METRO MINING LIMITED — AGM Information 2012

Oct 18, 2012

Notice of Annual General Meeting and Explanatory Memorandum

MetroCoal Limited ACN 117 763 443

Date of Meeting: Tuesday, 20 November 2012 Time of Meeting: 4:00pm (Brisbane time) Place of Meeting: HopgoodGanim Lawyers, Level 7, Waterfront Place, 1 Eagle Street, Brisbane

Notice of Annual General Meeting

Notice is hereby given that the Annual General Meeting of shareholders of MetroCoal Limited ACN 117 763 443 (MetroCoal or Company) will be held at the offices of HopgoodGanim Lawyers, Level 7, 1 Eagle Street, Brisbane on Tuesday 20 November 2012, commencing at 4:00pm (Brisbane time).

Terms used in this Notice of Meeting are defined in Section 10 of the accompanying Explanatory Memorandum.

The Explanatory Statement and the Proxy Form accompanying this Notice of Meeting are incorporated in and comprise part of this Notice of Meeting.

A copy of this Notice and the Explanatory Memorandum which accompanies this Notice has been lodged with the Australian Securities & Investments Commission ( ASIC ) in accordance with Section 218 of the Corporations Act.

Agenda

The agenda for the meeting is as follows:

1. Opening of meeting

2. Consideration and discussion of Audited Financial Statements for the year ended 30 June 2012.

3. Consideration of adoption of the Remuneration Report for the year ended 30 June 2012 (see Resolution 1 )– advisory resolution.

4. Re-election of Mr Michael Hansel as a Director (see Resolution 2 ).

5. Re-election of Mr Stephen Everett as a Director (see Resolution 3 ).

6. Re-election of Mr Dongping Wang as a Director (see Resolution 4 ).

7. Adoption of Employee Share and Option Plan (see Resolution 5 ).

8. Approval of issue of Options to Directors - Stephen Everett and Dongping Wang (see Resolutions 6 and 7 )

9. Approval for the Company to issue an additional 10% of the issued capital of the Company over a 12 month period pursuant to Listing Rule 7.1A (see Resolution 8 ) – special resolution.

10. Other business

11. Close of meeting

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Notice of Annual General Meeting

Ordinary business

1. Financial Report

To receive and consider the audited Annual Financial Statements for the Company ( Financial Statements ) for the financial year ended 30 June 2012.

The Financial Statements are being circulated to Shareholders who have elected to receive a paper copy of the Company’s reports in the attached Annual Report. Shareholders who have given the Company an election to receive an electronic copy of the Company’s reports and Shareholders from whom the Company has not received an election as to how they wish to receive the Company’s reports can directly access the Financial Statements on the Company’s website at www.metrocoal.com.au and by selecting the link titled “Investors > Financial Reports”, which was released to the ASX on 24 September 2012.

2. Resolution 1: Remuneration Report

To consider and, if thought fit, pass the following advisory resolution:

“That the Company be authorised to adopt the Remuneration Report for the year ended 30 June 2012”.

Advisory Vote

The vote on this Resolution 1 is advisory only and does not bind the Directors of the Company.

Voting Restriction pursuant to Section 250R(4) of the Corporations Act

A vote on Resolution 1 must not be cast (in any capacity) by or on behalf of either of the following persons:

• (a) a member of the Key Management Personnel details of whose remuneration are included in the Remuneration Report;

• (b) a Closely Related Party of such a member.

However, the above persons may cast a vote on Resolution 1 as a proxy if the vote is not cast on behalf of a person described above and either:

• (a) the voter is appointed as a proxy by writing that specifies the way the proxy is to vote on the resolution; or

• (b) the voter is the Chair and the appointment of the chair as proxy:

• (i) does not specify the way the proxy is to vote on the resolution; and

• (ii) expressly authorises the chair to exercise the proxy even if the resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel

3. Resolution 2: Re-election of Michael Hansel as a Director

To consider and, if thought fit, pass the following resolution, as an Ordinary Resolution of the Company:

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Notice of Annual General Meeting

“That, in accordance with article 38.1(c) of the Constitution, Mr Michael Hansel, having retired by rotation and being eligible offers himself for re-election, be appointed as a Director of the Company.”

4. Resolution 3: Re-election of Mr Stephen Everett as a Director

To consider and, if thought fit, pass the following resolution, as an Ordinary Resolution of the Company:

“That Mr Stephen Everett, who was appointed to the Board on 12 July 2012 and in accordance with article 36.2 of the Constitution, holds office as a casual appointee until the conclusion of the next annual general meeting, and being eligible offers himself for re-election, be re-appointed as a Director of the Company.”

5. Resolution 4: Re-election of Mr Dongping Wang as a Director

To consider and, if thought fit, pass the following resolution, as an Ordinary Resolution of the Company:

“That Mr Dongping Wang, who was appointed to the Board on 8 December 2011 and in accordance with article 36.2 of the Constitution, holds office as a casual appointee until the conclusion of the next annual general meeting, and being eligible offers himself for re-election, be re-appointed as a Director of the Company.”

6. Resolution 5: Adoption of Employee Share Option Plan

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

“That, for the purposes of Listing Rule 7.1 and Listing Rule 7.1A (if applicable) and for all other purposes, the Company is authorised to adopt the new employee share and option plan ( New ESOP ) in the form annexed to this Notice of Meeting, with effect from the date of this Resolution.”

Voting Exclusion Statement

It is noted that as no Directors are eligible to participate in the New ESOP no votes will be excluded from this Resolution.

7. Resolution 6: Issue of Options to Mr Stephen Everett

Subject to the passing of Resolution 3, to consider and, if thought fit, pass the following resolution, as an Ordinary Resolution of the Company:

“That in accordance with section 208(1) (Part 2E) of the Corporations Act and Listing Rule 10.11 and for all other purposes, the Company be authorised to issue for nil consideration 1,000,000 Director Options to Mr Stephen Everett, being the Chairman of the Board of the Company, or his nominee ( Mr Everett ) and otherwise on terms set out in the Explanatory Statement”.

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Notice of Annual General Meeting

Voting Exclusion Statement

The Company will disregard any votes cast on this Resolution by:

• (a) Mr Everett; and

• (b) Any associate of Mr Everett.

However, the Company need not disregard a vote if:

• (a) It is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions in the proxy form; or

• (b) It is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the proxy form to vote as the proxy decides.

8. Resolution 7: Issue of Options to Mr Dongping Wang

Subject to the passing of Resolution 4, to consider and, if thought fit, pass the following resolution, as an Ordinary Resolution of the Company:

“That in accordance with section 208(1) (Part 2E) of the Corporations Act and Listing Rule 10.11 and for all other purposes, the Company be authorised to issue for nil consideration 1,000,000 Director Options to Mr Dongping Wang, being a Director of the Company, or his nominee ( Mr Dongping Wang ) and otherwise on terms set out in the Explanatory Statement”.

Voting Exclusion Statement

The Company will disregard any votes cast on this Resolution by:

• (a) Mr Dongping Wang; and

• (b) any associate of Mr Dongping Wang.

However, the Company need not disregard a vote if:

• (a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions in the proxy form; or

• (b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the proxy form to vote as the proxy decides.

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Notice of Annual General Meeting

Special Business

9. Resolution 8: Approval for the Company to issue an additional 10% of the issued capital of the Company over a 12 month period pursuant to Listing Rule 7.1A

To consider and, if thought fit, to pass the following resolution with or without amendment, as a Special Resolution:

“That, pursuant to and in accordance with Listing Rule 7.1A, and for all other purposes, the Shareholders approve the issue of securities of up to 10% of the issued capital of the Company (at the time of issue) calculated in accordance with the formula prescribed in Listing Rule 7.1A.2, over a 12 month period from the date of this Annual General Meeting, at a price not less than that determined pursuant to Listing Rule 7.1A.3 and otherwise on the terms and conditions in the Explanatory Memorandum ( 10% Securities ).”

Voting Exclusion Statement

The Company will disregard any votes cast on this Special Resolution by a person and any associates of that person who:

• (a) may participate in the issue of the 10% Securities; or

• (b) might obtain a benefit if this Special Resolution is passed, except a benefit solely in their capacity as a holder of Shares if the resolution is passed.

However, the Company need not disregard a vote if:

• (a) it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions in the proxy form; or

• (b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with the direction on the proxy form to vote as the proxy decides.

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Notice of Annual General Meeting

General business

To consider any other business as may be lawfully put forward in accordance with the Constitution.

By order of the board

==> picture [199 x 40] intentionally omitted <==

John Haley Company Secretary

9 October 2012

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Explanatory Memorandum

1. Introduction

The following information is provided to Shareholders of MetroCoal Limited ACN 117 763 443 ( MetroCoal or Company ) in connection with the business to be considered at the Annual General Meeting of Shareholders to be held at the offices of HopgoodGanim Lawyers, Level 7, 1 Eagle Street, Brisbane on Tuesday 20 November 2012, commencing at 4:00pm (Brisbane time).

The Notice of Meeting, which is also enclosed, sets out details of proposals concerning the nine (9) Resolutions to be put to Shareholders.

The Directors recommend shareholders read the accompanying Notice of Meeting and this Explanatory Memorandum in full before making any decision in relation to the resolutions.

Terms used in this Explanatory Memorandum are defined in Section 10.

2. Resolution 1 – Adoption of Remuneration Report

The Board has submitted its Remuneration Report to Shareholders for consideration and adoption by way of a non-binding Advisory Resolution.

The Remuneration Report is set out in the Directors’ Report section of the Annual Report.

The Report:

• explains the Board’s policy for determining the nature and amount of remuneration of executive directors and senior executives of the Company;

• explains the relationship between the Board’s remuneration policy and the Company’s performance;

• sets out remuneration details for each Director and the most highly remunerated senior executive of the Company; and

• details and explains any performance conditions applicable to the remuneration of executive directors and senior executives of the Company.

A reasonable opportunity will be provided for discussion of the Remuneration Report at the meeting.

The Board unanimously recommends that Shareholders vote in favour of adopting the Remuneration Report. A vote on this Resolution 1 is advisory only and does not bind the Directors of the Company.

ORDINARY BUSINESS

3. Resolution 2: Re-election of Mr Michael Hansel as a Director

Article 38.1(c) of the Company’s Constitution and Listing Rule 14.4 requires that at each AGM, onethird of the Directors in office (excluding directors appointed to fill casual vacancies or a Managing Director) must stand for re-election, with Directors required to retire based upon length of tenure.

Mr Hansel retires in accordance with the Company’s Constitution and Listing Rule 14.4 and, being eligible, offers himself for re-election as a Director.

Mr Hansel was appointed as a director of the Company on 10 June 2008.

Michael is a Partner with the firm HopgoodGanim Lawyers, in the Corporate Advisory and Governance practice and his work includes advising in relation to mergers and acquisitions, capital raisings, due diligence, takeovers, joint ventures, corporate restructuring and private equity transactions. Michael holds qualifications in Business, Commerce (Honours) and Law (Honours). He was named a recommended Queensland lawyer in the latest Doyle's Guide to Australia's Leading Mergers & Acquisitions Lawyers.

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Explanatory Memorandum

The Directors (with Mr Hansel abstaining) recommend that you vote in favour of this Ordinary Resolution.

4. Resolution 3: Re-election of Mr Stephen Everett as a Director

Mr Everett was appointed as a director (and independent non-executive chairman) of the Company on 12 July 2012 as an additional Director.

Under Article 36.2 of the Constitution and Listing Rule 14.4, any Director who is appointed by the other Directors as an additional Director shall hold office only until the next following AGM of the Company and will then be eligible for re-election.

Mr Everett holds a Bachelor of Engineering (Chem Eng, Honours). He has forty years management and board experience in the resources and construction industries and has held Chairman and nonexecutive director positions in Government Development Boards, Private, ASX listed and TSX listed companies. Mr Everett has also held senior executive positions including Managing Director and Chief Executive Officer of private and publicly listed companies. He is currently also a director of Global Resources Corporation Limited (appointed April 2009) and IronRidge Resources Limited (appointed May 2011).

The Directors (with Mr Everett abstaining) recommend that you vote in favour of this Ordinary Resolution.

5. Resolution 4: Re-election of Mr Dongping Wang as a Director

Mr Dongping Wang was appointed as a director of the Company on 8 December 2011 as an additional Director.

Under Article 36.2 of the Constitution and Listing Rule 14.4, any Director who is appointed as an additional Director shall hold office only until the next following AGM of the Company and will then be eligible for re-election.

Mr Wang Dongping graduated from the China Mining University in 1981, with a Major in Coal Processing Technology. Mr Wang was Process Plant Manager, and later Director of Operations at Pingshuo Antaibao coal mine for many year; a World Bank funder USA – China joint venture project. Mr Wang then worked for a time in the China Coal Ministry. He later became General Manager at Long-Airdox (Tianjin), where from 1997 he was instrumental in into ducting modern coal process technology from Australia to China. Mr Wang became General Manager of Schneck (Tianjin) and worked there until 2007. He then helped establish the Dadi Engineering Group, now China’s largest coal industry engineering group. Mr Wang Dongping has worked at the highest level within the Chinese coal industry for 30 years and is a highly renowned coal processing expert, and a prominent figure in the Chinese coal industry. Mr Want brings extensive management experience and an intimate knowledge of modern coal process technology to MetroCoal.

The Directors (with Mr Dongping Wang abstaining) recommend that you vote in favour of this Ordinary Resolution.

6. Adoption of Employee Share Option Plan

6.1 Introduction

The Company has established the MetroCoal Employee Share Option Plan ( Original ESOP ) to enable the issue of Shares or Options to eligible employees ( Eligible Employees ) as incentives to assist in the retention and motivation of employees.

A summary of the Original ESOP was included in MetroCoal’s Prospectus dated 18 November 2009.

The Company has proposed amendments to the Original ESOP ( New ESOP ) which include more specific criteria by reference to which it will decide whether to issue Shares or Options under the New ESOP.

Accordingly, the Company is seeking to adopt the New ESOP.

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Explanatory Memorandum

Directors are not classed as eligible employees under the New ESOP or Original ESOP.

6.2 Listing Rule 7.1 - Issues exceeding 15% of capital

Listing Rule 7.1, known as the "15% rule" ( 15% Rule ), limits the capacity of a company to issue securities without the prior approval of its shareholders. In broad terms, Listing Rule 7.1 provides that a company may not, in a twelve month period, issue securities equal to more than 15% of the total number of ordinary securities on issue at the beginning of the twelve month period unless the issue is first approved by a majority of disinterested shareholders or the issue otherwise comes within one of the exceptions to Listing Rule 7.1 ( 15% Capacity ).

Under newly issued Listing Rule 7.1A, small and mid cap listed entities that meet the eligibility threshold and have obtained the approval of their ordinary Shareholders by special resolution at the annual general meeting ( AGM ), are permitted to issue an additional 10% of issued capital over a 12 month period from the date of the AGM ( Additional 10% Issue ). The Additional 10% Issue under Listing Rule 7.1A is in addition to the ability of the Company to issue 15% of its issued capital without Shareholder approval over a 12 month period pursuant to Listing Rule 7.1.

Pursuant to Resolution 8, the Company is seeking shareholder approval pursuant to Listing Rule 7.1A for the Additional 10% Issue.

An exception to Listing Rule 7.1 and 7.1A exists for employee incentive schemes such as the New ESOP. If the exception applies, then shares issued under the New ESOP will not count towards the shares that the Company may issue as part of its 15% Capacity or, if applicable, the Additional 10% Issue capacity.

Pursuant to the Exception in Listing Rule 7.2 (Exception 9(b)), Shares or Options issued under the New ESOP will not fall within 15% Limit or Additional 10% Issue (if applicable) if:

• (a) Shareholders have approved the employee incentive scheme within the last 3 years; and

• (b) The notice of meeting contains:

• (1) a summary of the terms of the scheme;

• (2) the number of securities issued under the scheme since the last date of approval; and

• (3) a voting exclusion statement.

Accordingly, Shareholder approval of the New ESOP is sought under Exception 9 to Listing Rule 7.2 so that any issue of securities under the ESOP over the next 3 years is disregarded when determining the 15% threshold of the Company. For this purpose, in accordance with Listing Rule 7.2 (Exception 9(b)) the Company advises that:

• (1) Summary of New ESOP terms

A summary of the New ESOP is set out in Appendix A to this Notice.

As permitted by the New ESOP, the Company has adopted non-binding guidelines to assist in determining whether and in what number securities will be issued under the New ESOP. Under the Guidelines, Eligible Employees will be issued securities at the discretion of the Board based on weighted criteria and considerations such as:

• (A) The level/position of the Eligible Employee;

• (B) The achievement of business measures by the Eligible Employee including:

• (i) financial,

• (ii) productivity,

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Explanatory Memorandum

(iii) safely,

• (iv) project; and

• (v) individual;

• (C) the outcome of the Eligible Employee’s performance appraisal.

(2) Securities issued under Original ESOP

There have been 6,250,000 securities issued under the Original ESOP (or any other employee incentive scheme of the Company) since the Company’s Prospectus was issued on 18 November 2009.

(3) Voting Exclusion Statement

It is noted that as no Directors are eligible to participate in the New ESOP no votes will be excluded from this Resolution.

6.3

Directors’ Recommendation

The Directors recommend that you vote in favour of this Ordinary Resolution.

7. Resolutions 6 and 7 – Issue of Options to Directors

7.1 Introduction

The Directors have resolved to refer to Shareholders for approval the proposed grant of 1,000,000 Options to each of Mr Everett and Mr Dongping Wang (or their respective nominees) who are each a Director of the Company (each a Recipient ), (the Director Options ).

The terms of the Director Options are set out in more detail below.

Approval for the issue of the Director Options is sought in accordance with Listing Rule 10.11 and Part 2E of the Corporations Act. As approval is being sought under Listing Rule 10.11, approval will not be required under Listing Rule 7.1.

In order for the Director Options to be granted to a Director, the requirements of Chapter 2E of the Corporations Act need to be observed.

7.2 Options Terms

A summary of the terms of the Director Options are set out in Appendix B to this Explanatory Memorandum.

7.3 Regulatory Requirements

Chapter 2E of the Corporations Act

Chapter 2E of the Corporations Act prohibits a public company from giving a financial benefit to a Related Party of a public company unless the benefit falls within one of various exceptions to the general prohibition (including where shareholder approval is obtained).

Resolutions 6 and 7 if passed, will confer financial benefits on the Recipients who, being Directors of the Company, are Related Parties. Accordingly, the Company seeks to obtain shareholder approval in accordance with the requirements of Chapter 2E of the Corporations Act.

For this reason, and for all other purposes, the following information is provided to Shareholders.

• (a) The Related Parties to whom Resolutions 6 and 7 would permit the financial benefit to be given

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Explanatory Memorandum

The proposed financial benefit will be given to each of Mr Stephen Everett and Mr Dongping Wang (or their respective nominees). Mr Stephen Everett and Mr Dongping Wang are Directors of the Company.

(b) The nature of the financial benefit

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

• (A) the grant of 1,000,000 Director Options to Mr Stephen Everett (or nominee) as referred to in Resolution 6;

• (B) the grant of 1,000,000 Director Options to Mr Dongping Wang (or nominee) as referred to in Resolution 7;

• (C) the Director Options shall be granted for nil consideration;

• (D) upon vesting, the Director Options shall be exercisable into fully paid ordinary Shares on or before the Expiry Date which will be the earlier of :

• 3 months from the date on which a Director who receives Director Options resigns, retires or otherwise cases to be a Director of the Company (unless exercised earlier); and

• 11 July 2015 .

• (E) the Director Options shall be issued in 2 tranches of 500,000 Shares each and will be exercisable in 50,000 lots at the exercise price to be determined as follows:

  • (i) First tranche:

    • $0. 235

  • (ii) Second Tranche:

    • $0.50

• (F) A summary of the key terms of the Director Options is set out in Appendix B to this Explanatory Memorandum.

(c) Directors’ Recommendation

(1) Resolution 6 – Issue of Director Options to Mr Everett

With respect to Resolution 6, Mr Gilles, Mr Haley, Mr Hansel, Mr Ward and Mr Dongping Wang recommend that Shareholders vote in favour of this resolution. The reasons for their recommendation include:

• (A) the grant of the Director Options as proposed to Mr Everett will provide him with reward and incentive for future services he will provide to the Company to further the progress of the Company;

• (B) the Director Options are not intended as a substitute for salary or wages or as a means for compensation for past services rendered; and

• (C) in the Company’s circumstances as they existed as at the date of this Explanatory Statement, Mr Gillies, Mr Haley, Mr Hansel, Mr Ward and Mr Dongping Wang considered that the incentive provided a cost-effective and efficient incentive as opposed to alternative forms of incentives (eg cash

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Explanatory Memorandum

bonuses, increased remuneration). However, it must be recognised that there will be an opportunity cost to the Company, being the price at which the Company could grant the Director Options to a third party.

As Mr Everett is interested in the outcome of Resolution 6, he accordingly makes no recommendation to Shareholders in respect of this resolution.

(2) Resolution 7 – Issue of Director Options to Mr Dongping Wang

With respect to Resolution 7, Mr Everett, Mr Gillies, Mr Haley, Mr Hansel and Mr Ward recommend that Shareholders vote in favour of this resolution. The reasons for their recommendation include:

• (A) the grant of the Director Options as proposed to Mr Dongping Wang will provide him with reward and incentive for future services he will provide to the Company to further the progress of the Company;

• (B) the Director Options are not intended as a substitute for salary or wages or as a means for compensation for past services rendered; and

• (C) in the Company’s circumstances as they existed as at the date of this Explanatory Statement, Mr Everett, Mr Gillies, Mr Haley, Mr Hansel and Mr Ward considered that the incentive provided a cost-effective and efficient incentive as opposed to alternative forms of incentives (eg cash bonuses, increased remuneration). However, it must be recognised that there will be an opportunity cost to the Company, being the price at which the Company could grant the Director Options to a third party.

As Mr Dongping Wang is interested in the outcome of Resolution 7, he accordingly makes no recommendation to Shareholders in respect of this resolution.

(d) Directors’ Interest and other remuneration

Mr Everett

Mr Everett has a material personal interest in the outcome of Resolution 6, as it is proposed that Director Options be granted to him (or his nominee).

Excluding the Director Options, Mr Everett (and entities associated with him) holds no Shares or Options in the Company.

Other than the Director Options to be issued to Mr Everett pursuant to Resolution 6, Mr Everett shall receive director's remuneration of $90,000 (inclusive of superannuation) per annum (total cost to the Company) from the Company for his services as a non-executive Director and Chairman of the Board.

If all of the Options granted under Resolution 6 are exercised by Mr Everett the following will be the effect on his holdings in the Company:

Director	Current Share Holding	% of Total Share Capital 208,883,663 shares on issue)	Share Holding Upon Exercise of new Options	% of Total Share Capital 208,883,663 shares on issue)
Mr Everett (and entities associated with him)	0	0	1,000,000	0.00476

Notes: Assuming that none of the other current options on issue are exercised.

Mr Dongping Wang

Mr Dongping has a material personal interest in the outcome of Resolution 7, as it is proposed that Director Options be granted to him (or his nominee).

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Explanatory Memorandum

Excluding the Director Options, Mr Dongping Wang (and entities associated with him) holds no Shares or Options in the Company. Mr Dongping Wang is a shareholder of DADI Engineering Pty Ltd ( DADI ) which holds 41,000,000 Shares in the Company, however DADI is not an Associated Entity of Mr Dongping Wang.

Other than the Director Options to be issued to Mr Dongping Wang pursuant to Resolution 7, Dongping Wang or his alternate (Mr Bob Finch) shall receive director's remuneration of $45,000 (inclusive of superannuation) per annum (total cost to the Company) from the Company for his services as Director.

If all of the Options granted under Resolution 7 are exercised by Mr Dongping Wang the following will be the effect on his holdings in the Company:

Director	Current Share Holding	% of Total Share Capital 208,883,663 shares on issue)	Share Holding Upon Exercise of new Options	% of Total Share Capital 209,883,663 shares on issue)
Mr Dongping Wang (and entities associated with him)	0	0	1,000,000	0.00476

Notes: Assuming that none of the other current options on issue are exercised.

(e) Valuation of Director Options

The Director Options are not currently quoted on the ASX and as such have no market value. The Director Options each grant the holder a right of grant of one ordinary Share in the Company upon exercise of the Director Options and payment of the exercise price of the Director Options described above. Accordingly, the Director Options may have a present value at the date of their grant.

The Director Options may acquire future value dependent upon the extent to which the Shares exceed the exercise price of the Director Options during the term of the Director Options.

As a general proposition, options to subscribe for ordinary fully paid shares in a company have a value. Various factors impact upon the value of options including:

• (A) the period outstanding before the expiry date of the options;

• (B) the exercise price of the options relative to the underlying price or value of the securities into which they may be converted;

• (C) the proportion of the issued capital as expanded consequent upon exercise represented by the shares issued upon exercise (ie whether or not the shares that might be acquired upon exercise of the options represent a controlling or other significant interest);

• (D) the value of the shares into which the options may be converted; and

• (E) whether the options are listed (ie readily capable of being liquidated).

There are various formulae which can be applied to determining the theoretical value of options (including the formula known as the Black-Scholes Model option valuation formula and the Binomial Model option valuation formula).

The Company has commissioned an independent valuation of the options, for the purposes of disclosing to Shareholders such information required to decide whether or not it is in the Company’s interest to pass Resolutions 6 and 7 and disclosing expenses in the Company’s Financial Statements in accordance with AASB 2 Share Based Payments, using both the Black-Scholes Model, which is the most widely used and recognised model for pricing options, and the Binomial Model. The value of an option calculated by the Black-Scholes

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Explanatory Memorandum

Model the Binomial Model is a function of the relationship between a number of variables, being the price of the underlying Share at the time of issue, the exercise price, the time to expiry, the risk-free interest rate, the volatility of the Company’s underlying Share price and expected dividends.

Inherent in the application of the Black-Scholes Model and the Binomial Model are a number of inputs, some of which must be assumed. The data relied upon in applying the Black-Scholes Model and the Binomial Model was:

• (A) The Share price (as at 26 September 2012) being 17 cents.

• (B) Exercise price:

• (i) First tranche:

• $0.235

• (ii) Second Tranche:

• $0.50

• (C) expiry date of 11 July 2015;

• (D) a volatility measure of 68.975%;

• (E) a risk-free interest rate of 2.6% for the Director Options proposed to be issued; and

• (F) a dividend yield of nil.

Based on the independent valuation of the Director Options, the Company agrees that the respective value of the Director Options to be issued pursuant to Resolutions 6 and 7 are as follows for each Director:

Mr Stephen Everett:

• first tranche of 500,000 Options - $29,937.50;

• second tranche of 500,000 Options - $14,358.00;

On that basis the total value of the Options to be issued pursuant to Resolution 6 is $44,295.50.

Mr Dongping Wang:

• first tranche of 500,000 Options - $29,937.50;

• second tranche of 500,000 Options - $14,358.00.

On that basis the total value of the Options to be issued pursuant to Resolution 7 is $44,295.50.

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

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

Market Price movements:

The option valuation noted above is based on a price per Share of 17 cents which is the trading price of the Shares on the close of trading on 26 September 2012.

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Explanatory Memorandum

There is a possibility that the market price of the Shares will change up to the date of the Annual General Meeting.

Trading history

In the 12 months prior to when the Notice of Meeting was lodged with ASIC (as required by Corporations Act in respect of resolutions for approval of related party transactions) for review, the Company’s trading history is as follows:

• the highest trading price was 78.5 cents on 25 October 2011 ; and

• the lowest trading price was 16.5 cents on 24 September 2012.

The VWAP per Share over the 12 month period prior to the option valuation was 45.61 cents.

The trading price of the Shares on the close of trading on 26 September 2012 was 17 cents.

Opportunity Costs

The opportunity costs and benefits foregone by the Company issuing the Director Options to the Directors is the potentially diluted impact on the issued Share capital of the Company (in the event that the options are exercised). Until exercised, the issue of the Director Options will not impact upon the number of Shares on issue in the Company. To the extent that upon their exercise the dilutionary impact caused by the issue of the Shares will be detrimental to the Company, this is more than offset by the advantages accruing from the Company securing the services of experienced and skilled directors on appropriate incentive terms.

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

Taxation Consequences

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

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

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Explanatory Memorandum

Dilutionary Effect

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

Director	Current Share Holding1	%	Director Options	Share Capital Upon Exercise of Director 1	%
				Options
Mr Everett	0	0	1,000,000	1,000,000	0.00474
Mr Dongping Wang	0	0	1,000,000	1,000,000	0.00474
Sub-total			0
Other Shareholders	208,883,663	100%	0	208,883,663	99.05
Total	208,883,663	100%	2,000,000	210,883,663	100%

Notes:

1. This assumes that none of the current Options on issue in the Company are exercised and no further securities are issued.

Listing Rule 10.11

Listing Rule 10.11 requires an entity to obtain the approval of shareholders to an issue of securities to a Related Party. Each of Mr Stephen Everett and Mr Dongping Wang, being Directors of the Company, are Related Parties.

Accordingly, because the issue of the Director Options will result in the Company issuing securities to a Related Party, approval under Listing Rule 10.11 is required.

For the purposes of Listing Rule 10.13, the Company advises as follows:

• The maximum number of Director Options to be issued are 1,000,000 Director Options to each of Mr Stephen Everett and Mr Dongping Wang;

• The Director Options are intended to be granted as soon as possible following the Annual General Meeting, but in any event, within one (1) month of the date of the Annual General Meeting;

• The Director Options are being issued for nil consideration; and

• No funds are being raised by the grant of the Director Options.

In accordance with Listing Rule 7.2, as approval is being sought under Listing Rule 10.11, approval is not required to be obtained under Listing Rule 7.1.

Save as set out in this Explanatory Statement, the Directors are not aware of any other information that will be reasonably required by Shareholders to make a decision in relation to benefits contemplated by Resolutions 6 and 7.

SPECIAL BUSINESS

8. Resolution 8 – Approval for the Company to issue an additional 10% of the issued capital of the Company over a 12 month period

• 8.1 Introduction

Pursuant to Resolution 8, the Company is seeking shareholder approval to issue an additional 10% of issued capital over a 12 month period in accordance with Listing Rule 7.1A. If passed, this resolution will allow the Company to issue and allot up to 20,888,366 Shares ( 10% Securities ) each at an issue price of at least 75% of the volume weighted average price ( VWAP ) for the Company’s quoted class of Securities (calculated over the last 15 days on which trades in the quoted Securities are recorded, and immediately before the date on which the price at which the Shares are to be

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Explanatory Memorandum

issued is agreed, or if not within 5 trading days of that date, the date on which the Shares are issued) ( Issue Price ).

This approval is sought pursuant to Listing Rule 7.1A which came into effect on 1 August 2012. Under newly issued Listing Rule 7.1A, small and mid cap listed entities that meet the eligibility threshold and have obtained the approval of their ordinary Shareholders by special resolution at the annual general meeting ( AGM ), are permitted to issue an additional 10% of issued capital over a 12 month period from the date of the AGM ( Additional 10% Issue ). The Additional 10% Issue under Listing Rule 7.1A is in addition to the ability of the Company to issue 15% of its issued capital without Shareholder approval over a 12 month period pursuant to Listing Rule 7.1. The Company may issue the 10% Securities to raise funds for the Company and for non-cash consideration (further details of which are set out below).

Funds raised from the issue of 10% Securities are intended to be used as follows:

• working capital; and

• additional exploration activities at the Company’s projects.

8.2 Listing Rule 7.1A

(a) General

(1) Eligibility

An entity is eligible to undertake an Additional 10% Issue if at the time of its AGM it has a market capitalisation of $300 million or less and it is not included in the S&P/ASX300 Index.

As required by the Listing Rules, the Company’s market capitalisation will be based on the closing price on the Trading Day before the AGM, and will be released by the Company to the ASX at that time. The calculation of market capitalisation will be based on the Closing Price of the Shares in the main class of Shares of the Company, on the last Trading Day on which trades in the Shares were recorded before the date of the AGM, multiplied by the number of Shares on issue (in that main class, but excluding restricted securities and securities quoted on a deferred settlement basis).

For illustrative purposes only, on 8 October 2012 the Company’s market capitalisation is $31,332,549.00 based on the Closing Trading Price on that date. The Company is not included in the S&P/ASX300 Index as at the time of issue of this Notice of Meeting and the Company does not expect that it will be included in the S&P/ASX300 Index at the date of the AGM.

The Company is therefore an eligible entity and able to undertake an Additional 10% Issue under Listing Rule 7.1A.

In the event that the Company is no longer an eligible entity to undertake an Additional 10% Issue after the Company has already obtained ordinary security holders’ approval, the approval obtained will not lapse and the Company will still be entitled to undertake the Additional 10% Issue.

(2) Shareholder approval

The ability to issue the 10% Securities under the Additional 10% Issue is conditional upon and subject to the Company obtaining Shareholder approval by way of a Special Resolution at the AGM. Pursuant to Listing Rule 7.1A, no Shares will be issued in reliance on Listing Rule 7.1A until and unless this Special Resolution is passed at Annual General Meeting.

(b) Issue Period – Listing Rule 7.1A.1

Shareholder approval of the Additional 10% Issue under Listing Rule 7.1A is valid from the date of the AGM at which the approval is obtained and expires on the earlier to occur of:

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Explanatory Memorandum

• (1) the date that is 12 months after the date of the AGM at which the approval is obtained; or

• (2) the date of the approval by shareholders of a transaction under Listing Rule 11.1.2 (a significant change to the nature or scale of activities) or 11.2 (disposal of main undertaking),

or such longer period if allowed by ASX.

If approval is given for the Additional 10% Issue at the AGM on 20 November 2012 then the approval will expire, unless there is a significant change to the Company’s Business, on 20 November 2013.

(c) Calculation for Additional 10% Issue – Listing Rule 7.1A.2

Listing Rule 7.1A.2 provides that eligible entities which have obtained Shareholder approval at AGM may issue or agree to issue, during the 12 month period after the date of the AGM, a number of Equity Securities calculated in accordance with the following formula:

(A x D) – E

A is the number of Shares on issue 12 months before the date of issue or agreement:

• (1) plus the number of fully paid ordinary shares in the Company issued in the 12 months under an exception in Listing Rule 7.2;

• (2) plus the number of partly paid ordinary shares in the Company that became fully paid in the 12 months;

• (3) plus the number of fully paid ordinary shares in the Company issued in the 12 months with approval of holders of Shares under Listing Rule 7.1 or rule 7.4. This does not include an issue of fully paid ordinary shares in the Company under the entity’s 15% placement capacity without Shareholder approval;

• (4) less the number of fully paid ordinary shares in the Company cancelled in the 12 months.

D is 10 percent.

E is the number of Equity Securities issued or agreed to be issued under Listing Rule 7.1A.2 in the 12 months before the date of the issue or agreement to issue that are not issued with the approval of Shareholders under Listing Rule 7.1 or 7.4

• (d) Listing Rule 7.1A.3

• (1) Shares

Equity Securities issued under the Additional 10% Issue must be in the same class as an existing quoted class of Equity Securities of the Company.

As at the date of this notice, the Company has 208,883,663 quoted Shares on issue (and no other Equity Securities which are quoted) . Accordingly, the Company is only seeking approval to issue ordinary Shares (and no other class of Equity Securities) under the Additional 10% Issue in addition to its 15% capacity permitted under Listing Rule 7.1.

• (2) Minimum Issue Price

The issue price for the 10% Securities issued under Listing Rule 7.1A must be not less than 75% of the VWAP of Shares in the same class calculated over the 15 Trading Days immediately before:

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Explanatory Memorandum

• (A) the date on which the price at which the 10% Securities are to be issued is agreed; or

• (B) if the 10% Securities are not issued within 5 Trading Days of the date in paragraph (A) above, the date on which the 10% Securities are issued.

As required by the Listing Rules, MTE’s market capitalisation based on the closing price on the Trading Day before the AGM will be released by MTE to the ASX at that time.

(e) Information to be given to ASX – Listing Rule 7.1A.4

If Resolution 8 is passed and the Company issues any 10% Securities under Listing Rule 7.1A, the Company will give to ASX:

• (1) a list of alottees of the 10% Securities and the number of 10% Securities allotted to each (this list will not be released to the market); and

• (2) the following information required by rule 3.10.5A, will be released to the market on the date of issue:

• (A) details of the dilution to the existing holders of Shares caused by the issue;

• (B) where the Shares are issued for cash consideration, a statement of the reasons why the Company issued the Shares as a placement under rule 7.1A and not as (or in addition to) a pro rata issue or other type of issue in which existing Shareholders would have been eligible to participate;

• (C) details of any underwriting arrangements, including any fees payable to the underwriter; and

• (D) any other fees or costs incurred in connection with the issue.

(f) Listing Rule 7.1 and 7.1A

The ability of an entity to issue Equity Securities under Listing Rule 7.1A is in addition to the entity’s 15% placement capacity under Listing Rule 7.1.

At the date of this Notice, the Company has on issue 208,883,663 Shares, and therefore has the capacity to issue:

• (1) 31,332,549 Equity Securities under Listing Rule 7.1; and

• (2) 20,888,366 Shares under Listing Rule 7.1A. [ Refer to 8.2(d)(1) above

The actual number of Shares that the Company will have the capacity to issue under Listing Rule 7.1A will be calculated at the date of issue of the Shares in accordance with the formula prescribed in Listing Rule 7.1A.2 (as above).

8.3 Specific Information required by Listing Rule 7.3A

• (a) Minimum Price of securities issued under Listing Rule 7.1A – Listing Rule 7.3A.1

Pursuant to and in accordance with Listing Rule 7.3A.1, the 10% Securities issued pursuant to approval under Listing Rule 7.1A must be not less than 75% of the VWAP for the Company’s Shares over the 15 Trading Days immediately before:

• (1) the date on which the price at which the 10% Securities are to be issued is agreed; or

• (2) if the 10% Securities are not issued within 5 Trading Days of the date in paragraph (1) above, the date on which the 10% Securities are issued.

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Explanatory Memorandum

The Company intends to issue the Shares within 5 Trading Days of approval of the Additional 10% Issue and will disclose to the ASX the Issue Price on the date of issue of the 10% Securities.

• (b) Risk of economic and voting dilution – Listing Rule 7.3A.2

As provided by Listing Rule 7.3A.2, if the Additional 10% Issue is passed by Shareholders and the Company issues the 10% Securities, there is a risk of economic and voting dilution to the existing ordinary Share holders of the Company. The Company currently has on issue 208,883,663 Shares. Upon the Additional 10% Issue, the Company will have approval to issue an additional 20,888,366 Shares. (The exact number of additional Shares to be issued under the Additional 10% Issue will be calculated in accordance with the formula contained in Listing Rule 7.1A.2 and set out above). Any issue of 10% Securities will have a dilutive effect on existing Shareholders.

There is a specific risk that:

• (1) the market price for the Company’s Shares may be significantly lower on the date of the Issue than it is on the date of the AGM; and

• (2) the 10% Securities may be issued at a price that is at a discount to the market price for the Company’s Shares on the issue date,

which may have an effect on the amount of funds raised by the issue of the 10% Securities.

As required by Listing Rule 7.3A.2, Table 1 below shows the economic and voting dilution effect, in circumstances where the issued capital has doubled and the Market Price of the Shares has halved.

Table 2

Issued Capital	50% decrease in Market Price 7.5 cents	50% decrease in Market Price 7.5 cents	Current Market Price 15 cents	Current Market Price 15 cents	100% increase in Market Price 30 cents	100% increase in Market Price 30 cents
	10 % Voting Dilution	Capital Raised	10 % Voting Dilution	Capital Raised	10 % Voting Dilution	Capital Raised
Present Issued Capital = 208,883,663 Shares	20,888,366 Shares	$1,566,627.47	20,888,366 Shares	$3,133,254.95	20,888,366 Shares	$6,266,509.89
50% Increase in Capital= 313,325,495 Shares	31,332,549 Shares	$2,349,941,21	31,332,549 Shares	$4,699,882.42	31,332,549 Shares	$9,399,764.84
100% Increase in Capital= 417,767,326 Shares	41,776,733 Shares	$3,133,254.95	41,776,733 Shares	$6,266,509.89	41,776,733 Shares	$12,533,019.78

Assumptions and explanations

• The Market Price is 15 cents based on the closing price of the Shares on ASX on 8 October 2012.

• The above table only shows the dilutionary effect based on the Additional 10% Issue and not the 15% under Listing Rule 7.1

• The 10% voting dilution reflects the aggregate percentage dilution against the issued share capital at the time of issue.

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Explanatory Memorandum

• The Company issues the maximum number of 10% Securities available to it under the Additional 10% Issue.

• The Issued Capital has been calculated in accordance with the formula in Listing Rule 7.1A(2) as at 9 October 2012.

• The issue price of the 10% Securities used in the table does not take into account the discount to the Market Price (if any).

(c) Final date for issue – Listing Rule 7.3A.3

As required by Listing Rule 7.3A.3, the Company will only issue and allot the 10% Securities during the 12 months after the date of this AGM. The approval under Resolution 8 for the issue of the 10% Securities will cease to be valid in the event that Shareholders approve a transaction under Listing Rule 11.1.2 (a significant change to the nature or scale of activities of the Company) or Listing Rule 11.2 (the disposal of the main undertaking of the Company) before the anniversary of the AGM.

(d) Purpose – Listing Rule 7.3A.4

As noted above, the purpose for which the 10% Securities may be issued include to raise funds for the Company and as non-cash consideration (further details of which are set out below). Funds raised from the issue of 10% Securities are intended to be used as follows:

• working capital; and

• additional exploration activities at the Company’s projects.

(e) Shares Issued for Non-cash consideration – Listing Rule 7.3A.4

The Company may issue 10% Securities for non-cash consideration, such as the acquisition of new assets or investments. If the Company issues Shares for non-cash consideration, the Company will release to the market a valuation of the non-cash consideration that demonstrates that the issue price of the Shares complies with Listing Rule 7.1A.3.

(f) Company’s Allocation Policy – Listing Rule 7.3A.5

The Company’s allocation policy is dependent on the prevailing market conditions at the time of any proposed issue of 10% Securities pursuant to the Additional 10% Issue. The identity of the allottees of Shares will be determined on a case-by-case basis having regard to the factor including but not limited to the following:

• (1) the methods of raising funds that are available to the Company, including but not limited to, rights issue or other issue in which existing Shareholders can participate;

• (2) the effect of the issue of the 10% Securities on the control of the Company;

• (3) the financial situation and solvency of the Company; and

• (4) advice from corporate, financial and broking advisers (if applicable).

The allottees of the 10% Securities under the Additional 10% Issue have not been determined as at the date of this Notice but may include existing substantial shareholders and/or new Shareholder who are not Related Parties or associates of a Related Party of the Company.

Further, if the Company is successful in acquiring new assets or investments, it is likely that the allottees under the Additional 10% Issue will be the vendors of the new assets or investments.

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Explanatory Memorandum

(g) Company not previously obtained shareholder approval under listing rule 7.1A

Listing Rule 7.1A came into effect on 1 August 2012 and the Company has not previously obtained Shareholder approval under Listing Rule 7.1A.

(h) Voting Exclusion Statement

A voting exclusion statement is included in this Notice. At the date of the Notice, the proposed allottees of any 10% Securities are not as yet known or identified. In these circumstances (and in accordance with the note set out in Listing Rule 14.11.1 relating to Listing Rules 7.1 and 7.1A), for a person’s vote to be excluded, it must be known that that person will participate in the proposed issue.

Where it is not known who will participate in the proposed issue (as is the case in respect of the 10% Securities), Shareholders must consider the proposal on the basis that they may or may not get a benefit and that it is possible that their holding will be diluted and there is no reason to exclude their votes.

9. Voting entitlement

For the purposes of determining voting entitlements at the Meeting, shares will be taken to be held by the persons who are registered as holding the shares at 4.00pm (Eastern Standard Time) on Sunday, 18 November 2012. Accordingly, transactions registered after that time will be disregarded in determining entitlements to attend and vote at the Meeting.

10. Interpretation

The following terms used in the Notice of Meeting and the Explanatory Memorandum are defined as follows:

AGM means annual general meeting;

ASIC means the Australian Securities & Investments Commission;

Associated Entity has the meaning given to that term in the Corporations Act;

ASX means the ASX Limited;

Business Day means a day on which all banks are open for business generally in Brisbane;

Chair means the person chairing the Meeting.

Closely Related Party (as defined in the Corporations Act) of a member of the Key Management Personnel for an entity means:

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

• (b) a child of the member’s spouse; or

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

• (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 dealings with the entity; or

• (e) a company the member controls; or

• (f) a person prescribed by the regulations for the purposes of the definition of closely related party;

Company means MetroCoal Limited ACN 117 763 443 (ASX: MTE);

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Explanatory Memorandum

Constitution means the constitution of the Company from time to time;

Corporations Act means the Corporations Act 2001 (Cth);

Directors means the board of directors of the Company as at the date of the Notice of Meeting;

Director Options means the Options to be issued to the Director, as contemplated under this Notice of Meeting;

Eligible Entity has the meaning given to that term in the Listing Rules;

Equity Securities has the meaning given to that term in the Listing Rules;

Explanatory Memorandum means the explanatory statement accompanying this Notice;

Key Management Personnel has the definition given in the Accounting Standard AASB 124 Related Party Disclosure as ‘those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly and indirectly, including any director (whether executive or otherwise) of that entity’;

Listing Rules means the official listing rules of the ASX as amended from time to time;

Market Price has the meaning given to that term in the Listing Rules;

Meeting means the Annual General Meeting to be held on 20 November 2012 as convened by the accompanying Notice of Meeting;

Notice of Meeting or Notice means the notice of meeting giving notice to shareholders of the Meeting, accompanying this Explanatory Memorandum;

Options means options to acquire Shares;

Ordinary Resolution means a resolution passed by more than 50% of the votes at a general meeting of shareholders;

Related Party has the meaning in section 228 of the Corporations Act.

Resolutions means the resolutions set out in the Notice of Meeting;

Shares means fully paid ordinary shares in the Company from time to time;

Shareholder means a shareholder of the Company;

Special Resolution means a resolution:

• (a) of which notice has been given as set out in paragraph 249L(1)(c) of the Corporations Act; and

• (b) that has been passed by at least 75% of the votes cast by members entitled to vote on the resolution.

Subsidiaries has the meaning given to that term in the Corporations Act;

Trading Day has the meaning given to that term in the Listing Rules.

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Explanatory Memorandum

Any inquiries in relation to the Resolutions or the Explanatory Memorandum should be directed to:

John Haley (Company Secretary):

Post: Attn: John Haley GPO Box 122 Brisbane QLD 4001 Tel: +617 3249 3040 Fax +617 3249 3041

Email: jhaley@metallicaminerals.com.au

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Explanatory Memorandum

APPENDIX “A”

1. Summary of terms and conditions of the New ESOP (Scheme)

• 1.1 The Scheme is to extend to Eligible Employees of MetroCoal Limited ACN 117 763 443 (the Company ) or an associated body corporate of the Company as the Board may in its discretion determine.

• 1.2 The total number of Shares to be issued by the Company to Eligible Employees in respect of which either Shares or Options have been issued under the Scheme shall not at any time exceed five percent (5%) of the Company’s total issued ordinary Share capital in that class at that time when aggregated with:

• (a) the number of Shares in the same class which would be issued with each outstanding offer with respect to Shares or Options under any share option scheme of the Company accepted and exercised; and

• (b) the number of Shares in the same class issued during the previous five (5) years pursuant to:

  • (1) the Scheme to an Eligible Employee; or

  • (2) any employee share option scheme of the Company,

  • but excluding for the purposes of the calculation, any offer made, or Option acquired or Share issued by way of or as a result of:

  • (3) any offer to a person situated at the time of receipt of the offer referred to in paragraph 1.2(a) and 1.2(b) outside of this jurisdiction; or

  • (4) an offer that did not require disclosure to investors because of Section 708 of the Corporations Act 2001 (Cth) ; or

  • (5) an offer that did not require the giving of a product disclosure statement because of Section 1012D of the Corporations Act 2001 (Cth) ; or

  • (6) an offer made under a disclosure document or product disclosure statement within the meaning of those terms in the Corporations Act 2001 (Cth) .

• 1.3 The Shares are to be issued at a price determined by the Board.

• 1.4 The Options are to be issued for no consideration.

• 1.5

• The exercise price of an Option is to be determined by the Board at its sole discretion.

• 1.6 The Vesting Date will be any such date or dates with respect to the Options or tranches of Options (as the case may be) as may be determined by the Board from time to time.

• 1.7 The Option Commencement Date will be the date to be determined by the Board prior to the issuance of the relevant Options.

• 1.8 The Option Exercise Period commences on the Option Commencement Date and ends on the earlier of:

• (a) the expiration of such period nominated by the Board at its sole discretion at the time of the grant of the Option but being not less than 2 years; or

• (b) the Business Day after the expiration of three months, or any longer period which the Board may determine, after the Eligible Employee ceases to be employed by the Company or an associated body corporate of the Company; or

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Explanatory Memorandum

• (c) the Eligible Employee ceasing to be employed by the Company or an associated body corporate of the Company due to fraud or dishonesty;

• 1.9 Eligibility to participate is determined by the Board. Eligibility is restricted to Eligible Employees of the Company or an associated body corporate of the Company. The Board is entitled to determine:

• (a) subject to paragraph 1.2, the total number of Shares or Options to be offered in any 1 year to Eligible Employees;

• (b) the Eligible Employees to whom offers will be made; and

• (c) the terms and conditions of any Options granted, subject to the Scheme.

• 1.10 Where the Board has adopted additional guidelines to determine entitlements, the Board will make decisions under the Scheme in accordance with those guidelines as varied from time to time.

• 1.11 Participants do not participate in dividends or in bonus issues unless the Options are exercised.

• 1.12 While the Option holders do not have any participating rights in new issues of securities in the Company during the term of any Options held, the Option holders shall be afforded a period of at least 10 Business Days before the record date to determine entitlements to the issue, to exercise the Options and it shall be a condition of the Options that any entitlements to bonus issues of securities are only available to Option holders in the event of a prior exercise of the Options.

• 1.13 In the event that a rights issue is made by the Company during the term of the Options at a discount to the independently ascertained value of the Shares, then the Company shall be obliged to adjust the exercise price for the Options in accordance with a specific formula.

• 1.14 The Board has the right to vary the entitlements of all participants to take account of the effective capital reconstructions, bonus issues or rights issues, in accordance with the Listing Rules.

• 1.15 The Board may impose as a condition of any offer of Shares and Options under the Scheme any restrictions on the transfer or encumbrance of such Shares and Options as it determines.

• 1.16 The Board may vary the Scheme (and any corresponding guidelines to determining entitlements).

• 1.17 The Scheme is separate to and does not in any way form part of, vary or otherwise affect the rights and obligations of a participant under the terms of his or her employment or arrangement.

• 1.18 At any time from the date of an Offer until the Acceptance Date of that Offer, the Board undertakes that it shall provide information as to:

• (a) the Current Market Price of the Shares; and

• (b) the Exercise Price of the Shares where this is calculated as at the date of the Offer,

to any Participant by mail (or such other form of notification as agreed by the Company and the Participant) within 3 Business Days of a written request to the Company from that Participant to do so.

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Explanatory Memorandum

APPENDIX “B”

2. Summary of key Option Terms

The material terms of the Director Options ( Options ) that are subject to this resolution, are set out below:

• Issued for no Consideration;

• Options vest on the date they are issued ( Issue Date );

• Expiry Date will be the earlier of:

• 3 months from the date on which a Director who receives Director Options resigns, retires or otherwise cases to be a Director of the Company (unless exercised earlier); and

• 11 July 2015.

• If all of the Options are exercised a total of an additional 2,000,000 Ordinary Shares in the Company will be issued;

• Exercisable wholly or in part;

• the Director Options shall be issued in 2 tranches of 500,000 Shares each and will be exercisable in 50,000 lots at the exercise price ( Exercise Price ) to be determined as follows:

  • (i) First tranche: $0.235

  • (ii) Second Tranche: $0.50

• Upon the valid exercise of the Options and payment of the Exercise Price, the Company will issue fully paid ordinary shares ranking pari passu with the then issued ordinary shares;

• The Company does not intend to quote the Options on the ASX, however the Company will apply for listing of resultant Shares of the Company issued upon the exercise of any Option;

• The Options will not be transferable in whole or in part and may not be exercised by any other person (except, in the case of the Option holder’s death, by his or her legal personal representative);

• Option holders do not have any right to participate in new issues of securities in the Company made to shareholders generally. The Company will, where required pursuant to the ASX Listing Rules, provide Option holders with notice prior to the books record date (to determine entitlements to any new issue of securities made to shareholders generally) to exercise the Options, in accordance with the requirements of the Listing Rules.

• Option holders do not participate in any dividends unless the Options are exercised and the resultant shares of the Company are issued prior to the record date to determine entitlements to the dividend;

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

• the number of Options, the Exercise Price of the Options, or both will be reconstructed (as appropriate) in a manner consistent with the ASX Listing Rules as applicable at the time of reconstruction, but with the intention that such reconstruction will not result in any

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Explanatory Memorandum

benefits being conferred on the holders of the Options which are not conferred on shareholders; and

• subject to the provisions with respect to rounding of entitlements as sanctioned by a meeting of shareholders approving a reconstruction of capital, in all other respects the terms for the exercise of the Options will remain unchanged;

• If there is a pro rata issue (except a bonus issue), the Exercise Price of an Option may be reduced according to the following formula:

O[n] = O – E [P-(S + D)]

N + 1

Where:

• O[n] = the new exercise price of the Option;

• O = the old exercise price of the Option;

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

• P = the average market price per security (weighted by reference to volume) of the underlying securities during the 5 trading days ending on the day before the ex right date or the ex entitlements date;

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

• D = dividend due but not yet paid on the existing underlying securities (except those to be issued under the pro rata issue);

• N = the number of securities with rights or entitlements that must be held to receive a right to one new security.

• If there is a bonus issue to the holders of shares in the Company, the number of shares over which the Option is exercisable may be increased by the number of shares which the Option holder would have received if the Option had been exercised before the record date for the bonus issue; and

• The terms of the Options shall only be changed if holders (whose votes are not to be disregarded) of ordinary shares in the Company approve of such a change. However, the terms of the Options shall not be changed to reduce the Exercise Price, increase the number of Options or change any period for exercise of the Options.

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LODGE YOUR VOTE

� ONLINE

www.linkmarketservices.com.au

ABN 45 117 763 443

By mail: � MetroCoal Limited � [By fax:][ +61 2 9287 0309] C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia

� All enquiries to: Telephone: 1300 554 474 Overseas: +61 2 8280 7454

�������������� X99999999999

SHAREHOLDER VOTING FORM

I/We being a member(s) of MetroCoal Limited and entitled to attend and vote hereby appoint:

STEP 1 APPOINT A PROXY the Chairman OR if you are NOT appointing the Chairman of the Meeting as your proxy, of the Meeting please write the name of the person or body corporate (excluding the (mark box) registered shareholder) you are appointing as your proxy. I/we appoint the Chairman of the Meeting as an alternate proxy to the person named.

If no person/body corporate is named, the Chairman of the Meeting, is appointed as my/our proxy and to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held at 4:00pm (Brisbane time) on Tuesday, 20 November 2012, at HopgoodGanim Lawyers, Level 7, Waterfront Place, 1 Eagle Street, Brisbane and at any adjournment or postponement of the meeting.

Important note for Items 1 and 6 - If the Chairman of the Meeting is your proxy or is appointed as your proxy by default

The Chairman of the Meeting intends to vote all available proxies in favour of all Resolutions, including Resolutions 1 and 6.

If the Chairman of the Meeting is (or becomes) your proxy you can direct the Chairman to vote for or against or abstain from voting by marking the appropriate box in step 2 below.

Resolution 1

If the Chairman of the Meeting is your proxy or is appointed as your proxy by default, unless you indicate otherwise by ticking one of the “for” “against” or “abstain” boxes in relation to Resolutions 1 you will be authorising the Chairman to vote in accordance with the Chairman’s voting intentions on Resolution 1 even though Resolutions 1 is connected directly or indirectly with the remuneration of a member of Key Management Personnel.

Resolution 6

If the Chair of the meeting is appointed as your proxy, or may be appointed by default and you do not wish to direct your proxy how to vote as your proxy in respect of Resolution 6, please place a mark in the box.

By marking this box, you acknowledge that the Chairman of the meeting may exercise your proxy even if he has an interest in the outcome of Resolution 6 and that votes cast by the Chairman of the meeting for Resolution 6 other than as proxy holder will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote the Chairman will not cast your votes on Resolution 6 and your votes will not be counted in calculating the required majority if a poll is called on Resolution 6.

Proxies will only be valid and accepted by the Company if they are signed and received no later than 48 hours before the meeting. Please read the voting instructions overleaf before marking any boxes with an X

STEP 2		VOTING DIRECTIONS	VOTING DIRECTIONS	VOTING DIRECTIONS
Resolutions	For	Against Abstain*			For	Against Abstain*
1Adoption of the Remuneration Report for the year ended 30 June 2012				5Adoption of Employee Share and Option Plan
2Re-election of Mr Michael Hansel as				6Approval of issue of Options to Director
a Director				Mr Stephen Everett
3Re-election of Mr Stephen Everett as				7Approval of issue of Options to Director
a Director 4Re-election of Mr Dong Ping Wang as a Director				Mr Dong Ping Wang 8Approval for the Company to issue an additional 10% of the issued capital of the Company over a 12 month period pursuant to Listing Rule 7.1A

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

STEP 3 SIGNATURE OF SHAREHOLDERS – THIS MUST BE COMPLETED Shareholder 1 (Individual) Joint Shareholder 2 (Individual) Joint Shareholder 3 (Individual) Sole Director and Sole Company Secretary Director/Company Secretary (Delete one) Director

Shareholder 1 (Individual) Sole Director and Sole Company Secretary

This form should be signed by the shareholder. If a joint holding, either shareholder may sign. If signed by the shareholder’s attorney, the power ���������������������������������������������������������������������������������������������������������������������������������������������� be executed in accordance with the company’s constitution and the Corporations Act 2001 (Cth).

MTE PRX201R

HOW TO COMPLETE THIS PROXY FORM

Your Name and Address

This is your name and address as it appears on the company’s share register. If this information is incorrect, please make the correction on the form. Shareholders sponsored by a broker should advise their broker of any changes. Please note: you cannot change ownership of your shares using this form.

Appointment of a Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box in Step 1. If the person you wish to appoint as your proxy is someone other than the Chairman of the Meeting please write the name of that person in Step 1. If you appoint someone other than the Chairman of the Meeting as your proxy, you will also be appointing the Chairman of the Meeting as your alternate proxy to act as your proxy in the event the named proxy does not attend the meeting. If you have directed your proxy how to vote on a Resolution and your named proxy either does not attend the Meeting or attends the Meeting but does not vote on a poll on the Resolution, the Chairman of the meeting will become your proxy in respect of that Resolution.

Votes on Items of Business – Proxy Appointment

You may direct your proxy how to vote by placing a mark in one of the boxes opposite each item of business. All your shares will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on the items of business, your proxy may vote as he or she chooses (except in relation to Resolution 1 where you have appointed a member of the key management personnel of the Company (other than the Chairman) or their closely related parties as your proxy, or Resolution 6 where you have appointed the Chairman of the Meeting as your proxy or the Chairman becomes your proxy by default, in which case there are additional restrictions explained below). If you mark more than one box on an item your vote on that item will be invalid.

Resolution 6

If the Chairman of the Meeting is appointed your proxy (or becomes your proxy by default), by checking the box under Resolution 6 in Step 1, you authorise the Chairman to exercise your proxy even if he has an interest in the outcome of the resolution and that votes cast by the Chairman of the Meeting for Resolution 6 other than as a proxy holder will be disregarded because of that interest, subject to the requirements of the Corporations Act 2001 (Cth).

Exercise of undirected proxies by Key Management Personnel:

If a member of the Company’s key management personnel (other than the Chairman) or their closely related parties is your proxy, if you have not directed the proxy how to vote, that person will not vote your shares on Item 1 (being a resolution which is connected directly or indirectly with the remuneration of members of the Company’s key management personnel).

If the Chairman of the Meeting is appointed your proxy (or becomes your proxy by default), you authorise the Chairman to exercise your proxy on Item 1 even though Item 1 is connected directly or indirectly with the remuneration of a member of key management personnel (and the chairman is a member of key management personnel).

Key management personnel of the company are the Directors and those persons having authority and responsibility for planning, directing and controlling the activities of the company directly or indirectly. The Remuneration Report identifies the company’s Key Management ������������������������������������������������������������������������ ������������������������������������������������������������������� certain of their family members, dependants and companies they control.

The Chairman of the Meeting intends to vote undirected proxies in favour of all items of business (including Item 1).

If you do not wish to authorise the Chairman to vote your proxy in this way, you should direct your proxy in accordance with the instructions in this proxy form.

Appointment of a Second Proxy

You are entitled to appoint up to two persons as proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the company’s share registry or you may copy this form and return them both together. The appointment of the Chairman of the Meeting as your alternate proxy also applies to the appointment of the second proxy.

To appoint a second proxy you must:

• ������������������������������������������������������������������� the percentage of your voting rights or number of shares applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded.

• (b) return both forms together.

Signing Instructions

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

Individual: where the holding is in one name, the holder must sign. Joint Holding: where the holding is in more than one name, either shareholder may sign.

Power of Attorney: to sign under Power of Attorney, you must lodge the Power of Attorney with the registry. If you have not previously lodged ���������������������������������������������������������������������� Power of Attorney to this form when you return it.

Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001 ) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either ������������������������������������������������������������������� held by signing in the appropriate place.

Corporate Representatives

If a representative of the corporation is to attend the meeting the �������������������������������������������������������������������� should be produced prior to admission in accordance with the Notice �������������������������������������������������������������� company’s share registry.

Lodgement of a Proxy Form

This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below by 4:00pm (Brisbane time) on Sunday, 18 November 2012, being not later than 48 hours before the commencement of the meeting. Any Proxy Form received after that time will not be valid for the scheduled meeting.

Proxy Forms may be lodged using the reply paid envelope or:

� ONLINE

www.linkmarketservices.com.au

Login to the Link website using the holding details as shown on the proxy form. Select ‘Voting’ and follow the prompts to lodge your vote. ��������������������������������������������������������������������������������������������������������������������������������������� ��������������������������������������������������������������������

by mail: �

MetroCoal Limited C/- Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 Australia

by fax:

�

+61 2 9287 0309

�

by hand:

delivering it to Link Market Services Limited, 1A Homebush Bay Drive, Rhodes NSW 2138.

If you would like to attend and vote at the Annual General Meeting, please bring this form with you. This will assist in registering your attendance.