GRAND GULF ENERGY LIMITED — AGM Information 2011

Oct 30, 2011

==> picture [232 x 122] intentionally omitted <==

Ground Floor 1292 Hay Street West Perth WA 6005 T +61 (0) 8 9389 2000 F +61 (0) 8 9389 2099 E info@grandgulf.net www.grandgulfenergy.com ABN 22 073 653 175 ASX GGE/GGEO

ASX/Media Release

31 October 2011

NOTICE OF ANNUAL GENERAL MEETING

Please find attached a copy of the Notice of Annual General Meeting to be held on 30 November 2011 at 4.30pm at Level 21, 77 St Georges Terrace, Perth WA.

Further to previous announcements the Board wishes to advise that in order to properly incentivise and retain directors and management and as a result of overall financial market conditions the options strike price has been reduced to 0.6c each. The options vest over 12 months and exercisable on or before 30 November 2013.

The Board also wishes to advise that Mr Jim Trimble has decided not to seek re‐election at the AGM. Mr Trimble has worked with the Company for over 4 years and the Board thanks Mr Trimble for his contribution over that period and wishes him every success in his future endeavours.

For further information contact:

Charles W. Morgan Executive Chairman Phone +61 8 9389 2000

For more information visit www.grandgulfenergy.com and sign up for email news.

==> picture [226 x 107] intentionally omitted <==

ABN 22 073 653 175

NOTICE OF ANNUAL GENERAL MEETING AND

EXPLANATORY STATEMENT

For the Annual General Meeting to be held on 30 November 2011 at 4:30 pm (WST) at Level 21, Allendale Square 77 St Georges Terrace, Perth Western Australia

This is an important document. Please read it carefully and in its entirety. If you do not understand it please consult your professional advisers.

If you are unable to attend the Annual General Meeting, please complete the form of proxy enclosed and return it in accordance with the instructions set out on that form.

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 1

TIME AND PLACE OF ANNUAL GENERAL MEETING AND HOW TO VOTE

This Annual General Meeting of the Shareholders of Grand Gulf Energy Ltd will be held at:

Level 21, Allendale Square 77 St Georges Terrace Perth Western Australia

Commencing at 4:30 pm (WST) on 30 November 2011

How to Vote

You may vote by attending the Meeting in person, by proxy or authorised representative.

Voting in Person

To vote in person you need to attend the Meeting on the date and at the place set out above. The Meeting will commence at 4:30 pm (WST).

Voting by Proxy

To vote by proxy, please complete and sign the proxy form enclosed with this Notice as soon as possible and either:

• return the proxy form (by hand delivery) to the Company’s office at Level 21, Allendale Square, 77 St Georges Terrace, Perth, Western Australia;

• return the proxy form (by post delivery) to the Company’s office at PO Box Z5446, St Georges Terrace, Perth, Western Australia 6831; or

• send the proxy by facsimile to facsimile number (+61 8 9389 2099),

so that it is received not later than 5:00 pm on 28 November 2011 (WST).

Your proxy form is enclosed.

New sections 250BB and 250BC of the Corporations Act came into effect on 1 August 2011 and apply to voting by proxy on or after that date. Shareholders and their proxies should be aware of these changes to the Corporations Act, as they will apply to this Annual General Meeting. Broadly, the changes mean that:

• if proxy holders vote, they must cast all directed proxies as directed; and

• any directed proxies which are not voted will automatically default to the Chair, who must vote the proxies as directed.

Further details on these changes is set out below.

Proxy vote if appointment specifies way to vote

Section 250BB(1) of the Corporations Act provides that an appointment of a proxy may specify the way the proxy is to vote on a particular resolution and, if it does :

• the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed); and

• if the proxy has 2 or more appointments that specify different ways to vote on the resolution – the proxy must not vote on a show of hands; and

• if the proxy is the chair of the meeting at which the resolution is voted on – the proxy must vote on a poll, and must vote that way (i.e. as directed); and

• if the proxy is not the chair – the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed).

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 2

Transfer of non‐chair proxy to chair in certain circumstances

Section 250BC of the Corporations Act provides that, if:

• an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a meeting of the Company's members; and

• the appointed proxy is not the chair of the meeting; and

• at the meeting, a poll is duly demanded on the resolution; and

• either of the following applies:

• the proxy is not recorded as attending the meeting;

• the proxy does not vote on the resolution,

the chair of the meeting is taken, before voting on the resolution closes, to have been appointed as the proxy for the purposes of voting on the resolution at the meeting.

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 3

GRAND GULF ENERGY LTD ABN 22 073 653 175 NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Annual General Meeting of the Shareholders of Grand Gulf Energy Ltd (“ Company ”) will be held at Level 21, Allendale Square, 77 St Georges Terrace, Perth, Western Australia on 30 November 2011 at 4:30 pm (WST) for the purpose of transacting the following business.

The Explanatory Statement to this Notice provides additional information on matters to be considered at the Meeting. The Explanatory Statement and the Proxy Form form part of this Notice.

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Meeting are those who are registered Shareholders of the Company at 5:00pm (WST) on 28 November 2011.

Terms and abbreviations used in this Notice and Explanatory Statement are defined in Schedule 1.

A G E N D A

1. Annual Report

To table and consider the Annual Report of the Company and its controlled entities for the year ended 30 June 2011, which includes the Financial Report, the Directors' Report and the Auditor's Report.

2. Resolution 1 – Adoption of Remuneration Report

To consider, and if thought fit, to pass, with or without amendments, the following resolution as a non‐binding resolution:

"That for the purposes of Section 250R(2) of the Corporations Act and for all other purposes, approval is given for the adoption of the Remuneration Report as contained in the Company’s annual financial report for the financial year ended 30 June 2011 on the terms and conditions in the Explanatory Statement."

Note: the vote on this Resolution is advisory only and does not bind the Directors or the Company.

Voting Prohibition Statement:

A vote on this Resolution must not be cast (in any capacity) by or on behalf of any of the following persons:

(a) a member of the Key Management Personnel, details of whose remuneration are included in the Remuneration Report; or (b) a Closely Related Party of such a member. However, a person described above may vote on this Resolution if: (c) the person does so as a proxy appointed by writing that specifies how the proxy is to vote on the Resolution; and (d) the vote is not cast on behalf of a person described in sub‐paragraphs (a) or (b) above.

3. Resolution 2 – Re‐election of Director – Mr Stephen Keenihan

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

"That, Mr Stephen Keenihan who retires in accordance with Rule 12.1.3 of the Constitution and, being eligible, offers himself for re‐election, be re‐elected as a Director."

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 4

4. Resolution 3 – Authority to increase the aggregate amount for Non‐Executive Directors to be paid as Directors’ fees

To consider, and if thought fit, to pass with or without amendment, the following resolution as an ordinary resolution:

"That, in accordance with Rule 12.6.1 of the Constitution, ASX Listing Rule 10.17 and for all other purposes, Shareholders approve the increase from $200,000 to $300,000 per annum the aggregate amount for Non‐ Executive Directors or their nominees to be paid as Directors’ fees on the terms and conditions in the Explanatory Statement."

Voting Exclusion: The Company will disregard any votes cast on this Resolution by a Director and any of their associates. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Voting Prohibition Statement

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if: the proxy is either:

• (a) a member of the Key Management Personnel; or

• (b) a Closely Related Party of such a member; and

• (c) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

• (d) the proxy is the Chair of the Meeting; and

• (e) the appointment expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

5. Resolution 4 – Authority to grant Options to Mr Mark Freeman

To consider, and if thought fit, to pass with or without amendment, the following resolution as an ordinary resolution:

"That, in accordance with Listing Rule 10.11 and Chapter 2E of the Corporations Act and for all other purposes, Shareholders approve the grant of 40,000,000 Options to Mr Mark Freeman or his nominee on the terms and conditions in the Explanatory Statement."

ASX Voting Exclusion: The Company will disregard any votes cast on this Resolution by Mr Mark Freeman (or his nominee) or any of his associates. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if: the proxy is either:

• (a) a member of the Key Management Personnel; or

• (b) a Closely Related Party of such a member; and

• (c) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

• (d) the proxy is the Chair of the Meeting; and

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 5

• (e) the appointment expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

6. Resolution 5 – Authority to grant Options to Mr Allan Boss

To consider, and if thought fit, to pass with or without amendment, the following resolution as an ordinary resolution:

"That, in accordance with Listing Rule 10.11 and Chapter 2E of the Corporations Act and for all other purposes, Shareholders approve the grant of 20,000,000 Options to Mr Allan Boss or his nominee on the terms and conditions in the Explanatory Statement."

ASX Voting Exclusion: The Company will disregard any votes cast on this Resolution by Mr Allan Boss (or his nominee) or any of his associates. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if: the proxy is either:

• (a) a member of the Key Management Personnel; or

• (b) a Closely Related Party of such a member; and

• (c) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

• (d) the proxy is the Chair of the Meeting; and

• (e) the appointment expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

7. Resolution 6 – Authority to grant Options to Mr Stephen Keenihan

To consider, and if thought fit, to pass with or without amendment, the following resolution as an ordinary resolution:

"That, in accordance with Listing Rule 10.11 and Chapter 2E of the Corporations Act and for all other purposes, Shareholders approve the grant of 10,000,000 Options to Mr Stephen Keenihan or his nominee on the terms and conditions in the Explanatory Statement."

ASX Voting Exclusion: The Company will disregard any votes cast on this Resolution by Mr Stephen Keenihan (or his nominee) or any of his associates. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if: the proxy is either:

• (a) a member of the Key Management Personnel; or

• (b) a Closely Related Party of such a member; and

• (c) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

• (d) the proxy is the Chair of the Meeting; and

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 6

(e) the appointment expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

8. Resolution 7 – Authority to grant Options to Mr Kevin Kenning

To consider, and if thought fit, to pass with or without amendment, the following resolution as an ordinary resolution:

"That, in accordance with Listing Rule 7.1 and for all other purposes, Shareholders approve the grant of 15,000,000 Options to Mr Kevin Kenning or his nominee on the terms and conditions in the Explanatory Statement."

Voting Exclusion : The Company will disregard any votes cast on this Resolution by any person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if: the proxy is either:

• (a) a member of the Key Management Personnel; or

• (b) a Closely Related Party of such a member; and

• (c) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

• (d) the proxy is the Chair of the Meeting; and

• (e) the appointment expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

9. Resolution 8 – Authority to grant Options to Ms Hena Park

To consider, and if thought fit, to pass with or without amendment, the following resolution as an ordinary resolution:

"That, in accordance with Listing Rule 7.1 and for all other purposes, Shareholders approve the grant of 5,000,000 Options to Ms Hena Park or her nominee on the terms and conditions in the Explanatory Statement."

Voting Exclusion : The Company will disregard any votes cast on this Resolution by any person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Voting Prohibition Statement:

A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if: the proxy is either:

• (a) a member of the Key Management Personnel; or

• (b) a Closely Related Party of such a member; and

• (c) the appointment does not specify the way the proxy is to vote on this Resolution.

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 7

However, the above prohibition does not apply if:

• (d) the proxy is the Chair of the Meeting; and

• (e) the appointment expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with remuneration of a member of the Key Management Personnel.

BY ORDER OF THE BOARD

Mark Freeman Executive Director/Company Secretary Dated: 27 October 2011

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 8

GRAND GULF ENERGY LTD ABN 22 073 653 175 EXPLANATORY STATEMENT

1. Introduction

This Explanatory Statement has been prepared for the information of Shareholders in connection with the business to be conducted at the Meeting to be held at Level 21, Allendale Square, 77 St Georges Terrace, Western Australia on 30 November 2011 at 4:30 pm (WST).

This Explanatory Statement should be read in conjunction with and forms part of the accompanying Notice. The purpose of this Explanatory Statement is to provide information to Shareholders in deciding whether or not to pass the Resolutions in the Notice.

A Proxy Form is located at the end of the Explanatory Statement.

2. Action to be taken by Shareholders

Shareholders should read the Notice and this Explanatory Statement carefully before deciding how to vote on the Resolutions.

2.1 Proxies

A Proxy Form is attached to the Notice. This is to be used by Shareholders if they wish to appoint a representative (a 'proxy') to vote in their place. All Shareholders are invited and encouraged to attend the Meeting or, if they are unable to attend in person, sign and return the Proxy Form to the Company in accordance with the instructions thereon. Lodgement of a Proxy Form will not preclude a Shareholder from attending and voting at the Meeting in person.

Please note that:

(a) a member of the Company entitled to attend and vote at the Meeting is entitled to appoint a proxy;

(b) a proxy need not be a member of the Company; and (c) a member of the Company entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise, but where the proportion or number is not specified, each proxy may exercise half of the votes.

The enclosed Proxy Form provides further details on appointing proxies and lodging Proxy Forms.

2.2 Voting Prohibition by Proxy Holders

In accordance with section 250R of the Corporations Act, a vote on Resolution 1 must not be cast (in any capacity) by, or on behalf of:

(a) a member of the Key Management Personnel whose remuneration details are included in the Remuneration Report; or (b) a Closely Related Party of such member.

However, a person described above may cast a vote on Resolution 1 if:

(a) the person does so as a proxy appointed by writing that specifies how the proxy is to vote on Resolution 1; and

• (b) the vote is not cast on behalf of a person described in section 2.2(a) or (b) above.

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 9

3. Annual Report

There is no requirement for Shareholders to approve the Annual Report.

Shareholders will be offered the following opportunities:

• (a) discuss the Annual Report which is online at www.grandgulfenergy.com and click on the direct link;

• (b) ask questions or make comment on the management of the Company; and

• (c) ask the auditor questions about the conduct of the audit and the preparation and content of the Auditor's Report.

In addition to taking questions at the Meeting, written questions to the Chairman about the management of the Company, or to the Company's auditor about:

• (d) the preparation and the content of the Auditor's Report;

• (e) the conduct of the audit;

• (f) accounting policies by the Company in relation to the preparation of the financial statements; and

• (g) the independence of the auditor in relation to the conduct of the audit,

may be submitted no later than 5 business days before the Meeting to the Company Secretary at the Company's registered office.

4. Resolution 1 – Remuneration Report

4.1 General

Section 250R(2) of the Corporations Act provides that the Company is required to put the Remuneration Report to the vote of Shareholders. The Directors' Report contains the Remuneration Report which sets out the remuneration policy for the Company and reports the remuneration arrangements in place for the executive Directors, specified executives and non‐executive Directors.

Section 250R(3) of the Corporations Act provides that Resolution 1 is advisory only and does not bind the Directors of the Company of itself, a failure of Shareholders to pass Resolution 1 will not require the Directors to alter any of the arrangements in the Remuneration Report.

However, the Corporations Act has been amended by the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011 ( Director and Executive Remuneration Act ) which received Royal Assent on 27 June 2011 and came into effect on 1 July 2011.

The Director and Executive Remuneration Act introduced new sections 250U and 250Y, amongst others, into the Corporations Act, giving Shareholders the opportunity to remove the Board if the Remuneration Report receives a 'no' vote of 25% or more at two consecutive annual general meetings ( Two Strikes Rule ).

Under the Two Strikes Rule, where a resolution on the Remuneration Report receives a 'no' vote of 25% or more at two consecutive annual general meetings, the Company will be required to put to Shareholders at the second annual general meeting a resolution on whether another meeting should be held (within 90 days) at which all Directors (other than the managing director) who were in office at the date of approval of the applicable Directors' Report must stand for re‐election.

In summary, if the Remuneration Report receives a 'no' vote of 25% or more at this Meeting, Shareholders should be aware that if there is a 'no' vote of 25% or more at the next annual general meeting the consequences are that it may result in the re‐election of the Board.

The Chairman will allow a reasonable opportunity for Shareholders as a whole to ask about, or make comments on the Remuneration Report.

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 10

4.2 Proxy Restrictions

Pursuant to the Corporations Act, if you elect to appoint the Chair, or another member of Key Management Personnel whose remuneration details are included in the Remuneration Report or any Closely Related Party of that member as your proxy to vote on this Resolution 1, you must direct the proxy how they are to vote. Where you do not direct the Chair, or another member of Key Management Personnel whose remuneration details are included in the Remuneration Report or Closely Related Party of that member on how to vote on this Resolution 1, the proxy is prevented by the Corporations Act from exercising your vote and your vote will not be counted in relation to this Resolution 1.

5. Resolution 2 – Re‐election of Director – Mr Stephen Keenihan

In accordance with the Constitution, Mr Keenihan will retire by rotation and seeks re‐election. Details of the qualifications and experience of Mr Keenihan are set out in the Company’s 2011 Annual Report (pg 3).

The Board believes that Mr Keenihan has performed the duties and responsibilities of a non‐executive Director of the Company diligently and professionally in the best interests of all Shareholders. The Board unanimously supports the re‐election of Mr Keenihan.

6. Resolution 3 – Authority to increase the aggregate amount for Non‐Executive Directors to be paid as Directors’ fees

Resolution 3 seeks Shareholder approval to increase the aggregate amount from $200,000 to a total of $300,000 per annum for Non‐Executive Directors to be paid as Directors’ fees. All non‐executive directors are paid a fixed sum for their services.

The purpose of the increase of the aggregate amount to be paid as non‐executive directors’ fees is for the Company to attract and retain directors of high calibre. The Board considers the increase to be reasonable in the circumstances given the Company's size, stage of development, and the need to attract and retain Directors of high calibre while still maintaining a cash reserve.

Shareholder approval is required under Listing Rule 10.17 and clause 12.6.1 of the Company’s Constitution.

7. Resolutions 4 to 6 – Authority to Grant Options to Directors

7.1 General

Resolutions 4 to 6 (inclusive) seek Shareholder approval pursuant to Listing Rule 10.11 and Chapter 2E of the Corporations Act for the grant of a total of 70,000,000 Options to the Directors (or their nominees) as follows:

Mr Mark Freeman 40,000,000 Options;

Mr Allan Boss 20,000,000 Options; and Mr Stephen Keenihan 10,000,000 Options (together the Related Parties ).

• 7.2 Reason approval required

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

(a) obtain the approval of the public company’s members in the manner set out in Sections 217 to 227 of the Corporations Act; and

(b) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in Sections 210 to 216 of the Corporations Act.

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 11

The grant of the Related Party Options constitutes giving a financial benefit and Messrs Freeman, Boss and Keenihan are related parties of the Company by virtue of being Directors.

In addition, ASX Listing Rule 10.11 also requires shareholder approval to be obtained where an entity issues, or agrees to issue, securities to a related party, or a person whose relationship with the entity or a related party is, in ASX’s opinion, such that approval should be obtained unless an exception in ASX Listing Rule 10.12 applies.

The Directors consider that the grant of the Options to the Related Parties falls within the exception in Section 211 of the Corporations Act, and accordingly, Shareholder approval is not required for the purpose of Section 208 of the Corporations Act. However, the grant of the Options does not fall within one of the exceptions pursuant to the Listing Rule 10.12 and therefore Shareholder approval is required pursuant to Listing Rule 10.11.

• 7.3 Specific information required by Listing Rule 10.13

The following information is provided for the purpose of obtaining Shareholder approval for the issue:

• (a) A total of 70,000,000 Options (being the nature of the financial benefit) will be issued to the Directors (or their nominees) as follows:

Director	Number of Options
Mr Mark Freeman	40,000,000
Mr Allan Boss	20,000,000
Mr Stephen Keenihan	10,000,000
Total	70,000,000

• (b) The Company will issue the Options no later than one month after the date of the Meeting (or such longer period of time as ASX may in its discretion allow).

• (c) The related parties are Messrs Freeman, Boss and Keenihan, and they are related parties by virtue of being directors of the Company.

• (d) Each Option will be issued for nil consideration. Each Option entitles the holder to subscribe for one (1) Share at an exercise price of 0.6c and expiring on that date which is 2 years from the date of grant. Further terms and conditions of the Options are in Schedule 2.

• (e) Each Director, other than Mr Morgan and Mr Trimble, has an interest in the Resolution under which Options will be granted to him and therefore believes it inappropriate to make a recommendation in respect of that Resolution. Each Director recommends the grant of Options to each of the other Directors as it allows the Company to retain directors of high calibre and it aligns the interests of the Company and its Directors to maximise Shareholder value. Messrs Morgan and Trimble recommend the granting of the options to the Directors.

• (f) A voting exclusion statement is included in the Notice.

• (g) No funds will be raised by the issue of the Options as they are being issued for nil consideration.

• (h) The terms and conditions of the Options are set out in Schedule 2.

• (i) On the basis of the assumptions below, the technical value of one Option approximates $0.001236. This valuation imputes a total value of $86,520 to the Options. The value may go up or down after that date as it will depend on the future price of a Share. Black & Scholes methodology has been used, together with the following assumptions:

• (i) Interest rate set at the Australian Government 5 year bond rate of 3.80%;

• (ii) The date of valuation for the purposes of settling the current market value of a share is 20 October 2011;

• (iii) At this date, the Share price was $0.004 which is the price used in the valuation;

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 12

• (iv) The estimated volatility used in the valuation is 75%;

• (v) For the purposes of the valuation, the Company is not expected to pay a dividend during the life of the Options;

• (vi) The Options will vest pro‐rata over 12 months from issue and be exercisable accordingly; and

• (vii) The individual value calculated for each Option holder (based on the assumptions above) would equate to: Mr Freeman ($49,440), Mr Boss ($24,720), and Mr Keenihan ($12,360).

(j) The current relevant interests in security holdings of the Directors (excluding the Company’s Chairman) are specified as follows:

Director	Number of Shares	Number of Options
Mr Mark Freeman	36,278,431	18,8139,216
Mr Allan Boss	12,408,600	2,068,100
Mr Stephen Keenihan	19,586,143	2,713,072

(k) If the Shareholders approve the proposed issue of the Options, the exercise of those Options (being the conversion into a total of 70,000,000 Shares) would increase the Company’s current issued share capital from 3,739,805,994 to 3,809,805,994 and will result in a dilution of all other Shareholders’ holdings in the Company of:

• (i) 1.8% based on the issued Shares as at the date of this Notice; and

• (ii) individual dilution rates (based on the issued Shares as at the date of this Notice) of 1% for Mr Freeman, 0.2% for Mr Keenihan and 0.5% for Mr Boss.

(l) The market price of Shares would normally determine whether the Directors will exercise the Options or not. If the Options are exercised at a price that is lower than the price at which Shares are trading on ASX, there may be a perceived cost to the Company.

• (m) The remuneration and emoluments payable by the Company to the Related Parties for the previous financial year and the proposed remuneration and emoluments for the current financial year are set out below:

Related Parties	Previous Financial Year	Current Financial Year
Mr Mark Freeman	$293,520	$250,000
Mr Allan Boss	$53,235	US$120,000
Mr Stephen Keenihan	$40,909	$42,000

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 13

(n) The historical share price information for the Company in the previous 12 months is as follows:

	Price	Date
Highest	$0.0087	8 April 2011
Lowest	$0.0030	11 August 2011
Last	$0.0040	21 October 2011

• (o) the Board acknowledges the grant of Options to Mr Keenihan is contrary to Recommendation 8.2 of the ASX Corporate Governance Principles and Recommendations regarding remuneration for Non Executive Directors. However, the Board considers the grant of Options to Mr Keenihan is reasonable in the circumstances for the reason set out below;

• (p) the primary purpose of the grant of the Options to the Related Parties is to provide a performance linked incentive component in the remuneration package for the Related Parties to motivate and reward their performance in their respective roles as Directors;

• (q) Mr Freeman declines to make a recommendation to Shareholders in relation to Resolution 4 due to his material personal interest in the outcome of the Resolution. However, in respect of Resolutions 5 and 6, Mr Freeman recommends that Shareholders vote in favour of those Resolutions for the following reasons:

• (i) the grant of Options to the Related Parties will align the interests of the Related Parties with those of Shareholders;

• (ii) the grant of the Options is a reasonable and appropriate method to provide cost effective remuneration as the non‐cash form of this benefit will allow the Company to spend a greater proportion of its cash reserves on its operations than it would if alternative cash forms of remuneration were given to the Related Parties; and

• (iii) it is not considered that there are any significant opportunity costs to the Company or benefits foregone by the Company in granting the Options upon the terms proposed;

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 14

• (r) Mr Allan Boss declines to make a recommendation to Shareholders in relation to Resolution 5 due to his material personal interest in the outcome of the Resolution. However, in respect of Resolutions 4 and 6, Mr Boss recommends that Shareholders vote in favour of those Resolutions for the reasons set out in subparagraphs (q)(i) to (iii);

• (s) Mr Keenihan declines to make a recommendation to Shareholders in relation to Resolution 6 due to his material personal interest in the outcome of the Resolution. However, in respect of Resolutions 4 and 5, Mr Keenihan recommends that Shareholders vote in favour of those Resolutions for the reasons set out in subparagraphs (q)(i) to (iii);

• (t) Mr Charles Morgan recommends that Shareholders vote in favour of Resolutions 4, 5 and 6 for the reasons set out in subparagraphs (q)(i) to (iii);

• (u) Mr James Trimble recommends that Shareholders vote in favour of Resolutions 4, 5 and 6 for the reasons set out in subparagraphs (q)(i) to (iii);

• (v) in forming their recommendations, each Director considered the experience of each other Related Party, the current market price of Shares, the current market practices when determining the number of Options to be granted as well as the exercise price and expiry date of those Options; and

• (w) the Board is not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass Resolutions 4 to 6.

Approval pursuant to ASX Listing Rule 7.1 is not required in order to issue the Options to the Related Parties as approval is being obtained under ASX Listing Rule 10.11. Accordingly, the issue of Options to the Related Parties will not be included in the 15% calculation of the Company’s annual placement capacity pursuant to ASX Listing Rule 7.1.

8. Resolutions 7 & 8 – Authority to Grant Options to Mr Kenning and Ms Park

8.1 General

Resolutions 7 & 8 seek Shareholder approval pursuant to Listing Rule 7.1 for the grant of a total of 20,000,000 Options to the following:

Mr Kevin Kenning (or his nominee) 15,000,000 Options; and

Ms Hena Park (or her nominee) 5,000,000 Options.

ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to issue more equity securities during any 12 month period than that amount which represents 15% of the number of fully paid ordinary securities on issue at the commencement of that 12 month period.

The effect of Resolutions 7 and 8 will be to allow the Directors to issue the Options to Messrs Kenning and Park during the period of 3 months after the Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

8.2 Technical Information Required by ASX Listing Rule 7.1

Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to the Placement:

• (a) the maximum number of Options to be issued to Mr Kenning (or his nominee) is 15,000,000 Options and the maximum number of Options to be issued to Ms Park (or her nominee) is 5,000,000 Options (both of whom are not related parties of the Company) in consideration for consultancy services provided to the Company in the previous financial year;

• (b) the Options will be issued no later than 3 months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur on the same date;

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 15

• (c) the Options will be issued for nil consideration and therefore no funds will be raised from the issue; and

• (d) the Options will be issued on the terms and conditions set out in Schedule 2.

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 16

==> picture [133 x 64] intentionally omitted <==

ABN 22 073 653 175

SCHEDULE 1 ‐ DEFINITIONS

In this Explanatory Statement, the following expressions have the following meanings:

“$” means Australian Dollars.

“Annual Report” means the Directors’ Report, the Financial Report and Auditor’s Report in respect to the financial year ended 30 June 2011.

" Associate " has the meaning given to it by Division 2 of Part 1.2 of the Corporations Act.

" ASIC " means the Australian Securities and Investments Commission.

• " ASX " means the ASX Limited.

• " ASX Listing Rules " or " Listing Rules " means the listing rules of ASX.

• “Auditor's Report” means the auditor's report on the Financial Report.

• " Board " means the board of directors of the Company.

• " Chairman " means the chairman of the Company.

• “Closely Related Party” of a member of the Key Management Personnel means:

• (a) a spouse or child of the member;

• (b) a child of the member’s spouse;

• (c) a dependent of the member or the member’s spouse;

• (d) anyone else who is one of the member’s family and may be expected to influence the member, or be influenced by the member, in the member’s dealing with the entity;

• (e) a company the member controls; or

(f) a person prescribed by the Corporations Regulations 2001 (Cth).

• " Company " or " Grand Gulf " means Grand Gulf Energy Ltd (ABN 22 009 171 046).

• " Corporations Act " means the Corporations Act 2001 (Cth).

• " Director " means a director of the Company from time to time.

" Explanatory Statement " means this explanatory statement.

“Financial Report” means the annual financial report prepared under Chapter 2M of the Corporations Act of the Company and its controlled entities.

“Key Management Personnel” means persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, including any Director (whether executive or otherwise) of the Company.

“Listing Rules” means the listing rules of ASX.

" Meeting " means the meeting convened by this Notice.

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 17

" Notice " means the notice of meeting that accompanies this Explanatory Statement.

" Option " means an option to subscribe for a Share in accordance with the terms and conditions set out in Schedule 2 to the Explanatory Statement.

“Proxy Form” means the proxy form attached to this Notice.

“Remuneration Report” means the remuneration report of the Company contained in the Directors' Report.

" Resolution " means a resolution contained in the Notice.

" Share " means a fully paid ordinary share in the capital of the Company.

" Shareholder " means a registered holder of a Share.

“Two Strike Rule” has the meaning given in Section 4 of the Explanatory Statement.

“WST” means Western Standard Time, being the time in Perth, Western Australia.

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 18

SCHEDULE 2 – Terms and Conditions of the Options

The terms and conditions of the options referred to in Resolutions 4 to 8 (inclusive) are as follows:

• (a) Each Option entitles the Option Holder or any other holder of an Option (each an Optionholder) to the issue of one fully paid ordinary share in the capital of the Company (Share) upon exercise by notice in writing (in the form attached to this certificate) and payment of the exercise price, during the exercise period.

• (b) The options vest pro‐rata over 12 months from issue, subject to the Optionholders continued employment or consultancy with the Company.

• (c) Options can be exercised, subject to (b) above at any time and from time to time during the exercise period. An Optionholder has no obligation to exercise all its Options at the same time.

• (d) The exercise price of each Option is $0.006.

• (e) The exercise period of the Options is from the date the Company issues the Options to 5.00pm (WST) to 30 November 2013.

• (f) If an Optionholder exercises any Options, the Company must within 5 Business Days issue to the Optionholder (or its nominee) the Shares to which the Optionholder is entitled on exercise of the Options and, if applicable, issue a replacement Options Certificate to the Optionholder for the balance of any unexercised Options.

• (g) At the time any Shares are issued, the Company will provide (and the Company will not do, or omit to do, anything to prevent it from providing at that time) a notice to the Australian Securities Exchange under section 708A(5)(e) and (6) of the Corporations Act.

• (h) An Option will not confer an entitlement to receive a dividend declared or paid by the Company, or an entitlement to vote at a general meeting of the Company nor will it confer an entitlement to participate in any pro rata or entitlement offer of securities to shareholders.

• (i) Each Share issued pursuant to the exercise of an Option will rank equally in all respects with other issued fully paid ordinary shares in the capital of the Company.

• (j) The Company will not apply to the ASX for official quotation of the Options but will apply to the ASX for official quotation of the Shares issued upon exercise of Options promptly after exercise of the Options (and in any event within the time period required by the Listing Rules).

• (k) The Options will be freely transferable.

• (l) Any Option not exercised before the end of the exercise period will lapse at the end of the exercise period.

• (m) In the event of a reorganisation or reconstruction of the capital of the Company, the rights of each Optionholder will be changed to the extent necessary to comply with the Listing Rules applying to the reorganisation or reconstruction of capital at the time of the reorganisation or reconstruction.

• (n) If the Company makes a pro rata issue (other than a bonus issue), from the date of the issue the exercise price of Options on issue will be reduced according to this formula:

A = O ‐ E / {P‐(S+D)}

(N + 1)

Where:

• A= the new exercise price of the Option;

• O= the old exercise price of the Option;

• E= the number of underlying shares into which one Option is exercisable;

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 19

• P= the average closing sale price per ordinary share (weighted by reference to volume) recorded on the stock market of ASX during the 5 trading days ending on the day before the ex‐rights date or ex entitlement date (excluding special crossings or overnight sales);

• S= the subscription price for a security under the pro rata issue;

• D= the dividend due but not yet paid on each ordinary share at the relevant time (except those to be issued under the pro rata issue); and

• N= the number of ordinary shares that must be held to entitle holders to receive a right to one new security in the pro rata issue.

• (o) If there is a bonus issue to the holders of ordinary shares in the capital of the Company, from the date of the issue the number of securities over which an Option is exercisable will be increased by the number of securities which the Optionholder would have received if the Option had been issued before the record date of the bonus issue.

• (p) The Company must notify the Optionholder of any adjustments made to the exercise price, the number of securities over which an Option may be exercised and the number of outstanding Options within 5 Business Days of the date of any adjustment.

• (q) Optionholders appearing on the Company’s register of Option Holders at the relevant date will be entitled to receive and will be sent all reports and accounts required to be laid before shareholders of the Company in general meetings and all notices of general meetings and will have the right to attend but shall have no right to vote at the meeting.

• (r) The Company must comply with the Listing Rules, the Corporations Act and its Constitution in relation to the issue of the Options. Without limiting the foregoing, the Company must ensure that the issue of the Options does not contravene Listing Rule 7.1.

• (s) If this certificate is lost, stolen, mutilated, defaced or destroyed, the holder of the relevant Options may apply for a replacement certificate. The application must be accompanied by:

• (i) a written statement that the certificate has been lost or destroyed and note otherwise pledged, sold or otherwise disposed of:

• (ii) if the certificate has been lost, a written statement that proper searches have been made; and

• (iii) an undertaking that, if the certificate is found or received by the holder of the relevant Options, it will be returned to the Company.

The Company must issue a replacement certificate within 10 Business Days after receipt of the documents referred to above.

• (t) There are no participating rights or entitlements inherent in the Options and Optionholders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options. However, the Company must ensure that the Optionholder is given at least 15 Business Days written notice prior to the closing date:

• (i) for any pro‐rata issue of any bonus shares or other marketable securities (as defined in the Corporations Act) issued or to be issued by the Company (Additional Rights); and

• (ii) on which a person may accept an offer of any Additional Rights in relation to any other issue of Additional Rights,

so as to enable the Optionholder to exercise its Options and participate in the pro‐rata issue or other offer of Additional Rights.

• (u) These terms and the Options are governed by the laws of Western Australia.

Grand Gulf Energy Limited Notice of Annual General Meeting and Explanatory Statement

Page 20