GRATIFII LIMITED — Proxy Solicitation & Information Statement 2012

May 1, 2012

WARATAH RESOURCES LIMITED ACN 125 688 940

NOTICE OF GENERAL MEETING

TIME : 12 Midday DATE : 8 June 2012 PLACE : Celtic Club, 48 Ord Street, West Perth WA 6005

This Notice of Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on (+61 8) 6365 4532.

CONTENTS PAGE

Business of the Meeting (setting out the proposed resolutions)	3
Explanatory Statement (explaining the proposed resolutions)	6
Glossary	12
Schedule 1 – Terms and Conditions of Related Party Options	14
Schedule 2 – Valuation of Related Party Options	16
Proxy Form	18
IMPORTANT INFORMATION

TIME AND PLACE OF MEETING

Notice is given that the general meeting of the Shareholders to which this Notice of Meeting relates will be held at 12 Midday on 8 June 2012 at:

Celtic Club, 48 Ord Street, West Perth WA 6005

YOUR VOTE IS IMPORTANT

The business of the General Meeting affects your shareholding and your vote is important.

VOTING ELIGIBILITY

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the General Meeting are those who are registered Shareholders at 12 Midday on 6 June 2012.

VOTING IN PERSON

To vote in person, attend the General Meeting at the time, date and place set out above.

VOTING BY PROXY

To vote by proxy, please complete and sign the enclosed Proxy Form and return by the time and in accordance with the instructions set out on the Proxy Form.

In accordance with section 249L of the Corporations Act, members are advised that:

• each member has a right to appoint a proxy;

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

• a member who 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 the member appoints 2 proxies and the appointment does not specify the proportion or number of the member’s votes, then in accordance with section 249X(3) of the Corporations Act, each proxy may exercise one-half of the votes.]

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2551-01/714623_7

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 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).

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.

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BUSINESS OF THE MEETING

AGENDA

ORDINARY BUSINESS

1. RESOLUTION 1 – RE-ELECTION OF DIRECTOR – TERENCE STREETER

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

“That, for the purpose of clause 13.4 of the Constitution and for all other purposes, Mr Terence Streeter, a Director who was appointed on 6 January 2012, retires, and being eligible, is re-elected as a Director.”

2. RESOLUTION 2 – RE-ELECTION OF DIRECTOR – RODERICK WHITE

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

“That, for the purpose of clause 13.4 of the Constitution and for all other purposes, Mr Roderick White, a Director who was appointed on 6 January 2012, retires, and being eligible, is re-elected as a Director.”

3. RESOLUTION 3 – ISSUE OF OPTIONS TO A DIRECTOR – TERENCE STREETER

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

“That, for the purposes of Section 208 of the Corporations Act, ASX Listing Rule 10.11 and for all other purposes, approval is given for the Directors to allot and issue 6,000,000 Options to Mr Terence Streeter (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

ASX Voting Exclusion : The Company will disregard any votes cast on this Resolution by Mr Terence Streeter (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:

(a) the proxy is either:

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

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

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

However, the above prohibition does not apply if:

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

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• (d) 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.

4. RESOLUTION 4 – ISSUE OF OPTIONS TO A DIRECTOR – RODERICK WHITE

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

“That, for the purposes of Section 208 of the Corporations Act, ASX Listing Rule 10.11 and for all other purposes, approval is given for the Directors to allot and issue 5,000,000 Options to Mr Roderick White (or his nominee) on the terms and conditions set out in the Explanatory Statement.”

ASX Voting Exclusion : The Company will disregard any votes cast on this Resolution by Mr Roderick White (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:

• (a) the proxy is either:

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

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

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

However, the above prohibition does not apply if:

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

• (d) 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 5 – RATIFICATION OF PRIOR ISSUE – SHARES

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

“That, for the purpose of ASX Listing Rule 7.4 and for all other purposes, Shareholders ratify the allotment and issue of 14,000,000 Shares on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by a person who participated in the issue 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.

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6. RESOLUTION 6 – DIRECTORS’ REMUNERATION

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

• “That, for the purposes of clause 13.8 of the Constitution, ASX Listing Rule 10.17 and for all other purposes, Shareholders approve the maximum total aggregate fixed sum per annum to be paid to Directors be set at $400,000 to be paid in accordance with the terms and conditions set out 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:

• (a) the proxy is either:

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

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

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

However, the above prohibition does not apply if:

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

• (d) 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.

DATED: 1 MAY 2012

BY ORDER OF THE BOARD

ROBERT ORR COMPANY SECRETARY

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EXPLANATORY STATEMENT

This Explanatory Statement has been prepared to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions which are the subject of the business of the Meeting.

1. RESOLUTIONS 1 AND 2 – RE-ELECTION OF DIRECTORS

Clause 13.4 of the Constitution allows the Directors to appoint at any time a person to be a Director as an addition to the existing Directors, but only where the total number of Directors does not at any time exceed the maximum number specified by the Constitution.

Any Director so appointed holds office only until the next following general meeting and is then eligible for re-election.

Messrs Terence Streeter and Roderick White will retire in accordance with clause 13.4 of the Constitution and, being eligible, seek re-election.

2. RESOLUTIONS 3 AND 4 – ISSUE OF OPTIONS TO DIRECTORS

2.1 General

On 6 January 2012, the Company announced the appointment of:

• (a) Terence Streeter as Non-Executive Director and Chairman; and

• (b) Roderick White as Non-Executive Director,

of the Company.

The Company has agreed, subject to obtaining Shareholder approval, to allot and issue a total of 11,000,000 Options ( Related Party Options ) to Messrs Terence Streeter and Roderick White ( Related Parties ) on the terms and conditions set out below.

2.2 Chapter 2E of the Corporations Act

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.

The grant of the Related Party Options constitutes giving a financial benefit and Messrs Terence Streeter and Roderick White are related parties of the Company by virtue of being Directors.

The Directors (other than Messrs Terence Streeter and Roderick White who have a material personal interest in Resolutions 3 and 4) consider that Shareholder approval pursuant to Chapter 2E of the Corporations Act is not required in

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respect of the grant of 11,000,000 Related Party Options to Messrs Terence Streeter and Roderick White because the agreement to grant the 11,000,000 Related Party Options was reached as part of the remuneration package for Messrs Terence Streeter and Roderick White, is considered reasonable remuneration in the circumstances and was negotiated on an arm’s length basis.

However, in the interest of being cautious, the Directors have resolved to provide the information that would normally be required where approval is required pursuant to Chapter 2E of the Corporations Act for Resolutions 3 and 4.

2.3 ASX Listing Rule 10.11

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.

It is the view of the Directors that the exceptions set out in ASX Listing Rule 10.12 do not apply in the current circumstances. Accordingly, Shareholder approval is also sought for the grant of Related Party Options to the Related Parties.

2.4 Shareholder Approval (Chapter 2E of the Corporations Act and Listing Rule 10.11)

Pursuant to and in accordance with the requirements of Section 219 of the Corporations Act and ASX Listing Rule 10.13, the following information is provided in relation to the proposed grant of Related Party Options:

• (a) the related parties are Messrs Terence Streeter and Roderick White. Messrs Terence Streeter and Roderick White are related parties by virtue of being Directors;

• (b) the maximum number of Related Party Options (being the nature of the financial benefit being provided) to be granted to the Related Parties is:

• (i) 6,000,000 Related Party Options to Mr Terence Streeter; and

• (ii) 5,000,000 Related Party Options to Mr Roderick White;

• (c) the Related Party Options will be granted to the Related Parties no later than 1 month after the date of the Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules) and it is anticipated the Related Party Options will be issued on one date;

• (d) the Related Party Options will be granted for nil cash consideration, accordingly no funds will be raised;

• (e) the terms and conditions of the Related Party Options are set out in Schedule 1;

• (f) the value of the Related Party Options and the pricing methodology is set out in Schedule 2;

• (g) the relevant interests of the Related Parties in securities of the Company are set out below:

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Related Party	Shares	Options
Mr Terence Streeter	25,050,0001	1,000,000 exercisable at 40 cents expiry 20 September 2012
Mr Roderick White	1,350,0001	50,000 exercisable at 40 cents expiry 20 September 2012

1 Held indirectly.

• (h) the remuneration and emoluments from the Company to the Related Parties, exclusive of superannuation, for the previous financial year and the proposed remuneration and emoluments for the current financial year are set out below:

year are set out below:
Related Party	Current Financial Year	Previous Financial Year
Mr Terence Streeter	12,500	N/A
Mr Roderick White	6,250	N/A

(i) if the Related Party Options granted to the Related Parties are exercised, a total of 11,000,000 Shares would be allotted and issued. This will increase the number of Shares on issue from 185,533,736 to 196,533,736 (assuming that no other Options are exercised and no other Shares are issued) with the effect that the shareholding of existing Shareholders would be diluted by an aggregate of 5.11%, comprising 3.07% by Resolution 3 and 2.04% by Resolution 4.

The market price for Shares during the term of the Related Party Options would normally determine whether or not the Related Party Options are exercised. If, at any time any of the Related Party Options are exercised and the Shares are trading on ASX at a price that is higher than the exercise price of the Related Party Options, there may be a perceived cost to the Company;

(j) the trading history of the Shares on ASX in the 12 months before the date of this Notice is set out below:

	Price	Date
Highest	37.5 cents	26 July 2011
Lowest	16.5 cents	25 November 2011
Last	19.5 cents	31May 2012

(k) the Board acknowledges the grant of Related Party Options to Messrs Terence Streeter and Roderick White is contrary to Recommendation 8.2 of the ASX Corporate Governance Principles and Recommendations. However, the Board considers the grant of Related Party Options to Messrs Terence Streeter and Roderick White reasonable in the circumstances for the reason set out in subparagraphs 2.4(q)(i) to 2.4(q)(iii);

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• (l) the primary purpose of the grant of the Related Party Options to Messrs Terence Streeter and Roderick White is to provide a performance linked incentive component in the remuneration package for Messrs Terence Streeter and Roderick White and to motivate and reward the performance of Messrs Terence Streeter and Roderick White in their respective roles as Directors;

• (m) Mr Terence Streeter declines to make a recommendation to Shareholders in relation to Resolution 3 due to his material personal interest in the outcome of the Resolution on the basis that he is to be granted Related Party Options in the Company should Resolution 3 be passed. However, Mr Terence Streeter recommends that Shareholders vote in favour of Resolution 4 for following reasons:

• (i) the grant of 5,000,000 Related Party Options to Mr Roderick White will align the interests of Mr Roderick White with those of Shareholders;

• (ii) the grant of the Related Party 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 Mr Roderick White; 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 Related Party Options upon the terms proposed;

• (n) Mr Roderick White declines to make a recommendation to Shareholders in relation to Resolution 4 due to his material personal interest in the outcome of the Resolution on the basis that he is to be granted Related Party Options in the Company should Resolution 4 be passed. However, Mr Roderick White recommends that Shareholders vote in favour of Resolution 3 for the following reasons:

• (i) the grant of 6,000,000 Related Party Options to Mr Terence Streeter will align the interests of Mr Terence Streeter with those of Shareholders;

• (ii) the grant of the Related Party 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 Mr Terence Streeter; 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 Related Party Options upon the terms proposed;

• (o) with the exception of Mr Terence Streeter, no other Director has a personal interest in the outcome of Resolution 3;

• (p) with the exception of Mr Roderick White, no other Director has a personal interest in the outcome of Resolution 4;

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• (q) Mr William (Chub) Witham recommends that Shareholders vote in favour of Resolutions 3 and 4 for the following reasons:

• (i) the grant of Related Party Options to Messrs Terence Streeter and Roderick White will align the interests of Messrs Terence Streeter and Roderick White with those of Shareholders;

• (ii) the grant of the Related Party 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 Messrs Terence Streeter and Roderick White; 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 Related Party Options upon the terms proposed;

• (r) Mr Peter Bennetto recommends that Shareholders vote in favour of Resolutions 3 and 4 for the reasons set out in subparagraphs 2.4(q)(i) to 2.4(q)(iii);

• (s) Mr Jonathan Downes recommends that Shareholders vote in favour of Resolutions 3 and 4 for the reasons set out in subparagraphs 2.4(q)(i) to 2.4(q)(iii);

• (t) 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 Related Party Options to be granted as well as the exercise price and expiry date of those Related Party Options; and

• (u) 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 3 and 4.

Approval pursuant to ASX Listing Rule 7.1 is not required in order to issue the Related Party Options to the Related Parties as approval is being obtained under ASX Listing Rule 10.11. Accordingly, the issue of Related Party 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.

3. RESOLUTION 5 – RATIFICATION OF PRIOR ISSUE – SHARES

3.1 General

As announced to ASX on 28 February 2012, on 2 March 2012 the Company issued 14,000,000 Shares at an issue price of $0.25 per Share to raise $3,500,000.

Resolution 5 seeks Shareholder ratification pursuant to ASX Listing Rule 7.4 for the issue of those Shares ( Ratification ).

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.

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ASX Listing Rule 7.4 sets out an exception to ASX Listing Rule 7.1. It provides that where a company in general meeting ratifies the previous issue of securities made pursuant to ASX Listing Rule 7.1 (and provided that the previous issue did not breach ASX Listing Rule 7.1) those securities will be deemed to have been made with shareholder approval for the purpose of ASX Listing Rule 7.1.

By ratifying this issue, the Company will retain the flexibility to issue equity securities in the future up to the 15% annual placement capacity set out in ASX Listing Rule 7.1 without the requirement to obtain prior Shareholder approval.

3.2 Technical information required by ASX Listing Rule 7.4

Pursuant to and in accordance with ASX Listing Rule 7.5, the following information is provided in relation to the Ratification:

• (a) 14,000,000 Shares were allotted;

• (b) the issue price was $0.25 per Share;

• (c) the Shares issued were all fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;

• (d) the Shares were allotted and issued to clients of Macquarie Private Wealth Management Pty Ltd. None of the subscribers are related parties of the Company; and

• (e) the funds raised from this issue were used to further advance exploration at the Youkou, Mekambo Est and Okanabora projects and working capital.

4. RESOLUTION 6 – DIRECTORS’ REMUNERATION

Clause 13.7 of the Constitution requires that the total aggregate fixed sum per annum to be paid to the Directors (excluding salaries of Executive Directors) from time to time will not exceed the sum determined by the Shareholders in general meeting and the total aggregate fixed sum will be divided between the Directors as the Directors shall determine and, in default of agreement between them, then in equal shares.

Resolution 6 seeks Shareholder approval to increase the total aggregate fixed sum per annum to be paid to the Directors by $200,000, from $200,000 to $400,000.

The total aggregate fixed sum per annum has been determined after reviewing similar companies listed on ASX and the Directors believe that this level of remuneration is in line with corporate remuneration of similar companies.

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GLOSSARY

$ means Australian dollars.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited.

ASX Listing Rules means the Listing Rules of ASX.

Board means the current board of directors of the Company.

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

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 means Waratah Resources Limited (ACN 125 688 940).

Constitution means the Company’s constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the current directors of the Company.

Explanatory Statement means the explanatory statement accompanying the Notice.

General Meeting or Meeting means the meeting convened by the Notice.

Key Management Personnel has the same meaning as in the accounting standards and broadly includes those 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.

Notice or Notice of Meeting or Notice of General Meeting means this notice of general meeting including the Explanatory Statement and the Proxy Form.

Option means an option to acquire a Share.

Optionholder means a holder of a Related Party Option.

Participant means a person who holds Performance Rights from time to time.

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Proxy Form means the proxy form accompanying the Notice.

Related Parties means Messrs Terence Streeter and Roderick White.

Related Party Options means 11,000,000 Options to be issued pursuant to Resolutions 3 and 4 with the terms and conditions set out in Schedule 1.

Resolutions means the resolutions set out in the Notice of Meeting, or any one of them, as the context requires.

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

Shareholder means a holder of a Share.

WST means Western Standard Time as observed in Perth, Western Australia.

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SCHEDULE 1 – TERMS AND CONDITIONS OF RELATED PARTY OPTIONS

The Related Party Options entitle the holder to subscribe for Shares on the following terms and conditions:

• (a) Each Related Party Option gives the Optionholder the right to subscribe for one Share.

• (b) Each Related Party Option will expire at 5.00pm (WST) on the date that is 3 years after the date on which the Related Party Options were issued ( Expiry Date ). A Related Party Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.

• (c) Subject to paragraph (k), the amount payable upon exercise of each Related Party Option will be $0.30 ( Exercise Price ).

• (d) The Related Party Options held by each Optionholder may be exercised in whole or in part, and if exercised in part, multiples of 1,000 must be exercised on each occasion.

• (e) An Optionholder may exercise their Related Party Options by lodging with the Company, before the Expiry Date:

• (i) a written notice of exercise of Related Party Options specifying the number of Related Party Options being exercised; and

• (ii) a cheque or electronic funds transfer for the Exercise Price for the number of Related Party Options being exercised;

( Exercise Notice ).

• (f) An Exercise Notice is only effective when the Company has received the full amount of the Exercise Price in cleared funds.

• (g) Within 10 Business Days of receipt of the Exercise Notice accompanied by the Exercise Price, the Company will allot the number of Shares required under these terms and conditions in respect of the number of Related Party Options specified in the Exercise Notice.

• (h) The Related Party Options are not transferable except with the prior written consent of the board of directors of the Company.

• (i) All Shares allotted upon the exercise of Related Party Options will upon allotment rank pari passu in all respects with other Shares.

• (j) The Company will not apply for quotation of the Related Party Options on ASX. However, the Company will apply for quotation of all Shares allotted pursuant to the exercise of Related Party Options on ASX within 10 Business Days after the date of allotment of those Shares.

• (k) If at any time the issued capital of the Company is reconstructed, all rights of an Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

• (l) There are no participating rights or entitlements inherent in the Related Party Options and Optionholders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Related Party Options without exercising the Related Party Options.

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• (m) A Related Party Option does not confer the right to a change in Exercise Price or a change in the number of underlying securities over which the Related Party Option can be exercised.

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SCHEDULE 2 – VALUATION OF RELATED PARTY OPTIONS

The Related Party Options to be issued to the Related Parties pursuant to Resolutions 3 and 4 have been independently valued by Stanton International Securities .

Using the Black & Scholes option pricing model and based on the assumptions set out below, the Related Party Options were ascribed the following value range:

Assumptions:
Valuation date	26 April 2012
Market price of Shares	20.5 cents
Exercise price	30 cents
Expiry date (length of time from issue)	3 years after date of issue
Risk free interest rate	3.05%
Volatility	70%	86%	100%
Discount as unlisted	20%
Indicative value per Related Party Option	6.188 cents	7.718 cents	9.120 cents
Total Value of Related Party Options	$680,680	$848,980	$1,003,200
Mr Terence Streeter	$371,280	$463,080	$547,200
Mr Roderick White	$309,400	$385,900	$456,000

Note: The valuation ranges noted above are not necessarily the market prices that the Related Party Options could be traded at and they are not automatically the market prices for taxation purposes.

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