CORAZON MINING LIMITED — Interim / Quarterly Report 2006

Jul 26, 2006

bevel 2, 22 Oxford Clase WEST DEEDERVILLE WA 6872 T +6+8 938+ 1436 F: +6+8 9381 1068 PO Box 1681 WEST PERTH WA 6872 www.graynicmerals.com.au

QUARTERLY REPORT FOR JUNE 2006

HIGHLIGHTS:

• 1. Quartz Circle Base Metal Project, Nullagine, WA
• Diamond drilling of the Igloo copper oxide deposit now completed, with $\bullet$ chalcocite, native copper, and malachite as the main minerals
• A 4m section in drill hole IG 05 at Igloo contained abundant chalcopyrite (primary $\bullet$ copper sulphide), the significance of which is yet to be determined
• Assay of 1m RC samples at Emperor confirmed strong intersection in GM 21 and gave several enhanced Zn and Pb values
• A scoping study is continuing to evaluate mining of the Igloo copper oxide deposit
• A VTEM survey of the entire tenement area is expected to be flown in mid August

2. Wertago Base Metals Project, NSW

• Airborne VTEM survey has been completed, and interpretation of the data is expected soon

Quartz-chalcopyrite-pyrite in drill core, Igloo Prospect, Quartz Circle

QUARTZ CIRCLE PROJECT, NULLAGINE, WA

Copper

The Company decided in May to evaluate the potential of the Igloo copper oxide deposit discovered at Quartz Circle by a previous explorer in 1994. The mineralization was reported to consist mainly of chalcocite, malachite, and native copper, although some chalcopyrite (primary copper sulphide) was also encountered.

Ten vertical diamond drill holes to about 50m depth were completed by Graynic in July, and as expected the main minerals intersected were chalcocite, malachite and native copper. The assays for this drilling program should be available in about 4 weeks. Of particular interest is a 4m section from about 40m in drill hole IG 05 consists of a highly-mineralised quartz-chalcopyrite breccia. The significance of this rich intersection of primary copper ore has yet to be determined.

This discrete pod occurs at a depth of between 25m and 50m from surface. A scoping study to evaluate mining of this deposit is now underway.

A helicopter-borne VTEM survey is due to be flown by Geotech in mid August. This may identify new target zones for copper, which is a highly conductive mineral.

Zinc

The original assays reported from Graynic's RC program at Emperor related to 4m composite samples. Follow-up assaying of the 1m intervals has now been completed and in some cases has aiven enhanced results for Zn and Pb. The most mineralized hole GM 21 (originally 52m @ 4.3%) Zn using the composites) has returned two intersections 16m $\omega$ 3.51% Zn and 27m $\omega$ 4.98% Zn. separated by 6m of unmineralised material.

-------------------------------------- Hole ID	Easting	Northing	Depth	$ +$ $ -$ Thickness	Zn %	Pb %	Ag g/t	Au g/t
GM 5	209504	7600694	49-50m	1m	3.98
			61-62m	1m.	3.19	0.76	20	0.2
			$67 - 71m$	4m	3.98	3.00	36	0.7
			99-101m	2m	3.57
GM 6	209502	7600700	59-60m	1m	10.33		12
			74-76m	2m	2.95		18	0.28
GM7	209485	7600690	56-58m	2m	7.43			0.23
GM 8	209537	7600727	14-16m	2m	1.75	3.38	65	0.75
GM 9	209510	7600834	28-30m	2m	3.49			0.26
	58-66m		8m	2.29
GM 21	209400	7600912	49-65m	16m	3.51
		(inc 52-56m		4m	5.42
			71-98m	27m	4.98
			(inc 72-80m	8m	7.59

Assays from 1m samples at the Emperor Prospect, Quartz Circle

A diamond drill hole to 100m depth has now been completed adjacent and parallel to GM 21, and although the core has not yet been completely logged there is abundant visible sphalerite, some of which seems to be a breccia infill. This core will be logged and assayed in the coming weeks.

SOIL GEOCHEMISTRY AND STRUCTURES

WERTAGO PROJECT, NSW

The Wertago proiect encompasses an area of historical copper mining as well as the Silverfields silver and lead workings. Previous limited drilling by CRA has intersected some good grades including $2m \omega$ 4.6% Cu below old copper workings but there is potential for a large deposit such as a Cu-Au porphyry or a Century-style zinc deposit.

The regional-scale Koonenberry Fault immediately to the east of the known mineralization could have been the conduit for substantial fluid flow and the project area is believed to have the ideal geological setting for a large deposit. The Grasmere copper deposit about 40km to the southwest of Wertago also lies immediately east of the Koonenberry Fault. Recent drilling at Grasmere by Black Range Minerals targeting EM conductors from a recent survey has returned some exciting copper intersections and has dramatically improved that project's prospectivity.

Our airborne VTEM survey over the historic mines and part of the Koonenberry Fault has just been completed and the interpretation of the data is now underway.

JUTSON ROCKS, WA

The Company has decided to withdraw from this joint venture project with Cazaly Resources Ltd.

Ron Thom Managing Director 26 July 2006

The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves was compiled by R Thom, who is a Member of the AusIMM. R Thom has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. R Thom, who is an employee of Graynic Metals Ltd, consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Appendix 5B

$Rule 5.3$

Mining exploration entity quarterly report

Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98, 30/9/2001.

Name of entity

Graynic Metals Limited

ABN

87 112 898 825

Quarter ended ("current quarter") 30 June 2006

Consolidated statement of cash flows

	Consondated statement of cash hows
Cash flows related to operating activities		Current quarter \$A'000	Year to date $(12$ months) \$A'000
1.1	Receipts from product sales and related debtors
1.2	Payments for
	(a)exploration and evaluation	(550)	(980)
	(b) development
	(c) production
	(d) administration	(72)	(433)
1.3	Dividends received
1.4	Interest and other items of a similar nature received	25	84
1.5	Interest and other costs of finance paid
1.6	Income taxes paid
1.7	Other (provide details if material)	4	18
	Net Operating Cash Flows	(593)	(1,311)
	Cash flows related to investing activities
1.8	Payment for purchases of:
	(a)prospects		(50)
	(b)equity investments		(116)
	(c)other fixed assets		(2)
1.9	Proceeds from sale of:
	(a)prospects
	(b)equity investments (c)other fixed assets
1.10	Loans to other entities
1.11	Loans repaid to other entities
1.12	Other (provide details if material)
	Net investing cash flows		(168)
1.13	Total operating and investing cash flows	(593)	(1, 479)
	(carried forward)

⁺ See chapter 19 for defined terms.

1.13	Total operating and investing cash flows (brought forward)	(593)	(1, 479)
	Cash flows related to financing activities
1.14	Proceeds from issues of shares, options, etc.	a.	623
1.15	Proceeds from sale of forfeited shares
1.16	Proceeds from borrowings
1.17	Repayment of borrowings
1.18	Dividends paid	E
1.19	Other - Capital raising costs		(11)
	Net financing cash flows		612
	Net increase (decrease) in cash held	(593)	(867)
1.20	Cash at beginning of quarter/year to date	1,943	2,217
1.21	Exchange rate adjustments to item 1.20
1.22	Cash at end of quarter	1,350	1,350

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

	\$A'000
Aggregate amount of payments to the parties included in item 1.2 1.23	60
Aggregate amount of loans to the parties included in item 1.10 1.24

1.25 Explanation necessary for an understanding of the transactions 1.23 includes directors fees and salaries.

Non-cash financing and investing activities

• $2.1$ Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows
• $2.2$ Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest

Financing facilities available

Add notes as necessary for an understanding of the position.

		Amount available \$A'000	Amount used \$A'000
-3.1	Loan facilities	m.
3.2	Credit standby arrangements	w.

⁺ See chapter 19 for defined terms.

Estimated cash outflows for next quarter

	Total
		300
4.2	Development	$\overline{\phantom{a}}$
4.1	Exploration and evaluation	300
		\$A'000

Reconciliation of cash

	Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to	Current quarter \$A'000	Previous quarter \$A'000
	the related items in the accounts is as follows.
5.1	Cash on hand and at bank	264	388
5.2	Deposits at call	1,086	1,555
5.3	Bank overdraft
5.4	Other
	Total: cash at end of quarter (item 1.22)	1,350	1,943

Changes in interests in mining tenements

		Tenement reference	Nature of interest (note (2))	Interest at beginning of quarter	Interest at end of quarter
6.1	Interests in mining tenements relinquished, reduced or lapsed	E66/0049	100%	100%	$0\%$
6.2.	Interests in mining tenements acquired or increased

⁺ See chapter 19 for defined terms.

Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.

		Total number	Number quoted	Issue price per security (see note $3)$ (cents)	Amount paid up per security (see note 3) (cents)
7.1	Preference
	i securities
	(description)
7.2	Changes during
	quarter
	(a) Increases
	through issues
	(b) Decreases
	through returns of
	capital, buy- backs,
	redemptions
7.3	+ Ordinary	37,004,607	34,110,039
	securities
7.4	Changes during
	quarter
	(a) Increases
	through issues (b) Decreases
	through returns of
	capital, buy-backs
7.5	+ Convertible
	debt securities
	(description)
7.6	Changes during
	quarter (a) Increases
	through issues
	(b) Decreases
	through securities
	matured.
	converted
7.7	Options (description and			Exercise price 20 cents	Expiry date 31/10/07
	conversion factor)	12,245,514 2,000,000	12,245,514	20 cents	28/03/07
		2,000,000		30 cents	28/03/08
		6,000,000		30 cents	30/04/08
		2,000,000		30 cents	31/10/08
7.8	Issued during
	quarter
7.9	Exercised during quarter
7.10	Expired during
	quarter
7.11	Debentures
	(totals only)
7.12	Unsecured notes (totals only)

$+$ See chapter 19 for defined terms.

Compliance statement

• $\mathbf{I}$ This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 4).
• $\overline{2}$ This statement does give a true and fair view of the matters disclosed.

(Company Secretary)

Sign here:

Date: 27 July 2006

Kent Hunter Print name:

Notes

• $\begin{array}{c}\n\bullet \
  \bullet \
  \bullet\n\end{array}$ The quarterly report provides a basis for informing the market how the entity's activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.
• $\overline{2}$ The "Nature of interest" (items 6.1 and 6.2) includes options in respect of interests in mining tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.
• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities.
• 4 The definitions in, and provisions of, AASB 1022: Accounting for Extractive Industries and AASB 1026: Statement of Cash Flows apply to this report.
• 5 Accounting Standards ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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⁺ See chapter 19 for defined terms.