ORION MINERALS LIMITED - Proxy Solicitation & Information Statement 2008

GOLDSTAR RESOURCES NL

ACN 098 939 274

NOTICE OF GENERAL MEETING AND PROXY FORM

TIME: 10.00am (EST) DATE: 31 October 2008 PLACE: Oaks On Market 60 Market Street MELBOURNE VIC 3000

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.

The Independent Expert reporting on Resolution 3 concludes that the acquisition referred to in that resolution is NOT FAIR BUT REASONABLE to the non-associated Shareholders of the Company.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on +61 3 9641 8939.

CONTENTS PAGE

Notice of General meeting (setting out the proposed resolutions)	3
Explanatory Statement (explaining the proposed resolutions)	5
Glossary	7
Proxy Form	8

TIME AND PLACE OF MEETING AND HOW TO VOTE

VENUE

The General meeting of the Shareholders to which this Notice of Meeting relates will be held at 10.00am (EST) on 31 October 2008 at:

Oaks On Market 60 Market Street MELBOURNE VIC 3000

YOUR VOTE IS IMPORTANT

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

VOTING IN PERSON

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

VOTING BY PROXY

To vote by proxy, please complete and sign the enclosed Proxy Form and return it to the Company’s Share Registry either:

(a) by post to Security Transfer Registrars Pty Ltd, PO Box 535, Applecross WA, 6953;
(b) by hand delivery to 770 Canning Highway, Applecross, WA, 6153; or
(c) by facsimile on (+61 8) 9315 2233,

so that it is received not later than 10.00am (EST) on 29 October 2008.

Proxy Forms received later than this time will be invalid.

NOTICE OF GENERAL MEETING

Notice is given that the General meeting of Shareholders will be held at 10.00am (EST) on 31 October 2008 at Oaks On Market, 60 Market Street, Melbourne, Victoria.

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

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 of the Company at 10.00am (EST) on 29 October 2008.

Terms and abbreviations used in this Notice of Meeting and Explanatory Statement are defined in the Glossary.

AGENDA

ORDINARY BUSINESS

1. RESOLUTION 1 – RE-ELECTION OF DIRECTOR – PETER HATFUL

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

“That, for the purposes of Listing Rule 14.4 and clause 7.3(f) of the Constitution and for all other purposes, Peter Hatfull, a Director who was appointed on 14 July 2008, retires, and being eligible, is re-elected as a Director.”

2. RESOLUTION 2 – RE-ELECTION OF DIRECTOR – GRAEME SLOAN

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

“That, for the purposes of Listing Rule 14.4 and clause 7.3(f) of the Constitution and for all other purposes, Graeme Sloan, a Director who was appointed on 25 July 2008, retires, and being eligible, is re-elected as a Director.”

3. RESOLUTION 3 – APPROVAL TO ISSUE CONVERTIBLE NOTES AND OPTIONS

“That, Shareholders approve:

(a) for the purposes of Listing Rule 7.1 of the ASX Listing Rules the issue of:
(i) 15,000,000 Options to the Silja Investment Ltd; and
(ii) three (3) Convertible Notes to Silja Investment Ltd;
(b) for the purposes of Item 7 of Section 611 of the Corporations Act, the acquisition of relevant interests in voting shares of the Company by Silja Investment Ltd and certain other parties mentioned in the Explanatory Statement by virtue of:

(i) the issue of up to 15,000,000 Shares on conversion of the Options referred to in paragraph (a)(i) above; and

(ii) the issue of Shares upon the conversion of the Convertible Notes to be issued pursuant to paragraph (a)(ii) above; and
(c) for the purposes of Listing Rule 10.1, the deemed disposal of a substantial asset to Silja Investments Ltd as a result of the Company granting Silja Investments Ltd security over its assets in relation to the funds made available under the Convertible Notes,

on the terms and conditions in the Explanatory Memorandum.”

Expert’s Report: Shareholders should carefully consider the Independent Expert’s Report prepared by Stanton Partners International Pty Ltd for the purposes of the Shareholder approval required under Item 7 of Section 611 of the Corporations Act and Listing Rule 10.1 which comments on the fairness and reasonableness of the transaction to the non-associated Shareholders in the Company.

Voting Exclusion: The Company will disregard any votes cast on this resolution by Silja Investment Ltd or a person who may participate in the proposed issue and a person who may obtain a benefit, except a benefit solely in the capacity of a security holder, if the resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the proxy form or it is cast by the person chairing the Meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

BY ORDER OF THE BOARD

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BRUCE PATERSON COMPANY SECRETARY GOLDSTAR RESOURCES NL

DATED: 30 SEPTEMBER 2008

Voting Exclusion Note:

Where a voting exclusion applies, 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.

EXPLANATORY STATEMENT

This Explanatory Statement has been prepared for the information of the Shareholders in connection with the business to be conducted at the General meeting to be held at 10.00am (EST) on 31 October 2008 at Oaks On Market, 60 Market Street, Melbourne, Victoria.

The purpose of this Explanatory Statement is to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions in the Notice of Meeting.

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

Listing Rule 14.4 and Clause 7.3(f) of the Constitution allow 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 meeting of members and is eligible for re-election at that meeting.

Peter Hatfull, who was appointed on 14 July 2008, and Graeme Sloan, who was appointed on 25 July 2008, both retire in accordance with clause 7.3(f) of the Constitution and being eligible seeks re-election.

Peter Hatfull

Mr Hatfull is a Chartered Accountant with over 30 years experience in a range of senior executive position with Australian and International companies. He has an extensive skill-set in the areas of business optimisation, capital raising and company restructuring.

He was most recently Managing Director of the leading integrated metal recycling and contracting company, CMA Corporation, where he managed a period of dramatic growth and increase in profitability. Prior to that, he held senior management and Board positions in Australia, Africa and the UK.

Qualifications

Chartered Accountant ACA (UK) MAICD

Directorships in the past three years

Barminco Pty Ltd CMA Corporation Ltd

Graeme Sloan

Mr Sloan has been acting as a consultant to a number of Australian and international mining companies, including recently for Goldstar. He was Managing Director/CEO of Victorian gold producer Perseverance Corporation Limited between 2002 and 2007, where he led the feasibility study and development of the Fosterville Gold Operation.

Before joining Perseverance, Mr Sloan held a diverse range of senior national and international executive positions and has a strong operational and corporate background. He is keenly interested in community affairs and currently holds a

number of not- for-profit Board positions in education and other community interests.

Qualifications

B.App Sc. (Min Eng) Diploma in Mine Surveying MAusIMM Assoc MIEAust Member of the Institution of Engineers of Australia

Directorships in the past three years

Perseverance Corporation Ltd

2. RESOLUTION 3 – APPROVAL TO ISSUE CONVERTIBLE NOTES AND OPTIONS

In August 2008, Silja Investment Ltd (Silja) agreed to provide debt funding to the Company by way of an initial loan of $1.4 million (Initial Loan). The Initial Loan was made available on the condition that the Company seeks shareholder approval to roll the Initial Loan over into a Convertible Note and also seeks approval to issue two (2) other Convertible Notes to Silja (having a face value of $1.6 million and $3 million respectively).

Silja is a wholly owned subsidiary of and controlled by Z Nominees, currently the largest shareholder in the Company.

Resolution 1 seeks that Shareholders approve:

(a) for the purposes of Listing Rule 7.1 of the ASX Listing Rules, the issue of:
(i) 15,000,000 Options to the Silja; and
(ii) three (3) Convertible Notes to Silja;
(b) for the purposes of Item 7 of Section 611 of the Corporations Act, the acquisition of relevant interests in voting shares of the Company by Silja and Z Nominees by virtue of:
(i) the issue of up to 15,000,000 Shares on conversion of the Options referred to in paragraph (a)(i) above; and
(ii) the issue of Shares upon the conversion of the Convertible Notes to be issued pursuant to paragraph (a)(ii) above; and
(c) for the purposes of Listing Rule 10.1, the deemed disposal of a substantial asset to Silja as a result of the Company granting Silja security over its assets in relation to the funds made available under the Convertible Notes.

2.1 ASX Listing Rule 7.1

In general terms, ASX Listing Rule 7.1 prohibits the Company from issuing more than 15% of its ordinary issued shares in any 12 month period. Securities issued with Shareholder approval will not be included in the calculation of the Company’s 15% placement capacity.

If Resolution 3 is passed it will allow the Directors to issue the 15,000,000 Options and the three (3) Convertible Notes to Silja within 3 months of the date of the General

Meeting without diminishing the Company’s 15% placement capacity. The issue of Shares upon the conversion of the Convertible Note will not need any further Shareholder approval pursuant to Listing Rule 7.1.

For the purposes of ASX Listing Rule 7.3 the following information is provided in relation to Resolution 3:

(a) the maximum number of Options to be issued is 15,000,000;
(b) the maximum number of Convertible Notes to be issued is three (3);
(c) the Options and Convertible Notes will be issued no later than 3 months after the date of the General Meeting (or such later date to the extent permitted by ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment of the Shares will occur on the same date;
(d) the Options are being issued in consideration for Silja providing the debt funding under the Convertible Notes. As such, they do not have an issue price;
(e) the Convertible Notes are being issued in return for providing approximately $6 million in debt funding;
(f) the Options and Convertible Notes will be issued Silja;
(g) the Options will be issued on the terms and conditions set out in Section 5.2 below;
(h) the Convertible Notes will be issued on the terms and conditions set out in Section 5.3 below;
(i) the funds raised from the issue of the Convertible Notes will be used to for the completion of the current feasibility study on its 100%-owned Tubal Cain and Eureka Gold Projects in Victoria and to fund other ongoing corporate and operational commitments.

2.2 Terms of Options

The material terms and conditions of the Options are as follows:

(a) Each Option gives the Optionholder the right to subscribe for one Share (subject to any adjustments as a result of reconstructions, rights issue, bonus issues or the like). To obtain the right given by each Option, the Optionholder must exercise the Options in accordance with the terms and conditions of the Options.
(b) The Options will expire at 5:00 pm (WST) on 18 August 2012 (Expiry Date). Any Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.
(c) The amount payable upon exercise of each Option will be as set out in the Convertible Note Terms (Exercise Price).
(d) The 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 Options by lodging with the Company, before the Expiry Date:

(i) a written notice of exercise of Options specifying the number of Options being exercised; and
(ii) a cheque or electronic funds transfer for the Exercise Price for the number of 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 Options specified in the Exercise Notice.
(h) The Options are transferable but will not be quoted on ASX.
(i) All Shares allotted upon the exercise of Options will upon allotment rank pari passu in all respects with other Shares.
(j) The Company will not apply for quotation of the Options on ASX. However, The Company will apply for quotation of all Shares allotted pursuant to the exercise of Options on ASX within 10 Business Days after the date of allotment of those Shares and will do whatever is else is required to ensure the Shares are quoted on ASX.
(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 and such that the percentage of the Company’s issued shares which the Optionholder is entitled to subscribe for (differences due to necessary rounding excepted) and the total subscription price remain unchanged.
(l) There are no participating rights or entitlements inherent in the Options and Optionholders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 6 Business Days after the issue is announced. This will give Optionholders the opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue.
(m) In the event the Company proceeds with a pro rata issue (except a bonus issue) of securities to Shareholders after the date of issue of the Options, the exercise price of the Options will be reduced in accordance with the formula set out in ASX Listing Rule 6.22.2.
(n) In the event the Company proceeds with a bonus issue of securities to Shareholders after the date of issues of the Options, the number of securities over which an Option is exercisable will be increased by the number of securities which the Optionholder would have received if the Option had been exercised before the record date for the bonus issue.

2.3 Terms of Convertible Notes

The material terms of the Convertible Notes are as follows:

(a) the Convertible Notes will be issued in three (3) tranches, referred to as the First Tranche Note, Second Tranche Note and Third Tranche Note respectively;
(b) the First Tranche Note and Second Tranche Note will be issued on the same terms as each other (other than face value) and on different terms to the Third Tranche Note;
(c) subject to the receipt of Shareholder approval, the Company may draw down on the First Tranche Note and the Second Tranche Note at its election. Silja is not obliged to subscribe for the Third Tranche Note;
(d) the maturity date for all of the Convertible Notes is 5.00pm (WST) on 31 August 2013 (Maturity Date);
(e) the face value of the Convertible Notes will be as follows:
(i) First Tranche Note - $1.4 million plus 9% interest on $1.4 million calculated from the date that the Initial Loan was made to the date of issue of the First Tranche Note;
(ii) Second Tranche Note - $1.6 million; and
(iii) Third Tranche Note - $3 million;
(f) each of the Convertible Notes are convertible at the election of Silja (in whole or in part) at any time as follows:
(i) the First Tranche Note and the Second Tranche Note may be converted into that number of Shares calculated by dividing the amount of principal and interest so being converted by the lesser of:
- (A) 0.10 (i.e. the Shares will have an issue price of $0.10 each); and
- (B) the lowest price at which the Company issues any new Shares prior to the Maturity Date; and
(ii) the Third Trance Note may be converted into that number of Shares calculated by dividing the amount of principal and interest so being converted by that number which is a 20% discount to the volume weighted average price of the Shares as traded on ASX over the 60 trading days prior to the date that Silja Lender delivers a conversion notice to the Company;
(g) if Silja does not elect to convert the Convertible Notes, then the Company may choose to repurchase the Convertible Notes after three (3) years from their issue date has expired by repaying the amount outstanding on any Convertible Note (principal and interest) together with the amount of interest which would have been paid on that part of the Convertible Note repurchased between the date of repurchase and the Maturity Date for the Convertible Note being repurchased had Convertible that Note remained outstanding until its maturity. The Company may not redeem the Convertible Notes prior to this period without the consent of Silja;

(h) at the time of subscription for the Third Tranche Note, the holder will be entitled to appoint two (2) directors to the board of directors of the Company;
(i) interest is payable on the Convertible Notes at a rate of 9% per annum (net of all withholding and other taxes) and will be capitalised at quarterly intervals;
(j) as security for the Convertible Notes, the Company has granted Silja a first ranking charge over all of its assets and undertakings;
(k) the Convertible Notes are transferable at the election of the holder; and
(l) the Company has given Silja various negative covenants, including a covenant that the Company will not grant security to any other third parties without Silja’s consent.

2.4 Section 606 of the Corporations Act – Statutory Prohibition

Pursuant to Section 606(1) of the Corporations Act, a person must not acquire a relevant interest in issued voting shares in a listed company if the person acquiring the interest does so through a transaction in relation to securities entered into by or on behalf of the person and because of the transaction, that person’s or someone else’s voting power in the company increases:

(a) from 20% or below to more than 20%; or
(b) from a starting point above 20% and below 90%.

VOTING POWER AND RELEVANT INTERESTS

The voting power of a person in a body corporate is determined in accordance with Section 610 of the Corporations Act. The calculation of a person’s voting power in a company involves determining the voting shares in the company in which the person and the person’s associates have a relevant interest.

A person (“second person”) will be an “associate” of the other person (“first person”) if:

(a) the first person is a body corporate and the second person is:
(i) a body corporate the first person controls;
(ii) a body corporate that controls the first person; or
(iii) a body corporate that is controlled by an entity that controls the person;
(b) the second person has entered or proposed to enter into a relevant agreement with the first person for the purpose of controlling or influencing the composition of the Company’s board or the conduct of the Company’s affairs; and
(c) the second person is a person with whom the first person is acting or proposed to act, in concert in relation to the Company’s affairs.

Section 608(1) of the Corporations Act provides that a person has a relevant interest in securities if they:

(a) are the holder of the securities;
(b) have the power to exercise, or control the exercise of, a right to vote attached to the securities; or
(c) have power to dispose of, or control the exercise of a power to dispose of, the securities.

It does not matter how remote the relevant interest is or how it arises. If two or more people can jointly exercise one of these powers, each of them is taken to have that power.

Section 608(3) of the Corporations Act provides that a person has the relevant interests in any securities held by a body corporate in which the person’s voting power is above 20%.

Deemed Relevant Interests, Voting Power and Associates

Silja is controlled by Z Nominees. As such, this party is considered to be an “associate” of Silja for the purposes of the Corporations Act.

In the event all of the Shares the subject of Resolution 2 (i.e. as a result of conversion of the Convertible Notes and the Options) are issued, the voting power of Silja and Z Nominees will increase from a point below 20% to above 20%.

For the purposes of the remainder of this Explanatory Memorandum, Silja and Z Nominees will hereafter be referred to as the “Associated Parties”.

Section 611 Item 7 of the Corporations Act – Exemption from Section 606

Section 611 provides that certain acquisitions of relevant interests in a company’s voting shares are exempt from the prohibition in Section 606(1), including acquisitions approved previously by a resolution passed at a general meeting of the company in which the acquisition is made (Item 7 of Section 611).

For the exemption of Item 7 of Section 611 to apply, Shareholders must be given all information known to the person proposing to make the acquisition or their associates, or known to the Company that was material to the decision on how to vote on the resolution. In Regulatory Guide 111, the ASIC has indicated what additional information should be provided to shareholders in these circumstances.

For the purposes of the Corporations Act, and Regulatory Guide 111, the following information is disclosed in relation to the acquisition of relevant interest in the Company by the Associated Parties. Shareholders are also referred to the Independent Expert’s Report prepared by Stanton Partners International Pty Ltd which forms part of this Explanatory Statement.

The figures in the following section assume that:

(a) the Company has 152,981,096 Shares on issue and does not issue any additional Shares other than on conversion of the Options and Convertible Notes;
(b) the Convertible Notes all convert at $0.10, $0.05 or $0.01 per Share (i.e. we have provided examples of three alternative situations). Theoretically, the price could be vary significantly and if the price was lower Silja would be issued with a much larger number of Shares) or higher (Silja would be issued with a much lower number of Shares);

(c) all of the 15,000,000 Options are converted into Shares;
(d) the Initial Loan is advanced on 11 September 2008 and the Convertible Notes are all issued in early November following the meeting;
(e) the Convertible Notes are converted in full on the Maturity Date and all capitalised interest is also converted on this date (with the Company having not elected to repurchase any of the Convertible Notes prior to this date) with the effect that the following number of Shares are issued:
(i) First Tranche Note – 21,793,921
(ii) Second Tranche Note – 24,605,509; and
(iii) Third Tranche Note – 46,135,330;
(f) the Company does not issue any additional Shares (other than on conversion of the Options and/or the Convertible Notes) prior to the Maturity Date; and
(g) the Associated Parties do not acquire any additional Shares other than those referred to in Resolution 5.

Prescribed Information

(a) The identity of each person proposing to make an acquisition of a relevant interest (“Acquirer”) and their associates (“Associates”) is:

Acquirer	Associates
Silja	Z Nominees

(b) As at the date of this Notice, the following Associated Parties had a relevant interest in shares of the Company:

Party	Relevant Interest	Capacity
Silja	Nil	N/A
Z Nominees	23,489,242	Direct Holder

The relevant interests of the Associated Parties and their voting power is set out in the tables below :

Relevant Interest in Shares (assuming the Options and each of the Convertible Notes are converted at $0.10)

Party	Current	Options	First Tranche Note	Second Tranche Note	Third Tranche Note
Silja	Nil	15,000,000	36,793,921	61,399,430	107,534,760
Z Nominees Pty Ltd	23,489,242	38,489,242	60,283,163	84,888,672	131,024,002

Relevant Interest in Shares (assuming the Options and each of the Convertible Notes are converted at $0.05)

Party	Current	Options	First Tranche Note	Second Tranche Note	Third Tranche Note
Silja	Nil	15,000,000	58,587,842	107,798,842	200,069,502
Z Nominees Pty Ltd	23,489,242	38,489,242	82,077,084	131,288,084	223,558,744

Relevant Interest in Shares (assuming the Options and each of the Convertible Notes are converted at $0.01)

Party	Current	Options	First Tranche Note	Second Tranche Note	Third Tranche Note
Silja	Nil	15,000,000	232,939,200	478,994,200	940,347,500
Z Nominees Pty Ltd	23,489,242	38,489,242	256,428,442	502,483,442	963,836,742

Voting Power (assuming the Options and each of the Convertible Notes are converted at $0.10)

Party	Current	Options	First Tranche Note	Second Tranche Note	Third Tranche Note
Silja	Nil	8.93%	19.39%	28.64%	41.28%
Z Nominees Pty Ltd	15.35%	22.91%	31.77%	39.60%	50.29%
Total Voting Power	15.35%	22.91%	31.77%	39.60%	50.29%

The maximum increase in the Acquirer’s voting power as a result of the acquisition will be 41.28%.

The maximum voting power that the Acquirer would have as a result of the acquisition will be 41.28%.

The maximum increase in the Associated Party’s voting power as a result of the acquisition will be 34.94%

The maximum voting power that the Associated Party would have as a result of the acquisition will be 50.29%.

Voting Power (assuming the Options and each of the Convertible Notes are converted at $0.05)

Party	Current	Options	First Tranche Note	Second Tranche Note	Third Tranche Note
Silja	Nil	8.93%	27.69%	41.34%	56.67%
Z Nominees Pty Ltd	15.35%	22.91%	34.92%	53.82%	59.37%
Total Voting Power	15.35%	22.91%	34.92%	53.82%	59.37%

The maximum increase in the Acquirer’s voting power as a result of the acquisition will be 56.67%.

The maximum voting power that the Acquirer would have as a result of the acquisition will be 56.67%.

The maximum increase in the Associated Party’s voting power as a result of the acquisition will be 44.02%.

The maximum voting power that the Associated Party would have as a result of the acquisition will be 59.37%.

Voting Power (assuming the Options and each of the Convertible Notes are converted at $0.01)

Party	Current	Options	First Tranche Note	Second Tranche Note	Third Tranche Note
Silja	Nil	8.93%	60.36%	75.79%	86.01%
Z Nominees Pty Ltd	15.35%	22.91%	62.63%	76.66%	86.30%
Total Voting Power	15.35%	22.91%	62.63%	76.66%	86.30%

The maximum increase in the Acquirer’s voting power as a result of the acquisition will be 86.01%.

The maximum voting power that the Acquirer would have as a result of the acquisition will be 86.01%.

The maximum increase in the Associated Party’s voting power as a result of the acquisition will be 70.95%.

The maximum voting power that the Associated Party would have as a result of the acquisition will be 86.30%.

Intentions of the Associated Parties in relation to the Company

Other than as disclosed elsewhere in this Explanatory Memorandum, the Company understands that the Associated Parties:

(a) have no intention of making any changes to the business of the Company;
(b) do not propose to change the employment arrangements of the Company;
(c) do not intend to redeploy any fixed assets of the Company;
(d) do not have any present intention to inject further capital into the Company;
(e) do not intend to transfer any property between the Company and the Vendors or any person associated with any of them; and
(f) have no current intention to change the Company’s existing policies in relation to financial matters or dividends.

2.5 Listing Rule 10.1

ASX Listing Rule 10.1 provides that an entity (or any of its subsidiaries) must not acquire a substantial asset from, or dispose of a substantial asset to, inter alia, a related party or a substantial holder (if the person and the person’s associates have a relevant interest, or had a relevant interest at any time in the 6 months before the transaction, in at least 10% of the total votes attached to the voting securities).

An asset is substantial if its value, or the value of the consideration for it is, or in ASX’s opinion is, 5% or more of the equity interests of the company as set out in the latest accounts given to ASX under the Listing Rules.

For the purposes of ASX Listing Rule 10.1, Silja is a substantial holder because it is controlled by Z Nominees Pty Ltd, an entity that holds in excess of 10% of the issued shares in the Company.

The granting of security by the Company in favour of Silja (by way of a first ranking fixed and floating charge over the Company’s assets) is deemed under Listing Rule 10.1 to be a disposal of the underlying assets and the value of the debt secured is greater than 5% of the equity interests of the Company as set out in its last accounts given to ASX. As such, Shareholder approval is required for the purpose of ASX Listing Rule 10.1.

2.6 Advantages and Disadvantages

The Directors are of the view that the following non-exhaustive list of advantages may be relevant to a Shareholder’s decision on how to vote on Resolution 3:

(a) by approving the issue of the Options and Convertible Notes, the Company will be able to access up to approximately $6 million in debt funding. In the current market conditions, funding in this amount is difficult to otherwise obtain and the Company does not currently have any other viable sources of funding available to it; and
(b) if Shareholders do not approve resolution 3, then it is probable that the Company’s Share price would fall to below 9 or 10 cents and the Company would be in a cash starved situation. Brokers were approached to support a capital raising and it was planned that a rights issue to raise

$7,000,000 would proceed with underwriting support. However, no brokers were interested in assisting in the capital raising process at a commercial issue price and the capital raising had to be aborted. By raising a minimum of $3,000,000 (via the Initial Loan of $1,400,000 that converts to the Tranche 1 Convertible Note and $1,600,000 from the Tranche 2 Convertible Note) and possibly a further $3,000,000 (may be subscribed for at Silja’s option) by way of the Tranche 3 Convertible Note, the Company may have sufficient funds to complete the Bankable Feasibility Study (BFS) in respect of the Southern Crown Gold Project (although the final costs to complete a BFS have yet to be accurately costed). If this can be completed and the BFS discloses that the Southern Crown Gold Project is economically sound, then the opportunity for the Company to raise new share equity and possibly new debt equity should be enhanced; and

(c) the Options to be granted to Silja are exercisable at 15 cents (5,000,000), 20 cents (5,000,000) and 25 cents (5,000,000). All of the exercise prices are in excess of the current Share price of a Goldstar Share trading on ASX. If all of the Options were exercised, the Company would raise a total of $3,000,000. Silja as the holder of the Options would not exercise any Options until the price of a Share trading on ASX was in excess of the relevant exercise price and there was reasonable liquidity in Share trading. All Shareholders would be advantaged by an increase in the Share price.

The Directors are of the view that the following non-exhaustive list of disadvantages may be relevant to a Shareholder’s decision on how to vote on Resolution 3:

(a) if the Options and/or Convertible Notes are converting into Shares, there may be a significant dilution to the current holdings of Shareholders;
(b) the Company has granted Silja security over all of its assets. If the Company is unable to repay the debt when due (or otherwise defaults under the security), Silja will have first priority to the Company’s assets in administration or liquidation. This will result in Shareholders having less chance of receiving a significant or any return in these circumstances.

2.7 Directors recommendation

Based on the information available, including that contained in this Explanatory Statement, all of the Directors consider that the Resolution 3 is in the best interests of the Company and recommend that Shareholders vote in favour of Resolution 3.

2.8 Independent Expert’s Report

Both Listing Rule 10.1 and Item 7 of Section 611 of the Corporations provide that shareholder approval sought for the purpose of rules must include a report on the proposed acquisition from an independent expert. Accompanying this Explanatory Statement is an Independent Expert’s Report prepared by Stanton Partners International Pty Ltd concluding that the proposed transaction is not fair but reasonable to the non-associated Shareholders of the Company.

The transaction will result in various advantages and disadvantages which Shareholders need to consider in assessing the impact of the Transaction on the Company.

Shareholders are urged to carefully read the Independent Expert’s Report to understand the scope of the report, the methodology of the valuation and the sources of information and assumptions made.

3. ENQUIRIES

Shareholders are required to contact Mr Bruce Paterson on (+ 61 3) 9641 8939 if they have any questions with respect to the matters set out in these documents.

GLOSSARY

$ means Australian dollars.

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

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited or the Australian Securities Exchange, as the context requires.

ASX Listing Rules means the Listing Rules of ASX.

Board means the current board of directors of the Company.

Business Days means any day other than a Saturday, Sunday or public holiday in the State of Western Australia.

Company means Goldstar Resources NL (ACN 098 939 274).

Constitution means the Company’s constitution.

Convertible Note means a convertible note to be issued pursuant to Resolution 3 on the terms set out in paragraph 2.3.

Corporations Act means the Corporations Act 2001 (Cth).

Directors mean the current directors of the Company.

EST means Eastern Standard Time as observed in Melbourne, Victoria.

Explanatory Statement means the explanatory statement accompanying the Notice of Meeting.

Notice of Meeting means this notice of general meeting including the Explanatory Statement.

Option means an option to subscribe for a Share on the terms set out in paragraph 2.2 of the Explanatory Statement.

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.

PROXY FORM

APPOINTMENT OF PROXY GOLDSTAR RESOURCES NL ACN 098 939 274

GENERAL MEETING

I/We

Being a member of Goldstar Resources NL entitled to attend and vote at the General meeting, hereby

Appoint

Name of proxy

Mark this box if you wish to appoint the Chair of the General meeting as your proxy

or failing the person so named or, if no person is named, the Chair of the General meeting, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, as the proxy sees fit, at the General meeting to be held at 10.00am (EST), on 31 October 2008 at Oaks On Market, 60 Market Street, Melbourne, Victoria, and at any adjournment thereof.

If no directions are given, the Chair will vote in favour of all the Resolutions.

Voting on Business of the General meeting

Resolution 1 – Re-election of Director – Peter Hatfull Resolution 2 – Re-election of Director – Graeme Sloan Resolution 3 – Approval to issue Convertible Notes and Options

FOR AGAINST ABSTAIN

OR

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If the Chair of the General 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 3 please place a mark in this box.

By marking this box, you acknowledge that the Chair of the General meeting may exercise your proxy even if he has an interest in the outcome of Resolution 3 and that votes cast by the Chair of the General meeting for Resolution 3 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 Chair will not cast your votes on Resolution 3 and your votes will not be counted in calculating the required majority if a poll is called on Resolution 3.

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

If two proxies are being appointed, the proportion of voting rights this proxy represents is

Signed this day of 2008

By:

Individuals and joint holders Companies (affix common seal if appropriate)

Signature Director Signature Director/Company Secretary 19 Signature Sole Director and Sole Company Secretary

GOLDSTAR RESOURCES NL ACN 098 939 274

I ns tr u cti o ns fo r C om p l et in g ‘ A p po in tm e n t o f Pr o x y ’ F or m

1.

A member entitled to attend and vote at an General meeting is entitled to appoint not more than two proxies to attend and vote on a poll on their behalf. The appointment of a second proxy must be done on a separate copy of the Proxy Form. Where more than one proxy is appointed, such proxy must be allocated a proportion of the member’s voting rights. If a member appoints two proxies and the appointment do not specify this proportion, each proxy may exercise half the votes. A duly appointed proxy need not be a member of the Company.

Where a member’s holding is in one name the holder must sign. Where the holding is in more than one name, all members should sign.
Where a Proxy Form or form of appointment of corporate representative is lodged and is executed under a power of attorney, the power of attorney must be lodged in like manner as this Proxy Form.
Corporate members should comply with the execution requirements set out on the Proxy Form or otherwise with the provisions of Section 127 of the Corporations Act. Section 127 of the Corporations Act provides that a company may execute a document without using its common seal if the document is signed by:
2 directors of the company;
a director and a company secretary of the company; or
for a proprietary company that has a sole director who is also the sole company secretary – that director.

For the Company to rely on the assumptions set out in Section 129(5) and (6) of the Corporations Act, a document must appear to have been executed in accordance with Section 127(1) or (2). This effectively means that the status of the persons signing the document or witnessing the affixing of the seal must be set out and conform to the requirements of Section 127(1) or (2) as applicable. In particular, a person who witnesses the affixing of a common seal and who is the sole director and sole company secretary of the company must state that next to his or her signature.

Completion of a Proxy Form will not prevent individual members from attending the General meeting in person if they wish. Where a member completes and lodges a valid Proxy Form and attends the General meeting in person, then the proxy’s authority to speak and vote for that member is suspended while the member is present at the General meeting.
To vote by proxy, please complete and sign the enclosed Proxy Form and return it to the Share Registry either:
(a) by post to Security Transfer Registrars Pty Ltd, PO Box 535, Applecross, WA, 6953;
(b) by hand to 770 Canning Highway, Applecross, WA, 6153; or
(c) by facsimile on +61 8 9315 2233,

so that it is received not later than 10.00am (EST) on 29 October 2008.

Proxy forms received later than this time will be invalid.

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ABN 42 128 908 289

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15 September 2008

The Directors Goldstar Resources NL Level 11 330 Collins Street MELBOURNE VIC 3000

Dear Sirs,

RE: GOLDSTAR RESOURCES NL (ABN 76 098 939 274) MEETING OF SHAREHOLDERS TO CONSIDER A RESOLUTION UNDER SECTION 611 (ITEM 7) OF THE CORPORATIONS ACT (“TCA”) AND AUSTRALIAN SECURITIES EXCHANGE (“ASX”) LISTING RULE 10.11 RELATING TO THE PROPOSAL TO ISSUE UP TO THREE TRANCHES OF CONVERTIBLE NOTES, ISSUE 15,000,000 SHARE OPTIONS TO SILJA INVESTMENT LIMITED AND ALLOW A CHARGE OVER THE ASSETS AND UNDERTAKINGS OF GOLDSTAR RESOURCES NL

1. INTRODUCTION

1.1 We have been requested by the Directors of Goldstar Resources NL (“Goldstar” or “the Company”) to prepare an Independent Expert’s Report to determine the fairness and reasonableness of the transactions referred to in resolution 3 as detailed in the Notice of Meeting to Goldstar shareholders (“the Notice”) to be issued to shareholders in September 2008. Resolution 3 relates to the proposal to issue three tranches of Convertible Notes (“Convertible Notes”) up to the value of $6,000,000 in Goldstar to Silja Investment Limited (“Silja”) a Jersey incorporated company that is wholly owned by Z Nominees Pty Ltd (“Z Nominees”) a substantial shareholder of Goldstar. Z Nominees is controlled by the Zurich Financial Group (through a Jersey company, Zurich Trust Limited). We are not reporting on the merits or otherwise of resolutions 1 and 2 that relate to the re-election of two directors of Goldstar. Paragraph 2.2 refers to our conclusion that the proposal is not fair but reasonable. The Company as part of the debt raising has borrowed $1,400,000 (“Initial Loan”) from Silja and this debt will convert to the Tranche 1 Convertible Notes as referred to below.
1.2 The material terms of the Convertible Notes are as follows:
(a) the Convertible Notes will be issued in three (3) tranches, referred to as the First Tranche Note, Second Tranche Note and Third Tranche Note respectively;
(b) the First Tranche Note and Second Tranche Note will be issued on the same terms as each other (other than face value) and on different terms to the Third Tranche Note;
(c) subject to the receipt of shareholder approval, the Company may draw down on the First Tranche Note and the Second Tranche Note at its election. Silja is not obliged to subscribe for the Third Tranche Note;

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(d) the maturity date for all of the Convertible Notes is 5.00pm (WST) on 31 August 2013 (Maturity Date);
(e) the face value of the Convertible Notes will be as follows:
- (i) First Tranche Note - $1,400,000 plus 9% interest on $1,400,000 calculated from the date that the Initial Loan was made to the date of issue of the First Tranche Note;
- (ii) Second Tranche Note - $1,600,000; and
- (iii) Third Tranche Note - $3,000,000;
(f) each of the Convertible Notes are convertible at the election of Silja (in whole or in part) at any time as follows:
- (i) the First Tranche Note and the Second Tranche Note may be converted into that number of shares calculated by dividing the amount of principal and interest so being converted by the lesser of:
- (A) 0.10 (i.e. the shares will have an issue price of 10 cents each); and
- (B) the lowest price at which the Borrower issues any new shares prior to the Maturity Date; and
- (ii) the Third Tranche Note may be converted into that number of shares calculated by dividing the amount of principal and interest so being converted by that number which is a 20% discount to the volume weighted average price of the shares as traded on ASX over the 60 trading days prior to the date that Silja as Lender delivers a conversion notice to the Company;
(g) if Silja does not elect to convert the Convertible Notes, then the Company may choose to repurchase the Convertible Notes after three (3) years from their issue date has expired by repaying the amount outstanding on any Convertible Note (principal and interest) together with the amount of interest which would have been paid on that part of the Convertible Note repurchased between the date of repurchase and the Maturity Date for the Convertible Note being repurchased had Convertible that Note remained outstanding until its maturity. The Company may not redeem the Convertible Notes prior to this period without the consent of Silja;
(h) at the time of subscription for the Third Tranche Note, the holder will be entitled to appoint two (2) directors to the board of directors of the Company;
(i) interest is payable on the Convertible Notes at a rate of 9% per annum (net of all withholding and other taxes) and will be capitalised at quarterly intervals;
(j) as security for the Convertible Notes, the Company has granted Silja a first ranking charge over all of its assets and undertakings;
(k) the Convertible Notes are transferable at the election of the holder; and
(l) the Company has given Silja various negative covenants, including a covenant that the Company will not grant security to any other third parties without Silja’s consent.
1.3 There are also to be issued 15,000,000 share options (“Options”) in Goldstar to Silja exercisable on or before 18 August 2012. There is to be three tranches of Options being:
Tranche 1 Options – 5,000,000 exercisable at 15 cents each;
• Tranche 2 options – 5,000,000 exercisable at 20 cents each; and • Tranche 3 options – 5,000,000 exercisable at 25 cents each.

Further details on the Options are set out in the Notice and Explanatory Statement to Shareholders attached to the Notice.

1.4 As security for the Convertible Notes, the Company is to grant a fixed and floating charge over the assets and undertakings of the Goldstar Group. The following are events of default under the Charge and Converting Loan Agreement:

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if the Company makes default in making a payment and such default remains outstanding for a period of 5 business days after receiving written demand for payment from Silja;
if the Company breaches the terms of the Converting Loan Agreement or Charge and that breach is not capable of remedy;
if the Company breaches the terms of the Converting Loan Agreement or Charge and that breach, if capable of remedy, has not been remedied within 5 business days of receiving notice of the breach from Silja requiring that breach to be remedied;
if an order is made or a resolution is effectively passed for the winding up of the Company except for the purposes of a reconstruction or amalgamation with the prior written consent of Silja (such consent not to be unreasonably withheld);
if the Company enters liquidation;
if any covenant, representation, warranty, undertaking or statement made by the Company in relation to the entering of the Converting Loan Agreement shall prove to be materially incorrect as at the date it was made or given;
if there is a material adverse change affecting the Company; and
if the Company has defaulted in payment of an amount in excess of $20,000 owing to any third party.
1.5 Under Section 606 of TCA, a person must not acquire a relevant interest in issued voting shares in a company if because of the transaction, that persons’ or someone else’s voting power in the company increases:
- (a) from 20% or below to more than 20%; or (b) from a starting point that is above 20% and below 90%.

Under Section 611 (Item 7) of TCA, Section 606 does not apply in relation to any acquisition of shares in a company by resolution passed at a general meeting at which no votes were cast in favour of the resolution by the acquirer or the disposer or their respective associates. An independent expert is required to report on the fairness and reasonableness of the transactions noted in resolution 3 pursuant to a Section 611 (Item 7) meeting.

1.6 If resolution 3 is passed by shareholders and shares allotted and issued as a result of conversion of all of the Convertible Notes (assuming the Tranche 3 Notes are also issued) to be issued to Silja, Silja may own or be associated with 131,093,196 ordinary shares of the total of 260,585,050 ordinary fully paid shares that would then be on issue (in the absence of any capital raisings or exercise of any outstanding share options other than for the exercise of the 15,000,000 Options) representing approximately 50.29% (Z Nominees who is associated with Silja currently holds 23,489,242 shares or 15.35% of the current issued capital of Goldstar). The above percentages assume a conversion rate at 10 cents per share. Refer to paragraph 3.4 of the report on a possible range of shareholdings by Silja and its associate, Z Nominees combined. The percentage interest of Silja could be higher if the conversion price is lower than 10 cents per share. As Silja is wholly owned by Z Nominees, we have referred to the two companies combined as the Zurich Group.

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1.7 ASX Listing Rule 10.1 provides that an entity (or any of its subsidiaries) must not acquire a substantial asset from, or dispose of a substantial asset to, inter alia, a related party or a substantial holder (if the person and the person’s associates have a relevant interest, or had a relevant interest at any time in the six months before the transaction, in at least 10% of the total votes attached to the voting securities). An asset is substantial if its value or the value of the consideration for it is, or in ASX’s opinion is, 5% or more of the equity interests of the company as set out in the latest accounts given to ASX under the Listing Rules. For the purposes of ASX Listing Rule 10.1, Silja is a substantial holder because it is controlled by Z Nominees, an entity that holds in excess of 15% of the issued shares in the Company. The granting of security by the Company in favour of Silja (by way of a first ranking fixed and floating charge over the Company’s assets) is deemed under Listing Rule 10.1 to be a disposal of the underlying assets and the value of the debt secured is greater than 5% of the equity interests of the Company as set out in its last accounts given to ASX. As such, shareholder approval is required for the purpose of ASX Listing Rule 10.1.
1.8 Under ASIC Regulatory Guideline 111 “Contents of Expert Reports” and ASX Listing Rule 10.11 an Independent Expert’s Report is required to report on the fairness and reasonableness of the transactions pursuant to resolution 3. The Directors have requested Stantons International Securities Pty Ltd to prepare an Independent Expert’s Report to assist the shareholders in determining how to vote on resolution 3 as outlined in the Notice.
1.9 Apart from this introduction, the report considers the following:
Summary of opinion
Implications of the proposals
Future directions of Goldstar
Basis of valuation of Goldstar
Premium for control
Fairness and Reasonableness of the Proposals
Conclusion as to Fairness and Reasonableness
Sources of information
Appendix A and our Financial Services Guide

2. SUMMARY OF OPINION

2.1 In determining the fairness and reasonableness of the transactions pursuant to resolution 3, we have had regard for the definitions set out by the Australian Securities and Investments Commission (“ASIC”) in its Regulatory Statement 111. Regulatory Statement 111 states that an opinion as to whether an offer is fair and/or reasonable shall entail a comparison between the offer price and the value that may be attributed to the securities under offer (fairness) and an examination to determine whether there is justification for the offer price on objective grounds after reference to that value (reasonableness). Regulatory Statement 111 also states that in all cases, where an acquisition of shares by way of an allotment is to be approved by shareholders pursuant to Section 611 (Item 7) of TCA, a report by an independent expert stating whether or not the proposals pursuant to resolution 3 are fair and reasonable, having regard to the interests of shareholders other than the proposed

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allottees (in this case, Silja and its associates including Z Nominees), and whether a premium for potential control is being paid by the allottees, will be required. Policy Statement 74 also provides that such an allotment should involve a comparison of the advantages and disadvantages likely to accrue to non-associated shareholders if the transaction proceeds compared with if it does not.

Accordingly, our report relating to resolution 3 is concerned firstly with the fairness and reasonableness of the proposals from the point of view of the existing non associated shareholders of Goldstar, and secondly whether the price payable for the potential to obtain an increased significant shareholding interest (by the Zurich Group) if Convertible Notes are converted and Options are exercised includes a premium for control.

2.2 In our opinion:

The proposals as outlined in resolution 3 whereby Goldstar will issue (to Silja) up to three Convertible Notes and allow such Notes to be converted to ordinary shares and allow the issue of 15,000,000 Options (and allowing the Options to be exercised), are, on balance not fair but in view of the current financial state of the Company may be considered to be reasonable to the non-associated shareholders of Goldstar.

The Company as part of the Convertible Notes issues with Silja has agreed to allow Silja to take a first ranking charge over the assets and undertakings of the Goldstar Group. Although this is not unusual to protect the lender (Silja), it may cause complications later on if the Company wishes to obtain debt finance to finance part of the development of the Southern Crown Gold Project. Any major financier would wish to have first security and this may lead to a rejection by financiers unless the charge by Silja was dropped to a second ranking charge. If debt finance is not required, then the issue is not a significant concern although if the Company failed, Silja could take control of the assets of Goldstar by appointing a Receiver and Manager. The opinions expressed above must be read in conjunction with the more detailed analysis and comments made in this report.

3. IMPLICATIONS OF THE PROPOSALS

3.1 As at 14 September 2008, there were 150,630,096 fully paid ordinary shares on issue in Goldstar. In addition, there are a total of 2,351,000 partly paid shares outstanding as at 11 September 2008. The partly paid shares are paid to 0.1 cent each with unpaid calls of 9.9 cents each ($232,749 of unpaid calls not paid). These partly paid shares were put to auction in August 2008 but none of the partly paid shares were sold to pay outstanding calls. As such they are still disclosed as partly paid shares. If the proposals with Silja proceed, it is expected that the partly paid shares currently held in trust by Goldstar will be sold and they will become fully paid shares. In calculating possible percentages, we have assumed that the partly paid shares will convert to fully paid shares in the near future. The significant fully paid shareholders as at 10 September 2008 are disclosed as:

Name of Shareholder (and associates) Z Nominees Pty Ltd Citicorp Nominees Mineral Resources Limited (“MRL”) ANZ Nominees HALB Nominees Ltd		No. of Shares 23,489,242 20,867,383 7,379,241 2,601,966 2,482,800	% Interest 15.35 13.64 4.82 1.70 1.63
		56,820,632	37.14

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3.2 The top twenty fully paid shareholders as at 10 September 2008 own 51.71% of the current issued capital. Z Nominees in 2006 acquired approximately 19 million of its shares at an average price of 37.6 cents per share. MRL acquired the majority (7,189,241 shares) of its fully paid shares on 29 April 2008 at a cost of 14.5 cents per share.
3.3 The unlisted share options currently on issue are 360,000 share options exercisable at 37.5 cents on or before 31 July 2009, 696,000 share options exercisable at 35 cents each on or before 27 September 2009, 725,000 share options exercisable at 37.5 cents each on or before 30 September 2009 and 75,000 share options exercisable at 15 cents each on or before 9 November 2011.
3.4 By issuing the Tranche 1 and Tranche 2 Convertible Notes, the Company raises a gross $3,000,000 and if Tranche 3 Convertible Notes are also issued a further $3,000,000 is raised (total convertible debt raising may be $6,000,000). It should be noted that a loan of $1,400,000 has already been made by Silja and on the basis that shareholders approve resolution 1, the Loan of $1,400,000 becomes the Tranche 1 Convertible Note. If all of the Convertible Notes are issued and are not converted to shares in Goldstar at the option of Silja, the total debt repayable, including capitalised interest (of approximately $3,253,476) at the Maturity Date of 31 August 2013 approximates $9,253,476. This assumes that the Initial Loan of $1,400,000 is made on 11 September 2008 (that converts to the Tranche 1 Convertible Note) and that both Tranche 2 and Tranche 3 Convertible Notes are issued on 31 October 2008. In the event that the Convertible Notes are converted to ordinary fully paid shares in Goldstar and all of the 15,000,000 options are exercised by Silja, the shareholding interests of Silja in conjunction with Z Nominees (the Zurich Group) increases from the 23,489,242 shares now held by Z Nominees (15.35%) to 131,024,002 fully paid shares representing approximately 50.29% of the expanded issued fully paid capital of the Company (260,515,856 shares may then be on issue assuming no further capital raisings, 15,000,000 share options are exercised and the partly paid shares are sold to become fully paid shares).

The Tranche 1 Convertible Note if interest at 9% is capitalised to the Maturity Date would total approximately $2,179,392 and if converted to equity at 10 cents each approximately 21,793,921 shares would be issued to Silja. If the Tranche 1 conversion was undertaken at 1 cent or 5 cents per share, the number of shares issued to Silja would increase to 217,939,200 or 43,587,842 respectively.

The Tranche 2 Convertible Note if interest at 9% is capitalised to the Maturity Date would total approximately $2,460,550 and if converted at 10 cents per share to equity approximately 24,605,509 shares would be issued to Silja. If the Tranche 2 conversion was undertaken at 1 cent or 5 cents per share, the number of shares issued to Silja would increase to 246,055,000 or 49,211,000 respectively.

As noted, the shares that may be issued at Maturity Date on conversion of the Tranche 1 and 2 Convertible Notes may be more if Goldstar issues ordinary shares to third parties prior to the Maturity Date at a price less than 10 cents. In this occurred, the number of shares to be issued if Tranche 1 and 2 Convertible Notes were converted to shares would be at the lowest price that a share issue was undertaken by Goldstar prior to the Maturity Date. We have given examples if the conversion prices were 1 cent and 10 cents per share.

The Tranche 3 Convertible Note if interest at 9% is capitalised to the Maturity Date would total approximately $4,613,533 and if converted to equity at 10 cents per share approximately 46,135,330 shares would be issued to Silja. This assumes the Tranche 3 Convertible Note is issued at the same time as the Tranche 2 Convertible Note that is assumed to be 31 October 2008. The actual number of shares to be issued on conversion

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of the Tranche 3 Convertible Notes if issued and converted at the Maturity Date may not be at 10 cents per share (as is the Tranche 1 and 2 Convertible Notes assuming there are no further capital raisings before the Maturity Date below 10 cents) as the Tranche 3 Convertible Notes are convertible at a 20% discount to the volume weighted average share price (“VWAP”) as traded on ASX over the 60 day period prior to conversion. The actual number of shares if the Tranche 3 Convertible Note is issued and converted may be less or more than the estimated 46,135,330 shares used in calculating the above percentages and numbers. If the Tranche 3 conversion was undertaken at 1 cent or 5 cents per share, the number of shares issued to Silja would increase to 461,353,300 or 92,270,660 respectively.

In the event that all conversions of the three Tranches of Convertible Notes took place at 1 cent each or 5 cents each, the potential shareholding of Silja would substantially increase. However, the final percentages cannot be determined as the conversion of the Tranches 1 and 2 below 10 cents only occurs if a capital raisings are undertaken before Maturity Date below 10 cents. The number of shares to be issued (if any) under a capital raising is indeterminable. In addition, the number of shares to be issued on conversion of Tranche 3 Convertible Notes cannot be accurately determined as noted above.

3.5 In relation to the Board of Directors control, the current directors are Messrs Gordon Hill, Eileen Carr, Ian Pankhurst, Jeff O’Leary, Peter Hatfull, and Graeme Sloan. Gordon Lewis assumes the appointment of Managing Director in October 2008. It is proposed to appoint one new director as a nominee of the Zurich Group following the passing and consummation of resolution 1 in the Notice and after the issue of the Tranche 1 and 2 Convertible Notes. The Zurich Group may nominate an additional director (Alexander Haller as noted in the Converting Note Agreement) if it subscribes for the Tranche 3 Convertible Note. The Board may be subject to further change should Goldstar move into gold production by developing the Tubal Cain and Eureka Gold Projects in Victoria (being part of the Southern Crown Gold Project that forms part of the Walhalla Gold Project Field.

4. FUTURE DIRECTION OF GOLDSTAR

4.1 We have been advised by a Director of Goldstar that:
The immediate short-term plan is to complete the issue and allotment of at least the Tranche 1 and 2 Convertible Notes (and possibly the Tranche 3 Convertible Notes) and the issue of 15,000,000 Options to Silja as outlined in resolution 3 and use the funds (minimum to be raised is $3,000,000 and the maximum is $6,000,000) for the purpose of working capital and developing the Walhalla Gold Field and specifically the Tubal Cain and Eureka Gold Projects in Victoria (hereby known as the Southern Crown Gold Project);
Composition of the Board of Directors of Goldstar is proposing to change in the near future as outlined in paragraph 3.5;
No dividend policy has been set and is not proposed to be set until such time as the Company is profitable and has a positive cash flow; and
The Company may seek to raise further capital if required to develop the Tubal Cain and Eureka Gold Projects. The Company had announced the proposal to undertake a non-renounceable rights issue (to be underwritten) to raise a gross $7,000,000 but due to poor stock market conditions and a falling gold price over the past month or so, the rights issue was cancelled as it was deemed that it would not be in the best interests of

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shareholders. The Convertible Note issues (to raise the minimum of $3,000,000 and up to $6,000,000) are to replace the proposed $7,000,000 share capital raising.

5. BASIS OF TECHNICAL VALUATION OF GOLDSTAR

5.1 Issue and Possible Conversion of Convertible Notes
5.1.1 In considering the proposals as outlined in resolution 3 we have sought to determine if the conversion price of the Notes by Silja is in excess of the current fair value of the shares in Goldstar on issue and then conclude whether the proposals are fair and reasonable to the existing non-associated shareholders of Goldstar.
5.1.2 The proposals pursuant to resolution 3 would be fair to the existing non associated shareholders if the conversion price of the potential loans (via the Convertible Notes) referred to above are greater than or equal to the implicit value of the shares in Goldstar currently on issue. Accordingly, we have sought to determine a theoretical value that could reasonably be placed on Goldstar shares for the purposes of this report.
5.1.3 The valuation methodologies we have considered in determining the current technical value of a Goldstar share are:
Capitalised maintainable earnings/discounted cash flow,
Takeover bid - the price which an alternative acquirer might be willing to offer,
Adjusted net asset backing and windup value, and
The market value price of Goldstar shares.
5.2 Capitalised Maintainable Earnings / Discounted Cash Flows
5.2.1 Goldstar currently does not have a reliable cash flow or profit history from a business undertaking and therefore this methodology is not appropriate. The Company is currently evaluating the Southern Crown Gold Project in Victoria and will make a decision possibly later this year or early next year as to whether it is economically feasible to enter into production mode. It may be too early to use a discounted cash flow model as proven and probable economic reserves are yet to be accurately determined. Preliminary evaluations undertaken by the Company however indicate that there is a likelihood that the Southern Crown Gold Project will more than likely proceed and some preliminary net present value numbers (that at this stage cannot be relied on) indicate that the Project may have a NPV that at least supports the current carrying value of the capitalised Victorian exploration costs and may well exceed materially the current carrying value (as at 30 June 2008). However, the Project cannot proceed without further expenditure on evaluation and bankable feasibility studies and ultimately further funds for capital and working capital expenditure. Currently, Goldstar does not have the funds and thus any perceived technical value of the Project is theoretical as without funds it will not be developed.
5.3 Takeover Bid

We have been advised by the Directors of Goldstar that they do not believe that there would be any person with an interest in taking over the Company by way of a formal takeover bid. To our knowledge, there are no current bids in the market place and the Directors of Goldstar have formed the view that there is unlikely to be any takeover bids made for Goldstar in the immediate future. It is noted however that the holding of the Zurich Group could approximate 50.29% (and could be significantly more if shares are

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issue on conversion of Tranches 1 to 3 at below 10 cents) post consummation of resolution 3 but only if all three Convertible Notes were issued and all converted to ordinary fully paid shares in Goldstar (plus the exercise of 15,000,000 share options). There is no guarantee that Silja will convert Convertible Notes in the future and exercise any of the 15,000,000 share options (exercisable in three equal tranches at 15 cents, 20 cents and 25 cents before 31 August 2012).

5.4 Net Asset Backing and Wind-Up Value
5.4.1 As there is no intention to wind up the Company, we have not considered wind up values for the purposes of this report. A summary of the unaudited consolidated balance sheet as at 30 June 2008 of Goldstar is summarised below along with two pro-forma consolidated balance sheets after allowing for the following:
the issue of $3,000,000 of Tranche 1 and 2 Convertible Notes to Silja (A pro-forma);
the allowance of $50,000 for costs relating to the Notice (A and B pro-forma);
the issue of a further $3,000,000 of Tranche 3 Convertible Notes (B pro-forma);
the incurring of say $1,000,000 in additional losses from July 2008 to September 2008 (actual unaudited and A and B pro-forma). The actual losses may be materially higher; and
the issue of 15,000,000 share options at a fair value of say $758,500 and expensed.

Current assets Cash and cash equivalents Receivables Inventories Other Non current assets Plant and equipment Capitalised exploration and evaluation costs - Victoria Capitalised exploration and evaluation costs - Queensland Capitalised exploration and evaluation costs – Western Australia Receivables Total assets Current liabilities Trade and other payables Provisions Non Current Liabilities Convertible Notes	Unaudited 30 June 2008 A Pro- forma 30 June 2008 B Pro- forma 30 June 2008 $000’s $000’s $000’s 906 3,906 6,906 51 51 51 22 22 22 20 20 20
	999 3,999 6,999
	2,796 2,796 2,796 27,536 27,536 27,536 501 501 501 1,867 1,867 1,867 16 16 16
	32,716 32,716 32,716
	33,715 36,715 39,715
	741 741 741 69 69 69
	810 810 810

	- 3,000 6,000
	- 3,000 6,000

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Total liabilities Net Assets Equity Issued capital Reserves Accumulated losses Net Equity	810 3,810 6,810
	32,905 32,905 32,905
	39,039 39,039 39,039 319 1,078 1,078 (6,453) (7,212) (7,212)
	32,905 32,905 32,905

5.4.2 Based on the book values at 30 June 2008 this equates to a value per share (152,981,096 shares) of approximately 21.5 cents (ignoring the value, if any, of non-booked tax benefits). Under International Financial Reporting Standards (“IFRS”), part of the Convertible Notes would be treated as equity to reflect the ability of the holder of the Convertible Notes to convert to equity (at Silja’s option). To simplify the balance sheets we have disclosed 100% of the Convertible Notes as liabilities.
5.4.3 Based on the pro-forma consolidated balance sheets A and B, the net book assets after taking into account the proposals pursuant to resolution 3 and allowing for costs as noted above is approximately $32,905,000. Thus, the net book asset backing per share (152,981,096 shares) would approximate 21.5 cents. There is no change as the funds to be raised are by debt.
5.4.4 In the event that the Convertible Notes are converted to ordinary fully paid shares in Goldstar, the net asset position (ignoring subsequent losses and share issues on conversion of 15,000,000 Options but allowing for the full capitalised interest on the Convertible Notes) would equate to:
Assume Tranche 1 and 2 Convertible Notes are converted (at 10 cents per share)
- $34,265,000 and the number of shares on issue would be 199,380,256 resulting in an asset backing per share of approximately 17.1 cents.
Assume Tranches 1, 2 and 3 Convertible Notes are converted (all at 10 cents per share)
- $35,651,000 and the number of shares on issue may be 245,515,856 resulting in an asset backing per share of approximately 14.5 cents.
5.5 Market Price of Goldstar Shares
5.5.1 We set out below a summary of share prices of Goldstar since 1 May 2008 to 9 September 2008, the day of the announcement of the proposals pursuant to resolution 3 (announced to the market after close of trading).

				Volumes Trade
2008	High Cents	Low Cents	Last Sale Cents	(000’s)
May	26.5	21.0	24.5	5,226
June	28.0	15.5	18.5	3,242
July	18.5	12.0	13.5	3,949
August	13.5	8.9	13.0	1,969
September
(to 9th)	14.0	8.5	8.5	905

The share price has been steadily falling over the past six months partly due to a general fall in the market generally and particularly over the past few months due a decline in the gold price. The gold price in June 2008 was around US$875 to US$900 per ounce (and peaking at around US$975 in mid July 2008) and as at 25 August 2008 it was US$820 (it

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fell below US$800 in early August 2008). As at 9 September 2008 the gold price was approximately US$800. In March 2008 is reached over US$1000 per ounce and for the period February 2008 to mid July 2008 gold traded in the range of US$850 to US$975. There has been a dramatic fall since mid July 2008 that to some extent though has been cushioned by a dramatic fall in the Australian dollar against the US dollar in the past 5 weeks to 10 September 2008. It is our belied that the fall in the share price of a Goldstar share has been affected by the fall in the price of gold as Goldstar is a potential gold producer. As at 8 September 2008, the share price was 8.5 cents and since the announcement of the Convertible Note proposals with Silja, the shares have traded around 9 cent and 10 cent mark but only 70,000 shares have been traded on 10 and 11 September 2008.

5.5.3 No independent valuations have been prepared on the mineral prospects of Goldstar and we do not consider it necessary to obtain an independent valuation of the mineral prospects for the purposes of this report. We note that the market has been informed of all of the current projects, joint ventures and farm in/farm out arrangements entered into between Goldstar and other parties. We also note it is not the present intention of the Directors of Goldstar to liquidate the Company and therefore any theoretical value based upon wind up value or even net book value (as adjusted), is just that, theoretical. The shareholders, existing and future, must acquire shares in Goldstar based on the market perceptions of what the market considers a Goldstar share to be worth. It is noted that over the past year or so, many gold exploration and producer companies listed on the ASX were arguably trading at premiums to appraised technical values (this is a turn around from the early 2000’s when a discount may have applied) although in recent months the premium has been reduced. The market capitalisation of Goldstar as at 10 September 2008 is approximately $15 million that is less than the net equity position as noted above of around $33 million as at 30 June 2008 (as adjusted). In the case of Goldstar, the monthly volume of trades over the last six months on the ASX is enough to argue that an orderly market exists for the Company’s shares. The “market” arguably is fully informed of the Company’s activities, notwithstanding that approximately 51.71% of the shares are under the control of twenty shareholders (and three shareholders control 33.82% as at 10 September 2008). We are of the opinion that it is fair to use a range of market values over the past three months as one of the indicators of what an Goldstar share is worth but this is not exclusive as we have also considered the net asset backing of the Company and the probability that the share price may continue to fall in the near future without a rise in the gold price, continued positive announcements on the prospectivity of its Southern Crown Gold Project in Victoria and the ability of the Company to raise funds. It is noted that feasibility studies are being undertaken at the moment to determine whether to proceed to development, although this has slowed down due the lack of cash resources. Indications to date have been positive and the announcements indicate that development will take place subject to final completion of the feasibility studies. The Company recently was granted a mining lease status that covers the Southern Crown Gold Project area.

The Company in late July 2008 had announced the proposal to undertake a non renounceable rights issue to shareholders to raise $7,000,000 and it was proposed to be underwritten subject to normal underwriting clauses. However, due to prevailing market conditions, the rights issue has been cancelled. The initial rights issue was to be at 15 cents per share but as time progressed the share price started to fall and fell below 10 cents. The proposed underwriter and sub-underwriter were then looking at an issue at 80% of market when the share price was 9.5 cents (a potential issue price of 7.6 cents per share). The sub-underwriter then pulled out due to other commitments. We have been advised that several brokers were contacted to assist in a capital raising but notwithstanding the potential but not guaranteed development of the gold projects in Victoria, the brokers declined to assist in the capital raising process and in one case the terms were too onerous.

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There have been a number of recent failures of gold mining companies, including Monarch Gold Mining Company Limited and View Resources Limited and this has reduced the appetite of brokers and investors to take up shareholding positions in junior and mid cap mining and exploration companies in Australia in recent months. As at 30 June 2008, the net cash position of the Company approximates $1,147,000 and this would have been reduced by administration costs and on-going exploration costs post 30 June 2008. The Company’s financial position is very poor and may not be able to continue exploration and evaluation of its Southern Crown Gold Project and pay new administration and corporate costs without a significant inflow of funds via a capital raising or loan funds (such as envisaged via the issue of Convertible Notes totalling $3,000,000 and up to $6,000,000).

5.6 Preferred value of Goldstar fully paid shares (range) to arrive at fairness conclusion
5.6.1 Notwithstanding the good prospectivity of the Southern Crown Gold Project without cash the Company cannot complete exploration and evaluation and the share price may continue to fall. As noted above, the market is kept fully informed of the operations of the Company and thus the pre announcement share price is a fair indicator of what the market considers the Company’s shares to be worth. Even though the net asset backing is higher than the above range, the Company cannot exploit its main asset (in the books at $27,536,000 at 30 June 2008) without further cash and thus we have not put a great weighting on to the asset backing approach. In conclusion, we consider that the fair value of a Goldstar fully paid share falls in the range of 8.5 cents to 13.5 cents. As stated, the share prices do not necessarily reflect fair values in the current economic circumstances of the Company. If funds can be raised and development of the Southern Crown Gold Project proceeds then arguably the fair value of a Goldstar share would be in excess of the current share price of around 9cents to 10 cents and the conversion price relating to the Tranche 1 and 2 Convertible Notes. As discussed previously, the conversion price may even be less than 10 cents if Goldstar undertakes a capital raising before the Maturity Date at less than 10 cents. If the Tranche 3 Convertible Notes are issued and converted, the conversion price is unknown as it will be a 20% discount to the 60 day VWAP before conversion. The share price in the future is unknown but it may be fair to say that if the Southern Crown Gold Project did proceed to production then it is likely that the share price would be higher than the September 2008 (to 11 September) price of around 9cents to 10 cents.

The future ultimate value of a Goldstar share will depend upon, inter alia:

the future prospects of its Southern Crown Gold Project and other mineral assets;
• the state of the gold and base metal market (and prices) in Australia and overseas;
the state of Australian and overseas stock markets;
the strength of the Board and/or who makes up the Board;
general economic conditions;
the liquidity of shares in Goldstar; and
possible ventures and acquisitions entered into by Goldstar.

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5.7 Options

5.7.1 The Company will issue 15,000,000 share options (5,000,000 A, B and C Options) to Silja as part of the package deal to issue the Convertible Notes (Tranches 1 and 2 with the possibility of issuing Tranche 3). Using a Black Scholes option pricing model, results in the value of one option to be issued as follows:

A Options 5.44 cents B Options 5.03 cents C Options 4.70 cents

The basic assumptions used were:

market share price (pre announcement) 11 cents
� interest rate 6.5% � volatility factor 100% � exercise price of 5,000,000 A Options 15 cents � exercise price of 5,000,000 B Options 20 cents � exercise price of 5,000,000 C Options 25 cents � option term (assumed issued 1 November 2008) 45.5 months � Expiry date 18 August 2012 � Discount for non listed status of Options 25%

The 15,000,000 share options to be issued to Goldstar will not be listed and may not be tradeable until expiry date. The value equates to $758,500. Under current Australian Accounting Standards, the Options need to be costed as part of debt raising costs and arguable expensed to the Income Statement. Silja is not paying any consideration for the Options, however the 15,000,000 share options is part of the consideration payable by the Company for Silja to enter into the Converting Note Agreement and agreeing to pay Tranches 1 and 2 and possibly Tranche 3 of the convertible notes.

6. PREMIUM FOR CONTROL

6.1 Premium for control for the purposes of this report, has been defined as the difference between the price per share, which a buyer would be prepared to pay to obtain or improve a controlling interest in the Company and the price per share which the same person would be required to pay per share, which does not carry with it control or the ability to improve control of the Company.
6.2 Under TCA, control may be deemed to occur when a shareholder or group of associated shareholders control more than 20% of the issued capital. In this case, if Silja converted all of the Convertible Notes to ordinary fully paid shares in Goldstar, Silja and its associate Z Nominees (the Zurich Group) collectively shareholding in Goldstar could increase (in stages) to approximately 50.29% (and possibly more) of the expanded issued capital of Goldstar. Accordingly, we have addressed whether a premium for control will be paid.
6.3 The recent pre announcement of the proposal market value of a Goldstar share lies in the range of approximately 8.5 cent to 13.5 cents with the net book asset backing disclosing a higher value. The value of the 46,399,430 ordinary shares that would be issued to Silja on conversion of the Tranche 1 and 2 Convertible Notes at Maturity Date (assumes 10 cents per share) would lie in the range of $3,943,951 to $6,263,923 compared with the value of the Tranche 1 and 2 Convertible Notes (possibly be converted into ordinary fully paid shares) of $4,639,443 (this includes capitalised interest to Maturity Date of $1,639,943).

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Therefore, Silja may not be considered to be paying a premium for potential control. However it is noted that Goldstar does not have sufficient funds to continue full evaluation of its Southern Crown Gold Project and other projects and without an inflow of funds by way of a capital raising (that it currently cannot raise after discussions with several brokers) or a debt raising (as envisaged by the proposal with Silja) there is the possibility that the shares in Goldstar could fall below the 11 September 2008 share price of 9 cents.

6.4 We note that currently Silja does not have Board control of Goldstar and following the passing and consummation of resolution 3 and the issue of Tranche 1 and 2 Convertible Notes, it is proposed that Silja may nominate one person to the Goldstar Board. In the event that Silja is also issued Tranche 3 Convertible Notes, Silja has the option to nominate another person to the Goldstar Board. If two persons are appointed this would represent 2 of the 9 member Board. However, this percentage may increase if any of the existing directors of Goldstar resign. There is this possibility as Goldstar has moved its administration office to Melbourne on 1 September and subject to the cash position of the Company and the final BFS results may move into gold production.

7. FAIRNESS AND REASONABLENESS OF THE PROPOSALS

We set out below, some of the advantages, disadvantages and other factors pertaining to the proposed issues, pursuant to resolution 3.

Advantages

7.1 If shareholders do not approve resolution 3, then it is probable that the share price would fall further to below 9 cents or 10 cents and the Goldstar Group would be in a cash starved situation. Brokers have been approached to support a capital raising and it was planned that a rights issue to raise $7,000,000 would proceed with underwriting support. However, no brokers were interested in assisting in the capital raising process at a commercial issue price and the capital raising had to be aborted. By raising a minimum of $3,000,000 (via the Initial Loan of $1,400,000 that converts to the Tranche 1 Convertible Note and $1,600,000 from the Tranche 2 Convertible Note) and possibly a further $3,000,000 (may be subscribed for at Silja’s option) by way of the Tranche 3 Convertible Note. By raising a minimum of $3,000,000 the Company may have enough funds to complete its study on the Southern Crown Gold Project and commence development (although this cannot be guaranteed) thereby providing the opportunity for the Company to raise new share equity and possibly new debt equity. Shareholders would be advantaged as the Company would then become a gold producer.
7.2 The exercise prices of the Options to be granted to Silja are exercisable at 15 cents (5,000,000), 20 cents (5,000,000) and 25 cents (5,000,000). All of the exercise prices are in excess of the current share price of a Goldstar share trading on ASX but based on share prices pre July 2008 some of the exercise prices are below the share prices of May and June 2008. If exercised, the Company would raise $750,000 from the A Options, $1,000,000 from the B Options and $1,250,000 from the C Options for a total capital raising if all Options exercised of $3,000,000. Silja as the Options Holder would not exercise any Options until the price of a Goldstar share trading on ASX was in excess of the exercise prices and there was reasonable liquidity in share trading. All shareholders would be advantaged by an increase in the share price.

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Disadvantages

7.3 In the event that Silja converts any of the Convertible Notes and/or Options, an influential shareholding of the Company is being given to Silja in that Silja and its associate Z Nominees (the Zurich Group) combined could have voting control of approximately 50.29% of the expanded ordinary issued capital after the successful ratification and implementation of resolution 3 (assumes conversion of all Tranches of Convertible Notes at 10 cents each). There is no immediate change in shareholding (Z Nominees would still hold a 15.35% shareholding) on the passing of resolution 3 and shareholdings only increases if Convertible Notes are converted or Options exercised. The conversions may only occur if the Company enters into a production mode and even then there is no guarantee or warranty that Silja will convert (or exercise Options). There is the potential for Silja to increase its shareholding interest in Goldstar on conversion of Tranches of Convertible Notes if converted below 10 cents per share. The actual percentages cannot be determined.
7.4 There is an interest cost in entering into the Convertible Notes although there is no cash outlay until such time as the Convertible Notes are repaid (may be three years after issue date and on the Maturity Date). If the Convertible Notes went to Maturity Date, the Company would end up paying interest of approximately $1,640,000 if only Tranche 1 and Tranche 2 Convertible Notes were issued and $3,253,000 if also the Tranche 3 Convertible Note was also issued at the same time as the Tranche 2 Convertible Note. The total amount payable on Maturity Date may lie in the range of approximately $4,640,000 and approximately $9,253,000. The Company may not be in a financial position to repay the Convertible Notes unless in the meantime the Company has become a successful and commercial gold producer.
7.5 The Company as part of the Convertible Notes issues with Silja has agreed to allow Silja to take a first ranking charge over the assets and undertakings of the Goldstar Group. Although this is not unusual to protect the lender (Silja), it may cause complications later on if the Company wishes to obtain debt finance to finance part of the development of the Southern Crown Gold Project. Any major financier would wish to have first security and this may lead to a rejection by financiers unless the charge by Silja was dropped to a second ranking charge. If debt finance is not required, then the issue is not a significant concern although if the Company failed, Silja could take control of the assets of Goldstar by appointing a Receiver and Manager. The Company’s current financial position is precarious and the ability to continue to develop the potential of the Southern Crown Gold Project is dependent on the Convertible Note raising or some form of capital raising (for which the Company has been unsuccessful in obtaining as noted above). Thus by allowing Silja to take a charge over the assets and undertakings is a risk that Silja obtains control of the assets if the Company could not repay the Convertible Notes when they fall due (in the event that Silja does not convert the Convertible Notes to share equity).
7.6 There is always the possibility that the value of the shares is in excess of the exercise prices of the three tranches of Options at the date of exercise. However, shareholders would also benefit from an increased share price.
7.7 The number of shares that could be issued on the Tranche 1 and 2 Convertible Notes if converted may be less than 10 cents if Goldstar makes a share issue before conversion (and before Maturity Date) at less than 10 cents. In addition the number of share to be issued on conversion if the Tranche 3 Convertible Notes are issued and converted is unknown although the formula is a 20% discount to the 60 day VWAP before conversion. Refer

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paragraph 3.4 for example of the number of shares that could be issued on conversions at 1 cent per share and 5 cents per share.

Other Factors

7.8 Silja is taking a risk in investing in Goldstar via Convertible Notes as to a large extent, Goldstar’s future share price may be determined by the exploitation and/or commercial success (or otherwise) of the Southern Crown Gold Project (as part of the Walhalla Gold Field) and other mineral projects owned by Goldstar. There is a huge incentive for the Zurich Group to make Goldstar a successful company and have the share price rise considerably. All shareholders would benefit from a rise in the share price. The shares since the announcement have risen from the low of 8.5 cents to trade at around 9 to 10 cents (that is still low compared with prices pre July 2008).
7.9 The opportunities to raise a total of $3,000,000 (and up to $6,000,000) are considered limited in the current bear market associated with gold companies and the stock market generally.
7.10 In the event that shareholders do not approve the proposals pursuant to resolution 3, the Company is required to pay a break fee of $300,000 and repay the Initial Loan of $1,400,000. This may be a serious detriment to the Company and in the absence of any other capital raisings (that has over the past several months proved difficult to achieve) may cause the Company to go into some form of Administration.

8. CONCLUSION AS TO FAIRNESS AND REASONABLENESS

8.1 After taking into account the factors referred to in Section 7 above and elsewhere in this report, we are of the opinion that the proposals as outlined in resolution 3 are, on balance, considered not to be fair but in view of the current financial position of the Company may be considered to be reasonable to the non associated shareholders of Goldstar.

The shareholders should be aware that Silja has the ability to take control of the assets of the Goldstar Group in the event that Goldstar defaults on repayment of the Convertible Notes.

9. SOURCES OF INFORMATION

9.1 In making our assessment as to whether the proposals pursuant to resolution 3 are fair and reasonable, we have reviewed relevant published available information and other unpublished information of the Company that is relevant to the current circumstances. In addition, we have held discussions with the management of Goldstar about the present and future operations of Goldstar. Statements and opinions contained in this report are given in good faith, but in the preparation of this report, we have relied in part on information provided by the Directors and management of Goldstar.

9.2

Information we have received, includes, but is not limited to:

Draft August and September 2008 Notice of General Meeting of Shareholders and Explanatory Memorandum of Goldstar;
Discussions with a Director of Goldstar;
Shareholding details of Goldstar as noted in the draft 2008 Annual Report;
Share prices of Goldstar since 1 January 2008 to 12 September 2008;
Draft Annual report of Goldstar for the year ended 30 June 2008;

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Announcements made by Goldstar to the ASX from 1 January 2007 to 14 September 2008;
The preliminary evaluation report on the Southern Crown Gold Project by SRK;
The Draft Convertible Loan Agreement;
The Draft Deed of Charge;
A calculation spreadsheet of interest on the Convertible Notes to Maturity Date; and
Gold price history sheet sourced from the web.
9.3 Our report includes Appendix A and our Financial Services Guide attached to this report.

Yours faithfully

STANTONS INTERNATIONAL SECURITIES PTY LTD

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J P Van Dieren, FCA Director

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APPENDIX A

AUTHOR INDEPENDENCE AND INDEMNITY

This annexure forms part of and should be read in conjunction with the report of Stantons International Securities Pty Ltd dated 15 September 2008, relating to resolution 3 outlined in the Notice of Meeting of Shareholders of Goldstar.

At the date of this report, Stantons International Securities Pty Ltd does not have any interest in the outcome of the proposal. There are no relationships with Goldstar other than acting as an independent expert for the purposes of this report. There are no existing relationships between Stantons International Securities Pty Ltd and the parties participating in the transaction detailed in this report which would affect our ability to provide an independent opinion. The fee to be received for the preparation of this report is based on the time spent at normal professional rates plus out of pocket expenses and is estimated not to exceed $16,000. The fee is payable regardless of the outcome. With the exception of that fee, neither Stantons International Securities Pty Ltd nor John P Van Dieren have received, nor will or may they receive any pecuniary or other benefits, whether directly or indirectly for or in connection with the making of this report.

Stantons International Securities Pty Ltd or Stantons International Pty Ltd or any directors of Stantons International Securities Pty Ltd and Stantons International Pty Ltd do not hold any securities in Goldstar. There are no pecuniary or other interests of Stantons International Securities Pty Ltd that could be reasonably argued as affecting its ability to give an unbiased and independent opinion in relation to the proposal. Stantons International Securities Pty Ltd and Mr J Van Dieren have consented to the inclusion of this report in the form and context in which it is included as an annexure to the Notice.

QUALIFICATIONS

We advise Stantons International Securities Pty Ltd is the holder of an Investment Advisers Licence (No 319600) under the Corporations Act 2001 relating to advice and reporting on mergers, takeovers and acquisitions involving securities. A number of the directors of Stantons International Pty Ltd are the Directors of Stantons International Securities Pty Ltd. Stantons International Pty Ltd and Stantons International Securities Pty Ltd have extensive experience in providing advice pertaining to mergers, acquisitions and strategic for both listed and unlisted companies and businesses.

Mr John P Van Dieren FCA, the person responsible for the preparation of this report, has extensive experience in the preparation of valuations for companies and in advising corporations on takeovers generally and in particular on the valuation and financial aspects thereof, including the fairness and reasonableness of the consideration offered.

The professionals employed in the research, analysis and evaluation leading to the formulation of opinions contained in this report, have qualifications and experience appropriate to the task they have performed.

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DECLARATION

This report has been prepared at the request of the Directors of Goldstar in order to assist the shareholders of Goldstar to assess the merits of the proposals (resolution 3 only) to which this report relates. This report has been prepared for the benefit of Goldstar and those persons only who are entitled to receive a copy for the purposes of Section 611 (Item 7) of the Corporations Act and ASX Listing Rule 10.11 and does not provide a general expression of Stantons International Securities Pty Ltd’s opinion as to the longer term value of Goldstar or its mineral assets. Stantons International Securities Pty Ltd does not imply, and it should not be construed, that is has carried out any form of audit on the accounting or other records of Goldstar or its subsidiaries, businesses or mineral assets. Neither the whole, nor any part of this report, nor any reference thereto may be included in or with or attached to any document, circular, resolution, letter or statement, without the prior written consent of Stantons International Securities Pty Ltd to the form and context in which it appears.

DISCLAIMER

This report has been prepared by Stantons International Securities Pty Ltd with care and diligence. However, except for those responsibilities which by law cannot be excluded, no responsibility arising in any way whatsoever for errors or omission (including responsibility to any person for negligence) is assumed by Stantons International Securities Pty Ltd, Stanton Partners, Stantons International Pty Ltd, its partners, directors, employees or consultants for the preparation of this report.

DECLARATION AND INDEMNITY

Recognising that Stantons International Securities Pty Ltd may rely on information provided by Goldstar and its officers (save whether it would not be reasonable to rely on the information having regard to Stantons International Securities Pty Ltd experience and qualifications), Goldstar has agreed:-

(a) to make no claim by it or its officers against Stantons International Securities Pty Ltd to recover any loss or damage which Goldstar may suffer as a result of reasonable reliance by Stantons International Securities Pty Ltd on the information provided by Goldstar; and

(b) to indemnify Stantons International Pty Ltd against any claim arising (wholly or in part) from Goldstar or any of its officers providing Stantons International Securities Pty Ltd any false or misleading information or in the failure of Goldstar or its officers in providing material information, except where the claim has arisen as a result of wilful misconduct or negligence by Stantons International Securities Pty Ltd.

A draft of this report was presented to Goldstar Directors for a review of factual information contained in the report. Comments received relating to factual matters were taken into account, however the valuation methodologies and conclusions did not alter.

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FINANCIAL SERVICES GUIDE FOR STANTONS INTERNATIONAL SECURITIES PTY LTD Dated 15 September 2008

Stantons International Securities Pty Ltd ACN 128 908 289 (“SIS” or “we” or “us” or “ours” as appropriate) has been engaged to issue general financial product advice in the form of a report to be provided to you.

2. Financial Services Guide

In the above circumstances we are required to issue to you, as a retail client a Financial Services Guide (“FSG”). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as financial services licensees.

This FSG includes information about:

who we are and how we can be contacted;
the services we are authorised to provide under our Australian Financial Services Licence, Licence No: 319600;
remuneration that we and/or our staff and any associated receive in connection with the general financial product advice;
any relevant associations or relationships we have; and
our complaints handling procedures and how you may access them.
Financial services we are licensed to provide

We hold an Australian Financial Services Licence which authorises us to provide financial product advice in relation to:

Securities (such as shares and options)

We provide financial product advice by virtue of an engagement to issue a report in connection with a financial product of another person. Our report will include a description of the circumstances of our engagement and identify the person who has engaged us. You will not have engaged us directly but will be provided with a copy of the report as a retail client because of your connection to the matters in respect of which we have been engaged to report.

Any report we provide is provided on our own behalf as a financial services licensee authorised to provide the financial product advice contained in the report.

4. General Financial Product Advice

In our report we provide general financial product advice, not personal financial product advice, because it has been prepared without taking into account your personal objectives, financial situation or needs.

You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice. Where the advice relates to the acquisition or possible acquisition of a financial product, you should

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also obtain a product disclosure statement relating to the product and consider that statement before making any decision about whether to acquire the product.

5. Benefits that we may receive

We charge fees for providing reports. These fees will be agreed with, and paid by, the person who engages us to provide the report. Fees will be agreed on either a fixed fee or time cost basis.

Except for the fees referred to above, neither SIS, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report.

6.

Remuneration or other benefits received by our employees

All our employees receive a salary. Our employees are eligible for bonuses based on overall productivity but not directly in connection with any engagement for the provision of a report.

7. Referrals

We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide.

8. Associations and relationships

Through a variety of corporate and trust structures, SIS is ultimately wholly owned by Stantons International Pty Ltd a professional advisory and accounting practice. Our directors may be directors in Stantons International Pty Ltd and/or Stantons International Services Pty Ltd.

From time to time, SIS, Stantons International Pty Ltd, Stantons International Services Pty Ltd and/or their related entities may provide professional services, including audit, tax and financial advisory services, to financial product issuers in the ordinary course of its business.

9. Complaints resolution

9.1 Internal complaints resolution process

As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing, addressed to:

The Complaints Officer Stantons International Securities Pty Ltd Level 1

1 Havelock Street WEST PERTH WA 6005

When we receive a written complaint we will record the complaint, acknowledge receipt of the complaints within 15 days and investigate the issues raised. As soon as practical, and not more than 45 days after receiving the written complaint, we will advise the complainant in writing of our determination.

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9.2 Referral to External Dispute Resolution Scheme

A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service Limited (“FOSL”). FOSL is an independent company that has been established to provide free advice and assistance to consumers to help in resolving complaints relating to the financial services industry.

Further details about FOSL are available at the FOSL website www.fos.org.au or by contacting them directly via the details set out below.

Financial Ombudsman Service Limited PO Box 3 MELBOURNE VIC 3001

Toll Free: 1300 78 08 08 Facsimile: (03) 9613 6399

Contact details

You may contact us using the details set out at section 9.1of this FSG or by phoning 08 9481 3188 or faxing 08 9321 1204.

GOL6446A/IER September 2008

AI assistant

ORION MINERALS LIMITED — Proxy Solicitation & Information Statement 2008

48784_rns_2008-09-29_12e4e186-6217-45b0-b3c7-b420b407798c.pdf

GOLDSTAR RESOURCES NL

ACN 098 939 274

NOTICE OF GENERAL MEETING AND PROXY FORM

CONTENTS PAGE

TIME AND PLACE OF MEETING AND HOW TO VOTE

VENUE

YOUR VOTE IS IMPORTANT

VOTING IN PERSON

VOTING BY PROXY

Proxy Forms received later than this time will be invalid.

NOTICE OF GENERAL MEETING

AGENDA

ORDINARY BUSINESS

1. RESOLUTION 1 – RE-ELECTION OF DIRECTOR – PETER HATFUL

2. RESOLUTION 2 – RE-ELECTION OF DIRECTOR – GRAEME SLOAN

3. RESOLUTION 3 – APPROVAL TO ISSUE CONVERTIBLE NOTES AND OPTIONS

on the terms and conditions in the Explanatory Memorandum.”

BY ORDER OF THE BOARD

BRUCE PATERSON COMPANY SECRETARY GOLDSTAR RESOURCES NL

DATED: 30 SEPTEMBER 2008

Voting Exclusion Note:

EXPLANATORY STATEMENT

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

Peter Hatfull

Qualifications

Directorships in the past three years

Graeme Sloan

Qualifications

Directorships in the past three years

2. RESOLUTION 3 – APPROVAL TO ISSUE CONVERTIBLE NOTES AND OPTIONS

2.1 ASX Listing Rule 7.1

2.2 Terms of Options

(Exercise Notice).

2.3 Terms of Convertible Notes

2.4 Section 606 of the Corporations Act – Statutory Prohibition

VOTING POWER AND RELEVANT INTERESTS

Deemed Relevant Interests, Voting Power and Associates

Section 611 Item 7 of the Corporations Act – Exemption from Section 606

Prescribed Information

Intentions of the Associated Parties in relation to the Company

2.5 Listing Rule 10.1

2.6 Advantages and Disadvantages

2.7 Directors recommendation

2.8 Independent Expert’s Report

3. ENQUIRIES

GLOSSARY

APPOINTMENT OF PROXY GOLDSTAR RESOURCES NL ACN 098 939 274

GENERAL MEETING

Voting on Business of the General meeting

OR

By:

GOLDSTAR RESOURCES NL ACN 098 939 274

I ns tr u cti o ns fo r C om p l et in g ‘ A p po in tm e n t o f Pr o x y ’ F or m

1.

Proxy forms received later than this time will be invalid.

1. INTRODUCTION

2. SUMMARY OF OPINION

2.2 In our opinion:

3. IMPLICATIONS OF THE PROPOSALS

4. FUTURE DIRECTION OF GOLDSTAR

5. BASIS OF TECHNICAL VALUATION OF GOLDSTAR

5.7 Options

6. PREMIUM FOR CONTROL

7. FAIRNESS AND REASONABLENESS OF THE PROPOSALS

Advantages

Disadvantages

Other Factors

8. CONCLUSION AS TO FAIRNESS AND REASONABLENESS

9. SOURCES OF INFORMATION

9.2

STANTONS INTERNATIONAL SECURITIES PTY LTD

J P Van Dieren, FCA Director

APPENDIX A

AUTHOR INDEPENDENCE AND INDEMNITY

QUALIFICATIONS

DECLARATION

DISCLAIMER

ORION MINERALS LIMITED Proxy Solicitation & Information Statement 2008