EVOLUTION MINING LIMITED - M&A Activity 2009

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This is an important document and requires your immediate attention.

You should read it in its entirety. If you are in any doubt about how to deal with this document, you should contact your broker, financial adviser or legal adviser immediately.

CATALPA RESOURCES LIMITED

ABN 74 084 669 036

Explanatory Memorandum in relation to resolutions to approve a proposed merger with Lion Selection Limited and a share consolidation

16 OCTOBER 2009

The Catalpa Directors unanimously recommend that you VOTE IN FAVOUR of the Resolutions, in the absence of a superior Competing Proposal.

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Financial Advisers

Important notices

Read entire Explanatory Memorandum

You should read this Explanatory Memorandum in its entirety before making a decision as to how to vote on the resolutions to be considered at the General Meeting. If you are not able to read this Explanatory Memorandum or are unable to decide what to do, you should consult your financial adviser. If there is anything you do not understand you can call Catalpa on +618 9321 3088 or consult your financial adviser.

Status of Explanatory Memorandum

This Explanatory Memorandum provides Catalpa Shareholders with information about the proposed Merger with Lion Selection Limited and associated Share Consolidation.

If you have sold all of your Catalpa Shares, you may ignore this Explanatory Memorandum.

This Explanatory Memorandum is not a disclosure document required by Chapter 6D of the Corporations Act.

Investment decisions

This Explanatory Memorandum is intended for all Catalpa Shareholders collectively and does not take into account your individual objectives, financial situation and needs. This Explanatory Memorandum should not be relied upon as the sole basis for any investment decision in relation to Catalpa Shares or any other securities. You need to have regard to all the publicly available information concerning the issuers of those securities. Before making any investment decision in relation to the Share Consolidation or Merger, you should consider, with or without the assistance of a financial advisor, that your decision is appropriate to your particular investment needs, objectives and financial circumstances. If you are in any doubt about what you should do, you should seek independent financial and taxation advice before making any investment decision in relation to Catalpa Shares or any other securities.

Forward looking statements

Certain statements in this Explanatory Memorandum relate to the future, including forward looking statements relating to the financial position and strategy of Catalpa and Lion Selection. These forward looking statements are generally based on stated or implied assumptions which may prove to be incorrect and involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of Catalpa or Lion Selection to be materially different from future results, performance or achievements expressed or implied by such statements. Certain important factors that could cause actual results, performance or achievements to differ materially from those in the forward looking statements include, among others, values of investee companies, levels of actual production during any period, levels of demand and market prices for commodities, the ability to produce and transport mine products profitably, the impact of foreign currency exchange rates on market prices and operating costs, construction and operational problems, general economic and financial conditions and actions by governmental authorities such as changes in taxation, environmental or other regulation.

None of Catalpa or Lion Selection, any directors of those companies nor any other person gives any representation, assurance or guarantee that the events expressed or implied in any forward looking statements in this Explanatory Memorandum will actually occur and you are cautioned not to place undue reliance on such forward looking statements.

Subject to any continuing obligations under law and the ASX Listing Rules, Catalpa, the Catalpa Directors, Lion Selection and the Lion Selection Directors disclaim any obligation or undertaking to disseminate after the date of this Explanatory Memorandum any updates or revisions to any forward looking statements to reflect any change in expectations in relation to those statements or any change in events, conditions or circumstances on which any such statement is based other than to comply with legal obligations and the ASX Listing Rules.

Estimates

disclosed in the pro forma financial statements set out in section 3 which have been prepared on the basis set out in those sections.

Responsibility statements

a. Preparation by Catalpa

All information contained in the Explanatory Memorandum other than the Lion Selection Material has been assembled by Catalpa and the Catalpa Directors and is the responsibility of Catalpa.

Neither Lion Selection, the Lion Selection Directors or their advisers assume any responsibility for the accuracy or completeness of the Catalpa Material.

b. Preparation by Lion Selection

The information concerning Lion Selection contained in the Lion Selection Material has been provided by Lion Selection and its advisers and is the responsibility of Lion Selection.

Neither Catalpa, the Catalpa Directors or their advisers assume any responsibility for the accuracy or completeness of the Lion Selection Material.

c. ASX

A copy of this Explanatory Memorandum has been lodged with ASX. Neither ASX nor its officers take any responsibility for the contents of the Explanatory Memorandum. The fact that ASX may grant official quotation of New Catalpa Shares is not to be taken in any way as an indication of the merits of Catalpa or the Scheme. Lion Selection Shares and Catalpa Shares will continue to be quoted on ASX if the Scheme is not approved.

New Zealand shareholders

This Explanatory Memorandum is not a New Zealand prospectus or an investment statement and has not been registered, filed with or approved by any New Zealand regulatory authority under or in accordance with the Securities Act 1978 (or any other relevant New Zealand law).

Glossary, defined terms and interpretation

A number of terms used in this Explanatory Memorandum have special meanings. These are listed in the Glossary at the back of this Explanatory Memorandum.

Unless otherwise stated, all data contained in charts, graphs and tables is based on information available at the date of this document. All numbers are rounded unless otherwise indicated.

Privacy

Catalpa and its share registry may collect personal information in the process of implementing the Merger. This information may include the names, contact details and security holdings Catalpa Shareholders and the names of persons appointed by Catalpa Shareholders to act as proxy, corporate representative or attorney at the General Meeting. The primary purpose of collecting this information is to assist Catalpa in the conduct of the General Meeting.

Personal information may be disclosed to Catalpa’s share registry, print and mail service providers, authorized securities brokers, Lion Selection and their respective related bodies corporate.

Catalpa Shareholders and other persons whose personal information has been collected by Catalpa have the right to access that information. Catalpa Shareholders should call Catalpa on +618 9321 3088, in the first instance if they wish to request access to that personal information.

The main consequence of not collecting the personal information outlined above would be that Catalpa may be hindered in, or prevented from, conducting the General Meeting as efficiently as possible.

Catalpa Shareholders who appoint a named person to act as their proxy, corporate representative or attorney at the General Meeting must inform that person of the matters outlined above.

Date

This Explanatory Memorandum is dated 16 October 2009.

Unless otherwise indicated, all references to estimates and derivations of the same in this Explanatory Memorandum are references to estimates by Catalpa management or Lion Selection management (as applicable). Management estimates are based on views at the date of this Explanatory Memorandum, and the actual facts or outcomes may be materially different from those estimates.

Pro forma financial information

Unless otherwise specified, references in this Explanatory Memorandum to the financial results or position of Lion Selection or Catalpa are to the pro forma financial results or position of Lion Selection or Catalpa

Contents of this Explanatory Memorandum

Important notices
Letter from the Chairman of Catalpa		3
Why you should vote	in favour	5
Timetable/key dates		7
Section 1	Frequently asked questions	8
Section 2	Summary of the Merger and Catalpa	22
	Directors’ recommendations
Section 3	Information about the Merged Group	45
Section 4	Information about Lion Selection	45
Section 5	Information about Catalpa	64
Section 6	Information about Implementation of	65
	the Merger
Section 7	Additional information	72
Section 8	Glossary and interpretation	73
Corporate Directory		OBC

What you should do

STEP 1: READ THIS EXPLANATORY MEMORANDUM IN FULL

You should read this Explanatory Memorandum in its entirety. If you have any questions, please call Catalpa on +618 9321 3088.

STEP 2: VOTE ON THE RESOLUTIONS

Vote on the Resolutions by doing one of the following:

•	By proxy, complete and return the proxy form accompanying this Explanatory Memorandum so that it is
	received by Catalpa’s Share Registry before 5.00pm on 13 November 2009.
	By mail: Security Transfer Registrars Pty Ltd
	PO Box 535
	Applecross WA 6953
	By hand: Suite 1, 770 Canning Highway
	Applecross WA 6153
	By Fax: + 61 8 9315 2233
	You are encouraged to submit your proxy bymailorfax.

	You are encouraged to submit your proxy bymailorfax.
•	Attend the Catalpa General Meeting in person at the Hyatt Regency Perth, Traders Lounge, 99 Adelaide
	Terrace, Perth WA on 17 November 2009, commencing at 10.00am (AWST).

page 1

Summary of the Merger

Catalpa Shareholders are being asked to approve the participation by Catalpa in a merger with Lion Selection and a share consolidation by Catalpa. The Merger and the Share Consolidation are part of broader transaction under which:

1 Lion Selection will demerge with LSG through the transfer of all of the shares in LSG to Lion Selection Shareholders by way of capital reduction. Following the capital reduction, Lion Selection’s only assets will be:
Its 46.9% shareholding in Catalpa and ~ 129.3 million Catalpa Options;
A 30% interest in the Cracow Gold Mine;
A pre-emptive over the remaining 70% of Cracow Gold Mine; and
$1.5m cash.
2 Catalpa will undertake an eleven for one share consolidation.
3 Catalpa will merge with Lion Selection. As part of the merger, Catalpa will issue one Catalpa share for every one Lion Selection share held by Lion Selection Shareholders.
4 Catalpa will cancel Lion Selection’s Catalpa Options, and it is Catalpa’s current intention to cancel Lion Selection’s Catalpa Shares within 12 months of implementation of the Scheme, subject to Catalpa Shareholders approval.

Catalpa before and after the Merger:

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PRE MERGER POST MERGER
Lion Selection Shareholding Catalpa OtherShareholders ShareholdersLion (4) Catalpa Other Shareholders
46.9% 53.1% 60.9% [(5)] 39.1%
Option HoldingLion Selection [(1)] CATALPA Catalpa OptionHolders [(2)] CATALPA 100% Catalpa Option Holders [(2)]
100% ~A$38m(3) 100% 30% ~A$40m
Edna May Cash Edna May Cracow [(6)] Cash Cracow
(JV) Pre-emptive
•••• Reserves 817k oz100koz+ productionResource 1.5m oz1st gold pour mid 2010 •••• 100koz+ productionReserves 817k ozResource 1.5m oz1 [st] gold pour mid 2010 •••• 31koz productionReserves 53k ozResource 211k ozOperating
Notes
(1) Holds 129.3m Catalpa Options to be cancelled following Merger
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(2) Holds 171.2m Catalpa Options (~15.6m Catalpa Options post 1 for 11 consolidation)
(3) At the time the Merger was announced
(4) It is intended that Lion Selection’s Catalpa Shares will be cancelled following the Merger. Lion shareholders to be issued Catalpa Shares in exchange for their Lion Selection Shares
(5) Reduces to ~55% on a fully diluted basis (6) Figures for 30% interest

page 2

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16 October 2009

Dear Catalpa Shareholder

On behalf of the Catalpa Directors, I am pleased to present to you the compelling proposal for Catalpa to merge with its largest shareholder, Lion Selection, to establish Catalpa as a new leading mid-tier Australian gold producer ( Merger ).

The Merger will be implemented via a scheme of arrangement between Lion Selection and Lion Selection Shareholders ( Scheme ). Under the Scheme, Catalpa will acquire all of the shares in Lion Selection. Lion Selection Shareholders will receive 1 Catalpa Share for each Lion Selection Share they hold subsequent to Catalpa undertaking an 11 for 1 share consolidation ( Share Consolidation ).

The Merger is part of a broader transaction involving a proposed demerger of Lion Selection’s investment business, the termination of an agreement under which Lion Manager Pty Ltd provides investment management services to Lion Selection and a cash distribution of 10 cents per Lion Selection Share to Lion Selection Shareholders by Lion Selection prior to the implementation of the Scheme.

The Merger will have the following benefits for Catalpa Shareholders:

Catalpa will obtain:
Lion Selection’s 30% ownership of the 100 000+ oz pa Cracow Gold Mine in Queensland;
$1.5 million cash; and
A pre-emptive right over Newcrest’s 70% interest in the Cracow Gold Mine;
Lion Selection will cancel its ~129.3 million Catalpa Options (pre consolidation in Catalpa);
Catalpa will have access to net cash flows from Lion Selection’s 30% ownership of the Cracow Gold Mine from 1 August 2009; and
Upon the cancellation of Lion Selection’s Catalpa Options and the intended cancellation of Lion Selection’s Catalpa Shares after the Merger, a controlling shareholder with a 46.9% interest in Catalpa will be removed from the Catalpa share register.

The key features of Catalpa post merger will include:

Two Australian gold projects:
100,000+ oz pa Edna May Gold Project in Western Australia;
Immediate gold producer status: ~30,000+ oz/pa of attributable production from the Cracow Gold Mine;

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Immediate cash flow;
Increased production: Company production growing to ~130,000+ oz/pa, ranking Catalpa as a mid-tier Australian gold producer, with a larger proportion of unhedged production;
An open share register, with no shareholder in the merged entity holding more than 9.0%;
Diversity (ownership in two mines with both open-cut and underground operations);
Significant potential to add additional resources and reserves at both operations through near mine exploration success; and
A pre-emptive right over Newcrest’s 70% stake in Cracow Gold Mine.

The Merger is required to be approved by both Catalpa Shareholders and Lion Selection Shareholders. The Share Consolidation is required to be approved by Catalpa Shareholders and is conditional on the approval of the Merger Resolution by Catalpa Shareholders and the approval of each of the Lion Selection Scheme Resolution, the Lion Selection Cash Distribution Resolution, Lion Manager Share Issue Resolution and the Lion Selection Demerger Resolution by Lion Selection Shareholders. This means that unless Catalpa Shareholders and Lion Selection Shareholders each approve the Merger, the Share Consolidation will not proceed.

The Merger is unanimously recommended by the boards of both Catalpa and Lion Selection and each Catalpa Director and Lion Selection Director intends to vote their respective shareholdings in favour of the Merger, in the absence of a superior Competing Proposal.

Your vote is important. I urge you to attend the Catalpa General Meeting at which the Merger and the Share Consolidation will be voted on or, if you are unable to attend, to complete the proxy form accompanying this Explanatory Memorandum and return it before 5.00pm (AWST) on 13 November 2009. If you require any assistance in completing or lodging your proxy form, please feel free to contact Catalpa on +618 9321 3088.

My fellow Catalpa Directors and I recommend the Merger and Share Consolidation to you as we consider the merged entity to be a superior investment compared to Catalpa in its current form and provides for an enhanced platform for future growth.

Yours faithfully

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John Rowe Chairman Catalpa Resources Limited

page 4

Reasons to vote in favour of the Resolutions

For the reasons set out below, Catalpa Directors unanimously recommend that Catalpa Shareholders vote in favour of the Resolutions in the absence of a superior Competing Proposal. This section should be read in conjunction with section 2, which sets out a summary of the disadvantages and risks associated with the Merger.

1	Immediate gold producer status Catalpa will acquire a 30% joint venture interest in the Cracow Gold Mine in Queensland operated by Newcrest, with a share of current production of around 30,000 oz per annum.
2	Immediate cash flow Catalpa will benefit from cash flows from Lion Selection’s 30% ownership of the Cracow Gold Mine’s production from 1 August 2009.
3	Increased production Catalpa’s production will grow to ~130,000+ oz/pa, ranking Catalpa as a leading mid-tier Australian gold producer, with a larger proportion of unhedged production.
4	A diversified register Lion Selection currently holds 46.9% of Catalpa. Upon the intended cancellation of Lion Selection’s Catalpa Shares following the Merger no shareholder in the merged entity will hold more than 9.0% of the enlarged group.
5	Cancellation of Catalpa Options Lion Selection will cancel ~129.3 million Catalpa Options which it currently holds.
6	Diversified operations Catalpa will have ownership in two Australian mines, with both open-cut and underground operations.
7	Exploration opportunities Significant potential to add additional resources and reserves through near mine exploration success at both operations.
8	Cracow pre-emptive Catalpa will acquire Lion Selection’s pre-emptive right over Newcrest’s 70% stake in the Cracow Gold Mine.
9	Additional $1.5 million of cash As part of the Merger, Lion Selection will contribute $1.5 million cash to Catalpa.
10	Share consolidation will provide flexibility The Share Consolidation will reduce the number of Catalpa Shares on issue to a more appropriate number for a producing gold company.

page 5

Disadvantages of the Merger and reasons to vote against the Resolutions

The Catalpa Directors are of the opinion that the benefits of the Merger outweigh its disadvantages and unanimously recommend that Catalpa Shareholders vote in favour of the Merger in the absence of a superior Competing Proposal.

However, you are not obliged to follow the recommendation of the Catalpa Directors. Some risks arising from the Merger and the factors that may lead you to vote against the Merger are outlined below. This section should be read in conjunction with section 2.4, which sets out in detail the disadvantages and risks associated with the Merger.

1	Dilution of Catalpa Shareholders’ interests Non-Lion Catalpa Shareholders currently hold 53% of Catalpa. As a result of the issue of Catalpa Shares under the Scheme and assuming the cancellation of Lion Selection’s Catalpa Shares, current (non-Lion) Catalpa Shareholders will hold 39% of the merged Catalpa. Following the exercise of all Catalpa Options on issue, this will increase to 45%.
2	Lion Selection’s liabilities Lion Selection (which will become a wholly owned subsidiary of Catalpa) will remain liable for liabilities of Lion Selection under the Cracow Joint Venture Agreements, including environmental remediation obligations and ongoing costs of the Cracow Gold Mine.
3	Macquarie Bank financing The Merger is a ‘review event’ under the Macquarie Facilities. Macquarie Bank has agreed in principle to waive the review event subject to and conditional upon certain amendments being made to the syndicated facility agreement. The amendments do not materially change the terms of the facility and have been agreed to, but are yet to be documented.
4	Change of control contractual provisions A number of contracts to which either Catalpa or Lion Selection is a party may contain ‘change of control’ or similar clauses. There is a risk that counterparties to these contracts may seek to terminate these agreements if the counterparty’s consent to the Scheme is not obtained
5	Commodity price risk The Cracow Gold Mine’s operating margin is not hedged and this will increase Catalpa’s susceptibility to a decline in the gold price.
6	Operating risks Catalpa Shareholders will have increased exposure to the operating risks associated with gold mining.

page 6

Key Dates/Timetable

Event	Time and Date
Time and date by which you must lodge the Catalpa General Meeting Proxy Form	Before 5.00pm on 13
for the Catalpa General Meeting if you wish to vote by proxy at the meeting.	November 2009
Time and date for determining eligibility to vote at the Catalpa General Meeting	7.00pm on 15 November
	2009
Lion Selection General Meeting	10.00am (AEST) on 17
	November 2009
Lion Selection Scheme Meeting	10.15am (AEST) on 17
	November 2009
Catalpa General Meeting to be held at the Hyatt Regency Perth, Traders Lounge,	10.00am on 17 November
99 Adelaide Terrace, Perth WA	2009
Catalpa Share Consolidation takes effect	7.00pm on 26 November
	2009
Catalpa Shares commence trading on ASXona deferred settlement basis	27 November 2009
Court hearing for approval of the Scheme	27 November 2009
Scheme Effective Date – the date the Scheme becomes legally effective. Lion	30 November 2009
Selection ceases trading at close of trading on ASX
Catalpa Share Consolidation record date	3 December 2009
Scheme Record Date - Date for determination of entitlements of Lion Selection	7 December 2009
Shareholders to Scheme Consideration
Demerger Effective Date - Transfer of LSG shares to Lion Selection shareholders	9 December 2009
	(immediately prior to
	implementationofScheme)
Scheme Implementation Date - Catalpa issues Scheme Consideration	10 December 2009
Despatch date in respect of Catalpa Share Consolidation and Scheme	10 December 2009
Consideration – last day ofdeferred settlement trading
NOTE

Unless otherwise stated, all times referred to in this Explanatory Memorandum are Australian Western Standard Times. Dates are indicative only. Catalpa reserves the right to vary the times and dates set out above and may not be able to notify Catalpa Shareholders of these changes. All dates following the Lion Selection Scheme Meeting are subject to Court, ASIC and ASX approval.

page 7

1 Frequently asked questions

This section answers some frequently asked questions about the Merger. It is not intended to address all relevant issues for Catalpa Shareholders. This section should be read together with all other parts of this Explanatory Memorandum.

Question	Answer	More Information
Background
What is the Merger?	The Merger is the merger of Catalpa with Lion	Section 2 contains a
	Selection. The Merger will be implemented by way of a	more detailed overview
	scheme of arrangement under s 411(1) of the	of the Merger.
	Corporations Act.
	Under the Scheme, Catalpa will offer 1 Catalpa Share
	for each 1 Lion Selection Share held by Lion Selection
	Shareholders (assuming that the Share Consolidation is
	approved by Catalpa Shareholders).
	Following the Implementation of the Scheme, Lion
	Selection will be a wholly owned subsidiary of Catalpa.
	The Merger is part of a broader transaction under
	which:
	i. the Demerger of 100% of LSG, a company holding
	all of Lion Selection’s investments other than the
	30% interest in the Cracow Gold Mine and the 47%
	shareholding in Catalpa and Catalpa Options and
	A$1.5 million in cash, from Lion Selection to Lion
	Selection Shareholders;
	ii. the issue of up to 5,923,757 shares by Lion
	Selection to Lion Manager as payment for the
	termination of the Lion Management Agreement;
	and
	iii. the payment by Lion Selection of a 10 cents per
	share Cash Distribution to Lion Selection
	Shareholders.
Who is Lion	Lion Selection was formed in April 2007 as a result of a	Section 4 contains
Selection?	shareholder approved merger between Lion Selection	more information
	Group Limited and AuSelect Limited. Lion Selection’s	regarding Lion
	assets currently comprise a portfolio of resource	Selection and the Lion
	investments and a 30% joint venture interest in the	Selection Demerger.
	Cracow Gold Mine.
	As at 30 June 2009, Lion Selection’s market
	capitalisation was approximately $109.2 million.
	Lion Selection currently holds 46.9%of shares in
	Catalpa.

page 8

Question

Answer

More Information

Approvals sought and meeting information

What are the key steps in implementing the Transactions?

The key steps in implementing the Transactions are:

i. at the Catalpa Meeting, Catalpa Shareholders will vote to:

Section 2 contains more information about what you are being asked to vote on.

approve Catalpa’s participation in the Scheme; and
approve the Share Consolidation;
ii. at the Lion Selection General Meeting, Lion Selection Shareholders will vote to:
approve both the Demerger of LSG from Lion Selection by way of a reduction of capital; and
approve the termination of the Management Agreement with Lion Manager (including the Lion Manager Share Issue); and
approve the Cash Distribution by Lion Selection by way of a capital reduction provided the Scheme is approved;
iii. at the Lion Selection Scheme Meeting, Lion Selection Shareholders will vote to approve the acquisition of Lion Selection by Catalpa (following the Lion Manager Share Issue, the Demerger and the Cash Distribution) by way of the Scheme; and
iv. if the resolutions to be considered by Lion Selection Shareholders and Catalpa Shareholders at the General Meeting, the Scheme Meeting and the Catalpa Meeting are approved by the requisite majorities of Lion Selection Shareholders and Catalpa Shareholders, applications will be made to the Court to approve the Scheme at a Court hearing expected to be held on 27 November 2009.

Why is my approval In relation to the Merger, given the effect that the of the Merger and the Merger will have on Catalpa and the Catalpa Share Share Consolidation Register, the Catalpa Directors consider it prudent to required? obtain the approval of Catalpa Shareholders to Catalpa’s participation in the Merger. In relation to the Share Consolidation, the Corporations Act requires Catalpa Shareholders to approve the consolidation of Catalpa’s share capital. Approval of the Share Consolidation is conditional on the approval of the Merger Resolution by Catalpa Shareholders and the approval of each of the Lion Selection Scheme Resolution, the Lion Selection Cash Distribution Resolution, the Lion Manager Share Issue Resolution and the Lion Selection Demerger Resolution by Lion Selection Shareholders. This means that unless Catalpa Shareholders and Lion Selection Shareholders

page 9

Question	Answer	More Information
	each approve the Merger, the Share Consolidation will
	not proceed.
Who can vote on the	The Catalpa Directors have determined that the Catalpa	Refer to section 2.7
Resolutions?	Shareholders entitled to attend and vote at the Catalpa General Meeting shall be those persons who are recorded in the Catalpa Share Register at 7.00pm	Refer to your proxy form.
	(AWST) on 15 November 2009.
	You can vote in person, by attorney, by proxy or, in the
	case of corporate shareholders, by corporate
	representative.
	If your Catalpa Shares are jointly held, only one of the
	joint Catalpa Shareholders is entitled to vote. If more
	than one Catalpa Shareholder votes in respect of jointly
	held Catalpa Shares, only the vote of the Catalpa
	Shareholder whose name appears first in the Share
	Register will be counted.
	Catalpa has determined that voting exclusions will apply
	to the Merger Resolution. In summary, the relevant
	voting exclusions mean that neither Lion Selection nor
	its associates can vote on the Merger Resolution. This
	voting exclusion is set out in the Notice of Meeting.
What are the voting	Catalpa General Meeting	Refer to section 2.1.
approval thresholds?	For the Scheme to proceed, at least 50% of the total
	number of Catalpa Shares voted on the Merger
	Resolution at the Catalpa Meeting must be voted in
	favour. Lion Selection will not be entitled to vote on the
	Merger Resolution.
	For the Share Consolidation to proceed, at least 50% of
	the total number of Catalpa Shares voted on the Share
	Consolidation Resolution at the Catalpa Meeting must
	be voted in favour. Lion Selection will be entitled to vote
	on the Share Consolidation Resolution.
	Lion Selection General Meeting
	For the Lion Manager Share issue to proceed, at least
	50% of the total number of Lion Selection Shares voted
	on the Lion Manager Share Issue Resolution must be
	voted in favour.
	Any votes cast by Lion Manager or its associates
	(including its executives) on the Lion Manager Share
	Issue Resolution are to be disregarded.
	For the Demerger to proceed, at least 50% of the total
	number of Lion Selection Shares voted on the
	Demerger Resolution must be voted in favour.
	For the Cash Distribution to proceed, at least 50% of the
	total number of Lion Selection Shares voted on the
	Cash Resolution must be voted in favour.
	Lion Selection Scheme Meeting
	For the Scheme to proceed, votes in favour must be

page 10

Question	Answer	More Information
	received from:
	i. a majority in number of Lion Selection
	Shareholders who vote at the Scheme Meeting (in
	person or by proxy, attorney or representative);
	and
	ii. at least 75% of the total number of Lion Selection
	Shares voted on the resolution to approve the
	Scheme.
	Any votes cast by Catalpa or its associates at the
	Scheme Meeting are to be disregarded.
Is voting	Voting is not compulsory, however, your vote is	Refer to section 2.7.
compulsory?	important. The Catalpa Directors urge you to attend the
	Catalpa General Meeting or, if you are unable to attend,
	to complete the proxy form accompanying this
	Explanatory Memorandum and return it before 5.00pm
	(AWST) on 13 November 2009.
	If you hold your Catalpa Shares through a broker or
	nominee holder, you should contact them as soon as
	possible to instruct them to vote on your behalf.
	If you require any assistance in completing or lodging
	your proxy form, please feel free to contact Catalpa on
	+618 9321 3088.
What happens if the	If the Merger Resolution is not passed, the Merger will	Section 2.5 provides
Merger Resolution is	not be implemented.	further information on
not passed?	The Company will have incurred costs, but will not be liable for payment of the $1 million Termination Fee, unless another event occurs to give rise to payment of the Termination Fee.	the implications for Catalpa Shareholders if the Merger does not proceed.
	The Share Consolidation Resolution is conditional on the Merger Resolution. This means that if the Merger Resolution is not passed, the Share Consolidation will not proceed.	Section 6.1(g) contains more information about the circumstances where a Termination Fee is payable.
What happens if the	If the Share Consolidation Resolution is not passed, one	Section2provides
Share Consolidation	of the conditions precedent to the Merger	further information
Resolution is not	Implementation Agreement will not be met.	regarding the Share
passed?	Lion Selection will have the choice of terminating the Merger Implementation Agreement, in which case the	Consolidation Resolution.
	Merger will not go ahead in its current form, or waiving
	the condition and proceeding with the Merger. If Lion
	Selection waives the condition relating to the Share
	Consolidation and proceeds with the Merger, Lion
	Selection Shareholders will receive 11 Catalpa Shares
	for every 1 Lion Selection Share.

page 11

Question

More Information

Answer

Rationale for and implications of the Merger

How were the terms	The terms of the Merger were determined by reference
of the Merger	to a number of factors including
determined?
	• the relative estimated project values for Catalpa and
	Lion Selection respectively as agreed by Catalpa
	and Lion Selection;
	• the relevant value of Catalpa (as determined above)
	as attributed to Lion Selection based on its
	shareholding and options in Catalpa;
	• cash to be held by Lion Selection (after
	implementation of the Lion Selection Demerger) and
	by Catalpa.
What assets of Lion	Prior to the implementation of the Scheme, subject to	Section 4 contains
Selection will Catalpa	the approval of Lion Selection Shareholders, Lion	more information
acquire upon the	Selection will implement the Lion Selection Demerger.	regarding the
implementation of the Scheme?	The Lion Selection Demerger will result in Lion Selection’s only assets being:	Demerger.
	• Lion Selection’s 30% interest in the Cracow Gold
	Mine;
	• Net revenue that has accrued to Lion Selection
	under the Cracow Joint Venture since 1 August
	2009 and interest accrued since that date in respect
	of that revenue;
	• Lion Selection’s gold produced by the Cracow Gold
	Mine since 1 August 2009 that is not sold prior to
	implementation of the Scheme;
	• Lion Selection’s 46.9% shareholding in Catalpa and
	its ~129.3 million Catalpa Options (pre Share
	Consolidation);
	• $1.5 million in cash and any interest accrued in
	respect of this amount since 1 August 2009; and
	• Certain gold put options.
	These assets are referred to as theLion Selection
	Gold Assetsin this Explanatory Memorandum.
	Under the Lion Selection Demerger, Lion Selection’s
	remaining investments, held by its subsidiary, LSG, will
	be demerged by Lion Selection prior to the Merger.
	Catalpa will not be acquiring the LSG assets as part of
	the Merger.
What will Lion	The Lion Selection Demerger will result in Lion	Section 4 contains
Selection’s liabilities	Selection’s only liabilities being:	more information
be upon the implementation of the	• The liabilities of Lion Selection and any of its related bodies corporate that arise directly from or relate to	regarding the Demerger.

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Question	Answer	More Information
Scheme?	the Cracow Joint Venture Agreements;
	• Deferred tax liabilities in respect of the Lion
	Selection Gold Companies and their businesses;
	• Any inter-company liabilities owed between the Lion
	Selection Gold Companies; and
	• Any other liability relating to a Lion Selection Gold
	Asset to the extent that it relates to anything which
	occurs after 1 August 2009.
	All other liabilities of Lion Selection and any of its
	related bodies corporate will be retained by LSG.
What will Catalpa	The Merger of Catalpa and Lion Selection’s gold assets	Information regarding
look like if the Merger	will create a new Australian mid tier gold producer with	Catalpa after the
proceeds?	a clear and focused strategy, an experienced board and	Merger is set out in
	management team and two gold mining projects that	section 3.
	both have significant potential to add additional
	Resources and Reserves through near mine exploration
	success.
	Following the Scheme, Catalpa’s two gold assets will
	be:
	• a 30% joint venture interest in the Cracow Gold
	Mine; and
	• the 100% owned Edna May Gold Project in Western
	Australia.
	In addition, upon completion of the Scheme, Catalpa will
	also hold a pre-emptive right over the 70% of the
	Cracow Gold Mine held by Newcrest and a strong cash
	position.
What will the Catalpa	Upon implementation of the Merger, the Catalpa Board	Information regarding
Board look like if the	is to be reconstituted so that it consists of:	Catalpa after the
Merger proceeds?	• Peter Maloney – Chairman;	Merger is set out in section 3.
	• Bruce McFadzean – Managing Director;
	• Graham Freestone – Non Executive Director;
	• John Rowe – Non Executive Director;
	• Barry Sullivan – Non Executive Director; and
	• Murray Pollock – Non Executive Director.
Where will Catalpa	Catalpa will remain headquartered in Perth, Western	Information regarding
be headquartered if	Australia.	Catalpa after the
the Merger		Merger is set out in
proceeds?		section 3.
What are the	The Catalpa Directors consider that the Merger has the	Refer to section 2.2.
advantages of the

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Answer

Question

More Information

Merger? following advantages:

Catalpa will gain immediate gold producer status by acquiring a 30% joint venture interest in the Cracow Gold Mine in Queensland operated by Newcrest, with a share of current production of around 30,000 oz per annum;
• Catalpa will benefit from immediate cash flows (from 1 August 2009) from the Cracow Gold Mine’s production;
• Lion Selection will contribute $1.5 million cash to Catalpa;
Catalpa’s production will grow to ~130,000+ oz/pa (following successful ramp up of Edna May) ranking Catalpa as a mid-tier Australian gold producer, with a larger proportion of unhedged production;
• the Merger will diversify the Catalpa Share Register. Lion Selection currently holds 46.9% of Catalpa. Post-Merger, no shareholder will hold more than 9.0%;
• Lion Selection will cancel the ~129.3 million (pre Share Consolidation) Catalpa Options it currently holds;
Catalpa’s operations will be diversified - Catalpa will be producing gold in two States, with both open-cut and underground operations;
There is significant potential to add additional Resources and Reserves at both operations through near mine exploration success;
Catalpa will have a pre-emptive right over Newcrest’s 70% stake in the Cracow Gold Mine; and
While your percentage interest in the total Catalpa Shares on issue will be diluted as a result of Catalpa Shares being issued as consideration under the Scheme, Catalpa will be in a stronger strategic and financial position as a result of the acquisition of Lion Selection’s interest in the Cracow Gold Mine via the Merger.
Based on the above factors, Catalpa Directors unanimously recommend that Catalpa Shareholders vote in favour of the Merger in the absence of a superior Competing Proposal.

What are the The risks and potential disadvantages of the Merger are Refer to section 2.3. potential outlined in detail in section 2.3. disadvantages and Key disadvantages and risks are: risks of the Merger?

Existing Catalpa Shareholders will be diluted as a result of the Scheme Consideration for the Lion Selection assets being paid in Catalpa Shares. As a result of the issue of Catalpa Shares under the Scheme and assuming the cancellation of Lion

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Question

Answer

More Information

Selection’s Catalpa Shares, current (non-Lion) Catalpa Shareholders will collectively hold 39% of the merged Catalpa. Following the exercise of all Catalpa Options on issue, this will increase to 45%;

After implementation of the Scheme, Lion Selection will remain liable for liabilities of Lion Selection and any of its related bodies corporate that arise directly from or relate to the Cracow Joint Venture Agreements and this will include, among other things, significant environmental remediation obligations in respect of the Cracow Gold Mine and ongoing costs of Lion Selection under the Cracow Joint Venture Agreements;
Lion Selection has not hedged the price at which it sells its share of the gold produced by the Cracow Gold Mine. After implementation of the Scheme, Catalpa will therefore have a greater exposure to movements in the spot price of gold, which could adversely affect its revenues and the book value of its Reserves, thereby affecting the market price of Catalpa Shares and Catalpa Options;
• The Merger will trigger a ‘review event’ under the Macquarie Facilities. Macquarie Bank has agreed in principle to waive the review event subject to and conditional upon certain amendments being made to the syndicated facility agreement. The amendments are minor in nature and do not materially change the terms of the facility. As at the date of this Explanatory Memorandum, the amendments have been agreed to, but are yet to be documented;
Catalpa Shareholders will have increased exposure to the operating risks associated with gold mining;
• Catalpa will have incurred significant transaction costs in connection with the Merger and, if the Scheme does not proceed, Catalpa may be required to pay a break fee of $1m to Lion Selection; and
A number of risks associated with holding an investment in resources company shares or investing in the stock market generally.

What is the	The key steps in implementing the Merger are:	Details regarding the
procedure for the Merger?	1 At the Catalpa General Meeting, Catalpa Shareholders will vote to approve:	implementation of the Merger are in section 2.

Catalpa’s participation in the Scheme; and
• the Share Consolidation.
2 At the Lion Selection General Meeting and Scheme Meeting, Lion Selection Shareholders will vote to approve:
the Lion Selection Demerger of LSG from Lion Selection by way of a reduction of capital;

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Answer

Question

More Information

	• the Lion Selection Cash Distribution by Lion
	Selection;
	• the acquisition of Lion Selection by Catalpa
	(following the Lion Selection Demerger and the
	Cash Distribution); and
	• the Lion Manager Share Issue.
	3 If the resolutions to be considered by Lion Selection
	Shareholders and Catalpa Shareholders at the Lion
	Selection General Meeting, the Scheme Meeting
	and the Catalpa Meeting are approved by the
	requisite majorities of Lion Selection Shareholders
	and Catalpa Shareholders, applications will be made
	to the Court to approve the Scheme at a Court
	hearing expected to be held on 27 November 2009.
	The Scheme and the Cash Distribution are conditional
	on the Demerger and the Lion Manager Share Issue
	proceeding.
	The Share Consolidation is required to be approved by
	Catalpa Shareholders and is conditional on the approval
	of the Merger Resolution by Catalpa Shareholders and
	the approval of each of the Lion Selection Scheme
	Resolution, the Lion Selection Cash Distribution
	Resolution, the Lion Manager Share Issue Resolution
	and the Lion Selection Demerger Resolution by Lion
	Selection Shareholders. This means that unless Catalpa
	Shareholders and Lion Selection Shareholders each
	approve the Merger, the Share Consolidation will not
	proceed.
When will the Merger	The Merger will be completed following the approval of	See section 2 for more
be completed?	the Merger by the Court, lodgement of the Court order	information regarding
	approving the Scheme with ASIC, and issue of the New	the process of the
	Catalpa Shares as Scheme Consideration. It is	Merger.
	anticipated that New Catalpa Shares will be issued on
	10 December 2009.
What proportion of	Lion Selection Shareholders will own approximately	Information regarding
Catalpa will Lion	61% of Catalpa following the Merger. If all of the	Catalpa after the
Selection	Catalpa Options not held by Lion Selection were	Merger is set out in
shareholders	exercised, the percentage interest held by Lion	section 3.
receive?	Selection Shareholders in Catalpa would reduce to
	55%.
Are there any	There are a number of conditions to the Merger. Key	Conditions to the
conditions to the	conditions that are yet to be satisfied are:	Merger are discussed in
Merger?	• Catalpa Shareholders must approve the Merger Resolution and Share Consolidation Resolution;	more detail in section 6.1(d).
	• Lion Selection Shareholders must approve the
	Scheme. To approve the Scheme, votes in favour
	must be received from a majority in number of Lion
	Selection Shareholders who vote at the Scheme

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Question	Answer	More Information
	Meeting (in person or by proxy, attorney or
	representative), and at least 75% of the total
	number of Lion Selection Shares voted on the
	resolution to approve the Scheme;
	• Lion Selection Shareholders must approve the Lion
	Selection Demerger, the Lion Manager Share Issue
	and the Lion Selection Cash Distribution;
	• the Court must approve the Scheme;
	• Lion Selection must receive written confirmation
	from the ATO that Lion Selection Shareholders will
	have the benefit of demerger relief in relation to the
	Lion Selection Demerger; and
	• Catalpa and Lion Selection must not suffer a
	material adverse effect.
How will the Merger	If the Merger occurs, your shareholding will be diluted	Refer to section 3.
affect my	by the issue of New Catalpa Shares (being the Scheme
shareholding in	Consideration) to the Lion Selection Shareholders.
Catalpa?	In addition, if the Share Consolidation occurs, each 11
	Catalpa Shares will be consolidated into 1 Catalpa
	Share, with all fractional entitlements to be rounded up.
	In return, Catalpa will have acquired an interest in the
	Cracow Joint Venture, additional cash of $1.5m, a pre-
	emptive on over the remaining 70% of the Cracow Gold
	Mine, diversified the Catalpa Share Register and will be
	a mid-tier gold production company.
	Existing (non-Lion) Catalpa Shareholders will hold 39%
	of the new merged Catalpa. This will increase to 45% if
	all of the Catalpa Options not held by Lion Selection
	(which will be cancelled) were exercised.
Who is Lion Manager	Lion Manager has a contract with Lion Selection to	Refer to section 4.3.
and what is	manage its investments. Lion Selection has given
happening to it?	notice to terminate the Lion Management Agreement
	subject to shareholder approval of the Lion Manager
	Share Issue and the conditions to the Demerger being
	satisfied or waived. The termination of the Management
	Agreement is not conditional on the implementation of
	the Scheme or the Cash Distribution.
	In general, the Management Agreement is being
	terminated in accordance with its terms, other than Lion
	Manager will receive 5,923,757 Lion Selection Shares in
	satisfaction of the termination fee rather than cash.
Rationale for and implications of the Share Consolidation
What is the Share	The Share Consolidation is the consolidation of each 11	Section 2 provides
Consolidation?	Catalpa Shares into 1 Catalpa Share, with all fractional	further information

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Question	Answer	More Information
	entitlements to be rounded up.	regarding the Share
		Consolidation
		Resolution.
What happens to my	The Share Consolidation will also result in the	Section 2 provides
options in Catalpa?	consolidation of each 11 Options in Catalpa into 1	further information
	Option in Catalpa, with all fractional entitlements to be	regarding the Share
	rounded up. The exercise price for the Options in	Consolidation.
	Catalpa will also increase 11 times as a result of the
	Share Consolidation.
Why should I vote in	Catalpa currently has almost 1.2 billion shares on issue	Section 2 provides
favour of the Share	(1.5 billion if all existing options were exercised). The	further information
Consolidation?	Share Consolidation will reduce this to a more	regarding the Share
	manageable number. The Catalpa Directors anticipate	Consolidation
	that this may result in a more appropriate price for a	Resolution.
	producing gold company. This should allow for more
	flexibility should a capital raising be required in the
	future.
	The Share Consolidation is a condition of the Merger
	Implementation Agreement. If the Share Consolidation
	is not approved, Lion Selection will have the right to
	terminate the Merger Implementation Agreement, and
	there is a risk that the Merger will not proceed.
What are the	Section2provides information regarding the potential	Refer to section2.
potential	disadvantages and risks of the Share Consolidation
disadvantages and	Resolution.
risks of the Share
Consolidation?
When will the Share	If approved, the Share Consolidation will take place at	Section 2 provides
Consolidation be	7.00pm (AWST) on 26 November 2009, before	further information
completed?	implementation of the Merger.	regarding the Share
		Consolidation.
Are there any	Approval of the Share Consolidation is conditional on	Section 2 provides
conditions to the	the approval of the Merger Resolution by Catalpa	further information
Share Consolidation?	Shareholders and the approval of each of the Lion	regarding the Share
	Selection Scheme Resolution, the Lion Selection Cash	Consolidation.
	Distribution Resolution, the Lion Manager Share Issue
	Resolution and the Lion Selection Demerger Resolution
	by Lion Selection Shareholders. This means that unless
	Catalpa Shareholders and Lion Selection Shareholders
	each approve the Merger, the Share Consolidation will
	not proceed.
What are the tax	There are no taxation implications in relation to the	Section 2 provides
implications of the	Share Consolidation.	further information
		regarding the Share

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Question	Answer	More Information
Share Consolidation?		Consolidation.
Recommendations
What do the Catalpa	In the absence of a superior Competing Proposal, the	Section 2 sets out the
Directors	Catalpa Directors unanimously recommend that you	recommendation of
recommend?	vote in favour of both the Merger and the Share	Directors andthe
	Consolidation.	matters which they
	In doing so, the Catalpa Directors have considered the advantages and disadvantages of the Merger and the Share Consolidation, and the alternatives to the Merger	have had regard to in making their recommendation.
	and Share Consolidation and believe that the reasons to
	vote in favour of the Merger and Share Consolidation
	outweigh the reasons to vote against the Merger and
	Share Consolidation.
Why are the Catalpa	The Catalpa Directors recommend that Catalpa	Section 2 sets out why
Directors	Shareholders vote in favour of the Merger for a number	the Catalpa Directors
recommending	of reasons, including:	recommend that
Catalpa Shareholders vote in favour of the Merger?	• Immediate gold producer status: ~30koz/pa of attributable production from Cracow;	shareholders vote in favour of the Merger.
	• Immediate cash flow (from 1 August 2009);
	• Increased production: Company production growing
	to ~130,000+ oz/pa, ranking Catalpa as a mid-tier
	Australian gold producer, with a larger proportion of
	unhedged production;
	• Removal of controlling shareholder (Lion Selection
	currently holds 46.9%), with no shareholder in the
	merged entity holding more than 9.0%;
	• Cancellation of Lion Selection’s ~129.3 million
	Catalpa Options;
	• $1.5 million cash contribution from Lion Selection;
	• Diversity: producing gold in two States, open-cut and
	underground operations;
	• Significant potential to add additional Resources and
	Reserves at both operations through near mine
	exploration success; and
	• A pre-emptive right over Newcrest’s 70% stake in
	the Cracow Joint Venture.
Why are the Catalpa	The Catalpa Directors recommend that Catalpa	Section2sets out why
Directors	Shareholders vote in favour of the Share Consolidation	the Catalpa Directors
recommending	for a number of reasons, including:	recommend that
Catalpa Shareholders vote in favour of the Share Consolidation?	• Reducing the number of shares on issue will result in a more appropriate share price for a producing gold company. This should allow for more flexibility if	shareholders vote in favour of the Share Consolidation.

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Question

Answer

More Information

a capital raising is required in the future.
• Ensuring that the conditions of the Merger Implementation Agreement are met - if the Share Consolidation is not approved, Lion Selection will have the right to terminate the Merger Implementation Agreement, and there is a risk that the Merger will not proceed.
• The Share Consolidation will have no material effect on the percentage interest of each Catalpa Shareholder and the aggregate value of each Catalpa Shareholder’s proportional interest in Catalpa should not materially change.
• The Share Consolidation will have no tax implications for Catalpa security holders whose securities have been consolidated.

Catalpa General meeting, agreement and approval

When and where will	The Resolutions will be considered at the Catalpa
the Catalpa General	General Meeting, which will be held on 17 November
Meeting be held?	2009 at the 10.00am (AWST) at the Hyatt Regency
	Perth, Traders Lounge, 99 Adelaide Terrace, Perth,
	WA.
Am I entitled to vote	If you are registered as a Catalpa Shareholder as at
at the Catalpa	7.00pm (AWST) on 15 November 2009, you will be
General Meeting?	entitled to vote at the Catalpa General Meeting in
	person, by attorney, by proxy or, in the case of
	corporate shareholders, by corporate representative.
	If your Catalpa Shares are jointly held, only one of the
	joint Catalpa Shareholders is entitled to vote. If more
	than one Catalpa Shareholder votes in respect of jointly
	held Catalpa Shares, only the vote of the Catalpa
	Shareholder whose name appears first in the Share
	Register will be counted.
	Lion Selection will not be entitled to vote on the Merger
	Resolution.
What level of	Each of the Resolutions is an ordinary resolution and
shareholder support	requires at least 50% of the total number of votes cast
is required for the	to be in favour. Lion Selection and its associates will not
resolutions?	vote on the Merger Resolution.
Should I vote?	The Merger is very important for Catalpa and the	Section 2 contains
	Catalpa Directors urge you to read this Explanatory	details on the Catalpa
	Memorandum carefully and to vote in favour of the	Directors’
	Merger and the Share Consolidation, in the absence of	recommendation and
	a superior Competing Proposal. However, voting is not	the reasons for it.
	compulsory.

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Question	Answer	More Information
Other questions
How do I vote if I am	Even if you cannot attend the Catalpa General Meeting	Refer to your proxy
not able to attend the	in person, you can still vote as follows:	form.
Catalpa General	• By proxy, complete and return the proxy form
Meeting?	accompanying this Explanatory Memorandum so
	that it is received by Catalpa’s Share Registry
	before 5.00pm (AWST) on 13 November 2009.
	By mail: Security Transfer Registrars Pty
	Ltd
	PO Box 535
	Applecross WA 6953
	By hand: Suite 1, 770 Canning Highway
	Applecross WA 6153
	By Fax: + 61 8 9315 2233
	You are encouraged to submit your proxy bymail
	orfax.
	• Attend the Catalpa General Meeting in person at
	the Hyatt Regency Perth, Traders Lounge, 99
	Adelaide Terrace, Perth, WA on 17 November
	2009, commencing at 10.00am (AWST).
	You may also vote by appointment of an attorney, or, in
	the case of corporate shareholders, by corporate
	representative.
When will the result	The result of the Catalpa General Meeting will be
of the Catalpa	available either during or shortly after the conclusion of
General Meeting be	the Catalpa General Meeting and will be announced to
known?	ASX once available.
What happens if a	If a superior Competing Proposal emerges, this will be
superior Competing	announced to ASX and the Catalpa Directors will
Proposal emerges?	carefully reconsider the Merger and advise you of their
	recommendation.
Where can I get	For further information, you can call the Catalpa on
further information?	+618 9321 3088.
	If you are in any doubt about anything in this
	Explanatory Memorandum, please contact your
	financial, legal, taxation or other professional adviser.

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2 Overview of the Resolutions and Directors’ recommendations

2.1 Overview of the Merger

On 24 June 2009, Catalpa and Lion Selection announced their entry into a Merger Implementation Agreement whereby Catalpa would acquire all of the shares in Lion Selection by way of a scheme of arrangement under section 411 of the Corporations Act. Under the Scheme, Catalpa proposes to offer 1 New Catalpa Share[*] for every 1 Lion Selection Share held by Lion Selection Shareholders on the Scheme Record Date.

The key steps in implementing the Merger are:

1 Catalpa General Meeting

At the Catalpa General Meeting, Catalpa Shareholders will vote to approve:

the Merger Resolution; and
the Share Consolidation Resolution.

Each of the Resolutions is an ordinary resolution, requiring approval by a simple majority.

If the Merger Resolution is not approved by Catalpa Shareholders, the Merger Implementation Agreement will be terminated, and the Merger will not proceed. Lion Selection and its associates will not vote in the Merger Resolution.

Approval of the Share Consolidation is conditional on the approval of the Merger Resolution by Catalpa Shareholders and the approval of each of the Lion Selection Scheme Resolution, the Lion Selection Cash Distribution Resolution, the Lion Manager Share Issue Resolution and the Lion Selection Demerger Resolution by Lion Selection Shareholders. This means that unless Catalpa Shareholders and Lion Selection Shareholders each approve the Merger, the Share Consolidation will not proceed.

If the Share Consolidation Resolution is not approved by Catalpa Shareholders, Lion Selection will be able to elect whether to terminate the Merger Implementation Agreement (in which case, the Merger will not go ahead), or to proceed with the Merger in any event (provided that the Merger resolution is approved).

2 Lion Selection General Meeting and Scheme Meeting

For the Merger to proceed, Lion Selection Shareholders must pass the following resolutions at the Lion Selection General Meeting and Scheme Meeting:

an ordinary resolution approving the Lion Selection Demerger of LSG from Lion Selection by way of a reduction of capital;
an ordinary resolution approving the Lion Selection Cash Distribution;
an ordinary resolution approving the Lion Manager Share Issue; and
a resolution passed by 50% of shareholders by number and 75% of shareholders by value of Lion Selection Shareholders, approving the acquisition of Lion Selection by Catalpa.

If Lion Selection Shareholders do not approve each of the above resolutions by the required margins, the Merger will not be implemented.

The ratio assumes that the Share Consolidation Resolution is approved. If the Share Consolidation Resolution is not approved but the Merger proceeds, the ratio will be 11 New Catalpa Shares for every 1 Lion Selection Share.

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3 Court approval

If the resolutions to be considered by Lion Selection Shareholders and Catalpa Shareholders at the Lion Selection General Meeting, the Scheme Meeting and Catalpa’s General Meeting are approved by the requisite majorities of Lion Selection Shareholders and Catalpa Shareholders, applications will be made to the Court to approve the Scheme at a Court hearing expected to be held on 27 November 2009.

Section 6 contains a more detailed explanation of implementation of the Scheme under the Merger Implementation Agreement.

Following the implementation of the Merger, Catalpa’s two gold assets will be:

a 30% joint venture interest in the Cracow Gold Mine in Queensland; and
the 100% owned Edna May Gold Project in Western Australia.

Details regarding the assets and structure of Catalpa if the Merger proceeds can be found in section 3.

2.2 Recommendation of Catalpa Directors – Merger Resolution

For the following reasons, the Catalpa Directors unanimously recommend the approval of the Merger, in the absence of a superior Competing Proposal.

Immediate gold producer status

Catalpa will gain immediate gold producer status by acquiring a 30% joint venture interest in the Cracow Gold Mine in Queensland operated by Newcrest. Cracow is currently producing 100,000 oz per annum, with the share of current production to be acquired of around 30,000 oz per annum.

(b)

Immediate cash flow

Catalpa will benefit from cash flows from Lion Selection’s 30% ownership of the Cracow Gold Mine’s production from 1 August 2009.

Catalpa will receive $1.5 million cash from Lion Selection as part of the proposed Merger, increasing Catalpa’s cash balance to around $32 million (as at 30 June 2009).

Increased production

Once Edna May comes into production, Catalpa will produce 130,000+ oz per annum, which will rank Catalpa as a leading mid-tier Australian gold producer.

(e)

A diversified register

Lion Selection currently holds 46.9% of Catalpa. Following implementation of the Merger, no shareholder in the merged entity will hold more than 9.0%. This should increase Catalpa share liquidity and attract a greater investor base.

(f)

Cancellation of options

Lion Selection will cancel ~129.3 million (pre Share Consolidation) Catalpa Options it currently holds. Following this cancellation, if all Catalpa Options not held by Lion Selection were exercised, Catalpa Shareholders would collectively hold around 55% of Catalpa.

page 23

(g) Diversified operations

Catalpa will be producing gold in two States, with both open-cut and underground operations. This increased operational diversity should reduce earnings risk and improve the investor appetite for Catalpa.

(h)

Exploration opportunities

There is significant potential to add additional Resources and Reserves at both the Edna May and Cracow operations through near mine exploration success. This provides greater scope to grow profitability and enhance shareholder returns with a lower risk profile, compared to greenfield exploration.

Cracow pre-emptive

Catalpa will acquire a pre-emptive right over Newcrest’s 70% stake in the Cracow Gold Mine. This provides Catalpa with a significant advantage should Newcrest seek to sell its interest in the Cracow Gold Mine.

2.3 Recommendation of the Catalpa Directors – Share Consolidation Resolution

For the following reasons, the Catalpa Directors unanimously recommend the approval of the Share Consolidation Resolution.

(a)

Condition precedent to implementation of Merger

The Share Consolidation is a condition precedent to the implementation of the Merger. Under the terms of the Merger Implementation Agreement. If the Share Consolidation does not occur before the Second Court Date, Lion Selection may elect to either:

terminate the Merger Implementation Agreement (in which case the Merger will not proceed); or
waive the condition and continue with the Merger in any event (provided that the Merger Resolution is approved).

For the reasons outlined above, the Catalpa Board considers that the Merger is for the benefit of Catalpa. If the Share Consolidation Resolution is not passed, there is a risk that the Merger will not proceed, and the advantages to Catalpa will not be realised.

(b)

Greater flexibility of share price

Catalpa currently has almost 1.2 billion Catalpa Shares on issue. The Share Consolidation will reduce this to a more appropriate number for a producing gold company. The Catalpa Directors anticipate that this may result in a more appropriate price for Catalpa Shares which should allow for more flexibility should a capital raising be required in the future.

2.4 Risks and potential disadvantages if the Merger proceeds

The Merger has a number of potential disadvantages and risks that Catalpa Shareholders must consider in deciding whether or not to vote in favour of the Merger. While the Catalpa Directors are of the opinion that these disadvantages are outweighed by the Merger’s advantages and that the Merger is in the best interests of Catalpa Shareholders, Catalpa Shareholders should consider their individual circumstances and make their own determination.

The key risks and disadvantages associated with the Merger are:

(a) Dilution of Catalpa Shareholders’ interests

page 24

As Scheme Consideration, Catalpa will be providing 1 New Catalpa Share for every 1 Lion Selection Share held by Lion Selection Shareholders.[] This will result in the issue of 38,106,650 New Catalpa Shares.[*] As a result, current Catalpa Shareholders’ percentage holdings in Catalpa will be reduced.

Current Catalpa Shareholders will hold 39% of the merged Catalpa, following the cancellation of the Lion Selection’s Catalpa Shares. If all Catalpa Options not held by Lion Selection (which will be cancelled) were exercised, current Catalpa Shareholders would own approximately 45% of Catalpa.

(b)

Macquarie Bank financing

Catalpa’s wholly owned subsidiary, Edna May Operations, has an A$68.51 million project finance facility with Macquarie Bank, none of which is currently drawn (refer section 5).

The Merger will trigger a ‘review event’ under the Macquarie Facilities. Macquarie Bank has agreed in principle to waive the review event subject to and conditional upon certain amendments being made to the syndicated facility agreement. The amendments are minor in nature and do not materially change the terms of the facility. As at the date of this Explanatory Memorandum, the amendments have been agreed to, but are yet to be documented.

(c)

Court delays

There is a risk the Court may not approve the Scheme or that the approvals are delayed. Under the Merger Implementation Agreement, Catalpa is restricted from undertaking certain activities, such as raising further capital, without the approval of Lion Selection until such time as the Court approves the Scheme. A delay in the Court approving the Scheme would limit Catalpa’s ability to undertake such activities without the approval of Lion Selection.

(d) Risk regarding change in control on contractual provisions and third party consents

Under the Cracow Joint Venture agreements, in certain circumstances changes in ownership in a joint venture interest can trigger a right whereby another party in the joint venture can acquire the joint venture interest. Lion Selection believes that these rights will not be triggered, however there is a risk that the Scheme may trigger a pre-emptive right with respect to the Cracow Joint Venture or there may be a dispute between the parties which may delay the Transaction.

There is a risk that the Scheme requires the consent of one or more third parties and that such a consent cannot be obtained, or if it can be obtained, it cannot be obtained on reasonable terms and conditions. The operation of provisions requiring consent may have negative consequences for Catalpa such as the loss of major contracts or assets, increased costs or the need to renegotiate financings.

(e) Cancellation of Lion Selection’s Catalpa Shares

As a consequence of the Scheme, Catalpa will (indirectly) acquire Lion Selection’s 46.9% shareholding and its option holding in Catalpa. Under the Corporations Act, Catalpa will be required to cease holding Lion Selection’s Catalpa Shares within 12 months of the implementation of the Scheme. Catalpa will cancel Lion Selection’s Catalpa Options and it is Catalpa’s current intention to cancel Lion Selection’s Catalpa Shares within 12 months of the implementation of the Scheme, subject to Catalpa Shareholder approval. If Catalpa Shareholders do not approve the cancellation of Lion Selection’s Catalpa Shares, Catalpa is required to otherwise cease to hold the Catalpa Shares and may be

The ratio assumes that the Share Consolidation Resolution is approved. If the Share Consolidation Resolution is not approved but the Merger proceeds, the ratio will be 11 New Catalpa Shares for every 1 Lion Selection Share.

** Or 419,176,150 New Catalpa Shares if the Share Consolidation Resolution is not approved.

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required to sell down the Catalpa Shares. If this was to occur, current Catalpa Shareholders’ holdings will be diluted to a lesser percentage than would otherwise be the case and the aggregate shareholding of current Catalpa Shareholders in Catalpa will be less than 39%.

(f)

Commodity price risk

Changes in the market price of gold, which in the past has fluctuated widely, will affect the profitability of Catalpa’s operations and its financial performance for unhedged ounces. Catalpa’s revenues, profitability and viability will depend on the market price of gold produced from the Cracow and Edna May (once commissioned) projects. The price of gold is set in the world market and is affected by numerous factors beyond Catalpa’s control including the demand for gold, expectations with respect to the rate of inflation, interest rates, currency exchange rates, the demand for jewellery and industrial products containing gold, gold production levels, inventories, cost of substitutes, changes in global or regional investment or consumption patterns, and sales by central banks and other holders, speculators and producers of gold and other metals in response to any of the above factors, and global and regional political and economic factors.

A decline in the market price of gold below Catalpa’s and Cracow’s respective production costs for any sustained period would have a material adverse impact on the profit, cash flow and results of operations of Catalpa’s projects and anticipated future operations. Such a decline also could have a material adverse impact on the ability of Catalpa to finance the exploration and development of its existing and future mineral projects. A decline in the market price of gold may also require Catalpa or Cracow to write down its Reserves which would have a material adverse effect on the value of Catalpa’s Shares. In addition, if revenue from gold sales declines, Catalpa may experience liquidity difficulties.

The expected cash operating cost is A$500-530/oz at Cracow and $636/oz for Edna May. Catalpa has entered into forward sales commitments over 352,317 oz of gold produced from Edna May at a fixed flat forward price of A$1,557.50/oz. Given the operating margin of the Cracow Gold Mine interest is unhedged, Catalpa will have a greater exposure to movements in the spot price of gold, which could adversely affect its revenues and the book value of its Reserves, thereby effecting the market price of Catalpa Shares and Catalpa Options.

(g)

Exchange rate and currency risk

Gold is sold throughout the world in US Dollars. Catalpa pays for goods and services in Australian dollars. Fluctuations in the Australian dollar relative to the US dollar may affect the costs and margins at Catalpa’s mining projects, which could materially affect the Company’s profitability and financial performance.

(h)

Reliance on key personnel

A number of key management and personnel will be important to attaining the business goals of Catalpa as a merged company. One or more of Catalpa’s key employees could leave their employment, and this may adversely affect the ability of Catalpa to conduct its business and, accordingly, affect the financial performance and share price of Catalpa. Further, the success of Catalpa as a merged company in part depends on the ability of Catalpa to attract and retain additional highly qualified management and personnel.

(i)

Litigation

Exposure to litigation brought by third parties such as customers, regulators, employees or business associates following the Merger could negatively impact on Catalpa’s financial performance through increased cost payments for damages and damage to reputation. Neither the Catalpa nor the Lion Selection boards are currently aware of any outstanding litigation against any of the Lion Selection companies or associated entities or in relation to the Cracow Joint Venture. However, there is no certainty that litigation

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will not be raised against the relevant company or its subsidiaries in relation to past or future events involving the Cracow Joint Venture.

(j)

Catalpa may not achieve an improved stock market rating

Following implementation of the Scheme, there is a risk that Catalpa will not achieve an improved stock market rating relative to Lion Selection or Catalpa’s respective stock market ratings prior to implementing of the Scheme.

(k)

Cracow risks

Catalpa (through its subsidiaries) will be 30% owner of the Cracow Gold Mine in joint venture with Newcrest on implementation of the Scheme. This acquisition holds the following risks for Catalpa Shareholders.

(i) Joint venture risks

Occurrence of any of the following events may have an adverse financial impact on Catalpa:

disagreement with joint venture partners on how to develop and operate the Cracow Joint Venture efficiently;
inability of a joint venture partner to meet its obligations under the joint venture; and
litigation between joint venture partners regarding joint venture matters.

Newcrest, as manager of the Cracow Joint Venture, is able to control the timing of delivery of the Joint Venture’s product to Catalpa. If delivery is interrupted, Catalpa may not be able to sell the product when expected, and will not receive cash flow from that sale when forecast. In severe cases, this may lead to Catalpa suffering liquidity difficulties.

(ii) Greater exposure to operating risks

By acquiring the Cracow gold mine, Catalpa Shareholders will accept greater operating risks on their shareholding in Catalpa due to the increased scale of Catalpa’s business.

Operating risks that are inherent to mining and exploration activities includes:

metallurgical issues that may affect gold recoveries and plant performance;
unexpected adverse geological or geotechnical issues which can cause reduced gold production or increased production costs;
interruptions caused by plant breakdowns, adverse weather conditions, industrial relations issues, health and safety concerns or power outages or fuel shortages;
the failure to achieve estimated production rates and production cost estimates for a range of reasons; and
increases in the cost of supplies, raw materials and capital and operating equipment can adversely impact operating and capital costs.

(iii) Capital cost estimates

Capital and operating cost estimates have been made in respect of the 30% joint venture interest in the Cracow Gold Mine. These estimates are made on the basis of interpretation of geological data, feasibility studies, prior operating experience, anticipated future conditions as well as other factors, and as such may not prove accurate. The eventual accuracy of the cost estimates could be affected by events including: unanticipated differences in grade and tonnage between ore mined and processed and the estimated Reserves and Resources; incorrect engineering assumptions; delays in construction or development schedules; unanticipated costs; accuracy of anticipated cost

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of capital items; labour negotiations; and changes in government regulation relating to royalties, duties, taxes or other levies.

(iv) Estimates of Reserves and Resources

Resources and Reserves have been prepared and stated in accordance with the JORC code 2004, but are estimates only and no assurance can be given that the anticipated tonnages and grades will be achieved, that the indicated level of recovery will be realised or that Reserves could be mined or processed profitably. There are numerous uncertainties inherent in estimating Reserves and Resources, including many factors beyond Catalpa or Lion Selection’s control. Such estimation is a subjective process, and the accuracy of the Reserve or Resource estimate is a function of the quantity and quality of available data and of the assumptions made and judgements used in engineering and geological interpretation.

Reserve or Resource estimates may require revision as a result of events that occur after the estimate is made. These include: fluctuation in gold prices; results of drilling; metallurgical testing and production; changes to mine design or schedules; and unplanned or unforseen accidents or disruptions. The volume and grade of Reserves mined and processed and recovery rates may not be the same as the estimate that has been made.

Any material reductions in estimates of Reserves and Resources, or of Catalpa’s ability to extract these Reserves, could have a material adverse effect on Catalpa’s financial performance.

(v) Exploration risk

The exploration for and development of mineral deposits involves significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. It is impossible to ensure that the exploration or development programs planned by Catalpa or any of its present or future joint venture partners will result in a profitable commercial extraction of mineralisation. The commercial viability of a mineral deposit depends on a number of factors. These include: the size and grade of the deposit and proximity to infrastructure; metal prices; government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted and may vary from now until any point in time. The result of these factors may be that Catalpa does not receive an adequate return on invested capital.

(vi) Environmental

Mining, processing and exploration activities are hazardous to the environment, and unforeseen liabilities such as accidental spills or damage may be costly to remedy.

The Cracow gold mine is subject to the environmental laws applicable in Queensland. Environmental legislation is evolving in a manner that will require: stricter standards and enforcement; increased fines and penalties for non compliance; more stringent environmental assessments of proposed projects; and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that existing future environmental regulation will not materially adversely affect Catalpa’s business, financial condition and results of operations.

The Cracow Joint Venture Agreements will require Catalpa to be 100% responsible for remediation resulting from activities occurring prior to 1996 on areas of land within the Cracow Exploration Joint Venture’s designated area. The designated area does not include any land incorporated into the Cracow Mining Joint Venture’s mining area. Catalpa will be responsible for remediation in the Cracow mining Joint Venture’s mining area and post 1996 in the Cracow Exploration Joint Venture designated area in proportion to its interest in the Cracow Joint Venture (currently 30%).

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Environmental hazards may exist on properties in which Catalpa will hold an interest that are not known to Catalpa at present and that have been caused by previous or existing owners or operators of the properties.

(vii) Government regulations

The mining, construction and exploration activities of Catalpa are governed by various laws covering areas including taxation, mineral exploration and prospecting, project development, production, industrial relations and occupational health and safety and toxic substances. Catalpa believes that its activities are carried out in accordance with all of the applicable laws and regulations, however no assurance can be given that new laws and regulations will not be enacted or that existing rules and regulations will not be applied in a manner that could limit or curtail the production from or development of Catalpa’s properties or have a materially detrimental financial effect on Catalpa’s business.

Failure to comply with the applicable laws, regulations and permitting requirements may result in enforcement actions, which may result in cessation or curtailment of operations and may include corrective measures requiring capital expenditures, the installation of additional equipment, or remedial actions. Catalpa may be required to compensate a party or parties suffering loss or damage that occurred as a result of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

Amendments to or a more stringent implementation of current laws, regulations and permits under which the activities of Catalpa are governed, could have a material adverse impact on Catalpa and cause increase in expenditures, reduction in levels of production, or abandonment or delays in development of new projects.

(viii) Insurance

Catalpa’s business is subject to a number of risks and hazards that may result in damage to mineral properties or production facilities, personal loss, injury or death, environmental damage to the Company’s properties or the properties of others, delays in mining, monetary losses and possible legal liability.

Whilst Catalpa maintains insurance to protect against certain risks in such amounts as it considers to be reasonable, its insurance will not cover all the potential risks associated with a mining operation. Catalpa may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability.

Insurance against risks such as environmental pollution or other damage as a result of exploration and production is not generally available to companies in the mining industry on acceptable terms. Catalpa may become subject to liability for pollution or other damage that may not be insured against or that the Company may elect not to insure against because of premium costs or other reasons. Catalpa may be caused to incur significant costs that could have a material adverse affect upon its financial performance.

(ix) Title risks

The Cracow Joint Venture participants may lose title to, or interests in, the tenements if the conditions to which those tenements are subject are not satisfied or if insufficient funds are available to meet expenditure commitments. In Queensland, both the conduct of operations and the steps involved in acquiring interests involve compliance with numerous procedures and formalities. It is not always possible to comply with, or obtain waivers from, all such requirements and it is not always clear whether requirements have been properly completed, or possible or practical to obtain evidence of compliance. In some cases, failure to follow such requirements or obtain relevant evidence may call into question the validity of the actions taken. Further, it is possible that tenements in which the participants in the Cracow Joint Venture have an interest may be subject to a native title claim. If native title rights do exist in respect of a tenement, the ability of the Cracow Joint Venture participants to gain access to that tenement may be adversely affected.

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(x) General

The value of the Cracow gold mine may be impacted by a range of factors including movements in inflation, interest rates, exchange rates, general economic conditions and outlooks, changes in government, fiscal, monetary and regulatory policies, prices of commodities, global geo-political events and hostilities and acts of terrorism. Catalpa attempts to mitigate the impact of these factors by implementing appropriate safeguards and commercial actions, but these factors are largely beyond its control.

(l)

Unexpected Transaction costs

Catalpa and Lion Selection have assets in Queensland and Western Australia, both States which impose stamp duty on transfers of assets and rights associated with land and joint venture interests. Lion Selection and Catalpa believe that stamp duty will not arise in relation to changes in ownership in the underlying assets as a result of the Merger. However there is a risk that the respective States may have a different view, and seek to impose stamp duty on the Merger, adversely impacting the merged Catalpa.

(m)

Share price risk

If the Merger does not proceed and there is no alternative proposal, the Catalpa Directors believe that the market price of Catalpa Shares and Catalpa Options may decrease to price levels similar to those seen before the Merger proposal was announced to the market

2.5 If the Share Consolidation does not proceed

If the Share Consolidation resolution is not approved but the Merger proceeds, the ratio will be 11 New Catalpa Shares for every 1 Lion Selection Share.

In addition, Catalpa will not be benefit from the advantages of the Share Consolidation highlighted in section 2.3.

2.6 If the Merger does not proceed

If the Merger is not approved at the Catalpa General Meeting, the Merger Implementation Agreement will be terminated and Catalpa and Lion Selection will not proceed with the Scheme.

If the Merger does not proceed:

Catalpa will not acquire the Cracow asset, and will not benefit from the advantages of the transaction highlighted in section 2.2, including the gold production and cash flow benefits that would have resulted from the acquisition;
• Catalpa will continue to have Lion Selection as a controlling shareholder on its register; and
Catalpa will have incurred substantial costs in relation to the negotiation of the Merger.

In some circumstances, a Termination Fee of $1 million will be payable, either from Catalpa to Lion Selection or from Lion Selection to Catalpa. The circumstances where a Termination Fee is payable are discussed in section 6.1(g).

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A Termination Fee will not be payable by Catalpa to Lion Selection if the Merger Resolution is not approved, unless other circumstances giving rise to the Termination Fee apply.

The Share Consolidation will not proceed unless the Merger is also approved by both Catalpa Shareholders and Lion Selection Shareholders and proceeds.

2.7 Obtaining further information

For further information, you can contact Catalpa on +618 9321 3088.

If you are in any doubt about anything in this Explanatory Memorandum, please contact your financial, legal, taxation or other professional adviser.

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3 Information about the Merged Group

3.1 Overview

The boards of Catalpa and Lion Selection consider that a merger of Lion Selection’s gold assets and Catalpa will create a new Australian mid-tier pure gold producer with an experienced board and management team with two gold mining projects that both have significant potential to add additional Resources and Reserves through near mine exploration success.

Following the Scheme, Catalpa’s two gold assets will be:

a 30% joint venture interest in the Cracow Gold Mine in Queensland operated by Newcrest with a share of current production of around 30,000 oz per annum; and
the 100% owned Edna May Gold Project in Western Australia which, when commissioned in mid 2010, is planned to produce at a rate in excess of 100,000 oz per annum with an estimated life of mine cash operating cost of A$636/oz (pre-royalty), a current mine life of around 8 years and 352,317 oz sold forward at a fixed flat price of A$1,557.50/oz.

Upon completion of the Scheme, Catalpa will also (through its wholly owned subsidiaries) hold the pre-emptive right over the 70% joint venture interest in the Cracow Gold Mine held by Newcrest.

3.2 Capital Structure

Details on the existing capital structure of Catalpa are set out in section 4 of this Explanatory Memorandum.

The capital structure of Catalpa, following the Scheme, will be dependent on whether the Share Consolidation Resolution is approved by Catalpa Shareholders.

If the Share Consolidation Resolution is approved, Lion Selection Shareholders will receive 1 New Catalpa Share for each Lion Selection Share held. If it is not approved, and Lion Selection elects to proceed with the Merger, Lion Selection Shareholders will receive 11 New Catalpa Shares for each Lion Selection Share held.

As a consequence of the Scheme, Catalpa will (indirectly) acquire Lion Selection’s 46.9% shareholding and its option holding in Catalpa. Catalpa will cancel Lion Selection’s Catalpa Options and it is Catalpa’s intention to cancel Lion Selection’s Catalpa Shares within 12 months of the implementation of the Scheme, subject to Catalpa Shareholder approval. If Catalpa Shareholders do not approve the cancellation of Lion Selection’s Catalpa Shares, Catalpa is required to otherwise cease to hold the Catalpa Shares and may be required to sell down the Catalpa Shares. While those Catalpa Shares are indirectly held by Catalpa they will have no voting rights.

The following table summarises the number of Catalpa Shares that will be on issue following the Scheme, depending on the outcome of the Share Consolidation Resolution, on the basis that Lion Selection’s existing 46.9% shareholding in Catalpa is subsequently cancelled.

Fully paid ordinary shares

The following table assumes that the Share Consolidation Resolution is approved by shareholders and proceeds prior to the Scheme:

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	Number of Catalpa Shares % (after Lion Selection's Catalpa Shares cancelled)
Existing Catalpa Shares 1 (other than held by Lion Selection) New shares to be issued to Lion Selection Shareholders (merger consideration) 2	56,602,561 39.1% + 88,029,353 60.9% =
Total Catalpa Shares Post Scheme implementation 3	144,631,914 100.0%
Lion Selection’s shareholding in Catalpa to be cancelled 4	49,922,703

Based on Catalpa’s capital structure as at 26 June 2009.
Assumes that 5,923,757 shares are issued to Lion Manager prior to the Scheme (refer to section 4).
Assumes that Lion Selection’s shareholding in Catalpa that will be indirectly acquired by Catalpa in the Scheme, is cancelled.
Catalpa will have 12 months in which to cancel (or otherwise dispose of) these Catalpa Shares. Shares can be cancelled if Catalpa Shareholder approval is granted at a meeting of Catalpa Shareholders. It is the intention of the Catalpa board to cancel these Catalpa Shares.

Options:

Catalpa will have the following options on issue on the basis that Lion Selection’s existing holdings in listed options are subsequently cancelled following the Scheme, and assuming the Share Consolidation takes place.

	Number		Exercise Price	Expiry
	Listed Options
CAHO	1,945,704	1	$1.10	30 June 2010
CAHOB	5,483,225	2	$1.10	31 October 2011
	7,428,928		Total listed options
	Unlisted Options
	18,182		$1.21	November 2010
	9,091		$0.88	April 2011
	56,819		$0.66	23 December 2013
	397,728		$0.88	23 December 2013
	397,728		$1.10	23 December 2013
	397,728		$1.32	23 December 2013
	340,910		$1.54	23 December 2013
	113,637		$0.66	March 2014

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113,637	$0.88	March	2014
113,637	$1.10	March	2014
113,637	$1.32	March	2014
6,060,606	$0.83	March	2014
8,133,340	Total unlisted options

All numbers are based on Catalpa’s capital structure as at 30 June 2009

Assumes that the 1,536,327 (post consolidation) June 2010 options currently held by Lion Selection are cancelled after the Scheme is complete
Assumes that the 10,218,873 (post consolidation) October 2011 options currently held by Lion Selection are cancelled after the Scheme is complete

As a condition of Catalpa’s wholly owned subsidiary, Edna May Operations, entering into financing facilities with Macquarie Bank to finance the development of the Edna May Gold Project (discussed further below in this section, and in section 5 of this Explanatory Memorandum) Catalpa has agreed to issue Macquarie Bank with unlisted options over fully paid ordinary shares in Catalpa. A total of 66,666,666 options with an exercise price 7.5 cents each and an expiry date of 31 March 2014 were issued. Post consolidation of Catalpa Shares, Macquarie Bank will hold 6,060,606 options with an exercise price of $0.825 per share. A further option issue of 6,060,606 options with an exercise price of $0.825 per share will occur only if there is a draw down under the mezzanine facility.

Top 20 Shareholders

The top 20 shareholders in Catalpa (based on the top 20 shareholder lists for both Catalpa and Lion Selection as at 31 July 2009) following implementation of the Scheme and the cancellation of Lion Selection’s Catalpa Shares are set out below.

		% Issued
Shareholder	No. of Shares	Capital
HSBC	13,222,948	9.1%
ANZ Nominees Limited	10,135,809	7.0%
National Nominees Ltd	7,960,709	5.5%
Citicorp Nominees Pty Ltd	7,263,053	5.0%
Cogent Nominees Pty Ltd	6,025,749	4.2%
Lion Manager Pty Ltd	5,923,757	4.1%
Mr Mark Gareth Creasy	3,473,366	2.4%
J P Morgan Nominees Australia Limited	2,224,427	1.5%
Reneagle PL	1,729,789	1.2%
Goldrich Holdings PL	1,454,545	1.0%
UBS Nominees Pty Ltd	966,354	0.7%
Springtide Cap PL	909,091	0.6%
Nefco Nominees PL	877,273	0.6%
Prospect Cust Ltd	871,420	0.6%
Bennett Robert W + D G	836,667	0.6%
Zero Nominees PL	805,398	0.6%
Bond Street Custodians Limited	669,000	0.5%
Mirrabooka Investments Limited	669,000	0.5%
Mr Robin Anthony Widdup + Mrs Janet Widdup <Widdup Super Fund
A/C>	654,793	0.5%
Drummond Shay Margaret	548,563	0.4%
Total top 20	67,221,711	46.5%

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Total Shares on Issue

100.0%

144,631,914

Substantial Shareholders

The substantial shareholders in Catalpa (based on the most recent substantial shareholdings in Lion Selection and Catalpa notified before the date of this Explanatory Memorandum) following completion of the Scheme are shown below.

Shareholder % Issued Capital Carrousel Capital Limited 8.5%

3.3 Board and Management

Board

The Board of Directors of Catalpa will consist of the following members after the Scheme:

Peter Maloney , Non-Executive Chairman

B Comm, MBA

Mr Maloney, aged 59, has broad commercial, financial and management expertise and experience. In a long career with WMC Resources, he held the positions of Treasurer, Executive Vice President Americas, and Manager Commercial and Marketing WA. He has also been Executive General Manager, Finance at Santos and Chief Financial Officer at FH Faulding. Mr Maloney has also been a director of several companies and organisations including Indophil Resources and Barra Resources and was chairman of Southern Health, the largest healthcare provider in Victoria, during a period of improvement in management and financial performance. He has been Chief Financial Officer of Lion Selection since 2003.

Mr Maloney will join the Catalpa board on completion of the Scheme.

Bruce McFadzean , Managing Director

Dip Mining

Mr McFadzean, aged 52, a mining engineer, brings over 30 years of management, mining, processing and project "start up" experience to the organisation, half of which was gained in the employ of global resources brands, Rio Tinto and BHP Billiton. Mr McFadzean has broad commodity experience in gold, iron ore, diamonds and nickel/cobalt and in a wide range of roles including corporate, managerial, technical and operational.

Mr McFadzean is a Non Executive Director of Venture Minerals Limited (ASX:VMS).

Mr McFadzean was appointed as Managing Director on 09 June 2008.

Barry Sullivan , Non-Executive Director

BSc (Hons), ARSM, FAusIMM, MAICD

Mr Sullivan, aged 62 is an experienced and successful mining engineer with a career spanning 40 years. His initial mining experience was gained in the South African gold mining industry, followed by more than 20 years with Mount Isa Mines. In the final 5 years of his tenure with MIM, Mr Sullivan was Executive General Manager responsible for the extensive Mount Isa and Hilton

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operations. More recently, Mr Sullivan has been working with a number of smaller exploration and mining companies.

Mr Sullivan is a Non Executive Chairman of Exco Resources (ASX:EXS), NonExecutive Director of Lion Mining Limited and also a Non-Executive Director of Lion Selection.

Mr Sullivan was appointed to the board on 16 June 2008.

Graham Freestone , Non-Executive Director

BEc (Hons)

Mr Freestone, aged 61, has over 30 years experience in the finance and natural resources industry in Australia and internationally. He has a broad based finance, corporate and commercial background obtained from various senior finance positions with the Shell Group, Acacia Resources and AngloGold. Graham was deeply involved in the float of the Shell Group’s mineral interests through Acacia Resources Limited and Acacia’s merger with AngloGold. He has been Non-Executive Director of Lion Selection since 2001.

Mr Freestone will join the Catalpa board on completion of the Scheme.

John Rowe , Non-Executive Director

BSc (Hons), ARSM, MAusIMM

Mr Rowe, aged 60 brings a wealth of geological and business development skills to the Company. Mr Rowe has 39 years experience predominantly within the nickel and gold industries of Australia. He has held a variety of positions in mine management, exploration and business development and was previously employed as an executive of MPI Mines and Lion Ore Australia.

Mr Rowe is also a Non-Executive Director of Panoramic Resources Limited (ASX:PAN).

Mr Rowe was appointed to the board of Westonia Mines (now Catalpa) on 12 October 2006, and became Chairman on 30 January 2008. He has agreed to step down as Chairman and will remain on the board as a Non-Executive Director, effective on completion of the Scheme.

Murray Pollock, Non-Executive Director

MAICD

Murray Pollock is a businessman with 40 years experience within the mineral resource sector, principally in drilling. Mr Pollock is a drilling and mine management services consultant for several companies.

Mr Pollock was appointed to the board of Westonia Mines (now Catalpa) prior to the company’s initial public offering and listing on ASX in 2002.

Nigel Johnson is currently a Non-Executive Director of Catalpa and will retire from the board prior to implementation of the Scheme.

Current board members of Lion Selection, Non-Executive Chairman Ewen Tyler and Managing Director Robin Widdup will not become a part of the board of Catalpa post the Scheme.

Management

The Catalpa management team will be unchanged by the Scheme. The current Catalpa senior managers are:

Erik Palmbachs, Chief Financial Officer
Stuart Pether, General Manager - Operations

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Nick Winnall, Geologist Exploration Manager
Adrian Pelliccia, Manager Geology
Graham Anderson, Company Secretary
Leonard Math, Company Secretary

Remuneration

The remuneration of directors and management of Catalpa as a Merged Group is proposed to follow that currently in place at Catalpa.

Corporate Governance

The corporate governance practices in place at Catalpa will continue to apply postMerger. These practices comply with the ASX Corporate Governance Council principles of Good Corporate Governance and Best Practice Recommendations, unless otherwise disclosed by Catalpa.

3.4 Principal Assets of the Merged Group

The merged group’s two assets are 100% of the Edna May Gold Project in Western Australia and a 30% joint venture interest in the Cracow Gold Mine in Queensland.

Edna May Gold Project

The Edna May Gold Project is located mid-way between Perth and Kalgoorlie in Western Australia, and was the subject of a feasibility study completed in 2008. On 7 April 2009 Catalpa announced an open pit Reserve of 817,000 ounces within a Resource of more than 1.5 million ounces.

Project construction commenced in July 2009 with first gold production targeted for June 2010. The 2008 feasibility study estimated a capital cost of A$92 million. The project is intended to process 2.8Mtpa of ore initially, ramping up to 3.2Mtpa with an estimated life of mine cash operating cost of A$636/ounce (pre-royalty).

Catalpa has successfully raised more than A$106 million in debt and equity to advance the Edna May Gold Project to production by June 2010. This is comprised of a A$68.51 million project finance facility Macquarie Bank has agreed with Catalpa’s wholly owned subsidiary, Edna May Operations, and A$38.9 million of equity funds raised.

Gold production has been partially hedged with 352,317 ounces sold at a fixed flat forward price of $A1,557.50/ounce. The Macquarie Facilities remain subject to the satisfaction of certain conditions precedent (discussed further in section 5).

Further details on the Edna May Gold Project are contained in section 5 of this Explanatory Memorandum.

30% of Cracow Gold Mine

The Cracow Gold Mine, located in the Theodore region of southern Queensland, commenced operations in November 2004 and has consistently produced around 100,000 ounces per annum for the last three years. Ore throughput capacity exceeds 400,000 tonnes per annum with ore currently being sourced from the Royal, Sovereign and Crown mineralised zones.

30% share of gold produced at the Cracow Gold Mine for the twelve months to 31 July 2009 was 30,183 ounces at cash operating cost of $512/ounce. Gold production from 30% share of Cracow is unhedged and unleveraged and continues to be fully exposed to the currently high A$ gold price providing a strong cash flow stream.

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Reserves for the project at 30 June 2008 were 230,000 ounces at 7.2g/t gold. Total measured, Indicated and Inferred Resources at 30 June 2008 were 840,000 ounces at 8.2g/t which includes 305,000 ounces following exploration success on the recently defined Kilkenny structure Recent drilling on the Kilkenny structure has intersected further gold mineralisation to the south of the Resource and this may extend the known mineralisation envelope, adding further potential for mine life extension.

Further details on the Cracow Gold Mine can be found in section 4 of this Explanatory Memorandum.

Other Assets

The merged group will have a cash balance of approximately A$36.0 million when the Scheme is completed. This cash will be used to contribute to the funding of Edna May and to cover administrative expenses.

Under the terms of the Cracow Joint Venture Agreement, the merged group (through its wholly owned subsidiary Lion Mining Limited) will hold the pre-emptive right over Newcrest Mining Limited’s 70% joint venture interest in the Cracow Gold Mine.

Resources & Reserves

Details of Cracow’s and Edna May’s respective Resource & Reserve Statements are set out in Annexures 1 and 2 respectively, of this Explanatory Memorandum.

3.5 Business

Other than as disclosed in this Explanatory Memorandum, it is the intention of the directors of Catalpa following the implementation of the Scheme:

create a new Australian mid tier gold producer having a clear and focused strategy;
to develop the Edna May Gold Project and participate in the Cracow Gold Mine Joint Venture including exploration;
not to make any major changes to the businesses of Catalpa or Lion Selection (ignoring LSG and its subsidiaries which will have been demerged from Lion Selection); and
the existing management team of Catalpa will remain in place.

Catalpa intends to fund the necessary working capital of the merged group from existing cash balances and revenues from the Cracow project.

3.6 Borrowings

Catalpa’s wholly owned subsidiary, Edna May Operations, has arranged the following secured finance facilities with Macquarie Bank to fund the development of the Edna May Gold Project:

A$55 million secured loan facility;
up to A$10 million mezzanine facility;
A$3.1 million performance bond facility; and
Gold hedging facility.

Further detail on these facilities, the applicable conditions precedent and the security provided to Macquarie Bank in relation to the Macquarie Facilities is set out in section 5 of this Explanatory Memorandum.

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Other than the Macquarie Facilities, Catalpa is not expected to have any other borrowings when the Scheme is implemented.

3.7 Hedging

As part of the financing arrangements for the Edna May Gold Project, Catalpa has entered into a gold hedging facility with Macquarie Bank.

Catalpa has announced that 352,317 ounces of gold has been forward sold under this facility at an achieved fixed flat forward price of A$1,557.50 per ounce for delivery from commencement of operations, into the 2015 financial year. Those hedging arrangements will be novated to a wholly owned subsidiary of Catalpa, Edna May Operations, upon completion of the transfer of the Edna May Gold Project assets by Catalpa to Edna May Operations.

Further detail on this forward sale of gold can be found in section 5.6 of this Explanatory Memorandum.

No hedging is in place for the Cracow Gold Mine. The directors of Catalpa will review the hedging policy from time to time, consistent with the company’s financial situation and outlook, shareholders interests, economic conditions, spot and forward gold prices and other matters.

3.8 Financial information

This section provides relevant financial information for Catalpa Selection shareholders to consider when assessing the Scheme and to understand the impact that voting in favour of the Merger Resolution will have on them.

All financial information is presented in accordance with Australian Equivalents to International Financial Reporting Standards (“AIFRS”). The financial information contained in this section has been presented in abbreviated form. It does not contain all the disclosures usually provided in an annual report prepared in accordance with the Corporations Act.

This section contains the following financial information, derived from unaudited financial statements of Lion Selection at 31 July 2009 and audited financial statements of Catalpa at 30 June 2009. The pro forma Merged Group consolidated Balance Sheet as at 31 July 2009 includes Lion Selection after the Demerger of LSG and payment of the Cash Distribution.

The audited financial statements of Lion Selection and Catalpa, including historical Income Statements, Statement of Cash Flows and accounting policies can be found at www.lionselection.com.au and www.catalparesources.com.au respectively.

The pro forma financial information has been prepared for illustrative purposes only as if the transactions had occurred at 30 June 2009 for Catalpa and 31 July 2009 for Lion Selection. The actual results will differ from those presented in this Explanatory Memorandum.

The financial information in this section should be read in conjunction with the risks described in section 2.3 and other information contained in this Explanatory Memorandum. Further detail on the underlying assets of Lion Selection and Catalpa can be found in sections 4 and 5.

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Pro forma Balance Sheet (post Demerger)

Pro forma Balance	Sheet (post	Demerger)
Balance Sheet as at 31 July 2009	*Catalpa* *Consolidated* *(Audited)*	*Notes*	*Issue of* *Scheme* *Consideration*	*Lion* *Selection* *Consolidated*	*Eliminatio* *n (a)*	*Catalpa* *(Unaudited)* *Pro Forma*
	*30 June 2009*		*(c)*	*(Unaudited)*		*Balance*
				*31 July 2009*		*Sheet*
				*Post*
				*Demerger (a)*
	*$000*		*$000*	*$000*	*$000*	*$000*
Current Assets
Cash and cash equivalents	32,297		-	2,014	-	34,311
Trade and other Receivables	4,371		-	175	-	4,546
Loans	-		-	-	-	-
Inventories	-		-	1,932	-	1,932
Other Current Assets	9		-	1,920	-	1,930
*Total Current Assets*	36,678		-	6,041	-	42,719
Non Current Assets
Goodwill	-	b	-	-	8,214	8,214
Property, Plant and Equipment	7,457		-	5,953	-	13,411
Mine Development	1,526		-	41,474	-	43,000
Prepayments	3,663				-	3,663
Financial assets	-	c	110,363	59,643	(170,006)
Deferred tax assets	-	d	-	-	-	-
*Total Non Current Assets*	12,646		110,363	107,070	(161,792)	68,288
*Total Assets*	49,324		110,363	113,111	(161,792)	111,007
Current Liabilities
Trade and Other Payables	4,113		-	1,332	-	5,446
Borrowings	20		-	-	-	20
Current tax liabilities	-		-	291	-	291
Provisions	108		-	622	-	729
*Total Current Liabilities*	4,240		-	2,245	-	6,485
Non Current Liabilities
Borrowings	66		-	-	-	66
Provisions	407		-	496	-	903
Deferred tax liabilities	-	f	-	8,222	-	8,222
*Total Non Current Liabilities*	473		-	8,718	-	9,190
*Total Liabilities*	4,713		-	10,963	-	15,676
Net Assets	44,611		110,363	102,149	(161,792)	95,331
Equity			-		-
Contributed equity	74,101	c	110,363	-	(59,643)	124,821
Reserves	4,526		-	-	-	4,526
Retained profits/(accumulated losses)	(34,016)		-	-	-	(34,016)

Total parent entity interest	44,611		110,363	-	(59,643)	95,331
Total Outside Equity Interest	-		-	-	-	-
Total Equity	44,611		110,363	-	-	95,331

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Note that the pro forma accounts above reflect different accounting periods, with Catalpa having a 30 June year end and Lion Selection having a 31 July year end. There are no material changes between 30 June and 31 July for Catalpa.

Basis of preparation

Catalpa Balance Sheet Notes

(a) Lion Selection balance sheet after the Demerger of LSG, issue of Lion Selection Shares to Lion Manager and payment of the Cash Distribution. These pro-forma balance sheets are based on the assumption that the fair value of Lion Selection’s assets and liabilities are equal to their book value (see further comments below). The pro forma balance sheets do not reflect the following items that are expected to be incurred or earned prior to Implementation Date:
(1) Transaction costs incurred by Catalpa, which are expected to be around $1.9. Upon application of the revised AASB 3 Business Combinations, these costs will be required to be expensed in the books of Catalpa as at the acquisition date.
(2) Net proceeds from gold sales (after production costs) that will be for Catalpa’s beneficial ownership from 1 August 2009, provided that the Scheme proceeds.
(b) Goodwill of $8,214,000 is recognised upon consolidation with respect to the excess purchase price over the fair value of the Net Assets acquired by Catalpa. Recognised goodwill is subject to impairment testing.
(c) Issue of shares valued at $110,363,000 to acquire Lion Selection, assuming that the consideration in the form of Catalpa shares is the same as the fair value of Lion Selection’s assets and liabilities acquired, excluding the deferred tax liability arising on acquisition (note f).
(d) For the purpose of the pro-forma balance sheet it is assumed that no fair value is attributed to Lion Selection tax losses or other deferred tax assets.
(e) Elimination of investment in Lion Selection, and elimination of Catalpa shares & options acquired by Catalpa in the Scheme.
(f) Recognition of deferred tax liability of $8,214,000, arising as a result of the business combination on the basis that tax depreciation is not anticipated to be available to the extent that the fair value for accounting purposes exceeds the tax base of assets.

Catalpa Accounting policies

The accounting policies adopted in the preparation of the pro forma financial statements are equivalent to those set out in Catalpa’s financial report for the year ended 30 June 2009. These policies are generally in alignment with those of Lion Selection. Catalpa’s accounting policies are available on the Catalpa website

( www.catalparesources.com.au ).

Adjustment relating to the fair value of Lion Selection’s assets and liabilities acquired

In accordance with the requirements of Australian Accounting Standard AASB 3 “Business Combinations”, Catalpa has been identified for accounting purposes as the “acquirer” in the Scheme.

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Catalpa, in accordance with the requirements of Australian Accounting Standard AASB “Business Combinations”, will measure Lion Selection’s identifiable net assets at their fair value as at the date of acquisition of Lion Selection. The excess of the acquisition consideration over the assessed fair value of the identifiable net assets at the acquisition date will be recognised as goodwill in accordance with AASB 3.

The Catalpa pro-forma consolidated balance sheet is based on the assumption that the fair value of the assets and liabilities are equal to their book value. In addition, the acquisition consideration assumed for the pro-forma balance sheet is the same as the book value of the assets and liabilities acquired, excluding the deferred tax liability arising on revaluation of Lion Selection’s interest in the Cracow Joint Venture. The fair values of assets and liabilities are subject to change following a detailed assessment of the fair values at the time of acquisition by Catalpa Directors which will be undertaken subsequent to the Implementation Date. The acquisition consideration is also subject to change, as value of shares to be issued to existing Lion Selection shareholders will be determined on the Implementation date.

Goodwill is required to be tested annually for impairment or when an indicator of impairment exists. The recoverable amount of goodwill and assets allocated to goodwill for the same cash generating unit will be based on the discounted forecast cash flows for the Cracow Joint Venture. It should be noted that impairment write downs may be required in the future in the event profitability declines in the Cracow Joint Venture operations.

AASB 3 “Business Combinations” requires the recognition of the fair value contingent liabilities. The fair value of a contingent liability is determined as the amount that a third party would charge to assume those contingent liabilities. No contingent liabilities are known to exist in Lion Selection.

Financial forecasts for the merged group

Catalpa has given careful consideration to whether forecast financial statements (including any internally created valuation models) can and should be included in the Explanatory Memorandum in respect of the merged group. In particular, Catalpa has considered whether there is a reasonable basis for the preparation and disclosure in the Explanatory Memorandum of reliable and useful forecast financial statements in this regard. Catalpa has concluded that forecast financial statements for the merged group cannot be provided in the Explanatory Memorandum as it does not have a reasonable basis for such forecasts as required by applicable law and practice, and therefore the forecasts would not be meaningful or material to Catalpa Shareholders. The considerations which have resulted in this conclusion include the potential timing and production effect that construction of the Edna May Gold Project, combined with variations in the price of gold and exchange rates, may have on future revenue and earnings.

Catalpa Balance Sheet 30 June 2009

In connection with entering into the project finance commitment with Macquarie Bank Catalpa has agreed to issue Macquarie Bank with options over fully paid ordinary shares in Catalpa.

Under Australian Accounting Standards the options are required to be fair valued and accounted for in the balance sheet as a deduction against the funds received and in equity, within the option reserve. The fair value of the options are then amortised against the debt component over the term of the facility and is accounted for in the income statement. The options have been accounted for in the pro-forma balance sheet as at 31 July 2009.

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Taxation Assumptions

The Catalpa pro-forma consolidated balance sheet is based on the assumption that the fair value of the Lion Selection assets and liabilities acquired are equal to their book value including the Cracow Joint Venture (mine development and mineral tenements) and exploration properties. Lion Selection’s book value in relation to the Cracow Joint Venture mine development and mineral tenements reflects their fair value at the time acquired by Lion Selection, less depreciation and amortisation to date. A related deferred tax liability of $8,889,708 arises, recognising that the mine development fair value will continue to be amortised for accounting purposes yet tax depreciation is not available. As a result of recognising this deferred tax liability, the identifiable Net Assets of Lion Selection on acquisition have been reduced. Consequently, an excess of purchase consideration over the Net Assets arises and this amount has been recognised as goodwill on the acquisition of Lion Selection.

The Catalpa pro-forma consolidated balance sheet does not include any adjustments that may arise from Lion Selection entering the Catalpa tax consolidated group. Lion Selection (and its subsidiaries, excluding LSG and LSG’s subsidiaries) will form part of the Catalpa tax consolidated group from when Catalpa obtains 100% ownership of Lion Selection. When Lion Selection joins the Catalpa tax consolidated group, Catalpa as the ‘head entity’ of the group is deemed to acquire the underlying assets of Lion Selection. In calculating the tax cost base of the assets of Lion Selection, the existing tax bases of the assets are reset for tax purposes. The Catalpa pro forma balance sheet assumes no change in the tax cost base of assets on the basis that the market value and book value of the underlying assets in Lion Selection are the same.

Lion Selection and Catalpa have tax losses carried forward, but which have not been recognised as a deferred tax asset on the pro forma Balance Sheet. These losses are subject to certain rules upon entering a tax consolidated group, restricting the ability to transfer tax losses into the consolidated group, and the subsequent use of the carried forward losses by the consolidated tax group. A review of these rules indicates that Lion Selection’s carried forward losses may not be available to Catalpa. The rate at which Catalpa may access their existing tax losses will be restricted and subject to satisfying the loss recoupment tests in the future. However, no deferred tax asset has been recognised with respect to these losses in the pro forma balance sheet as it is not considered to be probable that taxable income will arise to utilise the tax benefit of these losses. The level of any losses available to Catalpa will depend on Catalpa being able to satisfy tax loss recoupment provisions of the Income Tax Assessment Act 1936 and the Income Tax Assessment Act 1997.

3.9 Dividend Policy

The distribution policy of the merged group will be determined by the Catalpa Directors having regard to the earnings, financial and taxation position, and capital investment requirements of Catalpa at the time. Given the early stage of development of the Edna May Gold Project, Catalpa does not intend to pay dividends in the short term, however, this position will be reviewed on an ongoing basis in the future.

3.10 Financial Year End

Catalpa financial year end is and is intended to remain 30 June.

3.11 Auditor

It is intended that PKF, Chartered Accountants & Business Advisers will continue to be the auditors of Catalpa post-Merger.

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3.12 Statements of intention

The intentions stated in this section 3 have been formed on the basis of information relating to Lion Selection provided by Lion Selection and relating to Catalpa known by Catalpa, in each case as at the date of this Explanatory Memorandum. Final decisions will be made by Catalpa in light of the material information and circumstances at the relevant time and as Catalpa conducts a complete review of the operations of the merged Lion Selection and Catalpa businesses. Accordingly, the statements set out in this section are statements of current intentions only, and in this respect are “forward looking statements”. These statements may change as new information becomes available or as circumstances change.

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4 Information about Lion Selection

Set out below are details of Lion Selection. More detailed discussion of Lion Selection can be found in the Lion Selection Scheme Booklet. The Lion Selection Scheme Booklet is available from Lion Selection’s website at www.lionselection.com.au or from ASX’s website at www.asx.com.au.

4.1 Overview

Lion Selection was formed in April 2007 as a result of a shareholder approved merger between Lion Selection Group Limited and AuSelect Limited. At the time of the merger Lion Selection’s assets comprised a portfolio of resource investments and a 30% joint venture interest in the Cracow Gold Mine.

Since its formation, Lion Selection has continued to carry on the business of investing in junior resource companies and participating in the Cracow Gold Mine joint venture.

Currently, Lion Selection’s portfolio of resource investments comprises a number of investments held through its subsidiary, LSG, a 46.9% shareholding in Catalpa and the 30% joint venture interest in the Cracow Gold Mine. The Cracow Gold Mine is described below, and Catalpa is described in section 5.

If the Lion Selection Demerger Resolution and the Lion Manager Share Issue Resolution are approved at the Lion Selection General Meeting, then immediately prior to the acquisition of Lion Selection by Catalpa under the Scheme, the only assets remaining with Lion Selection (and its subsidiaries) will be the Cracow Gold Mine joint venture interest, Lion Selection’s 46.9% shareholding and options in Catalpa and A$1.5 million cash.

As at 30 June 2009, Lion Selection’s market capitalisation was approximately $109.2 million.

4.2 History of Lion Selection’s involvement with Catalpa

Lion Selection has been a strategic investor in Catalpa since before the company was listed on ASX in August 2002, having provided seed capital and participated in various fund raisings (including the Initial Public Offering in 2002) up until present.

Most recently, Lion Selection took part in Catalpa’s placement (Lion Selection contributed A$15 million) and share purchase plan (Lion Selection contributed A$2 million) in which Catalpa raised A$38.9 million (before fees) to contribute to the Edna May Gold Project development.

Lion Selection’s representative, Chris Melloy, also an employee of Lion Manager, sat on the Catalpa board from before Catalpa listed in 2002 to December 2008.

In June 2008 Lion Selection nominee Barry Sullivan was appointed to the Board of Catalpa.

4.3 Lion Selection Demerger and Lion Manager Share Issue

(a) Lion Selection Demerger

Lion Selection currently holds investments in several funds and resources companies through its wholly owned subsidiary, Lion Selection Group Limited.

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It is a condition of the Merger that Lion Selection will demerge with LSG through the transfer of all of the shares in LSG to Lion Selection Shareholders by way of capital reduction (referred to in this Explanatory Memorandum as the Lion Selection Demerger).

Once the Lion Selection Demerger is effected Lion Selection will no longer hold any shares in LSG. All of the shares in LSG will have been transferred to Lion Selection Shareholders (or the nominee on behalf of ineligible overseas Lion Selection Shareholders).

The Lion Selection Demerger will only proceed if:

the Lion Manager Share Issue is approved by 50% or more of the votes cast by Lion Selection Shareholders on the Lion Manager Share Issue Resolution at the Lion Selection General Meeting;
it is approved by 50% or more of the votes cast by Lion Selection Shareholders on the Demerger Resolution at the Lion Selection General Meeting;
NSX approves the admission of LSG to its official listing and the quotation of LSG Shares for trading on NSX; and
the ATO confirms that Lion Selection Shareholders will have the benefit of demerger relief in respect of the Lion Selection Demerger.

The Lion Selection Demerger will be effected immediately before the Scheme is implemented but the Lion Selection Demerger is not conditional on the Scheme proceeding.

(b) Lion Manager Share Issue

Lion Manager currently manages Lion Selection’s investments under the Lion Selection Management Agreement. The Lion Selection Board has decided that the Lion Selection Demerger of LSG from Lion Selection will result in the services provided by Lion Manager no longer being required. Catalpa also required the termination of the Management Agreement as a condition of the merger.

As a result, Lion Selection has given notice to terminate the Management Agreement with Lion Manager subject to the Demerger Resolution and the Lion Manager Share Issue Resolution being approved by Lion Selection Shareholders.

A termination payment applies for the termination of the Lion Selection Management Agreement. The Lion Selection and Lion Manager have agreed that Lion Manager will be issued the Lion Selection Shares immediately before the Lion Selection Demerger in satisfaction of the cash termination payment.

Consequently, Lion Manager will receive 5,923,757 Lion Selection Shares. These Lion Selection Shares will be issued to Lion Manager after shareholders have approved the Lion Selection Demerger, but before the Lion Selection Demerger is implemented, so these shares, if the Merger proceeds, will participate in the Merger with Catalpa.

(c) What if the Lion Selection Shareholders vote against the Lion Selection Demerger and the Lion Manager Share Issue?

If the Lion Selection Demerger Resolution and the Lion Manager Share Issue Resolution are not approved by Lion Selection Shareholders or other conditions of the Lion Selection Demerger are not satisfied, the Lion Selection Demerger and the Lion Manager Share Issue will not proceed. In addition, if the Lion Selection Demerger and the Lion Manager Share Issue do not proceed, the merger of Lion Selection and Catalpa under the Scheme will not proceed.

Lion Selection will be required to pay a break fee to Catalpa in certain circumstances if the Scheme does not proceed. These are set out section 6.1(g).

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4.4 Capital Structure

Lion Selection had 82,105,596 ordinary shares on issue at the date of this Explanatory Memorandum. If Lion Selection shareholders approve the Demerger, Lion Manager will be issued with 5,923,757 shares, taking the new total number of shares on issue that participate in the Demerger, Cash Distribution and Scheme to 88,029,353. The top 20 ordinary shareholders collectively held 44,915,523 shares, representing 51.0% of Lion Selection’s total issued shares.

The top 20 Lion Selection Shareholders at 31 July 2009 are set out below.

Shareholder	No. of Shares	% Issued Capital
Citicorp Nominees Pty Limited	7,263,053	8.9
ANZ Nominees Limited	6,861,416	8.4
Cogent Nominees Pty Limited	6,025,749	7.3
Lion Manager Pty Ltd⁺	5,923,757	6.7
HSBC Custody Nominees (Australia) Limited - A/C 3	4,220,236	5.1
National Nominees Limited	3,229,767	3.9
Mr Mark Gareth Creasy	3,062,502	3.7
J P Morgan Nominees Australia Limited	2,224,427	2.7
HSBC Custody Nominees (Australia) Limited	1,735,453	2.1
UBS Nominees Pty Ltd	966,354	1.2
Bond Street Custodians Limited	669,000	0.8
Mirrabooka Investments Limited	669,000	0.8
Mr Robin Anthony Widdup + Mrs Janet Widdup	654,793	0.8
Mr Alexandre Peter Swanson + Ms Lynley Marie Swanson	444,444	0.5
Mr Mark Gareth Creasy	410,864	0.5
Miviva Pty Ltd	350,000	0.4
Avanteos Investments Limited	345,761	0.4
Gryphon Partners Pty Ltd	304,711	0.4
Wal Assets Pty Ltd	272,157	0.3
Mrs Kathryn Margaret Evans	250,000	0.3
Total top 20	45,883,444	55.2
Total Shares On Issue	88,029,353	100.0

⁺ Lion Manager will not be issued the 5,923,757 Lion Selection Shares as Termination payment until the Demerger and the Lion Manager Share Issue have been approved by Lion Selection Shareholders. The top 20 shareholders list shown above assumes the Lion Manager Shares are issued, and accordingly Lion Manager will hold 6.7% of the issued capital in Lion Selection prior to the Demerger and Scheme taking place.

The numbers shown above were correct at 31 July 2009, but may change before the Scheme takes place.

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4.5 Substantial Shareholders

The substantial shareholders in Lion Selection as at the date of this Explanatory Memorandum are shown below.

Shareholder	% Issued Capital
Carrousel Capital Limited	12.9%
Select Asset Management Limited	9.3%
Laxey Partners	9.2%
Citigroup Global Markets	6.9%

There are no options over Lion Selection shares outstanding.

4.6 Board of Directors and Management

The Lion Selection directors in office as at the date of this Explanatory Memorandum are as below.

Ewen Tyler AM , BSc (Hons), Non Executive Chairman

FAus IMM, FAIM, MIMMM, CEng

Mr Tyler completed his degree in Geology at the University of Western Australia in 1949 and was involved in exploration and mining in Africa during the 1950s. In the following decade he worked in mining finance and exploration in London and on returning to Australia in 1969 initiated the exploration which led to the discovery of the Argyle Diamond Mine.

Mr Tyler was a founding director of Ashton Mining Limited and remained an executive director until his retirement in 1990. Mr Tyler has been chairman of Lion Selection (and its predecessors) since inception in 1997. Mr Tyler holds 37,056 Lion Selection Shares.

Robin Widdup , BSc (Hons), Managing Director

MAusIMM

Mr Widdup graduated from the University of Leeds (UK) with an Honours Degree in Geology in 1975. He worked in the Zambian copper belt gaining experience in mine geology at major copper-cobalt deposits, returning to the United Kingdom in 1978 to work for the National Coal Board in open-cast coal exploration activities. In 1980, Robin joined Mount Isa Mines Limited in Queensland as a project geologist in copper/silver, lead and zinc mining, progressing to become the senior geologist.

Mr Widdup moved to stockbroker J B Were & Son as base metals analyst in 1986, before his subsequent appointments as gold analyst and manager of J B Were’s Resource Research team. During his time at J B Were, Robin established himself as one of Australia’s leading resource analysts, and the Resource Research team under his management was held in the same regard.

Mr Widdup resigned from J B Were & Son in early 1997 to establish Lion Selection Group Limited and was the Managing Director from that time until the merger with AuSelect Limited in April 2007. Robin has continued as the Managing Director of the merged company, Lion Selection Limited. He is an executive director of Lion Manager Pty Limited.

Graham Freestone , Non Executive Director

BEc (Hons)

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Please refer to section 3.3 for a biography of Mr Freestone

Barry Sullivan BSc (Hons), Non Executive Director

ARSM, FAusIMM, MAICD

Please refer to section 3.3 for a biography of Mr Sullivan

Lion Selection will not have any employees immediately prior to the Scheme with Catalpa being implemented.

4.7 Assets

Cracow Gold Mine (30%)

The Cracow Gold mine in Queensland is a developed underground operation with a top quality management team operated by Newcrest. Cracow produces 95,000 – 105,000 ounces of gold annually and has outstanding potential to add substantially to the mine life through exploration success.

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The Cracow Gold mine is located in the Theodore region of southern Queensland and is very well located with good infrastructure and access. The majority of staff and contractors operate on a fly-in-flyout roster from the Sunshine Coast or Brisbane.

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==> picture [190 x 39] intentionally omitted <==

The Cracow Gold Mine is operated by Newcrest (70%) on behalf of the Cracow Gold Mine Joint Venture.

3 months to	Jul 2008	Oct 2008	Jan 2009	Apr 2009
Ore Mined (tonnes)	36,017	34,237	32,366	35,062
Ore Processed (tonnes)	31,250	31,190	33,779	32,720
Ore grade (g/t Au)	10.2	7.7	6.7	7.1
Met Recovery (%)	94	93	92	91
Gold Produced (oz)	9,458	7,182	6,372	7,109

Gold Sold (oz)	10,261	7,605	6,520	6,597
Gold Price Received(A$/oz)	949	1,051	1,212	1,337
Cash Operating Cost (A$/oz)	351	488	597	515
Royalties (A$/oz)	26	28	33	34
Total Cash cost (A$/oz)	377	516	630	549
Operating cashflow (A$M)	6.2	4.3	3.9	4.9

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Capital costs (A$M)	1.4	1.0	0.7	0.9
Exploration (A$M)	0.4	0.8	0.6	0.5

Operations commenced at Cracow in November 2004 and the mine has consistently produced around 100,000 ounces per annum for the last three years. Ore throughput capacity exceeds 400,000 tonnes per annum with ore currently being sourced predominantly from the Royal, Sovereign and Crown mineralised zones. Mine production will in time include ore from the newly discovered Kilkenny structure, which was included in the Resource for the first time in 2007, and displays outstanding potential to add more years to the project life.

Lion Selection’s share of gold produced at the Cracow Gold Mine for the twelve months to 30 April 2009 was 30,121 ounces at cash operating cost of $504/ounce.

4.8 Resources and Reserves

Details of the Cracow Resource and Reserve Statement are set out in Annexure 1.

4.9 Exploration

Cracow currently has a number of years of mine life ahead, with recent success at Kilkenny adding potential for mine life extension.

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Map of the Cracow Gold Field, showing the known mineralized structures, the areas of historic production with the year production commenced and approximate ounces produced as well as the main resources showing approximate contained ounces.

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North-South Long Projection of the Cracow Gold Mine, showing the positions of the main lodes.

Exploration of the Cracow Goldfield is conducted by Newcrest on behalf of the Cracow Joint Venture. The Cracow Goldfield has produced over 1,100,000 ounces of gold since 1932. The majority of this has been from the Golden Mile Fault, a vein structure which contained the Golden Plateau shoot.

Following from the successful delineation of 200,000 ounces of Inferred Resource at Kilkenny in 2007, further drilling south of Kilkenny has resulted in the discovery of a new zone of high grade gold mineralisation. Drill hole CBK226 intersected high grade mineralisation of 42.1m (19.8m True Width) @ 6.0g/t gold including 12.4m (5.8m True Width) @ 12.0g/t gold. This result is located along the Kilkenny footwall structure approximately 250m south of the current Inferred Resource. Since this result was received, further drilling has intersected mineralisation at economic grades and widths in the same vicinity. This new shoot has excellent potential to be included in a future Resource, and to substantially increase the mine life and value of Cracow.

The diagram below shows a schematic exploration history for the Cracow gold field and milestone discoveries.

A schematic time line of gold discovery over the Cracow Gold Field

==> picture [421 x 141] intentionally omitted <==

----- Start of picture text -----

1995 – Newcrest and 2001 –
Sedimentary form Discovered 2005 – Discovered 2009
70/30 JV to explore Crown Shoot 2002 – Kilkenny Structure Encouragement Cracow Gold Field 2009/10
Cracow Field targeting 1999 – Discovered along strike (south) Targets:
mineralisationepithermal Royal ShootDiscovered Sovereign, Empire & 2008 Kilkenny Resource of Kilkenny Resource – New Shoot ?? Definition
Phoenix (200,000oz
Structures inferred) •Infill Drill Kilkenny
•Establish more resources
along strike of Kilkenny
Discover new mineralisation
•Kilkenny & Royal structures
under cover to the south
1931 – Payable gold •Golden Plateau – historically
discovered (Golden Plateau) 1932-92: Sporadic discovery and drilled and mined, potential for additional shoots
production of 850koz, •Multiple fertile structures,
1875 – First Gold mainly from Golden poorly drilled to date
Discovered Plateau
----- End of picture text -----

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Investment in Catalpa

Lion Selection’s other major asset is a shareholding in Catalpa. At the date of this Explanatory Memorandum, Lion Selection held 549,149,733 ordinary fully paid ordinary shares in Catalpa, or 46.9%. In addition, Lion Selection holds 16,899,589 listed options over Catalpa shares, exercisable at 10 cents per share before 30 June 2010 (ASX:CAHO) as well as 112,407,597 listed options exercisable at 10 cents per share before 31 October 2011 (ASX:CAHOB).

Catalpa will cancel Lion Selection’s Catalpa Options and it is Catalpa’s current intention to cancel Lion Selection’s Catalpa Shares within 12 months of the implementation of the Scheme, subject to Catalpa Shareholder approval. If Catalpa Shareholders do not approve the cancellation of Lion Selection’s Catalpa Shares, Catalpa is required to otherwise cease to hold the Catalpa Shares and may be required to sell down the Catalpa Shares. While those Catalpa Shares are indirectly held by Catalpa they will have no voting rights.

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5 Information about Catalpa

5.1 Overview

Catalpa (ASX: CAH) is an emerging gold miner that has been listed on ASX since 15 August 2002 (Catalpa traded as Westonia Mines (ASX: WEZ) from 15 August 2002 until 3 September 2008). On 30 June 2009 it had a market capitalisation of approximately $117.2 million.

Catalpa’s key existing asset is the 100% owned Edna May Gold Project located at Westonia, mid-way between Perth and Kalgoorlie in Western Australia, which is surrounded by significant exploration tenure. Having completed permitting and financing, Catalpa has recently begun construction of the project. The Resources and Reserves for the Edna May Gold Project are in Annexure 2.

5.2 Edna May Gold Project

The Edna May Gold Project in Western Australia is poised to become a producer of in excess of 100,000 ounces of gold annually. The mine life of around 8 years is based on the current Reserve of 817,000 ounces of gold (at 1.2g/t), which is expected to increase as the project moves towards commissioning and first gold production in the June quarter of 2010. The project Ore Resource is 1.5Moz at 1.1g/t.

The Edna May Gold Project is conveniently positioned three kilometres from the infrastructure of Westonia, an established town with a long mining history. The project is just three hours or 300km by road from Perth; half way between Perth and Kalgoorlie and ideally situated to be serviced by both centres, as well as having access to a skilled regional workforce.

There have been three previous successful mining programs which have occurred both above and below the planned open pit at Edna May, producing a combined total in excess of 600,000 ounces of gold.

The Edna May Gold Project was the subject of a feasibility study in 2006. The project was judged feasible and finance was secured, however, the Catalpa board elected to delay the project and further prepare the project for a higher gold price. In preparation for production, the Big Bell process plant was purchased, dismantled and moved to lay down at Westonia.

==> picture [203 x 44] intentionally omitted <==

==> picture [203 x 43] intentionally omitted <==

==> picture [203 x 44] intentionally omitted <==

The Catalpa board was substantially changed in 2008 with the introduction of a new Managing Director and a reassessment of the Edna May Gold Project took place.

In January 2009 Catalpa released the results of the Edna May feasibility study, which in comparison with the previous study, adopted increased production throughput that enables the project to produce at an annualized rate in excess of 100,000 ounces. The additional process plant throughput, together with an alternative mining strategy and

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higher gold prices enabled a robust economic Feasibility Study for the Edna May Gold Project.

Funding for the Edna May Gold Project was obtained in March and April 2009, including:

A$68.51 million project finance facility with Macquarie Bank
Gold hedge facility comprising 352,317 ounces sold forward at A$1,557.50/oz
Equity funds of A$31.4 million (placement) and A$7.5 million (share purchase plan) raised gross proceeds of A$38.9 million.

Environmental Mining Approval Notification was received on 25 May 2009, clearing the way for placement of orders for major capital items and appointment of major contractors.

Construction commenced in July 2009 and continues on schedule and within budget. As of September 2009, the newly constructed 88 person accommodation village and dining facilities are commissioned and fully occupied with construction personnel. The process plant civil earthworks are almost complete, and concrete civil works are well advanced in the grinding, leach and absorption areas with over 1,000m3 of concrete poured to date. Tank fabrication has commenced and refurbishment of mechanical equipment, motors and steel is well advanced.

First gold is expected to be produced from the project during the June quarter of 2010. The mine is planned to produce at a rate in excess of 100,000 ounces of gold per annum. Initially, the plant is intended to process 2.8Mtpa of ore, ramping up to 3.2Mtpa in year three. The feasibility study estimated a capital cost of A$92 million and a life of mine cash operating cost of A$636/oz (pre-royalty) over a current mine life of around 8 years.

Projected Annual Production Profile

The Edna May Gold Project annual gold production is projected to average at more than 100,000 ounces of gold recovered per year. Catalpa management continues to review and optimize the gold ounce production profile to maximize cash flow from the project.

Catalpa is obliged to sell a total of 352,317 ounces of gold into the flat forward contracts at A$1,557.50/oz. The distribution of gold sold at spot versus gold sold into the forward contracts is shown in the chart below.

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----- Start of picture text -----

140,000
Sold at spot
Sold into forwards
120,000
100,000
80,000
60,000
40,000
20,000
0
FY 09/10 FY10/11 FY11/12 FY12/13 FY13/14 FY14/15 FY15/16 FY16/17
Ounces Sold
----- End of picture text -----

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Resources and Reserves

Statement of Edna May Gold Project Resources – 30 June 2009

					Edna May Gold Project Resource Statement	Edna May Gold Project Resource Statement	Edna May Gold Project Resource Statement	Edna May Gold Project Resource Statement	Edna May Gold Project Resource Statement	Edna May Gold Project Resource Statement	Edna May Gold Project Resource Statement
					Reported to 0.5g/t Au cut-off
							Total Measured &						Total Measured & Indicated
	Measured				Indicated						Inferred
								Indicated

	Million	Gold	'000	Million	Gold /t	'000	Million	Gold /t	'000	Million	Gold /t	'000	Million	Gold /t	'000 Ounces
	Tonnes	g/t	Ounces	Tonnes	g	Ounces	Tonnes	g	Ounces	Tonnes	g	Ounces	Tonnes	g

Greenfinch	0.71	1.26	29	2.03	1.15	75	2.74	1.18	104	0.45	1.2	17	3.19	1.18	121
Edna May	16.56	1.15	615	13.32	1.13	484	29.88	1.14	1,099	8.36	1.0	267	38.24	1.11	1,366
TOTAL	17.27	1.16	644	15.35	1.13	559	32.62	1.14	1,203	8.81	1.0	284	41.43	1.11	1,487

Statement of Edna May Gold Project Reserves – 30 June 2009

			Edna May Gold Project Reserve Statement	Edna May Gold Project Reserve Statement	Edna May Gold Project Reserve Statement	Edna May Gold Project Reserve Statement
			Reported to 0.5g/t Au cut-off
		Proved			Probable		Total Proved & Probable
					Gold g/t		Million Tonnes
	Million		'000	Million		'000
		Gold g/t						Gold g/t	'000 Ounces
	Tonnes		Ounces	Tonnes		Ounces


Greenfinch	0.60	1.29	26	1.40	1.18	53	2.00	1.22	79
Edna May	12.30	1.19	471	6.80	1.23	267	19.10	1.20	738
TOTAL	12.90	1.19	497	8.20	1.21	320	21.10	1.20	817

Further details of the Catalpa Resource and Reserve Statements are set out in Annexure 2.

5.3 Exploration

Catalpa holds approximately 840 km² of ground virtually covering the entire western half of the Westonia Greenstone Belt. It extends over 40km in length and large tracts remain under-explored and untested.

The Edna May Gold Project is surrounded by exploration tenure held 100% by Catalpa. The Westonia Greenstone Belt displays many geological similarities to the adjacent Southern Cross Greenstone Belt, which is host to several operating and historic gold mines that have produced in excess of 10 million ounces of gold.

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Regional Westonia Belt and Catalpa tenements

Location	Tenement	Status	Percentage
Bodallin
Bodallin SW	E 77/1165	Granted	100
Bodallin South
Kent Road	E 77/1452	Granted	100
Jilbadgie
Jilbadgie East	E 77/1132	Granted	65
Mine
Paddock	M 77/110	Granted	100
Golden Point East	M 77/124	Granted	100
Mine	M 77/88	Granted	100
Sandford Rocks
Sandford Rocks	E 77/1494	Granted	100
Westonia
Begley	E 77/1069	Granted	100
Westonia NE	E 77/1324	Granted	100
Westonia Belt	E 77/516	Granted	100
Westonia West	E 77/990	Granted	100
Westonia	L 77/18	Granted	100
Westonia NW	P 77/3712	Granted	100
West Westonia	P 77/3713	Granted	100
Westonia NE	P 77/3714	Granted	100
Bodallin	P 77/3875	Granted	100
Corsini Road	P 77/3876	Granted	100
Hitching Road	P 77/3877	Granted	100
Stoneman Road	P 77/3878	Granted	100
Kaolin Street	P 77/3879	Granted	100

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Map showing the locations of Catalpa’s land holdings in relation to greenstone units:

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Catalpa has exploration programs underway to assess new areas of mineralisation and to infill Inferred Resources within the current mine designs. These programs have the potential to add substantially to the Reserve and Resource in the near term, and further extend the mine life.

An infill drilling program at Greenfinch during late 2008 to early 2009 extended the previous Resource and resulted in a maiden Reserve.

During late 2008 Catalpa reported results of diamond drilling testing underground targets at the Edna May Gold Project. The program was designed to further test previous underground drilling intercepts interpreted to be potential extensions of the Edna May reef at depth. The table below illustrates previous intercepts at depth.

	Historical Drill Holes Interpreted to Intersect the Edna	Historical Drill Holes Interpreted to Intersect the Edna	Historical Drill Holes Interpreted to Intersect the Edna	Historical Drill Holes Interpreted to Intersect the Edna	Historical Drill Holes Interpreted to Intersect the Edna	Historical Drill Holes Interpreted to Intersect the Edna	Historical Drill Holes Interpreted to Intersect the Edna	May Reef

Hole ID	North	East	Rl	Dip	Azi	Depth From	Depth To	Downhole Interval (m)	Grade (g/t Au)
WDD041	9650	11650	1339	-90	0	284.0	287.0	3.0	15.0
WDD043	9656	11596	1339	-90	0	369.0	373.0	4.0	8.2
WDD043A	9656	11596	1339	-90	0	363.4	365.1	1.7	6.7
WDD052	9664	11627	1339	-90	0	324.0	327.0	3.0	14.7
WDD052A	9664	11627	1339	-90	0	311.0	314.0	3.0	4.6
WDD054	9694	11576	1338	-90	0	400.0	415.0	15.0	6.1

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WDD054A	9694	11576	1338	-90	0	407.0	413.1	6.1	11.8
WDD055	9739	11553	1338	-90	0	450.0	482.0	32.0	6.8
WDD055A	9739	11553	1338	-90	0	445.0	477.0	32.0	7.8
WDD079	9641	11589	1340	-83	122	347.4	349.8	2.4	2.9
WDD079B	9641	11589	1340	-83	122	330.8	334.0	3.2	4.6
WDD083	9802	11511	1339	-87	147	520.9	525.2	4.3	8.6

The 2008 drill program encountered visible gold in all holes drilled as well as numerous significant ore grade intercepts. The drilling to date is not sufficiently closely spaced to provide adequate confidence of the continuity of the reefs intersected in the deep drilling campaign, however the board of Catalpa is optimistic that future investigations could yield a coherent body of economic mineralisation. A decline was mined by Australian Consolidated Mines Ltd during the last phase of mining to a depth of approximately 260m below surface. This infrastructure is currently inaccessible, but may in future provide underground access from which to further investigate potential high grade underground mining targets.

Summary of significant intercepts below existing Resource:

			High grade intercepts from 2008 surface drilling	High grade intercepts from 2008 surface drilling	High grade intercepts from 2008 surface drilling	High grade intercepts from 2008 surface drilling	High grade intercepts from 2008 surface drilling	High grade intercepts from 2008 surface drilling
Hole ID	North	East	Rl	Dip	Azi	Depth From	Depth To	Down hole Interval (m)	Grade (Au g/t)	Comments
WDD144A	9851	11355	1340	-66.0	099	513.00m	513.27m	0.27	127.0	Narrow quartz vein
WDD144A	9851	11355	1340	-66.0	099	536.88	538.44	1.56	49.4	Significant High grade reef and minor associated veins. Probable Edna May Reef Intersection
WDD144A	9851	11355	1340	-66.0	099	542.38m	543.0m	0.62	99.09	Narrow quartz vein in interval
WDD144A	9851	11355	1340	-66.0	099	547.85	548.2m	0.35	85.697	Quartz rich zone. No coherent vein margin
WDD144A	9851	11355	1340	-66.0	099	568.29m	569.16m	0.87	140.0	Quartz rich zone within pegmatite
WDD145	9855	11354	1340	-61.6	112	458.86m	459.89m	1.03	15.0	Small 10cm vein in interval
WDD145	9855	11354	1340	-61.6	112	549.15	549.89	0.74	13.64	Veined and sulphide rich EMG – small 10cm vein
WDD145	9855	11354	1340	-61.6	112	506.64	525.59	18.95	4.91	CompleteEdna May Reef intercept including 5.03m zone of veined EMG. Hangingwall reef section + veined EMG 6.82m @ 10.81g/t
WDD146	9799	11358	1339	-61.6	112	412.07	412.45	0.38	70.091	Silicified quartz rich zone with sulphides and

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										visible gold
WDD146	9799	11358	1339	-61.6	112	495.79	496.6	0.81	9.364	Interval contains 10cm quartz vein
WDD146	9799	11358	1339	-61.6	112	539.20	540.29	1.09	10.192	0.75m vein within the interval
WDD147	9785	11453	1348	- 64.311	119	420.95	423.20	2.25	1.43	Edna May Reef– same style of Quartz lode cut by pegmatite intrusive therefore not complete intercept
WDD147	9785	11453	1348	- 64.311	119	464.29	464.79	0.50	49.5	40cm quartz vein with visible gold – flatter dipping vein set -35 degrees to 030
WDD147	9785	11453	1348	- 64.311	119	475.14	476.33	1.19	24.439	Irregular veining on the margin of a pegmatite intrusive
WDD148	9798	11361	1340	-58.6	103	401.60	403.2	1.60	48.5	0.87 m quartz vein plus additional peripheral veining
WDD148	9798	11361	1340	-58.6	103	489.35	489.86	0.51	12.1	0.34m quartz vein in interval
WDD149	9801	11359	1340	-56.2	113	479.95	481.2	1.25	31.329	Significant High grade reef and minor associated veins. Possible Edna May Reefor associated Intersection

Within the land holding Catalpa intends to conduct investigations into potential for new mineralisation that could be fed to the Edna May Gold Project process facility. Work to date has identified numerous targets, all of which are still at a very early stage of evaluation.

The recently completed shallow auger geochemical program has provided first pass geochemical gold-in-calcrete coverage over virtually the entire tenement block. Several widespread, robust and cohesive gold-in-calcrete/soil anomalies were produced. Some of these are new anomalies containing values up to 258 ppb gold and occur in ‘greenfields’ areas hitherto untested by RAB or RC drilling. The largest anomaly covers an area 2.5km by 2km. A program of RAB drilling the auger targets is planned for the end of the year after harvesting. The program will be drilled in conjunction with the testing of other targets at historical gold workings, several Edna May ‘lookalike’ targets and a gold prospect at Jilbadji, in joint venture with Image Resources NL.

5.4 Other Assets

As at 30 June 2009 Catalpa had a cash balance of A$35.8 million, including bonds.

5.5 Borrowings

In February 2009 Catalpa agreed the terms of a credit approved project finance facility for the Edna May Gold Project with Macquarie Bank. The facility consists of:

A$55 million secured loan facility;

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Up to A$10 million mezzanine facility;
A$3.51 million performance bond facility; and
gold hedging facility.

In conjunction with entering into the project finance commitment, Catalpa agreed to issue Macquarie Bank with options over fully paid ordinary shares in Catalpa. The number of options to be issued is equal to the amount provided under the mezzanine facility divided by the option exercise price which was set at 7.5 cents per share. Half of the options have been issued (66,666,666 million - pre consolidation basis) with the balance to be issued only if any draw down occurs under the mezzanine facility.

The conditions precedent for the drawdown of the loan facility reflect market practice for facilities of this nature and include, among other things:

evidence that Catalpa has raised sufficient equity to complete the Edna May Gold Project in accordance with the life of mine plan; and
the transfer of the Edna May Gold Project assets by Catalpa to a wholly owned special purpose subsidiary, Edna May Operations. The completion of the pushdown of those assets has been completed and the transfers of the Edna May Gold Project tenements have been lodged for registration at the Department of Mines and Petroleum. However, technically this condition precedent will not be satisfied until those registration formalities have been completed;
the novation of certain hedging arrangements from Catalpa to Edna May Operations; and
the execution of certain key project documents with counterparties in relation to the provision of power, mining and drilling and blast services in connection with the Edna May Gold Project, and related tripartite agreements with Macquarie Bank.

In addition, certain forward looking ratios are required to be satisfied not more than 5 business days prior to first drawdown of the project loan facility.

Certain forward looking ratios are also required to be satisfied prior to first draw under the mezzanine facility. As previously noted, Catalpa is also required to have issued further options, 66,666,668 to Macquarie Bank.

The project loan is to be repaid by quarterly instalments commencing from 30 September 2010 with the final repayment due on 30 September 2013. The mezzanine loan is repayable by quarterly instalments commencing on 31 December 2013 with the final repayment due 30 June 2014.

If moneys are to be withdrawn from the proceeds account established in relation to the facility (maintained with Macquarie Bank) for discretionary expenditure (which may only be made after 30 September 2011) or for distributions to Catalpa (which may only be made after 31 March 2012), then an amount equal to 50% of the amount withdrawn is required to be applied in or toward prepayment of the project loan (first), the mezzanine loan (second) and for providing cash cover for outstanding performance bond facility (third). There are additional conditions that are required to be satisfied before withdrawals may be made from the Proceeds Account for discretionary expenditure and distributions.

The performance bond facility expires on 30 June 2014.

The project finance is secured by fixed and floating charges granted by each of Catalpa, Edna May Operations Pty Ltd and Westonia Mines Minerals Pty Ltd together with mining mortgages granted over the project tenements by Edna May Operations Pty Ltd.

The Merger of Lion Selection with Catalpa will result in a change in control of Catalpa which triggers a review event under the Macquarie Bank facility. Macquarie Bank has agreed in principle to waive the review event subject to and conditional upon certain amendments being made to the syndicated facility agreement. The amendments are

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minor in nature and do not materially change the terms of the facility. As at the date of this Explanatory Memorandum, the amendments have been agreed to, but are yet to be documented.

5.6 Hedging

As a condition precedent to drawdown under the Macquarie bank facility Catalpa has entered into forward gold hedging arrangements as detailed in section 5.2. Accordingly, Catalpa’s intention is to deliver into these forward contracts based on the contracted delivery schedule, and presently has no intention to close the hedge book.

Should Catalpa choose to close out its hedge arrangements in the future, this would be subject to the approval of Macquarie Bank. The close out value would be determined reflecting a number of factors that impact the value of forward contracts, including:

Australian dollar spot gold price;
time to contracted delivery;
interest rates; and
gold borrowing costs.

These factors may result in the close out value being materially different compared with delivering into the contracted flat forward contracts.

5.7 Catalpa financial position

Catalpa Balance Sheet as at 30 June 2009

	Consolidated 30 June 2009 Audited 30 June 2008 Audited $ $
CURRENT ASSETS Cash and cash equivalents Other receivables Other financial assets Prepayments TOTAL CURRENT ASSETS NON-CURRENT ASSETS Other financial assets Property, plant and equipment Mining properties Prepayments TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Borrowings	32,296,718 2,799,198 838,981 78,004 3,532,500 37,884 9,444 -
	36,677,643 2,915,086
	- 386,194 7,457,212 3,593,990 1,526,218 - 3,662,943 -
	12,646,373 3,980,184
	49,324,016 6,895,270
	4,113,291 158,066 19,534 -

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Provisions TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Borrowings Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY	107,578 55,208
	4,240,403 213,274
	65,534 - 407,000 407,000
	472,534 407,000
	4,712,937 620,274
	44,611,079 6,274,996
	74,100,908 32,976,344 4,525,974 500,633 (34,015,803) (27,201,981)
	44,611,079 6,274,996

Catalpa’s last annual and interim financial reports are available from Catalpa’s website. Details of Catalpa’s accounting policies are contained in Catalpa’s annual report for the year ended 30 June 2009.

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Catalpa Interim Income Statement for the year ended 30 June 2009

	Consolidated 30 June 2009 Audited 30 June 2008 Audited $ $
Revenue Other income Depreciation expense Corporate expenses Occupancy expenses Employee and consultant expenses Travel and accommodation expenses Exploration, evaluation and development expenditure Impairment of non-current assets Finance costs LOSS BEFORE TAX INCOME TAX BENEFIT NET LOSS ATTRIBUTABLE TO EQUITY HOLDERS OF CATALPA RESOURCES LIMITED Basic and diluted loss per share (cents per share)	263,929 263,321 75,287 10,699 (161,982) (142,533) (1,463,455) (439,655) (231,790) (203,183) (1,755,310) (621,649) (139,223) (34,919) (3,316,493) (1,360,403) - (84,301) (110,390) -
	(6,839,427) (2,612,623) 25,605 -320,885
	(6,813,822) (2,291,738)
	(1.27) (0.67)

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Catalpa Cash Flow Statement for the year ended 30 June 2009

	Consolidated 30 June 2009 Audited 30 June 2008 Audited $ $
CASH FLOWS FROM OPERATING ACTIVITIES Research and development grant received Receipts from other debtors Payments to suppliers and employees Interest received NET CASH OUTFLOW FROM OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Payment for project development Transfer to term deposits Proceeds received from release of tenement bonds Payment for option to purchase mining equipment NET CASH OUTFLOW FROM INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issues of ordinary shares net of expenses Payment of loan to subsidiary Repayment of borrowings NET CASH INFLOW FROM FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at the beginning of the financial year CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR	25,605 320,885 - 35,904 (3,327,522) (3,123,579) 262,533 264,790
	(3,039,384) (2,502,000)
	(3,930,128) (137,743) (1,526,218) - (3,121,306) - - 1,500,000 - (25,000)
	(8,577,652) 1,337,257
	41,124,564 2,888,255 - - (10,008) -
	41,114,556 2,888,255
	29,497,520 1,723,512 2,799,198 1,075,686
	32,296,718 2,799,198

Catalpa Accounting policies

Material Events after 30 June 2009

Syndicate Facility Agreement with Macquarie Bank Limited

As noted in Section 4.5, the merger of Lion Selection with Catalpa will result in a change in control of Catalpa which triggers a review event under the Macquarie Bank facility. Macquarie Bank has agreed in principle to waive the review event subject to and conditional upon certain amendments being made to the syndicated facility agreement. The amendments are minor in nature and do not materially change the terms of the facility. As at the date of this Explanatory Memorandum, the amendments have been agreed to, but are yet to be documented.

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6 Information about the implementation of the Merger

6.1 Merger Implementation Agreement

On 24 June 2009 Lion Selection and Catalpa announced a proposal for Lion Selection to merge with Catalpa in accordance with the Merger Implementation Agreement.

The Merger Implementation Agreement specifies that the Merger will be structured as a scheme of arrangement between Lion Selection and all Lion Selection Shareholders under which Lion Selection Shareholders will receive 1 Catalpa Share for every 1 Lion Selection Share held by them.[*]

(a) Effect of the Scheme

If the Scheme is approved by Lion Selection Shareholders and the Court, and all other conditions to it are satisfied or waived in accordance with the Merger Implementation Agreement, all Lion Selection Shareholders who hold Lion Selection Shares on issue on the Record Date will participate in the Scheme (although the treatment of the shares held by ineligible overseas Lion Selection Shareholders will be as described in the Lion Selection Scheme Booklet).

The Lion Selection Shares to be issued to Lion Manager under the termination of the Lion Selection Management Agreement as described in section 4.3 are to be issued before the Record date for the Scheme. Accordingly, those shares will participate in the Scheme.

The Scheme will result in:

each Scheme Participant receiving 1 Catalpa Share[*] in exchange for every 1 Lion Selection Share held by them;
the transfer of all Scheme Shares to Catalpa; and
Lion Selection becoming a wholly-owned subsidiary of Catalpa.

(b)

Impact of the Scheme on shareholdings in Catalpa

Lion Selection currently holds 549,149,733 Catalpa Shares (Lion Selection Shareholding in Catalpa). Under the Corporations Act, as a result of implementation of the Scheme and Lion Selection becoming a wholly owned subsidiary of Catalpa, those Catalpa Shares will cease to carry the right to vote shares (so long as those shares are held by a subsidiary of Catalpa) and those shares must be disposed of or cancelled. Following implementation of the Scheme, Catalpa intends to cancel those shares.

Accordingly, after implementation of the Scheme, Lion Selection Shareholders (including the Nominee for ineligible overseas Lion Selection Shareholders) collectively will hold approximately 61% of the Catalpa Shares and the current Catalpa Shareholders will hold the remaining 39% of the Catalpa Shares (ignoring the Catalpa Shares held by Lion Selection which are to be cancelled.).

(c) Approvals required from Scheme Participants and the Court

For the Scheme to take effect, section 411(4) of the Corporations Act requires a meeting of Lion Selection Shareholders to be held, at which the Scheme must be agreed to by a resolution passed by a majority in number of Lion Selection Shareholders present and

The ratio assumes that the Share Consolidation Resolution is approved. If the Share Consolidation Resolution is not approved but the Merger proceeds, the ratio will be 11 New Catalpa Shares for every 1 Lion Selection Share.

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voting (either in person or by proxy) at the Scheme Meeting and representing in aggregate not less than 75% of the votes cast on the resolution at the Scheme Meeting. The result of the Scheme Meeting must then be provided to the Court which will consider whether or not to approve the Scheme.

On 9 October 2009, the Court made the requisite order convening the Scheme Meeting. The Court order does not constitute an endorsement of, or any other expression of opinion on, the Scheme or this Explanatory Memorandum.

The Scheme will not become binding on Lion Selection, Catalpa and each Scheme Participant until the Court makes an order under section 411(4)(b) of the Corporations Act and that order is lodged with ASIC. Application to the Court for that order will be made as soon as possible after the Scheme Meeting has been held.

(d) Conditions

Implementation of the Scheme is subject to the satisfaction (or waiver) of the conditions set out in clause 3.1 of the Merger Implementation Agreement in accordance with the terms of that agreement.

In summary, these conditions include:

an independent expert's report concluding that the Scheme is in the best interest of Lion Selection Shareholders;
the requisite majority of Lion Selection Shareholders approving the resolutions to approve the Scheme, the Cash Distribution and the Demerger;
the requisite majority of Catalpa shareholders approving resolutions to approve both Catalpa’s participation in the Scheme and the consolidation of Catalpa’s shares on an 11 to 1 ratio;
no temporary restraining order, injunction or other court order preventing the proposed transactions is in effect;
the Court making orders approving the Scheme;
all necessary third party consents being granted or obtained;
agreements relating to the proposed demerger being entered into by the relevant LSG companies in a form approved by Catalpa (such approval not to be unreasonably withheld or delayed). These documents will (among other things) establish the respective liabilities of each of the demerged and remaining companies in accordance with the liability regime set out in the Merger Implementation Agreement;
written confirmation from the ATO that Lion Selection shareholders will have the benefit of demerger relief upon the transfer of all of the shares in LSG to Lion Selection Shareholders as a result of the demerger;
NSX approving the admission of LSG to the official list of NSX;
prior to implementation:
the aggregate liabilities of the Lion Selection Gold Companies being nil (other than certain liabilities specified in the Merger Implementation Agreement); and
the Lion Selection Gold Companies holding $1,500,000 (plus net proceeds of gold sales and interest from 31 July 2009); and
the Catalpa Share Consolidation being effected;
no Material Transactions (as defined in the Merger Implementation Agreement) by Catalpa or a Lion Selection Gold Company occurring, without the prior consent of the other party;

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no event occurring which has a Material Adverse Effect (as defined in the Merger Implementation Agreement) in respect of either Lion Selection or Catalpa;
no Prescribed Event (as defined in the Merger Implementation Agreement) occurring in relation to Lion Selection or Catalpa;
representations and warranties given by Catalpa and Lion Selection remaining true and correct at the relevant date;
Lion Manager providing written confirmation to Lion Selection that it has no claim against Lion Selection or any subsidiary of Lion Selection other than in respect of its entitlement to be issued the Lion Manager Shares (see section 1.4 of this Explanatory Memorandum);
Lion Selection continuing to hold the Lion Selection Shareholding in Catalpa and the Lion Selection Optionholding in Catalpa;
Edna May Operations, as borrower, and Catalpa, as parent and guarantor, entering into satisfactory loan and other facilities with Macquarie Bank by 8 July 2009; and
Catalpa and Lion Selection both satisfactorily completed their due diligence investigations by 8 July 2009 (these conditions precedent have now been satisfied).

(e) Benefit of, and right to waive, the Scheme conditions

If a condition in the Merger Implementation Agreement has been included for the benefit of one party only, only that party may, in its sole discretion waive the breach or nonfulfilment of that condition.

The conditions included for the benefit of both Lion Selection and Catalpa and can be waived only if both parties agree.

Clauses 3.3 of the Merger Implementation Agreement sets out which conditions have been included for the benefit of which party.

The conditions referred to above in relation to Lion Shareholder and Catalpa Shareholder approvals of the Scheme and Court approval of the Scheme cannot be waived.

(f) No-talk and no-shop obligations

No-talk

Catalpa and Lion Selection have agreed that, from the date of the Merger Implementation Agreement until Implementation or the termination of the Merger Implementation Agreement ( Restricted Period ), each party must ensure that neither it nor any of its Related Bodies Corporate nor any of their respective officers, employees, advisors, agents or representatives ( Representatives ):

(1) participate in any negotiations or discussions or provide any information any person with respect to any inquiry, expression of interest, offer or proposal by any person to make a Competing Proposal;
(2) accept or enter into or offer to accept or enter into any agreement, arrangement or understanding regarding a Competing Proposal; or
(3) disclose any non-public information about the business or affairs of that party to a third party with a view to obtaining a Competing Proposal other than in the ordinary course of business or as required by law.

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However, either party may undertake any act which would otherwise be prohibited under the no-talk obligation if failing to take that action would, in the reasonable opinion of that party’s Board, be likely to involve a breach of that party’s Directors’ duties.

Each of Catalpa and Lion Selection may also continue to make normal presentations to brokers, investors and analysts in the ordinary course of business or promoting the merits of the Merger.

No-shop

Catalpa and Lion Selection have each agreed that during the Restricted Period, each of them must ensure that neither it nor any of its Representatives actively solicit, facilitate, encourage or initiate steps with the objective of receiving an offer or proposal by any person in relation to any Competing Proposal.

Notification of third party approaches

During the Restricted Period, each party must immediately notify the other party of any approach made or attempt to negotiate with it with respect to a Competing Proposal or any request for information or access which may lead to a Competing Proposal or if the party’s Board proposes to publicly change or withdraw its recommendation that its shareholders vote in favour of the Merger.

Right to match a Competing Proposal

If either party receives an unsolicited approach and proposes to withdraw its recommendation of the Merger, the party must provide the other party with the price, conditions and timing of the Competing Proposal and give the other party 2 Business Days to match the alternative transaction. If the other party’s counterproposal matches the Competing Proposal, Catalpa and Lion Selection must use their best endeavours to reach an agreement to implement the party’s counterproposal.

(g) Termination Fee

Catalpa’s payment of Termination Fee

Catalpa has agreed to pay a Termination Fee to Lion Selection of $1 million (exclusive of GST) if any of the following occur:

(1) a Competing Proposal for Catalpa is announced and, within 12 months after the date of the Merger Implementation Agreement, the person announcing the Competing Proposal:
acquires substantially all of the shares in Catalpa or the business of the Catalpa Group;
acquires from Catalpa rights which may convert into, or interest in, 10% or more of Catalpa’s fully diluted share capital; or
acquires control (as determined in accordance with section 50AA of the Corporations Act) of Catalpa;
(2) the Merger Implementation Agreement is terminated by Lion Selection because of a material breach of the agreement by Catalpa; or
(3) if any Catalpa director makes a public statement that they no longer support the Merger or publicly recommends a Competing Proposal.

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Lion Selection’s Payment of Termination Fee

Lion Selection has agreed to pay a Termination Fee to Catalpa of $1 million (exclusive of GST) if any of the following occur:

(1) a Competing Proposal for Lion Selection is announced and, within 12 months after the date of the Merger Implementation Agreement, the person announcing the Competing Proposal:
acquires substantially all of the shares in Lion Selection or the business of Lion Selection (other than LSG);
acquires from Lion Selection rights which may convert into, or interest in, 10% or more of Lion Selection’s fully diluted share capital; or
acquires control (as determined in accordance with section 50AA of the Corporations Act) of Lion Selection;
(2) the Merger Implementation Agreement is terminated by Catalpa because of a material breach of the agreement by Lion Selection; or
(3) if any Lion Selection Director makes a public statement that they no longer support the Merger or publicly recommends a Competing Proposal.

When Termination Fee is not payable

Neither Lion Selection nor Catalpa will be liable to pay the Termination Fee, and will be entitled to a refund of the Termination Fee if the Termination Fee has already been paid, if:

(1) the Merger proceeds; or
(2) a court or the Takeovers Panel determines that the agreement to pay, or payment of the Termination Fee:
constitutes or would constitute a breach of fiduciary or statutory duties owed by the Catalpa Board;
constitutes or would constitute unacceptable circumstances within the meaning of the Corporations Act; or
is or would be unlawful for any other reason.

(h) Termination Either Catalpa and Lion Selection may terminate the Merger Implementation Agreement where:

(1) there is a material breach of the Merger Implementation Agreement by the other party (having first given that party a right to rectify the breach);
(2)
where a court or government agency prohibits the transaction;
(3) where a Condition Precedent is not satisfied by the relevant date in the Merger Implementation Agreement;
(4) after 31 October 2009, if the Merger has not completed by then (unless Catalpa and Lion Selection agree to extend this date); or
(5)
if Catalpa has paid a Termination Fee.

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Catalpa may terminate the Merger Implementation Agreement if, before the Second Court Date, any director of Lion Selection adversely changes or withdraws its recommendation of the Merger, or acts in a manner which is inconsistent with obtaining Lion Selection Shareholders’ approval of the Merger.

Lion Selection may terminate the Merger Implementation Agreement if, before the Second Court Date, any director of Lion Selection adversely changes or withdraws its recommendation of the Merger, or acts in a manner which is inconsistent with obtaining Catalpa Shareholders’ approval of the Merger.

6.2 Deed Poll

The Deed Poll has been signed by Catalpa and sets out covenants given by Catalpa in favour of Lion Selection Shareholders, including that Catalpa will issue the Scheme Consideration (New Catalpa Shares) as contemplated by the Scheme and that Catalpa will apply for admission to the official list of ASX and for quotation of those New Catalpa Shares on ASX.

6.3 End Date

Catalpa and Lion Selection have committed to endeavour to implement the Merger by 18 December 2009. If the Merger has not been completed by then, the Merger will not proceed (unless Lion Selection and Catalpa agree otherwise).

6.4 Lion Selection Demerger

Prior to the implementation of the Scheme, subject to the approval of Lion Selection Shareholders, Lion Selection will implement the Lion Selection Demerger.

The Lion Selection Demerger will result in Lion Selection’s only assets being:

Lion Selection’s 30% interest in the Cracow Gold Mine;
revenue that has accrued to Lion Selection under the Cracow Joint Venture since 31 July 2009 and interest accrued since that date in respect of that revenue;
Lion Selection’s gold produced by the Cracow Gold Mine since 31 July 2009;
Lion Selection’s 46.9% shareholding in Catalpa and its Catalpa Options;
$1.5 million in cash and any interest accrued in respect of this amount since 31 July 2009; and
certain gold put options.

Under the Lion Selection Demerger, Lion Selection’s remaining investments, held by its subsidiary, LSG, will be demerged by Lion Selection prior to the Merger.

In addition, the Lion Selection Demerger will result in Lion Selection’s only liabilities being:

the liabilities of Lion Selection and any of its related bodies corporate that arise directly from or relate to the Cracow Joint Venture Agreements;
deferred tax liabilities in respect of the Lion Selection Gold Companies and their businesses;
any inter-company liabilities owed between the Lion Selection Gold Companies; and
any other liability relating to a Lion Selection Gold Asset to the extent that it relates to anything which occurs after 31 July 2009.

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All other liabilities of Lion Selection and any of its related bodies corporate will be retained by LSG.

The Scheme will not be implemented unless Lion Selection Shareholders approve the Lion Selection Demerger.

6.5 What will happen if the Scheme is not approved?

If the Scheme is not approved by Lion Selection Shareholders or all of the relevant conditions are not satisfied or waived, the Scheme will not proceed and Lion Selection Shareholders will not receive Catalpa Shares.

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7 Additional information

7.1 Information relating to Resources, Reserves and Exploration Results

Information in this Explanatory Memorandum that relates to Resources and Reserves at Cracow is based on information compiled by Mr James A. Francis who is a Member of the Australasian Institute of Mining and Metallurgy and was a full-time employee of Newcrest Mining Ltd at 30 June 2008. Mr Francis has sufficient experience which is relevant to this style of mineralisation and the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Resources and Reserves" (The JORC Code). Mr Francis consents to the inclusion in the report of the matters based on their information in the form and context in which it appears.

Catalpa’s reported Resource and Reserve has been compiled by Mr Adrian Pelliccia. Mr Pelliccia is a Member of the Australian Institute of Mining and Metallurgy and a full time employee of Catalpa. He has sufficient experience, relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking, to qualify as a Competent Person as defined in the 2004 Edition of the JORC ‘Australasian Code for Reporting of Exploration Results, Resources and Reserves. Mr Pelliccia consents to the inclusion in the Explanatory Memorandum of the matters based on their information in the form and context in which it appears.

7.2 Provision of further information relevant to the Resolutions

If, between the date of this Explanatory Memorandum and the Catalpa General Meeting, Catalpa becomes aware that:

a material statement in this Explanatory Memorandum is false or misleading;
there is a material omission from this Explanatory Memorandum; or
a significant change affecting a matter included in this Explanatory Memorandum has occurred,

Catalpa will prepare a supplementary document. The form which the supplementary document may take, and whether a copy will be sent to each shareholder, will depend on the nature and timing of the new or changed circumstances.

In all cases, the supplementary document will be available from Catalpa’s website at www.catalparesources.com.au or from ASX’s website at www.asx.com.au.

7.3 Lion Selection Scheme Booklet

Additional information in respect of Lion Selection, LSG, the Scheme and the Lion Selection Demerger can be found in the Lion Selection Scheme Booklet dated 16 October 2009 issued by Lion Selection in respect of the Scheme. The Lion Selection Scheme Booklet is available from Lion Selection’s website at www.lionselection.com.au or from ASX’s website at www.asx.com.au.

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8 Glossary and interpretation

8.1 Glossary

The meanings of the terms used in this Explanatory Memorandum are set out below.

Term	Meaning
$, A$ or AUD	Australian dollar.
ASIC	Australian Securities and Investments Commission.
ASX	ASX Limited (ABN 98 008 624 691).
ASX Listing Rules	the Listing Rules of the ASX as modified from time to time.
ATO	the Australian Taxation Office.
AWST	Australian Western Standard Time.
Business Day	a business day as defined in the ASX Listing Rules.
Catalpa (or the Company)	Catalpa Limited (ABN 74 084 669 036).
Catalpa Board	the board of directors of Catalpa.
Catalpa Director	a member of the Catalpa Board.
Catalpa Option	an option over an unissued ordinary fully paid share in the capital of Catalpa.
Catalpa Registry	Security Transfer Registrars Pty Ltd (ACN 008 894 488).
Catalpa Share	an ordinary fully paid share in the capital of Catalpa.

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Term

Catalpa Shareholder

Meaning each person registered in the Register as a holder of Catalpa Shares.

CGT capital gains tax.

Competent Person the meaning given in the JORC Code.

Competing Proposal where the proposal is made in relation to Lion Selection, any proposal or offer that would result in:

1 any person or persons who are associates (other than Catalpa and its related bodies corporate) acquiring, whether directly or indirectly:
an interest in more than 10% of the shares of Lion Selection;
from Lion Selection, rights which may convert into 10% or more of Lion Selection’s fully diluted share capital; or
an interest (whether legal, beneficial or economic) in any or all of Lion Selection Gold Assets or their production; or
2 the Scheme being rendered unable to be implemented, and

where the subject of the proposal is Catalpa, any proposal or offer that would, if completed substantially in accordance with its terms, result in:

1 any person or persons who are associates (other than Lion Selection and its related bodies corporate) acquiring whether directly or indirectly:
an interest in more than 10% of the shares of Catalpa (other than a relevant interest arising from the acquisition of a relevant interest in Lion Selection Shares);
from Catalpa, rights which may convert into, or interests in, 10% or more of Catalpa’s fully diluted share capital;
an interest in any or all of Catalpa’s Edna May Project; or
2 the Scheme being unable to be implemented.

Corporations Act the Corporations Act 2001 (Cth) . Court the Supreme Court of Victoria or such other court of competent jurisdiction under the Corporations Act agreed to in writing by Lion Selection and Catalpa. Cracow Gold Mine means the mine in Queensland known as the Cracow Gold Mine. Cracow Joint Venture the mining joint venture operated in accordance with the Cracow Joint Venture Agreements. Cracow Joint Venture 1 the Cracow Mining Joint Venture Agreement dated 5 September 2003

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Term	Meaning	Meaning
Agreements		between Lion Mining Limited, Sedgold Pty Ltd, Fernyside Pty Ltd, Newcrest
		Operations Limited and Newcrest Mining Limited; and
	2	the Cracow Joint Venture Agreement joint venture letter dated 18 January
		1996 between Lion Mining Limited, Sedgold Pty Ltd, Fernyside Pty Ltd,
		Newcrest Operations Limited and Newcrest Mining Limited.
Edna May Gold Project	the	Edna May Project located near Westonia in Western Australia.
End Date	31	October 2009, subject to any extension under clause 3.7 of the Merger
	Implementation Agreement.

Explanatory Memorandum means this explanatory memorandum.

GST	a goods and services or similar tax imposed in Australia.
Implementation	the implementation of the Scheme following the Lion Selection Cash Distribution
	and the Demerger being effected, on it becoming effective under section 411(10).
Implementation Date	the 10th Business Day after the Effective Date or such other date as agreed by
	Lion Selection and Catalpa.
Indicated Resource	means that part of a Resource for which tonnage, densities, shape, physical
	characteristics, grade and mineral content can be estimated with a reasonable
	level of confidence, according to JORC Code 2004.
Inferred Resource	means that part of a Resource for which tonnage, grade, and mineral content can
	be estimated with a low level of confidence, according to JORC Code 2004.
JORC Code	the Australasian Code for the Reporting of Resources, Reserves and Exploration
	Results, 2004 edition.
Lion Manager	Lion Manager Pty Limited ABN 76 078 018 934.
Lion Manager Share Issue	means the ordinary resolution to be put to Lion Selection Shareholders to
Resolution	approve the Lion Manager Share Issue.
Lion Manager Shares	not more than 5,923,757 Lion Selection Shares to be issued to Lion Manager
	(and credited as fully paid) pursuant to an agreement to terminate the Lion
	Selection Management Agreement.

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Term	Meaning
Lion Selection	Lion Selection Limited ABN 53 123 217 112
Lion Selection Capital	the reduction of Lion Selection’s share capital in accordance with the Lion
Reduction	Selection Demerger Resolution.
Lion Selection Cash	means the payment of an amount determined by Lion Selection up to a maximum
Distribution	of 10 cents per Lion Selection Share to Lion Selection Shareholders by any lawful
	mechanism determined by Lion Selection, conditional on the approval of the Lion
	Selection Scheme Resolution and the Lion Selection Demerger Resolution by the
	requisite majority of Lion Selection Shareholders.
Lion Selection Cash	the ordinary resolution to be put to Lion Selection Shareholders to approve the
Distribution Resolution	Lion Selection Cash Distribution.
Lion Selection Demerger	the transfer of all of the shares in LSG to Lion Shareholders by way of capital
	reduction.
Lion Selection Director	a director of Lion Selection.
Lion Selection General	the General Meeting of Lion Selection Shareholders for the purposes of
Meeting	considering, and if thought fit, passing the Lion Selection Cash Distribution
	Resolution and the Lion Selection Demerger Resolution.
Lion Selection Gold	each of Lion Selection, AuSelect Limited ABN 53 077 885 208, Lion Mining
Companies	Limited ABN 92 000 697 183, Sedgold Pty Ltd ABN 37 010 077 988 and
	Fernyside Pty Ltd ABN 17 001 245 530 and Lion Selection Gold Company means
	any one of them.
Lion Selection	the Management Agreement dated 1 February 2007 entered into by Lion
Management Agreement	Selection and Lion Manager as amended by deed of amendment dated 20
	September 2007.
Lion Selection Material	the information provided by Lion Selection to Catalpa contained in section 4 on
	pages 4 to 9.
Lion Selection	the Catalpa Options held, directly or indirectly, by Lion Selection as at the date of
Optionholding	the Merger Implementation Agreement as set out below:
	1 16,899,589 Catalpa Options, with an exercise price of 10 cents per Catalpa
	Share (expiry 2010); and
	2 112,407,597 Catalpa Options, with an exercise price of 10 cents per Catalpa
	Share (expiry 2011).

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Term	Meaning
Lion Selection	the Lion Selection Scheme Resolution, the Lion Selection Cash Distribution
Resolutions	Resolution, the Lion Manager Share Issue Resolution and the Lion Selection
	Demerger Resolution.
Lion Selection Scheme	the booklet dated 16 October 2009 issued by Lion Selection in respect of the
Booklet	Scheme and the Lion Selection Demerger.
Lion Selection Scheme	the resolution to be put to Lion Selection Shareholders to approve the Scheme.
Resolution
Lion Selection Share	a fully paid ordinary share in Lion Selection.
Lion Selection	each person entered in the Lion Selection share register as a holder of Lion
Shareholder	Selection Shares.
Lion Selection	the 549,149,733 Catalpa Shares held, directly or indirectly, by Lion Selection as
Shareholding in Catalpa	at the date of the Merger Implementation Agreement.
Lion Selection Gold	1 any direct or indirect interest held by Lion in Catalpa, including shares and
Assets	options to acquire shares in Catalpa; and
	2 any direct or indirect interest held by Lion in the Cracow gold mine in
	Queensland.
LSG	Lion Selection Group Limited ABN 26 077 729 572.
LSG Share	a fully paid ordinary share in LSG.
Macquarie Facilities	a A$68.51 million project finance facility Macquarie Bank has agreed with
	Catalpa’s wholly owned subsidiary, Edna May Operations, comprised of:
	1 A$55 million secured loan facility;
	2 Up to A$10 million mezzanine facility;
	3 A$3.51 million performance bond facility; and
	4 Gold hedging facility.

Merger the merger of Catalpa with Lion Selection by way of a scheme of arrangement as detailed in this Explanatory Memorandum.

Merger Implementation the Implementation Agreement between Catalpa and Lion Selection dated 24

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Term	Meaning
Agreement	June 2009.
Merger Resolution	the resolution to approve Catalpa’s participation in the Scheme.
New Catalpa Share	means Catalpa Shares to be issued under the Scheme as Scheme Consideration.
Newcrest	Newcrest Mining Limited ACN 005 683 625.
Notice of Meeting	means the notice of extraordinary general meeting set out in Annexure 3.
NSX	National Stock Exchange of Australia Limited ABN 11 000 902 063.
Resources	the meaning given to Mineral Resources in the JORC Code.
Reserves	the meaning given to Ore Reserves in the JORC Code.
Record Date	7.00pm on 15 November 2009.
Register	the share register of Catalpa.
Related Body Corporate	has the meaning it has in the Corporations Act.
Representative	an employee, agent, officer, director, auditor or adviser of a party.
Resolutions	each of the Share Consolidation Resolution and the Merger Resolution.
Scheme	a scheme of arrangement under Part 5.1 between Lion Selection and the Lion Selection Shareholders available at the Lion Selection website www.lionselection.com.au or the ASX websitewww.asx.com.au .
Scheme Consideration	for every one Lion Selection Share held by a Scheme Participant at the Record Date, the issue of: 1 if the Share Consolidation is effected before Implementation, one Catalpa Share; or 2 if the condition in clause 3.1(s) of the Merger Implementation Agreement has

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Term	Meaning
	been waived and the Share Consolidation has not been effected before
	Implementation, 11 Catalpa Shares.
Scheme Effective Date	the date the Scheme becomes legally effective.
Scheme Implementation	the date on which Catalpa issues the Scheme Consideration.
Date
Scheme Meeting	the meeting of Lion Selection Shareholders, to be convened by the Court, to
	consider the Scheme.
Scheme Participants	each Lion Selection Shareholder as at 5.00pm on the Scheme Record Date
	(taking into account registration of all registrable transfers and transmission
	applications received at Lion Selection's share registry by the Scheme Record
	Date).
Scheme Record Date	date for determination of entitlement to receive Scheme Consideration under the
	Scheme.
Scheme Share	each Lion Selection Share on issue as at the Record Date.
Second Court Date	means the last day on which the Court hears the application for an order under
	section 411(4)(b) approving the Scheme or, if the application is adjourned or
	subject to appeal for any reason, the last day on which the adjourned or appealed
	application is heard.
Share Consolidation	the consolidation of each 11 Catalpa Shares into 1 Catalpa Share, with all
	fractional entitlements to be rounded up.
Share Consolidation	the resolution to approve the Share Consolidation.
Resolution
Termination Fee	an amount of $1 million (exclusive of GST, if any is payable), which may become
	payable by Catalpa to Lion Selection in specific circumstances described in
	section 6.1(g) .

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8.2 Interpretation

In this Explanatory Memorandum:

(1) other words and phrases have the same meaning (if any) given to them in the Corporations Act;
(2) words of any gender include all genders;
(3) words importing the singular include the plural and vice versa;
(4) an expression importing a person includes any company, partnership, joint venture, association, corporation or other body corporate and vice versa;
(5) a reference to a section or annexure, is a reference to a section of or annexure of, to this Explanatory Memorandum as relevant;
(6) a reference to any legislation includes all delegated legislation made under it and amendments, consolidations, replacements or re-enactments of any of them;
(7) headings and bold type are for convenience only and do not affect the interpretation of this Explanatory Memorandum;
(8) a reference to time is a reference to Melbourne time;
(9) a reference to dollars, $, A$, AUD, cents, ¢ and currency is a reference to the lawful currency of the Commonwealth of Australia;
(10) an accounting term is a reference to that term as it is used in accounting standards under the Corporations Act, or, if not inconsistent with those standards, in accounting principles and practices generally accepted in Australia; and
(11) the words “include”, “including”, “for example” or “such as” when introducing an example, do not limit the meaning of the words to which the example relates to that example or examples of a similar kind.

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Annexure 1 - Cracow Reserve and Resource Statements

Statement of Cracow Resources – June 2008

Royal, Crown, Klondyke North, Empire, Roses Pride, Kilkenny and	Tonnes	Grade	Contained gold
Sovereign	(Millions)	(g/t gold)	(000’s ounces)
Measured	0.75	9.4	227
Indicated	0.29	6.3	58
Inferred	1.77	7.3	419
Total Resources	2.82	7.8	704
30% share	0.84	7.8	211

Statement of Cracow Reserves – June 2008

Royal, Crown, Klondyke North, Empire, Roses Pride, Kilkenny and	Tonnes	Grade	Contained gold
Sovereign	(Millions)	(g/t gold)	(000’s ounces)
Proven	0.64	8.6	176
Probable	-	-	-
Total Reserves	0.64	8.6	176
30% share	0.19	8.6	53

Competent Persons Statement

Information in this report that relates to Resources and Reserves] at Cracow is based on information compiled by Mr James A. Francis who is a Member of the Australasian Institute of Mining and Metallurgy and was a full-time employee of Newcrest Mining Ltd at 30 June 2008. Mr Francis has sufficient experience which is relevant to this style of mineralisation and the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Resources and Reserves" (The JORC Code). Mr Francis consents to the inclusion in the report of the matters based on their information in the form and context in which it appears.

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Annexure 2 - Catalpa Reserve and Resource Statements

Statement of Edna May Resources – 30 June 2009

The Edna May and the Greenfinch Resource, were estimated using Hellman & Schofield MIK block modelling techniques, based on a (0.5g/t) Au cut-off grade within a geologically and grade defined mineralisation envelopes and in accordance with the JORC Code, is summarised in the following table:

					Edna May Gold Project Resource Statement	Edna May Gold Project Resource Statement	Edna May Gold Project Resource Statement	Edna May Gold Project Resource Statement	Edna May Gold Project Resource Statement	Edna May Gold Project Resource Statement	Edna May Gold Project Resource Statement
					Reported to 0.5g/t Au cut-off
							Total Measured &						Total Measured &
	Measured				Indicated						Inferred
								Indicated						Indicated

	Million	Gold	'000	Million	Gold /t	'000	Million	Gold /t	'000	Million	Gold /t	'000	Million	Gold /t	'000
	Tonnes	g/t	Ounces	Tonnes	g	Ounces	Tonnes	g	Ounces	Tonnes	g	Ounces	Tonnes	g	Ounces

Greenfinch	0.71	1.26	29	2.03	1.15	75	2.74	1.18	104	0.45	1.2	17	3.19	1.18	121
Edna May	16.56	1.15	615	13.32	1.13	484	29.88	1.14	1,099	8.36	1.0	267	38.24	1.11	1,366
TOTAL	17.27	1.16	644	15.35	1.13	559	32.62	1.14	1,203	8.81	1.0	284	41.43	1.11	1,487

Resource footnotes:

Catalpa owns 100% of Edna May Operations which in turn owns 100% of the Edna May Gold Project.
The Resources are estimates of recoverable tonnes and grades using Multiple Indicator Kriging with block support correction and assuming a smallest mining unit for ore selection.
Measured and Indicated Resources lie in areas where drilling is available at a maximum of 25 x 25 metre spacing, Inferred Resources exist in areas of broader spaced drilling, generally peripheral to the Measured and Indicated panels.
All Resource figures are stated at the 30 June, 2009 on a 100% basis, with depletion by production where relevant.
There are no known environmental, permitting, legal, taxation, political or other relevant issues that would materially affect the estimates of the Reserves.
Resources are inclusive of Reserves. The stated contained Resource metal ounces are considered insitu; neither mining dilution nor beneficiation recovery factors have been applied.
Due to rounding of figures small discrepancies may exist.

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Statement of Edna May Reserves – 7 April 2009

The Edna May & Greenfinch Reserve, which were estimated using Whittle Software based on relevant diluted mining Au cut-off grades in accordance with the JORC Code, is summarised in the following table:

			Edna May Gold Project Reserve Statement	Edna May Gold Project Reserve Statement	Edna May Gold Project Reserve Statement	Edna May Gold Project Reserve Statement	Edna May Gold Project Reserve Statement	Edna May Gold Project Reserve Statement	Edna May Gold Project Reserve Statement
			Reported to 0.5g/t Au cut-off
		Proved			Probable		Total Proved & Probable

	Million		'000	Million		'000	Million
		Gold g/t			Gold g/t			Gold g/t	'000 Ounces
	Tonnes		Ounces	Tonnes		Ounces	Tonnes


Greenfinch	0.60	1.29	26	1.40	1.18	53	2.00	1.22	79
Edna May	12.30	1.19	471	6.80	1.23	267	19.10	1.20	738
TOTAL	12.90	1.19	497	8.20	1.21	320	21.10	1.20	817

Reserve Footnotes

Catalpa owns 100% of Edna May Operations which in turn owns 100% of the Edna May Gold Project.
A gold price of A$1,250 has been assumed in estimating the Greenfinch Reserve.
gold price of A$1,025 has been assumed in estimating the Edna May Reserve.
The economic cut-off grade of the Reserve was 0.5g/t Au.
All Reserve figures are stated at the 30 June, 2009, with depletion by production where relevant.
The Reserve figures are shown on a 100% basis.
There are no known environmental, permitting, legal, taxation, political or other relevant issues that would materially affect the estimates of the ore reserves.
Due to rounding of figures small discrepancies may exist.

Competent Persons Statement

Catalpa’s reported Resource and Reserve has been compiled by Mr Adrian Pelliccia. Mr Pelliccia is a Member of the Australian Institute of Mining and Metallurgy and a full time employee of Catalpa. He has sufficient experience, relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking, to qualify as a Competent Person as defined in the 2004 Edition of the JORC ‘Australasian Code for Reporting of Exploration Results, Resources and Reserves’. Mr Pelliccia consents to the inclusion in the report of the matters based on their information in the form and context in which it appears.

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Annexure 3 - Notice of extraordinary general meeting

Catalpa Resources Limited ABN 74 084 669 036

Notice of extraordinary general meeting

Notice is given that the Extraordinary General Meeting of Catalpa Resources Limited (the Company ) will be held at the Hyatt Regency Perth, Traders Lounge, 99 Adelaide Terrace, Perth WA on 17 November 2009 at 10.00am (AWST).

Shareholders should read the Explanatory Memorandum and its Schedules and Annexures in full. Terms defined in the Explanatory Memorandum have the same meaning in this Notice of Meeting.

Special business

1 Resolution 1

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

“That, for all purposes, approval is given for the Company to participate in the Merger pursuant to the Merger Implementation Agreement, details of which are given in the Explanatory Memorandum accompanying this Notice of Meeting.”

2 Resolution 2

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

“That, subject to and conditional on resolution 1 and the Lion Selection Resolutions being passed, and for the purposes of section 254H of the Corporations Act and for all other purposes, the existing share capital of the Company be consolidated on a 11:1 basis (with all fractional entitlements being rounded up), with effect from 7.00pm (AWST) on 26 November 2009.”

Explanatory memorandum

Shareholders are referred to the explanatory memorandum accompanying and forming part of this notice of meeting.

Entitlement to vote

1 Snapshot date

It has been determined that under regulation 7.11.37 of the Corporations Regulations 2001 (Cth), for the purposes of the extraordinary general meeting, shares will be taken to be held by the persons who are the registered holders at 7.00pm (AWST) on 15 November 2009. Accordingly, share transfers registered after that time will be disregarded in determining entitlements to attend and vote at the meeting.

2 Voting exclusion

The Company will disregard any votes cast on resolution 1 by:

Lion Selection Limited; and
any of its associates

unless the vote is cast in the following circumstances:

by a person as proxy for a person who is entitled to vote in accordance with the directions on the proxy form; or
by the person chairing the meeting as a proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Proxies

A shareholder entitled to attend and vote has a right to appoint a proxy to attend and vote instead of the shareholder. A proxy need not be a shareholder and can be either an individual or a body corporate.

A shareholder that is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If no proportion or number is specified, each proxy may exercise half of the shareholder’s votes.

A Proxy Form accompanies this Notice and to be effective must be received by Catalpa’s Share Registry before 5.00pm (AWST) on 13 November 2009:

By Mail: Security Transfer Registrars Pty Ltd PO Box 535 Applecross WA 6953 By hand: Suite1, 770 Canning Highway Applecross WA 6153 By Fax: +61 8 9315 2233

You are encouraged to submit your proxy by mail or fax.

Any corporate shareholder who has appointed a person to act as its corporate representative at the extraordinary general meeting 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 in advance of the meeting or handed in at the meeting when registering as a corporate representative. An appointment of corporate representative form is available upon request from the Company Secretary.

By Order of the Board

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13 October 2009
Company Secretary
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Corporate Directory

Catalpa Resources Limited

Registered Office

Level 1, 9 Havelock Street West Perth, WA 6005

Telephone number

618 9321 3088

Catalpa Registry

Security Transfer Registrars Pty Ltd

770 Canning Highway, Applecross WA 6153 Telephone: (61 8) 9315 2333 Facsimile: (61 8) 9315 2233 Email: [email protected] Web: www.securitytransfer.com.au

THIS DOCUMENT IS IMPORTANT. IF YOU ARE IN DOUBT AS TO HOW TO DEAL WITH IT, PLEASE CONTACT YOUR STOCK BROKER OR LICENSED PROFESSIONAL ADVISOR.

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PROXY FORM

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CATALPA RESOURCES LIMITED

REGISTERED OFFICE:

ABN: 74 084 669 036

Level 1, 9 Havelock Street West Perth WA 6872

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SHARE REGISTRY: Security Transfer Registrars Pty Ltd All Correspondence to: PO BOX 535, APPLECROSS WA 6953 AUSTRALIA 770 Canning Highway, APPLECROSS WA 6153 AUSTRALIA T: +61 8 9315 2333 F: +61 8 9315 2233 E: [email protected] W: www.securitytransfer.com.au

Code: CAH Holder Number:

SECTION A: Appointment of Proxy

I/We, the above named, being registered holders of the Company and entitled to attend and vote hereby appoint:

The meeting Chairperson The name of the person you are appointing (mark with an "X") (if this person is someone other than the Chairperson of the meeting). or failing the person named, or if no person is named, the Chairperson of the Meeting, as my/our Proxy to act generally at the meeting 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) at the Extraordinary General Meeting of the Company to be held at 10.00am (AWST) on Tuesday 17 November 2009 at the Hyatt Regency Perth, Traders Lounge, 99 Adelaide Terrace, Perth WA and at any adjournment of that meeting.

SECTION B: Voting Directions to your Proxy

Please mark "X" in the box to indicate your voting directions to your Proxy.

Resolution

For Against Abstain*

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

"'That , for all purposes, approval is given for the Company to participate in the Merger pursuant to the Merger Implementation Agreement, details of which are given in the Explanatory Memorandum accompanying this Notice of Meeting."

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

"'That, subject to and conditional on resolution 1 and the Lion Selection Resolutions being passed, and for the purposes of section 254H of the Corporations Act and for all other purposes, the existing share capital of the Company be consolidated on a 11:1 basis (with all fractional entitlements being rounded up), with effect from 7.00pm (AWST) on 26 November 2009."

If no directions are given my proxy may vote as the proxy thinks fit or may abstain.

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.

If you wish to appoint the Chairperson as your proxy , or the Chair may be appointed by default and you do not wish to direct the Chairperson how to vote, please mark

"X" in the box. By marking this box, you acknowledge that the Chairperson may exercise your proxy even if he has an interest in the outcome of the resolution and votes cast by him/her other than as a 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, the Chair will not cast your votes on the resolution and your votes will not be counted in calculating the required majority if a poll is called on the resolution. The Chairperson of the Meeting intends to vote undirected proxies in favour of the resolution.

SECTION C: Please Sign Below

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

Individual or Security Holder Security Holder 2 Sole Director and Sole Company Secretary Director

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Reference Number:

Security Holder 3

Director / Company Secretary

1558285925

CAH

My/Our contact details in case of enquiries are:

NAME

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TELEPHONE NUMBER ( )

NOTES

1. Name and Address

This is the name and address on the Share Register of Catalpa Resources Limited. If this information is incorrect, please make corrections on this form. Shareholders sponsored by a broker should advise their broker of any changes. Please note that you cannot change ownership of your shares using this form.

2. Appointment of a Proxy

If you wish to appoint the Chairperson of the Meeting as your Proxy please mark "X" in the box in Section A. Please also refer to Section B of this proxy form and ensure you mark the box in that section if you wish to appoint the Chairperson as your Proxy.

If the person you wish to appoint as your Proxy is someone other than the Chairperson of the Meeting please write the name of that person in Section A. If you leave this section blank, or your named Proxy does not attend the meeting, the Chairperson of the Meeting will be your Proxy. A Proxy need not be a Shareholder of Catalpa Resources Limited.

3. Directing your Proxy how to vote

To direct the Proxy how to vote place an "X" in the appropriate box against each item in Section B. Where more than one Proxy is to be appointed and the proxies are to vote differently, then two separate forms must be used to indicate voting intentions.

4. Appointment of a Second Proxy

You are entitled to appoint up to two (2) persons as 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 share registry +61 8 9315 2333 or you may photocopy this form.

To appoint a second Proxy you must:

(a) On each of the Proxy forms, state the percentage of your voting rights or 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 of your votes; and
(b) Return both forms in the same envelope.

5. Signing Instructions Individual: where the holding is in one name, the Shareholder must sign.

Joint Holding: where the holding is in more than one name, all of the Shareholders must 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 may sign alone. Otherwise this form must be signed by a Director jointly with either another Director or Company Secretary. Please indicate the office held in the appropriate place.

If a representative of the corporation is to attend the meeting the appropriate "Certificate of Appointment of Corporate Representative" should be lodged with the Company before the meeting or at the registration desk on the day of the meeting. A form of the certificate may be obtained from the Company's share registry.

6. Lodgement of Proxy

Proxy forms (and any Power of Attorney under which it is signed) must be received by Security Transfer Registrars Pty Ltd before 5.00pm (AWST) on 13 November 2009. Any Proxy form received after that time will not be valid for the scheduled meeting.

Security Transfer Registrars Pty Ltd PO BOX 535 Applecross, Western Australia 6953

Street Address: Alexandrea House, Suite 1 770 Canning Highway Applecross, Western Australia 6153

Telephone +61 8 9315 2333 Facsimile +61 8 9315 2233

PRIVACY STATEMENT

Personal information is collected on this form by Security Transfer Registrars Pty Ltd as the registrar for securities issuers for the purpose of maintaining registers of securityholders, facilitating distribution payments and other corporate actions and communications. Your personal details may be disclosed to related bodies corporate, to external service providers such as mail and print providers, or as otherwise required or permitted by law. If you would like details of your personal information held by Security Transfer Registrars Pty Ltd or you would like to correct information that is inaccurate please contact them on the address on this form.

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9245285926

AI assistant

EVOLUTION MINING LIMITED — M&A Activity 2009

64885_rns_2009-10-18_986ec9ef-4dbe-4dfa-9853-4486898ba9ed.pdf

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CATALPA RESOURCES LIMITED

Explanatory Memorandum in relation to resolutions to approve a proposed merger with Lion Selection Limited and a share consolidation

16 OCTOBER 2009

Important notices

Read entire Explanatory Memorandum

Status of Explanatory Memorandum

Investment decisions

Forward looking statements

Estimates

Responsibility statements

a. Preparation by Catalpa

b. Preparation by Lion Selection

c. ASX

New Zealand shareholders

Glossary, defined terms and interpretation

Privacy

Date

Pro forma financial information

Contents of this Explanatory Memorandum

What you should do

STEP 1: READ THIS EXPLANATORY MEMORANDUM IN FULL

STEP 2: VOTE ON THE RESOLUTIONS

Summary of the Merger

Catalpa before and after the Merger:

Reasons to vote in favour of the Resolutions

Disadvantages of the Merger and reasons to vote against the Resolutions

Key Dates/Timetable

More Information

Approvals sought and meeting information

Question

More Information

More Information

Question

More Information

More Information

Catalpa General meeting, agreement and approval

2.1 Overview of the Merger

1 Catalpa General Meeting

2 Lion Selection General Meeting and Scheme Meeting

3 Court approval

2.2 Recommendation of Catalpa Directors – Merger Resolution

Immediate gold producer status

(b)

Immediate cash flow

Increased production

(e)

A diversified register

(f)

Cancellation of options

(g) Diversified operations

(h)

Exploration opportunities

Cracow pre-emptive

2.3 Recommendation of the Catalpa Directors – Share Consolidation Resolution

(a)

Condition precedent to implementation of Merger

(b)

Greater flexibility of share price

2.4 Risks and potential disadvantages if the Merger proceeds

(a) Dilution of Catalpa Shareholders’ interests

(b)

Macquarie Bank financing

(c)

Court delays

(d) Risk regarding change in control on contractual provisions and third party consents

(e) Cancellation of Lion Selection’s Catalpa Shares

(f)

Commodity price risk

(g)

Exchange rate and currency risk

EVOLUTION MINING LIMITED M&A Activity 2009

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