CORAZON MINING LIMITED — Proxy Solicitation & Information Statement 2007

Apr 17, 2007

ABN 97 112 898 825

NOTICE OF GENERAL MEETING AND EXPLANATORY STATEMENT AND

INDEPENDENT EXPERT'S REPORT

General Meeting to be held at the Celtic Club 48 Ord Street, West Perth, Western Australia on Wednesday 16 May 2007 commencing at 10.00am (WST).

This Notice of General Meeting, Explanatory Statement and Independent Expert's report should be read in its entirety. ti
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lif Shareholders are in doubt as to how to vote, they should seek advice from their accountant, solicitor or other professional adviser without delay.

ABN 97 112 898 825

General Information

This Notice of Meeting and Explanatory Statement set out information about the proposed issue and allotment of 2,000,000 Shares to RAB Special Situations LP pursuant to the exercise of the \$0.20 Options.

You are urged to give careful consideration to the Notice of Meeting and the contents of the Explanatory Statement.

NOTICE OF GENERAL MEETING

GRAYNIC METALS LIMITED (ABN 97 112 898 825)

Notice of General Meeting

Notice is given that a General Meeting of Shareholders of Gravnic Metals Limited will be held at the Celtic Club. 48 Ord Street. West Perth Western Australia on Wednesday 16 May 2007 commencing at 10.00am (WST).

Special Business

The business to be transacted at the General Meeting is the proposal of the Resolution as set out below.

RESOLUTION: Issue of Shares to RAB Special Situations LP or its nominees/s pursuant to the exercise of the Options

To propose and, if thought fit to pass the following resolution as an ordinary resolution:

"That in accordance with Item 7 of section 611 of the Corporations Act and for all other purposes, approval be and is hereby given, to the issue of 2,000,000 Shares to RAB pursuant to the exercise of the \$0.20 Options in consideration for the payment of \$400,000 by RAB to the Company as detailed in the accompanying Explanatory Statement.

Voting Exclusion Statement

The following voting exclusion statement applies to the Resolution under the Listing Rules or where applicable, the provisions of the Corporations Act to the following persons (Excluded Persons).

The Company will disregard any votes on the Resolution cast by the following Excluded Persons:

Title	Excluded Persons
Issue of Shares to RAB and/or its RAB or its nominee/s. nominee/s

However, the Company need not disregard a vote if it is cast by:

• $(a)$ a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form: or
• $(b)$ the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Explanatory Statement

The accompanying Explanatory Statement forms part of this Notice of General Meeting and should be read in conjunction with it.

Shareholders are specifically referred to Section 6 of the Explanatory Statement which contains definitions of capitalised terms used in this Notice of General Meeting and the Explanatory Statement.

Proxies

Please note that:

• $(a)$ a Shareholder entitled to attend and vote at the general meeting is entitled to appoint a proxy;
• $(b)$ a proxy need not be a member of the Company;
• a Shareholder may appoint a body corporate or an individual as its proxy: $(c)$
• $(d)$ a body corporate appointed as a Shareholder's proxy may appoint an individual as its representative to exercise any of the powers that the body may exercise as the Shareholder's proxy; and
• $(e)$ Shareholders entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise, but where the proportion or number is not specified, each proxy may exercise half of the votes.

The enclosed proxy form provides further details on appointing proxies and lodging proxy forms. If a Shareholder appoints a body corporate as its proxy and the body corporate wishes to appoint an individual as its representative, the body corporate should provide that person with a certificate or letter executed in accordance with the Corporations Act authorising him or her to act as that company's representative. The authority may be sent to the Company or its share registry in advance of the General Meeting or handed in at the General Meeting when registering as a corporate representative.

Voting Entitlements

In accordance with Regulations 7.11.37 and 7.11.38 of the Corporations Regulations 2001, the Company has determined that a person's entitlement to vote at the General Meeting will be the entitlement of that person set out in the register of Shareholders as at 5.00pm (WST) on 14 May 2007. Accordingly, transactions registered after that time will be disregarded in determining Shareholders' entitlement to attend and vote at the General Meeting.

DATED: 12 April 2007

BY ORDER OF THE BOARD

Ivan Hoffman Chairman Graynic Metals Limited

EXPLANATORY STATEMENT TO SHAREHOLDERS

PROPOSAL FOR THE ALLOTMENT OF 2,000,000 ORDINARY SHARES TO RAB Special Situations LP (or its Nominee(s))

GRAYNIC METALS LIMITED

ABN 97 112 898 825

CONTENTS

PAGE NO.

1.	Introduction	1
2.	Proposal	1
3.	General Meeting	2
4.	Other Information	3
5.	Regulatory Requirements	4
6.	Definitions
Annexure 1 - Terms of the Options to be exercised 8
Proxy Form

Independent Expert's Report

EXPLANATORY STATEMENT

$1₁$ INTRODUCTION

This Explanatory Statement has been prepared for the information of Shareholders in relation to the business to be conducted at the Company's General Meeting.

The purpose of this Explanatory Statement is to provide Shareholders with all information known to the Company which is material to a decision on how to vote on the Resolution in the accompanying Notice of General Meeting.

This Explanatory Statement should be read in conjunction with the Notice of General Meeting. Capitalised terms in this Explanatory Statement are defined in Section 6 of this Explanatory Statement.

ISSUE 2,000,000 SHARES TO RAB OR ITS NOMINEE/S PURSUANT TO THE EXERCISE $2₁$ OF THE OPTIONS

$2.1$ BACKGROUND AND PRINCIPAL FEATURES OF THE PROPOSAL

The principal features of the Proposal are set out below:

The Company granted RAB 2,000,000 Options pursuant to the Option Deed dated on or about 28 March 2005.

Pursuant to the terms and conditions outlined in Appendix 1 to the Explanatory Statement, the \$0.20 Options must be exercised by no later than 2 years after the date of issue of \$0.20 Options. The date of issue of the \$0.20 Options was 16 June 2005. The Expiry Date is therefore 16 June 2007.

The Company is seeking Shareholder approval to issue 2,000,000 Shares to RAB upon exercise of the Options, in consideration for RAB paying the Company \$400,000.

$2.2$ OPERATIONAL PLANS OF THE COMPANY

The Company has base metal interests in Western Australia (WA) and New South Wales (NSW) including advanced projects and projects at the early exploration stage. All of the project areas have known mineralisation and/or a history of previous mining.

Current operations of the Company are as follows:

The Company's leading project is the Quartz Circle base metal project near Nullagine in the East Pilbara, WA. The geological setting indicates that this is a volcanic-hosted massive sulphide (VMS) deposit containing zinc. lead, copper, silver and gold. Extensive drilling has intersected rich copper-gold-silver mineralization at the Igloo Prospect and thick intersections of zinc-lead-silver-gold mineralisation at the Emperor Prospect. Much of the zone of potential is yet to be tested and further drilling programs are planned within the next few months.

An recent airborne EM (electromagnetic) survey at Quartz Circle has revealed a large EM conductance anomaly about 1km in diameter situated on the southern edge of the Emperor Prospect. This is an important new exploration target for our next drilling program.

In NSW an airborne VTEM (electromagnetic) survey was flown over a large part of our base metal project at Wertago and several drilling targets have been provisionally identified. These will be inspected on the ground prior to drilling. Exploration drilling at the Gulf Creek copper project is awaiting final heritage clearance from the Traditional Owners but this is expected soon. The exploration rights to tin and tungsten within our exploration licence at Yanco Glen have been sold to newly-listed Wolf Minerals for 2 million Wolf shares. The Company retains the exploration rights for all other minerals within this licence.

GENERAL MEETING $\mathbf{R}$

$3.1$ ACTION TO BE TAKEN BY THE SHAREHOLDERS

In order to proceed with the Proposal to issue 2,000,000 Shares to RAB or its nominee pursuant to the exercise of the Options, the Company must convene a General Meeting of Shareholders for the purposes of passing the Resolution in compliance with the requirements of the Corporations Act.

The Notice convening the General Meeting is included at the front of this booklet. Shareholders are encouraged to attend and vote in favour of the Resolution to be put at the General Meeting.

If a Shareholder is not able to attend and vote at the General Meeting, the Shareholder is encouraged to complete the proxy form at the back of this booklet and return it to the Company at the address stated on the proxy form not later than 48 hours before the time specified for the commencement of the General Meeting.

GENERAL MEETING RESOLUTION - ISSUE OF SHARES TO RAB PURSUANT TO THE $3.2$ EXCERISE OF THE OPTIONS

There is 1 Resolution to be put to the General Meeting.

Certain voting restrictions are imposed in relation to the Resolution as detailed in the accompanying Notice of General Meeting under the heading "Voting Exclusion Statement".

A short explanation of the Resolution is set out below:

The Resolution is an ordinary resolution and provides for the issue of 2,000,000 Shares in the Company to RAB and/or its nominees pursuant to the exercise of the \$0.20 Options in consideration of RAB paying \$400,000 to the Company.

The terms and conditions of the \$0.20 Options are set out in Annexure 1.

The latest trading price of the Shares at the date of this Notice of Meeting is \$0.225.

All of the Shares referred to in the Resolution will, upon issue, rank equally in all respects with the Shares.

The issue of Shares under Resolution 1 is to be approved by Shareholders under the requirements of Item 7 of section 611 of the Corporations Act as noted in Sections 5.3 of this Explanatory Statement.

OTHER INFORMATION $\overline{4}$ .

$4.1$ SCOPE OF DISCLOSURE

The provisions of the Corporations Act require that this Explanatory Statement sets out all other information that is reasonably required by Shareholders in order to decide whether or not it is in the Company's interests to pass the Resolution and which is known to the Company.

The Company is not aware of any relevant information that is material to the decision on how to vote on the Resolution other than as is disclosed in this Explanatory Statement or previously disclosed to Shareholders by the Company by notification to the ASX.

VOTING INTENTIONS AND INTERESTS OF DIRECTORS 4.2

The Directors of the Company are set out in the table below. At the date of this Explanatory Statement, the Directors intend to vote in favour of the Resolution set out in the Notice of General Meeting.

The Directors have no interest in the outcome of the Resolution except as Shareholders of the Company. In this regard, the table below sets out the details of the shareholdings held (directly or indirectly) by the Directors and their Associates and the percentage ownership in the Shares of the Company.

Name of Director	Number of Existing Fully Paid Shares Held	Percentage Interest in Voting Shares*	Number of Options Held
Ivan Hoffman	0	$0\%$	1,000,000, \$0.30 exercisable on or before 31/10/08.
Ron Thom	524,000	1.3%	262,000, \$0.20 exercisable on or before 31/10/07; 1,000,000, \$0.30 exercisable on or before 31/10/08 and; 1,000,000, \$0.30 exercisable on or before 31/07/09.
Jonathan Downes	97,000	0.2%
Clive Jones	1,057,689	2.6%	528,845, \$0.20 exercisable on or before 31/10/07 and; 1,000,000, \$0.30 exercisable on or before 30/04/08
TOTALS	1,678,689	4.1%

Based on the total number of Shares of the Company being 40,265,772.

$4.3$ RECOMMENDATION BY DIRECTORS

The Directors recommend the Shareholders should approve the Resolution to be put to the General Meeting. However, Shareholders must decide how to vote based on the matters set out in the Explanatory Statement.

4.4 TAXATION

Approval of the Resolution may give rise to income tax implications for the Company.

Shareholders are advised to seek their own taxation advice on the effect of the Resolution on their personal position and neither the Company, nor the Directors, or any adviser to the Company accepts any responsibility for any individual Shareholder's taxation consequences with respect to the Resolution if approved.

$4.5$ EFFECT OF THE ISSUE OF 2,000,000 SHARES TO RAB

For the purposes of this Explanatory Statement, the following information is provided for consideration by the Shareholders

The principal disadvantage to Shareholders is that their existing shareholdings will be diluted by the issue of Shares pursuant to the Resolution.

For further effects on the issue in accordance with the Resolution, please refer to the attached Expert's Report.

5. REGULATORY REQUIREMENTS

The General Meeting has been called to approve the Resolution in accordance with the Listing Rules and the Corporations Act which are summarised below.

LISTING RULE 10.11 $5.1$

Chapter 10 of the Listing Rules contains certain provisions in relation to transactions between a company and persons in a position of influence'. Listing Rule 10.11 provides that a company must not issue equity securities to a 'related party' without the approval of holders of ordinary securities by ordinary resolution. The term 'related party' is defined for these purposes to include a related party within the meaning of section 228 of the Corporations Act and a person whose relationship with the entity or a related party is, in ASX's opinion, such that approval should be obtained.

The Company does not considers that RAB are a 'related party' of the Company for the purposes of Listing Rule 10.11. Accordinaly, the Company is not required to seek approval under Listing Rule 10.11 in respect of the Shares to be issued to RAB.

52 SECTION 208 OF THE CORPORATIONS ACT

Section 208(1)(a) of the Corporations Act prohibits the Company from giving a financial benefit (including an issue of shares and options) to a related party of the Company without the approval of shareholders by a resolution passed at a general meeting at which no votes are cast in relation to the resolution in respect of any shares held by the related party or by an associate of the related party.

The Company considers that RAB are not a 'related party' of the Company for the purposes of section 208 of the Corporations Act. Accordingly, the Company is not required to seek approval under section 208 of the Corporations Act in respect of the Shares to be issue to RAB.

SECTION 611 OF THE CORPORATIONS ACT $5.3$

The Resolution seeks Shareholder approval under Item 7 of section 611 of the Corporations Act to the acquisition by RAB of a relevant interest in the specified number of Shares upon the issue of those Shares.

Except as provided by Chapter 6 of the Corporations Act, section 606(1) of the Corporations Act prohibits a person from acquiring shares in a company if, after the acquisition, that person or any other person would have a relevant interest or voting power in excess of 20% of the voting shares in that company.

Item 7 of section 611 of the Corporations Act provides that section 606(1) of the Corporations Act does not apply to an acquisition of a relevant interest in the voting shares in a company if the company has agreed to the acquisition by resolution passed at a general meeting at which no votes are cast in relation to the resolution by the person to whom the shares are to be issued or by an associate of that person.

Under section 610 of the Corporations Act, a person's voting power is defined as the percentage of the total voting shares in the Company held by the person and the person's associates.

Accordingly, the Company is seeking Shareholder approval under Item 7 of Section 611 of the Corporations Act in respect of the Shares to be issued to RAB under the Resolution because this issue of securities will result in RAB having a relevant interest in an aggregate of more than 20% of the voting shares in the Company.

At the date of the Notice of General Meeting, RAB held 7,000,000 Shares in the Company. If the Resolution is passed, the issue of the Shares to RAB, pursuant to the Resolution will give RAB a relevant interest in an aggregate of more than 20% of the voting shares in the Company.

As set out in the Voting Exclusion Statements in the Notice of General Meeting and in accordance with the Listing Rules, RAB and its nominees are precluded from voting on the Resolution.

ASIC Policy Statement 74

The following information is included in accordance with the requirements of Item 7 of section 611 of the Corporations Act and ASIC Policy Statement 74 to the extent it applies pursuant to ASIC Policy Statement 159.

$\mathcal{I}$ . Identity of Persons who will hold a relevant interest in the securities to be issued

If the Resolution is passed, the following Shares are to be issued to the following persons:

Shares

. .	. Total of Shares
RAB	2,000,000
TOTAL	2,000,000

$\overline{2}$ Impact of the Transactions on the Voting Power in the Company's Shares

$(a)$ The Company's capital structure

The capital structure of the Company currently consists of 40,265,772 Shares and 25,469,643 options.

Once the issue of Shares to RAB as proposed in the Resolution has been completed, the capital structure of the Company will consist of:

• 42,265,772 Shares; and
• 23,469,643 Existing Options

Current voting power of RAB $(b)$

As at the date of the Notice of Meeting, RAB held 7,000,000 Shares and had voting power of approximately 17.38%.

$(c)$ Voting power of RAB after the issue of Shares

Once all of the Shares referred to in the Resolution have been issued, the number of shares in the Company in which the RAB will have a relevant interest and their relevant voting power will be as follows:

a tha agus Thairin a Cairt agus tha a bha a bha a bha a bha a bha a bha a bha a bha a ${x^{i},y^{j},z^{j},z^{j},z^{j},z^{j},z^{j},z^{j},z^{j},z^{j},z^{j},z$ t for the complete section of the complete section of the complete section of the complete section of the complete section of the complete section of the complete section of the complete section of the complete section of . Periode di disebut di disebut di disebut di disebut di disebut di disebut di disebut di disebut di disebut dis .	Number of Shares in which have a relevant Electronic interest	% voting power
RAB Special Situations LP (or its Nominee(s))	9,000,000	21.29%
TOTAL	42,265,772	100%

Intentions as to the Future of the Company

The present intentions regarding the future of the Company, if the Resolution in the Notice of General Meeting is approved by Shareholders:

For further details, please refer to section 2.2 - Operational Plans of the Company.

Proposal is fair and reasonable

The report of the Expert concludes that the issue of shares the subject to RAB in accordance with the Resolution is fair and reasonable to non associated Shareholders. You should consider the Expert's Report in detail.

5.4 ASX's ROLE

The fact that the accompanying Notice of General Meeting, this Explanatory Statement and other relevant documentation has been received by ASX is not to be taken as an indication of the merits of the Resolution or the Company. ASX and its respective officers take no responsibility for any decision a Shareholder may make in reliance on any of that documentation.

DEFINITIONS $6.$

In this Explanatory Statement:

ASIC means the Australian Securities and Investments Commission.

ASX means Australian Stock Exchange Limited ACN 008 624 691.

Business Day means Monday to Friday inclusive, except New Year's Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day.

Claim means a debt owing (whether now, in the future or contingently) by, or a claim subsisting against or alleged to be subsisting against, the Company in favour of a person, which arose on or before the Administration Date irrespective of whether the debt or claim arose by virtue of contract. at law, in equity or otherwise and including (without limitation) a claim sounding only in damages, a debt or a claim arising under a guarantee.

Company means Graynic Metals Limited ABN 97 112 898 825

Constitution means the constitution of the Company.

Corporations Act means the Corporations Act 2001.

Expert's Report means the report of the Expert attached to and forming part of the Explanatory Statement.

Explanatory Statement means the Explanatory Statement accompanying the Notice of General Meeting.

General Meeting means the general meeting of the Shareholders convened for the purposes of considering the Resolution.

Gravnic means Gravnic Metals Limited ABN 97 112 898 825

Listing Rules means the Listing Rules of the ASX.

Share(s) means a fully paid ordinary share in the Company.

Notice of Meeting means the notice convening the General Meeting accompanying this Explanatory Statement.

\$0.20 Options means the options granted to RAB to have issued Shares, the terms and conditions of which are outlined in Annexure 1 of this Explanatory Statement.

Option Deed means the option deed between the Company and RAB and dated on or about 28 March 2005 for the grant of the Options.

Prospectus means the prospectus of Graynic Metals Limited dated 13 April 2005 for the issue of 6.250.000 Shares including any electronic or online version.

RAB means RAB Special Situations LP and/or its nominee(s).

Related Party means a party so defined by section 228 of the Corporations Act.

Resolution means a resolution to be considered at the General Meeting as contained in the Notice of General Meeting.

Section means a section of this Explanatory Statement.

Shareholder means a shareholder of the Company.

WST means Western Standard Time in Australia.

ANNEXURE 1

TERMS AND CONDITIONS OF OPTIONS ISSUED TO RAB SPECIAL SITUATIONS LP

The terms and conditions as contained in the Prospectus of the Options issued to RAB special situations LP pursuant to the \$0.20 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 the second anniversary of the date of the issue of the options 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.
• all Shares issued upon exercise of the options will rank pari passu in all respects with Graynic $f$ 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.
• if there is a bonus issue to shareholders, the number of shares over which the Option is exercisable i) 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 i). securities in the Company, the exercise price of the Options may be reduced in accordance with Listing Rule 6.22.

EXPLANATORY STATEMENT

GRAYNIC METALS LIMITED ABN 97 112 898 825 PROXY FORM

Shareholder Details

Name:
Address:
Contact Telephone No:
Contact Name (if different from above):

Appointment of Proxy

The Chairman

of the meeting (mark with an 'X')

I/We being a shareholder/s of Graynic Metals Limited and entitled to attend and vote hereby appoint the following proxy/proxies to attend and act on my/our behalf and to vote in accordance with my/our following directions at the General Meeting of Graynic Metals Limited to be held at the Celtic Club, 48 Ord Street, West Perth, Western Australia on Wednesday 16 May 2007 at 10.00am (WST) and at any adjournment of that meeting.

IMPORTANT:

OR

If the Chairman of the meeting is your proxy, or if appointed your proxy by default and you do not wish to direct him/her how to vote on any of these resolutions, you must mark this box with an "X". By marking this box, yo which you have not given a direction) even if he/she has an interest in the outcome of the resolution and that votes cast by him/her, other than as proxy holder, will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote on any of these resolutions, the Chairman of the meeting will not cast your votes on the resolutions (for which you have not given a
direction) on a show of hands or on a poll. The Chairman of the meeting intends to vote undirected proxies in favour of each resolution.

If the person you are appointing as your proxy is someone other than the Chairman of the meeting: Write the name of that person in the box below.

	%		You must specify the % of your votes that you authorise your proxy to exercise if:
If you hold 2 or more Shares in #full company name#, you may appoint a second proxy: Write the name of your second proxy in the box below.		{a}	you have only appointed 1 proxy and do not want him/her to exercise all of your votes; or
	%	(b)	if you have appointed 2 proxies under this proxy form.

If you do not name a proxy or your named proxy fails to attend the meeting, the Chairman of the meeting will be appointed as your proxy to attend and act on your behalf and to vote in accordance with the following directions at the General Meeting of Graynic Metals Limited to be held at the Celtic Club, 48 Ord Street, West Perth, Western Australia on Wednesday 16 May 2007 at 10.00a

Voting directions to your proxy - Please mark only one of the boxes with an "X" for each resolution to indicate your directions.

Special Business		For	Aαainst	Abstain
Resolution 1.	Issue to RAB and/or its nominees		$\Box$ and $\Box$ and $\Box$

If you mark the "Abstain" box with an "x" for a particular resolution, you are directing your proxy not to vote on your behalf on a show of hands or on a poll.

PLEASE SIGN HERE This section must be signed in accordance with the instructions overleaf to enable your directions to be implemented

Individual or Shareholder 1

Shareholder 2

Shareholder 3

Sole Director and Sole Company Secretary Director

Director/Company Secretary

How to complete this Proxy Form

$\ddagger$ Your Name and Address

Please print your name and address as it appears on your holding statement and the Company's share register. If Shares are jointly held, please ensure the name and address of each joint shareholder is indicated. Shareholders should advise the Company of any changes. Shareholders sponsored by a broker should advise their broker of any changes. Please note. you cannot change ownership of your securities using this form.

$\overline{2}$ Appointment of a Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box. If the person you wish to appoint as your proxy is someone other than the Chairman of the Meeting please write the name of that person. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a shareholder of the Company,

3 Votes on Resolutions

You may direct your proxy how to yote by placing a mark in one of the boxes opposite each Resolution. All your shareholding will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any Resolution by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given Resolution, your proxy may vote as he or she chooses. If you mark more than one box on a Resolution your vote on that Resolution will be invalid.

4 Appointment of a Second Proxy

You are entitled to appoint up to two persons as proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy please write the name of that person.

To appoint a second proxy you must state (in the appropriate box) the percentage of your voting rights which are the subject of the relevant proxy. If the Proxy Form does not specify a percentage, each proxy may exercise half your votes. Fractions of votes will be disregarded.

5 Signing Instructions

You must sign this form as follows in the spaces provided:

Individual: Joint Holding:	where the holding is in one name, the holder must sign. where the holding is in more than one name, all of the shareholders should sign.
Power of Attorney:	to sign under Power of Attorney, you must have already lodged this document with the company's share registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.
Companies:	where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

If a representative of the corporation is to attend the meeting a "Certificate of Appointment of Corporate Representative" should be produced prior to admission.

6. Lodgment of a Proxy

This Proxy Form (and any Power of Attorney under which it is signed) must be received at the address given below not later than 48 hours before the commencement of the meeting. ie. no later than 10.00am (WST) on Monday 14 May 2007. Any Proxy Form received after that time will not be valid for the scheduled meeting.

This Proxy Form (and any Power of Attorney and/or second Proxy Form) may be sent or delivered to 2^nd Floor, 22 Oxford Close, West Leederville, WA 6007 or sent by facsimile to Mr Ron Thom on 08 9381 1068.

Independent expert's report and financial services guide
April 2007

GRAYNIC METALS LIMITED

MOORE STEPHENS PERTH CORPORATE SERVICES PTY LTD

AFSL 240773

FINANCIAL SERVICES GUIDE

This Financial Services Guide is issued in relation to the Independent Expert's Report on the proposed allotment of shares in Graynic Metals Limited ("GYN") to RAB Special Situations LP ("RAB") prepared at the request of the Directors of GYN for inclusion in a Notice of Meeting of Shareholders dated on or about4 April 2007.

Moore Stephens Perth Corporate Services Pty Ltd

Moore Stephens Perth Corporate Services Pty Ltd ("MSPCS") has been engaged by the directors of GYN to prepare an independent expert's report expressing our opinion as to whether or not the proposed allotment of shares is "fair and reasonable" to non-associated shareholders of GYN.

MSPCS holds an Australian Financial Services Licence -Licence No 240773.

Financial Services Guide

As a result of our report being provided to you we are required to issue to you, as a retail client, a Financial Services Guide ("ESG"). The ESG includes information on the use of general financial product advice and is issued so as to comply with our obligations as holder of an Australian Financial Services Licence.

Financial Services we are licensed to provide

We hold an Australian Financial Services Licence which authorises us to provide reports for the purposes of acting for and on behalf of clients in relation to proposed or actual mergers, acquisitions, takeovers, corporate restructures or share issues, and to carry on a financial services business to provide general financial product advice for securities to retail and wholesale clients.

We provide financial product advice by virtue of an engagement to issue a Report in connection with the issue of securities of a company or other entities.

Our report includes a description of the circumstances of our engagement and identifies the party who has engaged us. You have not engaged us directly but will be provided with a copy of our report (as a retail client) because of your connection with the matters on which our report has been issued. We do not accept instructions from retail clients and do not receive remuneration from retail clients for financial services.

Our report is provided on our own behalf as an Australian Financial Services Licensee authorised to provide the financial product advice contained in this report.

General Financial Product Advice

Our report provides general financial product advice only, and does provide personal financial product advice, because it has been prepared without taking into account your particular personal circumstances or objectives (either financial or otherwise), your financial position or your needs.

Some individuals may place a different emphasis on various aspects of potential investments.

An individual's decision in relation to the Proposed Allotment may be influenced by their particular circumstances and. therefore, individuals should seek independent advice.

Benefits that we may receive

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MOORE STEPHENS

Partners

Svd Jeskiss Neil Pace Paul Rengel Ray Simpson Ennio Tavani Dino Travaglini

3 April 2007

The Directors Graynic Metals Limited Level 22 22 Oxford Close WEST LEEDERVILLE WA 6872

Dear Sirs

INDEPENDENT EXPERT'S REPORT

$\ddot{\mathbf{1}}$ . INTRODUCTION

Overview

Graynic Metals Limited ("GYN" or "the Company") is a public company listed on the Australian Stock Exchange ("ASX"). The directors of GYN have requested Moore Stephens Perth Corporate Services Pty Ltd to prepare an Independent Expert's report ("our Report") so as to comply with the Australian Securities and Investments Commission ("ASIC") Policy Statement 74, applicable to acquisitions agreed to by shareholders. The proposed allotment is permitted by Section 611 of the Corporations Act 2001("the Corporations Act") provided that the proposed transaction is agreed to by shareholders.

Should shareholders approve the proposed allotment, RAB Special Situations LP ("RAB") will exercise 2,000,000 GYN options it presently has an interest in, whereby it will be issued 2,000,000 fully paid ordinary shares in GYN at a exercise price of \$0.20 per share, ("the Proposed Allotment").

The Proposed Allotment is subject to the approval of non associated shareholders pursuant to the requirements of Section 611 of the Corporations Act. The GYN directors have requested Moore Stephens Perth Corporate Services Pty Ltd to independently assess whether the Proposed Allotment is fair and reasonable to the non associated shareholders of GYN.

Our report is to be included in the Explanatory Memorandum of GYN to be sent to all shareholders to assist them in determining whether to accept or reject the Proposed Allotment.

Ownership Structure

GYN currently has on issue 40,265,772 fully paid ordinary shares which are quoted on the ASX. It also has on issue 25,469,643 options to subscribe for ordinary shares, with a range of exercise prices and expiry dates. 12,219.643 of these options are quoted on the ASX and 13,250,000 are not quoted on the ASX.

Proposed Allotment

RAB is a shareholder of GYN currently holding 7,000,000 fully paid ordinary shares which is approximately 17.38% of the issued shares. Pursuant to an options agreement, together with legal advice dated 23 March 2007 addressed to the Company. RAB is entitled to subscribe for 2,000,000 shares in GYN at \$0.20 per share, prior to the options expiry date of 16 June 2007. Following the Proposed Allotment, RAB, or its nominee(s) will hold 9,000,000 fully paid ordinary shares in GYN. which equates to approximately 21.29% of the issued shares.

In addition to the Proposed Allotment, RAB is the current holder of 3,500,000 quoted options exercisable at \$0.20 per share on or before 31 October 2007 and 2,000,000 unquoted options exercisable on or before 27 April 2008 at \$0.30 per share.

$\overline{2}$ . PURPOSE OF OUR REPORT

This report has been prepared by Moore Stephens Perth Corporate Services Pty Ltd to accompany the Notice of Annual General Meeting and Explanatory Memorandum to be sent to shareholders to convene a General Meeting.

Section 606 of the Corporations Act provides a general prohibition against any person with a relevant interest of less than 20% in the voting capital of a company from increasing their interest to greater than 20%, or if they currently have a relevant interest exceeding 20%, from further increasing their interest, in the absence of a takeover offer. There are, however, various exemptions to the prohibition, one of which is set out in Item 7 of Section 611 of the Corporations Act. Under Section 611 such an acquisition is allowed if a majority of a company's non-associated shareholders pass an ordinary resolution at a general meeting approving the transaction.

Policy Statement 74 issued by ASIC requires that, in these circumstances, non-associated shareholder be provided with a report assessing whether the proposed transaction is fair and reasonable in the context of the interests of the non-associated shareholders.

This report has been prepared solely for the purpose of assisting the non-associated shareholders of GYN in considering the proposed exercise of 2,000,000 options by RAB. We do not assume any responsibility or liability to any party as a result of reliance on this report for any other purpose.

According to ASIC Policy Statement 74, the issue of whether a Section 611 proposal is fair and reasonable for non-associated shareholders should be judged in all the circumstances of the proposal. The report must compare the likely advantages and disadvantages for the nonassociated shareholders if the proposal is agreed to, with the advantages and disadvantages to those shareholders if it is not. Comparing the value of the shares to be acquired under the proposal and the value of the consideration to be paid is only one element of this assessment.

General

The proposition of fair and reasonable is not defined in the Corporations Act so we have defined it in the following context for the purpose of this report as follows:

Is the Proposed
Allotment Fair?_	The Proposed Allotment is fair if the value of a GYN share is equal to or less than the exercise price of the option.
Is the Proposed
Allotment Reasonable?	The Proposed Allotment may be reasonable whether it is fair or unfair as it involves consideration of other significant factors that shareholders might consider prior to voting on the resolution to approve the Proposed Allotment.

We have employed a two stage process to form an opinion as to whether the Proposed Allotment is fair and reasonable.

• To address whether the Proposed Allotment is fair, we have: $(i)$
• Determined a value of each GYN share: and $\bullet$
• Compared the value of a GYN share with the \$0.20 option exercise price. $\bullet$
• To address whether the Proposed Allotment is reasonable, we have analysed and $(ii)$ compared the advantages and disadvantages of the Proposed Allotment both proceeding and not proceeding.

$(iii)$ Under Policy Statement 74, what is fair and reasonable for the non-associated shareholders should be judged in all the circumstances of the proposal. In determining whether the Proposed Allotment is fair and reasonable to the non-associated shareholders, we have considered and concluded upon the results of (i) and (ii) above.

$\overline{3}$ . SUMMARY AND CONCLUSIONS

In our opinion the Proposed Allotment is fair and reasonable, having regard to the interests of the non-associated shareholders of GYN.

Our opinion as to fairness and reasonableness has been determined on the basis of our assessment of all the relevant matters and circumstance of the Proposed Allotment. It is not based only upon the value of the consideration to be paid by RAB, but also after consideration of the overall impact of the Proposed Allotment and the potential advantages and disadvantages to the non-associated shareholders.

The principal factors affecting our opinion are summarised below and are discussed in more detail in Section 8.

Fairness

The Proposed Allotment is considered fair if the exercise price is greater than the assessed value of an ordinary share in GYN.

In Section 8 of Our Report, the assessed value of an ordinary share in GYN is in the range of \$0.19 to \$0.23. This compares to the exercise price of the options of \$0.20 per share. As the exercise price of the option is within the range of values assessed by us, we conclude that the Proposed Allotment price is fair...

Reasonableness

In assessing whether the Proposed Allotment is reasonable we have considered the potential advantages and disadvantages to the non-associated shareholders of GYN and considered whether the advantages outweigh the disadvantages.

If the Proposed Allotment proceeds

Advantages

• $(i)$ GYN will receive additional cash of \$400,000 representing the total exercise price paid by RAB for the 2,000,000 options exercised at \$0.20 per share.
• $(ii)$ Although it appears that GYN has sufficient cash reserves in the short term to carry out its planned exploration program and to meet administrative expenses, it will probably need to seek further funding in the medium to long term. The injection of share capital of \$400,000 represents a cost effective method of raising capital for GYN compared with other current market alternatives.
• $(iii)$ The Proposed Allotment gives effect to the intention of the parties to the option agreements entered into with RAB that were set out in the prospectus dated 13 April 2005. These option agreements recognise RAB's financial support of GYN by effectively agreeing to act as a significant investor at the time of its initial public offering. RAB's continuing financial support for GYN, as indicated by the Proposed Allotment, is considered a potential advantage to non associated shareholders given the likely need of the Company to be able to access such funding sources at some stage in the future to finance further exploration and /or development activities.

Disadvantages

$(i)$ The existing shareholder percentage interests will be mildly diluted if the Proposed Allotment occurs. We note that RAB is a passive investor in GYN and its increased shareholding will not alter current management of GYN.

If the Proposed Allotment does not proceed

Advantages

$(i)$ The existing shareholders will not experience the dilution effect noted above with respect to their shareholding should the Proposed Allotment not proceed.

Disadvantages

If the Proposed Allotment does not proceed, the shareholders may not enjoy the benefits of $(i)$ the advantages listed above under the scenario that the Proposed Allotment proceeds.

Conclusion Regarding Fairness and Reasonableness

Taking into account the factors summarised above and discussed in detail at Section 8 of our Report, we have concluded that the Proposed Allotment is "fair and reasonable" because the consideration payable by RAB is within the range of values assessed by us and it is also reasonable for shareholders to agree to it because of the other significant non-price advantages in agreeing to it which outweigh the disadvantages of not agreeing to it.

Our conclusion was also affected by the fact that the intentions of the parties to the option agreements were disclosed in the 13 April 2005 prospectus as was the role of RAB as a significant investor.

Our opinion is based on economic, market and other conditions prevailing at the date of our Report. These conditions can experience rapid change which can have a significant effect on values over a short period of time.

This opinion should be read in conjunction with the attached report which outlines our detailed findings and scope of our Report.

Yours faithfully

Neit Pare

Neil Pace Director

TABLE OF CONTENTS

The remainder of our Report is divided into the following sections:

• $\overline{4}$ . Sources of Information
• $5.$ Profile of GYN
• $6.$ Purpose of the Report
• $7.$ Basis of Evaluation
• 1. Assessment of Fairness and Reasonableness
• Valuation of GYN shares
• Comparison of values fairness
• Advantages and disadvantages to non-associated shareholders reasonableness

Appendices

• $1.$ Additional Information
• $\overline{2}$ . Qualifications and Declarations
• $3_l$ Sources of Information

$\mathbf{4}$ . SOURCES OF INFORMATION

In preparing our Report and arriving at our opinion we have considered a number of sources of information as detailed in Appendix 3 to our Report.

The statements and opinions expressed in our Report are made in good faith and have been based on information believed to be reliable and accurate. We have relied upon the information set out in Appendix 3 and have no reason to believe that any material factors have been withheld from us.

PROFILE OF GYN 5.

Background

GYN was incorporated in February 2005 and was admitted to the official List of the Australian Stock Exchange ("ASX") on 28 June 2005 as a base metals exploration company.

Following Incorporation, GYN set about securing interests in a number of exploration tenements.

The Company has base metal interests in WA and NSW including advanced projects and projects at the early exploration stage. All of the project areas have known mineralization and/or a history of previous minina.

The Company's leading project is the Quartz Circle base metal project near Nullagine in the East Pilbara. WA. The geological setting indicates that this is a volcanic-hosted massive sulphide (VMS) deposit containing zinc, lead, copper, silver and gold. Extensive drilling has intersected rich coppergold-silver mineralization at the Igloo Prospect and thick intersections of zinc-lead-silver-gold mineralization at the Emperor Prospect. Much of the zone of potential is yet to be tested and further drilling programs are planned within the next few months.

A recent airborne EM (electromagnetic) survey at Quartz Circle has revealed a large EM conductance anomaly about 1km in diameter situated on the southern edge of the Emperor Prospect. This is an important new exploration target for the Company's next drilling program.

In NSW an airborne VTEM (electromagnetic) survey was flown over a large part of the base metal project at Wertago and several drilling targets have been provisionally identified. These will be inspected on the ground prior to drilling. Exploration drilling at the Gulf Creek copper project is awaiting final heritage clearance from the Traditional Owners but this is expected soon. The exploration rights to tin and tungsten within the Company's exploration licence at Yanco Glen have been sold to newly-listed Wolf Minerals for 2 million Wolf shares. The Company retains the exploration rights for all other minerals within this licence.

Share Capital

Shares

GYN currently has 40,265,772 shares on issue.

During the period from incorporation up to 31 March 2005, GYN issued a total of 2,000,003 shares.

In consideration for acquiring interests in exploration projects referred to as Quartz Circle, Jutson Rocks and Northampton projects. GYN issued a total of 10 million shares to Cazaly Resources Limited, such that Cazaly Resources Limited would retain an approximate 39% interest in GYN following a planned \$2.5 million Initial Public Offering ("IPO") and admission to the official List of the ASX.

GYN then entered into a Share Subscription Agreement with RAB for RAB to acquire 6,250,000 shares in GYN at \$0.20 per share.

By a prospectus dated 13 April 2005, GYN sought to issue a further 6,250,000 shares at \$0.20 per share in GYN by way of an IPO. Following gaining admission to the official list of the ASX, GYN had 24,500,003 shares on issue.

On or about 20 December 2005, GYN issued 2,500,000 shares at \$0.20 per share to raise 500,000 in working capital.

On 17 February 2006, at a General meeting of GYN, shareholders approved the acquisition of Resource Investment Group Pty Ltd and on or about 13 March 2006 the agreed purchase consideration of 10,000,000 shares in GYN were issued.

On 1 September 2006, GYN issued 3,235,294 shares at \$0.34 per share to raise \$1,100,000.

In addition, a total of 30,475 options in GYN have been exercised at \$0.20 per share.

The 20 largest shareholders of GYN as at 7 March 2007 are set out Appendix 1.

TIMING	ISSUE OF ORDINARY SHARES	NUMBER ISSUED
Up to 28/06/05	Following Admission to Official List 28 June 2005	24.500.003
17/02/06	Acquisition of Resource Investment Group Pty Ltd	10,000,000
On or about 13/03/06	Exercise of options	4.604
On or about 21/12/05	Additional working capital	2,500,000
1/09/06	Additional working capital	3.235.294
On or about 5/9/06	Exercise of options	25.000
9/1/07	Exercise of options	871
	Total	40.265.772

Summary of Share issues

Options

GYN entered into an Option Deed with RAB ("the \$0.20 Option Deed") which entitles RAB to subscribe for 2,000,000 ordinary shares at an exercise price of \$0.20 per share. This was detailed in the prospectus dated 13 April 2005. We understand that the expiry date of these options is 16 June 2007. These options are the subject of the Proposed Allotment.

GYN also entered into an Option Deed with RAB on 28 March 2005 ("the \$0.30 Option Deed") which entitles RAB to subscribe for 2,000,000 ordinary shares at an exercise price of \$0.30 per share. This was detailed in the prospectus dated 13 April 2005. We are advised that the expiry date of these options is 27 April 2008.

As at 15 January 2007, the Company had a total of 25,469,643 options on issue as follows:

DESCRIPTION OF OPTIONS	NUMBER ISSUED
options exercisable at \$0.20 on or before 16 June 2007 (pursuant to the	2,000,000
\$0.20 cent Option Deed")
options exercisable at \$0.20 on or before 31 October 2007 (RAB holds 3,500,000 of these)	12.219.643
options exercisable on or before 27 April 2008 at \$0.30 (pursuant to the \$0.30 cent Option Deed")	2,000,000
options exercisable on or before 30 April 2008 at \$0.30	6.000.000
options exercisable on or before 31 October 2008 at \$0.30	2,000,000
options exercisable on or before 31 July 2009 at \$0.30	1,000,000
options exercisable on or before 24 October 2011at \$0.46	250,000
Total	25.469.643

The 20 largest shareholders and option holders of GYYN as at 7 March 2007 are set out in Appendix 1.

Historical Statement of Financial Position

Set out below is the reviewed balance sheet of GYN as at 31 December 2006 and audited balance sheet as at 30 June 2006.

GRAYNIC METALS LIMITED	Hall Mean ended 31 December 2006	Year ended 30 June 2006
	\$	S
CURRENT ASSETS
Cash and cash equivalents	1,735,415	1,397,135
Trade and other receivables	49,508	33,377
Non-current assets classified as held for sale	223,744
TOTAL CURRENT ASSETS	2,008,667	1,430,512
NON CURRENT ASSETS
Other financial assets	40,680	64,458
Plant and equipment	4,914	6,935
Exploration and evaluation expenditure	5,738,437	5,267,961
TOTAL NON CURRENT ASSETS	5,784,031	5,339,354
TOTAL ASSETS	7,792,698	6,769,866
CURRENT LIABILITIES
Trade and other payables	237,391	129,811
Provisions	12,330	16,456
TOTAL CURRENT LIABILITIES	249,721	146,267
TOTAL LIABILITIES	249,721	146,267
NET ASSETS	7,542,977	6,623,599
EQUITY
Issued capital	9.681.815	8,631,979
Option reserve	1,126,495	996,095
Asset Revaluation Reserve	15.162	n
Accumulated Losses	(3,280,495)	(3,004,475)
TOTAL EQUITY	7,542,977	6,623,599

Historical Statement of Financial Performance

The reviewed financial results for the six months ended 31 December 2006 and audited financial results for the year ended 30 June 2006 are summarised as follows:

GRAYNIC METALS LIMITED	Half Year ended 31 December 2006	Year ended 30 June 2006
	\$
Revenue from continuing activities	81,471	110,741
Administrative Expense	(30, 123)	(144, 975)
Employee benefits expense	(235, 756)	(71, 676)
Borrowing costs expense	(571)	O
Consultancy expenses	(28, 682)	(43, 426)
Compliance and regulatory expenses	(35, 880)	(47, 707)
Director's Fees	O	(95, 333)
Occupancy expenses	(15,929)	(18, 860)
Insurance expense	O	(2,085)
Depreciation expense	(4,842)	(4, 109)
Exploration expenditure written off	o	(51,993)
Diminution in value of investments	0	(51, 262)
Exploration expenditure written off - intangible		(2,438,428)
Other expenses	(5,708)	ſ I
Operating loss	(276, 020)	(2,859,113)

6. PURPOSE OF THE REPORT

The Proposed Allotment will result in RAB's relevant interest in GYN voting shares increasing from 17.38% to 21.29%, which is not permitted by Section 606 of the Corporations Act 2001, unless approval of the non-associated shareholders has been given at a general meeting pursuant to Section 611 of the Corporations Act 2001.

The purpose of our report is to assess whether or not the proposed issue of shares to RAB which will exceed the 20% threshold, is fair and reasonable to the non-associated shareholders (i.e. those not associated with RAB). In forming our opinion we have considered ASIC Policy Statement 74 dealing with Acquisitions Agreed by Shareholders and ASIC Policy Statement 75 dealing with Independent Expert Reports to Shareholders.

Policy Statement 74 issued by ASIC sets out the minimum information it considers should by provided to shareholders in order to assist them in deciding whether or not to approve the issue of shares pursuant to Section 611.

One of the items of information to be provided is a report by an independent expert stating whether or not, in the opinion of the expert, the proposed allotment is fair and reasonable, having regard to the interests of the non-associated shareholders. In addition the expert should give an opinion as to whether the company will receive any premium for control of the company as a result of the issue.

$\overline{7}$ . BASIS OF EVALUATION

The key issue to consider, in terms of ASIC Policy Statement 74, in assessing whether the proposed share allotment to RAB is fair and reasonable to the non-associated shareholders, and having regard to all the circumstances of the proposal, those shareholders will be no worse off if the share issue proceeds than if it does not proceed.

The Corporations Act provides no definition of the meaning of fair and reasonable. ASIC's Policy Statement 75 provides quidelines, in determining whether transactions are fair and reasonable. Fairness relates to price whereas reasonableness will include the consideration of factors other than price.

ASIC Policy Statement 74 states that what is fair and reasonable for non-associated shareholders should be judged in all the circumstances of the proposal, with a comparison made of the likely advantages and disadvantages for non-associated shareholders if the proposal does or does not proceed. Comparing the value of the shares to be issued under the proposal and the value of the consideration to be paid would be only one element of this assessment.

Generally, a transaction will be fair and reasonable where the benefits of the transaction proceeding outweigh the disadvantages.

In determining whether the proposed share issue to RAB is fair and reasonable we have addressed the following:

• A comparison of the estimated share value of GYN to the share price exercisable pursuant to the options. ("fairness")
• A comparison of other potential advantages and disadvantages to the non-associated shareholders of the Proposed Allotment. ("reasonableness")
• An estimation of the amount of any premium control of GYN being paid by RAB being the amount by which the consideration paid exceeds the estimated value of a GYN share.

Accepted Valuation Methodologies

ASIC Practice Note 43 states that it is appropriate for the independent expert to consider various methodologies in forming an opinion as to whether a particular transaction may be considered fair and reasonable. In conducting our assessment, the following techniques, which are commonly used to value businesses, have been considered:

• the value of trading operations based on capitalisation of future maintainable earnings
• the value which would be realised upon the orderly realisation of the assets
• the discounted value of projected future cash flow
• the net asset per share calculation
• the value of the quoted market price of listed securities.

Capitalisation of Maintainable Earnings

A valuation based on the capitalisation of future maintainable earnings requires the determination of three key factors: future maintainable earnings ("FME's"), an appropriate capitalisation rate and the value of surplus assets. The capitalisation of earnings is appropriate where the earnings of the company are sufficient to justify a value exceeding the value of the underlying assets. This method is commonly used in valuing established profitable businesses.

In valuing an on-going entity it is usual to estimate a figure for the future maintainable profits and to multiply this earnings figure at an appropriate capitalisation multiple or price earnings ratio ("PER").

When assessing future maintainable earnings it is important to estimate an earnings figure intended to represent maintainable earnings. The inherent risk in the volatility of earnings and the relative weighting given to forecast rather than actual results in determining a maintainable earnings figure is reflected by the choice of an appropriate multiple.

Capitalisation multiples may be determined by reference to comparable companies. This process involves an examination of companies operating in a similar industry and comparing the relative advantages and disadvantages of those companies with the business subject to the valuation.

We have not adopted this methodology in considering the valuation of a GYN share, given the Company's earnings history and its financial performance, which precludes us from performing meaningful calculations.

Orderly Realisation of Assets

The Orderly Realisation of Assets Method estimates fair market value of a company's securities based on the amount that would be returned to equity holders following the payment of all liabilities of the company in an orderly manner. Taxation and costs of realisation are included in the calculation of liabilities.

This methodology may not contemplate the potential of the underlying assets of a company to generate future net earnings at a level sufficient to justify a value greater than the value of its assets subject to an orderly realisation process.

We consider that this valuation method is not appropriate as GYN's assets consist largely of exploration and prospecting licenses, minor plant and equipment and investments in other entities. As the exploration assets are at an early stage of development, any valuation would be considered speculative in nature.

Discounted Cash Flows

The discounted cash flow technique values a project on the basis of its future net cash flows, discounted to its present value using an appropriate discount rate (often referred to as the weighted average cost of capital). It requires an analysis of future cash flows, the capital structure and costs of capital and an assessment of the residual value of the business remaining at the end of the forecast period. Application of this technique generally requires a five year minimum period of analysis. In addition, a sensitivity analysis for variations in key assumptions adopted needs to be performed.

We have not adopted this methodology in considering the valuation of the company as we are unable to reliably estimate future cash flows.

Net Assets Method

We refer to the reviewed financial statements of GYN as at 31 December 2006 which disclose net assets of \$7,542,977 in Section 5 above. Based on the net asset valuation method which allocated a net asset per share value, we have assessed a value of one share in GYN at \$0.187.

Quoted Market Price Methodology

The quoted market price methodology involves valuing a share in a company by reference to its quoted price. Where there is a ready market for securities such as the ASX, through which shares are traded, recent share prices can reflect the market value of each share.

The market value is taken to include all relevant factors and influences that impact on a company traded on the ASX. The use of this method is more relevant where a quoted share displays regular volume trading creating a "market".

Reference is made to Appendix 1 which contains share volume and share price data from 1 January 2006 to 31 March 2007. The following observations are noted.

Share Prices

The table contained in Appendix 1 detailing the share prices shows that the price varied from a one month low of \$0.17 to a one month intra day high of \$0.275.

By using the underlying data contained in that table, we have calculated a seven day volume weighted day average price of \$0.19 and a thirty day volume weighted average price of \$0.23.

Share Volumes

Over the period 1 January 2006 to 31 March 2007, the total volume of shares traded in GYN was 21,924,541. This equates to approximately 54% of the shares currently on issue.

Over the thirty day period ending 30 March 2007, the total volume of shares traded in GYN was 1,215,237 This equates to approximately 3% of the shares currently on issue.

GYN's shares are also very tightly held as evidenced by the 20 largest shareholders holding 62.69% of the issued capital in the company.

Accordingly, this indicates that the stock in thinly traded and therefore not very liquid.

Although we consider this to be the most appropriate method to determine GYN's share value, the fact that the shares are thinly traded means that there could be implications for the share price in that there is a higher inherent degree of uncertainty as to value than if trading in the Company's shares was more liquid

ASSESSMENT OF FAIRNESS AND REASONABLENESS 8.

Valuation of GYN Shares - Fairness

With reference to Section 7, we have estimated a value per share in GYN to be in a range of \$0.19 to \$0.23 based on seven day and thirty day volume weighted average prices. We consider more recent market prices to be indicative of the value of a GYN share given the nature of the Company and its activities. This compares with the exercise price of the options, the subject of the Proposed Allotment, of \$0.20 per share.

Conclusion Regarding Fairness

As the exercise price of the option is within the range of values assessed by us, we conclude that the Proposed Allotment is fair...

Evaluation of GYN Shares - Reasonableness

Policy Statement 74 States:

"... what is fair and reasonable for non-associated shareholders should be judged in all the circumstances of the proposal. The report must compare the likely advantages and disadvantages for the non-associated shareholders if the proposal is agreed to, with the advantages and disadvantages to those shareholders if it is not. Comparing the value of shares to be acquired under the proposal and the value of the consideration to be paid is only one element of this assessment."

Advantages and Disadvantages to the Non-Associated Shareholders - Reasonableness

If the Proposed Allotment proceeds

Advantages

• GYN will receive additional cash of \$400,000 representing the total exercise price paid by $(i)$ RAB for the 2 million options exercised at \$0.20 per share.
• $(ii)$ Although it appears that GYN has sufficient cash reserves in the short term to carry out its planned exploration program and to meet administrative expenses, it will probably need to seek further funding in the medium to long term. The injection of share capital of \$400,000 represents a cost effective method of raising capital for GYN compared with other current market alternatives.
• $(iii)$ The Proposed Allotment gives effect to the intention of the parties to the option agreements entered into with RAB that were set out in the prospectus dated 13 April 2005. These option agreements recognise RAB's financial support of GYN by effectively agreeing to act as a significant investor at the time of its initial public offering. RAB's continuing financial support for GYN, as indicated by the Proposed Allotment, is considered a potential advantage to non associated shareholders given the likely need of the Company to be able to access such funding sources at some stage in the future to finance further exploration and /or development activities.

Disadvantages

The existing shareholder percentage interests will be diluted if the Proposed Allotment $(i)$ occurs, although the proposed is only mildly dilutive. We note that RAB is a passive investor in GYN and its increased shareholding will not alter current management of GYN.

If the Proposed Allotment does not proceed

Advantages

$(i)$ The existing shareholders will not experience the dilution effect noted above with respect to their shareholding should the Proposed Allotment not proceed.

Disadvantages

$(i)$ If the Proposed Allotment does not proceed, the shareholders may not enjoy the benefits of the advantages listed above under the scenario that the Proposed Allotment proceeds.

Conclusion Regarding Fairness and Reasonableness

Taking into account the factors summarised above and discussed in detail at Section 8 of the Report, we have concluded that the proposed Allotment is "fair and reasonable" because the consideration payable by RAB is within a range of values assessed by us and it is also reasonable for shareholders to agree to it because of the other significant non-price advantages in agreeing to it which outweigh the disadvantages of not agreeing to it.

Our conclusion was also affected by the fact that the intentions of the parties to the option agreements were disclosed in the 13 April 2005 prospectus as was the role of RAB as a cornerstone investor.

Control Premium

A control Premium represents the difference between the price that would have to be paid for a share to which a controlling interest attaches and the price at which a share which does not carry with it control of a company could be acquired. As RAB is not acquiring a controlling interest in GYN, the question of control premium is not relevant.

As RAB is not acquiring a controlling interest in GYN, the question of control premium is not relevant.

APPENDIX 1: ADDTIONAL INFORMATION

GRAYNIC METALS LIMITED

20 Largest Shareholders as at 7 March 2007

Name of Shareholder	Number of Fully Paid Ordinary Shares
Westpac Custodian Nominees Limited *	7,000,000
Katrina Peta Downes	3,333,333
Medan Ruth Roberts	2.500.001
Fleur Lesley Schell	2,500,000
Margaret Anne Mullins	1,666,666
Nathan Bruce McMahon	1,069,893
Clive Bruce Jones	995,248
Group # 706008 (Mervyn Ian Leo Bassett & Shirley Ethel Bassett)	850,000
Pylara Pty Ltd	800,000
Cyril Alan Ryman	700.000
Chaldane Pty Ltd	524,000
Saxon Holdings Pty Ltd	500,000
Mark Stephen Ghirardello	450,000
Kylee Lynne Keys	400,000
Robin Scrimgeour	375,000
Peter Macskasy Barnes	335,000
Bannerman Resources Limited	325,000
Vixhold Pty Limited	320,000
AFM Perseus Fund Limited	300,000
Audrey Irving Butchart & Bill Erskine Butchart	300,000
	25,244,141
The percentage of the total holding of the twenty largest holders of ordinary shares was 62.69% * Held on trust for RAB Special Situations LP

20 Largest Option Holders as at 7 March 2007

Name of Option Holder	Number of Options
Westpac Custodian Nominees Limited *	3,500,000
CPA Financial Services	878,400
Jezza Nominees Ltd	757,868
Alastair R Brown Pty Ltd	578,828
Clive Bruce Jones	497,624
Tricom Nominees Pty Ltd	400,000
Fortis Clearing Nominees P/L	377,516
Chaldane Pty Ltd	262,000
Drake Resources Limited	250,000
Alastair Rowland Brown	225,000
Group # 607174 (UBS Wealth Management Australia
Nominees Pty Ltd)	200,000
Melsim Pty Limited	200,000
International Business Network (Services) Pty Ltd Benjamin Robert Willoughby	200,000 183,600
Shane Sadleir	165,000
Bannerman Resources Limited	162,500
Cyril Resources Pty Ltd	106,089
Deanna Demunka Miocevich	105,000
Simon Wallington	101,244
Anthony John Vetter	100.000
	9.250,669
The percentage of the total holding of the twenty largest option holders was 75.70% * Held on trust for RAB Special Situations LP

Summary of Share Price and Volumes Traded History
for the Period 1 January 2006 to 31 March 2007

	Open Price	High Price	Low Price	Close Price		Value
Month/Yr	S,	S.	S.	Æ.	Volume	S.
Mar-07	22.0	25.5	17.0	22.0	658,879	145,073
Feb-07	25.6	27.5	18.0	25.0	1.503.591	353.842
Jan-07	28.0	28.0	26.0	26.5	360,498	99,233
$Dec-06$	29.3	30.9	27.8	29.3	1.099.827	323.704
Nov-06	30.6	35.0	26.0	28.8	1,574,905	459,361
$Oct-06$	30.1	40.0	25.0	31.1	2,580,808	906,227
Sep-06	38.0	40.2	34.3	34.6	2,251,049	888,706
Aug-06	38.9	55.0	36.0	39.5	1,747,152	789,030
Jul-06	21.0	43.0	19.0	25.9	2,552,876	837,057
Jun-06	22.6	24.0	20.6	22.8	1.076.522	218,402
May-06	31.6	36.0	29.0	31.9	1,032,253	332,090
Apr-06	26.6	39.0	25.0	29.1	981,241	282,615
Mar-06	36.1	37.9	33.5	35.1	1,407,937	499,742
$Feb-06$	36.3	40.0	32.0	36.9	1.340.704	477,789
Jan-06	26.1	37.5	24.5	28.6	1,756,299	488,181
					21.924.541	\$7,101,051

APPENDIX 2: QUALIFICATIONS AND DECLARATIONS

Moore Stephens Perth Corporate Services Pty Ltd is a professional practice company, wholly owned by the partner of the Perth practice of Moore Stephens Chartered Accountants. The firm is part of the national and international network of Moore Stephens independent firms, and provides a wide range of professional accounting and business advisory services.

Moore Stephens Perth Corporate Services Pty Ltd holds an Australian Financial Services License and its principals and owners are suitable professionally qualified, with substantial experience in professional practice. The director responsible for signing this report is:

Mr Neil Fenton Pace, Bachelor of Business (WAIT), a Member of the Institute of Chartered Accountants $\blacksquare$ and a Registered Company Auditor. Mr Pace has been involved in the preparation of numerous independent expert reports as well as other financial advisory and valuation assignments.

At the date of this report neither Mr Pace, nor any member or director of Moore Stephens Perth Corporate Services Pty Ltd has any interest in the outcome of the Proposed Allotment, except that Moore Stephens Perth Corporate Services Pty Ltd is entitled to receive professional fees for the preparation of this report based on time occupied at normal professional rates, estimated to be approximately \$10,000.

The partnership of Moore Stephens Perth has provided financial accounting and taxation services and advice to entities associated with the non executive chairman and the company secretary. We have considered the issue of our independence and have concluded that in our opinion, Moore Stephens Perth and Moore Stephens Perth Corporate Services Pty Ltd are independent of both the Company and RAB Special Situations LP.

Neither Moore Stephens Perth Corporate Services Pty Ltd nor Mr Pace take any responsibility for, nor have they authorised or caused the issue of any part of this report to any third party other than the Directors and shareholders of GYN in the context of the scope and purpose defined in Section 2 of the Report.

The statements and opinions expressed in this report are given in good faith, and with reliance upon information generated both independently and internally and with regard to all of the circumstances pertaining to the Proposed Allotment.

We have held discussions with management of GYN regarding the information contained in this report. We did not change the methodology used in our assessment as a result of these discussions and our independence has not been impaired in any way.

APPENDIX 3: SOURCES OF INFORMATION

In preparing the Report we have had access to the following principle sources of information:

• Audited financial statements of GYN for the year ended 30 June 2006, and reviewed financial report for $\ddot{\phantom{0}}$ the half year ended 31 December 2006.
• The draft Notice of Annual General Meeting and Explanatory Memorandum in relation to the proposed $\ddot{\phantom{a}}$ share issue.
• Shareholding Structure of GYN. $\ddot{\phantom{0}}$
• Reviews of recent events and trading performance, prepared by management of GYN. $\ddot{\phantom{0}}$
• Announcements made to the ASX by GYN. $\ddot{\phantom{0}}$
• Prospectus dated 13 April 2005. $\ddot{\bullet}$
• Option Agreement between GYN and RAB. .
• Legal advice to the Company dated 23 March 2007 $\ddot{\phantom{0}}$
• Share volume and share prices data for GYN supplied by a stockbroking firm. $\ddot{\phantom{a}}$