shareholders. Shareholders are invited and encouraged to attend the Meeting or, if they are unable to attend in person, to complete, sign and return the proxy form to the Company in accordance with the instructions contained in the proxy form and the Notice of Meeting. Lodgement of a proxy form will not preclude a shareholder from attending and voting at the Meeting in person.

Enquiries

All enquiries in relation to the contents of the Notice of Meeting or Explanatory Statement should be directed to the Company Secretary, Mr David Round (telephone: +618 6461 6350).

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7. GLOSSARY OF TERMS

In this Explanatory Statement the following terms have the meaning set out below:

“ACN” Australian Company Number “ASIC” Australian Securities and Investments Commission. “ASX” ASX Limited (ACN 008 624 691) “ASX Listing Rules” or “Listing Rules” The Official Listing Rules of ASX as amended from time to time. “Board” The current board of directors of the Company. “Constitution” The Company’s constitution. “Corporations Act” The Corporations Act 2001 (Commonwealth). “Director” A director of Graynic Metals Limited. “Director Option” An Option granted pursuant to Resolution 3 with the terms and conditions set out in section 4.4. “Explanatory Statement” The explanatory statement accompanying the Notice of Meeting. “Graynic” or “Company” Graynic Metals Limited (ABN 112 898 825). “IOS Option ” An Option granted under the Incentive Option Scheme (described in Section 6 of the Explanatory Statement) to acquire a Share, on the terms and conditions set out in the Explanatory Statement.

“Meeting” or “Annual General Meeting” The Annual General Meeting of the Company to be held on 2 November 2007. “Notice of Meeting” The notice convening the Meeting, which accompanies this Explanatory Statement. “Option” An option to acquire a Share. “Optionholder” A holder of an Option or Director Option as the context requires. “Resolutions” The resolutions set out in the Notice of Meeting. “Share” A fully paid ordinary share in the capital of the Company. “Shareholder” The registered holder of a Share in the Company. “WST” Western Standard Time as observed in Perth, Western Australia.

PROXY FORM

APPOINTMENT OF PROXY GRAYNIC METALS LIMITED ACN 112 898 825

ANNUAL GENERAL MEETING

I/We

being a member of Graynic Metals Limited entitled to attend and vote at the Annual General Meeting, hereby

Appoint

Name of proxy OR

Mark this box if you wish to appoint the Chair of the Annual General Meeting as your proxy

or failing the person so named or, if no person is named, the Chair of the Annual General Meeting, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, as the proxy sees fit, at the Annual General Meeting to be held at 1.30pm (WST), on 2 November 2007 at The Celtic Club, 48 Ord Street, West Perth, Western Australia and at any adjournment thereof.

If no directions are given, the Chair will vote in favour of all the Resolutions.

Voting on Business of the Annual General Meeting

FOR AGAINST ABSTAIN

Resolution 1 – Re-election of Director – Bronwyn Barnes Resolution 2 – Re-election of Director – Clive Jones Resolution 3 – Issue of Director Options to Bronwyn Barnes Resolution 4 – Adoption of remuneration report Resolution 5 – Approval of Incentive Option Scheme OR

If the Chair of the Annual General Meeting is appointed as your proxy, or may be appointed by default, and you do not wish to direct your proxy how to vote as your proxy in respect of Resolution 3 please place a mark in this box.

By marking this box, you acknowledge that the Chair of the Annual General Meeting may exercise your proxy even if he has an interest in the outcome of Resolutions 3 and 5 and that votes cast by the Chair of the Annual General Meeting for Resolutions 3 and 5 other than as proxy holder will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chair will not cast your votes on Resolutions 3 and 5 and your votes will not be counted in calculating the required majority if a poll is called on Resolutions 3 and 5.

If you mark the abstain box for a particular Resolution, you are directing your proxy not to vote on that Resolution on a show of hands or on a poll and your votes will not to be counted in computing the required majority on a poll.

If two proxies are being appointed, the proportion of voting rights this proxy represents is Signed this day of 2007

%

By:

By:	By:	By:
Individuals and joint holders Companies (affix common seal if appropriate)
Signature		Director
Signature Signature		Director/Company Secretary Sole Director and Sole Company Secretary

GRAYNIC METALS LIMITED ACN 112 898 825 Instructions for Completing ‘Appointment of Proxy’ Form

1. A member entitled to attend and vote at an Annual General Meeting is entitled to appoint not more than two proxies to attend and vote on a poll on their behalf. The appointment of a second proxy must be done on a separate copy of the Proxy Form. Where more than one proxy is appointed, such proxy must be allocated a proportion of the member’s voting rights. If a member appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half the votes. A duly appointed proxy need not be a member of the Company.

2. Where a member’s holding is in one name the holder must sign. Where the holding is in more than one name, all members should sign.

3. Where a Proxy Form or form of appointment of corporate representative is lodged and is executed under a power of attorney, the power of attorney must be lodged in like manner as this Proxy Form.

4. Corporate members should comply with the execution requirements set out on the Proxy Form or otherwise with the provisions of Section 127 of the Corporations Act. Section 127 of the Corporations Act provides that a company may execute a document without using its common seal if the document is signed by:

5. 2 directors of the company;

6. a director and a company secretary of the company; or

7. for a proprietary company that has a sole director who is also the sole company secretary – that director.

For the Company to rely on the assumptions set out in Section 129(5) and (6) of the Corporations Act, a document must appear to have been executed in accordance with Section 127(1) or (2). This effectively means that the status of the persons signing the document or witnessing the affixing of the seal must be set out and conform to the requirements of Section 127(1) or (2) as applicable. In particular, a person who witnesses the affixing of a common seal and who is the sole director and sole company secretary of the company must state that next to his or her signature.

1. Completion of a Proxy Form will not prevent individual members from attending the Annual General Meeting in person if they wish. Where a member completes and lodges a valid Proxy Form and attends the Annual General Meeting in person, then the proxy’s authority to speak and vote for that member is suspended while the member is present at the Annual General Meeting.

3. To vote by proxy, please complete and sign the enclosed Proxy Form and return by:

4. (a) post to Graynic Metals Limited, Level 1, 350 Hay Street, West Perth, Western Australia, 6007or

5. (b) facsimile to the Company on facsimile number +61 8 6210 1872,

so that it is received not later than 1.30pm (WST) on 31 October 2007.

Proxy forms received later than this time will be invalid.