ELEMENTOS LIMITED — Proxy Solicitation & Information Statement 2011

Feb 21, 2011

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22 February 2011

NOTICE OF GENERAL METTING

Attached is the Notice of General Meeting and Proxy Form which has been mailed out to shareholders this week.

For more information, please contact:

Corey Nolan Managing Director Phone: +61 (7) 3871 3985 Email: admin@elementos.com.au

Elementos is an Australian, ASX-listed, exploration company, with a number of projects in Argentina and Australia, which offer an attractive investment environment. The properties are all in mineral rich, highly prospective provinces, with developed infrastructure nearby. Please visit us at www.elementos.com.au

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Elementos Limited

ACN 138 468 756

Notice of General Meeting and Explanatory Statement

General Meeting to be held at Level 1, 349 Coronation Drive, Milton Queensland on Monday, 28 March 2011 at 9.00 am (Brisbane time)

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

Directors Mr A Anthony McLellan (Chairman) Mr Corey Nolan (Managing Director) Mr Neil Stuart (Non-Executive Director) Mr Mark McCauley (Non Executive Director) Mr James D Calaway (Non Executive Director) Company Secretary Paul Crawford Registered Office Level 1 349 Coronation Drive MILTON, QLD 4064 Phone: 07 3871 3985 Fax 07 3720 8988 Email: admin@elementos.com.au Website: www.elementos.com.au ACN 138 468 756 Auditors Hayes Knight Level 4 127 Creek Street BRISBANE QLD 4000 Legal Advisers Hemming + Hart Level 2 307 Queen Street BRISBANE QLD 4000 Share Registry Registries Limited Level 7 207 Kent Street SYDNEY NSW 2000

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Notice of General Meeting

Notice is given that a General Meeting ( Meeting ) of Elementos Limited (ACN 138 468 756) ( Company ) will be held at Level 1, 349 Coronation Drive, Milton, Queensland, Australia on 28 March 2011 commencing at 09:00 am (Brisbane Time).

BUSINESS

Resolution 1 – Issue of Shares to a Related Party

To consider and if thought fit pass the following resolution as an ordinary resolution:

“That for the purposes of Chapter 2E of the Corporations Act and ASX Listing Rule 10.11 and for all other purposes, the Company be authorised to allot and issue 4,230,770 Shares via a placement to Belmont Park Investments Pty Ltd, a related party of the Company, upon the terms and conditions described in the Explanatory Statement.”

Voting Exclusion

The Company will disregard any votes cast on this resolution by Belmont Park Investments Pty Ltd and any associate of Belmont Park Investments Pty Ltd.

However the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or it is cast by 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.

Resolution 2 – Issue of Shares

To consider and if thought fit pass the following resolution as an ordinary resolution:

“That for the purpose of Listing Rule 7.1 and for all other purposes, the Company be authorised to allot and issue 1,569,230 Shares via a placement to Panorama Ridge Pty Ltd, upon the terms and conditions described in the Explanatory Statement.”

Voting Exclusion

The Company will disregard any votes cast on this resolution by Panorama Ridge Pty Ltd and any associate of Panorama Ridge Pty Ltd.

However the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or it is cast by 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.

Resolution 3 – Ratification of Issue of Shares

To consider and if thought fit pass the following resolution as an ordinary resolution:

“That for the purposes of ASX Listing Rule 7.4 and for all other purposes, the allotment and issue on 18 January 2011 of 8,100,000 Shares at an issue price of 26 cents ( Placement Shares ) to Andes Investors LLC, be and is ratified.”

Voting Exclusion

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The Company will disregard any votes cast on this resolution by Andes Investors LLC and any associate of Andes Investors LLC.

However the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or it is cast by 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.

Resolution 4 – Election of Director

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

“That Mr James D Calaway, having been appointed as a Director of the Company since the last general meeting of the Company, be elected a Director of the Company”.

Voting Exclusion

The Company will disregard any votes cast on this resolution by James D Calaway and any associate of James D Calaway.

However the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or it is cast by 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.

Resolution 5 – Grant of Options to a Related Party

To consider and if thought fit pass the following resolution as an ordinary resolution:

“Subject to the due passage of Resolution 4, that for the purpose of Chapter 2E of the Corporations Act and ASX Listing Rule 10.11 and for all other purposes, the Company be authorised to grant 1,000,000 Options to Mr James D Calaway, a Director of the Company, for no consideration and otherwise on the terms and conditions described in the Explanatory Statement.”

Voting Exclusion

The Company will disregard any votes cast on this resolution by James D Calaway and any associate of James D Calaway.

However the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or it is cast by 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.

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Point at Which Voting Rights are Determined

The regulations of the Corporations Act permit the Company to specify a time, not more than 48 hours before the Meeting, at which a “snap-shot” of Shareholders will be taken for the purposes of determining Shareholder entitlements to vote at the Meeting.

The Directors have determined that all Shares of the Company that are quoted on ASX at 9.00am (Brisbane time) on 26 March 2011 will, for the purposes of determining voting entitlements at the Meeting, be taken to be held by the persons registered as holding the Shares at that time.

EXPLANATORY STATEMENT

The Explanatory Statement accompanying this Notice of General Meeting is incorporated in and forms part of this Notice of General Meeting.

Shareholders are referred to the Glossary in the Explanatory Statement, which contains definitions of capitalised terms used in the Explanatory Statement.

Proxies

Please note that:

• (a) a member of the Company entitled to attend and vote at the Meeting is entitled to appoint not more than two proxies;

• (b) a proxy need not be a member of the Company; and

• (c) a member of the Company 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 is not specified each proxy is entitled to cast half of the number of votes.

The enclosed proxy form provides further details on appointing proxies and lodging proxy forms.

Corporate Representative

In order to vote on behalf of a company that is a Shareholder in the Company, a valid Appointment of Corporate Representative form must be either lodged with the Company prior to the Meeting or be presented at the Meeting before registering on the Attendee Register for the Meeting. An Appointment of Corporate Representative form is enclosed, if required.

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Paul Crawford Company Secretary Elementos Limited

Dated 16 February 2011

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Explanatory Statement

Purpose of this Explanatory Statement

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 to be held at Level 1, 349 Coronation Drive, Milton, Queensland on Monday, 28 March 2011 commencing at 9.00 am (Brisbane time).

The purpose of this Explanatory Statement is to provide Shareholders with information that is reasonably required by Shareholders to decide how to vote upon the resolutions to be considered by the Meeting.

The Directors recommend that Shareholders read this Explanatory Statement before determining whether to support the resolutions or otherwise.

Other than as contained in the Notice of General Meeting and Explanatory Statement, the Directors believe that there is no other information known to the Company or the Directors that is reasonably required by Shareholders to decide whether or not it is in the Company’s best interests to pass any of the resolutions.

Resolution 1: Issue of Shares to a Related Party

Background:

On 29 December 2010, the Company announced that it had entered into agreements for the placement of 5,800,000 Shares to sophisticated investors Belmont Park Investments Pty Ltd and Panorama Ridge Pty Ltd, at an issue price of 26 cents. Pursuant to the placement agreement with Belmont Park Investments Pty Ltd, the Company has agreed to issue 4,230,770 Shares to Belmont Park Investments Pty Ltd, subject to the due passage of Resolution 1.

Mr Ian McCauley, the sole director and shareholder of Belmont Park Investments Pty Ltd, has been associated with the Australian resources industry for over 30 years and was a founding shareholder of Felix Resources Ltd. He is regarded as resource industry investment specialist and has strategic interests in several listed and unlisted resource companies around the world. He was introduced to the Company by private equity firm RMM Capital, a resources industry private equity firm managed by the Company’s Director, Mr Mark McCauley.

The issue of 4,230,770 Shares to Belmont Park Investments is subject to the obtaining of Shareholder approval because the entity is a related party of the Company through its association with Mr Mark McCauley, a Director of the Company, solely because Mr Mark McCauley’s father, Mr Ian McCauley, is a director of and controls Belmont Park Investments Pty Ltd.

Mr Mark McCauley has stated that he is neither a director of, nor has any direct or indirect interest in Belmont Park Investments Pty Ltd and will not accept or receive any fee, commission or other financial benefit in relation to the placement to Belmont Park Investments Pty Ltd the subject of this Resolution 1.

Panorama Ridge Pty Ltd is not a related party of the Company. The issue of Shares to Panorama Ridge Pty Ltd is the subject of Resolution 2.

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Regulatory Requirements:

Chapter 2E of the Corporations Act

Chapter 2E of the Corporations Act prohibits a public company from giving a financial benefit to a related party of a public company unless the benefit falls within one of various exceptions to the general prohibition. One of the exceptions includes where the company first obtains the approval of its shareholders in general meeting in circumstances where the requirements of Chapter 2E in relation to the convening of that meeting, have been met.

A “related party” for the purposes of the Corporations Act is defined widely and includes a director of a public company and former directors of a public company.

A “financial benefit” for the purposes of the Corporations Act has a very wide meaning. It includes the public company paying money or issuing securities to a related party. In determining whether or not a financial benefit is being given, it is necessary to look to the economic and commercial substance and effect of what the public company is doing (rather than just the legal form). Any consideration which is given for the financial benefit is to be disregarded, even if it is full or adequate.

This proposed resolution, if passed, will confer financial benefits on Belmont Park Investments Pty Ltd. The Company therefore seeks Shareholder approval in accordance with the requirements of Chapter 2E of the Corporations Act and for this reason and for all other purposes, the following information is provided to Shareholders:

1. The related party to whom resolution 1 will permit the financial benefit to be given

Belmont Park Investments Pty, a related party of the Company through an association with the Company’s Director, Mr Mark McCauley.

2. The nature of the financial benefit

The placement of 4,230,770 Shares to Belmont Park Investments Pty Ltd, at an issue price of 26 cents each, the total issue consideration being $1,100,000.20.

3. Directors’ recommendation

The Directors, with the exception of Mr Mark McCauley, recommend that Shareholders vote in favour of resolution 1. The non-interested members of the Board of the Company at the time when the proposed placement of the Shares was considered, resolved that the Shares were being placed on arm’s length commercial terms, the issue price having been determined with reference to the 14 day volume weighted average price of the Company’s Shares on the date the Company entered into the placement agreement with Belmont Park Investments Pty Ltd.

4. Recipient’s interest and other remuneration

Belmont Park Investments Pty Ltd has a material personal interest in the outcome of resolution 1, as it is proposed that Shares be issued to it. Excluding the Shares proposed to be issued under this resolution, Belmont Park Investments Pty Ltd (and entities associated with it) holds no Shares or options to subscribe for Shares.

5. Valuation

The Shares to be issued pursuant to resolution 1 are in a class of securities that is quoted on ASX. Accordingly, based on the volume weighted average Share trading price for the previous 5 trading days prior to this Notice, the 4,230,770 Shares to be issued pursuant to this Resolution 1, have a value of $0.316 per Share, resulting in an aggregate value of all Shares to be issued to Belmont Park Investments Pty Ltd pursuant to resolution 1, as $1,336,923.

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6. Any other information that is reasonably required by Shareholders to make a decision and that is known to the Company or any of its Directors

There is no other information known to the Company or any of its Directors concerning resolution 1, save and except as follows:

(a) Opportunity Costs

The opportunity costs and benefits foregone by the Company issuing the Shares pursuant to the Placement is the dilutionary impact on the issued share capital of the Company. This is discussed further below.

(b)

Taxation Consequences

No stamp duty will be payable in respect of the grant of the Shares. No GST will be payable by the Company in respect of the grant of the Shares (or if it is, it will be recoverable as an input credit).

AASB 2 “Share Based Payments” requires that these payments shall be measured at the more readily determinable fair value of the equity instrument. Under the accounting standards, this amount will be expensed in the statement of financial performance. Where the grant date and the vesting date are different, the total expenditure calculated will be allocated between the two dates taking into account the terms and conditions attached to the instruments and the counterparties as well as management’s assumptions about probabilities of payments and compliance with and attainment of the set out terms and conditions.

(c) Dilutionary Effect

The issue of the Shares to Belmont Park Investments Pty Ltd will have the following effect on the current issued capital of the Company:

Shareholder	Current Shareholding	% of Total Share Capital
Current Shareholders	77,653,160	94.84
Belmont Park Investments Pty Ltd	4,230,770	5.16
TOTAL	81,883,930	100%

Notes:

1. The total stated in this table includes the Shares proposed to be issued to Panorama Ridge Pty Ltd pursuant to Resolution 2.

2. It is assumed that none of the Options currently on issue are exercised and no further securities are issued, except for the issue of 13,883,929 Shares pursuant to the Company’s Rights Issue, in relation to which a Prospectus was lodged with ASIC and announced on ASX on 28 January 2011. The Rights Issue closes on 25 February 2011.

3. The dilutionary impact of Resolution 1 is therefore that current Shareholders are diluted by 5.16%.

Except as set out in this Explanatory Statement, the Directors are not aware of any other information that will be reasonably required by Shareholders to make a decision in relation to benefits contemplated by resolution 1.

Listing Rule 10.11

Listing Rule 10.11 requires an entity to obtain the approval of Shareholders to an issue of securities to a related party. Belmont Park Investments Pty Ltd is a related party of the Company.

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For the purposes of Listing Rule 10.13 and for all other purposes, the Company advises as follows:

Number of Securities 4,230,770 to be issued:

Timing:

The Shares will be issued and allotted not later than 1 month from the date of this Meeting.

Price at which the Securities are to be issued:

26 cents per Share

Terms of the Securities:

Fully Paid Ordinary Shares

Name of allottee and relationship to the Company:

The Shares will be issued to Belmont Park Investments Pty Ltd. Belmont Park Investments Pty Ltd is a related party solely because it is controlled by Mr Ian Robert McCauley, father of Mr Mark McCauley, a Director of the Company.

Use of the funds:

Funds raised by the issue of the Shares will be used towards:

• accelerating the Company’s planned 2011 exploration programme;

• pursuing additional growth opportunities;

• meeting the Company’s commitments under Options to Purchase Agreements under which the Company acquired rights to its projects;

• meeting other corporate costs; and

• working capital.

In accordance with Listing Rule 7.2 Exception 14, since approval is being sought under Listing Rule 10.11, approval is not required to be obtained from Shareholders under Listing Rule 7.1.

With respect to Resolution 1, the Directors, with the exception of Mr Mark McCauley, recommend that Shareholders vote in favour of resolution 1. The reason for this recommendation is that at the time when the proposed placement of the Shares was considered, the Shares were being placed on arm’s length commercial terms, the issue price having been determined with reference to the 14 day volume weighted average price of the Company’s Shares on ASX on the date of the agreement to place the Shares.

As Mr Mark McCauley is interested in the outcome of resolution 1, he makes no recommendation to Shareholders in respect of this resolution.

Resolution 2: Issue of Shares

Background

On 29 December 2010, the Company announced that it had entered into agreements for the placement of 5,800,000 Shares to sophisticated investors Belmont Park Investments Pty Ltd and Panorama Ridge Pty Ltd, at an issue price of 26 cents. Pursuant to the placement agreement with Panorama Ridge Pty Ltd, the Company has agreed to issue 1,569,230 Shares to Panorama Ridge Pty Ltd, subject to the due passage of Resolution 2.

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Mr John Rawlins, sole director and shareholder of Panorama Ridge Pty Ltd, has been associated with the Australian resources industry for over 30 years and was a major shareholder of Felix Resources Ltd. He is regarded as resource industry investment specialist and has strategic interests in several listed and unlisted resource companies around the world. He was introduced to the Company by private equity firm RMM Capital, a resources industry private equity firm managed by the Company’s Director, Mr Mark McCauley.

Mr McCauley has stated that he is neither a director of, nor has any direct or indirect interest in Panorama Ridge Pty Ltd and will not accept or receive any fee, commission or other financial benefit in relation to the placement to Panorama Ridge Pty Ltd the subject of this Resolution 2.

The issue of 1,569,230 Shares to Panorama Ridge Pty Ltd is subject to Shareholder approval by application of the requirements of Chapter 7 of the Listing Rules, which are discussed below.

The issue of Shares to Belmont Park Investments Pty Ltd is the subject of Resolution 1.

Regulatory Requirements

Listing Rules Chapter 7

Listing Rule 7.1 limits the capacity of the Company to issue securities without the approval of its Shareholders. In broad terms, that rule provides that a Company may not, within a 12 month period, issue securities equal to more than 15% of the total number of ordinary securities on issue at the beginning of the 12 month period, unless the issue is approved by Shareholders or the issue otherwise comes within one of the exceptions to Listing Rule 7.1.

The Shares the subject of Resolution 2 would exceed the 15% Rule and Resolution 2 is therefore designed to fulfil the requirements of Listing Rule 7.1.

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Listing Rule 7.3 contains requirements as to the contents of a notice to Shareholders for the purposes of Listing Rule 7.1. For the purposes of Listing Rule 7.3 and for all other purposes, the Company advises as follows:

The maximum number 1,569,230 Shares. of securities to be issued:

The date by which the entity will issue the securities:

The Shares will be issued and allotted no later than 1 month from the date of this Meeting.

The issue price of the securities:

26 cents each.

Name of the allottee:

Panorama Ridge Pty Ltd.

The terms of the securities:

The Shares the subject of the placement will rank equally with all the existing Shares on issue.

Use of the funds:

Funds raised by the issue of the Shares will be used towards:

• accelerating the Company’s planned 2011 exploration programme;

• pursuing additional growth opportunities;

• meeting the Company’s commitments under Options to Purchase Agreements under which the Company acquired rights to its projects;

• meeting other corporate costs; and

• working capital.

Resolution 3: Ratification of the issue of Shares

This resolution seeks the ratification by Shareholders of the previous allotment and issue by the Company of 8,100,000 Shares by way of placement to Andes Investors LLC, announced on 29 December 2010 and completed on 18 January 2011.

Regulatory Requirements:

Under Listing Rule 7.1, the Company is limited to issuing up to 15% of its issued capital in any 12 month period without Shareholder approval, subject to certain exceptions.

An issue of Shares made without specific approval under Listing Rule 7.1 is treated as having been made with approval for the purpose of Listing Rule 7.1 if the original issue did not breach Listing Rule 7.1 and is subsequently approved by ordinary Shareholders pursuant to the provisions of Listing Rule 7.4.

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The original issue did not breach Listing Rule 7.1 and Shareholder approval is now sought under Listing Rule 7.4 to refresh the Company’s 15% equity placement limit under Listing Rule 7.1. For the purposes of Listing Rule 7.5 and for all other purposes, the Company advises as follows:

Number of Securities Allotted:

8,100,000 Shares

Price at which the 26 cents per Share Securities were issued:

Terms of the Fully Paid Ordinary Shares Securities:

Name of the allottees Andes Investors LLC (Investors):

Use of the funds:

Funds will be used towards:

• accelerating the Company’s planned 2011 exploration programme;

• pursuing additional growth opportunities;

• meeting the Company’s commitments under Options to Purchase Agreements under which the Company acquired rights to its projects;

• meeting other corporate costs; and

• working capital.

Date of Allotment 18 January 2011

With respect to Resolution 3, each of the Directors of the Company recommends that Shareholders vote in favour of this resolution.

Resolution 4 – Election of Mr James D Calaway as Director

Mr Calaway was appointed to the Board of Directors on 18 January 2011. Mr Calaway’s business experience in Argentina and his knowledge of the North American capital markets will greatly assist in the delivery of the Company’s strategy as it plans growth from explorer to developer.

Mr. Calaway is a respected business and civic leader in Houston, Texas, where he serves as Chairman of the Houston Independent School District Foundation. Mr Calaway also serves on various other civic boards, including the Council of Overseers of the Jones School of Management at Rice University. Mr Calaway was appointed as a non-executive Director on 18 January 2011.

Mr. Calaway currently serves as Chairman of the Board of DataCert Inc, the global leader in legal operations management, Chairman of the Board of Open Spirit Corporation, the premier middleware software company in the geological and geophysical software industry and serves as a director on several other U.S. corporate boards. He and his family have considerable experience and success in building young companies into successful commercial enterprises.

Mr. Calaway and his family have played major roles in the development of both public and private companies in the United States, including companies engaged in oil and gas exploration and production and commercial wind-farm development.

Mr Calaway is perhaps best known in Australian capital markets as the major shareholder and Chairman of Orocobre Limited, whose market capitalisation has increased substantially since he became actively involved in the company.

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Mr Calaway received a Bachelor of Arts in Economics from the University of Texas in 1979 and a Master of Arts in Politics, Philosophy and Economics from Oxford University in 1981.

Resolution 5: Grant of Options to a Related Party

Introduction

Subject to the due passage of Resolution 4, Shareholder approval in accordance with the provisions of Part 2E of the Corporations Act and Listing Rule 10.11 and for all other purposes, is sought for the grant, for no consideration, of 1,000,000 Options to Mr James D Calaway, a Director of the Company.

Key Details of Options

Key details of the Options to be granted by the Company to Mr Calaway are set out below:

Recipient Director	Number	Vesting Date	Expiry Date	Exercise Price
Mr James D Calaway	500,000	On the date when the Company’s Share price reaches 40 cents.	18 January 2017	35 cents per Option
	500,000	On the date when the Company’s Share price reaches 45 cents.	18 January 2017	35 cents per Option

Regulatory Requirements:

Chapter 2E of the Corporations Act

Chapter 2E of the Corporations Act prohibits a public company from giving a financial benefit to a related party of a public company unless the benefit falls within one of various exceptions to the general prohibition. One of the exceptions includes where the company first obtains the approval of its shareholders in general meeting in circumstances where the requirements of Chapter 2E in relation to the convening of that meeting, have been met.

A “related party” for the purposes of the Corporations Act is defined widely and includes a director of a public company and former directors of a public company.

A “financial benefit” for the purposes of the Corporations Act has a very wide meaning. It includes the public company paying money or issuing securities to the related party. In determining whether or not a financial benefit is being given, it is necessary to look to the economic and commercial substance and effect of what the public company is doing (rather than just the legal form). Any consideration which is given for the financial benefit is to be disregarded, even if it is full or adequate.

This proposed resolution, if passed, will confer financial benefits on Mr James D Calaway, because he is being issued Options to acquire Shares in the Company. Mr Calaway is a related party of the Company because he is a Director.

The Company therefore seeks Shareholder approval in accordance with the requirements of Chapter 2E of the Corporations Act and for this reason and for all other purposes, the following information is provided to Shareholders:

1. The Related Party to whom Resolution 5 would permit a financial benefit to be given

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Mr James D Calaway, a Director of the Company.

2. The Nature of the Financial Benefit

The nature of the proposed financial benefit to be given is:

• (a) the grant of 1,000,000 Options;

• (b) subject to the vesting conditions stated above, the Options will be exercisable into Shares at an exercise price of $0.35 per Share, expiring on or before 18 January 2017; and

• (c) the Options are granted for no cash consideration. Consequently, no funds will be raised as a result of the grant of the Options. A total of $350,000 in additional share capital will be raised by the Company if the Options are exercised in full.

The detailed terms and conditions of the Options are set out at Annexure A to this Explanatory Statement, which forms part of this Explanatory Statement.

3. Directors’ Recommendation

With respect to Resolution 5, with the exception of Mr James D Calaway, each of the Directors of the Company recommends that Shareholders vote in favour of this resolution. The reasons for the Directors’ recommendation are:

• (a) The grant of the Options as proposed to Mr Calaway will provide reward and incentive for future services provided to the Company to further the progress of the Company; and

• (b) In the Company’s circumstances, the Directors consider that the grant of the Options provides a cost-effective and efficient incentive as opposed to alternative forms of incentives (e.g. cash bonuses or increased remuneration). However, it must be recognised that there will be an opportunity cost to the Company, being the price at which the Company could grant the Options to a third party.

As Mr James D Calaway is interested in the outcome of this resolution, he makes no recommendation to Shareholders in respect of this resolution.

4. Director’s Interest and other Remuneration

Mr Calaway has a material personal interest in the outcome of Resolution 5, as it is proposed that the Options be issued to him as set out in Resolution 5.

In addition to the Options to be issued to Mr Calaway pursuant to Resolution 5, Mr Calaway will receive director’s fees of $40,000 per annum from the Company for his services as Nonexecutive Director of the Company.

Excluding the Options to be issued subject to the passing of Resolution 5, Mr Calaway (through entities associated with him) holds 10,129,256 Shares in the Company.

On 28 January 2011, the Company issued and lodged a Prospectus under which it is conducting a 1:4.48 non-renounceable Rights Issue, the record date for which is 8 February 2011 and which closes on 25 February 2011. Pursuant to the Rights Issue, the Company is seeking to raise approximately $3,610,000 before costs of the Offer. If the Rights Issue is fully subscribed, the Company will issue approximately 13,900,000 Shares at 26 cents per Share.

Mr Calaway (through entities associated with him) is, by virtue of his current holding of Shares, entitled to pursuant to the Rights Issue, to subscribe for an additional 2,260,995 Shares. Accordingly, the maximum number of Shares that Mr Calaway (through entities associated with him) may hold at the close of the Rights Issue, will be 12,390,251 Shares.

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If all of the Options granted to Mr Calaway are subsequently exercised, the following will be the effect on the Company’s capital structure:

	Current Share Holding	% of Total Share Capital (81,883,930 Shares on issue)	Shareholding upon exercise	% of Total Share Capital (81,883,930 Shares on issue)
Mr Calaway	12,390,251	15.13%	13,390,251	16.16%

Notes:

1. Mr Calaway’s interest in the Company’s Shares are held through Andes Investors LLC and Lithium Investors LLC.

2. It is assumed that:

3. a. 13,883,929 Shares will be issued pursuant to the Company’s rights issue;

4. b. In order to illustrate the maximum interests in the Company that Mr Calaway (and entities associated with him) may hold, that Mr Calaway (and entities associated with him) take up their full entitlement under the Rights Issue; in reality, Mr Calaway (and entities associated with him) will hold fewer interests in the Company’s Shares, because Mr Calaway has advised the Company that he (and entities associated with him) only intend to take up 1,808,035 of the 2,260,995 Shares to which he (and entities associated with him) are entitled under the Rights Issue;

5. c. the placements the subject to Resolutions 1 and 2 are approved by Shareholders; and

6. d. none of the other Options on issue are exercised and that no further securities are issued.

5. Valuation

The Options are not currently quoted on the ASX and as such have no market value. The Options may acquire future value dependent upon the extent to which the Shares exceed the Exercise Price of the Options during the term of the Options.

As a general proposition, options to subscribe for fully paid ordinary shares in a company have value. There are various formulae which can be applied to determining the theoretical value of options.

The Board has determined the value of the Options to be issued pursuant to this resolution to be approximately 17.87 cents per Option ($0.1787), representing a total value of approximately $178,700.

This value has been derived using a Binomial Model Option Pricing Model assuming the following:

• (a) 500,000 of the Options vest and become capable of exercise on the date the Company’s Share price on ASX reaches $0.40 and the remaining 500,000 of the Options vest and become capable of exercise on the date the Company’s Share price on ASX reaches $0.45.

• (b) a Share price of 32 cents, being the closing price of Shares on the ASX on 14 February 2011;

• (c) an exercise price of 35 cents;

• (d) a risk free rate of 5.25% per annum;

• (e) a volatility factor of 75%, which has been determined having regard to the historical trading of Shares on ASX;

• (f) an expiry date of 6 years from the date of issue; and

• (g) all other terms and conditions as outlined in this Explanatory Statement.

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6. Any other information that is reasonably required by Shareholders to make a decision and that is known to the Company or any of its Directors

There is no other information known to the Company or any of its Directors except as follows:

(a) Opportunity Costs

The opportunity costs and benefits foregone by the Company issuing the Options to Mr Calaway is the potentially dilutionary impact on the issued share capital of the Company in the event that the Options are exercised. Until exercised, the issue of the Options will not impact upon the number of Shares on issue in the Company. To the extent that upon the exercise of the Options the dilutionary impact caused with the issue of Shares will be detrimental to the Company, this is more than offset by the advantages accruing from the Company securing the services of an experienced and skilled Director on appropriately incentivised terms.

It is also considered that the potential increase of value in the Options is dependent upon a concomitant increase in the value of the Company generally.

(b) Dilutionary Effect

If all of the Options granted are exercised by Mr Calaway, the following will be the dilutionary effect on the current issued capital of the Company:

Shareholders	Current Share Capital	Current Share Capital	Share Capital upon exercise of Options	Share Capital upon exercise of Options
Current Shareholders	69,493,679	84.87%	69,493,679	83.84%
Mr Calaway and entities associated with Mr Calaway	12,390,251	15.13%	13,390,251	16.16%
Total	81,883,930	100%	82,883,930	100%

Notes:

1. Mr Calaway’s interest in the Company’s Shares are held through Andes Investors LLC and Lithium Investors LLC.

2. It is assumed that:

3. a. 13,883,929 Shares will be issued pursuant to the Company’s rights issue;

4. b. Mr Calaway (and entities associated with him) take up their full entitlement under the Rights Issue. If the full entitlements are not taken up, the dilutionary effect of the exercise of the Options will be reduced (in this regard, see note 2b to the table at the end of page 13 and onto page 14);

5. c. the placements the subject to Resolutions 1 and 3 are approved by Shareholders; and

6. d. none of the other Options on issue are exercised and that no further securities are issued.

(c)

Share Price History

In order to assist Shareholders to appropriately consider this resolution, it is noted that the Company’s Shares have traded on ASX in the 6 months prior to the date of this Notice of Annual General Meeting between $0.465 on 18 January 2011 and $0.160 on 17 September 2010. At the close of trading on 14 February 2011, the Company’s Share price was $0.32 cents.

Listing Rule 10.11

Listing Rule 10.11 prohibits the issue of securities to a director of a company unless the approval of the Shareholders of the company is obtained. Listing Rule 7 broadly prohibits a company from issuing more than 15% of its Shares in any one year. Pursuant to Listing Rule 7.2 (Exception 14), if Shareholder approval is given under Listing Rule 10.11, further approval is not required for the purposes of Listing Rule 7.1.

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Listing Rule 10.11 requires an entity to obtain the approval of Shareholders to an issue of securities to a related party. Mr Calaway, being a Director of the Company, is a related party. Accordingly, because the issue of the Shares will result in the Company issuing securities to a related party, approval under Listing Rule 10.11 is required.

For the purposes of Listing Rule 10.13 and for all other purposes, the following information is provided to Shareholders:

Number of Securities	1,000,000 Options
to be issued:
Timing:	The Options will be issued and allotted not later than 1 month
	from the date of this Meeting.
Price at which the	No consideration
Securities are to be
issued:
Terms of the	As set out in this Explanatory Statement, including Annexure A.
Securities:
Use of the funds:	No funds will be received by the Company upon issue of the
	Options.
	If the Options are exercised, the funds will be used towards
	working capital.

Except as set out in this Explanatory Statement, the Directors are not aware of any other information that will be reasonably required by Shareholders to make a decision in relation to benefits contemplated by resolution 5.

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GLOSSARY

In this Explanatory Statement, the following terms have the following meanings unless the context otherwise requires:

In this Explanatory Statement, the context otherwise requires:	following terms have the following meanings unle
AEDT	Australian Eastern Daylight Time
ASX	ASX Limited (ACN 008 624 691).
Company	Elementos Limited (ACN 138 468 756)
Constitution	The constitution of Elementos Limited
Corporations Act	Corporations Act 2001 (Cth).
Director	A director of Elementos Limited.
Listing Rules	Official listing rules of ASX.
Notice of MeetingorNotice	The notice of general meeting accompanying this Explanatory Statement.
Option	An option to acquire a Share.
Rights Issue	The 1:4.48 pro rata, non-renounceable rights issue to eligible Shareholders at 26 cents per Share, under a Prospectus dated 28 January 2011 and lodged on that date with the Australian Securities and Investments Commission.
Share	A fully paid ordinary share in the capital of the Company.
Shareholder	A person holding Shares of the Company.

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Annexure A

Terms and Conditions of Options

The Options to be granted by Elementos Limited (the Company ) to Mr James D Calaway, subject to the passing of Resolution 5, are to be issued on the following terms and conditions:

1. The options are options to subscribe for Shares in the capital of the Company.

2. Shares issued on exercise of the options will rank pari - passu with all existing fully paid ordinary shares of the Company from the date of issue.

3. Subject to the Company’s Constitution, the Corporations Act, the Listing Rules and the ASTC Settlement Rules, the options will not be transferable.

4. The options may be exercised wholly or in part by notice in writing ( Exercise Notice ) to the Company at any time on or after the Vesting Date but before the Expiry Date.

6. The options will not be quoted on ASX.

7. The Company will allot the number of Shares the subject of any valid Exercise Notice, and apply at its cost for quotation on ASX of the Shares so allotted.

8. The option holder will be permitted to participate in new issues of securities of the Company on the prior exercise of the options, in which case the holder of the options will be afforded the period of at least 14 days notice prior to and inclusive of the books closing date (to determine entitlements to the issue) to exercise the options.

9. In the event of any reconstruction (including consolidation, subdivision, reduction or return) of the issued capital of the Company:

10. (a) the number of options, the exercise price of the options, or both will be reconstructed (as appropriate) in a manner consistent with the ASX Listing Rules, but with the intention that such reconstruction will not result in any benefits being conferred on the holders of the options which are not conferred on Shareholders; and

11. (b) subject to the provisions with respect to rounding of entitlements as sanctioned by a meeting of Shareholders approving a reconstruction of capital, in all other respects the terms for the exercise of the options will remain unchanged.

12. The terms of the options will only be changed if holders (whose votes are not to be disregarded) of Shares in the Company approve of such a change. However, the terms of the options will not be changed to reduce the exercise price, increase the number of options or change any period for exercise of the options.

13. The options will be forfeited if:

14. (a) If the Director ceases to hold office as a director of the Company and does not exercise the options within the shorter of the 6 months following his ceasing to hold office as director and the Expiry Date; subject always to the Vesting Date occurring during that Period; and

15. (b) If the Director ceases to hold office as a director of the Company during the option period because of:

    • (i) being convicted of any breach of a criminal provision of the Corporations Act;

    • (ii) being convicted of any other criminal offence; or

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• (iii) committing a material breach of his employment or consultancy agreement (as the case may be) with the Company.

Definitions: In these terms and conditions:

Expiry Date means 18 January 2017.

Option Period means the period between the grant of the options and the Expiry Date.

Vesting Date means:

• (a) For 500,000 of the Options - the date the Company’s Share price on ASX reaches $0.40; and

• (b) For the remaining 500,000 of the Options - the date the Company’s Share price on ASX, reaches $0.45.

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Elementos Limited ABN 49 138 468 756

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FOR ALL ENQUIRIES CALL:

(within Australia) 1300 737 760 (outside Australia) +61 2 9290 9600

FACSIMILE +61 2 9290 9655

ALL CORRESPONDENCE TO:

Registries Limited GPO Box 3993 Sydney NSW 2001 Australia

Your Address

This is your address as it appears on the company’s share register. If this is incorrect, please mark the box with an “X” and make the correction on the form. Securityholders sponsored by a broker should advise your broker of any changes. Please note, you cannot change ownership of your securities using this form.

YOUR VOTE IS IMPORTANT

FOR YOUR VOTE TO BE EFFECTIVE IT MUST BE RECORDED BEFORE 9am (Brisbane Time) SATURDAY 26[TH] MARCH 2011

TO VOTE BY COMPLETING THE PROXY FORM

STEP 1 Appointment of Proxy

Indicate here who you want to appoint as your Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box. If you wish to appoint someone other than the Chairman of the Meeting as your proxy please write the full name of that individual or body corporate. 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 security holder of the company. Do not write the name of the issuer company or the registered securityholder in the space.

Proxy which is a Body Corporate

Where a body corporate is appointed as your proxy, the representative of that body corporate attending the meeting must have provided an “Appointment of Corporate Representative” prior to admission. An Appointment of Corporate Representative form can be obtained from the company’s securities registry.

Appointment of a Second Proxy

You are entitled to appoint up to two proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the company’s securities registry or you may copy this form.

To appoint a second proxy you must:

(a) complete two Proxy Forms. On each Proxy Form state the percentage of your voting rights or the number of securities applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded.

(b) return both forms together in the same envelope.

STEP 2 Voting Directions to your Proxy

STEP 3 Sign the Form

The form must be signed as follows :

Individual: This form is to be signed by the securityholder.

Joint Holding : where the holding is in more than one name, all the securityholders must sign.

Power of Attorney: to sign under a Power of Attorney, you must have already lodged it with the registry. Alternatively, attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: this form must be signed by a Director jointly with either another Director or a Company Secretary. Where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. Please indicate the office held by signing in the appropriate place.

STEP 4 Lodgement of a Proxy

This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below not later than 48 hours before the commencement of the meeting at time 9am (local time) on Monday,28[th] March 2011 . Any Proxy Form received after that time will not be valid for the scheduled meeting.

BY MAIL - Registries Limited GPO Box 3993 Sydney NSW 2001

BY FAX - +61 2 9290 9655

IN PERSON - Registries Limited Level 7 207 Kent Street Sydney NSW

You can tell your Proxy how to vote

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

Attending the Meeting

If you wish to attend the meeting please bring this form with you to assist registration .

ELEMENTOS LIMITED

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STEP 1 - Appointment of Proxy

I/We being a member/s of Elementos Limited and entitled to attend and vote hereby appoint

the Chairman of the Meeting (mark with an OR ‘X’)

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If you are not appointing the Chairman of the Meeting as your proxy please write here the full name of the individual or body corporate (excluding the registered Securityholder) you are appointing as your proxy.

or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy at the General Meeting of Elementos Limited to be held at to be held at Level 1, 349 Coronation Drive, Milton QLD 4064 on Monday the28th of March 2011 at 9am (local time) and at any adjournment of that meeting, to act on my/our behalf and to vote in accordance with the following directions or if no directions have been given, as the proxy sees fit.

STEP 2 - Voting directions to your Proxy – please mark � to indicate your directions

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Ordinary Business For Against Abstain
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Resolution 1 Issue of Shares to a Related Party Resolution 2 Issue of Shares Resolution 3 Ratification of Issue of Shares Resolution 4 Election of Director Resolution 5 Grant of Options to a Related Party

In addition to the intentions advised above. The Chairman of the Meeting intends to vote undirected proxies in favour of each of the items of business.

*If you mark the Abstain box for a particular item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

STEP 3 - PLEASE SIGN HERE This section must

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This section must be signed in accordance with the instructions overleaf to enable your directions to be implemented.
Individual or Securityholder 1 Securityholder 2 Securityholder 3
Sole Director and Sole Company Secretary Director Director/Company Secretary
Contact Name ……………………………….…….. Contact Daytime Telephone ………………………………….. Date / / 2011
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