ETRAYNIE NE HALE

ABN 87 112 898 825

For the issue of 6.250.000 Shares at an Issue price of 20 cents each to raise a total of \$1,250,000.

Lead Manager

Parerson Securities Limited ABN 69 008 896 311

GRAYNIC METALS

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 6007

CONTACT DETAILS

Website: www.graynicmetals.com.au

Email: [email protected]

Ph: (08) 9381 1436 Fax: (08) 9381 1068

IPO COMPLIANCE MANAGERS

Mining Corporate Advisory Services Pty Ltd PO Box 1905 SUBIACO WA 6008

SOLICITORS TO THE COMPANY

Price Sierakowski Level 24, 44 St George's Terrace PERTH WA 6000

INDEPENDENT GEOLOGIST

Boonjarding Resources Ltd Geological Consultant Services - Mining & Mineral Exploration 56 Kent Street CANNINGTON WA 6107

INVESTIGATING ACCOUNTANTS

Ord Corporate Pty Ltd Level 2, 47 Colin Street West Perth WA 6005

SHARE REGISTRY

Advanced Share Registry Services Level 7, 200 Adelaide Terrace Perth WA 6000

Ph: (08) 9221 7288 Fax: (08) 9221 7869

AUDITORS

Ord Partners Chartered Accountants Level 2, 47 Colin Street West Perth WA 6005

LEAD MANAGER

Paterson Securities Limited Level 23 Exchange Plaza 2 The Esplanade PERTH WA 6000

CONTENTS

I.	DETAILS OF THE OFFER	5
1.1	Shares Offered for Subscription	$\overline{5}$
1.2	Maximum Subscription	$\ddot{\circ}$
1.3	Minimum Subscription	$\overline{5}$
1.4	Purpose of the Offer	$\ddot{\circ}$
1.5	Underwriting	$\ddot{\circ}$
1.6	Rights Issue of Options after Listing	$\ddot{\rm o}$
1.7	Arrangements with Lead Manager	6
1.8	RAB Share Subscription Agreement	6
1.9	Cash flow Projections	6
1.10	Allotment and Allocation of Shares	6
1.11	Applicants outside Australia ASX Listing	6 7
1.12 1.13	- CHESS	$\overline{7}$
1.14	Enquiries in Relation to the Offer	$\overline{7}$
	1.15 How to Apply	7
	1.16 Escrow Provisions	8
1.17	Electronic Prospectus	8
1.18	Privacy Disclosure	8

2	PROJECT REVIEW	9
2.1	Background	9
2.2	Projects	9
2.3	Expenditure Summary	Н
2.4	Summary	Ħ
3	BOARD AND MANAGEMENT	14
3.1	Board of Directors	14
3.2	Corporate Governance	15
4	RISK FACTORS	16

5	INDEPENDENT GEOLOGIST'S REPORT	19
6	INVESTIGATING ACCOUNTANT'S REPORT	52
7	SOLICITORS' REPORT ON MINING TENEMENTS	60
8	ADDITIONAL INFORMATION	70
9	GLOSSARY OF NAMES & TERMS	79
10	CONSENT BY THE DIRECTORS	81
11	APPLICATION FORM & INSTRUCTIONS	83

a katika matsa ya katika mwaka wa 1972, kata wa 1972, a mshindi wa 1972, a mshindi wa mshindi wa 197

P R O S P E C T U S

PY. د کر

INVESTMENT HIGHLIGHTS

DEMONSTRATED HIGH GRADE COPPER TARGETS

Focus on copper mineralisation at Quartz Circle where previous drilling has returned broad high grade intercepts including $38\text{m} \otimes 5.5\%$ Cu and $34\text{m} \otimes 4.4\%$ Cu. Existing inferred resource of 127,000T $\otimes$ 4.1% Cu within the oxide zone may overlie deeper sulphide mineralisation. RC drilling in early May 2005.

HIGH GRADE LEAD, SILVER ZINC TARGETS UNTESTED

Review of underexplored lead and silver potential at Quartz Circle where previous exploration has returned high grade results including 9m @ 46% Pb and 1,000g/t Ag (i.e. 32 ounces/tonne) as well as zinc intersections including 17.7m @ 16.1% Zn. There has been limited exploration targeting of lead, zinc and silver.

QUARTZ CIRCLE POTENTIALLY WORLD CLASS OREBODY

Extensive rock alteration indicates potential setting for volcanic massive sulphide (VMS) deposit such as Kidd Creek and Golden Grove. Project exhibits classic base metal zonation of VMS deposits.

JUTSON ROCKS BELT PROSPECTIVE FOR NICKEL/PLATINUM GROUP ELEMENTS

Commencement of nickel exploration at Jurson Rocks where an Independent Report has stated that there is "significant potential for komatiite hosted nickel mineralisation." Previous rock chip sampling has returned 2g/t platinum group elements (PGE). Graynic Metals controls the majority of this underexplored greenstone belt. There are several untested geochemical anomalies that will be subject to nickel sulphide exploration.

STRONG COMMODITY PRICE OUTLOOK

Strong demand for base metals with exceptionally robust prices for lead and copper being fuelled by the appetite from China, and to a lesser extent by India. Outlook also remains positive for zinc.

EXPERIENCED, PRO-ACTIVE BOARD

The Board has a blend of exploration, development, resource management, corporate and financial skills to ensure the cost-effective exploitation of the existing project base. The Board has a recent track record of creating value for shareholders.

PRO FORMA CAPITAL STRUCTURE & INDICATIVE TIMETABLE

PRO FORMA CAPITAL STRUCTURE

The pro-forma capital structure of Graynic Metals is summarised below and assumes the Offer is fully subscribed.

	ANUMINES
Shares presently on issue	2.000,003	150,503	8.2
Shares to be issued to Cazaly Resources Ltd	10,000,000		40.8
Shares to be issued to RAB Special Situations LP	6,250,000	1,250,000	25.5
Shares now offered	6.250,000	1,250,000	25.5
KIOINTENUUD TAIDEN S		EXAMPLE A RELATIONS AND DESCRIPTIONS

In addition there are 6,000,000 options on issue exercisable as follows:

* 2,000,000 at 20 cents each on or before the earlier of 2 years from either;
(i) the date that Graynic Metals is granted Quotation on ASX; and
(ii) the date 30 days after the execution of the \$0.20 Option Deed.
2,000,000 at 30 cents each on or before 30 April 2008;
* 2,000,000 at 30 cents each on or before the ealier of 3 years from either;
(i) the date that Graynic Metals is granted Quotation on ASX; and
(ii) the date 30 days after the execution of the \$0.30 Option Deed.

Further details of the Company's issued capital are contained in the Investigating Accountant's Report in Section 6.

INDICATIVE TIMETABLE

Subscription lists open for Applications:	21 April 2005
Closing Date for Applications:	6 May 2005
Dispatch of Statements of Shareholdings:	11 May 2005
Quotation of Shares on ASX expected to commence:	17 May 2005

These dates are indicative only and may vary. Graynic Metals reserves the right to close the Offer early, or extend the Closing Date without prior notice. Applicants are therefore encouraged to submit Applications as soon as possible after the Opening Date.

IMPORTANT NOTICE

This Prospectus is dated 13 April 2005.

A copy of this Prospectus was lodged with the ASIC on 13 April 2005. Neither the ASIC nor ASX take any responsibility for the contents of this Prospectus.

This Prospectus will be issued in paper form and as an electronic Prospectus, which may be viewed online at www.graynicmetals.com.au. The offer of Shares pursuant to this Prospectus is available to persons receiving an electronic version of this Prospectus in Australia. The Corporations Act 2001 prohibits any person from passing onto another person the Application Form unless it is attached to or accompanied by the complete and unaltered version of this Prospectus. During the Offer Period, any person may obtain a hard copy of this Prospectus by contacting the Company by e-mail at [email protected].

No person or entity is authorised to give any information or to make any representation in connection with the Offer which is not contained in this Prospectus. Any information or representation not so contained may not be relied on as having been authorised by the Company in connection with the Offer.

No Shares 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 Shares offered by this Prospectus to be listed for Quotation.

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.

In accordance with Chapter 6D of the Corporations Act, this Prospectus is subject to an Exposure Period of 7 days from the date of lodgement of the Prospectus with the ASIC. This period may be extended by the ASIC for a further period of 7 days. The purpose of this Exposure Period is to enable the Prospectus to be examined by market participants prior to the raising of the funds, which examination may result in the identification of deficiencies in this Prospectus. If this Prospectus is found to be deficient, Applications received during the Exposure Period will be dealt with in accordance with section 724 of the Corporations Act. Applications received prior to the expiration of the Exposure Period will not be processed until after the Exposure Period. No preference will be conferred upon Applications received in the Exposure Period.

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

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 9 of this Prospectus.

All amounts are in Australian dollars unless otherwise specified.

S. P. E. $\mathbb{C}$ T U - S

SECTION 1: DETAILS OF THE OFFER.

DETAILS OF THE OFFER

1.1 SHARES OFFERED FOR SUBSCRIPTION

This Prospectus invites investors to apply for a total of 6,250,000 Shares at an issue price of 20 cents per Share to raise \$1,250,000 before expenses of the Offer. All Shares issued pursuant to this Prospectus will be issued as fully paid and will rank equally in all respects with the Shares already on issue.

Applications must be for a minimum of 10,000 Shares and thereafter in multiples of 1,000 Shares, and can only be made by completing the Application Form atrached to this Prospectus.

The Company reserves the right to reject any Application or to allocate any Applicant fewer Shares than the number applied for.

1.2 MAXIMUM SUBSCRIPTION

The maximum subscription to the Offer is 6,250,000 Shares raising \$1,250,000 before expenses of the Offer. The maximum amount which may be raised under this Prospectus is therefore \$1,250,000.

1.3 MINIMUM SUBSCRIPTION

The minimum subscription to the Offer is 6,250,000 Shares raising \$1,250,000 before expenses of the Offer. If the minimum subscription has not been raised within three (3) months after the date of this Prospectus, all Applications will be dealt with in accordance with the Corporations Act 2001.

1.4 PURPOSE OF THE OFFER

In the two years after listing on ASX the funds raised from the Issue will be applied as follows:

EUSKOPERINDS	RINAYADIKGRIBDY
Pre-Offer cash and receivables	150,003
Total raised pursuant to RAB Share Subscription Agreement	1.250.000
Total raised in the Offer	1,250,000
EXPLORATION DS AVAILABLE Exploration expenditure (refer Section 2.3)	PAGDADA 1,700,000
Stamp Duty on Project Acquisition	101,700
Expenses of the Issue, including broker fees (refer Section 8.6)	199,228
Unallocated working capital	649.075
STOTAL FRINDS ADDITION	PAGOOB

Following the completion of the Offer, the Company will have sufficient working capital to carry out its objectives over the next two years.

R O S P E C T U S P

$1.5$ UNDERWRITING

The Offer is not underwritten.

1.6 RIGHTS ISSUE OF OPTIONS AFTER LISTING

All Shareholders registered on the shares register of Graynic Metals at a date approximately eight (8) weeks after Graynic Metals' Share are quoted on ASX will be entitled to participate in a proposed non-renounceable rights issue of Options on the basis of 1 Option for every 2 Shares then held. The options are to be issued at one (1) cent each with an exercise price of 20 cents and an expiry date of 30 April 2007.

The terms and conditions of the Options to be issued pursuant to the rights issue are set out in Section 8.11.1 of this Prospectus.

1.7 ARRANGEMENTS WITH LEAD MANAGER

Graynic Metals will pay the Lead Manager, Patersons Securities Limited (Patersons), a Lead Manager Fee of \$25,000, a Management Fee of 1% of the total amount raised by Patersons pursuant to the IPO (i.e. \$12,500 on Patersons' \$1.25million) and a Lodgement Fee of 4% on all Applications lodged bearing one of their stamps.

1.8 RAB SUBSCRIPTION AGREEMENT

Graynic Metals has entered into a Share Subscription Agreement with RAB Special Situations LP for the issue of 6,250,000 Shares at an issue price of 20 cents each to raise \$1,250,000. The Share Subscription Agreement is subject to the preparation of this Prospectus and the terms of the Share Subscription Agreement are summarised in Section 7.

CASH FLOW PROJECTIONS 1.9

Graynic Metals is predominantly a base metals exploration company. Given the speculative nature of exploration and gold and base metals development and production, there are significant uncertainties associated with forecasting future revenue. On this basis, the Directors believe that reliable forecasts cannot be prepared and accordingly have not included forecasts in this Prospectus.

1.10 ALLOTMENT AND ALLOCATION OF SHARES

Subject to ASX granting approval for the Company to be admitted to the Official List, the allotment of Shares to Applicants will occur as soon as possible after the Offer is closed, following which statements of Shareholdings will be disparched. It is the responsibility of Applicants to determine their allocation prior to trading in Shares. Applicants who sell Shares before they receive their holding statements will do so at their own risk.

Pending the issue of the Shares, or return of the Application Monies, the Application Monies will be held in trust for the Applicants.

The Directors have the right to allocate Shares under the Offer. The Company may reject any Application or allocate any Applicant fewer Shares than applied for under the Offer.

If an Application is not accepted, or is accepted in part only, the relevant part of the Application Monies will be refunded. Interest will not be paid on Application Monies refunded.

SECTION 12 DETAILS OF THE OFFER

1.11 APPLICANTS OUTSIDE AUSTRALIA

This Prospectus does not constitute an offer of securities in any jurisdiction where, or to any person to whom, it would not be lawful to issue the Prospectus or make the Offer. It is the responsibility of any Applicant who is resident outside Australia to ensure compliance with all laws of any country relevant to their Application, and any such Applicant should consult their professional advisers as to whether any government or other consents are required, or whether any formalities need to be observed to enable them to apply for and be allotted Shares.

No action has been taken to register or qualify the Shares or the Offer or otherwise to permit a public offering of the Shares in any jurisdiction outside Australia.

1.12 ASX LISTING

Within 7 days after the date of this Prospectus, application will be made for the Shares offered by this Prospectus to be granted Quotation.

If approval for Quotation is not granted within 3 months after the date of this Prospectus, the Company will not allor or issue any Shares, and will repay all Application Monies without interest as soon as practicable.

ASX takes no responsibility for the contents of this Prospectus. The fact that ASX may admit Graynic Metals to its Official List is not to be taken in any way as an indication of the merits of the Company or the Shares offered pursuant to this Prospectus.

1.13 CHESS

Graynic Metals will apply to participate in the Clearing House Electronic Subregister System (CHESS), operated by ASX Settlement and Transfer Corporation Pty Ltd (ASTC) (a wholly owned subsidiary of ASX), in accordance with the Listing Rules and ASTC Settlement Rules. On admission to CHESS, the Company will operate an electronic issuer-sponsored subregister and an electronic CHESS subregister. The two subregisters together will make up the Company's principal register of securities.

Under CHESS, the Company will not issue certificates to Shareholders. Instead, the Company will provide Shareholders with a holding statement (which is similar to a bank account statement) that sets out the number of Shares allotted to that Shareholder under this Prospectus.

This statement will also advise investors of either their Holder Identification Number (HIN) in the case of a holding on the CHESS sub-register or Security Holder Reference Number (SRN) in the case of a holding on the issuer-sponsored sub-register.

A statement will be routinely sent to holders at the end of any calendar month during which their holding changes. A holder may request a statement at any other time however a charge may be incurred for additional statements.

1.14 ENQUIRIES IN RELATION TO THE OFFER

This Prospectus provides information for potential investors in Graynic Metals, and should be read in its entirety. If, after reading this Prospectus, you have any questions about any aspect of an investment in Graynic Metals, please contact your stockbroker, accountant or independent financial adviser.

SECTION 1: DETAILS OF THE OFFER

1.15 HOW TO APPLY

Applications for Shares under the Offer can only be made on the Application Form attached to this Prospectus.

The Application Form must be completed in accordance with the instructions set out on the back of each Application Form. COMPLETED APPLICATION FORMS AND ACCOMPANYING CHEQUES SHOULD, AT ANY TIME AFTER THE OPENING DATE BE:

ОR	Delivered to:
	Graynic Metals Limited
	C/- Advanced Share Registry Services
	110 Stirling Highway
	NEDLANDS WA 6009
	Delivered to:

	Graynic Metals Limited
	Level 2, 22 Oxford Close
	WEST LEEDERVILLE WA 6007
	ОR

Cheques must be made payable to "Graynic Metals Limited - Application Funds" and crossed "Not Negotiable".

No brokerage or stamp duty is payable by Applicants.

Applications must be for a minimum of 10,000 Shares at the issue price of 20 cents per Share. Applications for more than 10,000 Shares must be in multiples of 1,000.

1.16 ESCROW PROVISIONS

Securities on issue as at the date of this Prospectus may be subject to the restricted securities provisions of the Listing Rules. Accordingly, a proportion of such securities may be required to be held in escrow for up to 24 months and may not be transferred, assigned or otherwise disposed of during that period. These agreements will be entered into in accordance with the Listing Rules.

Based on their experience, the Directors expect that a substantial majority of the shares on issue at the date of this Prospectus will be subject to escrow restrictions.

1.17 ELECTRONIC PROSPECTUS

This Prospectus is available on-line at www.graynicmetals.com.au and www.patersonssecurities.com.au

1.18 PRIVACY DISCLOSURE

The Company collects information in relation to each Applicant as provided on an Application Form (Information) for the purposes of processing the Application Form and, should the Application be successful, to administer the Applicant's security holding in the Company (Purposes).

The Company may use the Information for the Purposes and the Company may disclose the Information for the Purposes to the Lead Managers, Share Registrar, the Company's related bodies corporate, agents, contractors and third party service providers, and to ASX, ASIC and other regulatory authorities.

The Information may also be used and disclosed to persons inspecting the register, including bidders for your securities in the context of take-overs, licensed securities dealers, mail houses, and regulatory bodies including the Australian Taxation Office.

S. P. E. C T U - S O

PROJECT REVIEW

$2.1$ BACKGROUND

Graynic Metals ultimate goal is to achieve recognition as a premier Australian owned and controlled mining company, based on the quality of its operations and growth potential of its assets.

The Company aims to achieve this goal through;

active drill based exploration programmes on its existing projects; and 61
consolidation of its substantial tenement holdings in both the Quartz Circle and Jutson Rocks project areas; $(ii)$ and
utilisation of our proven project acquisition skills to provide the Company with exposure to high quality $(iii)$ exploration projects at a cheap entry price; and
utilising the collective experience of the Board and management team to advance its existing resource base iv) through cashflow opportunities.

Graynic Metals was incorporated as a public company for the purposes of acquiring several base metal mineral exploration projects within Western Australia that were deemed to be highly prospective yet generally underexplored. Graynic Metals is acquiring three projects from Cazaly Resources Ltd who have decided to focus on gold exploration near the world class Kalgoorlie mining centre.

The major commodity focus will be copper and nickel with a lesser emphasis on zinc, lead, silver, gold and platinum group elements. Prices for these commodities have been in a strong upward trend in recent times and the price outlook is very positive in both the medium and long term. LME inventories have fallen dramatically for copper, nickel and lead and demand is at long term highs.

The Board has a proven track record of recognising and rapidly advancing under-explored gold projects and these skills shall ensure maximum returns from the substantial exploration portfolio.

2.2 PROJECTS

The Company controls three key project areas within mineral provinces that have demonstrated copper, lead, zinc, nickel and/or platinum mineralisation. These areas are greatly under explored and the Company plans immediate vigorous exploration in these areas.

The Company will seek new resources and extensions to existing resources by appropriate use of available rechniques including drilling, geochemistry, geophysics and geological interpretation.

Each project area has a significant land position which allows for further growth opportunities should exploration be successful.

QUARTZ CIRCLE (COPPER, LEAD, ZINC, GOLD)

Graynic Merals will assess the existing resource base and conduct further exploration over several advanced quality targets. At the Quartz Circle Prospect there is a small inferred resource of approximately 127,000T $\&$ 4.1% Cu consisting of secondary copper, principally chalcocite, commencing at a depth of approximately 20 metres. Significant intercepts within this zone include 38m @ 4.04% Cu and 34m @ 5.51% Cu. Potential exists to extend this resource, particularly at depth within the primary zone. Minimal drilling 300m along strike to the south has intersected significant copper and gold results (ie. $4m \otimes 9.3\%$ Cu + 13.3 g/t Au and $4m \& 1.96\%$ Cu + 11.6 g/t Au), whilst outcropping veins 500m to the north returned up to 2.75% $Cu + 18.5$ g/t Au.

P R S. $P$ $E$ $C$ T U -S 0

About 600m southeast of the Quartz Circle Prospect previous percussion drilling by an earlier explorer intersected significant zones of sulphide with intercepts of 17.74m @ 16.1% Zn and 7.5m @ 16.0% Zn with elevated lead and cadmium. RGC Limited and Herald Resources Limited later conducted further drilling throughout the area generating numerous high grade base metal and gold targets which are ready for immediate drill testing.

The geological setting at Quartz Circle resembles the geological setting for volcanic-hosted massive sulphide (VMS) deposits which in Archean terranes such as this typically contain Cu, Pb and Zn accompanied by Au and Ag. Previous stream and soil sampling generated copper-gold and lead-zinc anomalies over a wide area within the Graynic tenements and these may reflect the typical metal zonation of a VMS sulphide deposit.

JUTSON ROCKS (NICKEL, GOLD, PLATINUM GROUP ELEMENTS)

Graynic Metals will drill test existing targets and generate new targets within this project which effectively covers the majority of the Jutson Rocks greenstone belt. The greenstone belt covers several layered maficultramafic complexes with strong Platinum Group Elements (PGE) and Ni-Cu sulphide potential. Potential also exists for gold discoveries as there are several Au anomalies coincident with major regional structures.

Previous exploration over the mafic complexes has defined several surface anomalies comprising Nickel, Copper and PGEs. A zone of anomalous rock chips over a large stratiform mafic complex may indicate a PGE-bearing reef within this intrusion and is an immediate target for drilling. The complexes have also returned anomalous nickel from surface geochemical sampling, and a recent independent study concluded that "These untested geochemical anomalies indicate the Jutson Rocks komatiite sequence to be prospective for nickel sulphides."

NORTHAMPTON PROJECT (COPPER, LEAD, SILVER)

The tenement covers approximately 200 square kilometres and encompasses a large number of historic lead mines that date back to 1865. Silver, copper and zinc occur with the lead in many of these old mines but their potential needs to be fully assessed. The Northampton block has similarities to the Willyama Complex in which the Broken Hill silver-lead-zinc deposit is located and exploration will be directed towards this type of discovery.

EXPENDITURE SUMMARY $2.3$

The Company proposes to fund its intended activities as outlined in the tables below from the proceeds of the Offer.

It should be noted that the budgets will be subject to modification on an ongoing basis depending on the results obtained from such exploration as carried out. Ongoing assessment of each of the Company's gold and base metals interests may lead to increased or decreased levels of expenditure reflecting a change in emphasis. Subject to the above, the following expenditure is proposed:

BUDGET - QUARTZ CIRCLE YEAR 1 AND YEAR 2

EXQUANDIZERING washing wat	VM TER		MATE IN BEAM IN
Wages/salaries/contractors	150,000	170.000	320,000
Surface exploration	10.000	10.000	20.000
Geophysics	40,000	50.000	90.000
RAB/AC drilling	30,000	30,000	60.000
RC drilling	175,000	150.000	325.000
Diamond drilling	100,000	150,000	250.000
Assays	30,000	35,000	65,000
Field costs/consumables	45,000	50,000	95,000
Tenement costs	55,000	35,000	90.000
Administration	55,000	65.000	120.000
TOIAIN	TODORODIE		ZASADOLI SE ARBADOLI

BUDGET -- JUTSON ROCKS YEAR 1 AND YEAR 2

EXUALDERED	1836, 81 49 4		TATO TELEVISIONIS
Wages/salaries/contractors	35,000	60.000	95.000
Surface exploration	8,000	10.000	18.000
Geophysics		15,000	15.000
RAB/AC drilling
RC drilling	$\mathcal{L}$	50,000	50,000
Diamond drilling	$\overline{\phantom{a}}$	$\overline{a}$
Assays	7.000	8.000	15,000
Field costs/consumables	5,000	8.000	13,000
Tenement costs	5.000	5.000	10,000
Administration	4.000	5.000	9,000
ETOTALISM 88.ELS		64.000

$\texttt{BUDGET} - \texttt{NORTHAMPTON}$ YEAR 1 AND YEAR 2

EXPLANDER ON THE All and the second contract of the second second second second second second second second second second second second second second second second second second second second second second second second second second secon	YEARS BEEN		NEWS CONTRACT
Wages/salaries/contractors	10.000	9.000	19.000
Surface exploration	6.500		6,500
RC drilling		7.500	7.500
Assays	1.000	1.000	2,000
Field costs/consumables	1,000	000.1	2.000
Tenement costs	500	500	1,000
Administration	1,000	1.000	2.000
			20,000 - 40,000

$\overline{13}$

SECTION 2: PROJECT REVIEW

EXPENDITURE SUMMARY - ALL PROJECTS

	Availe man		YARA GORU
Quartz Circle	690,000	745,000	1,435,000
Jurson Rocks	64,000	161,000	225,000
Northampton	20,000	20,000	40,000

2.4 SUMMARY

The Company has acquired interests in several highly prospective base metals exploration projects with the potential to host economic base metals resources. The company hopes that exploration successes in the short term will lead to it becoming a significant gold and base metals producer. Graynic Metals believes it can achieve this with its experienced management team that has a strong background in gold and base metals exploration as well as prudent fiscal management and administration.

SECTION 3: BOARD AND MANAGEMENT

3.1 BOARD OF DIRECTORS

RON THOM Managing Director Qualifications: B.Sc., Ph.D

Ron has extensive experience in base metals, platinum, lateritic nickel and industrial mineral exploration with a strong track record of success. He has field experience in every State and Territory in Australia. Throughout 30 years in the minerals industry Ron has acquired extensive experience in exploration management, budgeting, and exploration strategy.

Ron has previously been an Exploration Manager and has been involved in several profitable mining ventures including Davyhurst and Tuckabiana.

NATHAN MCMAHON Non- Executive Director Qualifications: B. Comm (UWA)

Nathan is currently Managing Director - Corporate and Administration, for Cazaly Resources Ltd which is listed on the ASX. Nathan was the founding director of Hamill Resources Ltd which listed on the ASX in June 2001 and which achieved significant exploration success and increase in market capitalisation during his tenure. Nathan has demonstrated extensive skills in project acquisition and management.

CLIVE JONES Non-Executive Director Qualifications: B.App.Sc (Geol)

Clive is currently Managing Director - Technical for Cazaly Resources Ltd which is listed on the ASX. Clive is also a Non-Execuitve Director of the Australian exploration company Jackson Gold Ltd. Clive has formerly been a director of Mount Burgess Mining Ltd and Hamill Resources Ltd, which both experienced significant market capitalisation growth during his tenure as a director. Clive 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. Whilst a Director of Mount Burgess Mining Ltd, Clive oversaw the discovery of the high grade Red October gold deposit situated in the Eastern Goldfields of Western Australia.

SECTION 3. BOARD AND MANAGEMENT

$3.2$ CORPORATE GOVERNANCE

The Board is responsible for the overall corporate governance of the Company, and it recognises the need for the highest standards of ethical behaviour and accountability. The board is committed to administering its Corporate Governance structures to promote integrity and responsible decision-making. To the extent that they are relevant to the organisation, the Company has adopted the Ten Corporate Governance Principles and Best Practice Recommendations as published by the ASX Corporate Governance Council.

The following policies and procedures have been implemented and are available in full on the company's website at www.graynicmetals.com.au

Statement of Board and Management Functions;
· Nomination Committee Charter;
· Policy and Procedures for selection and appointment of new directors;
· Code of conduct for directors and key executives;
· Share Trading Policy;
· Audit Committee Charter;
· Summary of procedure for selection of external auditor and rotation of engagement audit partner;
Continuous Disclosure Policy;
· Shareholder Communications Strategy;
Risk Management Policy;
Remuneration Committee Charter;
· Process for performance evaluation of the Board, board committees, individual directors and key executives;
Corporate Code of Conduct.

The Board will consider on an ongoing basis its Corporate Governance procedures and whether they are sufficient given the Company's nature of operations and size.

4.0 INVESTMENT RISKS

An investment in the Company has risk and prospective investors in the Company should consider the risk factors described in this section, together with the information contained elsewhere in this Prospectus, before deciding whether to apply for Shares.

4.1 EXPLORATION SUCCESS

The mineral tenements of the Company as described in this Prospectus are at various stages of exploration, and potential investors should understand that mineral exploration and development are high-risk undertakings.

There can be no assurance that exploration of the project areas described in this Prospectus, or any other tenements that may be acquired in the future, will result in the discovery of an economic ore deposit. Even if an apparently viable deposit is identified, there is no guarantee that it can be economically exploited.

4.2 OPERATING RISKS

The operations of the Company may be affected by various factors, including failure to locate or identify mineral deposits; failure to achieve predicted grades in exploration and mining; operational and technical difficulties encountered in mining; difficulties in commissioning and operating plant and equipment; mechanical failure or plant breakdown; unanticipated metallurgical problems which may affect extraction costs; adverse weather conditions; industrial and environmental accidents; industrial disputes; and unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment.

Having been incorporated on 10th February 2005 Graynic Metals does not have any operating history, although it should be noted that the Company's Directors have between them significant operational experience. No assurances can be given that Graynic will achieve commercial viability through the successful exploration and/or mining of its tenement interests. Until Graynic is able to realise value from its projects, it is likely to incur ongoing operating losses.

4.3 RESOURCE ESTIMATES

Resource estimates are expressions of judgement based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their very nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional fieldwork and analysis, the estimates are likely to change. This may result in alterations to development and mining plans which may, in turn, adversely affect the Company's operations.

SECTION 5 RISK FACTORS

$4.4$ COMMODITY PRICE VOLATILITY AND EXCHANGE RATE RISKS

If Graynic Metals achieves success leading to mineral production, the revenue it will derive through the sale of commodities exposes the potential income of the Company to commodity price and exchange rate risks.

Commodity prices fluctuate and are affected by many factors beyond the control of Graynic Metals. Such factors include supply and demand fluctuations for precious and base metals, technological advancements, forward selling activities and other macro-economic factors.

Furthermore, international prices of various commodities are denominated in United States dollars, whereas the income and expenditure of the Company are and will be taken into account in Australian currency, exposing the Company to the fluctuations and volatility of the rate of exchange between the United States dollar and the Australian dollar as determined in international markets.

$4.5$ ENVIRONMENTAL RISKS

The operations and proposed activities of the Company are subject to State and Federal laws and regulation concerning the environment. As with most exploration projects and mining operations, the Company's activities are expected to have an impact on the environment, particularly if advanced exploration or mine development proceeds. It is the Company's intention to conduct its activities to the highest standard of environmental obligation, including compliance with all environmental laws.

$4.6$ TITLE RISKS AND NATIVE TITLE

Interests in tenements in Australia are governed by the respective State legislation and are evidenced by the granting of licences or leases. Each licence or lease is for a specific term and carries with it annual expenditure and reporting commitments, as well as other conditions requiring compliance. Consequently, Graynic Metals could lose title to or its interest in tenements if licence conditions are not met or if insufficient funds are available to meet expenditure commitments.

It is also possible that, in relation to tenements which the Company has an interest in or will in the future acquire such an interest, there may be areas over which legitimate common law native title rights of Aboriginal Australians exist. If native title rights do exist, the ability of Graynic Metals to gain access to tenements (through obtaining consent of any relevant landowner), or to progress from the exploration phase to the development and mining phases of operations may be adversely affected.

The Directors will closely monitor the potential effect of native title claims involving tenements in which the Company has or may have an interest.

Reference should be made to the relevant section of the Solicitor's Report on Mining Tenements set out in Section 7 of this Prospectus for information on the issue of title and a description of the native title regime in Western Australia.

SHARE MARKET CONDITIONS 4.7

The price of the Shares when quoted on ASX will be influenced by international and domestic factors affecting conditions in equity, financial and commodity markets. These factors may affect the general level of prices for listed securities of mining and exploration companies quoted on ASX.

R O S P E C T U S P

SECTION 4 RISK FACTORS

4.8 GENERAL INVESTMENT RISKS

There is a risk that the price of Shares and returns to Shareholders may be affected by changes in:

· local and world economic conditions;
· interest rates:
· levels of tax, taxation law and accounting practice;
· government legislation or intervention;
· inflation or inflationary expectations; and
· natural disasters, social upheaval or war in Australia or overseas,

as well as other factors beyond the control of the Company.

4.9 SPECIFIC RISKS ASSOCIATED WITH THE COMPANY

There are also a number of specific risks associated with the Company which may adversely affect the Company's financial position, prospects and price of its listed securities. In particular, the Company is subject to risks relating to the exploration and development of mineral properties which are not generally associated with other businesses.

Set out below are specific risks that may adversely affect the Company:

4.9.1 the Company cannot guarantee that those Project Tenements that are applications for tenements will ultimately be granted in whole or in part pursuant to the Mining Act;
4.9.2 the Western Australian Department of Industry and Resources ("Department") from time to time reviews the environmental bonds that are placed on tenements. The Directors are not in a position to state whether a review is imminent or whether the outcome of such a review would be detrimental to the funding needs of the Company; and
4.9.3 the exploration costs of the Company described in the Project Review section of this Prospectus are based on certain assumptions with respect to the method and timing of exploration. By their nature, these estimates and assumptions are subject to significant uncertainties and, accordingly, the actual costs may materially differ from these estimates and assumptions. Accordingly, no assurance can be given that the cost estimates and the underlying assumptions will be realised in practice, which may materially and adversely affect the Company's viability.

BOONJARDING RESOURCES LTD

Geological Consultant Services - Mining & Mineral Exploration

Lot H. Level 7, Wisma Oceanic Jalan OKK Awang Besar 87007 F.T. Labuan East Malaysia

56 Kent Street Cannington Perth W.A. 6107 Australia

30 March 2005

The Directors

GRAYNIC METALS LTD

Let Floor, 22 Oxford Close Leederville WA 6007 Western Australia

Dear Sire

INDEPENDENT GEOLOGIST'S REPORT - GRAYNIC METALS LTD - PROSPECTUS

Boonjarding Resources Ltd ("BRL") has been commissioned by Graynic Metals Ltd ("Company" or "the Company") to provide an Independent Geologist's Report on the various mining tenements and mining tenement applications ("mineral properties") located in Western Australia, and in which Company has, or is earning, an interest. This report is to be included in a Prospectus to be lodged with the Australian Securities and Investments Commission ("ASIC") on or about the 4th April 2005, offering for subscription 6,250,000 Ordinary Shares at an issue price of 20 cents per Ordinary Share through a Prospectus, to raise a total of \$1,250,000 (before costs associated with the issue). The funds raised will be used for the purpose of exploration and evaluation of the existing mineral properties and identification of new projects.

BRL has not been requested to provide an Independent Valuation, nor have we been asked to comment on the Fairness or Reasonableness of any vendor or promoter considerations, and we have therefore not offered any opinion on these matters. Native Title issues that may affect parts or all of the project areas are not subject of this report but addressed in the Native Title section of the Independent Solicitor's Report on Mining Tenements, located elsewhere in the Prospectus.

BRI. has based its review of the various mineral properties on information provided by the Company, along with rechnical reports prepared by Government agencies and previous tenements holders, and other relevant published and unpublished data. A listing of the principal sources of information is included in the Independent Geologist's Report. Site visits were not undertaken for any of the Projects for the following reasons. The writer has had many years experience in the Eastern Goldfields of Western Australia. He is familiar with the Northampton project having visited the area during the early 1990s. Access to the Juson Rocks Project area is restricted pending current negotiations with the traditional owners. The Quartz Circle Project has been well documented recently by other exploration companies and independent geological consultant companies, thus it was considered that a site visit would not be required.

A final draft of the report was provided to the Company, along with a written request to identify any material errors or omissions prior to lodgement.

The mineral properties are understood to consist of a portfolio of 7 granted Prospecting Licences, 4 granted Exploration Licences and I Exploration Licence Application covering a total combined area of approximately 960 square kilometres. Assumptions have been made by BRL that the tenements and associated agreements are current, in good standing and the tenements are fawfully accessible for exploration.

The assessment of the properties included in the Project is initially based upon rechnical, tenement and cost information provided by the Company and Company and this information has been accepted by BRL as being true and accurate and that the Company has not retained any material information relevant to the reporting assessment of the mineral properties.

SPEC P R $\mathsf{T}$ ៈ ប Ŝ $\circ$

GRAYNIC METAL

STORION 5 INDEEMBER GEORGE IS FEEDER

The Independent Geologist's Report has been prepared in accordance with the Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports ("The Valmin Code"), which is binding upon Members of the Australasian Institute of Mining and Metallurgy ("AusIMM"), the Australian Institute of Geoscientists ("AIG"), and the rules and guidelines issued by such bodies as the ASIC and Australian Stock Exchange ("ASX"), which pertain to Independent Expert Reports.

The mineral properties, in which Company has, or is earning, an interest, are considered to be either "Exploration Projects" which are inherently more speculative in nature, or "Resource Projects" which, although may contain mineral resources, are less speculative in nature but require additional exploration to enhance their economic potential. BRI, considers that these Projects have been retained or acquired on the basis of sound technical merit. All of the mineral properties are generally considered to be sufficiently prospective, subject to varying degrees of exploration risk, to warrant further exploration and assessment of their economic porential, consistent with the Company's proposed programs.

Exploration and evaluation programs summarised in the Report amount to a total expenditure of approximately \$1.7 million, of which the Company plans to spend approximately \$774,000 in the first year of assessment.

Company intends to raise \$1,250,000, and at least half the liquid assets held, or funds proposed to be raised by the Company, are understood to be committed to acquisition, exploration, development and administration of the mineral properties, satisfying the requirements of ASX Listing Rules 1.3.2(b) and 1.3.3(b).

BRL is satisfied that if the minimum subscription is raised the Company will have sufficient working capital to carry out its stated objectives, satisfying the requirements of ASX Listing Rule 1.3.3(a).

Company has provided reasonably comprehensive work programs and budgets covering the initial two years of exploration. Where proposed exploration strategies have been stated, the proposed programs are considered to be broadly consistent with the potential of the various projects. The corresponding budgets are generally adequate to cover the anticipated costs of the programs. BRI. considers that sufficient exploration has been undertaken within the last 2 years, and where this is not the case the relevant areas have sufficient rechnical merit, to justify the proposed programs and associated expenditure, satisfying the requirements of ASX Listing Rule 1.3.3(a).

The Independent Geologist's Report has been prepared on information available up to and including 6th March 2005. BRI, has provided consent for the inclusion of the Independent Geologist's Report in the Company Prospectus, in the form and context in which the report and those statements appear, and has not withdrawn that consent before lodgement of the Prospectus with the ASIC.

Boonjarding Resources Ltd is an exploration, mining and resource consulting firm, which has been providing services to the international mining and exploration industry since 1998. This report has been compiled by Mr G. R. Powell, who is a professional geologist with more than 20 years experience in the exploration, development and mining, and evaluation of mineral properties within Australia and Sooth East Asia. Mr. Powell is a Member of the AusIMM and has the appropriate relevant qualifications, experience, comperence and independence to be considered an "Expert" under definitions provided in the Valmin Code.

Neither Boonjarding Resources Lrd, nor the author of this report, have or have previously had, any material interest in Graynic Metals Ltd, or the mineral properties in which the Company has an interest. The relationship with Graynic Metals Ltd is solely one of professional association between client and independent consultant. This report is prepared in return for professional fees based upon agreed commercial rates and the payment of these fees is in no way contingent on the results of this report.

Yours faithfully

BOONJARDING RESOURCES LTD

Gary R Powell B.App.Sc.(Geol)., M.Aus.I.M.M., M.A.I.G.

P S P Е C T U S o

CONTENTS

GRAYNIC METALS

EXECUTIVE SUMMARY

QUARTZ CIRCLE PROJECT ı.

1.1 Introduction
Regional Geology $1.2$
Project Geology $1.3$
Mineralisation $1.4^{\circ}$
Previous Exploration 1.5
Exploration Potential $1.6$
$1.7$ Exploration Strategy and Budget

JUTSON ROCKS PROJECT $2.$

Introduction $2.1$
$2.2^{\circ}$ Regional Geology
Project Geology $2.3$
Previous Exploration $2.4^{\circ}$
$2.5$ Exploration Potential
2.6 Exploration Strategy and Budget

NORTHAMPTON PROJECT 3.

$3.1$ Introduction
$3.2$ Regional Geology and Mineralisation
$3.3$ Previous Exploration
3.4 Project Geology and Exploration Potential
$3.5$ Exploration Strategy and Budget

PRINCIPAL SOURCES OF INFORMATION 4,

GLOSSARY OF TECHNICAL TERMS 5.

FIGURES

Projects Location Plan $1.$
$\overline{2}$ . Quartz Circle Project - Regional Geological Setting
Quartz Circle Project Local Geological Setting 3.
1. Quartz Circle Project - Cu-Au and Pb-Zn Anomalies
Quartz Circle Project ~ Cu-in-soil anomalies 5.
1. Jurson Rocks Project - Geology Plan
Northampton Project Geology Plan 7.

TABLES

$1.$ Graynic Metals Ltd - Proposed Exploration Expenditure
Quartz Circle Project Best Drill Intercepts $\overline{2}$ .
Quartz Circle Project Proposed Exploration Expenditure 3.
Jurson rocks Project Proposed Exploration Expenditure 4.
Northampton Project Proposed Exploration Expenditure 5.

EXECUTIVE SUMMARY

Graynic Metals Limited ("Graynic") has assembled a portfolio of mineral exploration properties, namely the Quartz Circle, Jutson Rocks and Northampton Projects, which are prospective for a range of mineral commodities. The projects were purchased from Cazaly Resources Limited ("Cazaly") with the majority of information used in this review of the projects having been provided by Cazaly. The author has not undertaken any audit, valuation or re-estimation of the Quartz Circle copper resource in the course of preparing this report.

The Company controls three key project areas within mineral provinces that have demonstrated copper, lead, zinc, nickel and/or platinum mineralisation. These areas are considered to be greatly under-explored and the Company plans immediate commencement of aggressive exploration, initially at Quartz Circle and then over the other project areas. Each project comprises a significant land position which allows for further growth opportunities should exploration be successful.

Exploration at the Quartz Circle Project (copper, lead, zinc, gold) will initially assess the existing resource base as well as conduct. further exploration over several other advanced targets. Currently the project has a small inferred existing copper resource $\circ$ f approximately 127,000t @ 4.1% Cu. The deposit occurs as a pod of secondary copper, principally chalcocite, commencing at a depth of approximately 20 Significant drill metres. intercepts within this zone include; 38m @ 4.04% Cu and 34m @ 5.51% Cu. Potential exists to further explore the resource, particularly at depth in search of a primary source. Other previous work elsewhere in the project area comprised stream and soil sampling which generated large copper-gold and lead-zinc geochemistry anomalies. Previous drilling intersected significant zones of sulphide mineralization and include best results of 17.74m @ 16.1% Zn and 9m @ 46.5% PЬ. Previous drilling throughout the remainder of the area generated numerous other base metal and gold targets worthy of further work.

The Jurson Rocks Project (nickel, gold, platinum group elements) effectively covers the majority of the Jurson Rocks greenstone belt. The greenstone belt comprises several layered mafic-ultramafic complexes with strong PGE & Ni-Cu sulphide mineralisation potential in reef-, feeder- & trap- systems. One large stratiform PGE-bearing reef is defined by a zone of anomalous rock chips extending for over 2000 metres. The complexes have also reported anomalous nickel from surface sampling, which highlights the prospectivity of the Jutson Rocks komatiite sequence for nickel sulphides. Potential also exists for the discovery of gold mineralisation along the relatively under-explored, major regional structures.

The Northampton Project (copper, lead, silver) covers approximately 210 square kilometres and includes a large number of historic silver, lead and copper producers that date back to 1865. The full silver and zinc potential of the project has not been fully assessed. The Northampton block has similarities to the Willyama Complex in which the Broken Hill silver-lead-zinc deposit is located.

Exploration proposed by Graynic for the first year will focus on:

QUARTZ CIRCLE PROJECT

· GEOLOGICAL MAPPING Detailed geological mapping is required over the entire Quartz Circle project. Previous mapping is not detailed enough or, in the case of the northern area, has not yet been undertaken. Particular emphasis will be on identifying rock types and rock alteration in a bid to reconstruct the original volcanic environment.
· GEOPHYSICS Recent advances in geophysical rechniques and data manipulation enable the project to be better explored utilising these techniques in conjunction with the mapping. Airborne magnetics are required for the entire project whilst other techniques envisaged being used include: electromagnetic, induced polarisation, sub-audio magnetics and downhole EM surveys.
RAB DRILLING RAB drilling will be a used as a reconnaissance tool in the northern area.
RC DRILLING This will be the main exploration tool at Quartz Circle testing targets identified by the results of geophysics and geological mapping.
· DIAMOND DRILLING Diamond drilling provides the best sample for lithological, structural and metallurgical information and will be utilised more as the project progresses.
SURFACE SAMPLING Infill and extensional soil and rock chip sampling will be undertaken over the northern anomaly in E45/2602.

JUTSON ROCKS PROJECT

· LAND ACCESS the project area lies within aboriginal lands, therefore land access agreements are required to be finalised prior to the commencement of any ground-based exploration. Land access agreements have been arranged by previous explorers and are not considered to be a major obstacle to exploration commencing.
SURFACE SAMPLING infill and extend existing anomalies and test newly generated targets.
GEOPHYSICS geophysical techniques are particularly useful in the exploration for nickel and PGE's over mafic-ultramafic terranes, particularly ground-electromagnetic and down-hole EM surveys. These methods will be utilised in the exploration.
RC DRILLING will be utilised to test the more advanced targets. This may be followed up with diamond core drilling.

P R O S P E C T U - S

NORTHAMPTON PROJECT

GEOLOGICAL MAPPING is required over selected historic mine areas prior to more advanced exploration. Alteration and ore zonation patterns will be particularly important in guiding subsequent drilling programs.
. DRILLING Drilling of potential zinc and silver mineralisation in particular will be planned based on the results of mapping and historic data assessments.

It is considered that Graynic Metals Ltd has acquired the mineral properties on the basis of sound technical merit. In addition, each of the projects has known indications of the presence of mineralisation systems and therefore provide an opportunity for the discovery and exploitation of precious metal and/or base-metal resources.

Graynic intends to rapidly evaluate each property via sensible low-cost exploration, and has provided reasonably comprehensive work programs and budgets covering the initial two years of exploration on each of the Project areas. Proposed exploration strategies have been devised and the programs are considered to be broadly consistent with the potential of the various projects.

TABLE 1. GRAYNIC METALS LTD -- PROPOSED EXPLORATION EXPENDITURE
-----------------------------------------------------------------	--	--	--	--	--	--	--	--

	Except Andrew Communication
Quartz Circle	\$690,000		\$745,000 \$1,435,000
Jutson Rocks	64,000	161,000	225,000
Northampton	20,000	20,000	40,000

The corresponding budgets, totalling an estimated \$1.7 million, are considered adequate to cover the anticipated costs of the proposed exploration programs of the Company and the minimum expenditure requirements of the Western Australian Department of Industry and Resources.

Ĺ. QUARTZ CIRCLE PROJECT

INTRODUCTION $1.1$

The Quartz Circle project is situated in the Eastern Pilbara Region of Western Australia, and approximately 25km northeast of the town of Nullagine. Access to the project area is via the main highway between the towns of Nullagine and Marble Bar, then by well-formed unsealed tracks eastwards to the project area.

The Quartz Circle project comprises a group of contiguous granted mining tenements (Prospecting Licences 46/1360-1366 and two Exploration Licences 46/54, and 45/2602) and one granted Exploration Licence (45/2495) located some 7km to the north. The combined project area totals approximately 62 square kilometres.

The Project is the subject of a Farm-in Agreement with Cazaly Resources Ltd. ("Cazaly") dated 21 February 2005 whereby Graynic can earn up to 80% equity in the Quartz Circle project by sole funding exploration to \$1 million on the project over a forty-two month period. A description of the Joint Venture Agreements appears in the "Solicitor's Report on Mining Tenements", located elsewhere in the Prospectus.

There has been considerable previous exploration since the 1970's and although much of this has been unsystematic, it has revealed the presence of extensive base metal and precious metal mineralisation including Cu, Zn, Pb, Ag, and Au. The base-metal mineralisation occurs as sulphides at depth and as oxides and carbonates

within the surface weathering zone. A small near-surface, oxide copper resource consisting of $127,100$ T @ $4.1\%$ Cu has been defineated by previous explorers. The style of mineralisation at Quartz Circle has been tentatively described as volcanic-hosted massive sulphide (VMS), similar to other deposits in this part of the Pilbara. Although surface geochemical anomalies and mineralisation intersected from previous drilling provide good targets for immediate drilling, further field investigations aimed at better identifying the deposit style could assist in future exploration. Some of the better lead and zinc drill intercepts elsewhere in the project area include 17.74m @ 16.1% Zn and 9m @ 46.5% Pb, highlighting the potential for the delineation of additional base-metal deposits.

The northern tenement was recently acquired by Cazaly Resources Limited ("Cazaly") who identified a large circular feature from Landsat imagery with similarities to the main area at Quartz Circle. Cazaly subsequently

delineated significant base metal anomalism during a recent soil sampling program and the ground is consequently regarded as highly prospective.

1.2 REGIONAL GEOLOGY

The project area contains mainly rocks belonging to the Warrawoona Group, a thick succession of volcanics and sediments which were laid down subaerially or in shallow water during Achaean times, with the various Archean representing distal to proximal clastic deposits associated with felsic volcanic centres. $\frac{1}{2}$ is considered that the Warrawoona Group was deposited as regionallyextensive tabular successions overlying the more tholeiitic lavas of the Talga Talga Subgroup. Numerous volcanic massive sulphide deposits and occurrences in the east Pilbara are associated with volcanics of the Duffer Formation, a sequence of intermediate to felsic volcanics which makes up the bulk of the Warrawoona Group.

The sediments and volcanics of the Pilbara Craton were repeatedly deformed as a consequence of the spasmodic diapiric emplacement of large granitic bodies, although other types of deformation including subhorizontal tectonics have also been recognised. The Corunna Downs Batholith and the Mount Edgar Batholith, which occur to the west and north respectively of the Quartz Circle volcanics, are regional-scale

granitic intrusions of this type. Numerous smaller intrusions ranging from ultramafic to felsic composition occur in throughout $thc$ geological succession in the Pilbara Craton, and some of these are important at the project scale.

1.3 PROJECT GEOLOGY

Most of the rocks in the project area comprise felsic volcanics and sediments belonging to the Duffer Formation. They are mainly dacitic tuffs, lavas and agglomerates with subordinate rhyolite, basalt and chert. Lapilli tuffs may contain clasts up to 10mm across, and breecias contain clasts up 100mm across. Flow banding is evident in many of the felsic lavas. Mineralisation mainly occurs within the Quartz Circle Member which comprises dacitic pyroclastic rocks - mainly coarse to fine tuffs, which are subhorizontal with gentle south dips.

In the north this succession has been intruded by a syn-volcanic tonalite porphyry, which may have played an important role in mineralising the. event. Petrologically there $_{\rm 376}$ indications that the original intrusion was oxidised and hence had the potential to develop Cu, Au, Mo and W mineralisation. The presence of Fe/Mg after hornblende confirms the granite to be I-type. The presence of sericite and carbonate appears to represent early alteration phases.

The rocks are generally well ar surface exposed with hydrothermal alteration evident in many places. Carbonate, chlorite and silica alteration is widespread and there is much

disseminated pyrite. Surface veins containing secondary copper minerals including native copper, malachite and azurite are widespread.

$1.4$ MINERALISATION

Drilling since the 1970's has demonstrated that abundant disseminated to massive sulphide mineralisation occurs within altered dacitic lavas, tuffs and breccias. Within the surface weathering zone this mineralisation consists of oxide and carbonate minerals which locally can be very rich. Below the weathering zone the mineralisation consists of sulphides and drilling has shown some of this primary mineralisation to be thick and high grade. Frequently the base metals are accompanied by significant gold and silver.

Although the tonalite intrusion itself is not mineralised, recent field investigations have revealed a classic base metals zonation around the intrusion. A halo of Cu-Au mineralisation occurs immediately adjacent to the intrusion, and outwards from this is an extensive Pb-Zn soil anomaly. This anomalism largely delineated on the basis of soil sampling and widespread surface occurrences of gossans and copper oxides may reflect a similar zonation at depth within primary mineralisation. Observations of this type are useful in determining the genetic type of deposit.

Drilling at the Quartz Circle Prospect in 1991 identified a flat-lying zoned blanket of secondary mineralisation containing malachite, chalcocite and abundant native copper. This near-surface resource has previously been estimated at 127,100t @ 4.1% Cu (Hamill Resources, 2002). At depth the primary Cu, Pb and Zn minerals comprise chalcopyrite, galena and sphalerite respectively. This style of mineralisation is the main target for future exploration.

Several prospects have been delineated in the area and include the Lead-Zinc prospect where previous drilling has intersected high-grade Pb-Zn mineralisation.

PREVIOUS EXPLORATION $1.5$

Quartz Circle was first investigated by Placer Exploration Ltd ("Placer") from 1971 to 1973, who were seeking porphyry-style gold mineralisation. Work included regional and detailed geological mapping, and a stream sediment sampling survey which identified a copper-rich anomaly and a lead-zinc rich anomaly some distance apart.

From 1976 until 1980, Alcoa of Australia (WA) Ltd ("Alcoa") conducted exploration which included geological mapping, induced polarisation (IP) surveys, and percussion and diamond drilling. A total of 28 holes were drilled by Alcoa, some of which contain very high grades of zinc. For example, diamond coring in drillhole ALCO19 intersected massive sphalerite from 49.5m to 63.7m depth, averaging 20.2% Zn with elevated cadmium values. ALCO26 was drilled into the same zone and gave an intersection from 69.4m to 76.6m averaging 17.7% Zn, again with elevated cadmium. Numerous sphalerite veins transecting the coarse volcanic breccia were observed in the drill core of hole ALCO26. Other drillholes intersected narrow sphalerite and galena veins, including holes PH3, DDH16, DDH18, DDH20 and DDH21.

In 1981 a single 50 metre deep hole was drilled to test the "Quartz Circle" which is an outcropping quartz vein interpreted to be a ring dyke. The drillhole intersected $7m \& 2.6\%$ Cu from 29 metres depth within the oxide zone. In the same hole, 6m @ 76.6 g/t Ag (including 2m @ 192 g/t Ag) was intercepted from 35 metres depth. The host rocks were identified as a felsic volcanic breccia.

From 1983 to 1985, the project was explored by Clackline Ltd ("Clackline"), commencing with surface sampling. They re-sampled some of the Alcoa drill core (Alcoa did not assay for gold) and obtained a result of 2.3 g/t Au between 40m and 43m for DDH 8. Clackline subsequently drilled six holes at Quartz Circle and obtained some

S. P E $\mathbf C$ T. U S. O

significant intersections including 7m @ 1.7% Cu from hole QCC5. Clackline noted a correlation between the better gold values and elevated arsenic, antimony and mercury results. In 1984, Clackline drilled another 4 percussion holes and intercepted gold, base metal and associated mineralisation.

BHP Minerals assessed the prospect between 1982 and 1983, and carried out some rock chip sampling, geological mapping, and re-logging of core. They were followed by RGC Exploration Limited ("RGC"), who investigated the area from 1987 and completed geological mapping, structural interpretation and rock chip sampling. In contrast to some previous work which interpreted the stratigraphy as relatively undeformed and flat lying, RGC concluded that the stratigraphy was steeply dipping with predominantly north to northwest trends and that the rocks had been deformed by tight isoclinal folding and subsequently by broad, open reclined folding. Two angle drill holes were drilled to test the Veins Prospect (named after the presence of surface veins containing malachite and assaying up to 15.5g/t Au and 2.75% Cu). Best results include: RC15 $\sim$ 3m @ 1.3 g/t Au, 1m @ 25 g/t Au & 2m @ 4.3 g/t Au and RC 16 - 1m @ 7.0 g/t Au & 1m @ 4.5 g/t Au.

From 1990, Pancontinental Resources (Exploration) Pty Ltd ("Pancontinental") conducted exploration at the Quartz Circle project area under the auspices of a joint venture with Herald Resources NL ("Herald", formerly Clackline Ltd). Initially Pancontinental drilled tested a SIROTEM anomaly at Quartz Circle itself and completed

s P E C T U - S O

GRAYNIC

SECTION 5: INDEPENDENT GEOLOGIST'S REPORT

a 'mise a la masse' survey. They also drilled a number of other targets including some drilling of the known sulphide mineralisation at the Lead-Zinc Prospect. A detailed gravity survey was also completed at the Lead-Zinc Prospect.

The most significant results from the drilling included 4m @ 24% Cu and 21m @ 4.0% Cu from Quartz Circle and 9m @ 46.6% Pb and 1008 g/t Ag from the Lead-Zinc prospect.

These results indicated the presence of zoned, supergene chalcocite/native copper/malachite mineralisation at Quartz Circle forming an apron around a sulphide-bearing quartz vein. The mineralisation was interpreted to consist of small pods of massive sulphide now oxidised and concentrated by supergene processes and hosted by quartz-sericite-leucoxene altered dacitic lava.

The poorly conductive sphalerite-galena mineralisation at the Lead-Zinc prospect failed to give a good SIROTEM anomaly, and a mise a la masse survey was also unsuccessful due to the highly resistive nature of the mineralisation. Furthermore the gravity survey failed to locate any concentration of sphalerite because its relative low density contrast precluded its detection.

Pancontinental recognised that the Duffer Formation is host to a variety of mineralisation styles ranging from disseminated Cu-sulphide deposits, vein-style Zn-sulphide deposits, and massive and sub-massive Zn-Pb-sulphide deposits hosted by volcanic breccia. At Quartz Circle, they recognised the concentric metal-zoning around the tonalite pluton and considered that this metal zonation reflected the thermal gradient across a hydrothermal convective cell centred on the tonalite, thus copper and gold precipitated near the central (hotter) parts of the system and zinc and gold precipitated further away in relatively cooler parts.

In 1994, Pancontinental continued their exploration conducting a range of work including; a lead isotope study, fluid inclusion studies, local mapping at Quartz Circle, further soil sampling, re-analysis of soil pulps and contouring and imaging of airborne radiometrics and magnetics.

Pancontinental concluded that the mineralising fluids were sourced from a granitoid intrusion in the north and were transported via a number of major structures. They also indicated that if the Quartz Circle mineralisation was indeed supergene, then the source still remained to be discovered. On the basis of geochronology of the local granites it was suggested that mineralisation is about 85 million years younger than the host rocks and is therefore epigenetic, consistent with their understanding of the alteration styles. They also considered the area to be highly prospective for gold mineralisation.

In 1995, following a limited soil sampling program, Pancontinental conducted further drilling and in 1996 further diamond core and RC drilling was also conducted.

In 1997 RGC's 80% interest in the project passed to Iluka, who became managers of the joint venture. In 2001, the project was sold to Herald for a nominal consideration, six months after which Herald Resources relinquished the Quartz Circle project. Between 1997 and 2001 no significant exploration activity was carried out.

In 2002, MIM Exploration Pty Ltd ("MIM") conducted a geophysical survey utilising their 'state-of-the-art' proprietary geophysical data acquisition system (MIMDAS). MIMDAS is primarily used to acquire Induced Polarisation data in the search for deeply buried, disseminated base metal deposits. The survey was particularly successful in delineating sub-surface anomalies coincident with the previously outlined surface Cu-Au mineralisation. The area subsequently became a priority target for MIM, however no drilling was conducted as a result of the takeover of MIM by Xstrata in 2003. The project was subsequently dealt out to Straits Resources Limited ("Straits"), who completed a small drilling programme comprising 4 RC/Diamond core holes in May,

Only 1 drillhole (QCRD001) was drilled into the large, circular soil-copper anomaly. The other holes rargeted a shallow conductive chargeable anomaly further to the west and beneath previous anomalous intercepts and which Straits considered may have represented shallow chalcocite mineralisation.

All holes intersected felsic volcanic lithologies, varying from rhyolites to dacites with minor porphyritic felsic intrusions. Anomalous Cu and Au values were intersected in all holes. Disseminated chalcopyrite within broad zones of silica alteration was widely observed in all holes, possibly indicative of a potentially large Cu-Au mineralised system. QCRD001 was drilled into the prominent circular soil-copper anomaly and returned a best result of 10.05m @ 0.22% Cu. Minor disseminated chalcopyrite was observed from the drilling. Several significant gold intercepts were also returned including 3.22m @ 1.20g/t Au and 22.66m @ 0.48g/t Au, associated with strongly silica-pyrite altered dacite.

In December 2004 Cazaly Resources Ltd ("Cazaly") drilled 5 RC holes into a second soil-copper anomaly (Western Anomaly), situated immediately to the west of the circular anomaly. Due to limited rig availability, no drilling was able to be conducted within the main circular anomaly. The Western Anomaly has a coincident MIMDAS chargeable anomaly associated with it. Drilling encountered a buried, intermediate intrusive body which displayed wide zones of brecciated and sulphidic, mostly pyritic, material. The best copper mineralisation of significance came from QCRC068, a deep vertically drilled hole targeting the more highly charged portion of the MIMDAS anomaly. Extensive low-order copper mineralisation (i.e. 63m @ 0.19% Cu) was intersected. Further to the south beneath a gold-in-soil anomaly, extensive low tenor grades were encountered (i.e. 84m @ 0.20 g/t Au).

Cazaly interpreted the presence of disseminated pyrite/chalcopyrite together with the abundant alteration of the host volcanics as indicating the potential presence of a large mineralising system in the area associated with an intermediate intrusive. They recommended further work to better understand the large mineralising system apparent in the area and suggested that exploration should focus on the large circular copper anomaly particularly along any major structures within the area. No further work has been carried out to date.

An area to the north of the Quartz Circle prospect was identified by Cazaly as a base metal target akin to Quartz Circle. Located just 7km to the north, this new prospect was targeted from a study of satellite imagery which indicated a large circular feature of uncertain origin. The feature was tested in October 2004 by a programme of soil sampling which delineated a large circular copper-gold soil anomaly measuring 2.5 by 3.5 km in size. Peak values are 143ppm Cu and 275ppb Au. Further work was recommended however no follow up work has been conducted to date.

EXPLORATION POTENTIAL 1.6

Continued exploration of anomalies and drill hole mineralisation

The project has the potential to host additional zinc-lead, copper, and gold deposits in different parts of the project area. Most areas of known mineralisation have been insufficiently drilled, and many are still open to extension in various directions. The best exploration results are summarised in the following table:

TABLE 2: QUARTZ CIRCLE PROJECT - BEST DRILL INTERCEPTS

Hole 10	NordW	DELTS	E	晒	Internation
ALCO016	10,970	11,126	97	107	10m [email protected]\%$	Zn
ALCO018	10,887	11,068	84	103	19m @ 1.60%	Zn
ALCO018			100	101	inc 1m @ 12.50%	Ζn
ALCO019	11,116	11,094	46	63.74	17.74m @ 16.1%	Zn
ALCO026	11,152	11,028	69.4	76.9	7.5m $@$ 16.0%	$\rm Zn$
CLAG003	11,260	9,930	82	85	$3m \otimes 3.51g/t$	Au
CLAG004	11,610	9,450	25	28	3m @ 4.19g/t	Aц
CLAG004			94	103	9m @ 1.12%	$C_{11}$
QCRC001	11,650	10,550	19	57	38m @ 4.04%	$\mathrm{Cu}$
QCRC001			37	53	inc 16m @ 9.24%	$_{\rm Cu}$
QCRC001			46	49	3m @ 3.54g/t	Aц
QCRC002	11,625	10,520	14	48	34m @ 2.66%	$C_{11}$
QCRC002			26	47	inc $21m \& 4.05\%$	Сu
QCRC006	11,152	11,093	25	55	30m @ 0.56%	Zn
QCRC006			31	54	23m @ 18.4%	PЬ
QCRC006 QCRC006			39.	48	inc 9m @ 46.5%	P _b
QCRC014	10,930	10,956	0	54	& 1007ppm 54m @ 1.36%	Ag Zn
QCRC015	11,640	10,560	22	36	14m @ 1.31%	Cu
QCRC016	11,617	10,538	8	24	$16m \& 1.14\%$	Cu
QCRC017	11,623	10,540	13	47eoh	34m @ 5.51%	Cu
QCRC017			27	30	3m @ 47.2%	Cu
QCRC017					& 450ppm	Ag
QCRC023	11,010	11,015	42	46	$4m \& 2.60\%$	Zn
QCRC025	10,900	10,940	26	28	2m @ 4.53g/t	Au
QCRC029	11,602	10,513	32	56	24m @ 1.23%	$_{\rm Cu}$
QCRC043	11,350	10.445	24	38	14m @ 3.23%	Cu
QCRC043			26	34	inc 8m @ $7.25g/t$	Aц
QCRC043			28	30	inc 2m @ 9.30%	$_{\rm Cu}$
QCRC045	11,350	10,453	58	62	[email protected]/\tau$	Au
QCRC056	10,614	9,804	62	64	$2m \otimes 8.50g/\tau$	Au
QCRC057	10,642	9,832	40	46	6m @ $6.87g/\tau$	Au
QCRC058	10,614	9,564	8	10	2m 10.00 g/r	Au
QCRC059	10,642	9,592	12	16	4m @ 4.73g/t	Au
QCRC061	10,520	9,815	70	72	2m @ 7.40g/t	Aμ

It should be noted that:

· There is a zonation from copper-gold to lead-zinc mineralization southwards across the area;

P S P E C T U S R $\circ$

Some of the intersections are very thick and of 'economic' type grades;
· There is significant Au and Ag associated with the copper, and
Gold occurs throughout the project area indicating the possibility of a separate mineralising event to the base metals.

Gold occurs predominantly as thin intersections possibly representing narrow veins cutting across the project area, but in places the intersections are more substantial. The wide lower-grade zones recognised from recent drilling are consistent with the view that some gold has been introduced during pervasive silicification and sericitisation of the volcanic sequence resulting from hydrothermal fluid circulation in the cooling volcanic pile. Future exploration for gold will focus on areas where thick, higher grade intersections have been encountered

2. Quartz Circle as a possible Volcanic-hosted Massive Sulphide (VMS) deposit

Volcanic-hosted massive sulphide deposits have long been an important worldwide source of zinc and copper, often with significant Au and Ag and sometimes with significant Pb. Usually VMS sulphides occur as pods and layers within a submarine volcanic sequence of felsic composition and a common view is that the sulphides emanated from an underwater volcano ('black smoker') during a hiatus in volcanic activity. The sulphides probably spread out as layers on the sea floor, forming thicker accumulations in sea floor depressions. Commercial VMS deposits range from small to very large (1Mt to 100Mt) but even the smaller ones can be very profitable.

In the 1970's numerous VMS deposits were discovered in the Archaean terrane of Canada using newly-developed rechnology and this spawned a vigorous search for VMS deposits in the comparable Archaean terrane of Western Australia. Only two commercial deposits emerged from that search - Gossan Hill/Scuddles at Golden Grove in the Murchison Province, and Teutonic Bore, north of Leonora in the Eastern Goldfields Province - although many smaller examples of VMS-style mineralisation were recognized. Approximately half of these occur within the Pilbara Craton, and the other half in the Yilgarn Craton.

Most of the known Pilbara occurrences are small and clustered within the felsic volcanic sequence known as the Duffer Formation, indicating that this was a distinct geological period during which these types of deposit were being formed. Significantly, the mineralisation at Quartz Circle is associated with felsic rocks of the Duffer Formation and five other VMS-style deposits have been identified within 70km of the Quartz Circle, also associated with Duffer Formation volcanics.

One of the first 'modern' exploration groups to investigate this area (Alcoa, 1970's) proposed Quartz Circle as an example of VMS-style mineralisation. Alcoa discovered some very high-grade intersections during their drilling programs but as they were unable to delineate commercial quantities of base metals they eventually relinquished the project. Since then several companies have also recognized the possibility of a VMS system at this locality but the majority of exploration over the past three decades has tended to be selective follow-up of previously delineated mineralisation or anomalies without attempting to establish the genesis of the mineralisation.

A review of all data for Quartz Circle supports the Alcoa view that this may be a VMS deposit. Characteristics of a VMS geological setting can include:

· Large hydrothermal alteration system involving the formation of chlorite, carbonate, silica and pyrite within the rocks hosting the deposit but particularly below the deposit horizon;
Submarine felsic volcanic rocks as the host;
Coarse felsic volcanic breccias indicating a proximal (near-source) position relative to the upwelling sulphides;
· Substantial pyrite concentrations;
· Substantial magnetite concentrations;
· Substantial base metal mineralisation;
Occurrence of other VMS-style mineralisation at the same stratigraphic horizon;

P R O. -S $P E C$ $T$ Û -S

Presence of a major fault, possibly a growth fault accompanying the formation of the volcanic pile;
Presence of thin exhalite (chert) horizon at the top of the deposit:
An overall mushroom shape (when undeformed) consisting of a sub-vertical feeder pipe capped by extensive subhorizontal sulphide deposits, and
· Presence of a subvolcanic sill or intrusion emplaced below the sulphide deposit.

Quartz Circle displays the first seven characteristics, but additional field work is required to demonstrate others. Although determining the original mushroom shape will be difficult because the rocks have been strongly deformed and altered, understanding the geometry would be a valuable guide to future drilling, given that the most valuable ore in a VMS deposit typically occurs immediately above the feeder pipe.

Towards the end of their five years of exploration at Quartz Circle, Pancontinental commented that 'What is unknown at present is whether the sulphide mineralisation, interpreted to be giving the SIROTEM conductive response, is quartz-sulphide vein mineralisation or whether the quartz veins are merely coincident with nonoutcropping volcanogenic massive sulphide mineralisation. The SIROTEM anomaly may represent only the conductive portion of a much larger body of VMS mineralisation'.

$1.7$ EXPLORATION STRATEGY AND BUDGET

Graynic has provided comprehensive programs and budgets for the initial two years of exploration. Initial exploration is designed to seek extensions to known mineralisation, particularly at Quartz Circle Prospect and at the Lead-Zinc Prospect and will mainly consist of drilling and geophysical surveys. At the same time they will undertake detailed geological, structural and alteration mapping designed to determine the original geometry of the mineralisation and to investigate the relationship between the different sites of mineralisation.

For the northern area a more grass roots style of exploration will be conducted, including geological mapping, surface sampling, geophysics and shallow drilling.

BRL considers that the proposed exploration programs are generally consistent with the status and mineral potential of the Quartz Circle project and will meet the Company's stated objectives.

TABLE 3. QUARTZ CIRCLE PROJECT - PROPOSED EXPLORATION EXPENDITURE

Wages/salaries/contractors	\$150,000	\$170,000	\$320,000
Surface exploration	10.000	10.000	20,000
Geophysics	40.000	50.000	90.000
RAB/AC drilling	30,000	30,000	60,000
RC drilling	175,000	150,000	325,000
Diamond drilling	100,000	150,000	250,000
Assays	30,000	35,000	65,000
Field costs/consumables	45,000	50,000	95,000
Tenement costs	55,000	35,000	90.000
Administration	55,000	65,000	120,000

The budgeted expenditure of \$690,000 and \$745,000 on the Quartz Circle Project in Year 1 and Year 2 respectively is considered adequate to cover the cost of the proposed programs.

$\overline{2}$ . JUTSON ROCKS PROJECT

$2.1$ INTRODUCTION

The Jutson Rocks project comprises two granted contiguous Exploration Licences (38/1540 and 38/1541), rotalling some 320 square kilometres. The project encompasses part of the NNWstriking Archean Jurson Rocks Greenstone Belt situated 125km northeast of Laverton on the eastern extremity of the north-eastern part of the Eastern Goldfields Province. The tenements cover 40 strike kilometres of greenstone sequences with an average width of 9km, with the exclusion of a small group of tenements that encompasses the historical Chapman's Reward/Jutson Rocks gold workings.

To date the region has only been superficially explored but the geology and geochemical anomalies so far discovered indicate that the area has considerable exploration potential for platinum-palladium, nickel, chromium and gold.

The Project is the subject of a Farm-in Agreement with Cazaly Resources Ltd. ("Cazaly") dated 21

February 2005 whereby Graynic can earn up to 80% equity in the Jutson Rocks project by sole funding exploration to \$1 million on the project over a forty-two month period. A description of the Joint Venture Agreements appears in the "Solicitor's Report on Mining Tenements", located elsewhere in the Prospectus.

2.2 REGIONAL GEOLOGY

The Jurson Rocks succession consists of Archean ultramafic, mafic and felsic extrusive rocks, pyroclastics and sediments. Thick gabbro and dolerite intrusions make up the mafic intrusive complexes on the eastern side of the belt, whilst a bimodal sequence of mafic and felsic volcanics with banded iron formation occurs to the west. Regional granitoids flank the greenstone belt on each side.

The rocks of the Jutson Rocks greenstone belt are metamorphosed to greenschist and amphibolite facies, with pervasive metamorphism and deformation having destroyed many of the original igneous and sedimentary textures. There is a consistent southerly plunge to lineations and minor fold axes and the greenstones are interpreted to have a south-plunging synformal structure. A regional shear zone between 1 and 3 km wide traverses the entire length of the greenstone belt, mainly confined to the mafic sequence in the north but with splays into the felsic sequence in the southern part of the area. Post-folding internal granitoids have invaded these shears northeast of Mount Shenton, at Jurson Rocks and at Lang Rocks.

2.3 PROJECT GEOLOGY

Foliated metamorphosed mafic rocks occurring in the north of the project area represent a sequence of metamorphosed and deformed tholeiitic basalts. Within this mafic succession are two roughly concordant intrusions of pyroxenite, gabbro and dolerite known as the Mount Warren Sill and the Mount Cornell Sill. Together these sills are known as the Mount Cummings Mafic Complex. A similar but smaller gabbro which occurs north of Jutson Rocks itself is known as the Jutson Mafic Complex.

On the eastern side of the tenement area is a sequence of metamorphosed and deformed komatiites now consisting mainly of tremolite, chlorite and serpentinite. This komatiite sequence is estimated to be about 4km thick where it curves round the nose of the synformal fold structure at the northern end of the project area.

The mafic extrusives in the southern part of the project are commonly amygdaloidal, in places pillow-form, and frequently associated with dark-weathering rocks which may be pillow breccias. The felsic volcaniclastic sequence which dominates the central and southern part of the belt consists of metamorphosed pyroclastic tuff, breccia and agglomerate with interbedded felsic lavas, mostly andesite with some dacite and minor rhyolite, and sediments. Banded iron formation outcrops in the west at Mount Shenton, Mount Scott and Mount Grant.

The greenstones are intruded by granitic rocks ranging from granite to tonalite in composition, while batholiths of strongly foliated granodiorite and adamellite flank the belt to the east and west.

The Jutson Lineament extends the entire strike length of the tenements with splay shears trending through the felsic rocks south of Langs Find and Rutters Soak. Several north-south faults and shears, as well as quartz-filled east-west fractures, post-date the regional structures. It is these later structures that appear to host the gold at Langs Find and Rutters Soak.

The tenements are prospective for several different commodities. Gold is known at several prospects within the project area (although individual small mines are excised from the Graynic tenements), and the major shear zone which traverses the area should be investigated as a possible locus of substantial gold mineralisation. The thick mafic complexes in this greenstone belt have been shown to have potential for Pt and Pd, while the komatiitic flow sequence has previously been explored for nickel sulphides.

P S P E C T U - S 0

$2.4$ PREVIOUS EXPLORATION

In 1923 a State Prospecting Party noted visible gold in existing prospecting pits at Chapman's Reward. Selected sampling from pit walls and dump material associated with these pits assayed up to 210 g/t Au. Sampling at Langs Find returned assays of 208 g/t Au and 165 g/t Au, while a sample from quartz-veined mafics at Mount Shenton assayed 2.2 g/t Au.

In 1971, Kennecott Exploration (Australia) Pty Ltd ("Kennecott") carried our geological mapping, aeromagnetics, soil sampling, rock chip sampling and costeaning over tremolite-chlorite komatiites in the Throssell One (Jurson Rocks) and Throssell Two (Shenton Well) prospects in the search for nickel sulphides. A pit sample from Throssell One assayed 890ppm Ni and 165ppm Cu while a costean sample from Throssell Two assayed 685ppm Ni and 260ppm Cu. Both samples originate from interpreted komatiite footwall-contact positions. In addition, a sample from an interpreted hanging wall contact-position assayed 7,000ppm Ni and 504ppm Cu.

In 1972, International Nickel Australia Ltd ("International Nickel") conducted nickel exploration over the Mount Cummings Mafic Complex and the adjacent komatiites. They completed geological mapping, ground magnetics, rock chip sampling, soil sampling, IP surveys and RAB drilling. Several nickel assays exceeding 700ppm Ni were returned from the komatiites and several copper assays exceeding 420ppm were reported.

From 1993 to 1999 the area was explored for gold by Quadrant Australia ("Quadrant") and Elmina NL ("Elmina"). Aeromagnetic data collected by Aerodata in 1991 on 200m-spaced lines flown east-west was processed by World Geoscience to produce pseudo-colour and first derivative images of the total magnetic intensity. These images helped to identify lithotypes, regolith, regional lineaments and fracture patterns as a basis for field work. Initial reconnaissance rock chip sampling produced three significant results -- two at Jutson Rocks (20.5 g/t Au, 15.8 g/t Au) and one at Mount Cummings (8.4 g/t Au, 3.2% Cu and 3 g/t Ag in the one sample). In addition a pegmatite at Jutsons Rock assayed 1.31 g/t Pt and 0.769 g/t Pd.

A regional soil sampling program on a 1000m by 250m grid identified two large areas of anomalous gold, one at Langs Find and the other at Mount Cumming, as well as several smaller gold anomalies. Infill sampling on 500m by 100m identified four main anomalous clusters with gold mostly in the 3 to 20ppb range. The highest achieved value of 720ppb Au occurred 250m east of the Mount Cummings rock chip sample which assayed 8.4 g/t Au. The anomalies were found to occur in all rock types including undeformed, relatively fresh rock characterised by brittle, fracture-filled quartz veins as well as in areas which are strongly sheared and altered. In general the best and most continuous gold anomalies were found in soils near outcrop or in areas where the calcrete horizon crops out at surface.

The identified gold anomalies generally follow the regional north-northwest trend of the greenstones and appear to thicken in areas cross-cut by north-, northwest- or northeast-trending faults. The large gold anomalies at Mount Scott and Mount Cummings relate to mafic and ultramafic rock types while at Langs Find and Rutters Soak a central dolerite ridge outcrops in a mixed sequence of mafic and felsic volcanics.

From 2000 to 2002, the area was explored by Helix Resources Limited ("Helix") for gold, Pt and Pd. They conducted infill soil sampling and vacuum drilling on 250m by 100m centres on the Spacely Grid covering the main gold, nickel and copper anomalies delineated by earlier work. This work resulted in the recognition of anomalous platinum group elements (PGEs) in the Mount Warren and Mount Cornell sills of the Mount Cummings Mafic Complex.

The Mount Warren PGE anomaly is roughly elliptical and is related to a 25m wide stratigraphic horizon dipping at 45 to 55 degrees within the gabbroic portion of the sill, situated between 50m and 100m stratigraphically above the gabbro-pyroxenite contact. The sampling defined anomalous PGEs up to 51ppb Pt+Pd over a 5km strike length. In addition an anomalous (ie 2-3 times background) copper horizon occurs approximately 50m

P R -S $P E C$ T U -S $\Omega$

GRAYNIC

SECTION 5: INDEPENDENT GEOLOGIST'S REPORT

stratigraphically above the PGE horizon and appears to be at the contact between the magnetic gabbro and nonmagnetic gabbro. Follow-up rock chip channel sampling returned assays up to 226ppb Pt+Pd over a 1 metre interval within a 3 to 11 metres wide PGE-anomalous zone for a strike of more than 2km along the eastern flank of the sill. About 1.5km of this strike length occurs within the Graynic tenements.

The Mount Cornell PGE anomaly is approximately 2km in strike length and, because of its relatively shallow dip (5 to 10 degrees to south), occurs over a surface width of 500m. The anomalous horizon defined by values up to 27ppb Pt+Pd occurs in a similar stratigraphic position to the Mount Warren anomaly, that is within the gabbroic portion of the sill some distance above the pyroxenite. While some of this surface anomaly occurs outside the Graynic tenements, the shallow southerly dips mean that the anomalous unit should occur within the Graynic tenements at modest depth.

One line of vacuum drilling on grid line 6926750N, about 6km south of Mount Warren, tested an interpreted unexposed komatiite sequence. Hole JRVC 691 returned a result of 71ppb Pt+Pd, coincident with 4840ppm Cr, 815ppm Ni and 104ppm Cu occurring in ironstone material (possibly a gossan) at shallow depth. No deeper drilling was subsequently undertaken to test these anomalies.

$2.5$ EXPLORATION POTENTIAL

Of primary interest at Jutson Rocks is the PGE potential of the mafic sills within the Mount Cummings and Jutson Rocks mafic complexes. Soil and rock chip sampling will be extended and the most anomalous areas will be rested by drilling. Samples of the PGE-enriched horizons within the fresh rock will enable a more thorough understanding of the potential of these sills to host a viable PGE deposit.

Prospecting pits and gold anomalies from rock chips and soil sampling are widespread throughout the tenement area, so gold is clearly an important target in this under-explored greenstone belt. In particular the regional shear zone will be a focus for gold exploration, including its associated splay structures within the felsic and mafic volcanics. Anomalies identified by Quadrant and Elmina will be further investigated.

The komatiliic lava sequences explored in 1971 and 1972 by Kennecott should be re-investigated for their nickel sulphide potential. The combined soil/rock chip/costean sampling anomaly delineated at Jutson Rocks is a target of immediate interest. However, relative to the scale of the thick komatilitic lava pile this early work is superficial in its scope and a new approach is merited. Since the 1970's there have been dramatic advances in the techniques of nickel sulphide exploration and in the understanding of the geological processes leading to their deposition, resulting in exciting new discoveries such as Silver Swan and others, and renewed nickel production in other parts of the state.

$2.6$ EXPLORATION STRATEGY AND BUDGET

Graynic Metals has provided a reasonably comprehensive program and budget for the initial 2 years of exploration at Jutson Rocks. Initial exploration will seek to confirm and extend existing PGE, Ni and Au anomalies within the project area and the most promising areas will be tested by drilling. As the tenements lie within an Aboriginal area, land access agreements need to be negotiated prior to the commencement of any activities.

The first exploration targets for PGEs will be the anomalies so far delineated at Mount Warren and Mount Cornell. Additionally soil sampling will be extended southwards along the strike of the sills to seek further areas of anomalism.

The major shear zone which traverses the length of the greenstone belt will be mapped in detail and the best of the gold anomalies delineated by Quadrant and Elmina will, where appropriate, be re-sampled as a preliminary to drill testing.

P $\mathsf{S}$ P. E. $\mathbb{C}$ T U S R 0

The nickel sulphide potential of the entire komatiite sequence will be reviewed in the light of recent advances in nickel sulphide exploration and an appropriate exploration program will be developed.

Graynic has also provided comprehensive budgets covering the first two years of exploration to complement the proposed programs. Because of the need to negotiate land access agreements with the relevant aboriginal groups, expenditure in Year 1 is expected to be minimal, but it is anticipated that a substantial exploration program can be completed in Year 2.

TABLE 4. JUTSON ROCKS PROJECT - PROPOSED EXPLORATION EXPENDITURE

EXPENDITIONS Alban Maria (	nane B		ATANG ANG KORY
Wages/salaries/contractors	\$35,000	\$60,000	\$95,000
Surface exploration	8,000	10.000	18,000
Geophysics	$\mathbf{a}$	15,000	15,000
RAB/AC drilling	$\mathbf{a}$	$\overline{\phantom{a}}$
RC drilling	$\mathbf{r}$	50,000	50,000
Diamond drilling
Assays	7,000	8,000	15,000
Field costs/consumables	5,000	8.000	13,000
Tenement costs	5,000	5.000	10,000
Administration	4,000	5.000	9.000
toimes		RANDIA STARD - SZENDO

The budgeted expenditure of \$64,000 and \$161,000 on the Jutson Rocks Project in Year 1 and Year 2 respectively is considered adequate to cover the cost of the proposed programs.

3. NORTHAMPTON PROJECT

INTRODUCTION $3.1$

The Northampton Project comprises one exploration licence application (ELA66/49) covering a total of 70 graticular blocks over an area of approximately 200 square kilometres. The project is situated 430 kilometres north of Perth and is approximately 50 kilometres north of Geraldton. Access to the project area is excellent via sealed and unsealed roads leading from the North West Coastal Highway, which passes through the area, linking the provincial centre of Northampton, situated within the project area, to Geraldton and Carnarvon. The project includes the majority of the historically significant lead and copper producing centres around the township of Northampton in the Northampton Mineral Field.

The very first mining operations in Western Australia were based upon the lead-silver and copper deposits of the Northampton Complex. In excess of 100 deposits were mined from within the Complex, which was originally worked in the period 1850 to 1890. Production records for this period however are poor. Overall recorded production from the Complex is at least 77,000 tonnes of lead, 4,268 tonnes of copper, 42.3 tonnes of zinc and 6,600 ounces of silver. Significant production also occurred between the years 1910 to 1927 and again in the 1950's.

Zinc was generally avoided by the early miners and left in the ground due to metallurgical problems. The occurrence of zinc mineralisation is widespread but currently poorly defined in detail. Zonation in the distribution of lead and zinc mineralisation at a number of abandoned mines allowed lead ores to be preferentially mined and

P R S. $P$ $E$ $C$ T U -S $\Omega$

there is evidence to suggest that the silver content of mineralisation enriched in zinc is higher than in the more commonly mined lead ores.

Since the discovery of lead deposits at Northampton, the origin and structural control of the base-metal vein deposits have remained enigmatic due to the lack of detailed geological studies and uncertainty concerning the age of the base metal mineralisation.

The Project is the subject of a Farm-in Agreement with Cazaly Resources Ltd. ("Cazaly") dated 21 February 2005 whereby Graynic can earn up to 80% equity in the Northampton project by sole funding exploration to \$1 million on the project over a forty-two month period. A description of the Joint Venture Agreements appears in the "Solicitor's Report on Mining Tenements", located in Section 7 of the Prospectus.

REGIONAL GEOLOGY AND MINERALISATION 3.2

The project occurs within the Proterozoic Northampton Complex, a partly fault-bounded, up-thrown block juxtaposed along the western margin of the Archean Yilgarn Craton. The area has undergone repeated deformation during the Proterozoic, and during the Mesozoic was affected by rifting resulting from the separation of the Indian and Australian continents. Much of the Northampton Complex is overlain by Mesozoic and Cainozoic cover rocks.

Dominant rock types within the Northampton Complex comprise granulite, gneiss, granite and migmatite which are folded about northwest-trending fold axes plunging mainly to the southeast. The granulite gneiss forms the oldest component of the Complex, interpreted to be derived from predominantly sediments (i.e. paragneiss). Additionally there are strongly magnetic pods of mafic granulite, indicative of some probable original igneous components. Age dating has indicated that the last metamorphic event was around 1.05 Ga after which, porphyritic granites intruded into the gneiss at around 1.0 Ga. A later northeasterly-trending tholeiitic dyke swarm intruded around 0.65 to 0.8 Ga.

The internal structure of the Northampton Complex is poorly understood. The earliest structures are mesoscopic, recumbent folds and thrusts. These are typically re-folded by upright northwest- to southeast-plunging open folds to form the prominent NNW to SSE structural grain of the terrane.

Known lead-zinc-silver and copper mineralisation of the Northampton Complex is predominantly associated with the north to north-easterly trending brittle ductile shear zones which host the tholeiltic dykes in the region. Most mineralised occurrences form lensoid veins near the margins of the shear zones, or are associated with breccia zones where the shear zones intersect or bifurcate. The larger deposits are found in more structurally complex situations where faults intersect or form sigmoidal loops. Typically the lodes comprise brecciated wallrock cemented by massive sulphides or quartz.

Galena, sphalerite, pyrite, marcasite and chalcopyrite are the main sulphides present within a gangue of quartz, carbonate and barite. Wallrock alteration is common and includes silicification, chloritisation and kaolinisation of the host rocks. Metal zonation has been noted in the distribution of lead and zinc at a number of localities. There is also evidence from limited assay data that the silver content of mineralisation is more enriched in sphalerite than it is in the galena rich zones.

The age and genesis of mineralisation at Northampton is currently not well defined. Current available data has been interpreted to indicate that mineralisation is younger than the north-northeasterly trending Proterozoic dolerite dyke swarm but possibly older than the north-northwesterly trending shears which left laterally displace the north-northeasterly trending structures. This indicates an age of between 0.65 to 0.75 Ga, however dating data from altered wallrocks has indicated a Silurian (427 Ma) age for the mineralisation.

$S$ P. E. $\mathbb{C}$ T U -S 0

3.3 PREVIOUS EXPLORATION

Exploration in the area prior to the 1970's essentially comprised of prospecting for surface gossans and silicified breecias associated with base metal mineralisation. The Western Australian Mines Department, and some private companies, completed some diamond drill holes beneath several of the old mines prior to 1950.

During the 1970's, exploration was carried out in the vicinity of the Baddera and Wheal May mining centres. A helicopterborne electromagnetic (EM) and magnetic survey was flown and followed up by geological ground-based mapping, Induced Polarization $(\mathrm{IP})$ survey and rock chip sampling. Prospective zones were outlined and mapping located fault breccias within the known Wheal May and Baddera mines, together with several other fault breccia zones. These newly identified fault breccia zones were defined over distances up to 1700m long and included silicification, chloritisation and kaolinisation of host rocks.

addition In $\mathbf{t}$ defining extensions to known fault breccia zones and the location of new zones, the programme identified several IP and EM anomalies which remain untested by drilling.

Regional exploration based on conceptual stratiform base metal models was carried out for the first time during the 1980s. In the northern part of the Northampton Block, to the north of the project area, a programme of regional and detailed geophysics was conducted with geochemical and drilling follow up. Forty aeromagnetic anomalies were followed up on the ground with SIROTEM and ground magnetics. RAB drilling of confirmed conductive zones was carried our and four anomalies were diamond drilled for a total of four holes. The drilling intersected gneisses with minor breccia zones and related veins of pyrite and galena.

Ρ R o s P $E$ $C$ T U - S

GRAYNIC

SECTION 5: INDEPENDENT GEOLOGIST'S REPORT

During the 1990s, regional exploration programmes examined the possibility that vein-style lead-zinc may occupy the faulted eastern margin of the complex beneath Perth Basin sediments. The development of sediment-hosted deposits in the Tumblagooda Sandstone was also considered to be a possibility. Airborne magnetic and electromagnetic (GEOTEM) surveys were carried out to locate structurally and stratigraphically favourable areas. These were followed up with ground magnetics, RAB and geochemistry surveys. Four sites were tested with diamond drilling which located faulting and haematite alteration, but no economic mineralisation.

Exploration work was undertaken over portions of the Northampton Block focussing on locating stratiform, Broken Hill-style Pb-Zn-Ag massive sulphide deposits, and to a lesser extent, vein-type deposits and mineralisation related to the faulted eastern margin of the Northampton Block.

A more regional approach was then taken in defining prospective targets for base metal mineralisation guided largely by the results obtained from an airborne magnetic and GEOTEM survey carried out at on 2,000m flight line spacing with 400m infill lines over the project area. Follow up ground investigations over selected conductive geophysical targets took the form of a phased assessment using various ground magnetic and electromagnetic surveys, mapping, gridding, auger sampling and/or shallow RAB drilling. Limited diamond drilling was carried out at some of the more advanced prospects.

Within the Northampton Project, six airborne electromagnetic anomalies were selected for follow up at prospects known as Old Papa's, Gino's, Iguana, King Street, Neon and Paradiso. The most significant ground work took place at the Old Papa's and Gino's prospects, located respectively 6 kilometres west and 8 kilometres south west of Northampton and within the current project area.

At Old Papa's Prospect, the target comprised a ground electromagnetic conductor interpreted to be inclined east and probably conformably aligned within an enclosing ferruginous graphitic unit traced for 500m along strike. Shallow RAB drillholes (40 holes for 235m) were completed to 'bedrock' returning peak values of 1,337ppm Pb, 339ppm Zn and 297ppm Cu. These geochemically anomalous values were associated with a ferruginous graphitebiotite-garnet schist veined by tourmaline-bearing quartz and occurs near the projected sub-cropping manifestation of the geophysical conductor. Subsequent diamond drilling to an inclined depth of 139m intersected an alternating sequence of feldspathic metaquartzite and pelitic to psammitic granulite.

Gino's Prospect was found to contain a moderately conductive, arcuate, electromagnetic anomaly inclined to the southwest and associated with a psammitic and pelitic granulite. Shallow RAB drilling (52 holes for 257m) investigated the anomaly. An extensive zone of low-magnitude anomalism was defined, corresponding to a graphite-biotite schist. This zone also displayed a close spatial association with elevated W and As levels. Further investigative work to test the graphite-biotite schist along strike and at depth was not carried out.

3.4 PROJECT GEOLOGY AND EXPLORATION POTENTIAL

Outcrop within the project area reveals that the gneiss, granulite and granite, typical of the Northampton Complex, occur within the area. The area hosts the largest concentration of historic mines and workings in the Northampton Complex, centred on the township of Northampton. A summary of the key mines in the area is as follows:

Gurkha: Produced 5,323t Pb and 600 ozs Ag in 1859, and from 1952 to 1961. Mineralisation occurs in a 030° trending shear zone over some 150m and was mined to 75m depth over four levels. Mineralisation comprises solid galena in a silica-barite gangue. A sample of pyrite assayed 0.54% Ni;

Nooka: Produced 1,239t Pb and 160 ozs Ag during the 1870's from 1916 to 1918 and from 1960 to 1967. Mineralisation occurs in five deposits within a group of north-trending shears extending over 1 km. Veins of galena with sphalerite, pyrite and chalcopyrite occur at Nooka whilst some of the adjacent mines contain mainly cerussite or chalcopyrite ore;

Baddera: Produced 14,200r Pb from 1910 to 1920 from a shear zone striking over 300m at 050° to a depth of 135m. The orebodies comprise quartz, galena, sphalerite, pyrite and minor chalcopyrite;

Wheal Fortune: Three deposits, with combined production of 4,428t Pb, 2,681 Cu and 914 ozs Ag - mined mainly between 1862 to 1968. The deposits lie within a series of en echelon shears trending 045° and with the higher grade zones forming at the intersections with pegmatite. Ore minerals comprise galena, sphalerite, chalcopyrite and pyrite in the primary zone and cerussite, malachite, azurite, chalcocite, covellite and native copper in the oxide zone.
Wheal May: Produced 2,240t of ore at a grade of 75% Pb prior to 1899. The deposit was worked over 180m to about 25m depth. The mineralisation is hosted by a shear trending 040°, running parallel to a dolerite dyke. Ore minerals comprise galena, cerussite, chalcocite and copper carbonates.

Numerous other workings exist throughout the project area, displaying similar characteristics to those described above. The deposits mined to date are generally small in scale however the widespread occurrence of Pb-Zn-Cu mineralisation throughout the area, combined with the source of the metals likely to have been locally derived, indicates that there is potential for more base metal deposits to exist in the region.

The broad tectonic setting of a possible continental margin, the complex deformational and high grade metamorphic history, and the presence of an extensive turbidite succession are all features which typify Broken Hill style mineralised environments. This model for Broken Hill style mineralisation should be considered in conjunction with the potential for proximal VMS (volcanogenic hosted massive sulphide) deposits associated with felsic volcanics.

Further exploration around the existing historic mines for zinc in particular is also recommended as zinc was generally ignored in the past due to difficulties in producing a concentrate at that time. The metal zonation observed in the mines indicates that there is much scope to discover significant zinc mineralisation adjacent to the previously mined lodes. Additionally there is the potential for significant silver credits with this mineralisation.

EXPLORATION STRATEGY AND BUDGET 3.5

This is a single exploration licence application covering a number of abandoned lead mines in one of WA's historic mining centres. Previously, the more metallurgically complex ores (zinc $\ast$ associated silver) were not mined to any significant degree, consequently there is the opportunity to focus exploration on the zinc potential around the many historic mines in the district. To evaluate the potential, geological mapping of the underground mine openings is planned for Year 1. Particular regard to any alteration and mineralogical zonation will be made with a view towards generating vectors towards this zinc mineralisation. This will be followed up with RC drilling to assess the generated targets.

EXPLNDERENCE	*EXERCISE AVAILER AND RESIDENCE*
Wages/salaries/contractors	\$10,000	\$9,000	\$19,000
Surface exploration	6.500		6.500
RC drilling		7.500	7,500
Assays	1.000	1.000	2.000
Field costs/consumables	1.000	1,000	2,000
Tenement costs	500	500	1,000
Administration	1.000	1.000	2,000

TABLE 5. NORTHAMPTON PROJECT -- PROPOSED EXPLORATION EXPENDITURE

Minimal expenditure only is budgeted for here as the licence has not yet been granted.

4. PRINCIPAL SOURCES OF INFORMATION

OUARTZ CIRCLE PROJECT

Ashley, P.M., 2002. Petrographic Report on 12 Rock Samples and One Drill Chip Sample from the Quartz Circle Project Area, Pilbara Region, WA: Unpublished internal report for MIM Exploration Pty Ltd.

Carlson, R.D. and Beeson J.B., 1994. Quartz Circle Project Annual report P46/1015, E46/212, and MLA46/147 for the Year ended December 1990: Pancontinental Resources Pty Ltd, Herald Resources N.L.

Donovan Rogers, S., 1997. Annual report, Quartz Circle M46/101, M46/147, M46/158, E46/ 393 and E46/369, Nullagine, WA for the period ending 31 December 1996: Unpublished report by RGC Exploration, Report No. 0150-9701.

Gemuts, I., 1989. Final report - Exploration Licence E46/86: Assessment of the Quartz Circle Claims, East Pilbara, Western Australia: Unpublished report by Herald Resources N.L.

Hall, S.G., 1995. Quartz Circle Project Annual report M46/101, M46/147, E46/369, M46/158, Nullagine, WA, for the year ending December 1994 Reference no M 6781: Unpublished report by Pancontinental Resources Pty Ltd, Herald Resources N.L.

Hall, S.G., 1996. Annual report Quartz Circle M46/101, M46/147, E46/369, M46/158, Nullagine, WA, for the year ending December 1994, Reference No M 6781: Unpublished report by RGC Exploration.

Hamill Resources, 2002. Internal Report

Miles, G., 2004. Progress report Quartz Circle Project, Nullagine, WA for the Period 1 January 2004 to 1 September 2004; E46/541, P46/1360-1366: Unpublished report by Straits Resources/Cazaly Resources Limited Joint Venture.

Norris, N., 2003. Exploration Review, Quartz Circle Project, Nullagine, WA: Unpublished internal report for MIM Exploration Ltd.

Perring, R.J., 1990. Quartz Circle Project Annual report M46/101, P46/1015, E46/212 for the Year ended December 1990: Unpublished report by Pancontinental Resources Pty Ltd, Herald Resources N.L.

Perring, R.J., 1991. Quartz Circle Project Annual report M46/101, P46/1015, E46/212 for the Year ended December 1991: Unpublished report by Pancontinental Resources Pty Ltd, Herald Resources N.L.

Perring, R.J. and Groeneveld, W.G., 1993. Quartz Circle Project Annual report M46/101, P46/1015, E46/212 for the Year ended December 1992: Unpublished report by Pancontinental Resources Pty Ltd, Herald Resources N.L. Combined Annual Technical report no M6781.

JUTSON ROCKS PROJECT

McIntyre, J., 2003. Final report for the tenements E38/68 and E38/69, Jutson Rocks, for the Period 23/12/01 to 22/12/02: Unpublished report by Helix Resources Limited. Combined Reporting Group C123/1995.

Rogers, K.A., 1995. Annual report of Exploration for the Period to 22 December 1994, Exploration Licence E38/68, Jutson Rocks Project, Mount Margaret Mineral Field, WA: Unpublished report by Elmina N.L.

P R O S P E C T U -S

Rogers, K.A., 1999. Combined annual report of exploration for 1998, Jutson Rocks Project, E38/68, E 38/69 and P38/1723-1730: Unpublished report by Elmina N.L.

Wilson, M.H., 2002. Annual report for Tenements E38/68-69, Jurson Rocks, for the Period 23/12/00 to 22/12/01: Unpublished report by Helix Resources Limited - Technical report 2242.

Woodhouse, M., 2004. Review of the Nickel Sulphide and PGE Potential of the Jutson Rocks Project: Unpublished internal report prepared by Newexco Services Pty Ltd for Cazaly Resources Limited.

NORTHAMPTON PROJECT

Christie M.H., 1993. Annual Report, Northampton Project, E66/5-8 for the period Aug. 1992 to Aug. 1993: Unpublished report compiled by CRA Exploration Pty Ltd, on behalf of West Australian Metals N.L., to the Department of Mineral and Petroleum Resources.

Christie M.H., 1994. Annual Report, Northampton Project, E66/5-8 for the period Sept. 1993 to Sept. 1994: Unpublished report compiled by CRA Exploration Pty Ltd, on behalf of West Australian Metals N.L., to the Department of Mineral and Petroleum Resources.

Christie M.H., 1995. Annual Report, Northampton Project, E66/6,7 for the period Sept. 1994 to Aug. 1995: Unpublished report compiled by CRA Exploration Pty Ltd, on behalf of West Australian Metals N.L., to the Department of Mineral and Petroleum Resources.

Ferguson, K.M., 1999. Lead, zinc and silver deposits of Western Australia: Western Australian Geological Survey, Mineral Resources Bulletin 15, 314p.

Garlick H.J., 1997. Independent Geologists Report: Report prepared for inclusion in Prospectus of Silver Rose NL

Morant P., 1992. Northampton Project, West Australian Metals N.L.: Unpublished internal report to West Australian Metals N.L.

Thornett J.R., 1993. Base metal exploration in the Northampton Block. A preliminary investigation: Unpublished report to West Australian Metals N.L.

Unknown, 1990. Annual Report Northampton Project, E66/6,7,12 for the period Sept. 1989 to Sept. 1990: Unpublished report compiled by West Australian Metals N.L. to the Department of Mineral and Petroleum Resources.

Unknown, 1991. Annual Report Northampton Project, E66/6,7 for the period Sept.1990 to Sept. 1991: Unpublished report compiled by West Australian Metals N.L. to the Department of Mineral and Petroleum Resources.

Unknown, 1992. Annual Report, Northampton Project, E66/5-9,11-12, E70/448,563 for the period Aug. 1991 to Aug. 1992: Unpublished report compiled by West Australian Metals N.L. to the Department of Mineral and Petroleum Resources.

$5.$ GLOSSARY OF TECHNICAL TERMS

Terms not listed below are as defined in the Collins English Dictionary (4th Australian Edition - ISBN 0 00 472219 1) For Elements and Geological Ages refer to back cover of the Dictionary.

ⅇ	Abbreviation for 'at an average grade of'. For example: '5m @ 3.2 g/t Au' translates as '5 metres at an average grade of 3.2 grams per tonne gold'.
AAS	Atomic Absorption Spectroscopy – a chemical analysis technique.
aeromagnetic survey	A magnetic survey conducted from an aircraft.
alteration	The change in the mineral composition of a rock, commonly due to hydrothermal activity.
alteration zone	A zone in which rock-forming minerals have been chemically changed.
arkose	A sandstone consisting of feldspar and quartz grains cemented by a mixture of quartz and clay minerals.
AusIMM	Australasian Institute of Mining and Metallurgy.
BIF	Banded Iron Formation. A rock consisting essentially of alternating bands of iron- oxides and cherty silica.
block	A large mass of rock bounded by faults.
BLEG	Bulk Leach Extractable Gold - a chemical analysis technique.
bulk sample	A large volume of soil or rock obtained for examination or analysis.
calcrete	Superficial gravels cemented by secondary calcium carbonate.
complex	An assemblage of rocks of various ages and origins intricately mixed together.
costean	A trench excavated in the surface for the purpose of geological investigation.
cut-off grade	The lowest or highest assay value that is included in a resource estimate.
dacite	A fine-grained extrusive rock composed mainly of plagioclase, quartz and pyroxene or hornblende or both. It is the extrusive equivalent of granodiorite.
DDH	Diamond Drill Hole
diamond drilling	Rotary drilling technique using diamond set or impregnated bits, to cut a solid, continuous core sample of the rock. The core sample is retrieved to the surface, in a core barrel, by a wireline.
differentiated intrusive	Applied to intrusives that are made up of two or more rock types produced by differential segregation of minerals of the parent magma.

P S P E C T U S $R$ $\circ$

GRAYNIC METALS SECTION 5 INDERENDENT GEOLOGIST'S REPORT

dyke	A tabular body of intrusive igneous rock, crosscutting the host strata at a high angle.
EM survey	Electromagnetic survey. A method of measuring the alternating magnetic fields associated with electrical currents artificially or naturally maintained in the subsurface.
epithermal	Descriptive of mineral deposits formed in rock fissures at shallow depths and low temperatures by ascending mineralizing solutions
felsic	Light coloured rocks containing an abundance of feldspars and quartz.
fire assay	Analytical rechnique involving heating a sample in a furnace to ensure complete extraction of all contained precious metal.
foreland basin	A basin formed within a continental setting, often adjacent to a mountain range.
g	gram.
g/t	grams per tonne.
g/t Au	grams gold per tonne.
Ga	Billion years ago.
geochemistry survey	Systematic collection of data on the variation of chemical elements in rocks and soils.
geophysical survey	Systematic collection of data on the variation of physical properties in rocks and soils.
GIS	Geographic Information System. A system devised to present spatial data in a series of compatible and interactive layers.
gossan	A ferruginous deposit remaining after the oxidation of the original sulphide minerals in a vein or ore zone.
gravity survey	Systematic measurement and collection of the earth's gravitational field at the surface at regular intervals. Used to discern different rock types based on associated variations with differences in the distribution of densities, and hence rock types.
greenschist	A schistose metamorphic rock which owes its green colour and schistosity to abundant chlorite and lesser epidote and/or actinolite.
greenschist facies	A classification of the metamorphic grade of a rock, diagnostically defined by the metamorphic formation of chlorite and biotite at generally lower pressures and temperatures.
helimag	A low-level, high-resolution aeromagnetic survey conducted using a helicopter.
IP survey	Induced Polarization survey. An electrical geophysical survey technique measuring the magnetic field spontaneously induced in a volume of rock by the application of an electric current. A technique often used to identify disseminated sulphide deposits.
intracratonic	Within a large, stable mass of the earth's crust.
	C T U S P R S. P. E.

I-type granitoid	Coarse-grained felsic intrusive rocks derived from the melting and reconstitution of igneous rocks.
JORC	Joint Ore Reserves Committee. The guidelines of the JORC Code (1999) are observed in the calculation of ore resources and ore reserves.
komatiite	Magnesium-rich mafic to ultramafic extrusive rock.
LandSat imagery	Photographs of the earth's surface collected by satellite and commonly processed to enhance particular features.
lateritisation	An extreme form of weathering common in tropical climates, in which silica an other constituents are removed, leaving a rock characterised by a high proportion of alumina and/or iron oxide.
Ma	Million years ago.
mafic	Descriptive of rocks composed dominantly of magnesium, iron and calcium-rich rock- forming silicates, and for rocks in which these minerals are abundant.
magnetic anomalies	Zones where the magnitude and orientation of the earth's magnetic field differs from adjacent areas.
magnetic survey	Systematic collection of readings of the earth's magnetic field.
mesothermal	Mineral deposits formed (precipitated) at moderate temperatures.
metabasite	general term applied to undifferentiated metamorphosed mafic rock.
mineral resource	A tonnage or volume of rock or mineralisation of intrinsic economic interest.
monzogranite	A granular plutonic rock with a composition between monzonite and granite.
Mt	Million metric tonnes
normal fault	A fault along which movement has placed younger rocks over older rocks.
ortho-	A prefix used in front of a metamorphic rock name indicating that rock derived from an igneous rock. Orthogneiss - gneissic rock derived from igneous rock types.
palaeochannel	an ancient alluvial channel of a pre-existing river or creek bed.
para-	A prefix used in front of a metamorphic rock name indicating that rock derived from a sedimentary rock. Paragneiss -- gneissic rock derived from sedimentary rock types.
PGE, PGM	Platinum Group Elements, Platinum Group Metals: Platinum (Pt), Palladium (Pd), Iridium (Ir), Osmium (Os), Rhodium (Rh) and Ruthenium (Ru). Often associated with Ni-Cu iron-sulphides, and generally hosted by mafic-ultramafic rock types.
plunge	The attitude of a line in a plane which is used to define the orientation of fold hinges, mineralised zones and other structures.

P R O S P E C T U S

GRAYNIC METALS SECTION 5. INDEPENDENT GEOLOGIST'S REPORT

ppb, ppm	parts per billion, parts per million (quantitative equivalent of $g(r)$ .
primary	A rock or mineral that has remained unaltered since it was originally formed.
RAB	Rotary Air Blast. A method of rotary drilling in which sample is returned, using compressed air, to the surface in the annulus between drill-rod and the drill-hole. A relatively inexpensive and less accurate drilling technique.
radiometric	Data relating to the radioactivity emitted by rocks at or near the earth's surface, usually collected by helicopter or fixed wing aircraft.
RC	Reverse Circulation. A method of rotary drilling in which the sample is returned to the surface, using compressed air, inside the inner-tube of the drill-rod. A more accurate drilling technique than RAB, which minimises contamination.
rift basin	A large fault-bounded depression infilled with volcanic and/or sedimentary material.
SEDEX deposit	A sediment-hosted massive sulphide deposit, typically tabular to lensoidal in shape and range from centimetres to tens of metres thick. Multiple horizons may occur over stratigraphic intervals of 1000 metres or more. Sedimentary exhalative deposits currently produce a significant proportion of the world's Zn and Pb.
sericite	Fine mica introduced through metamorphism or alteration.
serpentinite	A rock consisting almost wholly of serpentine, a hydrous magnesium silicare (Mg6(Si4O10)(OH)8), derived from the alteration of pre-existing olivine and pyroxene.
shear zone	A zone in which rocks have been deformed primarily in a ductile manner in response to applied stress.
sheetwash	A widely distributed, thin blanket of sediment deposited in a broad, poorly defined drainage.
SIROTEM	a variant of a Transient Electromagentic survey
stockwork	A network of (usually) quartz veinlets produced during pervasive brittle fracture.
stratabound	Occurring parallel to the rock strata, but not necessarily deposited at the same time.
stringer	A small discontinuous or irregular veinlet.
supergene	of, or relating to minerals and mineral deposits or enrichments formed near the surface, generally by descending solutions.
syntectonic	Occurring or forming at the same time as deformation and metamorphism.

TEM survey	Transient Electromagnetic survey - a variant of EM survey.
tholeiitic	A term applied to mafic or ultramafic rocks composed predominantly of magnesium- rich feldspar and pyroxene minerals.
tonalite	A coarse grained plutonic rock similar to diorite in composition but containing quartz as 5% to 20% of the light colored minerals.
ultramafic	Igneous rocks consisting essentially of ferro-magnesium minerals and containing less than 45% silica, with trace quartz and feldspar.
volcanoclastic	Pertaining to sedimentary clastic rock containing volcanic material.
VMS	Volcanogenic Massive Sulphides. Mineral deposit formed by the exhalation of sulphide rich solutions and subsequent precipitation of sulphides onto the sea floor surrounding a hydrothermal vent.

SECTION 6. INVESTIGATING ACCOUNTANT'S REPORT

6 April 2005

The Directors Graynic Metals Limited Level 2, 22 Oxford Close LEEDERVILLE WA 6007

Dear Sirs

RE: INVESTIGATING ACCOUNTANT'S REPORT

Introduction

This report has been prepared at the request of the Directors of Graynic Metals Limited ("Graynic Metals" or "the Company"), for inclusion in a prospectus to be lodged with the Australian Securities and Investment Commission ("ASIC") on or around 6 April 2005 ("Prospectus"), relating to the proposed issue of up to 6,250,000 ordinary shares at an issue price of 20 cents each to raise a total of \$1,250,000.

Basis of Preparation

The report has been prepared to provide investors with information on historical results and the financial position of Graynic Metals, and to provide investors with a pro forma statement of financial position of Graynic Metals as at 31 March 2005 adjusted to include funds raised by this Prospectus and the completion of exploration interest acquisitions and other transactions as referred to in Note 2 of Appendix 2.

This Report does not address the rights attaching to the Shares to be issued in accordance with the Prospectus, the risks associated with the investment, nor form the basis of an Expert's opinion with respect to a valuation of the Company or a valuation of the Share issue price of 20 cents per share.

Ord Corporate Pty Ltd ("Ord Corporate") has not been requested to consider the prospects for Graynic Metals nor the merits and risks associated with becoming a shareholder and accordingly, has not done so, nor purports to do so. Ord Corporate accordingly takes no responsibility for those matters or for any matter or omission in the Prospectus, other than responsibility for this report.

Background

Graynic Metals was incorporated on 10 February 2005 with the intention to seek official quotation on the Australian Stock Exchange Limited ("ASX") in April 2005 as a base metals exploration company.

Since incorporation, the only activities undertaken by the Company have been to secure interests in a number of exploration tenements, and preparation for the proposed listing of Graynic Metals.

PECTU

Ord Corporate Pty Ltd ABN: 26 097 209 688

Ord Computer Consulting Pty Ltd

Ord Financial Services Pty Ltd ABN: 61 105 210 978

Level 2, 47 Colin Street West Perth WA 6005

PO Box 359 West Perth WA 6872

雪+61893213514 编 +61893213523

[email protected] www.ordgroup.com.au

Chartered Accountains

SECTION 6: INVESTIGATING ACCOUNTANT'S REPORT

From the date of incorporation to 31 March 2005, 2,000,003 ordinary fully paid shares have been issued as follows;

3 subscriber shares were issued to the founding members at \$1.00 per share;
500,000 shares were issued to promoters at 0.1 cents per share: and
1,500,000 shares were issued to seed capitalists at 10 cents per share.

Scope of Report

Ord Corporate has been requested to:

report whether anything has come to our attention which would cause us to believe that the historical $(a)$ financial information disclosed in the appendices to this report is not fairly presented in accordance with generally accepted accounting principles as applied in Australia for reporting on financial information in a public offer document; and
report whether anything has come to our attention which would cause us to believe that the pro-forma (b) financial information disclosed in the appendices to this report is not properly drawn up in accordance with the basis of preparation and assumptions set out therein and with generally accepted practice as applied in Australia for presenting pro-forma financial information in a public offer document.

Graynic Merals has prepared, and is responsible for, the historical and pro-forma financial information included in the appendices to this report.

Scope of Review

Ord Corporate has not audited the financial statements of Graynic Metals as at 31 March 2005. We have conducted our review of the historical financial information in accordance with Auditing Standard AUS 902 "Review of Financial Reports". We made such enquiries and performed such procedures as we, in our professional judgement, considered reasonable in the circumstances, including:

$(i)$ enquiry of directors, management and others;
review of contractual arrangements; and $(ii)$
a review of work papers, accounting records and other documents. (iii)

The review procedures were substantially less in scope than an audit examination conducted in accordance with generally accepted auditing standards.

Having regard to the nature of the review, which provides less assurance than an audit, and to the nature of the historical and pro-forma financial information, this report does not express an audit opinion on the historical and pro-forma financial information included in the appendices to this report.

Valuation of Exploration Interests

The principal assets of Graynic Metals will be its exploration interests.

The exploration interests have been included at cost in the pro-forma statement of financial position. We have not performed our own valuation of the exploration interests. We are unable to form a view on whether the carrying values of the exploration interests are fairly stated.

R O S P E C T U S P

SECTION 6 INVESTIGATING ACCOUNTANT'S REPORT

Opinions

$\left( a\right)$ Historical Financial Information

Based on our review, which is not an audit, nothing has come to our attention which causes us to believe that the historical financial information, as set out in Appendix 1 and 2 of this 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.

Pro-Forma Financial Information $(b)$

Based on our review, which is not an audit, nothing has come to our attention which causes us to believe that the pro-forma financial information, as set out in Appendix I and 2 of this report is not properly drawn up in accordance with basis of preparation in Appendix 1 and 2 and assumptions set out to this report and with generally accepted practice as applied in Australia for presenting pro-forma financial information in a public offer document.

Subsequent Events

To the best of Ord Corporate's knowledge and belief, there have been no material items, transactions or events subsequent to 31 March 2005 not otherwise disclosed in this report, that have come to our attention during the course of our review which would cause the information included in this report to be misleading.

Independence

Ord Corporate does not have any interest in the outcome of the listing of the shares, other than in connection with the preparation of this report for which normal professional fees will be received.

Ord Corporate were not involved in the preparation of any part of the Prospectus, and accordingly, make no representations or warranties as to the completeness and accuracy of any information contained in any other part of the Prospectus

Ord Corporate consents to the inclusion of this report in the Prospectus in the form and content in which it is included. At the date of this report, this consent has not been withdrawn.

Yours faithfully

Ord Corporate Pty Ltd

Lloyd Flint Director

SECTION 62 INVESTIGATING ACCOUNTANT'S REPORT

APPENDIX 1 - HISTORICAL FINANCIAL INFORMATION

STATEMENT OF FINANCIAL PERFORMANCE

THE REAL	Ummidal Dolome 10 Editorial 2005 10 Editorialy 经漏 31 March 2005 31 March 2005 a matematika na katika na matematika na matematika na matematika na matematika na matematika na matematika na	SANCE CONTROL
Revenues from ordinary activities
Other expenses from ordinary activities	(14,773)	(14,773)
Loss from ordinary activities before income tax expense	(14,773)	(14,773)
Income Tax expense relating to ordinary activities Loss from ordinary activities after related income
tax expense	(14,773)	(14,773)
		a Birwa a

STATEMENT OF FINANCIAL POSITION AND PRO-FORMA STATEMENT OF FINANCIAL POSITION

	Norda	Strandformer	Pro-forma 51 March 2005 31 March 2005
CURRENT ASSETS Cash	3	149,340	2,148,340
Receivables	4	2,517	202,517
TOTAL CURRENT ASSETS		151,857	2,350,857
NON CURRENT ASSETS
Plant and Equipment	5	11,442	11,442
Exploration Expenditure TOTAL NON CURRENT ASSETS		538 11,980	2,102,238 2,113,680
TOTAL ASSETS		163,837	4,464,537
CURRENT LIABILITIES
Trade creditors and accruals		28,107	28,107
NET ASSETS		135,730	4,436,430
EQUITY
Contributed Equity Accumulated Losses	6	150,503 (14, 773)	4,451,203 (14,773)

MORUMANINA'S		56576113	SACARDIAN SOLUTION

The statement of financial position as at 31 March 2005 is in accordance with the Company's reviewed financial position at that date. The pro-forma statement of financial position at 31 March 2005 represents the reviewed financial position as at that date adjusted for the transactions discussed in Note 2 of Appendix 2 to this report.

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SECTION 6 INVESTIGATING ACCOUNTANT'S REPORT

These statements of financial position are to be read in conjunction with the notes set out in Appendix 2.

APPENDIX 2 - NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS

Note 1 Summary of Significant Accounting Policies

The significant accounting policies adopted in the preparation of the historical information and the pro-forma statement of financial position (collectively referred to as the "financial statements") are:

Basis of Accounting $(a)$

The financial statements have been prepared in accordance with the measurement and recognition (but not the disclosure) requirements of applicable Accounting Standards, Urgent Issues Group Consensus Views and other authoritative pronouncements of the Australian Accounting Standards Board with the exception of AASB 1026 -Statement of Cashflows.

The financial statements have been prepared on an accruals basis, are based on historical cost and except where stated do not take into account changing money values or current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.

$(b)$ Income tax

The company adopts the liability method of tax-effect accounting whereby the income tax expense is based on the loss from ordinary activities adjusted for any permanent differences.

Timing differences which arise due to the different accounting periods in which items of revenue and expense are included in the determination of accounting profit and taxable income are brought to account as either a provision for deferred income tax or as a future income tax benefit at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable.

Future income tax benefits are not brought to account unless the realisation of the asset is assured beyond a reasonable doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the benefit.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income tax legislation and the anticipation that the Company will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

Exploration Interests $(c)$

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are carried forward only if they relate to an area of interest for which rights of tenure are current and in respect of which:

such costs are expected to be recouped through successful development and exploitation or from sale of the $(i)$ area; or
$(ii)$ exploration and evaluation activities in the area have not, at balance date, reached a stage which permit a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active operations in, or relating to, the area are continuing.

Accumulated costs in respect of areas of interest which are abandoned are written off in full against profit in the year in which the decision to abandon the area is made.

P S. P. E. $\mathbf{C}$ T U S R O

SECTION 6: INVESTIGATING ACCOUNTANT'S REPORT

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

Deferred share issue costs $(A)$

Any transaction costs on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate.

Goods and Services Tax (GST) $(e)$

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office ("ATO"). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables in the statement of financial position are shown inclusive of GST.

The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position.

Adoption of Australian Equivalent to International Financial Reporting Standards $(f)$

Australia is currently preparing for the introduction of International Financial Reporting Standards (IFRS) effective for financial years commencing 1 January 2005. The company's management, along with its auditors, are assessing the significance of these changes and preparing for their implementation.

The directors are of the opinion that the key differences in the company's accounting policies which will arise from the adoption of IFRS are:

Exploration and evaluation costs

Currently, tenement acquisition costs and mineral exploration expenditure are capitalised in relation to each separate area of interest in accordance with the accounting policy set out in Note 1 (c).

The Australian Accounting Standards Board has recently issued the IFRS equivalent standard dealing with this issue, AASB 6 "Exploration For and Evaluation of Mineral Metals", which is not expected to significantly impact on the current accounting policy.

Impairment of Assets

The company currently determines the recoverable amount of an asset on the basis of undiscounted net cash flows that will be received from the assets use and subsequently disposed. In terms of pending AASB 136: Impairment of Assets, the recoverable amount of an asset will be determined as the higher of fair value less costs to sell and value in use. It is likely that this change in accounting policy will lead to impairments being recognised more often than under the existing policy.

Income Tax

Currently the company adopts the liability method of tax-effect accounting whereby the income tax expense is based on the accounting profit adjusted for any permanent differences. Timing differences are currently brought to account as either a provision for deferred income tax or future income tax benefits. Under the Australian equivalent to IAS 12, the company will be required to adopt a balance sheet approach under which temporary differences are identified for each asset and liability rather than the effects of timing and permanent differences between taxable income and accounting profit.

Share Based Payments

Under AASB 2 "Share Based Payment", the Company will be required to determine the fair value of options issued to employees and recognise an expense in the Statement of Financial Performance. For options on issue on the application of AASB 2 an adjustment for their recognition will be made against opening retained earnings. Reliable estimation of the

S P E C T U P $R$ $\mathbf{O}$ - S

SECTION 6 INVESTIGATING ACCOUNTANT'S REPORT

future financial effects of this change in accounting policy is impracticable as the details of future equity based remuneration plans are unknown, however where share based payments are made, net profit is expected to decrease by the fair value of such payments.

The above should be regarded as a complete list of changes in accounting policies that will result from the transition to AASB equivalents to IFRS. As noted above these are expected to be the material areas of impact for the Company that have been identified.

Note 2 Actual and Proposed Transactions to Arrive at Pro-forma Statement of financial position

The pro-forma statement of financial position as at 31 March 2005 has been included for illustrative purposes to reflect the position of the Company on the basis of the following transactions which occurred subsequent to 31 March 2005 and transactions that are proposed to occur after the Company has issued shares subject to this Prospectus:

a) the proposed issue and allotment by Graynic Metals of 6,250,000 Shares at an issue price of 20 cents each pursuant to the RAB Share Subscription Agreement to raise a total of \$1,250,000.
$b)$ the proposed issue and allotment by Graynic Metals of 6,500,000 shares at an issue price of 20 cents each to raise a total of \$1,250,000.
c) the estimated expenses associated with the preparation, sponsorship and issue of the Prospectus of \$199,300 have been offset against the share capital raised; and
d) the purchase of exploration interests. Consideration is settled through the issue of 10,000,000 shares at 20 cents each on listing of the company, including \$101,700 stamp duty on acquisition and \$200,000 GST recoverable.

	ROT 3	Limithed Alliance SINarch 2005 - IT Match 2005
Cash at Bank - unaudited 31 March 2005		149.340	149.340
Issue of 6,250,000 Shares pursuant to RAB Share Subscription Agreement	2(a)		1.250.000
Issue of 6,250,000 Shares pursuant to this Prospectus	2(b)	$\overline{\phantom{a}}$	1.250.000
Prospectus issue costs	2(c)	$\overline{a}$	(199.300)
Costs payable on acquisition of exploration interests	2(d)		(301,700)
England State (1988 - 1988 - 1988 - 1988 - 1988 - 1988 - 1988 - 1988 - 1988 - 1988 - 1988 - 1988 - 1988 - 19		a shekarar 1974 ya ya kuma matsayin wa masa ya katika matsayin wa

Note 3 Cash

SECTION 6: INVESTIGATING ACCOUNTANT'S REPORT

GRAYNIC METALS	4.4 以上不反向

Note 4 Receivables

80	Note	Chandra Common	SILVARAR 2005 - SILVARAR 2005
Receivables - unaudited 31 March 2005 GST receivable on payments for exploration interests pursuant to acquisition agreements	2(d)	2.517	2,517 200,000
as e Note 5 Exploration Expenditure		24.162	20215174
at da	A RICO	Schemmer	Roberto SINGRAD 2005 STINGRAD 2005.
Capitalised exploration expenditure at cost. - unaudited 31 March 2005 Payments for exploration interests pursuant to acquisition agreements	2(d)	538	538 2,101,700
428.YO		$-21.2$	2. 112.2313

Note 6 Contributed Equity

30 SAMARA	a Yffra	Affinition	Prosforma SI Marah 2005. SI Marah 2005.
Balance at 31 March 2005 - unaudited (2,000,003 Fully Paid Ordinary Shares)		150,503	150,503
Issue of 6,250,000 Shares pursuant to RAB Share Subscription Agreement	2(a)		1,250,000
Issue of 6,250,000 Shares pursuant to this Prospectus	2(b)		1,250,000
Prospectus issue costs	2(c)		(199,300)
Issue of 10,000,000 fully paid ordinary shares for exploration interests pursuant to option agreements	2(d)		2,000,000
0.101-1103000000000000000000000000000000		LOSSE CLEARING

SECTION 6 INVESTIGATING ACCOUNTANT'S REPORT

Note 7 Commitments

Exploration $(a)$

The Company has minimum obligations pursuant to the terms and conditions of Tenement Licences in the forthcoming year of \$50,150 for exploration commitments and \$1,840 for rental commitments. These obligations are capable of being varied from time to time, in order to maintain current rights of tenure to mining tenements.

$(b)$ Native Title

The Company's mining tenements may be subject to native title applications in the future. At this stage it is not possible to quantify the impact (if any) that native title may have on the operations of the Company.

Note 8 Options on Issue

The Company has issued 6,000,000 options exercisable as follows:

2,000,000 at 20 cents each on or before and the earlier of 2 years from either: (i) the date that Graynic Metals is granted Quotation on ASX; and (ii) the date 30 days after the execution of the \$0.20 Option Deed.

2,000,000 at 30 cents each on or before 30 April 2008.

2,000,000 at 30 cents each on or before and the earlier of 3 years from either: (i) the date that Graynic Metals is granted Quotation on ASX; and (ii) the date 30 days after the execution of the \$0.30 Option Deed.

Note 9 Contingent Liabilities

Graynic Metals has entered into a farm-in agreement to acquire tenement interest, and royalty arrangements with Cazaly Resources Limited and Hayes Mining Limited. The arrangement provides for additional amounts to be paid if certain conditions are met or if the Directors of the company decide to take certain action. At the date of our report, the Directors have not made any specific undertakings regarding the amounts which may become payable in the future. The following amounts represent the maximum amounts that may become payable in the future (as can be reasonably measured at the time) if the Directors decide to acquire the maximum available holdings in their existing tenements:

Amounts payable on exercise of options to acquire tenement interests have already been accounted for in the pro-forma accounts as per Note 2 (d),
· Graynic Metals may elect to earn an 80% interest in the Quartz Hill Project through the sole spending of a further \$1,000,000 in exploration expenditure on that project no later than 42 months from the Commencement Date; and
· Graynic Metals may elect to earn an 80% interest in the Jutson Rocks Project through the sole spending of a further \$1,000,000 in exploration expenditure on that project no later than 42 months from the Commencement Date; and

SECTION 6: INVESTIGATING ACCOUNTANT'S REPORT

· Graynic Metals may elect to earn an 80% interest in the Northampton Project through the sole spending of a further \$1,000,000 in exploration expenditure on that project no later than 42 months from the Commencement Date.
· Royalty payments may be payable if certain conditions are met in the future. At this time, these payments are uncertain and can not be measured reliably.

Further details and specific arrangements are contained in Section 7 of this Prospectus.

In the opinion of the directors, other than the matters disclosed above, there were no contingent liabilities as at 31 March 2005 and in the interval between 31 March 2005 and the date of this report.

Note 10 Related Party Transactions

Refer to Section 8 of the Prospectus for details of other related party transactions and shareholdings.

Graynic Resources Limited 1st Floor, 22 Oxford Close LEEDERVILLE WA 6007 44 St George's ferrace Perth WA 8000

PO Rox 75433 St George's Terrace Penh WA 6831

Telephone +61 (08) 9221 6733 Facsimile +61 (08) 9221 6744 www.phoesierakowski.com.au. email [email protected] au

Dear Sirs

SOLICITORS' REPORT ON MINING TENEMENTS

This report has been prepared for inclusion in the Prospectus to be issued by Graynic Resources Limited ("the Company") dated on or about 6 April 2005 to raise up to \$1,250,000.00 ("the Prospectus"). The offer in the Prospectus comprises the issue by the Company of up to 6,250,000 fully paid ordinary shares at \$0.20 each.

We have been requested to report on the various interests in mining tenements and applications for mining tenements to which the Company is entitled or has acquired rights ("the Tenements"). Details of the Tenements are listed in the attached Schedule of Tenements ("the Schedule") which, together with the notes to the Schedule ("the Notes") forms part of this report.

All of the Tenements are located in Western Australia and are identified in the Schedule.

$\mathbf{I}$ . SEARCHES

Searches of the Tenements listed in the Schedule were conducted on the registers maintained by the Western Australian Department of Industry and Resources ("DIR") on 11 March 2005. We have also reviewed searches of the National Native Title Tribunal's ("NNTT") Perth register in relation to the Tenements as at 8 March 2004 for those tenements over which a registered claim has been made as outlined in the Schedule.

As a result of those searches and our perusal of the material contracts set out in section 7 of the Prospectus ("the Agreements"), we consider this report provides an accurate statement, as at the date of the respective searches, as to the status of the Tenements and the interests of the Company in those Tenements. We have assumed the information in the registers maintained by DIR and NNTT is accurate. We have further assumed that the various parties' seals and signatures on all the Agreements are authentic and that the Agreements are and were within the capacity and powers of those who executed them. We assume that all of the Agreements were validly authorised, executed and delivered by and are binding on the parties to them and comprise the entire agreements of the parties to each of them with respect to their respective subject matters.

GENERAL INFORMATION ABOUT MINING TENEMENTS 2.

$(a)$ Mining Lease ("ML")

A ML gives the holder the exclusive right to find, extract and dispose of any minerals on the land the subject of that ML. The maximum area over which a ML may be granted must not exceed 10 square kilometres. A

SPECTU - S O

SECTION 7: SOLICITORS' REPORT ON MINING TENEMENTS

ML remains in force for a period of 21 years from the date of grant and the holder has an option to renew for another 21 years on expiry. Further renewals are possible under the Mining Act 1978 (WA) ("Mining Act").

Mining Lease Application ("MLA") (b)

A MLA does not constitute a lease while the application is pending grant; however the applicant has a statutory entitlement to certain rights. A grant may take a considerable amount of time due to the Minister having to comply with the law relating to native title. This process is outlined in section 5 of this report.

$(c)$ Exploration Licence ("EE")

An EL remains in force for 5 years from the date of grant with the possibility of renewal by the Minister in certain circumstances. The holder of an EL is required to expend certain amounts upon exploration activities during the term with failure to do this leading to possible forfeiture of the licence.

The holder of an EL has, subject to the Mining Act, the right to apply for and to have granted a ML over the land the subject of the EL.

The Company has E46/541 as set out in the Schedule.

(d) Exploration Licence Application ("ELA")

If an ELA is successful the Minister will grant an EL to the applicant. An ELA gives the applicant no title to land or any exclusive rights relating to the land the subject of the application. For there to be a valid grant the procedures outlined in section 5 below must have been followed.

The Company has ELA45/2602, ELA38/1540, ELA38/1541 and ELA66/49 as set out in the Schedule.

Prospecting Licence ("PL") $(e)$

A PL remains in force for 4 years and does not carry any right of renewal. Pursuant to the Act the holder of a PL may apply for and have granted a mining lease over any of the land the subject of the PL, subject to the Act and the conditions of the licence. The holder must make an application for conversion prior to expiry of the PL.

The Company has P46/1360, P46/1361, P46/1362, P46/1363, P46/1364, P46/1365 and P46/1366 as set out in the Schedule.

Prospecting Licence Application ("PLA") $(f)$

If a PLA is successful then the Minister will grant a PL to the applicant. A PLA gives the applicant no title to land or any exclusive rights relating to the land the subject of the application. For there to be a valid grant the native title procedures outlined in section 5 below must have been followed.

The Company has PLA46/1385, PLA46/1386, PLA46/1441 and PLA46/1442 as set out in the Schedule.

ABORIGINAL SITES 3.

The Aboriginal Heritage Act 1972 (WA) ("WA Heritage Act") is applicable to all of the Tenements. The WA Heritage Act makes it an offence to alter or damage an Aboriginal site or object on or under an Aboriginal

S P E C T U S P R O.

SECTION 7 SOLICITORS REPORT ON MINING TENEMENTS

site. An Aboriginal site includes any sacred, ritual or ceremonial site which is of significance to persons of Aboriginal descent.

There is no requirement for an Aboriginal site to be registered in any public manner or to be acknowledged as an Aboriginal site for it to qualify as an Aboriginal site for the purposes of the WA Heritage Act.

The Company must ensure that any interference with such sites is in strict conformity with the provisions of the WA Heritage Act.

The provisions of the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth) (the "Commonwealth Heritage Act") may also apply to the Tenements. This Act contains provisions designed to preserve and protect from desecration areas and objects which are of particular significance to Aboriginal people in accordance with Aboriginal tradition. An area or object is found to be desecrated if it is treated in a manner inconsistent with Aboriginal tradition.

$\overline{4}$ . NATIVE TITLE LEGISLATION

Judicial recognition of native title at common law occurred in Mabo -v- Queensland (No 2) (Mabo), a decision of the High Court of Australia on 3 June 1992. Generally native title rights to land will be recognised where:

the claimants can establish that they have maintained a continuous connection with the land in accordance a) with their traditional laws and customs since British settlement in 1788; and
$b)$ the native title rights have not been lawfully extinguished.

After Mabo considerable uncertainty existed about the validity of proprietary rights in mining tenements. To address those uncertainties the Commonwealth Parliament passed the Native Title Act 1993 (Cth) ("NTA). The NTA commenced on January 1994 and was substantially amended in 1998 in response to the decision of the High Court in Wik v Queensland. The Wik case recognised that the granting of a pastoral lease did not necessarily extinguish all native title rights, some of which could co-exist with the rights under a pastoral lease.

In Mabo, the High Court held that native title rights can be lawfully extinguished by certain government legislation and executive actions which are not inconsistent with native title. In order for extinguishment to be lawful it must comply with the obligations imposed by the NTA.

In summary the NTA:

a) provides for recognition and protection of native title;
b) sets up mechanisms for determining claims for native title such as the "right to negotiate" which allows native title claimants to be consulted in relation to certain mining and other developments;
make valid certain "past acts" which would otherwise be invalidated because of native title; c)
establishes ways in which "future acts" (for example the granting of mining tenement applications and $\mathbf{d}$ converting exploration licences and prospecting licences to mining leases) affecting native title may proceed and how native title rights are protected, including rights to compensation; and
provides a process by which claims for native title and compensation can be determined. $\epsilon$ )

The High Court decision of Ward v Western Australia and South Australia established that where tenure such as a

SECTION 7 SOLICITORS' REPORT ON MINING TENEMENTS

pastoral lease is granted on a mining tenement, native title is extinguished only to the extent that it is inconsistent with the rights conferred by the pastoral lease on that mining tenement.

5. NATIVE TITLE CLAIMS

Persons claiming to hold native title may lodge an application for determination of native title with the Federal Court. Once a native title claim has been lodged, the Court will refer the application to the Native Title Registrar. The Native Title Registrar must determine whether the claim meets certain conditions concerning the merits of the claim and certain procedural requirements set out by the NTA.

If the Native Title Registrar is satisfied the lodged claim meets the registration requirements set out in the NTA ("Registration Test") it will be entered on the Register of Native Title Claims maintained by the National Native Title Tribunal ("Register"). Claimants under registered claims are afforded certain procedural rights under the NTA including the "right to negotiate".

Claims which fail to meet the Registration Test are recorded on the Schedule of Applications Received. Such claims may be entered on the Register at a later date if additional information is provided by the claimant satisfying the Registration Test.

A number of the Tenements relate to land that is currently the subject of one or more native title claims. These claims are identified in the Schedule. The fact that a claim has been lodged does not necessarily mean that native title exists over the area claimed. Nor does the absence of a claim necessarily indicate that no native title exists over that area.

We have not undertaken the considerable historical, anthropological and ethnographic work that would be required to determine the likelihood that existing claims may be successful, or the possibility of any further claims being made in the future.

VALIDITY OF THE TENEMENTS 6.

Tenements granted prior to 1 January 1994 $a)$

The NTA permits a State to validate 'past acts'. Under the Titles (Validation) and Native Title (Effect of Past Acts) Act 1995, which gives effect to this provision of the NTA, mining tenements granted in Western Australia prior to 1 January 1994 are deemed to be valid. To the extent that the exercise of native title rights and interests is inconsistent with the exercise of the rights conferred by those Tenements, the rights under each particular Tenement will have priority for the term of the relevant grant.

Tenements granted between 1 January 1994 and 23 December 1996 $\mathbf{b}$

These are known as 'intermediate period acts'. The 1998 amendments to the NTA provided scope for the States and Territories to validate these acts.

c) Tenements granted since 23 December 1996

Mining tenements granted since 23 December 1996 which affect native title rights and interests will be valid provided that the future act procedures set out in (d) below were followed by the relevant parties. We have not been instructed to analyse whether or not the relevant NTA procedures were followed in relation to each Tenement, but are not aware of any reason to doubt that they were validly granted.

Assuming that all future act procedures were followed, these Tenements are classified as valid future acts under the NTA.

GRAYNIC

SECTION 7 SOLICITORS' REPORT ON MINING TENEMENTS

All the tenements listed in the Schedule have been granted since 23 December 1996.

$\mathbf{d}$ Future Tenement Grants

The remainder of the Tenements have been duly applied for under the Act but as at the date of this Report are not granted. The valid grant of any tenement which may affect native title requires full compliance with the provisions of the NTA in addition to compliance with the usual procedures under the Mining Act. The primary procedure prescribed under the NTA is the "right to negotiate" process.

The right to negotiate process involves the publishing of a notice of the proposed grant of a tenement followed by a period of negotiation between the State Government, the tenement applicant and the relevant registered native title claimant. If an agreement is not reached, the matter may be referred to arbitration before the NNTT, which has a further 6 months to reach a decision. The decision of the NNTT may be reviewed by the relevant Federal Minister.

The right to negoriate process is not required to be followed in respect of a proposed future act in instances where the expedited procedure applies. Under the NTA, a future act is an act attracting the expedited procedure if:

the act will not interfere directly with the carrying on of the community or social activities of the $(i)$ persons who are the holders of native title in relation to the land;
$(ii)$ the act is not likely to interfere with areas or sites of particular significance, in accordance with their traditions, to the persons who are holders of the native title in relation to the land; and
$(iii)$ the act is not likely to involve major disturbance to any land or waters concerned or create rights whose exercise is likely to involve major disturbance to any land.

When the proposed future act is considered to be one that attracts the expedited procedure, the future act may be done unless, within four months after the notification day, a native title party lodges an objection with the NNTT against the inclusion of a statement that the proposed future act is an act attracting the expedited procedure.

If there is no objection lodged within the four month period, the act may be done. If one or more native title parties object to the statement, the NNTT must determine whether the act is an act attracting the expedited procedure. If the NNTT determines that it is, the Minister may carry out the future act (for example grant an exploration licence).

Further, the right to negotiate process does not have to be pursued in cases where an indigenous land use agreement ("ILUA") is negotiated with the relevant Aboriginal people and registered with the NNTT. In such cases, the procedures prescribed by the ILUA must be followed to obtain the valid grant of the tenement. These procedures will vary depending on the terms of the ILUA.

As set out in the Schedule, some of the Tenements are applications at different stages in the NTA future act process.

RENEWALS AND EXTENSIONS OF TENEMENTS 7.

As with the granting of mining tenements, renewals and extensions of mining tenements granted prior to 1 January 1994, to the extent the renewals were invalid due to native title, have been validated by legislation.

SECTION 7 SOLICITORS' REPORT ON MINING TENEMENTS

Renewals of mining tenements granted between 1 January 1994 and 23 December 1996 have been similarly validated provided certain statutory criteria have been met.

Renewals made after 23 December 1996 of tenements validly granted before that date will not be subject to the right to negotiate process provided:

the area to which the earlier right is made is not extended; $(a)$
$(b)$ the term of the new right is not longer than the term of the earlier right; and
the rights to be created are not greater than the rights conferred by the earlier grant. $(c)$

There is doubt as to whether the right to negotiate process applies to second and subsequent renewals but this matter is yet to be determined by the Courts.

Other than as stated above, renewals of mining tenements are subject to the same right to negotiate process as is described in 6 (d) above.

8. ENVIRONMENTAL PROTECTION

The Mining Act is required to be construed subject to the Environmental Protection Act 1986. We have not undertaken the considerable work that would be required to establish that each tenement is in compliance with the Environmental Protection Act.

9. COMPLIANCE

The Company's interest in or rights in relation to the granted Tenements are subject to the holder continuing to comply with the respective terms and conditions of the respective granted Tenements under the provisions of the Mining Act and regulations made pursuant to that legislation, together with the conditions specifically applicable to any granted Tenement.

10. QUALIFICATIONS

The status of the Tenements is dealt with in detail in the Schedule and the Notes to the Schedule. However by way of summary please note that:

we have assumed that all information in the registers maintained by DIR and NNTT are complete and $(a)$ accurate as at the time the searches were conducted;
$(b)$ we have assumed that all information or advice, whether oral or written provided to us by the Company, its officers, employees, agents or representatives is accurate and complete;
$(c)$ in relation to each Tenement application we express no opinion as to whether such tenement application will ultimately be granted, (including whether relevant Ministerial consent will be obtained) nor the conditions subject to which such Tenement application may be granted; and
$(d)$ in relation to each native title claim outlined in this report we do not express an opinion on the merits of such native title claim.

CONSENT 11.

This report is given solely for the benefit of the Company and the directors of the Company in connection with the issue of the Prospectus and is not to be relied on or disclosed to any other person or used for any other purpose or quoted or referred to in any public document or filed with any government body or other person without our prior consent.

Yours faithfully

$\sqrt{7n}$ f

PRICE SIERAKOWSKI

MENENEN	33333333			È.			DESCRIPTION	A A A A A A A A A A A A A A A A A A A
QUARTZ CIRCLE E46/541	Goldfelds Ltd International	100	25/05/04	24/05/09	Blocks c4	\$198.00	\$15,000.00	$\vec{z}$	÷ άÑ માં તે માં તે	Njanal (WC997008) Pilbara (ARB) 12
ELA45/2602	Caraly Resources Ltd	L	(27/02/04)	$\frac{8}{2}$	16 Blocks	$\frac{8}{2}$	required Not yet	$\vec{z}$	$\frac{3}{2}$	Njanal (WC99/008) Pilbara (ARB) 12
P46/1360	Cazaly Resources 100 $\mathbb{E}$		21/05/04	20/05/08	108.76 Ha	\$203.83	\$4,360.00	a) Cavear 99H/045 Goldfields Ltd $ [$ nternariona $]$	Ā . જે દરે . નંદ	Njamal (WC99/008) Pilbara (ARB) 12
P46/1361 P R	Caraly Resources 100 Led		21/05/04	20/05/08	107.71 Ha	\$201.96	\$4,320.00	а) Саченг 100Н/045 Goldfields Ltd - International	$\frac{4}{5} \frac{4}{5}$ . નંદર	Njamal (WC99/008) Pilbara (ARB) 12
P46/1362 S O	Cazaly Resources 100 Ltd		21/05/04	20/05/08	114.11 Ha	\$215.05	\$4,600.00	a) Cavear 101H/045 Goldfields Ltd $ [$ n $\alpha$ nasiona $\alpha$	$\frac{1}{2}$ , 3, 3, 4, 5, 6, 7,	Njanal (WC997008) Pilbara (ARB) 12
P46/1363 ₽ E	Caraly Resources 100 Ï		21/05/04	20/05/08	114.14 Ha	\$215.05	\$4,600.00	а) Сачен: 102Н/045 Goldfields Ltd - International	ની છે તી હો નું છે. મંદી	Njamal (WC99/008) Pilbara (ARB) 12
P46/1364 ¢	Caraly Resources Ltd	Ë	21/05/04	20/05/08	119.26 Ha	5224.40	\$4,800.00	a) Cavear 103H/045 Goldfields Ltd $ \arccan$	$\frac{1}{5}$ , 3, 3, 4, 8	Njamal (WC997008) Pilbara (ARB) 12
P46/1365 т U	Caraly Resources 100 Ltd		21/05/04	20/05/08	118.49 Ha	\$222.53	\$4,760.00	a) Caveat 104H/045 Goldfields Ltd - International	તે. તે નું તું. મુખ્	Njamal (WC99/008) Pilbara (ARB) 12
P46/1366 S	Cazaly Resources Ltd	$\tilde{z}$	21/05/04	20/05/08	192.00 Ha	\$359.04	\$7,680.00	a) Cavear 105H/045 Goldfields Ltd - International	4 $\frac{3}{5}$ $\frac{3}{5}$ $\frac{3}{5}$	Njamal (WC99/008) Pilbara (ARB) 12
PLA46/1385	Goldfields Ltd International	$\tilde{\mathbf{g}}$	(2/04/03)	Š	114.62 Ha	$\mathbb{S}^4$	yer required ž	$\vec{z}$	$\mathbb{S}^4$	Njamal (WC99/008) Pilbara (ARB) 12
PLA46/1386	Goldfields Ltd International	$\frac{1}{2}$	(2/04/03)	$\lessapprox$	86.68 Ha	$\lessapprox$	yet required ž	$\vec{z}$	$\mathbb{S}^2$	Njanal (WC99/008) Pilbam (ARB) 12
PLA46/1441	Cataly Resources Ltd	$\ddot{100}$	(10/06/04)	Ź	16.0 Fla	$\lessapprox$	yer required ž	$\frac{1}{2}$	$\lessapprox$	Njamal (WC99/008) Pilbara (ARB) 12
PLA46/1442	Caraly Resources	Î	(10/06/04)	$\frac{z}{Z}$	40.43 Ha	$\frac{3}{2}$	yer required $\check{\check{z}}$	$\vec{z}$	$\frac{3}{2}$	Njanal (WC99/008) Pilbara (ARB) 12

SECTION 7: SOLICITORS' REPORT ON MINING TENEMENTS

$\overline{\phantom{a}}$ 69

			KONSKION CRANE	È,	êŠ,		944.98.944 KONERS	BEERINGS	Kilons
RUTSON ROCKS ELA38/1540	Goldfields Ltd International	\$	(23/12/02)	$\leq$	70 Blocks	ž	yet required ž	$\frac{1}{2}$	$\lessapprox$	Central Desett (ARB) 11 Wongarba (WC99/001) Goldfields (ARB) 13 Cosmo Newberry (WC96/017)
ELA38/1541	Goldfields Ltd International	L	(23/12/02)	$\frac{3}{2}$	42 Blocks	$\frac{3}{2}$	yet required ž	$\overline{\overline{z}}$	$\frac{4}{2}$	Central Desert (ARB) 11 Wongarha (WC99/001) Cosmo Newberry (WC96/17)
NORTHHAMPTON ELA66/49	Hayes Mining Pty Ltd	g	(08/06/04)	$\sum_{i=1}^{n}$	70 Blocks	Ž	yet required ž	$\frac{1}{2}$	Ž	Hurt River (WC00/001) Wadjari (WC96/093) Geraldton (ARB) 14 Mullewa
E Exploration Licence P Prospecting Licence Key		EA NA		Exploration Licence Application rospecting Licence Application
NOTES
	The licensee's attention is drawn to the provisions of the Aboriginal Flericage Act, 1972.
eå	All surface holes drilled for the purpose of			exploration are to be capped, filled or orberwise made safe after completion.
m5	District Mining Engineer.							All costeans and other disturbances to the surface of the land made as a result of exploration, including drill pads, grid lines and access tracks, being backfilled and rchabilitated to the satisfaction of the District Mining Enginees. Backfilling and relativilitation being required no later than 6 months after excavation unless otherwise approved in writing by the
ý.								All waste materials, rubbish, plastic sample bags, abandoned equipment and temporary buildings being removed from the mining tenement prior to or at the termination of

Unless the written approval of the District Mining Engineer is first obtained, the use of scrapers, paders, bludozers, backhoes or other mechanised equipment for surface
disturbance or the excavation of costeans is probibi exploration program. $\hat{\phi}^{\dagger}_{\lambda}$
The licensee notifying the holder of any underlying pastoral lease by telephone or in person, or by registered post if contact cannot be made, prior to undertaking airborne
geophysical surveys or any ground disturbing acti $\vec{\phi}$
The licensee or ransferee, as the case may be, shall advise by registered post the holder of any underlying pastoral lease details of the grant or transfer within thirty (30) days of receiving written notification of: k.
the grant of the licence; or ă,
registration of a transfer introducing a new licensee. ć,
The grant of this licence does not include land the subject of Exploration Licence 46/461. $\infty$

$\sim 20$

GRAYNIC METALS

SECTION 7: SOLICITORS' REPORT ON TENEMENTS

$\mathsf P$ $\mathbf E$ $\mathbf C$ T

P R $\bullet$ S $\mathsf{U}% {T}=\mathsf{U}{T}!\left( a,b\right) ,\ \mathsf{U}{T}=\mathsf{U}{T}!\left( a,b\right) ,$

SECTION 7: SOLICITOR'S REPORT ON TENEMENTS

SUMMARY OF MATERIAL CONTRACTS

1. Farm-in Agreement between Cazaly Resources Ltd ("Cazaly"), Hayes Mining Pty Ltd ("Hayes Mining") and the Company ("the Farm-in Agreement")

The Company executed the Farm-in Agreement with Cazaly and Hayes Mining on 7 March 2005 whereby the Company agreed to farm into the tenements comprised in the Quartz Circle Project, the Jutson Rocks Project and the Northampton Project ("the Tenements"). The Company is the manager of the farm-in.

Upon the issue of 10,000,000 fully paid ordinary shares in the Company to Cazaly (to occur following Cazaly shareholder approval of the transaction) the Company will have a 20% share in the Tenements. The Company may spend \$1,000,000.00 within 42 calendar months of the execution of the Farm-in Agreement on any project to earn a further 60% in that project. If the Company does not expend \$1,000,000.00 on a project within 42 months of the execution of the Agreement it shall have no further interest in that project.

A bankable feasibility study must be undertaken on the Tenements before a decision to mine is made. When the bankable feasibility study is completed Cazaly must notify the Company that it will either begin to contribute to expenditure on the Tenements on a pro-rata basis or that its interest will convert to a 1% net smelter royalty on all gold and base metals produced in the Tenements payable by the Company.

Hayes Mining (a wholly owned subsidiary of Cazaly) is the applicant for Exploration Licence 66/49. Hayes Mining consented to EL 66/49 forming part of the farm-in assets and released the Company and Cazaly from any obligation or liability owing to Hayes Mining in the future.

A 1% net smelter royalty is payable to International Goldfields Ltd ("IGL") from the mined and milled ore produced from tenement E45/2602 in the Quartz Circle Project. The Company and Cazaly will honour the obligation to pay the IGL royalty on a pro-rata basis in accordance with their respective interests as at the date the IGL royalty becomes payable.

2. Share Subscription Agreement between the Company and RAB Special Situations LP ("RAB") ("the Share Subscription Agreement")

The Company executed the Share Subscription Agreement with RAB on 28 March 2005. Pursuant to the Share Subscription Agreement RAB agreed to apply for and the Company agreed to issue 6,250,000 shares at an issue price of \$0.20 per share. RAB agreed to pay to the Company a total of \$1,250,000 for the Shares. The obligations of the parties under the Share Subscription do not commence until a prospectus is prepared for lodgement with the ASIC.

The shares will be issued to RAB within 2 business days of the prospectus being lodged with the ASIC. The Share Subscription Agreement contains conditions considered standard in an agreement of this type.

3. Option Deed between the Company and RAB Special Situations LP ("RAB") ("the \$0.20 Option Deed")

The Company entered into the \$0.20 Option Deed with RAB on 28 March 2005. Pursuant to the \$0.20 Option Deed the Company granted RAB options to subscribe for 2,000,000 ordinary shares at an exercise price of \$0.20 per share.

The options are exercisable from the earlier of 30 days from the date of execution of the \$0.20 Option Deed or the date of admission of the Company to trading on the ASX. The options expire on the second anniversary of the date of the issue of the options.

SECTION 7: SOLICITORS' REPORT ON TENEMENTS

RAB may not exercise the options while in possession of relevant price sensitive information. The option exercise price shall be payable in full on exercise of the options.

4. Option Deed between the Company and RAB Special Situations LP ("RAB") ("the \$0.30 Option Deed")

The Company entered into the \$0.30 Option Deed with RAB on 28 March 2005. Pursuant to the \$0.30 Option Deed the Company granted RAB options to subscribe for 2,000,000 ordinary shares at an exercise price of \$0.30 per share.

The options are exercisable from the earlier of 30 days from the date of execution of the \$0.30 Option Deed or the date of admission of the Company to trading on the ASX. The options expire on the third anniversary of the date of the issue of the options.

RAB may not exercise the options while in possession of relevant price sensitive information. The option exercise price shall be payable in full on exercise of the options.

SECTION 8 ADDITIONAL INFORMATION

$\overline{\mathbf{8.1}}$ RIGHTS ATTACHING TO SHARES

Full details of the rights attaching to Shares are set out in Graynic Metals' Constitution a copy of which can be inspected, free of charge, at Graynic Metals' 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.

8.1.1 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 Metals:

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).

8.1.2 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 Graynic Metals 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).

8.1.3 TRANSFER OF SHARES

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

8.1.4 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, 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.

8.1.5 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

O S P E C T U S P $R$

SECTION 8 ADDITIONAL INFORMATION

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.

8.1.6 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 Graynic Metals' which the Directors determine to distribute by way of dividend are divisible among the holders of ordinary Shares in proportion to the number of Shares held by them.

8.2 SUMMARY OF MATERIAL CONTRACTS

The summary of the contracts to which the Company is a party which may be material in terms of the Offer or the operation of the business of Graynic Metals are summarised in the Solicitor's Report in Section 7.

INTERESTS OF DIRECTORS OF THE COMPANY 83

Except as disclosed in this Prospectus, no director holds, or during the last two years has held, any interest in:

a) the formation or promotion of Graynic Metals;
b) property acquired or proposed to be acquired by Graynic Metals in connection with its formation or promotion of the Offer; or
c) the Offer,

and no amounts of any kind (whether in cash, Shares or otherwise) have been paid or agreed to be paid to any Director to induce him to become or to qualify as a Director or otherwise for services rendered by him in connection with the formation or promotion of Graynic Metals or the Offer.

Directors' Shareholdings

The Directors are not required to hold any Shares in Graynic Metals under the constitution of Graynic Metals.

At the date of this Prospectus the relevant interests of each of the Directors in the Shares of the Company are as follows:

þ	Alle Communication of the Communication of the Communication of the Communication
$R$ Thom $(a)$	500,000	$\overline{ }$
N McMahon (b)		1,000,000
C Jones (c)		1,000,000

Notes:

a) All Shares are held by Chaldane Pty Ltd, an entity controlled by Mr R. Thom.
b) All Options are held by Kingsreef Pty Ltd ATF the NB & DL Family Trust;
c) All Options are held by Widerange Corporation Pty Ltd.

Nothing in this Prospectus will be taken to preclude Directors, officers or employees of Graynic Metals or the Lead Manager from applying for Shares under this Prospectus.

P S P E C T U -S R $\Omega$

SECTION 8. ADDITIONAL INFORMATION

Directors' Remuneration

Pursuant to the Employment Agreement, the Directors have arranged for Ron Thom to provide his services as Managing Director of Graynic Metals. Graynic Metals will pay at a rate calculated on the basis of \$120,000 per annum fully inclusive of superannuation requirements.

Mr McMahon will receive director's fees of \$24,000 per annum.

Mr Jones will receive director's fees of \$24,000 per annum.

8.4 INTERESTS OF PERSONS NAMED

Other than as set our below or elsewhere in this Prospectus, no person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus has, or has had within the two years before lodgement of this Prospectus with the ASIC, any interest in:

a) the formation or promotion of Graynic Metals;
b) any property acquired or proposed to be acquired by Graynic Metals in connection with its formation or promotion or in connection with the Offer; or
c) the Offer.

and no amounts have been paid or agreed to be paid and no benefits have been given or agreed to be given to any of those persons for services rendered by them in connection with the formation or promotion of the Company or the Offer.

Ord Corporate Pty Ltd will receive professional fees of approximately \$3,500 for accounting services in connection with this Prospectus including the provision of the Investigating Accountant's Report.

Ord Partners will act as auditors of the Company. The Company will pay for auditing or related services in the normal course of business.

Boonjarding Resources Limited will receive professional fees of approximately \$10,000 for the provision of the Independent Geologist's Report.

Price Sierakowski will receive professional fees of approximately \$15,000 for legal work undertaken by them in connection with this Prospectus, including the Solicitors' Report on Mining Tenements, a general review of the compliance of the Prospectus with the requirements of the Corporations Act, a review of the due diligence process and the Summary of Material Agreements in section 7.

Paterson Securities are acting as Lead Manager of the Offer and will be paid:

a) Lead Manager Fee of \$25,000,
b) a Management Fee of 1% of the total amount raised by Patersons pursuant to the IPO (i.e. \$12,500 on Patersons' \$1.25million); and
c) a Lodgement Fee of 4% on all Applications lodged bearing one of their stamps.

P R -S $P E C$ T U -S $\Omega$

SECTION 8 ADDITIONAL INFORMATION

Advanced Share Registry Services have been appointed as Graynic Metals's share registry and will be paid for these services on normal commercial terms.

8.5 CONSENTS

The following persons have each consented to being named in the Prospectus and 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:

· Boonjarding Resources Limited Independent Geologist's Report;
· Ord Corporate Pty Ltd Investigating Accountant's Report; and
· Price Sierakowski Independent Solicitors Report on Tenements.

To the maximum extent permitted by law, each of the persons referred to above expressly disclaims and takes no responsibility for any part of this Prospectus other than the statements referred to above and the statements identified in this Prospectus as being based on statements made by those persons.

The following persons have consented to being named in this Prospectus but have not made any statements that are included in this Prospectus or statements identified in this Prospectus as being based on any statements made by those persons, and have not withdrawn their consent before lodgement of this Prospectus with ASIC:

· Price Sierakowski as solicitors to Graynic Metals;
Ord Partners as auditors of Graynic Metals;
Advanced Share Registry Services as Share Registrar;
· Paterson Securities Limited as Lead Manager to the Offer; and
Mining Corporate Advisory Services Pty Ltd as IPO Compliance Managers to Graynic Metals.

To the maximum extent permitted by law, each of the persons referred to above expressly disclaims and takes no responsibility for any part of this Prospectus other than the references to their name.

EXPENSES OF THE OFFER 8.6

It is estimated that Graynic Metals will pay the following costs in connection with the preparation and issue of this Prospectus:

Lead Managers	\$25,000
Mangement and lodgement fee	\$62,500
Corporate Advisory	\$10,000
Legal	\$15,000
Independent Accountant	\$7,000
Geological Expert	\$10,000
Printing	\$25,000
ASIC and ASX Fees	\$19,728
Other costs	\$25.000

mm SOSODI

TAXATION 8.7

The acquisition and disposal of Shares in Graynic Metals will have tax consequences, which will differ depending

P O -S. P. E. $\mathbb{C}$ T U S R

SECTION 8. ADDITIONAL INFORMATION

on the individual financial affairs of each investor. All potential investors in Graynic Metals are urged to obtain independent financial advice about the consequences of acquiring Shares from a taxation viewpoint and generally.

To the maximum extent permitted by law, Graynic Metals, its officers and each of their respective advisors accept no liability or responsibility with respect to the taxation consequences of subscribing for Shares under this Prospectus.

8.8 EXPOSURE PERIOD

This Prospectus will be circulated during the Exposure Period. The purpose of the Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds. Potential investors should be aware that this examination may result in the identification of deficiencies in the Prospectus and, in those circumstances, any Application that has been received may need to be dealt with in accordance with Section 724 of the Corporations Act 2001. Applications for Shares under this Prospectus will not be accepted by the Company until after the expiry of the Exposure Period. No preference will be conferred on persons who lodge Applications prior to the expiry of the Exposure Period.

8.9 LITIGATION

The Company is not involved in any material litigation or arbitration proceedings, nor, so far as the Directors are aware, are any such proceedings pending or threatened against the Company.

8.10 ELECTRONIC PROSPECTUS

Pursuant to Class Order 00/044 the ASIC has exempted compliance with certain provisions of the Corporations Act 2001 to allow distribution of an electronic prospectus and electronic application form on the basis of a paper prospectus lodged with ASIC, and the publication of notices referring to an electronic prospectus or electronic application form, subject to compliance with certain conditions.

If you have received this Prospectus as an electronic Prospectus, please ensure that you have received the entire Prospectus accompanied by the Application Form. If you have not, please email the Company at [email protected] and the Company will send you, for free, either a hard copy or a further electronic copy of the Prospectus or both. Alternatively, you may obtain a copy of the Prospectus from the Company's website at www.graynicmetals.com.au and www.patersonssecurities.com.au

The Company reserves the right not to accept an Application Form from a person if it has reason to believe that when that person was given access to the electronic Application Form, it was not provided together with the electronic Prospectus and any relevant supplementary or replacement prospectus or any of those documents were incomplete or altered.

8.11 TERMS AND CONDITIONS OF OPTIONS

8.11.1 OPTIONS TO BE OFFERED FOR SUBSCRIPTION UNDER PROPOSED NON-RENOUNCEABLE RIGHTS ISSUE PURSUANT TO THIS PROSPECTUS

As detailed in Section 1.6 of this Prospectus, it is proposed that all Shareholders registered on the share register of Graynic Metals at a date approximately eight (8) weeks after Graynic Metals' Shares are granted Quotation will be entitled to participate in a non-renounceable rights issue of Options on the basis of I Option for every 2 Shares rhen held.

A summary of the terms and conditions of the Options is as follows:

P R O S P E C T U S

GRAYNIC

SECTION 8 ADDITIONAL INFORMATION

1. Each Option entitles the holder to acquire one fully paid ordinary share in the Company.
1. The Options may be exercised at any time until 30 April 2007. Each Option may be exercised by forwarding to the Company at its principal office the exercise notice, duly completed rogether with payment of the sum of twenty cents (20c) per Option exercised. The Options will lapse at 5.00pm WST on 30 April 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 30 April 2007. This right is subject to any restrictions on the transfer of an Option that may be imposed by ASX in circumstances where the Company is Listed on ASX.
1. 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.
1. 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. If the Company is listed on ASX it will, pursuant to the exercise of an Option, apply to ASX for Quotation of the Shares issued as a result of the exercise, in accordance with the Corporations Act and the Listing Rules.
6 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.
If there is a bonus issue to shareholders, the number of shares over which the Option is exercisable may be 7 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.
8 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 Options may be reduced in accordance with Listing Rule 6.22.

8.11.2 TERMS AND CONDITIONS OF OPTIONS ISSUED TO RAB SPECIAL SITUATIONS LP

The terms and conditions of the Options issued to RAB special situations LP pursuant to the \$0.20 Option Deed are as follows:

each option entitles the holder, when exercised, to one Share. a).
b) the options are exercisable on or before 5pm (WST) on the date which is 2 years from the earlier of the date that Graynic Metals is granted quotation on ASX Limited and the date which is 30 days after the date of executing the Option Deed by completing an option exercise form and delivering it together with the payment for the number of Shares in respect of which the Options are exercised to the registered office of the Company.
c) the option exercise price is \$0.20 per Option;
d) an option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the option can be exercised.
e) subject to the Corporations Act, the ASX Listing Rules and the Company's Constitution, the options are freely transferable.

P -S. P. E. $\mathbb{C}$ T U -S R 0

SECTION 8. ADDITIONAL INFORMATION

f) all Shares issued upon exercise of the options will rank pari passu in all respects with Graynic Metals's issued Shares. Graynic Metals will apply for official quotation by ASX of all Shares issued upon exercise of the options.
g) there are no participating rights or entitlements inherent in the options and the holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the options. However, the record date for determining entitlements to any such issue will be determined in accordance with the ASX Listing Rules. This will give option holders the opportunity to exercise their options prior to the date for determining entitlements to participate in any such issue.
h) 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.
i) 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.
j) 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 Options may be reduced in accordance with Listing Rule 6.22.

8.11.3 TERMS AND CONDITIONS OF OPTIONS ON ISSUE

The terms and conditions of the 30 April 2008 options on issue are as follows:

a) each option entitles the holder, when exercised, to one Share.
b) the options are exercisable on or before 5pm (WST) on 30 April 2008 by completing an option exercise form and delivering it together with the payment for the number of Shares in respect of which the Options are exercised to the registered office of the Company.
c) the option exercise price is \$0.30 per Option;
d) an option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the option can be exercised.
subject to the Corporations Act, the ASX Listing Rules and the Company's Constitution, the options are freely transferable. $\epsilon$ )
f) all Shares issued upon exercise of the options will rank pari passu in all respects with Graynic Metals's issued Shares. Graynic Metals will apply for official quotation by ASX of all Shares issued upon exercise of the options.
g) there are no participating rights or entitlements inherent in the options and the holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the options. However, the record date for determining entitlements to any such issue will be determined in accordance with the ASX Listing Rules. This will give option holders the opportunity to exercise their options prior to the date for determining entitlements to participate in any such issue.
h) 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.

Ρ s P E -C T U S o

GRAYNIC

SECTION 8 ADDITIONAL INFORMATION

i) 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.
j) 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 Options may be reduced in accordance with Listing Rule 6.22.

8.11.4 TERMS AND CONDITIONS OF OPTIONS ISSUED TO RAB SPECIAL SITUATIONS LP

The terms and conditions of the Options issued to RAB special situations LP pursuant to the \$0.30 Option Deed are as follows:

a) each option entitles the holder, when exercised, to one Share.
b) the options are exercisable on or before 5pm (WST) on the date which is 3 years from the earlier of the date that Graynic Metals is granted quotation on ASX Limited and the date which is 30 days after the date of executing the Option Deed by completing an option exercise form and delivering it together with the payment for the number of Shares in respect of which the Options are exercised to the registered office of the Company.
c) the option exercise price is \$0.30 per Option;
d) an option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the option can be exercised.
e) subject to the Corporations Act, the ASX Listing Rules and the Company's Constitution, the options are freely transferable.
f) all Shares issued upon exercise of the options will rank pari passu in all respects with Graynic Metals's issued Shares. Graynic Metals will apply for official quotation by ASX of all Shares issued upon exercise of the options.
g) there are no participating rights or entitlements inherent in the options and the holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the options. However, the record date for determining entitlements to any such issue will be determined in accordance with the ASX Listing Rules. This will give option holders the opportunity to exercise their options prior to the date for determining entitlements to participate in any such issue.
h) 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.
i) 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.
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 Options may be reduced in accordance with Listing Rule 6.22.

P $S$ P. E. C T U - S R 0

SECTION 8 ADDITIONAL INFORMATION

8.12 EMPLOYEE INCENTIVE SCHEME

As an incentive to employees of Graynic Metals, the Company has adopted a scheme called the Graynic Metals Employee Incentive Scheme (Scheme). At the date of this Prospectus, no options have been granted under this Scheme,

The purpose of the Scheme is to give employees, directors, executive officers and consultants of the Company an opportunity, in the form of options, to subscribe for ordinary shares in the Company. The Directors consider the Scheme will enable the Company to retain and attract skilled and experienced employees, board members and executive officers and provide them with the motivation to make the Company more successful.

Brief Overview of the Scheme

A summary of the Terms and Conditions of the Scheme is set out below:

Participants in the Scheme

The Board may offer free options to persons ("Eligible Persons") who are:

· Full-time or part-time employees;
· directors; or
· consultants and any persons who are concerned, or take part in the management, of the Company or any subsidiary.

Upon receipt of such an Offer, the Eligible Person may nominate an associate acceptable to the Board to be issued with the options.

Terms of Options

There is no issue price for the options. The exercise price for the options will be:

. 125% of the market value (as defined in the attached Terms and Conditions) of the Company's shares on the date on which the options are issued;
$-20$ cents; or
* any greater price determined by the Board, whichever is the greatest.

Shares issued on exercise of options will rank equally with other ordinary shares of the Company.

Options may not be transferred without the approval of the Board. Quotation of options on the Australian Stock Exchange ("ASX") will not be sought. However, in the event that the Company is listed on ASX, it will apply to ASX for official quotation of shares issued on the exercise of options.

Restrictions on Issues and Exercise of Options

The Board may not offer options under the Scheme if the total number of shares which would be issued were each option accepted, together with the number of shares in the same class or options to acquire such shares issued

R O S P E C T U P -S

GRAYNIC

SECTION 8 ADDITIONAL INFORMATION

pursuant to all employee or executive share schemes during the previous five years, exceeds 5% of the total number of issued shares in that class as at the date of the offer.

Options may only be issued or exercised within the limitations imposed by the Corporations Law and the Australian Stock Exchange Listing Rules.

Exercise of Options

Options may be exercised at any time between 2 and 5 years after the date of grant of the options.

If an Eligible Person leaves the employment of the group:

i. 2 years or more after options are issued; or
ii. because of retirement at or after 55 years of age, disablement, retrenchment, death or any other circumstances approved by the Board,

the options may be exercised within 30 days (or 3 months in the case of death), or any longer period permitted by the Board. If not exercised in that time, the options lapse.

If an Eligible Person leaves the employment of the group earlier than 2 years after options are issued and (ii) above does not apply, the options lapse.

If an Eligible Person acts fraudulently, dishonestly or in breach of obligations to the Company or any subsidiary then, at the Board's discretion, options issued for that person will lapse.

Unexercised options will automatically lapse five years after they are issued.

Participation in Future Issues

The holders of options will only participate in new issues, including bonus issues, if they have exercised the options at that time and provided such exercise is permitted by the terms of the option.

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.

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 options may be reduced in accordance with Listing Rule 6.22.

Capital Reconstruction

In the event of any reconstruction (including consolidation, subdivision, 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.

SECTION 9: GLOSSARY OF NAMES & TERMS

Applicant means a person who submits an Application. Application means a valid application to subscribe for Shares. Application Form means the application form attached to and forming part of this Prospectus. Application Monies means monies received by Graynic Metals from Applicants. ASIC means Australian Securities and Investments Commission. ASTC means ASX Settlement and Transfer Corporation Pty Ltd ACN 008 504 532. ASX means Australian Stock Exchange Limited ACN 008 624 691. Auditors means Ord Partners. 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 Graynic Metals. Corporations Act 2001 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. Graynic Metals means Graynic Metals Limited ABN 87 112 898 825. Exposure Period means the period of seven (7) days after the date of lodgement of this Prospectus, which period may be extended by the ASIC by not more than seven (7) days pursuant to Section 727(3) of the Corporations Act 2001. Farm-In Agreement means the farm-in agreement between Graynic Metals and Cazaly Resources Limited executed on 21 February 2005, the terms of which are summarised in section 7. Glossary means this glossary. Investigating Accountant means Ord Partners. Investigating Accountant's Report means the report contained in Section 6 of this Prospectus. Independent Geologist means Boonjarding Resources Limited. Independent Geologist's Report means the report contained in Section 5 of this Prospectus. Lead Manager means Paterson Securities Limited. Listing Rules means Listing Rules of the ASX. Offer means the offer of 6,250,000 Shares 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 the ASX. Opening Date means the date on which the Offer opens. Option means an option to acquire 1 Share. \$0.20 Option Deed means the option deed between the Company and RAB Special Situations LP and dated 28 March 2005 for the grant of 20c Options. \$0.30 Option Deed means the option deed between the Company and RAB Special Situations LP and dated 28 March 2005 for the grant of 30c Options. Prospectus means this prospectus dated 13 April 2005 for the issue of 6,250,000 Shares including any electronic or online version. Quotation means quotation of the Shares on ASX. Reiwoldt means Captain of AFL Premiership favourites for 2005. Share means I fully paid ordinary share in Graynic Metals. Shareholder means a holder of Shares. Share Registrar means Advanced Share Registry Services. Share Subscription Agreement means the Share Subscription agreement between the Company and RAB Special Situations LP and dated 28 March 2005. Solicitors' Report on Mining Tenements means the report contained in Section 7 of this Prospectus. WST means Western Standard Time, Perth, Western Australia.

R O S P E C T U S

SECTION 10. CONSENT BY THE DIRECTOR

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 enquiries 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.

This Prospectus is prepared on the basis that certain matters may reasonably be expected to be known to likely investors or their professional advisors.

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 the 13th day of April 2005.

Rould Frame

Signed for and on behalf of GRAYNIC METALS LIMITED

by Ron Thom Managing Director

Broker/Dealer Stamp

CRAYNIC MERAIS HIMBER

Share Registrar Use Only

ABN 87-112-898-325

Before completing this Application Form, you should read the Prospectus dated 13 April 2005 and the instructions overleaf. No Shares will be issued pursuant to the Prospectus later than thirteen (13) months after the date of the Prospectus.

I/We apply for		PELASE READ CAREFULLY ALL INSTRUCTIONS ON THE REWERSE OF THIS FORM
		Shares in GRAYNIC METALS LIMITED at 20 cents per Share.
or such lesser number of Shares which may be allocated to me/us by the Directors.
I/We lodge full application monies of \$
Full Name (PLEASE PRINT)
Joint Applicant #2 or
Joint Applicant #2 or
Postal Address (PHEASE PRINT) Street Number	Street
Suburb/Town		State	Post code
Contact Name		Telephone number - Business hours
		Telephone number - After hours
CHESS HIN (where applicable)		E-mail address
Tax File Number or Exemption	Applicant #2	Applicant #3
CHEQUE DETAILS Drawer	Bank	$_{\rm BSB}$ Amount of cheque

Cheques should be marked 'Not negotiable' and make payable "Graynic Metals Limited Application Funds."

Declaration and Statements:

By lodging this Application Form;

I/We declare that all details and statements made by me/us are complete and accurate;

l/We agree to be bound by the terms and conditions set out in the Prospectus and by the Constitution of the Company;

I/We acknowledge that the Company will send me/us a paper copy of the Prospectus and any Supplementary Prospectus (if applicable) free of charge if I/we request so during the currency of the Prospectus:

I/We authorize the Company to complete and execute any documentation necessary to effect the issue of Shares and Options to me/us; and I/We acknowledge that returning the Application Form with the application monies will constitute invlout offer to subscribe for Shares in Graynic Metals Limited and that no notice of acceptance of the application will be provided.

TO MEET THE REQUIREMENTS OF THE CORPORATIONS ACT, THIS FORM MUST NOT BE HANDED TO ANY PERSON UNLESS IT IS ATTACHED TO OR ACCOMPANIED BY THE PROSPECTUS DATED 13 APRIL 2005.

Applications must be made on the Application Form attached to this Prospectus. Please complete all relevant parts of the Application Form using BLOCK LETTERS. Enter the NUMBER OF SHARES you wish to apply for. The application must be for a minimum of 10.000 Shares and thereafter in multiples of 1.000 Shares. ái.

Eurer the TCFIAL AMOUNT of application money payable. To calculate the amount, multiply the number of Shares applied for by \$0.20. $\mathbf{b}$
Enter the FULL NAME(S) of all legal entries that are to be recorded as the registered holder(s). Use entreet forms of registrable name (see below). Applications $\alpha$ using the wrong form of name may be rejected.
Enter the POSTAL ADDRESS for all communications from the Company. Only one address can be recorded. d)
Enter a CONTACT NAME and TELEPHONE NUMBER(S) of a person the share registry can speak to regarding any queries they may have on the Application. The Company will become an Issuer Sponsored participant in the Australian Stock Exchange CHESS System. This enables a holder to receive a statement of their shareholdings from the Company's share registrar. If you are already a Broker Sponsored participant in this system, enter your Holder Identification Number (HIN). Otherwise, leave this box blank and your Shares will auromatically be issuer sponsored on allotment.
Enter the TAX FILE NUMBER(S) of the Applicant(s). Collection of Tax File Numbers is authorised by taxation laws. Quoration of Tax File Number(s) is not $\sqrt{2}$ compulsory and will not affect the Application.
Enter the details of cheque(s) accompanying the Application Form in payment of application monies. ø).

DECLARATION AND STATEMENTS

Before completing the Application Form the Applicant(s) should read the Prospectus dated 13 April 2005. The Applicant(s) agree(s), upon and subject to the terms of the Prospectus, to take any number of Shares equal to or less than the number of Shares indicated on the Application Form that may be allotted to the Applicants pursuant to the Prospectus and declare(s) that all details of statements made are complete and accurate,

No notice of acceptance of the Application will be provided by the Company prior to the allotment of Shares. Applicants agree to be bound upon acceptance by the Company of the Application.

If your Application Form is not completed correctly, it may still be treated as valid. The Company's decision as to whether to treat your Application as valid, and how to construe, amend or complete it, shall be final.

There is no requirement to sign the Application Form.

PAYMENT

Applications for Shares must be accompanied by the application money of \$0.20 per share (in Australian currency). Cheques should be made payable to "Graynic Metals Limited Application Funds" and crossed "Not Negotiable".

LODGING OF APPLICATIONS

Completed Application Forms and accompanying application montes must be:

Posted to

Graynic Metals Limited C Advanced Share Registry Services PO Box 1156 NEDLANDS WA 6909

Delivered to:

Graynic Metals Limited C/- Advanced Share Registry Services 110 Stirling Highway NEDLANDS WA 6009

Applications must be received by no later than 5.00pm WST on the Closing Date; currently 6 May 2005 (unless varied by the Company).

OR.

CORRECT FORM OF REGISTRABLE TITLE

Note that only legal entries are allowed to hold Shares. Applications must be in the name(s) of a natural person(s), companies or other legal entries acceptable to Graynic Metals Limited. At least one full given name and the sumante is required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the example of the correct forms of registrable names below:

INTERCORDINATIONS	CORRECTE DRAIDE IIKOKTI AIIBI BUBBBB	INCORRECT TORM OF Прекчиливсенния
Individual the given names, not initials	Peter David Jones	PD lones
Company Use Company title, not abbreviations	AAA Pty Ltd	AAA PILAACA
Irusts Use trustee(s) personal name(s), Do not use the name of the trust	Michele Jones	Michelle Jones Family Trust
Deceased Estates (Se executor(s) personal name(s)	James Jones	Estate of late James Jones
Partnerships Use partners' personal names, do not use the name of the partnership.	fames Jones and Peter Jones. stantes lones and Son A/C>	fames lones and Son
Clubs/Incorporated Bodies/Business Names Use office bearer(s) personal name(s), Do not use the names of the clubs etc.	Michael lones	BBB Cricker Association
Superannuation Funds Use of name of trustee at hand shower was the moment the bund	Lisa lones Pty Ltd <super a="" cs<="" fund="" td="">	Lisa lones Pty Ltd Superannuation Fund	Lisa lones Pty Ltd Superannuation Fund

Broker/Dealer Stamp

CRAYNOMENTS INTERD

ABN 87-112-898-825

Share Registrar Use Only

DEKVERLIDIGARE DESTALE INSERIGATONSIONE HERMARE GEEH VIORM I/We apply for
or such lesser number of Shares which may be allocated to me/us by the Directors.	Shares in GRAYNIC METALS LIMITED at 20 cents per Share.
I/We lodge full application monies of
\$ Full Name (PLIASE PRINT)
Joint Applicant #2 or
Joint Applicant #2 or
Postal Address (PHASE PRINT) Street Number Street
Suburb/Town ▒			State	Post code
Contact Name			Telephone number - Business hours
		Telephone number - After hours
CHESS HIN (where applicable)		E-mail address
Tax File Number or Exemption	Applicant #2		Applicant #3
CHEQUE DETAILS Drawer	Bank	BSB	Amount of cheque

Cheques should be marked 'Not negotiable' and make payable "Graynic Metals Limited Application Funds."

Declaration and Statements:

By lodging this Application Form;

I/We declare that all details and statements made by me/us are complete and accurate;

l/We agree to be bound by the terms and conditions set out in the Prospectus and by the Constitution of the Company;

I/We authorize the Company to complete and execute any documentation necessary to effect the issue of Shares and Options to me/us; and I/We acknowledge that returning the Application Form with the application monies will constitute inv/out offer to subscribe for Shares in Graynic Metals Limited and that no notice of acceptance of the application will be provided.

TO MEET THE REQUIREMENTS OF THE CORPORATIONS ACT, THIS FORM MUST NOT BE HANDED TO ANY PERSON UNLESS IT IS ATTACHED TO OR ACCOMPANIED BY THE PROSPECTUS DATED 13 APRIL 2005.

Eurer the TCFIAL AMOUNT of application money payable. To calculate the amount, multiply the number of Shares applied for by \$0.20. $\mathbf{b}$
Enter the FULL NAME(S) of all legal entries that are to be recorded as the registered holder(s). Use entreet forms of registrable name (see below). Applications $\alpha$ using the wrong form of name may be rejected.
Enter the POSTAL ADDRESS for all communications from the Company. Only one address can be recorded. d)
Enter a CONTACT NAME and TELEPHONE NUMBER(S) of a person the share registry can speak to regarding any queries they may have on the Application. The Company will become an Issuer Sponsored participant in the Australian Stock Exchange CHESS System. This enables a holder to receive a statement of their shareholdings from the Company's share registrar. If you are already a Broker Sponsored participant in this system, enter your Holder Identification Number (HIN). Otherwise, leave this box blank and your Shares will auromatically be issuer sponsored on allotment.
Enter the TAX FILE NUMBER(S) of the Applicant(s). Collection of Tax File Numbers is authorised by taxation laws. Quoration of Tax File Number(s) is not $\sqrt{2}$ compulsory and will not affect the Application.
Enter the details of cheque(s) accompanying the Application Form in payment of application monies. ø).

DECLARATION AND STATEMENTS

No notice of acceptance of the Application will be provided by the Company prior to the allotment of Shares. Applicants agree to be bound upon acceptance by the Company of the Application.

There is no requirement to sign the Application Form.

PAYMENT

LODGING OF APPLICATIONS

Completed Application Forms and accompanying application montes must be:

Posted to

Graynic Metals Limited C Advanced Share Registry Services PO Box 1156 NEDLANDS WA 6909

Delivered to:

Graynic Metals Limited C/- Advanced Share Registry Services 110 Stirling Highway NEDLANDS WA 6009

Applications must be received by no later than 5.00pm WST on the Closing Date; currently 6 May 2005 (unless varied by the Company).

OR.

CORRECT FORM OF REGISTRABLE TITLE

INTERCORDINATIONS	CORRECTE DRAIDE IIKOKTI AIIBI BUBBBB	INCORRECT TORM OF Прекчиливсенния
Individual the given names, not initials	Peter David Jones	PD lones
Company Use Company title, not abbreviations	AAA Pty Ltd	AAA PILAACA
Irusts Use trustee(s) personal name(s), Do not use the name of the trust	Michele Jones	Michelle Jones Family Trust
Deceased Estates (he executor(s) personal name(s)	James Jones	Estate of late James Jones
Partnerships Use partners' personal names, do not use the name of the partnership.	fames Jones and Peter Jones. stantes lones and Son A/C>	fames lones and Son
Clubs/Incorporated Bodies/Business Names Use office bearer(s) personal name(s), Do not use the names of the clubs etc.	Michael lones	BBB Cricker Association
Superannuation Funds Use of name of trustee at hand shower was the moment the bund	Lisa lones Pty Ltd <super a="" cs<="" fund="" td="">	Lisa lones Pty Ltd Superannuation Fund	Lisa lones Pty Ltd Superannuation Fund

Level 2, 22 Oxford Close Leederville WA 6007

Ph: (08) 9381 1436

AI assistant

CORAZON MINING LIMITED — Capital/Financing Update 2005

64747_rns_2005-04-25_8ba14e24-0b55-499a-b189-89f45f87da1d.pdf

ETRAYNIE NE HALE

ABN 87 112 898 825

GRAYNIC METALS

DIRECTORS

INDEPENDENT GEOLOGIST

INVESTMENT HIGHLIGHTS

INVESTMENT HIGHLIGHTS

DEMONSTRATED HIGH GRADE COPPER TARGETS

HIGH GRADE LEAD, SILVER ZINC TARGETS UNTESTED

QUARTZ CIRCLE POTENTIALLY WORLD CLASS OREBODY

JUTSON ROCKS BELT PROSPECTIVE FOR NICKEL/PLATINUM GROUP ELEMENTS

STRONG COMMODITY PRICE OUTLOOK

EXPERIENCED, PRO-ACTIVE BOARD

PRO FORMA CAPITAL STRUCTURE & INDICATIVE TIMETABLE

PRO FORMA CAPITAL STRUCTURE

INDICATIVE TIMETABLE

IMPORTANT NOTICE

IMPORTANT NOTICE

S. P. E. $\mathbb{C}$ T U - S

SECTION 1: DETAILS OF THE OFFER.

DETAILS OF THE OFFER

1.1 SHARES OFFERED FOR SUBSCRIPTION

1.2 MAXIMUM SUBSCRIPTION

1.3 MINIMUM SUBSCRIPTION

1.4 PURPOSE OF THE OFFER

$1.5$ UNDERWRITING

1.6 RIGHTS ISSUE OF OPTIONS AFTER LISTING

1.7 ARRANGEMENTS WITH LEAD MANAGER

1.8 RAB SUBSCRIPTION AGREEMENT

CASH FLOW PROJECTIONS 1.9

1.10 ALLOTMENT AND ALLOCATION OF SHARES

SECTION 12 DETAILS OF THE OFFER

1.11 APPLICANTS OUTSIDE AUSTRALIA

1.12 ASX LISTING

1.13 CHESS

1.14 ENQUIRIES IN RELATION TO THE OFFER

SECTION 1: DETAILS OF THE OFFER

1.15 HOW TO APPLY

1.16 ESCROW PROVISIONS

1.17 ELECTRONIC PROSPECTUS

1.18 PRIVACY DISCLOSURE

PROJECT REVIEW

$2.1$ BACKGROUND

2.2 PROJECTS

QUARTZ CIRCLE (COPPER, LEAD, ZINC, GOLD)

JUTSON ROCKS (NICKEL, GOLD, PLATINUM GROUP ELEMENTS)

NORTHAMPTON PROJECT (COPPER, LEAD, SILVER)

EXPENDITURE SUMMARY $2.3$

BUDGET - QUARTZ CIRCLE YEAR 1 AND YEAR 2

BUDGET -- JUTSON ROCKS YEAR 1 AND YEAR 2

$\texttt{BUDGET} - \texttt{NORTHAMPTON}$ YEAR 1 AND YEAR 2

SECTION 2: PROJECT REVIEW

EXPENDITURE SUMMARY - ALL PROJECTS

2.4 SUMMARY

SECTION 3: BOARD AND MANAGEMENT

3.1 BOARD OF DIRECTORS

NATHAN MCMAHON Non- Executive Director Qualifications: B. Comm (UWA)

SECTION 3. BOARD AND MANAGEMENT

$3.2$ CORPORATE GOVERNANCE

4.0 INVESTMENT RISKS

4.1 EXPLORATION SUCCESS

4.2 OPERATING RISKS

4.3 RESOURCE ESTIMATES

SECTION 5 RISK FACTORS

$4.4$ COMMODITY PRICE VOLATILITY AND EXCHANGE RATE RISKS

$4.5$ ENVIRONMENTAL RISKS

$4.6$ TITLE RISKS AND NATIVE TITLE

SHARE MARKET CONDITIONS 4.7

R O S P E C T U S P

SECTION 4 RISK FACTORS

4.8 GENERAL INVESTMENT RISKS

4.9 SPECIFIC RISKS ASSOCIATED WITH THE COMPANY

BOONJARDING RESOURCES LTD

GRAYNIC METALS LTD

INDEPENDENT GEOLOGIST'S REPORT - GRAYNIC METALS LTD - PROSPECTUS

SPEC P R $\mathsf{T}$ ៈ ប Ŝ $\circ$

GRAYNIC METAL

CORAZON MINING LIMITED Capital/Financing Update 2005