CORAZON MINING LIMITED — Capital/Financing Update 2005

Aug 28, 2005

ABN 87 112 898 825

SHORT FORM PROSPECTUS

For a non renounceable entitlements issue of 1 New Option for every 2 Shares held by Shareholders at an issue price of 1 cent per New Option.

Important Notice

This Prospectus is a short form prospectus issued in accordance with Section 712 of the Corporations Act 2001. This Prospectus does not of itself contain all the information that is generally required to be set out in a document of this type but refers to another document the information of which is deemed to be incorporated in this Prospectus. CORPORATE DIRECTORY

TABLE OF CONTENTS

	SECTION 1 CORPORATE DIRECTORY	4
	SECTION 2 MANAGING DIRECTOR'S LETTER	5
	SECTION 3 TIMETABLE AND IMPORTANT DATES	6
	SECTION 4 DETAILS OF THE OFFER	7
SECTION 5	INFORMATION DEEMED TO BE INCORPORATED IN THIS PROSPECTUS	10
	SECTION 6 COMPANY OVERVIEW	13
	SECTION 7 EFFECT OF THE ENTITLEMENTS ISSUE ON THE COMPANY	14
	SECTION 8 OVERSEAS PARTICIPANTS	14
SECTION 9	TERMS AND CONDITIONS OF NEW OPTIONS AND RIGHTS ATTACHING TO SHARES	15
	SECTION 10 ADDITIONAL INFORMATION	17
	SECTION 11 MATERIAL CONTRACTS	18
SECTION 12 CONSENTS		19
	SECTION 13 AUTHORITY OF DIRECTORS	20
	SECTION 14 DEFINITIONS	21

$\overline{2}$

Important Notice

This Prospectus is dated 18 August 2005.

A copy of this Prospectus was lodged with the ASIC on 18 August 2005. The ASIC takes no responsibility for the contents of this Prospectus.

No New Options will be issued on the basis of this Prospectus later than thirteen (13) months after the date of this Prospectus. Application will be made within seven (7) days after the date of this Prospectus for permission for the New Options offered by this Prospectus to be listed for Quotation.

Applicants should read this document in its entirety and, if in any doubt, consult with their professional advisors before deciding whether to apply for New Options. There are risks associated with an investment in Graynic and the New Options offered under this Prospectus must be regarded as a speculative investment. The New Options offered under this Prospectus carry no guarantee with respect to return on capital investment, payment of dividends or the future value of the New Options.

Certain abbreviations and other defined terms are used throughout this Prospectus. Defined terms are generally identifiable by the use of an upper case first letter. Details of the definitions and abbreviations used are set out in Section 14 of this Prospectus.

Short Form Prospectus

This Prospectus is a short form prospectus issued in accordance with Section 712 of the Corporations Act 2001. This means that this Prospectus does not of itself contain all the information that is generally required to be set out in a document of this type. Rather, the Prospectus incorporates by reference information contained in a document that has been lodged with the ASIC.

This Prospectus refers to the disclosure document lodged by the Company with the ASIC on 13 April 2005 for the offer of 6.250.000 Shares at an issue price of 20 cents each to raise a total of \$1.250.000 (April 2005 Prospectus). In referring to the April 2005 Prospectus, the Company:

• $(a)$ identifies the April 2005 Prospectus as being relevant to the offer of New Options under this Prospectus and containing information that will provide investors and their professional advisers information to assist them in making an informed assessment of:
• the rights and liabilities attaching to: $(i)$
  • (a) the New Options; and
  • (b) the underlying securities:
• (ii) the capacity of the Company to issue the underlying securities; and
• (iii) the assets and liabilities, financial position and performance, profits and losses and prospects of Graynic:
• $(b)$ refers investors and their professional advisers to Section 5 of this Prospectus which summarises the information in the April 2005 Prospectus deemed to be incorporated in this Prospectus;
• informs investors and their professional advisers that they are able to obtain, free of $(c)$ charge, a copy of the April 2005 Prospectus by contacting the Company at its registered office during normal business hours during the Offer Period; and
• $(d)$ advises that the information in the April 2005 Prospectus will be primarily of interest to investors and their professional advisers or analysts.

SECTION 1 CORPORATE DIRECTORY

DIRECTORS

Ron Thom Nathan McMahon Clive Jones

Managing Director Non Executive Director Non-Executive Director

COMPANY SECRETARY

Kent Hunter

REGISTERED OFFICE

Level 2, 22 Oxford Close, LEEDERVILLE WA 6005

LAWYERS TO THE COMPANY

Price Sierakowski Level 24, 44 St Georges Terrace PERTH WA 6000

AUDITORS

Ord Partners Chartered Accountants Level 2, 47 Colin Street WEST PERTH WA 6005

SHARE REGISTRY

Advanced Share Registry Services 110 Stirling Highway NEDLANDS WA 6009

CONTACT DETAILS

Website:www.graynicmetals.com.au

Email: admin@graynicmetals.com.au

Telephone: Graynic Metals Ltd (08) 9381 1436

• Facsimile: Graynic Metals Ltd $(08)$ 9381 1068
• Telephone: Share Registry (08) 9389 8033
• Facsimile: Share Registry (08) 9389 7871

SECTION 2 MANAGING DIRECTOR'S LETTER

18 August 2005

Dear Shareholder

The Board is pleased to offer Shareholders the opportunity to participate in a 1 for 2 non-renounceable entitlements issue.

All Shareholders registered as at 5.00pm WST on Monday 29 August 2005 will be entitled to participate in a non-renounceable entitlements issue of New Options on the basis of 1 New Option for every 2 Shares then held.

The Closing Date for acceptances is 5.00pm WST on Friday 16 September 2005.

The Board recommends all Shareholders take up their entitlement.

The Board takes this opportunity to thank all Shareholders for their support since listing and looks forward to your continued support in the future.

Yours faithfully,

Ron Thom Managing Director

SECTION 3

TIMETABLE AND IMPORTANT DATES

evani	DATE
Prospectus lodged with ASIC and ASX	18 August 2005
'Ex' Date	23 August 2005
Record Date for determining entitlements	29 August 2005
Dispatch Prospectus	1 September 2005
Closing Date	16 September 2005
Deferred settlement trading commences	19 September 2005

DETAILS OF THE OFFER

$4.1$ Purpose of the Entitlements Issue

The funds raised by the Offer of up to \$122,500 will be applied to working capital and also to meet issue expenses of approximately \$10,000.

$4.2$ The Entitlements Issue

SECTION 4

The Company is making a pro-rata non-renounceable entitlements issue to Shareholders who are registered at 5.00pm WST on 29 August 2005 of up to 12.250.002 New Options at an issue price of 1 cent each to raise approximately \$122,500 (before costs of the Issue).

The New Options will be offered on the basis of one (1) New Option for every two (2) Shares then held.

The rights issue may have to be increased by up to 3,000,000 New Options (raising up to a further \$30,000) if existing March 2007 Options, March 2008 Options or April 2008 Options are exercised prior to the Record Date.

The maximum number of New Options which could therefore be issued under this Prospectus is 15,250,002.

However, the market price of Shares at the date of this Prospectus is such that it is unlikely any of the existing March 2007 Options, March 2008 Options or April 2008 Options will be exercised. It has been assumed for the purposes of this Prospectus that:

• no existing March 2007 Options, March 2008 Options or April 2008 Options will be $\sim$ exercised prior to the Record Date; and
• $\circ$ the maximum number of New Options that will be issued is 12,250,002.

$4.3$ Entitlement

The number of New Options to which each Shareholder is entitled ("Entitlement") is shown on the enclosed Acceptance Form.

Shareholders may accept their entitlement in full or part by returning a completed Acceptance Form to the Company's Share Registry by 5.00 pm WST, 16 September 2005.

4.4 Minimum Subscription

There is no minimum subscription.

4.5 Oversubscriptions

Oversubscriptions will not be accepted.

SECTION 4

DETAILS OF THE OFFER

4.6 Issue Price

The issue price is 1 cent for each New Option payable in full in Australian currency on the acceptance of the Entitlements Issue as follows:

• o Cheque drawn on and payable at any Australian bank:
• Money Order; or $\circ$
• Bank draft drawn on and payable at any Australian bank.

4.7 Acceptance

This Offer may be accepted in whole or in part. Acceptance and payment in full of 1 cent per New Option must be received before 5.00pm WST on 16 September 2005. Instructions for completion and lodgement of acceptances are set out on the back of the enclosed Acceptance Form.

4.8 Action Required

If you wish to take up all of your entitlement, complete the enclosed Acceptance Form in accordance with the instructions set out and lodge the form together with your cheque for the amount shown on the form so that it reaches the Company's share registry:

Advanced Share Registry Services 110 Stirling Highway Nedlands WA 6009

by no later than 5.00pm WST on 16 September 2005.

Cheques and drafts should be made payable to "Graynic Metals Ltd - Option Issue" and crossed "Not Negotiable".

If you wish to take up part of your entitlement, complete the enclosed Acceptance Form in respect of the New Options you wish to take up in accordance with the instructions set out in the form and lodge the form together with your cheque for the relevant amount (being the number of New Options you wish to take up multiplied by 1 cent per New Option) so that it reaches the Company's share registry by no later than 5.00pm WST on 16 September 2005.

If you do not wish to take up any of your entitlement, you do not need to take any action and your entitlement to the New Options will lapse.

4.9 Underwriting

This Offer is not underwritten. The Directors reserve the right to place with parties selected by them any New Options not taken up by the Shareholders. These New Options will be placed within 3 months of the Closing Date on the same terms as are being offered to Shareholders pursuant to this Prospectus. New Options not taken up by Shareholders will not be placed to the Directors or any associates of Directors

SECTION 4

DETAILS OF THE OFFER

4.10 Closing Date

The Closing Date for the Entitlements Issue is 5.00 pm WST on 16 September 2005.

4.11 Offer Period

The Prospectus will be dispatched to Shareholders on or about 1 September 2005. The Entitlements Issue closes on 16 September 2005.

4.12 Allotment

The New Options will be allotted and issued as soon as practicable after 16 September 2005.

Statements of holding for the New Options will be mailed as soon as possible after the Closing Date.

No New Options will be allotted and issued on the basis of this Prospectus later than thirteen (13) months after the date of this Prospectus.

4.13 Stock Exchange Quotation

Application for official quotation of the New Options by the ASX will be made by the Company within seven (7) days of the date of this Prospectus. Application for official quotation of Shares allotted and issued as a result of the exercise of New Options issued under this Prospectus will be made within three (3) business days of allotment and issue.

4.14 Overseas Shareholders

Shareholders resident outside Australia should consult their professional advisers as to whether any governmental or other consents are required, or other formalities need to be observed to enable them to accept or deal with their entitlements.

This Prospectus does not constitute an offer in any place in which or to any person whom it would not be lawful to make such an offer.

4.15 Enquiries

If you have any questions concerning your entitlement, please contact the Company Secretary, Mr Kent Hunter on (618) 9381 1436, or fax (618) 9381 1068 or contact your professional adviser.

SECTION 5 INFORMATION DEEMED TO BE INCORPORATED IN THIS PROSPECTUS

$5.1$ Short Form Prospectus

This Prospectus is a short form prospectus issued in accordance with Section 712 of the Corporations Act 2001. This means that this Prospectus does not of itself contain all the information that is generally required to be set out in a document of this type, however it incorporates by reference information contained in a document that has been lodged with the ASIC.

The information to be incorporated by reference into this Prospectus is summarised below in subsection 5.2 and will primarily be of interest to investors and their professional advisers or analysts.

The Company informs investors and their professional advisers that they are able to obtain, free of charge, a copy of the April 2005 Prospectus by contacting the Company at its registered office during normal business hours during the Offer Period. The April 2005 Prospectus will also be available by searching ASIC's records in relation to Graynic, or by visiting the Company's website at www.graynicmetals.com.au.

$5.2$ Summary of Information Deemed to be Incorporated

Set out below is a summary of the information contained in the April 2005 Prospectus that is deemed to be incorporated in this Prospectus to assist investors and their professional advisers to determine whether, for the purposes of making an informed investment decision in relation to the New Options, they should obtain a copy of the April 2005 Prospectus.

The Sections referred to below are a reference to sections in the April 2005 Prospectus.

Section 2 - Project Review

This section contains a summary of the projects and tenements acquired by Gravnic Metals since its incorporation on 10 February 2005. It details the objectives and strategies of the Company and provides information relating to the mineral exploration tenements at the Quartz Circle, Jutson Rocks and Northhampton Projects,

Section 2 also summarises the intended exploration expenditure in regard to the projects noted above.

Section 3 - Board and Management

Section 3 contains information relating to each of the three directors of the Company and also refers to the corporate governance policies adopted by the Board.

Section 4 - Risk Factors

Section 4 notes that an investment in Gravnic Metals has risks reasonably expected of an investment in a business of its type. It details a number of factors that may impact on the success and future profitability of Graynic Metals. The factors referred to are Exploration Success, Operating Risks, Resource Estimates, Commodity Price Volatility and Exchange Rate Risks, Environmental Risks, Title Risks and Native Title, Share Market Conditions, General Investment Risks, and Specific Risks Associated with the Company.

SECTION 5 INFORMATION DEEMED TO BE INCORPORATED IN THIS PROSPECTUS

Section 5 - Independent Geologist's Report

Section 5 consists of the report prepared by the Independent Geologist, Boonjarding Resources Ltd. The report describes in detail the geological setting and historical mining and exploration on the mining tenements of Gravnic. The Report also sets out details of proposed exploration programs on the mining exploration tenements.

Section 6 - Investigating Accountant's Report

This comprises the Investigating Accountant's Report prepared by Ord Corporate Pty Ltd, dated 6 April 2005. The report was included in the April 2005 Prospectus to assist investors and their financial advisers in making an assessment of the financial position of the Company.

The Investigating Accountant's Report contains the unaudited Statement of Financial Performance for the period from incorporation to 31 March 2005. Statement of Financial Position of the Company as at 31 March 2005 and pro-forma Statement of Financial Position as at that date reflecting the position of the Company on the basis that various transactions. including the issue of all the Shares offered under the April 2005 Prospectus, and the final settlement of the acquisition of the mineral exploration tenements comprising the project by the Company, has been completed.

Based on their review, the Investigating Accountant stated that nothing had come to their attention that caused them to believe that:

(a) the historical financial information, as set out in Appendix 1 and 2 of their Report is not presented fairly in accordance with generally accepted accounting principles as applied in Australia for reporting on financial information in a public offer document; or

(b) the pro-forma financial information, as set out in Appendix 1 and 2 of their Report is not properly drawn up in accordance with the basis of preparation in Appendix 1 and 2, and the assumptions set out in their report and with generally accepted practice as applied in Australia for presenting pro-forma financial information in a public offer document.

Subsequent to lodgement of the April 2005 Prospectus and as announced to ASX by way of pre-quotation disclosure on 30 June 2005, the financial statements have been prepared in accordance with the measurement and recognition (but not the disclosure) requirements of all Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards ('AIFRS'), and UIG interpretations with the exception of AASB 107 - Cash Flow Statements.

SECTION 5 INFORMATION DEEMED TO BE INCORPORATED IN THIS PROSPECTUS

Section 7 - Solicitor's Report on Tenements

Section 7 consists of a report prepared by Price Sierakowski Lawyers, on the mining tenements acquired, or which may be acquired or in which an interest may earned by Graynic. The report details the titleholders of the mining tenements and the agreements entered into by the Company with Cazaly Resources Limited. The report also details the further contracts entered into by Cazaly Resources Limited which have been identified as material and relevant to potential investors.

Section 8 - Additional Information

Section 8 sets out additional information required to be disclosed in the prospectus including:

• Rights Attaching to Shares: $\bullet$
• Summary of Material Contracts to which the Company is a party (other than those summarised in Section 7) that the Directors considered were material in enabling investors to make an informed assessment of the offer of shares under the April 2005 Prospectus;
• Interests of Directors of the Company:
• Interests of Persons Named in the April 2005 Prospectus;
• Details of the Consents of persons to be named in the April 2005 Prospectus;
• Expenses of the Issue:
• Taxation:
• Exposure Period:
• A statement that the Company is not involved in any material litigation or arbitration proceedings, nor are any proceedings pending or threatened against the Company;
• Availability of an Electronic Prospectus; and
• Details of the Employee Incentive Scheme.

SECTION 6 COMPANY OVERVIEW

$6.1$ Overview and Reference to April 2005 Prospectus

A comprehensive overview of the Company is set out in the April 2005 Prospectus that was lodged with ASIC on 13 April 2005 for the initial public offering of 6,250,000 Shares. Persons considering subscribing for New Options under this Prospectus should refer to Section 5 of this Prospectus for a summary of the information contained in the April 2005 Prospectus deemed to be incorporated in this Prospectus.

As detailed in Section 2.2 of the April 2005 Prospectus, Graynic had proposed an exploration budget of \$1,700,000 over 24 months on the Quartz Circle, Jutson Rock and Northampton Project acquired by Graynic.

The actual manner in which the exploration expenditure is incurred may vary having regard to numerous factors, including the results of ongoing exploration activities and other matters as outlined in Section 4 of the April 2005 Prospectus.

On 16 June 2005, the Directors resolved to allot and issue 6,250,000 Shares at an issue price of 20 cents each pursuant to applications received under the April 2005 Prospectus. On 16 June 2005 the Directors resolved to allot and issue 6,250,000 Shares required under the Share Subscription Agreement with RAB Special Situations LP. On 31 May 2005 the Directors resolved to allot and issue 10,000,000 Shares to Cazaly Resources Limited pursuant to the Farm-in Agreement between Cazaly Resources Limited, Hayes Mining Pty Ltd and the Company.

The Company now has 24,500,003 Shares on issue.

Graynic was admitted to the Official List on 28 June 2005 with official quotation of its shares commencing on 30 June 2005.

Under the ASX Listing Rules, 4,167,048 Shares were subject to escrow restrictions. Accordingly, the Company's share registry has implemented holding locks on the relevant holdings and will not release them without ASX approval. The numbers and periods of escrow are as follows:

• 750,000 Shares for 12 months from 31 March 2005;
• $\blacksquare$ 522,480 Shares to 31 October 2005:
• 2,894,568 Shares for 24 months from 30 June 2005; and

The balance of the issued capital of the Company, being 20,332,955 Shares are quoted on ASX.

6.2 Circumstances or Matters subsequent to the April 2005 Prospectus

Other than as stated in this Prospectus, the Company is not aware of any material matter or circumstance that would impact on the contents of the April 2005 Prospectus or the activities and prospects of the Company and be relevant to assist investors or their professional advisers making an informed assessment of relevant matters.

SECTION 7 EFFECT OF THE ENTITLEMENTS ISSUE ON THE COMPANY

Under the Offer, up to 12,250,002 New Options are available for issue and will be issued if the Offer is fully subscribed (either by Shareholders accepting the offer under this Prospectus or pursuant to the Directors' discretion to place any shortfall referred to in Section 4.9 of this Prospectus).

Upon completion of the Entitlements Issue, the issued capital of the Company will comprise 24,500,003 Shares and 12,250,002 New Options.

After expenses of the Offer, the proceeds from the issue of New Options will be approximately \$112,500. These funds will be applied to the general working capital requirements of the Company.

SECTION 8 OVERSEAS PARTICIPANTS

The distribution of this Prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

This Prospectus does not constitute an offer in any place in which, or to any person to whom, it would not be lawful to make an offer.

SECTION 9 TERMS AND CONDITIONS OF NEW OPTIONS AND RIGHTS ATTACHING TO SHARES

Terms and Conditions of New Options $9.1$

The options will entitle the holders to subscribe for fully paid ordinary shares in the Company on the following terms:

• $1₁$ Each Option entitles the holder to acquire one fully paid ordinary share in the Company.
• $2₁$ The Options may be exercised at any time until 31 October 2007. Each Option may be exercised by forwarding to the Company at its principal office the exercise notice, duly completed together with payment of the sum of twenty cents (20c) per Option exercised. The Options will lapse at 5.00pm WST on 31 October 2007.
• 1. The Options may be transferred by an instrument (duly stamped where necessary) in the form commonly used for transfer of Options at any time until 31 October 2007, subject to any restrictions which may be imposed by ASX.
• $4.$ Optionholders shall be permitted to participate in new issues of securities on the prior exercise of options in which case the Optionholders shall be afforded the period of at least nine (9) business days prior to and inclusive of the record date (to determine entitlements to the issue) to exercise the Option.
• $5.$ Shares issued on the exercise of Options will be issued not more than fourteen (14) days after receipt of a properly executed exercise notice and application moneys. Shares allotted pursuant to the exercise of an Option will rank equally with the then issued ordinary shares of the Company in all respects. Official Quotation of the shares will be sought.
• 1. In the event of any reconstruction (including consolidation, sub-division, reduction or return) of the issued capital of the Company, all rights of the option holder will be changed to the extent necessary to comply with the Listing Rules applying to the reconstruction of capital at the time of the reconstruction.
• $7.$ If there is a bonus issue to shareholders, the number of shares over which the Option is exercisable may be increased by the number of shares which the holder of the Option would have received if the Option had been exercised before the record date for the bonus issue.
• 1. In the event that a pro rata issue (except a bonus issue) is made to the holders of the underlying securities in the Company, the exercise price of the Option may be reduced in accordance with Listing Rule 6.22.

$9.2$ Rights attaching to Shares upon Conversion of New Options

Full details of the rights attaching to Shares are set out in the Company's Constitution a copy of which can be inspected, free of charge, at the Company's registered office during normal business hours.

The following is a broad summary of the rights, privileges and restrictions attaching to all Shares. This summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of Shareholders.

All Shares issued pursuant to this Prospectus will from the time they are issued, rank pari passu with all the Company's existing Shares.

SECTION 9 TERMS AND CONDITIONS OF NEW OPTIONS AND RIGHTS ATTACHING TO SHARES

Voting Rights

Subject to any rights or restrictions for the time being attached to any class or classes of Shares (at present there are none), at meetings of shareholders of Graynic:

• a) each shareholder entitled to vote may vote in person or by proxy, attorney or representative;
• b) on a show of hands, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder has one vote; and
• c) on a poll, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder shall, in respect of each fully paid Share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for the Share, but in respect of partly paid Shares, shall have such number of votes as bears the same proportion which the amount paid (not credited) is of the total amounts paid and payable (excluding amounts credited).

Rights on Winding Up

Subject to the rights of holders of shares with special rights in a winding up (at present there are none), on a winding up of the Company all assets that may be legally distributed among members will be distributed in proportion to the number of fully paid shares held by them (and a partly paid share is counted as a fraction of a fully paid share equal to the amount paid on it, divided by the total issue price of the share).

Transfer of Shares

Subject to the Constitution of the Company, the Corporations Act 2001, the ASTC Settlement Rules, the ASX Listing Rules, and any other applicable laws. Shares are freely transferable.

Future Increases in Capital

The allotment and issue of any Shares is under the control of the Directors. Subject to restrictions on the allotment of Shares to Directors or their associates contained in the ASX Listing Rules, the Constitution of the Company and the Corporations Act 2001, the Directors may allot or otherwise dispose of Shares on such terms and conditions as they see fit.

Variation of Rights

Under the Corporations Act 2001, the Company may, with the sanction of a special resolution passed at a meeting of shareholders vary or abrogate the rights attaching to shares. If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of the issue of the shares of that class), whether or not the Company is being wound up may be varied or abrogated with the consent in writing of the holders of three quarters of the issued shares of that class, or if authorised by a special resolution passed at a separate meeting of the holders of the shares of that class.

Dividend Rights

Subject to the rights of holders of shares issued with special, preferential or qualified rights (at present there are none), the profits of the Company which the Directors determine to distribute by way of dividend are divisible among the Shareholders in proportion to the number of Shares held by them.

SECTION 10 ADDITIONAL INFORMATION

$10.1$ Market Prices of Ordinary Shares

Official quotation of the Company's Shares commenced on 30 June 2005 and consequently, the trading history on ASX as at the date of this Prospectus is limited to that period.

The highest recorded market sale price of the Company's Shares guoted on ASX during the period from commencement of official quotation to the date of this Prospectus was 20 cents on 30 June 2005 and 1 July 2005. The lowest recorded market sale price of the Company's Shares during this period was 15 cents on 14, 26, 27 and 28 July, and 3, 4, 5 August, 2005.

The last market sale price of the Company's Shares on ASX on the last day that trading took place in these shares prior to the date of this Prospectus was 17.5 cents on 16 August 2005.

The Company has no options over Shares currently quoted on ASX.

$10.2$ Taxation

It is the responsibility of all persons to satisfy themselves of the particular taxation treatment that applies to them by consulting their own professional tax advisers before investing in the New Options. Taxation consequences will depend on particular circumstances. Neither Graynic nor any of its officers accept any liability or responsibility in respect of the taxation consequences of the matters referred to above or any other taxation consequences connected with an investment in the New Options in Graynic or dealing with an entitlement in this Entitlements Issue.

$10.3$ Legal Proceedings

There is no litigation, arbitration or proceedings pending against or involving the Company as at the date of this Prospectus.

Continuous Disclosure and Documents Available for Inspection $10.4$

The Company is listed on ASX and its Shares are quoted on ASX.

The Company is a "disclosing entity" for the purposes of the Corporations Act 2001. As such, it is subject to regular reporting and disclosure obligations, which require it to disclose to ASX any information of which it is or becomes aware concerning the Company and which a reasonable person would expect to have a material effect on the price or value of securities of the Company.

Copies of documents lodged with the ASIC in relation to the Company may be obtained from or inspected at an office of the ASIC. This includes the April 2005 Prospectus referred to in Section 5 of this Prospectus.

The Company will provide a copy of all documents used to notify the ASX of information relating to the Company under the provisions of the Listing Rules since official quotation on 30 June 2005. As at the time of lodging this Prospectus the only such documents were :

Date	Number	Details
30 June 2005		Initial Directors' Interests Notice x 3
8 July 2005	2	Drilling to Commence at Quartz Circle Project
19 July 2005	3.	Good Results from Initial Pre-Collar Drilling
27 July 2005	4	Fourth Quarter Activities Report
29 July 2005	5	Fourth Quarter Cashflow Report

SECTION 10 ADDITIONAL INFORMATION

$10.5$ Interests of Directors and Experts

A full disclosure of the interests of Directors, Experts and Promoters of and to the Company for the period commencing on incorporation of the Company and to the date of issue of the April 2005 Prospectus are set out in Section 8.3 of the April 2005 Prospectus and other than as set out below or elsewhere in this Prospectus, that information and disclosure remains current.

The interest of the Directors in the securities of the Company at the date of this Prospectus are as follows :

Directors	Shares	30 cent 30 April 2008 Options
Ron Thom	524.000
Nathan McMahon	1,260,150	1,000,000
Clive Jones	1.057.689	1,000,000

10.6 Expenses of the Issue

The total expenses of the Issue are estimated to be \$10,000 comprising ASIC Lodgement fees, legal and due diligence costs and printing and other administrative expenses, including ASX quotation fees.

SECTION 11 MATERIAL CONTRACTS

Section 8.2 and Section 7 of the April 2005 Prospectus which are referred to in Section 5.2 of this Prospectus, set out contracts to which the Company is a party which were considered by the Directors as being material to enable investors to make an informed assessment of the shares being offered under that Prospectus. Investors and their professional advisers are referred to those sections of the April 2005 Prospectus in relation to material contracts.

A true copy of each of the material contracts referred to in the April 2005 prospectus will be available for inspection at the Company's registered office during office hours.

SECTION 12

CONSENTS

The following persons have each consented to the inclusion of the following statements and statements identified in this Prospectus as being based on statements made by those persons, in the form and context in which they are included, and have not withdrawn that consent before lodgement of this Prospectus with the ASIC:

Ord Corporate Pty Ltd in relation to the Investigating Accountant's Report in Section 6 of the April 2005 Prospectus and the reference to that report in this Prospectus. Ord Corporate Pty Ltd has not authorised or caused the issue of any other part of this Prospectus.

Price Sierakowski Lawyers in relation to the Solicitor's Report set out in Section 7 of the April 2005 Prospectus and the reference to that report in this Prospectus. Price Sierakowski Lawyers have also consented to be named in this Prospectus as Lawyers to the Company. Price Sierakowski Lawyers has not authorised or caused the issue of any other part of this Prospectus.

Booniarding Resources Ltd in relation to the Independent Geologist's Report set out in Section 5 of the April 2005 Prospectus and the reference to that report in this Prospectus. Boonjarding Resources Ltd has not authorised or caused the issue of any other part of this Prospectus.

SECTION 13

AUTHORITY OF DIRECTORS

The Directors state that they have made all reasonable enquiries and on the basis have reasonable grounds to believe that any statements made by the Directors in this Prospectus are not misleading or deceptive and that in respect to any other statements made in this Prospectus by persons other than Directors, the Directors have made reasonable enguiries and on that basis have reasonable grounds to believe that persons making the statement or statements were competent to make such statements, those persons have given their consent to the statements being included in this Prospectus in the form and context in which they are included and have not withdrawn that consent before lodgement of this Prospectus with the ASIC, or to the Directors knowledge, before any issue of Shares pursuant to this Prospectus.

Each of the Directors of Graynic Metals Limited has consented to the lodgement of this Prospectus in accordance with Section 720 of the Corporations Act 2001 and has not withdrawn that consent.

Dated 18 August 2005.

Signed for and on behalf of GRAYNIC METALS LIMITED

By Nathan McMahon Director

SECTION 14

DEFINITIONS

Acceptance Form means the entitlement and acceptance form enclosed with this Prospectus. Applicant means a person who submits an Application.

Application means a valid application to subscribe for New Options.

April 2005 Prospectus means the prospectus lodged by the Company with the ASIC and dated 13 April 2005.

ASIC means Australian Securities and Investments Commission.

ASX means Australian Stock Exchange Limited (ACN 008 624 691).

Auditors means Ord Partners Chartered Accountants.

Board means the board of Directors unless the context indicates otherwise.

Business Day means a day other than a Saturday or Sunday on which banks are open for business in Perth. Western Australia.

CHESS means ASX Clearing House Electronic Subregistry System.

Closing Date means the date on which the Offer closes.

Company means Gravnic.

Corporations Act 2001 and Law means the Corporations Act 2001 of Australia.

Directors means the directors of the Company from time to time.

Dollars or \$ means Australian dollars unless otherwise stated.

Entitlements issue means a pro-rata non-renounceable entitlements issue to Shareholders who are registered at 5.00pm WST on 29 August 2005 of up to 12,250,002 New Options at an issue price of 1 cent each to raise approximately \$122,500 (before costs of the Issue).

Glossary means this glossary. Graynic and Graynic Metals means Graynic Metals Limited (ABN 87 112 898 825).

Investigating Accountant means Ord Corporate Pty Ltd.

Investigating Accountant's Report means the report contained in Section 6 of the April 2005 Prospectus.

Independent Geologist means Booniarding Resources Ltd.

Independent Geologist's Report means the report contained in Section 5 of the April 2005 Prospectus.

Issue means the issue of New Options pursuant to this Prospectus.

Listing Rules or ASX Listing Rules means the official Listing Rules of ASX.

New Option means an option to subscribe for one Share in Graynic exercisable at 20 cents on or before 5:00pm WST on 31 October 2007 and issued on the terms and conditions set out in this Prospectus.

Offer means the offer of New Options pursuant to this Prospectus.

Offer Period means the period commencing on the Opening Date and ending on the Closing Date

Official List means the Official List of ASX.

Opening Date means the date on which the Offer opens.

Option Holders means those parties holding options to acquire Shares in Graynic.

Prospectus means this prospectus dated 18 August 2005 for the issue of up to 12,250,002 New Options, including any electronic or online version.

Quotation means quotation of the Shares or New Options on ASX.

Share means a fully paid ordinary share in Graynic Metals Limited.

Shareholder means a holder of Shares.

WST means Western Standard Time, Perth, Western Australia.

ENTITLEMENT AND ACCEPTANCE FORM

THIS DOCUMENT IS IMPORTANT. IF YOU ARE IN DOUBT AS TO HOW TO DEAL WITH IT. PLEASE CONTACT YOUR STOCKBROKER OR LICENSED PROFESSIONAL ADVISER.

GRAYNIC METALS LIMITED

ABN 87 112 898 825

REGISTERED OFFICE

Level 2, 22 Oxford Close LEEDERVILLE WA 6005

Non-renounceable entitlement issue of up to 12,250,002 options to subscribe for ordinary fully paid shares (New Options) on the basis of 1 New Option for every 2 ordinary fully paid share held, at an issue price of \$0.01.

Non-renounceable entitlement, closing 5.00 p.m. W.S.T on 16 September 2005.

Shareholding at 5.00 pm W.S.T on 29 August 2005

SHARE REGISTRY

110 Stirling Highway NEDLANDS WA 6009

Advanced Share Registry Services

Entitlement to New Shares on a 1:2 basis

Amount Payable at \$0.01 per New Option

To the Directors GRAYNIC METALS LIMITED

• 1. I/We the above mentioned, being registered on 29 August 2005 as the holder(s) of ordinary fully paid shares in your Company hereby accept the below mentioned New Options in accordance with the enclosed Prospectus;
• 1. I/We enclose my/our cheque or bank draft made payable to GRAYNIC METALS LIMITED OPTION ISSUE, for the amount shown being payment at the rate of \$0.01 per New Option;
• 1. I/We hereby authorise you to place my/our name(s) on the registers of shareholders in respect of the number of New Options allotted to me/us; and
• 1. I/We agree to be bound by the Constitution of the Company.

RETURN OF THIS DOCUMENT WITH THE REQUIRED REMITTANCE WILL CONSTITUTE YOUR ACCEPTANCE OF THE SECURITIES BEING OFFERED

	New Options Accepted		Amount Enclosed at \$0.01 per New Option
PLEASE ENTER	. .	Andream Bank Hermann	Allender Branch (Marchan)	Martin Amount
CHEQUE DETAILS THANKYOU
My/Our contact numbers in the case of inquiry are:
Telephone $($ $)$ $\text{Fix } (-)$
Email:
Cheques and bank drafts should be made payable to GRAYNIC METALS LIMITED - OPTION ISSUE, crossed "NOT NEGOTIABLE" and forwarded NOTE: to Advanced Share Registry Services at 110 Stirling, Perth, Western Australia 6009 or PO Box 1156, Nedlands, Western Australia 6909 to arrive no later than 5.00pm W.S.T on 16 September 2005.
Complete this panel and sign below only if a change of address is to be registered with the Company
New Address: _____
---------------------------------------
	Signature(s): ______
Please indicate your correct title: Director / Secretary / ---------------------------------------
ISSUE CLOSES 5.00PM W.S.T. ON 16 SEPTEMBER 2005. THE DIRECTORS RESERVE THE RIGHT TO MAKE AMENDMENTS TO THIS FORM WHERE APPROPRIATE

PLEASE REFER OVERLEAF FOR INSTRUCTIONS

EXPLANATION OF ENTITLEMENT

• 1. The front of this form sets out the number of New Options which you are entitled to accept.
• $\overline{2}$ . Your entitlement may be accepted either in full or in part. There is no minimum acceptance.
• 1. You may not apply for New Options in excess of your maximum entitlement using this form.
• 1. The price payable on acceptance of each New Option is \$0.01.
• 1. You may accept your entitlement in full by completing the Entitlement and Acceptance Form overleaf.

APPLICATION INSTRUCTIONS

• 1. The issue price of \$0.01 per New Option is payable in full upon application.
• $\overline{2}$ . Payments must be made in Australian currency by cheque or bank draft drawn on and payable at a bank within Australia. Cheques and bank drafts drawn on banks outside Australia in either Australian currency or in foreign currency will not be accepted.
• The cheque or bank draft must be made payable to GRAYNIC METALS LIMITED OPTION ISSUE and 3. crossed "Not Negotiable".
• When completed, this form together with the appropriate payment in Australian currency should be 4. forwarded to GRAYNIC METALS LIMITED, c/- Advanced Share Registry Services.
• 1. Acceptances must be received by Advanced Share Registry Services no later than 5.00pm W.S.T on 16 September 2005.

ENQUIRIES

Any enquiries should be directed to:

The Company's share registry: Advanced Share Registry 110 Stirling Highway Nedlands, Western Australia 6009

Postal Address: PO Box 1156 Nedlands, Western Australia 6909

Telephone (61-8) 9389 8033

Facsimile (61-8) 9389 7871