CORAZON MINING LIMITED — Interim / Quarterly Report 2006

Jan 23, 2006

Level 2, 22 Oxford Close WEST LEEDERVILLE WA 6872 T: +61 8 9381 1436 F: +61 8 9381 1068 PO Box 1681 WIST PERTH WA 6872 www.eravnicanglats.com.su

Quarterly Report for December 2005

HIGHLIGHTS:

Corporate

• Completion of \$500,000 placement of shares to provide additional exploration funds
• Opportunity to acquire highly prospective new projects in NSW with the possibility of early tungsten ore production in a buoyant tungsten market
• Formal due diligence now completed and an EGM to seek approval for the NSW transaction set for 17 February 2006

$NSW$

• Proposed acquisition of four base metal and tungsten projects in NSW:
• The Yanco Glen project, which contains identified scheelite (tungsten) $\circ$ resources ready for immediate drill testing
• The Wertago, Gulf Creek and Copper Ridge projects which have $\Omega$ demonstrated Cu, Zn and Ag potential
• Evaluation drilling of Yanco Glen scheelite resource to commence in late February subject to EGM approval of acquisition
• Exploration drilling of Cu prospect at Wertago also planned for first quarter

W_A

Ouartz Circle

• Completion of aeromagnetic and radiometric survey at Quartz Circle:
• $\circ$ 5 aeromagnetic highs
• $\circ$ Two K anomalies (possibly representing rock alteration)
• $\circ$ Two U-Th anomalies, indicating some potential for U exploration
• O Delineation of ultramafic unit which may have nickel potential
• O Delineation of major structures and rock type boundaries
• 2000m RC drilling program scheduled to commence in February to test new zone of base metal potential
• Selected aeromagnetic and radiometric anomalies may also be drilled $\bullet$ immediately after ground checking

1. CORPORATE

The Company has entered into an agreement with a private company, Resource Investment Group Pty Ltd, to acquire three high quality projects near Broken Hill and at another at Gulf Creek near Tamworth in New South Wales. The Company will acquire the projects and the holding company by issuing to the vendors 10 million Graynic shares and 4 million options exercisable at 30 cents. together with a payment of \$50,000 in cash. The deal is subject to shareholder approval and an Extraordinary General Meeting will be held on 17 February 2006 to seek ratification. The Company believes that these projects are a substantial and exciting addition to its existing portfolio, and that evaluation drilling at the scheelite prospect could well lead to an early cash flow for the Company in the current buoyant tungsten market. The chart below shows the prices for ammonium paratungstate (APT) which is the key quotation for the metal.

The Company has now completed a placement of 2,500,000 shares to private sophisticated investors at 20c each to raise \$500,000 of working capital. The money will be used mainly to fund exploration in NSW, and drilling is planned at three of NSW projects within the first quarter of 2006.

2. NSW PROJECTS

Tenure

The projects comprise the four granted exploration licences Yanco Glen (EL 6489), Wertago (EL 6424), and Copper Ridge (EL 6435) in the Broken Hill area, and Gulf Creek (EL 6492) in the Tamworth area.

A. Yanco Glen Project

Highlights

• Identified scheelite resources with possibility of early production
• Potential for shear-hosted gold

Scheelite is calcium tungstate (CaWO4) and is one of the two main ores of tungsten metal. Tungsten is used in the manufacture of certain hard steels and alloys and is in great demand at the moment due to the upsurge of steelmaking in China. Scheelite is often sold as a concentrate produced on site in a relatively cheap and straightforward process.

The identified scheelite resources at Yanco Glen occur in the south of the tenement at a distance of about 30km north of Broken Hill. Scheelite was mined on a small scale in the 1930s and the small workings define the line of lode over a distance of about 2km. Between 1980 and 1984 CRA Exploration (CRAE) investigated the scheelite potential and estimated that there could be a substantial scheelite resource present.

Indications from the geology and data available suggest that an exploration target in the range of 1 to 2Mt at average grades of around 0.5%W could be present. This is based upon detailed geological mapping, UV lamping (scheelite fluoresces under ultraviolet light), rock chip sampling and some drilling over the 2km long extent of workings. This potential quantity and grade of mineralisation is only conceptual in nature as there is insufficient exploration data currently available to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

The main target zone is well defined and a drill out of the scheelite resource is scheduled to commence in February 2006.

A line of small gold workings including the historic Anaconda mine occur in the northern part of the tenement. They have not been explored in recent times and will be investigated in 2006.

B. Wertago Project

Highlights

• Historic Cu-Ag production with head grades up to 30% Cu $\bullet$
• Modern exploration has been limited in scope
• Previous diamond drilling intersected $2m$ $@$ 4.6% Cu below historic workings at Eclipse
• $\bullet$ Zn is known to be present in exploration drill core but was never assayed
• Prospects lie adiacent to the same regional structure as the Grasmere deposit about $30km$ to the southeast (0.55mt @ 2.5% Cu, Black Range Minerals Ltd)
• Previous gold exploration results included 12.2m $(a)$ 4.6 g/t Au, not followed up $\bullet$

The copper mineralization at Wertago is evident within numerous historic workings which occur along structures linked to the Koonenberry Fault. The presence of a major fault is important, as in general large deposits occur near large fault structures. The shears hosting the known mineralization are targets in themselves and will be drill tested in early 2006 to identify high grade copper resources which might lead to early production. However the general setting, including the occurrence of Ag. Pb, and Zn as well as Cu suggests that a large polymetallic deposit could be present in the area. There is also potential for Cu-Au porphyry deposits and Century-style zinc deposits within the Koonenberry belt.

C. Copper Ridge Project

Highlights

• Historic small-scale copper mining
• A zone of Cu potential 3.5km long
• Copper mineralization could be in a sheeted vein system
• Untested by modern exploration $-$ no drilling in 125 years

There is little published information on this prospect because it has never previously been held as an exploration licence. Previous work has been confined to small-scale copper mining for which there are no production records. The mineralization occurs as narrow individual lodes which repeat as parallel reefs, and may be a sheeted vein system. Alternatively the mineralization could relate to an intrusion of Cu porphyry style.

D. Gulf Creek Project

Highlights

• Historic copper production at high Cu grades $\bullet$
• Three-lode system with some existing Cu-Zn resources $\bullet$
• Limited modern exploration

The Gulf Creek copper mine represents the largest copper mine of its type in the New England region of NSW and was primarily mined between 1889 and 1912. Over 35,000 tonnes of Cu ore was mined at an average grade of 5% Cu over the mine life. Higher grades were recovered from some areas such as the Fishers Mine, with head grades exceeding 15% Cu. Mine records estimate that ore reserves up to 50,000 tonnes of ore grading 2.7% copper, and 4.5% zinc could remain in the known ore lenses.

The deposit is considered to be a Cyprus pyrite style and has not been properly explored since mining ceased almost 100 years ago, creating an exceptional modern exploration opportunity.

The mine reached a depth of 150m, had a strike length of 400m and the ore channel was 30m in width. The ore channel hosts 3 parallel lodes known as the Cornish Lode (2m wide at 6-6.5% Cu), Middle Lode (1.5-2m wide at 3-3.5% Cu), and the Big Lode (7m wide at 2-2.5% Cu). Records indicate Zn credits amount to nearly twice the Cu in the estimated ore reserves, but this will be verified by drilling.

3. WA PROJECTS

Ouartz Circle

A. Completion of aeromagnetic and radiometric survey

In December 2005 a low-level high-resolution aeromagnetic and radiometric survey was flown by UTS over the Company's tenements to assist in the mapping and interpretation of this highlyprospective but poorly understood area and to provide new targets for immediate exploration.

The processed data has now been received and a provisional interpretation has been presented by Southern Geoscience Consultants. The survey has revealed:

• Five discrete aeromagnetic highs which could be related to Ni, base metal, or other $\bigcap$ mineralization
• Two outstanding potassium anomalies which could represent altered rocks associated with $\sigma$ mineralization, possibly Ni
• Two uranium-thorium anomalies which could be associated with uranium mineralization $\circ$
• A possible ultramafic unit which could have potential for Ni mineralization $\sigma$
• Two major faults which may influence mineralization in the area Ó

These anomalies will be examined in the field in February prior to or during the upcoming drilling program. Should any of the anomalies merit immediate drilling this will be done as an extension to the scheduled program.

B. RC drilling program for base metals scheduled for February 2006

The Company has booked a drilling rig for mid February to carry out a 2000m program of reverse circulation (RC) drilling at the Emperor Pb-Zn prospect. The primary objective is to test a new zone of

base metal potential revealed from geological mapping last year, which showed that the classic geological setting for a volcanic massive sulphide (VMS) system extends for at least another 500m northwards from the area of previous drilling.

Other WA projects

Jutson Rocks

Negotiations for access to the Jutson Rocks project area have now commenced with the Traditional Owners. Once access is granted field investigations will commence with a view to implementing a substantial exploration program early in 2006. The Company is highly encouraged by the exciting drilling results achieved by the Falcon Minerals-BHPB joint venture at Collurabbie, which seems to have a similar geological setting to Jutson Rocks.

Northampton

This tenement has not yet been granted

Walgidee Hills This tenement has not yet been granted

Brockman Creek This tenement has not yet been granted.

Ron Thom Managing Director 24 January 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, 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")

Current quarter

\$A'000

31 December 2005

Year to date (6 months) $$A'000$

Consolidated statement of cash flows

Cash flows related to operating activities

1.1	Receipts from product sales and related debtors
1.2	Payments for
	(a)exploration and evaluation	(67)	(368)
	(b) development
	(c) production
	(d) administration	(79)	(179)
1.3	Dividends received
1.4	Interest and other items of a similar nature	21	40
	received
1.5	Interest and other costs of finance paid
1.6	Income taxes paid
1.7	Other (provide details if material)	4
	Net Operating Cash Flows	(121)	(500)
	Cash flows related to investing activities
1.8	Payment for purchases of:
	(a)prospects	(14)	(14)
	(b) equity investments	(98)	(114)
	(c)other fixed assets	(2)	(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		(14)
1.12	Other (provide details if material)
1.13	Net investing cash flows Total operating and investing cash flows	(114) (235)	(144) (644)

⁺ See chapter 19 for defined terms.

1.13	Total operating and investing cash flows (brought forward)	(235)	(644)
	Cash flows related to financing activities
1.14	Proceeds from issues of shares, options, etc.		123
1.15	Proceeds from sale of forfeited shares
1.16	Proceeds from borrowings
1.17	Repayment of borrowings
1.18	Dividends paid
1.19	Other - Capital raising costs		(11)
	Net financing cash flows		112
	Net increase (decrease) in cash held	(235)	(532)
1.20	Cash at beginning of quarter/year to date	1,920	2,217
1.21	Exchange rate adjustments to item 1.20
1.22	Cash at end of quarter	1,685	1,685

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

	Current quarter
	\$A'000
	46
Aggregate amount of payments to the parties included in item 1.2
Aggregate amount of loans to the parties included in item 1.10

^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 1 \$A'000
3.1	Loan facilities	w
3.2	Credit standby arrangements	w

⁺ See chapter 19 for defined terms.

Estimated cash outflows for next quarter

4.1	Exploration and evaluation	\$A'000 250
4.2	Development
	Total	250

Reconciliation of cash

	Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.	Current quarter \$A'000	Previous quarter SA'000
5.1	Cash on hand and at bank	420	655
5.2	Deposits at call	1,265	1,265
5.3	Bank overdraft
5.4	Other
	Total: cash at end of quarter (item 1.22)	1,685	1,920

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
6.2	Interests in mining tenements acquired or increased	E45/2602	100%	$0\%$	100%

$+$ 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	Amount paid up per
				security (see note	security (see note 3)
				$3)$ (cents)	(cents)
7.1	Preference
	*securities
	(description)
7.2	Changes during
	quarter
	(a) Increases
	through issues
	(b) Decreases
	through returns of
	capital, buy-
	backs,
	redemptions
7.3	+ Ordinary	27,000,003	23,355,435
	securities
7.4	Changes during
	quarter
	(a) Increases	2,500,000	2,500,000
	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			Exercise price	Expiry date
	(description and	12,250,118	12,250,118	20 cents	31/10/07
	conversion factor)	2,000,000		20 cents	28/03/07
		2,000,000		30 cents	28/03/08
		2,000,000		30 cents	30/04/08
		2,000,000		30 cents	31/10/08
7.8	Issued during	2,000,000		30 cents	30/10/08
	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: 24 January 2006

Kent Hunter Print name:

Notes

• $\mathbf{I}$ 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.
• $\overline{4}$ 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.

---

⁺ See chapter 19 for defined terms.