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NOTICE OF GENERAL MEETING
LIMITED
CHRYSALIS RESOURCES
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12th September 2013

Company Announcements Australian Securities Exchange Limited

By Electronic Lodgement

NOTICE OF GENERAL MEETING

Chrysalis Resources Limited announces that a general meeting will be held on 14 October 2013 at Boulevard Centre, 99 The Boulevard, Floreat Western Australia commencing at 3pm (WST).

Attached is a copy of the booklet comprising the following documents which has today been dispatched to shareholders:

Notice of General Meeting, Explanatory Statement and Proxy Form;
Independents Expert’s Report; and
Independent valuation of mineral assets

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Dr Neale Fong Executive Chairman

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Mel Cotterell Company Secretary

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Chrysalis Resources Limited Company Snapshot Company Structure Board Management
A.B.N 56 125 931 964 Listed on ASX 27 May 2008 No of Shares on Issue 196,899,454 Dr Neale Fong - Executive Chairman
Level 1
331 Hay Street ASX Share Code CYS Cash (as at 31st July) $2.3M Mr Grant Kidner - Executive Director
SUBIACO WA 6008 Mr Jianhua Sang – CEO / Executive Director
Sector Mining
PO Box 226, Wembley WA 6913 Mr Adrian Paul- Non-Executive Director
Phone: 618 9380 4430 Mr Trevor Benson – Non-Executive Director
Fax: 618 9481 5044 Mr Michael Griffiths – Non-Executive Director
E: [email protected]
www.chrysalisresources.com.au Ms Mel Cotterell- Company Secretary
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2013 NOTICE OF GENERAL MEETING

ACN 125 931 964

TIME 3pm (WST)

DATE Monday, 14th October 2013

PLACE Boulevard Centre 99 The Boulevard Floreat WA 6014

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 has concluded that the transactions the subject of Resolution 3 are fair and reasonable to non-associated Shareholders. All Shareholders should refer to the Independent Expert’s Report enclosed with this Notice of General Meeting.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on (+61 8) 9388 3802.

CONTENTS PAGE

Business of the Meeting (setting out the proposed resolutions) Explanatory Statement (explaining the proposed resolutions) Glossary Proxy Form Annexure 1 – Independent Expert’s Report

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3
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IMPORTANT INFORMATION

TIME AND PLACE OF MEETING

Notice is given that the meeting of the Shareholders to which this Notice of Meeting relates will be held at 3pm WST on Monday, 14th October 2013 at:

Boulevard Centre, 99 The Boulevard, Floreat WA 6014

YOUR VOTE IS IMPORTANT

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

VOTING ELIGIBILITY

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Meeting are those who are registered Shareholders at 3pm (WST) on 12 October 2013.

VOTING IN PERSON

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

VOTING BY PROXY

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

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

each member has a right to appoint a proxy;
the proxy need not be a member of the Company; and
a member who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member’s votes, then in accordance with section 249X(3) of the Corporations Act, each proxy may exercise one-half of the votes.

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

if proxy holders vote, they must cast all directed proxies as directed; and
any directed proxies which are not voted will automatically default to the Chair, who must vote the proxies as directed.

Further details on these changes is set out below.

Proxy vote if appointment specifies way to vote

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

the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed); and
if the proxy has 2 or more appointments that specify different ways to vote on the resolution – the proxy must not vote on a show of hands; and
if the proxy is the chair of the meeting at which the resolution is voted on – the proxy must vote on a poll, and must vote that way (i.e. as directed); and
if the proxy is not the chair – the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed).

Transfer of non-chair proxy to chair in certain circumstances

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

an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a meeting of the Company’s members; and
the appointed proxy is not the chair of the meeting; and
at the meeting, a poll is duly demanded on the resolution; and
either of the following applies:
the proxy is not recorded as attending the meeting;
the proxy does not vote on the resolution,

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

BUSINESS OF THE MEETING

AGENDA

1. RESOLUTION 1 – RATIFICATION OF PRIOR ISSUE OF SHARES

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

“That for the purposes of ASX Listing Rule 7.4 and for all other purposes, Shareholders ratify the issue of 23,627,934 Shares on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion: The Company will disregard any votes cast on this Resolution by Tiger Resources Limited (and their nominee), Eagle Brilliant Holdings Limited (and their nominee) 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.

2. RESOLUTION 2 – RATIFICATION OF PRIOR ISSUE OF SHARES

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

“That for the purposes of ASX Listing Rule 7.4 and for all other purposes, Shareholders ratify the issue of 15,751,956 Shares on the terms and conditions set out in the Explanatory Statement”

3. RESOLUTION 3 – APPROVAL PURSUANT TO ITEM 7 SECTION 611 OF THE CORPORATIONS ACT

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

“That for the purposes of section 611 (Item 7) of the Corporations Act and for all other purposes, approval is given for the Directors to allot and issue up to 25,704,062 Shares to Eagle Brilliant Holdings Limited (or its nominee) on the terms and conditions set out in the Explanatory Statement, which in addition to the 31,543,293 Shares already held, will result in Eagle Brilliant Holdings Limited’s voting power increasing from 16.02% to 25% in the capital of the Company.”

Expert’s Report: Shareholders should carefully consider the report prepared by the Independent Expert for the purposes of the Shareholder approval required under section 611 Item 7 of the Corporations Act. The Independent Expert’s Report comments on the fairness and reasonableness of the transactions the subject of this Resolution to the non-associated Shareholders in the Company, and concludes that the issue of the Shares the subject of this resolution is fair and reasonable to Shareholders not associated with EBH.

Voting Exclusion: The Company will disregard any votes cast on this Resolution by Eagle Brilliant Holdings Limited (and its nominee) and any of its associates and any other person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed. 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.

Notice of Meeting 2013 Chrysalis Resources Limited | 1

BUSINESS OF THE MEETING

4. RESOLUTION 4 – PLACEMENT – SHARES

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

“That subject to the passing of Resolution 3, for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Company to issue up to 6,385,903 Shares on the terms and conditions set out in the Explanatory Statement.”

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

DATED: 27 August 2013 BY ORDER OF THE BOARD

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Neale Fong Executive Chairman

2 | Chrysalis Resources Limited Notice of Meeting 2013

EXPLANATORY STATEMENT

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

1. OVE RVIEW

1.1 GEN ERAL

As announced on the Australian Securities Exchange on 24 June 2013 the Company has entered into a binding term sheet (Term Sheet) with Eagle Brilliant Holdings Limited (EBH) (together the Parties) in order to establish an ongoing strategic relationship with the Tiandilong Group Limited (TDL Group) and EBH. EBH is a 100% controlled subsidiary of the TDL Group. The Term Sheet has created the foundation for a strategic relationship by providing EBH with a substantive shareholding in the Company of 25% subject to the approval of Resolution 3 of this Notice of Meeting.

The TDL Group is a private enterprise situated in Yixing, East China’s Jiangsu Province, and operates a diversified business portfolio. Amongst other operations, TDL Group’s main business involves the manufacturing and distribution of high quality copper cathodes, rods, and electric wires. Due to this, TDL Group has a heavy reliance on access to global resources, and has begun investing in international mining companies for long-term resource supply and distribution. EBH is focused on the exploration, development and processing of mineral resources around the world, with a view to develop and invest in quality exploration and mining projects and provide offtake arrangements upon development.

Both CYS and EBH believe that the Term Sheet is in their best interests and marks the beginning of a long term strategic relationship between the Parties.

As announced to the market on 5 July 2013, EBH currently has a holding of 31,543,293 shares or 16.02% in the Company.

1.2 KEY FEATURES OF THE TERM SHEET

Subscription

Pursuant to the Term Sheet, the Company will make the following placements to EBH, providing it with, subject to obtaining Shareholder approval, a strategic shareholding in the Company of up to 25% (Placements):

(a) the initial placement (Initial Placement), being 31,543,293 Shares at $0.06 per share. The Initial Placement along with the issue of 7,836,597 Shares to Tiger under the subscription agreement executed between the Company and Tiger on or around 27 August 2012 (Tiger Subscription Agreement), is being ratified pursuant to Resolutions 1 and 2; and
(b) subject to obtaining Shareholder approval of Resolution 3, up to 25,704,062 Shares at $0.06 per share, which will give EBH a 25% shareholding in the Company (Additional Placement).

The Term Sheet and the obligations of the Parties under it are conditional upon the Company obtaining any necessary regulatory, shareholder, or other approvals (including but not limited to any required under the Tiger Subscription Agreement and under the Listing Rules of the ASX).

EBH Top Up Right

Pursuant to the Term Sheet, EBH was granted, subject to the Company obtaining an ASX waiver, a right which gives EBH (or its nominee) the right to participate in future equity capital raisings by the Company on the same terms that are offered to other participants in order to maintain its strategic 25% shareholding in the Company’s issued capital and therefore maintain the strategic relationship between the Company and EBH (EBH Top Up Right). As announced to the ASX on 31 July 2013, the Company has been granted the necessary ASX waiver for the EBH Top Up Right.

The EBH Top Up Right remains in existence for as long as EBH’s voting power in the Company is at least 19.9% (Minimum Shareholding) and does not exceed 25%.

Additional rights of EBH under the Term Sheet

In addition to the Placements and the EBH Top Up Right, the Term Sheet also provides:

(a) EBH with the right to nominate to the Board of the Company, subject to Board approval:
(i) one executive director after the Initial Settlement Date, pursuant to which Jian Hua Sang was nominated; and
(ii) in addition, a non-executive director on or following the Additional Placement being made; and
(b) that should the Company develop a producing mining operation in Zambia, EBH will be given the first right of refusal to enter into any off-take agreement for mined ore or metal products in accordance with standard commercial terms and pricing.

Notice of Meeting 2013 Chrysalis Resources Limited | 3

EXPLANATORY STATEMENT

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1.3 CON DITIONALITY OF RESOLUTIONS

Resolution 4 is conditional on Resolution 3 being passed, meaning that both Resolutions 3 and 4 must be passed by Shareholders for Resolution 4 to have effect.

In relation to Resolution 4, the Company is awaiting confirmation from Tiger as to whether it will exercise its top up right provided for in the Tiger Subscription Agreement (Tiger Top Up Right) to subscribe for the Shares pursuant to Resolution 4. Should Tiger decide not to exercise the Tiger Top Up Right no Shares will be issued pursuant to Resolution 4.

If Resolution 3 is passed, Resolution 4 is not passed and Tiger decides to exercise the Tiger Top Up Right to subscribe for the Shares pursuant to Resolution 4, pursuant to the terms of the Tiger Subscription Agreement the Company has an obligation to issue to Tiger the Shares the subject of Resolution 4.

The Company will therefore have to make this issue under either or both of its 15% annual placement capacity set out in ASX Listing Rule 7.1 and/or its 10% annual placement capacity set out in ASX Listing Rule 7.1A. For further information, please see Resolution 4.

2. RESOLUTIONS 1 AND 2 – RATIFICATION OF PRIOR ISSUE OF SHARES

2.1 GENE RAL

Resolutions 1 and 2 seek Shareholder ratification pursuant to ASX Listing Rule 7.4 for the issue of the 23,627,934 Shares pursuant to ASX Listing Rule 7.1 (Resolution 1) and 15,751,956 Shares pursuant to ASX Listing Rule 7.1A (Resolution 2).

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

ASX Listing Rule 7.1A provides that a company may seek Shareholder approval at its annual general meeting to allow it to issue Securities up to 10% of its issued capital, provided that it is an eligible entity (Eligible Entity).

An Eligible Entity is one that, as at the date of the relevant annual general meeting:

(a) is not included in the S&P/ASX 300 Index; and
(b) has a maximum market capitalisation (excluding restricted securities and securities quoted on a deferred settlement basis) of $300,000,000.

At the time approval was obtained, the Company was an Eligible Entity as it was not included in the S&P/ASX 300 Index and had a market capitalisation of less than $300,000,000.

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

By ratifying this issue through Resolutions 1 and 2, the Company will retain the flexibility to issue equity securities in the future up to the 15% annual placement capacity set out in ASX Listing Rule 7.1 and up to the 10% annual placement capacity set out in ASX Listing Rule 7.1A without the requirement to obtain prior Shareholder approval.

4 | Chrysalis Resources Limited Notice of Meeting 2013

EXPLANATORY STATEMENT

2.2 TECHNICAL INFORMATION REQUIRED BY ASX LISTING RULE 7.4 IN RELATION TO RESOLUTION 1

Pursuant to and in accordance with ASX Listing Rule 7.5, the following information is provided in relation to Resolution 1:

(a) 23,627,934 Shares were issued pursuant to Listing Rule 7.1;
(b) the issue price was $0.06 per Share;
(c) the Shares issued were all fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;
(d) the Shares were issued to the following, both of which are unrelated parties of the Company:
(i) EBH as per a binding term sheet executed between EBH and the Company on 19 June 2013; and
(ii) Tiger via the exercise of the Tiger Top Up Right pursuant to the Tiger Subscription Agreement; and
(e) the funds raised from the issue of the Resolution 1 Shares will be used to conduct further exploration on the Company’s Zambian copper projects, and to meet working capital requirements.

2.3 TECHNICAL INFORMATION REQUIRED BY ASX LISTING RULE 7.4 IN RELATION TO RESOLUTION 2

Pursuant to and in accordance with ASX Listing Rule 7.5, the following information is provided in relation to Resolution 2:

(a) 15,751,956 Shares were issued pursuant to Listing Rule 7.1A;
(b) the issue price was $0.06 per Share;
(c) the Shares issued were all fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;
(d) the Shares were issued to the following, both of which are unrelated parties of the Company:
(i) EBH as per a binding term sheet executed between EBH and the Company on 19 June 2013; and
(ii) Tiger via the exercise of the Tiger Top Up Right pursuant to the Tiger Subscription Agreement; and
(e) the funds raised from the issue of the Resolution 2 Shares will be used to conduct further exploration on the Company’s Zambian copper projects, and to meet working capital requirements.

3. RESOLUTION 3 – APPROVAL PURSUANT TO ITEM 7 SECTION 611

OF THE CORPORATIONS ACT

3.1 GENE RAL

This Resolution seeks Shareholder approval for the purpose of Item 7 of section 611 of the Corporations Act to allow EBH to increase its voting power in the Company from 16.02% up to a maximum of 25% as per the Term Sheet.

The increase in voting power will arise as a result of the issue of up to 25,704,062 Shares to EBH at an issue price of $0.06 per Share to raise up to $1,542,244 (Additional Placement Shares).

Pursuant to ASX Listing Rule 7.2 (Exception 16), Listing Rule 7.1 does not apply to an issue of securities approved for the purpose of Item 7 of section 611 of the Corporations Act. Accordingly, if Shareholders approve the issue of securities pursuant to this Resolution, the Company will retain the flexibility to issue equity securities in the future up to the 15% annual placement capacity set out in ASX Listing Rule 7.1 and any additional 10% annual capacity set out in ASX Listing Rule 7.1A without the requirement to obtain prior Shareholder approval.

Notice of Meeting 2013 Chrysalis Resources Limited | 5

EXPLANATORY STATEMENT

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3.2 ITEM 7 OF SECTION 611 OF THE CORPORATIONS ACT

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 that is above 20% and below 90%,

(Prohibition).

Voting Power

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.

Associates

For the purposes of determining voting power under the Corporations Act, a person (second person) is an “associate” of the other person (first person) if:

(a) pursuant to section 11 of the Corporations Act) the first person is a body corporate and the second person is:
(i) a di rector or secretary of the body;
(ii) a related body corporate; or
(iii) a director or secretary of a related body corporate,
(b) pursuant to section 12(2) of the Corporations Act) 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;
(c) 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; or
(d) 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.

Relevant Interests

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.

In addition, section 608(3) of the Corporations Act provides that a person has a relevant interest in securities that any of the following has:

(a) a body corporate in which the person’s voting power is above 20%;
(b) a body corporate that the person controls.

EBH currently has a relevant interest of 16.02% in the Company. The whole of the relevant interest was acquired under the Term Sheet.

6 | Chrysalis Resources Limited Notice of Meeting 2013

EXPLANATORY STATEMENT

3.3 REASON SECTION 611 APPROVAL IS REQUIRED

Item 7 of section 611 of the Corporations Act provides an exception to the Prohibition, whereby a person may acquire a relevant interest in a company’s voting shares with shareholder approval. Shareholder approval under Item 7 of section 611 of the Corporations Act is required for this Resolution.

Increase in Relevant Interest

As at the date of this Meeting, EBH has a relevant interest in 31,543,293 Shares in the Company, representing 16.02% voting power in the Company.

Following the issue of the Additional Placement Shares, EBH will have a relevant interest in a total of 55,118,720 or 57,247,355 Shares, depending on whether the Tiger Top Up Right is exercised. In both circumstances this will cause an increase in its voting power from 16.02% to 25% (this assumes that the Company does not issue any Shares between now and the date of issue of the Placement Shares).

Accordingly, this Resolution seeks Shareholder approval for the purpose of section 611 Item 7 and all other purposes to enable the Company to issue the Additional Placement Shares to EBH.

3.4 PRESCRIBED INFORMATION – ASIC REGULATORY GUIDE

The following information is required to be provided to Shareholders under the Corporations Act and ASIC Regulatory Guide 74 in respect of obtaining approval for Item 7 of section 611 of the Corporations Act. Shareholders are also referred to the Independent Expert’s Report annexed to this Explanatory Statement.

(a) Identity of the Acquirer and its Associates

It is proposed that EBH will be issued the Additional Placement Shares in accordance with the terms of the Term Sheet as discussed in sections 1.1 and 1.2. EBH has no relevant associates in relation to the affairs of the Company.

(b) Relevant Interest and Voting Power

The maximum relevant interests of EBH in voting shares in the capital of the Company, as well its relevant voting power, (both current, and following the issue of Additional Placement Shares to EBH and the placement to Tiger as contemplated by this Notice) are set out in the table below. If Tiger decides not to take up the Share placement pursuant to Resolution 4, the number of Shares that EBH will have a relevant interest in will decrease, however EBH’s percentage holding will remain the same.

	Current Shares	Position %	Proposed Shares	Position %	Relevant Interest & Voting Power Current Proposed Change % % %	Relevant Interest & Voting Power Current Proposed Change % % %
EBH	31,543,293	16.02	57,247,355	25.00	16.02	25.00 8.98
Non associated	165,356,161	83.98	171,742,064	75.00	83.98	75.00 (8.98)
Total	196,899,454	100	228,989,419	100	100	100 100

The maximum relevant interest that EBH will hold after the issue of the Placement Shares is 57,247,355 Shares, and the maximum voting power that EBH will hold is 25%. This represents a maximum decrease in voting power of 8.98% to non-associated shareholders.

EBH does not have any associates with relevant interests in the Company’s Shares other than as set out herein.

Further details on the voting power of EBH are set out in the Independent Expert’s Report.

(c) Reasons for the proposed issue of securities

As set out in section 3.1, the reason for the issue of securities to EBH is to raise up to $1,542,244 and to continue the established ongoing strategic relationship with EBH and the TDL Group. The Company intends to use the money raised from the issue of the Additional Placement Shares to conduct further exploration on the Company’s Zambian projects and for working capital requirements.

(d) Date of proposed issue of securities

The Company proposes to issue the Additional Placement Shares on a date after the Meeting to be determined by the Company and EBH in accordance with the Term Sheet.

Notice of Meeting 2013 Chrysalis Resources Limited | 7

EXPLANATORY STATEMENT

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(e) Material terms of proposed issue of securities

The material terms of the proposed issue of Additional Placement Shares is outlined above in sections 1.1 and 1.2. The issue of the Additional Placement Shares is conditional on approval of this Resolution.

(f) EBH’s Intentions

Other than as disclosed elsewhere in this Explanatory Statement, the Company understands that EBH:

(i) has no present intention of making any significant changes to the business of the Company;
(ii) has no present intention to inject further capital into the Company;
(iii) has no present intention of making changes regarding the future employment of the present employees of the Company;
(iv) does not intend to redeploy any fixed assets of the Company;
(v) does not intend to transfer any property between the Company and EBH, the TDL Group or any of its associates; and
(vi) has no intention to change the Company’s existing policies in relation to financial matters or dividends.

Based upon the information available to the Company, the Company is unaware of any other reason for the issue and subscription of the Additional Placement Shares other than to raise up to $1,542,244 in funds, and for EBH to increase its participation in the Company’s existing business.

These intentions are based on information concerning the Company, its business and the business environment which is known to EBH and its associates at the date of this Notice.

These present intentions may change as new information becomes available, as circumstances change or in the light of all material information, facts and circumstances necessary to assess the operational, commercial, taxation and financial implications of those decisions at the relevant time.

(g) Identity, associations and qualifications of Nominee Director

In conjunction with the issue of the Additional Placement Shares, the Company will appoint Ms Michelle Jing Wang as a non-executive director with effect from the completion of the Placements.

Ms Wang has a Bachelor of Science in Chemistry from Shandong University of China (2001) and gained her Masters of Accounting from Curtin University (2003). She is a member of CPA Australia and has had 10 years of commercial and financial experience in the mining industry in China, Australia and Africa. She has worked in the areas of marketing, business development, accounting and commercial services for several ASX companies and a major Chinese multinational group which were actively involved in exploration or mining of gold, nickel and iron ore.

Ms Wang currently holds no other directorship positions.

Ms Wang has no interest in the Term Sheet, EBH or its associates apart from providing EBH with consulting services on an ad hoc basis.

Neither Ms Wang nor any of her associates currently hold or have a relevant interest in any Shares in the Company.

(h) Interests and Recommendations of Directors

Refer to section 3.8 for the interests and recommendations of Directors in relation to Resolution 3.

(i) Pro Forma Capital Structure of the Company

The capital structure of the Company following the issue of the Shares pursuant to the Placements is set out below based on the assumption that the Share placement pursuant to Resolution 4 is subscribed for by Tiger. Shares

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Number
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Shares on issue as at the date of this Notice	196,899,454
Additional Placement Shares to be issued under Resolution 3	25,704,062
Additional shares to be issued to Tiger pursuant to Resolution 4	6,385,903
Total Shares	228,989,419

The Company currently has no Options on issue and no Options will be issued pursuant to this Notice.

8 | Chrysalis Resources Limited Notice of Meeting 2013

EXPLANATORY STATEMENT

3.5 ADVANTAGES OF THE PLACEMENT

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 this Resolution:

(a) the issue of the Additional Placement Shares will provide the Company with additional funds of up to $1,542,244, plus an additional amount of $383,154 should Tiger subscribe for the placement Shares pursuant to Resolution 4;
(b) with these additional funds the Company’s cash position will increase to approximately $3.6 million based on cash at hand as at the date of this Notice;
(c) the funds raised from the issue of the Additional Placement Shares will enable the Company to conduct further exploration on the Company’s Zambian copper project and for general working capital requirements of the Company; and
(d) the Independent Expert’s Report has concluded that the issue of the Shares to EBH is fair and reasonable to the non-associated Shareholders.

The Independent Expert’s Report also contains an assessment of the advantages of the proposed issue of the Additional Placement Shares the subject of this Resolution.

3.6 DISADVANTAGES OF THE PLACEMENT

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 this Resolution:

(a) the issue of the Additional Placement Shares to EBH will increase the voting power of EBH from 16.02% to 25%, reducing the voting power of non-associated Shareholders in aggregate from 83.98% to 75%;
(b) existing Shareholders will have their current Share holdings diluted by approximately 8.98%, which may lead to a decrease in the price of their Shares (apart from Tiger whose Share holding will not be diluted should it exercise the Tiger Top Up Right); and
(c) there is no guarantee that the Company’s Shares will not fall in value as a result of the issue of Shares to EBH.

The Independent Expert’s Report also contains an assessment of the disadvantages of the proposed issue of the Additional Placement Shares the subject of this Resolution.

3.7 INDEPENDENT EXPERT’S REPORT

The Independent Expert’s Report assesses whether the issue of the Additional Placement Shares outlined in Resolution 3 is fair and reasonable to the Shareholders who are not associated with EBH.

The Independent Expert’s Report also contains an assessment of the advantages and disadvantages of the proposed issue of the Additional Placement Shares the subject of Resolution 3. This assessment is designed to assist all Shareholders in reaching their voting decision.

The Independent Expert has provided the Independent Expert’s Report and has provided an opinion that it believes the proposal as outlined in Resolution 3, on balance, IS FAIR AND REASONABLE to the Shareholders of the Company not associated with EBH. It is recommended that all Shareholders read the Independent Expert’s Report in full.

The Independent Expert’s Report is enclosed with this Notice of Meeting.

3.8 DIRECTORS RECOMMENDATIONS

None of the current Board members have a material personal interest in the outcome of Resolution 3 other than Jian Hua Sang. Mr Sang has an interest in this Resolution as he will receive a facilitation fee of 5% of any funds the Company raises from EBH. As such, Mr Sang does not make a recommendation in relation to this Resolution.

Mr Griffiths does not provide a recommendation on this Resolution in order to avoid a conflict of interest arising, whether perceived or otherwise, due to his position as Tiger’s representative on the Board as provided for in the Tiger Subscription Agreement.

The Directors, apart from Jian Hua Sang and Michael Griffiths, recommend that Shareholders vote in favour of Resolution 3 for the reasons set out in section 3.5 above.

The Directors are not aware of any other information other than as set out in this Notice of Meeting that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass Resolution 3.

Notice of Meeting 2013 Chrysalis Resources Limited | 9

EXPLANATORY STATEMENT

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4. RESOLUTION 3 – PLACEMENT SHARES

4.1 GENERAL

This Resolution seeks Shareholder approval for the issue to Tiger of up to 6,385,903 Shares at an issue price of $0.06 per Share to raise up to $383,154 pursuant to the Tiger Subscription Agreement (Tiger Placement). As stated in section 1.3 above, the Shares pursuant to this Resolution will only be issued if Tiger elects to exercise the Tiger Top Up Right to maintain its shareholding and Resolution 3 is passed.

A summary of ASX Listing Rules 7.1 and 7.1A is set out in section 2.1 above.

The effect of this Resolution will be to allow the Company to issue the Shares pursuant to the Tiger Placement during the period of 3 months after the Meeting (or a longer period, if allowed by ASX), without using the Company’s annual placement capacity under Listing Rules 7.1 and 7.1A.

4.2 TECHNICAL INFORMATION REQUIRED BY ASX LISTING RULE 7.1

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

(a) the maximum number of Shares to be issued is 6,385,903;

(b) the Shares will be issued no later than 3 months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that issue of the Shares will occur on the same date;
(c) the issue price will be $0.06 per Share;
(d) the Shares will be issued to Tiger who is not a related party of the Company;
(e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares; and
(f) the Company intends to use the funds raised from the Placement to conduct further exploration on the Company’s projects in Zambia and for general working capital purposes.

Assuming no Options are exercised or other Shares issued and the maximum number of Shares as set out above are issued, the effect on the Company’s share capital and the dilution effect on Shareholders is set out in sections 3.4(b) and 3.4(i) of the Explanatory Statement.

10 | Chrysalis Resources Limited Notice of Meeting 2013

GLOSSARY

$ means Australian dollars.

Additional Placement means as defined in section 1.2(b) of this Notice.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited.

ASX Listing Rules means the Listing Rules of ASX.

Board means the current board of directors of the Company.

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

Chair means the chair of the Meeting.

Company means Chrysalis Resources Limited (ACN 125 931 964).

Constitution means the Company’s constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the current directors of the Company.

EBH means Eagle Brilliant Holdings Limited.

EBH Top Up Right means as defined in section 1.2 of this Notice.

Explanatory Statement means the explanatory statement accompanying the Notice.

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

Independent Expert’s Report means the report prepared by HLB Mann Judd Corporate (WA) Pty Ltd as attached to this Notice.

Initial Placement means the initial placement of 31,543,293 Shares to EBH pursuant to the Term Sheet.

Minimum Shareholding means as defined in section 1.2 of this Notice.

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

Placements means the Initial Placement and the Additional Placement.

Proxy Form means the proxy form accompanying the Notice.

Resolutions means the resolutions set out in the Notice, 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.

TDL Group means Tiandilong Group Limited.

Term Sheet means the term sheet entered into between the Company and EBH on or around 19 June 2013.

Tiger means Tiger Resources Limited (ACN 077 110 304).

Tiger Subscription Agreement means the subscription agreement entered into between the Company and Tiger on or around 27 August 2012.

Tiger Top Up Right means as defined in section 1.3 of this Notice.

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

Notice of Meeting 2013 Chrysalis Resources Limited | 11

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12 | Chrysalis Resources Limited Notice of Meeting 2013

PROXY FORM

APPOINTMENT OF PROXY CHRYSALIS RESOURCES LIMITED ACN 125 931 964

GENERAL MEETING

I/We

of being a Shareholder entitled to attend and vote at the Meeting, hereby

appoint

Name of proxy

OR the Chair as my/our proxy

or failing the person so named or, if no person is named, the Chair, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, and subject to the relevant laws as the proxy sees fit, at the Meeting to be held at Boulevard centre, 99 The Boulevard, Floreat WA 6014, on 14 October 2013 at 3pm WST, and at any adjournment thereof.

The Chair intends to vote undirected proxies in favour of all Resolutions in which the Chair is entitled to vote.

Voting on business of the Meeting


Resolution	1	–Ratification of Prior Issue of Shares
Resolution	2	- Ratification of Prior Issue of Shares
Resolution	3	– Approval of Additional Placement Pursuant to Item 7 section 611
		and ASX Listing Rule 7.1
Resolution	4	– Placement Shares

Please note: 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 be counted in computing the required majority on a poll.

Important for Resolutions 1-4

If you have not directed your proxy how to vote as your proxy in respect of Resolutions 1-4 and the Chair is, or may by default be, appointed your proxy, you must mark the box below.

I/we direct the Chair to vote in accordance with his/her voting intentions (as set out above) on Resolutions 1-4 (except where I/we have indicated a different voting intention above) and acknowledge that the Chair may exercise my/our proxy even if the Chair has an interest in the outcome of Resolutions 1-4 and that votes cast by the Chair for Resolutions 1-4, other than as proxy holder, will be disregarded because of that interest.

If the Chair is, or may by default be, appointed your proxy and you do not mark this box and you have not directed the Chair how to vote, the Chair will not cast your votes on Resolutions 1-4 and your votes will not be counted in calculating the required majority if a poll is called on Resolutions 1-4.

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

Signature of Shareholder(s):	Date: _________
Individual or Shareholder 1	Shareholder 2	Shareholder 3

Sole Director/Company Secretary	Director	Director/Company Secretary

Contact Name: ______ Contact Ph (daytime): __________

PROXY FORM

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INSTRUCTIONS FOR COMPLETING ‘APPOINTMENT OF PROXY’ FORM

(Appointing a Proxy): A Shareholder entitled to attend and cast a vote at the Meeting is entitled to appoint a proxy to attend and vote on their behalf at the Meeting. If a Shareholder is entitled to cast 2 or more votes at the Meeting, the Shareholder may appoint a second proxy to attend and vote on their behalf at the Meeting. However, where both proxies attend the Meeting, voting may only be exercised on a poll. The appointment of a second proxy must be done on a separate copy of the Proxy Form. A Shareholder who appoints 2 proxies may specify the proportion or number of votes each proxy is appointed to exercise. If a Shareholder appoints 2 proxies and the appointments do not specify the proportion or number of the Shareholder’s votes each proxy is appointed to exercise, each proxy may exercise one-half of the votes. Any fractions of votes resulting from the application of these principles will be disregarded. A duly appointed proxy need not be a Shareholder.
(Direction to Vote): A Shareholder may direct a proxy how to vote by marking one of the boxes opposite each item of business. The direction may specify the proportion or number of votes that the proxy may exercise by writing the percentage or number of Shares next to the box marked for the relevant item of business. Where a box is not marked the proxy may vote as they choose subject to the relevant laws. Where more than one box is marked on an item the vote will be invalid on that item.
(Signing Instructions):
(Individual): Where the holding is in one name, the Shareholder must sign
(Joint Holding): Where the holding is in more than one name, all of the Shareholders should sign.
(Power of Attorney): If you have not already provided the power of attorney with the registry, please attach a certified photocopy of the power of attorney to this Proxy Form when you return it.
(Companies): Where the company has a sole director who is also the sole company secretary, that person must sign. Where the company (pursuant to section 204A of the Corporations Act) does not have a company secretary, a sole director can also sign alone. Otherwise, a director jointly with either another director or a company secretary must sign. Please sign in the appropriate place to indicate the office held. In addition, if a representative of a company is appointed pursuant to section 250D of the Corporations Act to attend the Meeting, the documentation evidencing such appointment should be produced prior to admission to the Meeting. A form of a certificate evidencing the appointment may be obtained from the Company.
(Attending the Meeting): Completion of a Proxy Form will not prevent individual Shareholders from attending the Meeting in person if they wish. Where a Shareholder completes and lodges a valid Proxy Form and attends the Meeting in person, then the proxy’s authority to speak and vote for that Shareholder is suspended while the Shareholder is present at the Meeting.
(Return of Proxy Form): To vote by proxy, please complete and sign the enclosed Proxy Form and return by:
(a) post to Chrysalis Resources Limited, PO Box 226, WEMBLEY, WA, AUSTRALIA 6913; or
(b) facsimile to the Company on facsimile number +61 8 9481 5044; or

so that it is received not less than 48 hours prior to commencement of the Meeting.

Proxy Forms received later than this time will be invalid.

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ANNEXURE 1 INDEPENDENT EXPERT’S REPORT PREPARED BY HLB MANN JUDD CORPORATE (WA) PTY LTD

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Independent Expert’s Report Chrysalis Resources Limited

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HLB Mann Judd Corporate (WA) Pty Ltd AFSL 250903 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: [email protected]. Website: http://www.hlb.com.au

HLB Mann Judd Corporate (WA) Pty Ltd is a member of

International, a worldwide organisation of accounting firms and business advisers.

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FINANCIAL SERVICES GUIDE Dated 1 July 2013

1. HLB Mann Judd Corporate (WA) Pty Ltd

HLB Mann Judd Corporate (WA) Pty Ltd ABN 69 008 878 555 (“HLB Mann Judd Corporate” 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 a financial services licensee.

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. 250903 ;
remuneration that we and/or our staff and any associates 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.

3. 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;
interests in managed investment schemes excluding investor directed portfolio services;
� superannuation; and
debentures, stocks or bonds issued or proposed to be issued by a government.

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.

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HLB Mann Judd Corporate (WA) Pty Ltd is a member of

International, a worldwide organisation of accounting firms and business advisers.

Financial Services Guide

-2-

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 and there is no statutory exemption relating to the matter, you should 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 HLB Mann Judd Corporate, 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 us

HLB Mann Judd Corporate has no employees. All personnel who complete reports for HLB Mann Judd Corporate are partners of HLB Mann Judd (WA Partnership). None of those partners are eligible for bonuses 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

HLB Mann Judd Corporate is wholly owned by HLB Mann Judd (WA Partnership). Also, our directors are partners in HLB Mann Judd (WA Partnership). Ultimately the partners of HLB Mann Judd (WA Partnership) own and control HLB Mann Judd Corporate.

From time to time HLB Mann Judd Corporate or HLB Mann Judd (WA Partnership) 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. Complaints must be in writing, addressed to The Complaints Officer, HLB Mann Judd Corporate (WA) Pty Ltd, Level 4, 130 Stirling Street, Perth WA 6000.

When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 7 days and investigate the issues raised. As soon as practical, and not more than one month after receiving the written complaint, we will advise the complainant in writing of the determination.

Financial Services Guide

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9.2 Referral to external disputes 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 ( “FOS ”). FOS independently and impartially resolves disputes between consumers, including some small business, and participating financial services providers.

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

Financial Ombudsman Service Limited GPO Box 3 Melbourne VIC 3001 Toll free: 1300 78 08 08 Facsimile: (03) 9613 6399

10. Contact details

You may contact us using the details at the foot of page 1 of this FSG.

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22 August 2013

The Directors Chrysalis Resources Limited Unit 2, Level 1 Churchill Court 331-335 Hay Street SUBIACO WA 6005

Dear Sirs

INDEPENDENT EXPERT’S REPORT

INTRODUCTION

On 24 June 2013 (“Announcement Date”), Chrysalis Resources Limited (“Chrysalis” or the “Company”) announced that it had entered into a binding term sheet (“term sheet”) with Eagle Brilliant Holdings Limited (“EBH”) in order to establish an ongoing strategic relationship with the Tiandilong Group Limited (“TDL Group”) and EBH. EBH is a 100% controlled subsidiary of the TDL Group. The term sheet has created the foundation for a strategic relationship by providing EBH with a substantive shareholding in the Company of 25%. This will be achieved by the approval of Resolution 2 of the Notice of Meeting of shareholders of the Company proposed to be held on 14 October 2013, namely the issue to Eagle Brilliant Holdings Limited (or its nominee) of up to 25,704,062 ordinary shares at $0.06 per share on the terms and conditions set out in the Explanatory Statement (“the Proposed Transaction”). A summary of the key components of the term sheet are set out in Section 3 of this Report.

STRUCTURE OF REPORT

This report has been divided into the following sections:

Summary and opinion
Purpose of the Report
Key components of the term sheet
Economic analysis
Industry analysis
Adopted basis of evaluation
Profile of Chrysalis
Valuation of Chrysalis
Consideration
Assessment of whether the Proposed Transaction is fair
Assessment of whether the Proposed Transaction is reasonable
Sources of information
Qualifications, Declarations and Consents

HLB Mann Judd Corporate (WA) Pty Ltd is a member of International, a worldwide organisation of accounting firms and business advisers.

Chrysalis Resources Limited Independent Expert’s Report -2-

1. SUMMARY AND OPINION

1.1 Fairness

Set out in the table below is a comparison of the consideration payable in relation to the Proposed Transaction (ie subscription amount per share) with our assessment of the fair market value of a Chrysalis share.

	Report	Low	Preferred	High
	Reference	cents	cents	cents
Value of a Chrysalis share	Section 8	3.0	4.0	5.0
Subscription amount per share	Section 9	6.0	6.0	6.0

The subscription amount payable per Chrysalis share in relation to the Proposed Transaction is greater than our assessed fair market value of a Chrysalis share.

Accordingly, it is our opinion that the Proposed Transaction is fair.

1.2 Reasonableness

We have considered the analysis in Section 11 of this Report, in terms of both the advantages and disadvantages of the Proposed Transaction and the position of the nonassociated shareholders of Chrysalis if the Proposed Transaction was to proceed.

In our opinion, the position of the non-associated shareholders of Chrysalis if the Proposed Transaction was to proceed is more advantageous than if the Proposed Transaction was not approved by the shareholders.

1.3 Opinion

We are of the opinion that the Proposed Transaction is fair and reasonable to the nonassociated shareholders of Chrysalis.

2. PURPOSE OF THE REPORT

2.1 General

The Directors of Chrysalis have requested that HLB Mann Judd Corporate (WA) Pty Ltd (“HLB”) provide an independent expert’s report (“Report”) advising whether, in our opinion, the Proposed Transaction is fair and reasonable to holders of the Company’s ordinary shares whose votes are not to be regarded (“non-associated shareholders”).

This Report has been prepared to assist shareholders in their decision whether to vote for or against the resolution giving effect to the Proposed Transaction. Chrysalis is seeking the approval of its shareholders, under Item 7 of section 611 of the Corporations Act, for the Proposed Transaction, as it involves EBH and its associates acquiring greater than 20% of the issued capital of Chrysalis. EBH currently has a 16.02% shareholding in

Chrysalis Resources Limited Independent Expert’s Report -3-

Chrysalis. The issue of further shares to EBH pursuant to the Proposed Transaction will increase this shareholding to 25%.

2.2 Regulatory guidance

This Report is to be included in the Notice of General Meeting and Explanatory Statement (“Notice of Meeting”) for the meeting to be held on 14 October 2013 to consider the resolution giving effect to the Proposed Transaction, for the purpose of assisting shareholders in their consideration of that resolution. This Report should not be used for any other purpose.

We have prepared this Report having regard to the relevant Australian Securities and Investments Commission (“ASIC”) releases. ASIC Regulatory Guide 74 “ Acquisitions agreed to by shareholders ” suggests that the obligation to supply shareholders with all information that is material to the decision on how to vote on the resolution giving effect to the Proposed Transaction can be satisfied by the directors of Chrysalis, by either:

(a) undertaking a detailed examination of the Proposed Transaction themselves, if they consider that they have sufficient expertise; or
(b) by commissioning an independent expert’s report.

The directors of Chrysalis have commissioned this Report to satisfy this obligation.

In determining the fairness and reasonableness of the Proposed Transaction, we have had regard to ASIC Regulatory Guide 111 “Content of expert reports” (“RG 111”), which states that an opinion as to whether an offer is fair and/or reasonable shall entail a comparison between the offer price (in this case, the proposed amount payable for the Chrysalis shares) and the value that may be attributed to the securities under offer (in this case, the value of the Chrysalis shares) (fairness ) and an examination to determine whether there are sufficient reasons for security holders to accept the offer despite an offer not being fair ( reasonableness ) .

The concept of fairness is taken to be the value of the offer price, or the consideration, being equal to or greater than the value of the securities in this offer (in this case, the value of the Chrysalis shares). Furthermore, this comparison should be made assuming 100% ownership of the “target” (in this case, 100% of Chrysalis) and irrespective of whether the consideration is scrip or cash.

RG 111 states that an offer is reasonable if it is fair. An offer may also be reasonable, if despite it not being fair, there are significant factors which in the expert’s opinion shareholders should consider in accepting the offer.

RG 111 also suggests that where the Proposed Transaction is a control transaction the expert should focus on the substance of the control transaction, rather than the legal mechanism used to effect it. RG 111 suggests that where a transaction is a control transaction it should be analysed on a basis that is consistent with a takeover bid.

In our opinion, the Proposed Transaction is a control transaction as defined by RG 111 and we have therefore assessed the Proposed Transaction to consider whether, in our opinion, it is fair and reasonable to the non-associated shareholders of Chrysalis.

We have also had regard to ASIC Regulatory Guide 112 “Independence of experts”.

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2.3 Compliance with APES 225 Valuation Services

This report has been prepared in accordance with the requirements of the professional standard APES 225 Valuation Services (“APES 225”) as issued by the Accounting Professional & Ethical Standards Board.

In accordance with the requirements of APES 225, we advise that this assignment is a Valuation Engagement as defined by that standard as follows:

“an Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Member is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Member at that time.”

3. KEY COMPONENTS OF THE TERM SHEET

On 19 June 2013, Chrysalis entered into a binding term sheet with EBH in order to establish an ongoing strategic relationship with the Tiandilong Group Limited and EBH. EBH is a 100% controlled subsidiary of the TDL Group. The term sheet has created the foundation for a strategic relationship by providing EBH with a substantive shareholding in the Company of 25% subject to the approval of Resolution 2 of this Notice of Meeting. Details of the components of the term sheet are set out in the Notice of Meeting.

The principal components of the term sheet are as follows:

i) an initial placement of 31,543,293 shares has been made to EBH, giving EBH an initial 16.02% shareholding in Chrysalis. This placement is part of the ratification being sought pursuant to Resolution 1 of the Notice of Meeting of shareholders of the Company proposed to be held on 14 October 2013 ;
ii) subject to obtaining shareholder approval of Resolution 2, up to 25,704,062 Shares at $0.06 per share will be issued to EBH, which will give EBH a 25% shareholding in the Company;
iii) EBH was granted, subject to the Company obtaining an ASX waiver, a right which gives EBH (or its nominee) the right to participate in future equity capital raisings by the Company on the same terms that are offered to other participants in order to maintain its strategic 25% shareholding in the Company’s issued capital and therefore maintain the strategic relationship between the Company and EBH (“EBH Top Up Right”). As announced to the ASX on 31 July 2013, the Company has been granted the necessary ASX waiver for the EBH Top Up Right. The EBH Top Up Right remains in existence for as long as EBH’s voting power in the Company is at least 19.9%; and
iv) in addition to the above placements and the EBH Top Up Right, the term sheet also provides:
(a) EBH with the right to nominate to the Board of the Company, subject to Board approval:
- (i) one executive director after the initial placement, pursuant to which Jian Hua Sang was nominated; and

Chrysalis Resources Limited Independent Expert’s Report -5-

(ii) in addition, a non-executive director on or following the placement the subject of Resolution 2 being made; and
(b) that should the Company develop a producing mining operation in Zambia, EBH will be given the first right of refusal to enter into any off-take agreement for mined ore or metal products in accordance with standard commercial terms and pricing.

4. ECONOMIC ANALYSIS

At its meeting on 6 August 2013, the Reserve Bank of Australia Board (“Board”) decided to lower the cash rate by 25 basis points to 2.5 per cent, effective 7 August 2013. In support of this decision, the Board provided the following commentary:

“Recent information is consistent with global growth running a bit below average this year, with reasonable prospects of a pick-up next year. Commodity prices have declined but, overall, remain at high levels by historical standards. Inflation has moderated over recent months in a number of countries.

Globally, financial conditions remain very accommodative, though the recent reassessment by markets of the outlook for US monetary policy has seen a noticeable rise in sovereign bond yields, from exceptionally low levels. Volatility in financial markets has increased and has affected a number of emerging market economies in particular.

In Australia, the economy has been growing a bit below trend over the past year. This is expected to continue in the near term as the economy adjusts to lower levels of mining investment. The unemployment rate has edged higher. Recent data confirm that inflation has been consistent with the medium-term target. With growth in labour costs moderating, this is expected to remain the case over the next one to two years, even with the effects of the recent depreciation of the exchange rate.

The easing in monetary policy over the past 18 months has supported interest-sensitive spending and asset values, and further effects can be expected over time. The pace of borrowing has remained relatively subdued, though recently there are signs of increased demand for finance by households.

The Australian dollar has depreciated by around 15 per cent since early April, although it remains at a high level. It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy.

The Board has previously noted that the inflation outlook could provide some scope to ease policy further, should that be required to support demand. At today's meeting, and taking account of recent information on prices and activity, the Board judged that a further decline in the cash rate was appropriate. The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the inflation target over time”.

Source : www.rba.gov.au Statement by Glenn Stevens, Governor: Monetary Policy Decision 6 August 2013

5. INDUSTRY ANALYSIS

5.1 Iron Ore in Australia

Over the five years through 2012/13, revenue for the Iron Ore Mining industry is expected to increase at an annualised 20.2% to reach $74.5 billion. Strong economic growth in large emerging nations, such as China and India, has lifted steel production,

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fuelling growing demand for iron ore and boosting its price (even allowing for the fall in 2011/12). Rising prices have led to capacity expansions and large-scale increases in Australia's iron ore output. These factors have contributed to the 6.3% annualised increase in Australia's iron ore production over the past five years.

Despite strong growth over the past five years, industry revenue is forecast to increase by just 2.0% in 2012/13 as higher output fails to offset price weakness. Increases in iron ore output worldwide, combined with subdued economic growth in developed and developing economies, are putting downward pressure on prices. In 2012/13, industry profit is expected to be approximately $25.5 billion and the industry is forecast to generate about 2.8% of Australia's GDP.

The industry is expected to continue growing strongly over the five years through 2017/18, as production volumes increase and prices recover from the lows of 2012. A volatile price climate is expected over the coming five years. Demand will continue to grow steadily, but supply will come on-stream in large blocks, leading to seesawing prices on an upward trend. Industry revenue is expected to grow at an annualised 12.7% to reach $135.5 billion in 2017/18.

Iron ore producers (together with black coal miners) became subject to the Mineral Resource Rent Tax on 1 July 2012. A headline tax rate of 30% is imposed on profit after a return equal to the long-term government bond rate plus 7.0%. Firms will gain a tax credit for royalties paid to state governments. Carbon pricing, initially in the form of a carbon tax, was introduced on the same date. Mining firms attract the tax, which is implemented via reductions in fuel tax credits, through their use of fuel.

Source : IBIS World

5.2 Gold in Australia

Gold mining is a well-established industry in Australia with origins dating back to the gold rushes of the mid to late 1800s. Despite its mature status, however, the industry has undergone an intense revival over the past five years, during which revenue is expected to increase at an annualised 11.0%. This growth stems from gold's status as a counter-cyclical commodity whereby it is viewed as a safe haven asset during times of national and global economic upheaval.

As a result, the onset of the global financial crisis and the recessionary environment that ensued set up the perfect conditions for a brand new, modern-day gold rush. Investors across the world flocked to gold as a safe monetary asset as the value of global financial assets and currencies tumbled. This sudden increase in demand caused global gold prices to surge, which pushed up industry revenue and profit. These conditions also prompted gold producers in Australia to expand production because higher prices more than offset the higher cost of developing lower grade ores. However, the gold boom could be short-lived given the forecast decline in gold prices over the next year as the global economy strengthens. This would cast an ominous shadow over the viability of the industry in Australia given the ongoing rise in production costs for many companies. As a result of these conditions, industry revenue is expected to fall by 1.9% to $15.2 billion in 2012/13 even though production is expected to increase.

Over the next five years, the industry's fortunes will be largely tied to the rise and fall of global gold prices. Gold prices are expected to fluctuate, which will expose the industry to a relatively high degree of revenue volatility. However, prices at the end of the period are expected to remain largely stagnant compared with 2012/13, and as a result the expected increase in gold production will drive industry performance. As a result,

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industry revenue is forecast to increase at an annualised 6.8% over the five years through 2017/18, to reach $21.1 billion. An increase in production in 2013/14 will kickstart the five-year period with revenue growth of 3.8%. However, the slow increase in gold prices and rising costs of production are expected to stifle overall profitability over the medium term.

Source: IBIS World

5.3 Copper in Australia

Copper has excellent heat and electrical conducting properties. Copper is widely used in applications such as the electrical wiring in homes or in computer devices. Computers and other digital devices require heat sinks to prevent overheating. These heat sinks commonly feature copper as a heat conductor to dissipate heat to surrounding air.

Australia is one of the world's major copper mining countries, although its output lags behind that of Chile, Peru, the United States and China. Chile alone represents about one-third of global copper mine output. An increase in Australia's copper ore production is expected to boost industry revenue by 5.1% in 2013/14. This will bring industry revenue to $7.8 billion in 2013/14. Exports will absorb over half the volume of mine output, with India, China, Japan and South Korea dominating those sales. Export revenue is forecast to total $5.9 billion in 2013/14. The industry as a whole is expected to grow by a compound annual 7.5% over the five years through 2013/14. Growth in industry revenue over the past five years has occurred due to booming demand for copper in large emerging nations such as China and India. Global copper production, spurred by a price boom in the early 2000s, has also surged. In this climate, copper prices in US dollars have fluctuated over the five years through 2013/14. However, the global financial crisis ensured that there was great price volatility.

Industry revenue is forecast to grow by a compound annual 1.8% to $8.5 billion over the five years through 2018/19. This reflects the interaction of higher output, a weaker Australian dollar and higher US dollar copper prices. The importance of copper ore exports will increase over the next five years as Glencore Xstrata implements its plan to cease copper refining in Australia in 2016.

Source: IBIS World

5.4 Copper in Zambia

Copper and cobalt are the key commodities produced by Zambia, with the Zambian copperbelt remaining the focus of mining and development activities. The copperbelt, which is situated between Zambia and the DRC, is one of the world's greatest metallogenic provinces. The area contains the world's highest grade copper and cobalt deposits, with tailings dumps often containing grades greater than that of most hard rock mines. Zambia is ranked as the world's seventh largest producer of copper, generating 3.3% of the western world’s production, and the world’s second largest producer of cobalt (19.7%).

Source: www.mbendi.com

Refer to Section 5 of the Optiro report for an overview of Zambia, including the country’s political and economic framework; mineral legislation and mining tenure; and taxes and royalties.

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6. ADOPTED BASIS OF EVALUATION

6.1 Fairness

We have assessed whether the Proposed Transaction is fair by comparing the proposed consideration for each Chrysalis share with our assessed value of each Chrysalis share.

The Chrysalis shares have been valued at fair market value, which we have defined as the amount at which the shares would be expected to change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither of whom is under any compulsion to buy or sell. Special purchasers may be willing to pay higher prices to gain control, to reduce or eliminate competition, to secure a source of material supply or sales, or to achieve cost savings or other synergies arising on business combinations, which could only be enjoyed by the special purchaser. As the Proposed Transaction is a control transaction (as defined in RG 111), we have considered this factor in forming our opinion.

6.2 Reasonableness

We have assessed the reasonableness of the Proposed Transaction by considering other advantages and disadvantages of the Proposed Transaction to the non-associated shareholders of Chrysalis.

6.3 Individual circumstances

We have evaluated the Proposed Transaction for Chrysalis shareholders as a whole. We have not considered the effect of the Proposed Transaction on the particular circumstances of individual shareholders. Due to their particular circumstances, individual shareholders may place a different emphasis on various aspects of the Proposed Transaction from those adopted in this Report. Accordingly, individual shareholders may reach different conclusions to ours on whether the Proposed Transaction is fair and reasonable. If in doubt, shareholders should consult an independent adviser.

6.4 Limitations and Reliance on Information

HLB’s opinion is based on economic, share market, business trading and other conditions and expectations prevailing at the date of this Report. These conditions can change significantly over relatively short periods of time. If these conditions did change materially the valuations and opinions could be different in these changed circumstances.

This report is also based upon financial information and other information provided by Chrysalis. HLB has considered and relied upon this information. HLB has no reason to believe that any material facts have been withheld. The information provided to HLB has been evaluated through analysis, enquiry and review for the purposes of forming an opinion as to whether the Proposed Transaction is fair and reasonable. However, in preparing reports such as this, time is limited and HLB does not warrant that its enquiries have identified or verified all of the matters that an audit, extensive examination or “due diligence” investigation might disclose. In any event, an opinion as to fairness and reasonableness is more in the nature of an overall review rather than a detailed audit or investigation.

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An important part of the information used in forming an opinion of the kind expressed in this Report is comprised of the opinions and judgment of management. This type of information was also evaluated through analysis, enquiry and review to the extent practical. However, such information is often not capable of external verification or valuation.

Preparation of this Report does not imply that HLB has audited in any way the records of Chrysalis for the purposes of this Report. It is understood that the accounting information that was provided was prepared in accordance with generally accepted accounting principles and in a manner consistent with the method of accounting in previous years except as otherwise noted.

The information provided to HLB included historical financial information for Chrysalis. Chrysalis is responsible for this information. HLB has used and relied on this information for the purpose of analysis. HLB has assumed that this information was prepared appropriately and accurately based on the information available to management at the time and within the practical constraints and limitations of such information. HLB has assumed that this information does not reflect any material bias, either positive or negative. HLB has no reason to believe otherwise.

7. PROFILE OF CHRYSALIS

7.1 Company History

Chrysalis was incorporated on 13 June 2007 and was admitted to the Official List of ASX on 27 May 2008.

Chrysalis is an exploration company which has focussed its strategic and exploration efforts on four main projects which cover copper (Zambian project and Halloween West copper/gold project), gold (Pioneer) and iron ore (West Angelas).

Chrysalis’s other interests comprise Horseshoe Lights (copper/gold) and Gregory Range (iron/base metals).

7.2 Assets

The Company’s assets comprise predominantly cash and mineral exploration properties. An extract of the Company’s unaudited management accounts for the year ended 30 June 2013 together with the audited financial statements for the year ended 30 June 2012 is shown at Section 7.8 of this report.

7.3 Legal Structure

Chrysalis is a company incorporated and domiciled in Australia. The structure of the consolidated entity comprising Chrysalis and its controlled entities is set out below:

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		Country of	Parent entity’s
		incorporation	holding
Parent entity:	Chrysalis Resources Limited	Australia	N/A
Controlled entities:	Horizon Copper Zambia	Republic of	100%
	Limited	Zambia
	Zambian Copper Pty Ltd	Australia	100%
	Sedgwick Resources	Republic of	99.99%
	Limited	Zambia

7.4 Management and Personnel

The Company’s current directors are:

Dr Neale Fong Executive Chairman Mr Grant Kidner Executive Director Mr Jian Hua Sang Executive Director Mr Trevor Benson Non-Executive Director Mr Michael Griffiths Non-Executive Director Mr Adrian Paul Non-Executive Director

7.5 Capital Structure and Shareholders

At the date of this Report, Chrysalis had the following securities on issue:

Number Fully paid ordinary shares 196,899,454 Options: Expiry date Exercise price Number (cents) NIL

All issued options expired on 30 June 2013. At the date of this report, the Company had no options on issue.

Escrow provisions

No securities are held in escrow as at the date of this report.

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Top 20 shareholders

The top 20 shareholders as at 19 August 2013 are set out below.

Shareholder	Number of Shares % of total shares on issue
Tiger Resources Limited Eagle Brilliant Holdings Limited Mr Adrian Stephen Paul Mr David Nasir Yusoff Ice Cold Investments Pty Ltd Mr Trevor Benson Pareto Nominees Pty Ltd Mr Grant Anthony Kidner Mr Graham William Waldon and Mrs Barbara Elizabeth Waldon Mr Denis Ivan Rakich and Mrs Francesca Angelina Rakich Bell Potter Nominees Limited Mr Neale William Fong Secor Pty Ltd Mr Neale William Fong Trevetal Investments Pty Ltd Mr Grant Michael Button Mr Adrian Stephen Paul and Mrs Noelene Fay Paul Mr Robert Lawrence Hawke Juneday Pty Ltd Mr Gary Wayne Watkins and Mrs Debra Doreen Watkins TOTAL	39,182,991 19.90% 31,543,293 16.02% 9,450,004 4.80% 6,750,000 3.43% 5,400,000 2.74% 4,140,000 2.10% 4,000,000 2.03% 3,375,000 1.71% 3,060,000 1.55% 3,000,000 1.52% 2,880,000 1.46% 2,835,000 1.44% 2,700,000 1.37% 2,610,000 1.33% 2,610,000 1.33% 2,250,000 1.14% 2,194,816 1.11% 2,050,000 1.04% 1,929,735 0.98% 1,810,000 0.92%
	133,770,839 67.94%

Shareholder

Number of
Shares
% of total
shares on
issue

Tiger Resources Limited
Eagle Brilliant Holdings Limited
Mr Adrian Stephen Paul
Mr David Nasir Yusoff
Ice Cold Investments Pty Ltd
Mr Trevor Benson
Pareto Nominees Pty Ltd
Mr Grant Anthony Kidner
Mr Graham William Waldon and Mrs Barbara
Elizabeth Waldon
Mr Denis Ivan Rakich and Mrs Francesca Angelina Rakich
Bell Potter Nominees Limited
Mr Neale William Fong
Secor Pty Ltd
Mr Neale William Fong
Trevetal Investments Pty Ltd
Mr Grant Michael Button
Mr Adrian Stephen Paul and Mrs Noelene Fay Paul
Mr Robert Lawrence Hawke
Juneday Pty Ltd
Mr Gary Wayne Watkins and Mrs Debra Doreen Watkins
TOTAL

39,182,991
19.90%
31,543,293
16.02%
9,450,004
4.80%
6,750,000
3.43%
5,400,000
2.74%
4,140,000
2.10%
4,000,000
2.03%
3,375,000
1.71%
3,060,000
1.55%
3,000,000
1.52%
2,880,000
1.46%
2,835,000
1.44%
2,700,000
1.37%
2,610,000
1.33%
2,610,000
1.33%
2,250,000
1.14%
2,194,816
1.11%
2,050,000
1.04%
1,929,735
0.98%
1,810,000
0.92%

133,770,839
67.94%

7.6 Share Price Performance

Chrysalis’s share price movements in the 12 months to the date of preparation of this Report, together with volumes traded are presented in the graph below:

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The following key announcements were made by the Company to the market during the above period:

Date	Announcement		Closing share price after announcement $ (movement)	Closing share price three days after announcement $ (movement)
20 Aug 13	Wangolo maiden resource estimate		0.035 (�0%)	N/A
31 Jul 13	Waiver from Listing Rule 6.18		0.04 (�0%)	0.04 (�0%)
31 Jul 13	Quarterly activities and cashflow report		0.04 (�0%)	0.04 (�0%)
29 Jul 13	Appointment and resignation of	non-executive	0.04 (�8%)	0.037 (�8%)
	directors
5 Jul 13	Strategic investor and appointment	of executive	0.05 (�0%)	0.042 (�16%)
	director
24 Jun 13	Placement to Chinese strategic investor		0.055 (�0%)	0.055 (�0%)
8 Apr 13	Further copper intersections at Wangolo		0.08 (�0%)	0.08 (�0%)
19 Mar 13	Significant copper targets at Shikila		0.1 (�0%)	0.1 (�0%)
27 Feb 13	Chrysalis confirms new discovery		0.11 (�0%)	0.11 (�0%)
29 Jan 13	Significant copper mineralisation intersected at		0.13 (�13%)	0.125 (�4%)
	Shikila
21 Dec 12	Zambian exploration drilling update		0.115 (�5%)	0.115 (�0%)
20 Nov 12	Drilling at Halloween West project commences		0.08 (�0%)	0.105 (�31%)
4 Oct 12	Exploration drilling commences at Zambian copper		0.1 (�11%)	0.1 (�0%)
	project
28 Sept 12	Annual report to shareholders		0.095 (�10%)	0.089 (�6%)
24 Sept 12	Appointment of non-executive directors		0.086 (�1%)	0.086 (�0%)
5 Sept 12	Exploration of Zambia project commences		0.1 (�5%)	0.1 (�0%)
28 Aug 12	Strategic alliance with Tiger Resources Ltd		0.08 (�23%)	0.091 (�14%)

Source : ASX company announcements

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The following facts are worthy of note in relation to the above:

(a) The Chrysalis closing share price has fluctuated from a price of approximately 6 cents at the beginning of the above period to a high of 15.5 cents on 15 January 2013 and to a closing price at the date of this Report of 3.5 cents; and
(b) Following the announcement on 24 June 2013 that the Company had signed a binding term sheet with EBH, the Company’s closing share price did not change from the pre-announcement price of 5.5 cents. Since that date, the Company’s closing share price has fallen to a low of 3.5 cents on 17 July 2013 which is the price at the date of this Report.

7.7 Financial Performance

Extracts of the Company’s unaudited financial results for the year ended 30 June 2013 and audited financial results for the year ended 30 June 2012 are set out below:

	Unaudited Year to 30 June 2013 $ Audited Year to 30 June 2012 $
Finance income Stock exchange and registry fees Depreciation and amortisation Directors’ remuneration Employee benefits expense Accounting fees Audit fees Costs associated with Zambian Copper Project Tenement management fees Exploration costs reimbursed/(written off) Impairment of exploration costs Other expenses Loss before income tax Income tax benefit Loss for the year Other comprehensive income/(loss), net of tax TOTAL COMPREHENSIVE LOSS FOR THE YEAR	32,895 24,093 (35,258) (20,592) (38,212) (10,620) (370,207) (245,520) (433,437) (130,800) (114,759) (59,607) (63,398) (34,750) (9,426) (531,766) (14,265) (14,134) (299,505) 14,848 (1,927,801) (58,033) (631,634) (140,859)
	(3,905,007) (1,207,470) - -
	(3,905,007) (1,207,470) 118,163 (1,192)
	(3,786,844) (1,208,662)

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7.8 Financial Position

Extracts of the Company’s unaudited financial position as at 30 June 2013 and audited financial position as at 30 June 2012 are set out below:

	Unaudited 30 June 2013 $ Audited 30 June 2012 $
Current Assets Cash and cash equivalents Other receivables Total Current Assets Non Current Assets Plant and equipment Exploration and evaluation expenditure Total Non Current Assets Total Assets Liabilities Current Liabilities Trade and other payables Amounts due under contract Total Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity	456,885 294,444 62,249 498,655
	519,134 793,099
	194,656 27,200 3,304,788 3,544,166
	3,499,444 3,571,366
	4,018,578 4,364,465
	406,936 607,909 - 300,000
	406,936 907,909
	406,936 907,099
	3,611,642 3,456,556
	11,657,010 7,715,081 1,035,871 917,708 (9,081,239) (5,176,233)
	3,611,642 3,456,556

7.9 Tax Losses

At 30 June 2012, the Company had a net unrecognised deferred tax asset of $1,542,608 relating primarily to the benefit of income tax losses. The movement in the unrecognised deferred tax asset for the year ended 30 June 2013 has not yet been quantified. This asset is not included in the statement of financial position in Section 7.8 of this Report. Refer to Section 8.3.1 of this Report for further discussion on this matter.

8. VALUATION OF CHRYSALIS

8.1 Valuation Summary

HLB has assessed the fair market value of Chrysalis to be 4.0 cents per share.

For the purpose of our opinion, fair market value is defined as the amount at which the shares would change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither being under a compulsion to buy or sell. We have considered the aspect of a premium for control in forming our opinion.

In determining this amount, we assessed the fair market value of Chrysalis after considering the various valuation methods, which are discussed in further detail at Section 8.2 of this Report.

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8.2 Valuation Methodology

Methodologies commonly used for valuing assets and businesses are as follows:

8.2.1 Capitalisation of future maintainable earnings (“FME”)

This method places a value on a business by estimating the likely future maintainable earnings, capitalised at an appropriate rate which reflects business outlook, business risk, investor expectations, future growth prospects and other entity specific factors. This approach relies on the availability and analysis of comparable market data.

The FME approach is the most commonly applied valuation technique and is particularly applicable to profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure requirements and non-finite lives.

The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings before interest and tax (“ EBIT ”) or earnings before interest, tax, depreciation and amortisation (“ EBITDA ”). The capitalisation rate or "earnings multiple" is adjusted to reflect which base is being used for FME.

This method is not appropriate for use in mining exploration companies.

8.2.2 Discounted future cash flows (“DCF”)

The DCF methodology is based on the generally accepted theory that the value of an asset or business depends on its future net cash flows, discounted to their present values at an appropriate discount rate (often called the weighted average cost of capital). This discount rate represents an opportunity cost of capital reflecting the expected rate of return which investors can obtain from investments having equivalent risks.

A terminal value for the asset or business is calculated at the end of the future cash flow period and this is also discounted to its present value using the appropriate discount rate.

DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are in a start-up phase, or experience irregular cash flows.

The DCF methodology is not considered appropriate to use in the valuation of Chrysalis as the Company is in the exploration phase and does not have cash flow forecast information based on JORC reserves.

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8.2.3 Net asset value

Asset based methods estimate the market value of an entity’s securities based on the realisable value of its identifiable net assets. Asset based methods include:

Orderly realisation of assets method
Liquidation of assets method
Net assets on a going concern method

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to entity holders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the entity is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Where wind up or liquidation of the entity is not being contemplated, these methods in their strictest form are generally not appropriate. The net assets on a going concern method estimates the market values of the net assets of an entity but does not take into account any realisation costs.

The net assets on a going concern method is usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. All assets and liabilities of the entity are valued at market value under this alternative and this combined market value forms the basis for the entity’s valuation.

Often the FME and DCF methodologies are used in valuing assets forming part of the overall net assets on a going concern basis.

These asset based methods ignore the possibility that the entity’s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as management, intellectual property and goodwill. Asset based methods are appropriate when entities are not profitable, a significant proportion of the entity’s assets are liquid or for asset holding companies.

8.2.4 Quoted Market Price Basis

Another valuation approach that can be used in conjunction with (or as a replacement for) any of the above methods is the quoted market price of listed securities. Where there is a ready market for securities such as the ASX through which shares are traded, recent prices at which shares are bought and sold can be taken as the market value per share. Such market value includes all factors and influences that impact upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume trading, creating a “deep” market in that security.

8.2.5 Methodology Adopted

We consider that the most appropriate methods for the valuation of Chrysalis shares are the net assets on a going concern method and the quoted market price basis.

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8.3 Valuation

8.3.1 Net assets on a going concern method of valuation of Chrysalis

Our valuation of Chrysalis on a going concern method of valuation is set out in our valuation calculations below.

Statement of Financial Position Note	Unaudited 30 June 2013 $ Valuation Low $ Valuation Preferred $ Valuation High $
Current Assets Cash and cash equivalents 1 Other receivables Total Current Assets Non Current Assets Plant and equipment Exploration and evaluation expenditure 2 Total Non Current Assets Total Assets Liabilities Current Liabilities Trade and other payables Total Current Liabilities Total Liabilities Net Assets	456,885 3,202,832 3,202,832 3,202,832 62,249 62,249 62,249 62,249
	519,134 3,265,081 3,265,081 3,265,081
	194,656 194,656 194,656 194,656 3,304,788 3,110,000 5,100,000 7,120,000
	3,499,444 3,304,656 5,294,656 7,314,656
	4,018,578 6,569,737 8,559,737 10,579,737
	406,936 406,936 406,936 406,936
	406,936 406,936 406,936 406,936
	406,936 406,936 406,936 406,936
	3,611,642 6,162,801 8,152,801 10,172,801

	Number Number Number Number
Shares on issue 3 Value per share (cents)	157,519,564 203,285,357 203,285,357 203,285,357 2.3 3.0 4.0 5.0

We have made the following adjustments to the net assets and issued capital of Chrysalis as at 30 June 2013 in determining our valuation:

1. Cash and cash equivalents

a) As set out in the Notice of Meeting of shareholders of the Company proposed to be held on 14 October 2013, Resolution 3, namely the issue of 6,385,903 shares to Tiger Resources Limited (“Tiger”) at an issue price of $0.06 per share to raise $383,154, is conditional on Resolution 2 (the Proposed Transaction) being passed, meaning that both Resolutions 2 and 3 must be passed by shareholders for Resolution 3 to have effect. The issue of shares to Tiger is pursuant to the Top Up Right which Tiger has under a subscription agreement with Chrysalis. Notwithstanding that the Company is awaiting confirmation from Tiger whether it will exercise this Top Up Right, we have assumed that this will occur for the purposes of our Report and have included this cash inflow as well as the increase in shares issued in our valuation above.
b) On 5 July 2013, the Company issued 31,543,293 shares to EBH at $0.06 per share, as well as 7,836,597 shares to Tiger at $0.06 per share pursuant to the Tiger Top Up Right. Total funds of $2,362,793 were received. We have included this cash inflow as well as the increase in shares issued in our valuation above.

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2. Exploration and evaluation expenditure

We instructed Optiro to provide an independent market valuation of the Zambian mineral assets held by Chrysalis and CSA Global Pty Ltd (“CSA Global”) to provide an independent market valuation of the Western Australian mineral assets held by Chrysalis. Both Optiro and CSA Global considered a number of different valuation methods when valuing the mineral assets of Chrysalis. A copy of the report prepared by Optiro is attached to this Report as Appendix 2 and a copy of the report prepared by CSA Global is attached to this Report as Appendix 3.

The range of values for Chrysalis’s exploration assets as assessed by Optiro and CSA Global is set out below:

		Low Value $Million Preferred Value $Million High Value $Million
	Zambian projects (as valued by Optiro): Zambian projects Western Australian projects (as valued by CSA Global): West Angelas Pioneer Halloween West Horseshoe South Gregory Range Total	2.820 3.870 4.910
		0.040 0.020 0.020 0.010 0.100 0.200 0.200 0.030 0.360 0.620 0.290 0.040 0.200 0.700 0.900
		0.290 1.230 2.210
		3.110 5.100 7.120

Our valuation calculations are therefore based on a range of values between $3.11 million and $7.12 million, with a preferred value of $5.10 million.

3. Issued shares

As set out in Note 1 above, the issue of shares to EBH and Tiger on 5 July 2013, as well as the potential issue of shares to Tiger under the Top Up Right, have been incorporated into the above valuation.

4. Deferred tax assets and liabilities

The company had a net deferred tax asset of $1,542,608 at 30 June 2012 arising primarily from the benefit of income tax losses. The movement in the unrecognised deferred tax asset for the year ended 30 June 2013 has not yet been quantified. For the purposes of our Report, we have not incorporated into our above valuation any deferred tax liability arising on the recognition of the value of the Company’s exploration assets as this unrecorded deferred tax asset would have the effect of reducing the potential gain arising from the revaluation of the Company’s mineral assets.

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8.3.2 Quoted Market Price Basis - Shares

To provide a comparison to our assessed valuation of Chrysalis in Section 8.3.1, we have also assessed the value of Chrysalis on the quoted market price basis.

The quoted market value of a company’s shares is reflective of its value on a minority interest basis. A minority interest is an interest in a company that is not significant enough for the holder to have an individual influence in the operations and value of that company.

RG 111.25 suggests that when considering the value of a company’s shares for the purposes of approval under Item 7 of section 611 of the Corporations Act, the expert should consider a premium for control. An acquirer could be expected to pay a premium for control due to the advantages they will receive should they obtain control of another company. These advantages include the following:

control over policy, decision making and strategic direction;
access to cash flows;
control over dividend policies; and
potentially, access to tax losses.

Whilst EBH will not be obtaining 100% of Chrysalis, RG 111 states that the expert should calculate the value of a “target’s” (ie Chrysalis) shares as if 100% control was being obtained. RG 111.3 states that the expert can then consider an acquirer’s practical level of control when considering reasonableness. We have considered reasonableness in Section 11 of this Report.

Our valuation calculation has been prepared in two parts. First, we have calculated the quoted market price on a minority interest basis. Secondly, we have added a premium for control to the minority interest value to arrive at a quoted market price value that includes a premium for control.

Minority interest value

A chart of the share price movement of Chrysalis over the 12 month period prior to the date of this Report is included in Section 7.6 of this Report.

The Chrysalis closing share price has fluctuated from a price of approximately 6 cents in August 2012 to a high of 15.5 cents on 15 January 2013. The closing share price at the date of this Report is 3.5 cents.

To provide further analysis of the market prices for a Chrysalis share, we have also calculated the volume weighted average market price for 10, 30, 60 and 90 day periods prior to 24 June 2013 (being the date of the announcement that the Company had entered into a binding term sheet with EBH) as follows:

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	24 June	10 Days	30 Days	60 Days	90 Days
	2013	(cents)	(cents)	(cents)	(cents)
	(cents)
Closing price	5.5
Volume weighted average		5.5	5.7	5.7	6.1

For the quoted market price basis to be reliable there needs to be an adequately liquid and active market for the securities. We consider the following characteristics to be representative of a liquid and active or “deep” market:

Regular trading in a company’s securities;
At least 50% of a company’s securities are traded on an annual basis;
The spread of a company’s shares must not be so great that a single minority trade can significantly affect the market capitalisation of a company; and
There are no significant and unexplained movements in the company’s share price.

A company’s shares should meet all of the above criteria to be considered as trading in a “deep” market, however, failure of a company’s securities to exhibit all of the above characteristics does not necessarily mean that the value of its shares determined on this basis cannot be considered relevant.

An analysis of the volume of trading in Chrysalis shares for the twelve months to 16 August 2013 is set out below:

	Low	High	Cumulative	As a % of
	Cents	Cents	Volume Traded	issued capital
				as at 30 June
				2013
10 days	3.7	4.0	1,860,000	1.2%
30 days	3.5	4.0	2,049,153	1.3%
60 days	3.5	5.5	2,843,053	1.8%
90 days	3.5	7.0	3,759,470	2.4%
180 days	3.5	12.0	5,920,493	3.8%
1 year	3.5	15.5	17,737,304	11.3%

This table indicates that the Company’s shares display a low level of liquidity, with only 11.3% of the Company’s issued capital at 30 June 2013 being traded in the 12 month period to 16 August 2013 and only 2.4% over the last 90 trading days. We do not consider the level of trading in the Company’s shares to be sufficiently adequate and to otherwise meet the criteria in order for the trading in the Company’s shares to be considered as “deep”.

Notwithstanding our opinion that the quoted market price basis is not a reliable valuation basis for our assessment, for the purpose of comparison, in our opinion a range of values for Chrysalis shares based on market pricing, after disregarding postannouncement pricing, is between 5.5 cents and 5.7 cents per share, with a preferred pricing of 5.5 cents.

Chrysalis Resources Limited Independent Expert’s Report -21-

Control Premium

Share prices from share market trading do not reflect the market value for control of a company as they are in respect of minority interest holdings. Traditionally, the premiums required to obtain control of companies range between 15% and 25% of the minority interest values.

Quoted market price including control premium

Applying these control premiums to Chrysalis’s quoted market share price results in the following quoted market price values including a premium for control:

	Low	Preferred	High
	Cents	Cents	Cents
Quoted market price value	5.5	5.5	5.7
Control premium	15%	20%	25%
Quoted market price value inclusive of a
control premium	6.3	6.6	7.1

Therefore, our valuation of a Chrysalis share based on the quoted market price method and including a premium for control is between 6.3 cents and 7.1 cents with a preferred value of 6.6 cents.

8.4 Assessment on the Fair Market Value of a Chrysalis Share

The results of the net asset and quoted market price valuations performed are summarised in the table below:

	Low	Preferred	High
	cents	cents	cents
Net assets (Section 8.3.1)	3.0	4.0	5.0
Quoted market price (Section 8.3.2)	6.3	6.6	7.1

As it is our opinion that the trading in Chrysalis shares is illiquid, we believe the most appropriate method of valuation of Chrysalis shares in accordance with RG 111 is the net assets method.

Based on the results above we consider the value of a Chrysalis share to be between 3.0 cents and 5.0 cents per share, with a preferred value of 4.0 cents per share.

9. CONSIDERATION

The shares proposed to be issued to EBH are being issued at 6.0 cents per share.

10. ASSESSMENT OF WHETHER THE PROPOSED TRANSACTION IS FAIR

RG 111 defines an offer as being fair if the value of the offer price (price of the shares proposed to be issued to EBH) is equal to or greater than the value of the securities being the subject of the offer. Set out in the table below is a comparison of our assessment of

Chrysalis Resources Limited Independent Expert’s Report -22-

the fair market value of a Chrysalis share with the value of the consideration pursuant to the Proposed Transaction.

Cents Assessed fair market value of a Chrysalis share (Section 8) 4.0 Price at which shares are proposed to be issued to EBH (Section 9) 6.0

As the amount offered is greater than the assessed fair market value of a Chrysalis share, it is our opinion that the Proposed Transaction is fair.

11. CONSIDERATION WHETHER THE PROPOSED TRANSACTION IS REASONABLE

In accordance with RG 111, an offer can be reasonable even though it is not fair. On this basis, we have identified the following factors in relation to the reasonableness of the Agreement:

Advantages

The issue of shares to EBH will provide the Company with additional funds of $1,542,244.
Funds raised from the issue of shares to EBH will enable the Company to conduct further exploration on the Company’s Zambian project, Western Australian projects and for general working capital requirements of the Company.
The price at which shares are being issued to EBH is 50% higher than the assessed market value of a Chrysalis share, based on our assessment above.

Disadvantages

The issue of shares to EBH will increase the voting power of EBH from 16.02% to 25%, thus reducing the voting power of non-associated shareholders in aggregate from 83.98% to 75%.
Existing shareholders will have their current shareholdings diluted by approximately 8.98% in aggregate, which may lead to a decrease in the price of their shares (apart from Tiger whose shareholding will not be diluted should it exercise its Top Up Right).
There is no guarantee that the Company’s share price will not fall as a result of the issue of shares to EBH.

We have considered the above factors. We are of the view that the position of the nonassociated shareholders if the resolution giving rise to the Proposed Transaction is passed, would be more advantageous than if the resolution was not passed. Accordingly, we are of the opinion that the Proposed Transaction is reasonable to the non-associated shareholders.

12. SOURCES OF INFORMATION

In preparing this report we have had access to the following principal sources of information:

Draft notice of meeting and explanatory statement concerning the Proposed Transaction;

Chrysalis Resources Limited Independent Expert’s Report -23-

Chrysalis’s Annual report for the year ended 30 June 2012 and half year report for the period ended 31 December 2012;
Chrysalis’s unaudited Management reports for the year ended 30 June 2013;
Discussions with officers of Chrysalis;
Publicly available information;
Share registry information;
ASX Announcements concerning the Proposed Transaction;
Valuation report of Chrysalis’s Zambian mineral assets prepared by Optiro; and
Valuation report of Chrysalis’s Western Australian mineral assets prepared by CSA Global.

13. QUALIFICATIONS, DECLARATIONS AND CONSENTS

HLB, which is a wholly owned entity of HLB Mann Judd Chartered Accountants, is a Licensed Investment Adviser and holder of an Australian Financial Services Licence under the Act and its authorised representatives are qualified to provide this Report. The authorised representative of HLB responsible for this Report has not provided financial advice to Chrysalis.

The author of this report is Lucio Di Giallonardo. He is a Fellow of the Institute of Chartered Accountants in Australia, holds a Bachelor of Business, and has considerable experience in the preparation of independent expert reports and valuations of business entities in a wide range of industry sectors.

Prior to accepting this engagement, HLB considered its independence with respect to Chrysalis with reference to ASIC Regulatory Guide 112 and APES 225. In HLB’s opinion, it is independent of Chrysalis.

This Report has been prepared specifically for the shareholders of Chrysalis. It is not intended that this Report be used for any other purpose other than to accompany the Notice of Meeting to be sent to the Chrysalis shareholders. In particular, it is not intended that this Report should be used for any purpose other than as an expression of the opinion as to whether or not the Proposed Transaction is fair and reasonable to the non-associated shareholders of Chrysalis. HLB disclaims any assumption of responsibility for any reliance on this Report to any person other than those for whom it was intended, or for any purpose other than that for which it was prepared.

The statements and opinions given in this Report are given in good faith and in the belief that such statements and opinions are not false or misleading. In the preparation of this Report, HLB has relied on and considered information believed, after due inquiry, to be reliable and accurate. HLB has no reason to believe that any information supplied to it was false or that any material information has been withheld.

HLB has evaluated the information provided to it by Chrysalis and other parties, through inquiry, analysis and review, and nothing has come to its attention to indicate the information provided was materially misstated or would not provide a reasonable basis for this Report. HLB has not, nor does it imply that it has, audited or in any way verified any of the information provided to it for the purposes of the preparation of this Report.

In accordance with the Act, HLB provides the following information and disclosures:

Chrysalis Resources Limited Independent Expert’s Report -24-

HLB will be paid its usual professional fee based on time involvement at normal professional rates, for the preparation of this Report. This fee, estimated to be in the range of $15,000 to $20,000 excluding GST, is not contingent on the conclusion, content or future use of the report.
Apart from the aforementioned fee, neither HLB, nor any of its associates will receive any other benefits, either directly or indirectly, for or in connection with the preparation of this Report.
HLB and its directors and associates do not have any interest in Chrysalis.
HLB and its directors and associates do not have any relationship with Chrysalis or any associate of Chrysalis, other than the firm of HLB Mann Judd being the appointed auditor of Chrysalis.

Yours faithfully

HLB MANN JUDD CORPORATE (WA) PTY LTD Licensed Investment Advisor (AFSL Licence number 250903)

L DI GIALLONARDO Authorised Representative

Chrysalis Resources Limited Independent Expert’s Report

APPENDIX 1 Appendix 1 – Glossary of Terms

TERM	DEFINITION
Announcement Date	Date the event giving rise to the Proposed Transaction
	was announced to ASX being 24 June 2013
ASIC	Australian Securities and Investments Commission
ASX	Australian Securities Exchange Limited
CSA Global	CSA Global Pty Ltd
DCF	Discounted cash flows
Directors	Directors of Chrysalis
EBIT	Earnings before Interest and Tax
EBITDA	Earnings before Interest, Tax, Depreciation	and
	Amortisation
FME	Future maintainable earnings
HLB	HLB Mann Judd Corporate (WA) Pty Ltd
JORC	Code of the Joint Ore Reserves Committee of the AIMM,
	AIG and MCA
Chrysalis or the Company	Chrysalis Resources Limited
Notice of Meeting	The Notice of General Meeting and Explanatory
	Statement for the meeting to be held on 14 October 2013
Optiro report	Report by Optiro on the Company’s Zambian mineral
	interests
Proposed Transaction	The issue of 25,704,062 shares in the capital of Chrysalis at
	an issue price of $0.06 per share to raise $1,542,244
Report	Independent expert’s report prepared by HLB
Non-associated shareholders	Existing shareholders in Chrysalis who are not associated
	with EBH

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APPENDIX 2 INDEPENDENT VALUATION OF MINERAL ASSETS PREPARED BY OPTIRO

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Valu a tion of the mineral ass e ts of Chrysalis Resources Limited

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Perth Office Lev e l 4, 50 Col i n Street We s t Perth W A 6005 PO B ox 1646 We s t Perth WA 6872 Doc Ref: A ustralia 130820_J 1 624_Chrysali s Valuation.do c x Print Dat e : 15 August 2 0 13 Tel: +61 8 9215 0000 Fax: +61 8 9215 0011 Number o f copies: Optiro Pt y Limited Optiro: 1 AB N : 63 131 922 739 www.op t iro.com HLB Man n Judd Corpora t e (WA) Pty Lt d : 1 Principal A uthors: C hristine Standing Signatu r e: B Sc Hons, MAu_ s IMM, MAIG Date: 20 August 2013 Contribut o rs: J ason Froud B Sc Hons, MAu s IMM Principal R eviewer: Ian Glacken Signatu r e: F AusIMM(CP), C Eng Date: 20 August 2013

Important Information:

This Repo r t is provided in accordance wi t h the proposal by Optiro Pty L t d (Optiro) to C h rysalis Resourc e s Limited (Chr y salis) and the terms of Optiro’s Consulting Services Agreement (the Agreement). Optiro has con s ented to the u s e and publicat i on of this Report b y Chrysalis for t he purposes s e t out in Optir o ’s proposal a n d in accordan c e with the Ag r eement. Chr y salis may reproduc e copies of this e ntire Report only for those pur p oses but may n ot and must not allow any oth e r person to pu b lish, copy or reprod u ce this Report in whole or in p a rt without Optiro’s prior writt e n consent. Optiro ha s used its reasonable endeavo u rs to verify th e accuracy and c ompleteness of information provided to it b y Chrysalis which it h as relied in co m piling the Re p ort. We have no reason to b elieve that an y of the infor m ation or expla n ations so supplied are false or that material information has been withheld. It is n ot the role of O ptiro acting as a n independen t valuer to perform a n y due diligenc e procedures on behalf of the C o mpany. Optir o provides no w a rranty as to th e adequacy, eff e ctiveness or comple t eness of the d u e diligence pro c ess. The opini o n of Optiro is based on the market, econo m ic and other conditions pre v ailing at the d a te of this rep o rt. Such condition s can change sig n ificantly over short periods of t ime. The state m ents and opini o ns included in t his report are g iven in good fa i th and in the b e lief that they a r e not false, misleading or incomplet e . The terms of engagemen t are such that Optiro has no o bligation to update this repor t for events oc c urring subsequ e nt to the date of this report.

P a g e | ii

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APPENDIX 3 INDEPENDENT VALUATION OF MINERAL ASSETS PREPARED BY CSA GLOBAL

Date: 16[th] August 2013 Report No: R292.2013

Independent Technical Assessment and Valuation

C HRYSALIS R ESOURCES L TD

Valuation of Mineral Assets Western Australia,

by Craig Hall

BSc. (Hons), MAusIMM, MAIG, MGSA

and

Graham Jeffress

BSc. (Hons), MAIG, RPGeo

For: Chrysalis Resources Ltd Unit 2 Level 1, 331-335 Hay Street SUBIACO WA 6008

Approved:

______ Daniel Wholley Director - Operations

Chrysalis Resources Ltd Valuation of Mineral Assets

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Author and Reviewer Signatures

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

Craig Hall
BSc.(Hons), MAusIMM,
MAIG, MGSA
Signature:
Signature:
Principal
Authors:
Graham Jeffress
BSc (Hons), MAIG, RPGeo,
MGSA, MSEG
Signature:
Principal Mick Elias
Reviewer: BSc.(Hons), FAusIMM
Signature:
Daniel Wholley
CSA Authorisation:
BSc., MAIG
----- End of picture text -----

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Executive Summary

CSA Global Pty Ltd (“CSA”) was commissioned by HLB Mann Judd Corporate (WA) Pty Ltd (“HLB”) to prepare a technical project review and an independent technical valuation of Chrysalis Resources Limited’s (“Chrysalis” or “The Company”) Australian mineral assets. This review and valuation report (“Report”) was written for inclusion in an Independent Expert’s Report (“IER”) to be prepared by HLB as part of a Target statement. The IER will provide an opinion to Chrysalis shareholders and as such it will be a public document.

Chrysalis’s mineral assets comprise five groups of tenements, all within Western Australia. The company’s Zambian Copper project is not discussed within this document, and is the subject of a separate report. Mineral assets reviewed include:

�	West Angelas Iron Project	(100% owned)
�	Pioneer Gold Project	(93.3% owned)
�	Halloween West Copper-Gold	(40% owned)
�	Horseshoe South Copper-Gold	(100% owned)
�	Gregory Range Iron-Base Metals Project	(100% owned)

Some of the tenements remain at the application stage and whilst these tenements have been discussed they are not considered for valuation purposes due to the uncertainty of when or if they will be granted.

CSA has completed a review of the technical aspects of the projects, including previous work, geology and prospectivity, to inform the valuation. It is the professional opinion of CSA that further exploration work is warranted for all projects. Whilst there has been significant work completed at each project, further work is required to improve the geological understanding, to generate new exploration targets, to fully test identified targets and assess new targets, to enable the estimation or improvement of Mineral Resources estimates and to consider the commercial viability of the mineral assets.

The Australian mineral assets held by Chrysalis generally consist of early stage Exploration Areas.

The valuation presented in this Report was completed on behalf of HLB using information provided by and with the full support of Chrysalis. The applicable valuation date is 16[th] August 2013. The Report has been prepared in accordance with the Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports (“VALMIN Code”).

Valuation of the mineral assets has chiefly relied on the Market Approach (Comparable Transactions) method. As confirmation of the Market Value method the Appraised Value (Multiples of Exploration Expenditure) method has also been used for comparison with the Market Value results. Table 1 summarises the valuations for Chrysalis ’s projects.

The total value of Chrysalis’s mineral assets is considered to lie in the range $0.29M to $2.21M, within which range CSA has chosen a Preferred Value of $1.23M. It is stressed that the valuation is an opinion as to likely values, not absolute values, which can only be tested by going to the market.

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Table 1: Summary valuation of Chrysalis’s Australian mineral assets

			*Granted* *Area*
		*Ownership*		*Valuation*
*Project*	*Mineral Asset*
				Low	_High _	Preferred
		%	*km2*
				_$M _	_$M _	_$M _

West Angelas	Exploration Area	100	88.6	0.04	0.36	0.10
Pioneer	Exploration Area	93.3	22.3	0.02	0.62	0.20
Halloween West	Exploration Area	40	18.5	0.02	0.29	0.20
Horseshoe South	Exploration Area	100	11.3	0.01	0.04	0.03
Gregory Range	Exploration Area	100	933.2	0.20	0.90	0.70
*Totals*			*1073.9*	*0.29*	*2.21*	*1.23*

NB. The valuation has been compiled to an appropriate level of precision and minor rounding errors may occur.

Only granted tenements can be considered ¬ the uncertainty of grant for applications means that they are not considered for valuation purposes.

Report No: R292.2013

III

Chrysalis Resources Ltd Valuation of Mineral Assets

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Figure 1: Location of Chrysalis’s Australian mineral projects considered in this valuation report

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Contents	Contents	Contents
Author and Reviewer Signatures ........................................................................................................... I
Executive Summary .............................................................................................................................. II
Contents ................................................................................................................................................ V
1	Introduction ................................................................................................................................... 1
	1.1	Context, Scope and Terms of Reference............................................................................................. 1
	1.2	Compliance with the VALMIN Code 2005 ........................................................................................... 1
	1.3	Author of the Report – Qualifications, Experience ............................................................................. 2
	1.4	Independence ..................................................................................................................................... 2
	1.5	Principal Sources of Information ........................................................................................................ 3
	1.6	Declarations ........................................................................................................................................ 3
2	West Angelas Iron Project ............................................................................................................. 4
	2.1	Property location, access and Infrastructure ...................................................................................... 4
	2.2	Description of the Mineral Assets ....................................................................................................... 4
	2.3	Project Details ..................................................................................................................................... 4
	2.3.1	Regional Geology ............................................................................................................................ 4
	2.3.2	Local Geology and Mineralisation .................................................................................................. 4
	2.3.3	Historical Exploration ..................................................................................................................... 5
	2.3.4	Recent Exploration ......................................................................................................................... 5
	2.3.5	Mineral Resource Estimates ........................................................................................................... 8
3	Pioneer Gold Project...................................................................................................................... 9
	3.1	Property Location, Access and Infrastructure .................................................................................... 9
	3.2	Description of the Mineral Assets ....................................................................................................... 9
	3.3	Project Details ................................................................................................................................... 11
	3.3.1	Regional Geology .......................................................................................................................... 11
	3.3.2	Local Geology and Mineralisation ................................................................................................ 11
	3.3.3	Historical Exploration ................................................................................................................... 12
	3.3.4	Recent Exploration ....................................................................................................................... 12
	3.3.1	Mineral Resource Estimates ......................................................................................................... 14
4	Halloween West Copper-Gold Project ........................................................................................ 15
	4.1	Property Location, Access and Infrastructure .................................................................................. 15
	4.2	Description of the Mineral Assets ..................................................................................................... 15
	4.3	Project Details ................................................................................................................................... 15
	4.3.1	Regional Geology .......................................................................................................................... 15
	4.3.2	Local Geology ............................................................................................................................... 15
	4.3.3	Historic Exploration ...................................................................................................................... 16
	4.3.4	Recent Exploration ....................................................................................................................... 16
5	Horseshoe South Project ............................................................................................................. 18
	5.1	Property Location, Access and Infrastructure .................................................................................. 18
	5.2	Description of the Mineral Assets ..................................................................................................... 19
	5.3	Project Details ................................................................................................................................... 19
	5.3.1	Geology......................................................................................................................................... 19
	5.3.2	Mineralisation and Prospectivity .................................................................................................. 21
	5.3.3	Historical Exploration ................................................................................................................... 21
	5.3.4	Recent Exploration ....................................................................................................................... 21
6	Gregory Range Project ................................................................................................................. 22
	6.1	Property Location, Access and Infrastructure .................................................................................. 22
	6.2	Description of the Mineral Assets ..................................................................................................... 23
	6.3	Project Details ................................................................................................................................... 23
	6.3.1	Regional Geology .......................................................................................................................... 23
	6.3.2	Local Geology ............................................................................................................................... 23

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	6.3.3	Historical Exploration ................................................................................................................... 25
	6.3.4	Prospectivity ................................................................................................................................. 25
7	Valuation ..................................................................................................................................... 26
	7.1	Methodology and Assumptions ........................................................................................................ 26
	7.2	Valuation Methods for Exploration Projects .................................................................................... 27
	7.2.1	Appraised Value or Exploration Expenditure Method ................................................................. 28
	7.2.2	Market Approach Method or Comparable Transactions ............................................................. 28
	7.3	Technical Valuation of Mineral Assets .............................................................................................. 29
	7.3.1	Previous Valuations ...................................................................................................................... 29
	7.3.2	Tenements included in the Valuation .......................................................................................... 30
	7.3.3	Comparable Transactions ............................................................................................................. 30
	7.3.4	West Angelas Project.................................................................................................................... 30
	7.3.5	Pioneer Project ............................................................................................................................. 32
	7.3.6	Halloween West Project ............................................................................................................... 33
	7.3.7	Horseshoe South Project .............................................................................................................. 35
	7.3.8	Gregory Range Project.................................................................................................................. 35
	7.4	Preferred Value of the Projects ........................................................................................................ 37
8	Bibliography ................................................................................................................................. 38
	8.1	Mineral Property Valuation References ........................................................................................... 38
	8.2	Geological references ....................................................................................................................... 38
9	Glossary ....................................................................................................................................... 39

Figures Figure 1: Location of Chrysalis’s Australian mineral projects considered in this valuation report ................... IV Figure 2: Chrysalis Location, Tenure, Drilling and Significant Iron intercepts, West Angelas Project area...................................................................................................................................................... 6 Figure 3: Schematic Cross section from Chrysalis Drilling, West Angelas Project area ...................................... 8 Figure 4: Location Plan of Chrysalis’s Pioneer Gold Project ............................................................................... 9 Figure 5: Tenement Plan of Chrysalis’s Pioneer Gold Project .......................................................................... 10 Figure 6: Drill plan and geology of Chrysalis’s Pioneer Gold Project ................................................................ 14 Figure 7: Chrysalis Location, Tenure, and Areas of Interest, Halloween West JV Project area ........................ 17 Figure 8: Location of Chrysalis’s Horseshoe South Project .............................................................................. 18 Figure 9: Geology of Chrysalis’s Horseshoe South Project ............................................................................... 20 Figure 10: Location of Chrysalis’s Gregory Range Project .................................................................................. 22 Figure 11. Gregory Range Project Geological Interpretation and Mineral occurrences/deposits (note this map includes previous application areas that have not been progressed) ................................ 24 Tables Table 1: Summary valuation of Chrysalis’s Australian mineral assets ............................................................. III Table 2: Tenement Details, Chrysalis West Angelas Project ............................................................................. 4 Table 3: West Angelas Drilling Intercept Highlights (after Bunting) ................................................................. 7 Table 4: Tenement Details, Chrysalis’s Pioneer Project .................................................................................. 10 Table 5: Pre-Chrysalis exploration history, Pioneer Gold Project ...................................................................... 12 Table 6: 2012 Drilling results, Pioneer Gold Project ........................................................................................... 13 Table 7: Halloween West Project Tenements ................................................................................................. 15 Table 8: Horseshoe South Project Tenements ................................................................................................ 19 Table 9: Gregory Range Project Tenements ................................................................................................... 23 Table 10: Prospectivity Enhancement Multiplier (PEM) factors ....................................................................... 28 Table 11: PEM factors for West Angelas Iron Project ....................................................................................... 30 Table 12: Summary of Values for West Angelas, Selected for Comparable Transactions Valuations................ 31 Table 13: PEM factors for Pioneer Gold Project ............................................................................................... 32 Table 14: Summary of Values for Pioneer Gold Project, Selected for Comparable Transactions Valuations .......................................................................................................................................... 33

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Chrysalis Resources Ltd
Valuation of Mineral Assets
Table 15: PEM factors for Halloween West ...................................................................................................... 34
Table 16: Summary of Values for Halloween West Project, Selected for Comparable Transactions
Valuations .......................................................................................................................................... 34
Table 17: Kilburn Table for Horseshoe South Project ....................................................................................... 35
Table 18: Kilburn Table for Gregory Range Project ........................................................................................... 36
Table 19: Summary Valuation of Chrysalis’s Projects ....................................................................................... 37
Appendices
Appendix 1: Tenement Schedule ....................................................................................................................... 40
Appendix 2: Market Transactions Involving Iron Ore Projects at the early and conceptual
Exploration Stage within Western Australia ..................................................................................... 41
Appendix 3: Market Transactions Involving Gold Projects at the early and conceptual
Exploration Stage within Australia .................................................................................................... 42
Appendix 4: Market Transactions Involving Cu Projects at the strategically located early &
conceptual Exploration Stage within Western Australia ................................................................... 43
Appendix 5: Market Transactions Involving Cu Projects at the early & conceptual Exploration Stage
within Western Australia ................................................................................................................... 44

Report No: R292.2013

VII

Chrysalis Resources Ltd Valuation of Mineral Assets

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1 Introduction

1.1 Context, Scope and Terms of Reference

Chrysalis Resources Limited (“Chrysalis ” or “the Company”; ASX:CYS) is a public company listed on the Australian Securities Exchange (“ASX”) which has mineral assets in Australia and Zambia that are prospective for iron, copper, gold, copper-gold and base metal mineralisation. The company’s flagship projects are located in the Zambian copper belt in Africa, which are not discussed in this report.

The Company is entering into a transaction with Eagle Brilliant Holding Limited, a Chinese group whom is to take a strategic stake in Chrysalis via share placements. The Initial Placement of up to $2.35 million for up to 19.9% stake in Chrysalis is subject to obtaining the necessary approvals in the Binding Term Sheet, followed by an Additional Placement for up to 25%.

The Additional Placement is conditional upon receiving a waiver from the Australian Securities Exchange (ASX) and secondly, shareholder approval at a General Meeting proposed to be held in Perth by the end of August 2013 (“Shareholder Meeting). Should the Further Placement be made, this will also be conditional upon obtaining shareholder approval.

A general meeting is being called in relation to Section 611 of the Corporations Act, amongst other purposes, and specifically for the purposes of this report to seek the approval of shareholders to issue fully paid ordinary shares to Eagle Brilliant Holdings Limited (or its nominee) on the terms and conditions to be set out in an Explanatory Statement, such that the issue of shares will result in Eagle Brilliant Holding Limited’s voting power in the Company increasing from 16.02% to 25%. The Notice must include an Independent Expert’s Report (“IER”) on the transaction from an independent expert stating whether the transaction is fair and reasonable to holders of the Company’s ordinary securities whose votes are not to be disregarded.

As such, HLB has commissioned CSA Global Pty Ltd (“CSA”) to prepare an independent technical assessment and valuation of the mineral assets for inclusion in the IER. The review and valuation report, or a summary of it, is to be appended to the IER, and as such, will become a public document.

The mineral assets discussed in this report are all located in Western Australia (see Figure 1). Each major project area is discussed in the report and tenement details are provided in Appendix 1, and summarised in the relevant sections below. CSA understands that the project tenements are held in good standing. CSA makes no other assessment or assertion as to the legal title of tenements and is not qualified to do so. A brief overview of the projects is outlined in Sections 2 to 6. The Independent Valuation of Chrysalis’s projects is outlined in Section 7 below.

1.2 Compliance with the VALMIN Code 2005

This Valuation has been prepared in accordance with the VALMIN Code 2005, which is binding upon Members of the Australasian Institute of Mining and Metallurgy (“AusIMM”) and the Australian Institute of Geoscientists (“AIG”).

The author has taken due note of the rules and guidelines issued by such bodies as the Australian Securities and Investments Commission (“ASIC”) and the ASX, including ASIC Regulatory Guide 111 – Content of Expert Reports and ASIC Regulatory Guide 112 – Independence of Experts.

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1.3 Author of the Report – Qualifications, Experience

This Report has been prepared by CSA Global Pty Ltd, a privately-owned consulting company that has been operating from Perth, Western Australia for over 25 years.

CSA provides multi-disciplinary services to clients in the global resources industry. CSA services include project generation, exploration, resource estimations, project evaluation, development studies, operations assistance and corporate advice, such as valuations and independent technical documentation. CSA has worked for major clients globally and many junior resource companies. CSA has been involved in the preparation of independent reports for Canadian, Australian, United States and United Kingdom listed companies.

The principal authors of this report are CSA’s Principal Geologists Mr Graham Jeffress and Mr Craig Hall.

Mr Graham Jeffress BSc. (Hons), a Member of the AIG (“MAIG”) and a Registered Professional Geologist (“RPGeo”), has over 20 years’ experience in the exploration and evaluation of mineral properties, within Australia and overseas, which includes experience with uranium exploration in various parts of Australia.

Mr Craig Hall BSc. (Hons), a Member of the AIG (“MAIG”) and a Member of the AusIMM (“MAusIMM”) has over 25 years’ experience in the exploration and evaluation of mineral properties, in grass roots to advanced exploration; near-mine and resource definition with associated management skills, within Australia and overseas.

Mr Jeffress and Mr Hall each have the relevant qualifications, experience, competence and independence to be considered an “Expert” under the definitions provided in the VALMIN Code and a “Competent Person” as defined in the JORC Code.

Peer review of this report has been undertaken by CSA’s Director of Operations Mr Daniel Wholley, BSc. (Geology) who is a geologist with over 20 years’ experience in the international minerals industry. Mr Wholley is a Member of the AIG and has been involved in numerous consulting assignments during his 8 years with CSA including many expert reports.

1.4 Independence

Neither CSA, nor the authors of this report, has or has had previously, any material interest in Chrysalis or the mineral properties in which Chrysalis has an interest. CSA’s relationship with Chrysalis is solely one of professional association between client and independent consultant.

CSA is an independent geological consultancy. This report is prepared in return for professional fees based upon agreed commercial rates and the payment of these fees is in no way contingent on the results of this report. The fee for the preparation of this report is approximately $25,000.

No member or employee of CSA is, or is intended to be, a director, officer or other direct employee of Chrysalis . No member or employee of CSA has, or has had, any shareholding in Chrysalis . There is no formal agreement between CSA and Chrysalis as to CSA conducting further work for Chrysalis .

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1.5 Principal Sources of Information

This Report has been based upon information available up to and including 16[th] August 2013 (“Valuation Date”). The information was provided to CSA by Chrysalis or has been sourced from the public domain, and includes both published and unpublished technical reports prepared by consultants, and other data relevant to the project area.

The authors have endeavoured, by making all reasonable enquiries, to confirm the authenticity and completeness of the technical data upon which this report is based. Chrysalis and HLB were provided a final draft of this Report and requested to identify any material errors or omissions prior to its lodgement.

CSA did not undertake site visits to the respective project areas, but were familiar with the geology and recent exploration history of the tenements. In light of this information and due to CSA’s satisfaction with the quality of the records, exploration site visits were deemed unnecessary for the purposes of this report.

The statements and opinions contained in this report are given in good faith and in the belief that they are not false or misleading.

1.6 Declarations

This Report has been prepared by CSA at the request of, and for the sole benefit of HLB. Its purpose is to provide an independent technical assessment and valuation of Chrysalis ’s Projects in Australia. The Report is to be included in its entirety or in summary form within an IER to be prepared by HLB in connection with a Target’s Statement . It is not intended to serve any purpose beyond that stated and should not be relied upon for any other purpose.

CSA has consented to the inclusion of the Report within the IER in the form and context in which it is to appear. Neither the whole nor any part of the Report, nor any reference to it, may be included in or with, or attached to any other documents, circular, resolution, letter or statement without the prior written consent of CSA as to the form and context in which it is to appear.

This report has been compiled based on information available up to and including the date of this report. The statements and opinions are based on the reference date of 16[th] August 2013 and could alter over time depending on exploration results, mineral prices and other relevant market factors.

The information in this report that relates to exploration results and Mineral Resources is based upon information compiled by Mr Craig Hall and Mr Graham Jeffress; both of whom are full time employees of CSA. Mr Hall and Mr Jeffress have sufficient experience which is relevant to the styles of mineralisation and types of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Persons as defined in the JORC Code 2004. Mr Hall and Mr Jeffress consent to the inclusion in the report of the matters based on their information in the form and context in which it appears.

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2 West Angelas Iron Project

2.1 Property location, access and Infrastructure

West Angelas is located approximately 135 kilometres west of the town of Newman in the world class Pilbara iron ore province of Western Australia (Figure 1). Access is either via the Angelas Minesite, Turee Creek station, or tracks from the Tom Price/Paraburdoo road.

2.2 Description of the Mineral Assets

The West Angelas Project consists of 2 tenements, E47/1838 and P47/1538, details of which are found below in Table 2. The tenements are located in the Shire of Ashburton. The project is classed as an early stage exploration project.

Table 2: Tenement Details, Chrysalis West Angelas Project

	*Tenement* ID		*Share* %		*Area* *km2*	*Grant* *Date*	*Expiry* *Date*		*Expenditure* *Commitment*
*Project*		*Status*		*Blocks*				*Rent*

West Angelas	E47/1838	Live	100	31	87.7	16-Sept-09	15-Sept-14	$5,738.10	$46,500
	P47/1538	Live	100	-	0.9	25-Nov-11	24-Dec-15	$197.80	$3,440
	Totals				88.6			$5,935.90	$49,940

CSA reviewed the status of the licences using the WA Department of Mines and Petroleum eMiTs (Mineral Titles Online) system on 13[th] August 2013. Both tenements have met or exceeded their most recent expenditure commitments. Similarly rents for each licence have also been paid in full for the current licence terms. CSA makes no other assessment or assertion as to the legal title of tenements and is not qualified to do so.

Total recorded expenditure to the 2012 anniversary date was:

$474.6k against a commitment of $93k for E47/1838, and
$3.6k against a commitment of $3.4k for P47/1538

The tenement E47/1838 falls partially within the boundary of the Yinhawangka Part A people native title claim.

2.3 Project Details

2.3.1 Regional Geology

The West Angelas Iron Ore Project is located in the Pilbara Iron Ore Province of Western Australia. The West Angelas EL contains outcropping folded Boolgeeda Iron Formation, with poorly exposed underlying Woongarra Volcanics and Weeli Wolli Formation. Above the Boolgeeda the Turee Creek Group (shale, sandstone and dolomite) is present but covered by extensive alluvium and colluvium. The dominant structures are a faulted central W-plunging anticline flanked by synclines.

2.3.2 Local Geology and Mineralisation

Bedrock within the project area covers the upper part of the early Palaeoproterozoic Hamersley Group and the overlying Turee Creek Group. Outcrop is restricted to the eastern third of the tenement where the Boolgeeda Iron Formation forms low hills. The outcrop shape is defined by west-plunging folds and

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associated faults on the eastern side of the basin-shaped regional Turee Creek Syncline. The regional syncline is split into two synclines by a central anticline, with part of a second faulted anticline in the south.

Underneath the Boolgeeda Iron Formation the underlying Woongarra Volcanics (mainly rhyolite) are exposed in the core of the central anticline. Below the Woongarra Volcanics the banded iron formations (BIF), pelites and dolerites of the Weeli Wolli Formation are expressed as a lateritic duricrust. Further down the stratigraphy the Brockman Iron Formation is exposed in the core of the anticline approximately 2 kilometres east of the eastern boundary of the project area, and is interpreted to be present at depth in the eastern part of E47/1838.

Aeromagnetic interpretation suggests that the unexposed western part of the project is probably underlain by Boolgeeda Iron Formation in anticlinal positions. The synclinal positions are interpreted as unexposed undifferentiated Turee Creek and Wyloo Groups.

Colluvium, comprising partly consolidated quartz and rock fragments in soil, flanks some of the low hills, but this passes downslope into a wide alluvial plain of silt, sand and gravel, with numerous small watercourses. In the western and southern parts of E47/1838 the watercourses coalesce into larger southwest-flowing creeks. The areas between the creeks form wide alluvial and colluvial floodplains. Further downstream, beyond the project area, the major creek systems broaden and contain extensive deposits of calcrete.

An iron-rich duricrust occupies an area of approximately 2 kilometres by 1.5 kilometres in the centre of the project area, which is most likely a remnant of a Channel Iron Deposit (CID).

2.3.3 Historical Exploration

The Geological Survey of Western Australia (GSWA) collected eleven samples from within the project area as part of regolith geochemical mapping of the Turee Creek 1:250,000 map sheet. One sample (150835), a stream sediment sample collected from near the eastern boundary of the area, returned a result of 62.9% Fe2O3. The remaining samples produced no significant results.

2.3.4 Recent Exploration

Chrysalis selected the tenement for its potential for iron ore and have completed reconnaissance field work in 2009 and subsequently commissioned a detailed aeromagnetic interpretation and target definition program over the whole tenement. The aeromagnetic interpretation and targeting exercise generated targets for exploration and highlighted prospects for future evaluation. Reverse Circulation (RC) drilling commenced in late 2010, with 37 vertical holes for 2214 meters completed, averaging 60m depth.

A single hole (WARC0033) was drilled in Weeli Wolli Formation and terminated at a depth of 198 m, targeting Brockman Iron Formation. The remaining thirty six holes were drilled to test three CID targets. The summary of this program is shown below, and better results highlighted in Figure 2:

Drill holes WARC0001 to 0011 (11 holes) were drilled on a single E-W traverse around 100m apart to test Target CID 1, located on the south west section of the project area.
Drill holes WARC0031, 0032, & 0034 to 0037 (6 holes) were drilled on a single E-W traverse at variable spacing to test Target CID 2, located near the centre of the project area.
Drill holes WARC0012 to 0030 (19 holes) were drilled on a N-S traverse around 100m apart to test Target CID 3, now named the Turee Creek East CID Prospect.

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Drillhole WARC0033 demonstrated that the top of the Brockman Iron Formation is at least 200m deep in the project area, and there is almost no chance of an economically viable Brockman orebody existing within the tenure.

Other results from the first drilling programme are encouraging, given that the grades and thickness of CID material in the best of the holes is comparable to other deposits in the Pilbara. There is scope in the immediate vicinity for extending both the width and strike of the mineralisation, though the amount of overburden is an issue. Low grade iron detrital material above the channel mineralisation could potentially be beneficiated efficiently to ore grade, offsetting the amount of overburden. Further drilling has been proposed at several target areas as follow-up to the work-to-date.

Table 3: West Angelas Drilling Intercept Highlights (after Bunting)

Hole	From	To	Intercept	Fe%	Si02%	Lithology
WARC0012	0	18	18m@	31.46	45.71	Low-Fe overburden
	18	32	14m@	37.30	31.14	Detrital mineralisation
	32	54	22m@	48.04	9.16	Channel mineralisation

WARC0013	0	20	20m@	32.3	43.07	Low-Fe overburden
	20	34	14m@	40.9	26.59	Detrital mineralisation
	34	60	26m@	56.16	3.95	Channel mineralisation

WARC0014	0	26	26m@	31.05	43.11	Low-Fe overburden
	26	34	8m@	37.46	21.31	Detrital mineralisation
	34	42	8m@	26.29	31.60	Low-Fe overburden
	42	54	12m@	49.41	8.88	Channel mineralisation

WARC0015	0	42	42m@	29.00	39.84	Low-Fe overburden
	42	46	4m@	48.38	10.94	Channel mineralisation

WARC0031	0	22	22m@	28.3	48.6	Colluvium
	22	36	14m@	46.1	24.0	Detrital mineralisation
	36	42	6m@	54.2	8.7	Detrital/Channel mineralisation

WARC0032	0	48	48m@			Colluvium
	48	62	14m@	49.67	14.3	Detrital/Channel mineralisation

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Figure 3: Schematic Cross section from Chrysalis Drilling, West Angelas Project area

Positives in the project include the grade, thickness and apparent quality of the CID mineralisation in the Discovery Channel; the potential for adding to this with beneficiable detrital material; the space available to explore for more channels; and a speculative interpretation on where such a channel might be located.

Negatives are the thickness of overburden; the relatively low grades; and nature of competing CID resources in the Pilbara.

2.3.5 Mineral Resource Estimates

No mineral resources have been generated from work undertaken to date.

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3 Pioneer Gold Project

3.1 Property Location, Access and Infrastructure

The Pioneer project is located approximately 135km south-southeast of Kalgoorlie-Boulder and 25km north-northwest of Norseman. The project area lies just east of the major sealed Coolgardie-Esperance Highway, with the westernmost tenements straddling the Kambalda-Esperance railway. The KalgoorlieEsperance gas pipeline is situated immediately east of the railway. Direct access to the project area is via a turnoff on the Coolgardie-Esperance Highway approximately 39km north of Norseman, via a railway crossing, rail and local access tracks.

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Figure 4: Location Plan of Chrysalis’s Pioneer Gold Project

3.2 Description of the Mineral Assets

The Pioneer Gold Project is an exploration project comprising 2 mining leases, 2 prospecting leases, and 3 exploration leases covering around 22km[2] in the Dundas Mineral Field. Chrysalis Resources Ltd holds a

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93.3% interest in the Pioneer tenements, with the balance of 20/300 fully held by Trent Paterson Stehn. The tenement group (C10/2002) is operated by Chrysalis Resources Ltd.

Table 4: Tenement Details, Chrysalis’s Pioneer Project

	*Tenement* ID		*Share* %		*Area* *km2*	*Grant* *Date*	*Expiry* *Date*		*Expenditure* *Commitment*
*Project*		*Status*		*Blocks*				*Rent*

Pioneer	E63/1117	Live	93.33	5	11.07	7-Oct-08	6-Oct-13	$1,255.50	$20,000
	M63/0329	Live	93.33	-	0.68	23-Jul-01	22-Jul-22	$1067.60	$10,000
	M63/0368	Live	93.33	-	3.83	23-Jul-96	22-Jul-22	$6013.10	$38,300
	P63/1429	Live	93.33	-	1.28	7-Oct-08	6-Oct-16	$294.40	$5,120
	P63/1468	Live	93.33	-	0.13	3-June-08	2-June-16	$29.90	$2,000
	E63/1413	Live	93.33	-	0.1	12-Jan-11	11-Jan-16	$286.25	$10,000
	E63/1414	Live	93.33	-	5.23	20-Dec-10	19-Dec-15	$370.20	$15,000
	Totals				22.32			$9316.95	$100,420

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Figure 5: Tenement Plan of Chrysalis’s Pioneer Gold Project

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CSA reviewed the status of the licences using the WA Department of Mines and Petroleum eMiTs (Mineral Titles Online) system on 13[th] August 2013. Tenements have generally met or exceeded their most recent expenditure commitments; where not, exemptions have been granted. Similarly rents for each licence have also been paid in full for the current licence terms. CSA makes no other assessment or assertion as to the legal title of tenements and is not qualified to do so.

Total recorded expenditure to the latest anniversary date for each tenement was

$718.4k against a commitment of $65k for E63/1117;
$134.4k versus $30k for M63/0329 since 2009;
$176.8k versus $153.2k for M63/0368 since 2009;
$33.5k versus $20.4k for P63/1429,
$28.9k versus $10k for P63/1468;
$8.2k versus $20k for E63/1413; and
$9.9k versus $30k for E63/1414.

3.3 Project Details

3.3.1 Regional Geology

The project area is part of an Archaean granite-greenstone terrane and situated in the south of the Eastern Goldfields Province of the Yilgarn Craton. The 7km-thick greenstone sequence generally consists of metamorphosed mafic and ultramafic units underlain by volcaniclastics and metasediments, intruded by granitoids.

Deformation of the sequence included recumbent folding and thrusting, which resulted in local repetition of the original greenstone stratigraphy. Uplift and erosion followed by further intense deformation produced strong north-northwest trends in the granite-greenstone terrane, which is reflected in tight upright folds, steep cleavage and major wrench faults, such as the Boulder-Lefroy Fault.

3.3.2 Local Geology and Mineralisation

The project area is occupied by a western sequence of metasedimentary rocks, and an eastern sequence of mafic/ultramafic rocks known as the Mission Sill. Two major shears, the Western Shear and the Central Shear, traverse the area from north to south. These two shears bound a syn-tectonic tonalite intrusive. The Central Shear forms the boundary between the metasediment sequence and the Mission Sill. The local geology is partly depicted below in Figure 5.

The Spongelite gold mineralization is located within east dipping sheared felsics along a structural feature known as the Spongelite Shear which is positioned close to the contact between the metasediments and the mafics/ultramafics to the east. The felsic sequence comprises volcanics, volcaniclastics and pelitic sediments including carbonaceous schists. All lithologies (excluding the tonalite intrusion) have undergone metamorphism to upper greenschist facies.

Close to the surface, rocks are weathered into ferruginous duricrust and pisolitic laterite, overlying both Archaean bedrock and Tertiary sediments. The weathering zone consists mostly of saprolite and extends to 50-75m depth. Below the base of oxidation, weakly foliated to schistose felsic volcanic rocks occur. The most intense alteration contains a typical pervasive tourmaline-quartz-sericite, with zones of

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abundant quartz veining and fairly ubiquitous weak pyrite. Quartz veining varies from stringers/veins to nearly massive but is not necessary related to gold mineralisation.

The gold mineralisation has been defined in the weathering zone, forming a supergene enrichment blanket overlain by a depleted zone. Below the base of weathering, primary gold mineralisation is restricted to a few thin, east-dipping zones.

3.3.3 Historical Exploration

The Pioneer Project area has been explored for nickel, PGEs and gold on a regional scale since the 1960s. However exploration was not systematic, and can be considered reasonably ineffective. A brief summary of the pre-Chrysalis exploration is shown in Table 5.

Table 5: Pre-Chrysalis exploration history, Pioneer Gold Project

Years	Company	Commodity	Exploration
1987-91	Consolidated Exploration	Au and PGEs	Stream sediments, soil and rock chip geochemistry, ground magnetic,mapping
1993-98	WMC	Ni and Au	Mapping, soil geochemistry, aeromagnetic, aircore and diamond drilling
1999-2002	Delta Gold	Au	Aircore drilling, petrography,TFMMR survey
2002-2003	Bullion Minerals	Au	Soil and rock chip geochemistry, aircore and RC drilling
2003	Mt Dimer	Au	Mappingand data review
2006	Beacon	Au	Data review

Since 2007, exploration was performed by Chrysalis Resources. Activities included reconnaissance mapping and sampling, aeromagnetic interpretation and four drilling programs. In 2007, an aircore drilling program was carried out at Jardine, Spongelite, Spongelite South and Eyre prospects. It was followed by RC drilling at Spongelite in 2009 and at Spongelite and Jardine in 2010. A diamond hole SPRCD0001 was also drilled at Spongelite that year. A preliminary and informal, non JORC-compliant, polygon-based estimate of tonnes and grade for the Spongelite prospect was made in 2009.

3.3.4 Recent Exploration

A drill programme of 3 RC drill holes (SPRC005-7, refer Figure 6) for a total of 442m was completed in 2012 at the Spongelite Prospect. Drill holes were designed to test a potential primary source below the known supergene gold mineralisation. The target zone included the faulted contact between ultramafics/mafics and volcaniclastics as well as the upper hydrothermally-altered and sheared part of the felsic lower unit. Results returned modest low grade gold intersections (refer Table 6)

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Table 6: 2012 Drilling results, Pioneer Gold Project

Drill Hole	From(m)	To(m)	Interval(m)	Au(g/t)
SPRC0005	108	109	1	0.8
SPRC0006	114	115	1	0.62
SPRC0007	105	106	1	0.82
SPRC0007	122	126	4	0.77
SPRC0007	125	126	1	1.98
SPRC0007	132	133	1	1.13

The current geological model is that the Spongelite gold system dips to the east, is hosted by a felsic rock sequence and is controlled by the north-south trending Spongelite shear. The bulk of the known mineralization is interpreted as being supergene in saprolite and is associated with weathered clays. Primary gold mineralization is apparently closely associated with tourmaline and arsenopyrite alteration.

Recent re-interpretation of the data suggests the mineralization is developed along the Spongelite ‘shear’ zone as plunging shoots, and possibly as splays off the Spongelite ‘shear’. In addition, at least some of the primary gold mineralization is associated with chlorite alteration in low strain rocks, suggesting the ‘shear’ model may not account for all of the gold distribution. Additional diamond drilling was recommended, along with follow-up drilling of hole PD96 drilled in 1999 (2m at 14.65 g/t Au from 22m) in quartz veins on an mafic/ultramafic contact. This mineralization may be indicative of the presence of high-grade lode type as per the Norseman gold deposits.

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Figure 6: Drill plan and geology of Chrysalis’s Pioneer Gold Project

3.3.1 Mineral Resource Estimates

No formal mineral resources have been generated from work undertaken to date.

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4 Halloween West Copper-Gold Project

4.1 Property Location, Access and Infrastructure

The Halloween West Copper-Gold Project is a very early stage exploration project comprising one granted exploration licence (E52/2275). Access is via tracks off the Great Northern Highway.

The Halloween West Project is located approximately 18.5km west of the Springfield Copper-Gold Project and 13.5km south-west of Sandfire Resources high-grade DeGrussa VMS Copper-Gold Project.

4.2 Description of the Mineral Assets

The mineral asset at Halloween West comprises a single exploration licence (see Table 7) totalling some 18.5 km[2] . The licence is held in the name of Talisman Mining Limited (60%) and Chrysalis Resources Pty Ltd (40%).

Table 7: Halloween West Project Tenements

	*Tenement* ID		*Share* %		*Area* *km2*	*Grant* *Date*	*Expiry* *Date*		*Expenditure* *Commitment*
*Project*		*Status*		*Blocks*				*Rent*

Halloween West	E52/2275	Live	40	6	18.5	9-Feb-09	8-Feb-14	$1,506.60	$30,000
	Totals				18.5			$1,506.60	$30,000

CSA reviewed the status of the licence using the WA Department of Mines and Petroleum eMiTs (Mineral Titles Online) system on 13th August 2013. Work on the tenement has significantly exceeded the statutory expenditure commitments, and rent has been paid in full for the current licence terms. CSA makes no other assessment or assertion as to the legal title of tenements and is not qualified to do so.

Total expenditure for the tenement totals $1.12M versus a commitment of $90k.

4.3 Project Details

4.3.1 Regional Geology

The Project area fall within the Early Proterozoic Bryah Basin, containing the Padbury, Bryah and Yerrida Groups. The Bryah group consists of the Karalundi Formation and Narracoota Volcanics, of which the latter hosts the DeGrussa Deposit.

4.3.2 Local Geology

The Project area is underlain by metabasalts of the Narracoota Volcanics, exposed in the NE and SW parts of the EL, but in the central part the bedrock is obscured by lateritic and superficial deposits in a WNW-to ESE-draining creek system. The tenement is on the northern limb of the NE-trending Robinson Syncline, and the Narracoota Formation is part of a bulge that may be the result of structural thickening. A series of south-dipping faults and a folded contact with the underlying, and unexposed, metasediments of the Karalundi Formation is observed. The metabasalts are dominantly lavas, in part pillowed and brecciated, intruded by dolerite dykes and sills. Composition of the lavas ranges from basalt to high-Mg basalt, with inter-flow sedimentary layers.

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4.3.3 Historic Exploration

The only significant previous exploration was by Barrick, who covered about 80% of the tenement with soil sampling in 2002-2007 and found scattered weakly anomalous Au, Cu, Ag and Zn.

Upon grant, Chrysalis undertook airborne EM across the tenement. Targets were generated using the De Grussa model, and RC drilling program was completed during July-August 2010. Twelve vertical RC holes were drilled into five EM targets for a total of 1,172 m. No massive sulphides were encountered. Gold and copper were only weakly anomalous. A down-hole transient EM survey was conducted on eight of the RC holes. There were no responses indicative of strongly conductive mineralisation near the drill holes. From these results and the earlier EM surveys it was concluded that if there is a conductive body on the tenement then it is below 150-200 m depth, and that the EM anomalies likely related to surficial artefacts.

Trace amounts of copper, zinc and nickel sulphides were found in thin sections of drill chips from several holes. The thin sections also revealed several phases of calc-silicate and sulphide alteration. Anomalous copper (1,380 ppm) was returned from a 1m sample from 94m in hole DWRC0005, and in DWRC0008 a 1m sample from 6m returned 1,280 ppm copper, 25 ppb platinum and 50 ppb palladium from an ironrich sheared dolerite.

4.3.4 Recent Exploration

During May 2012, the Company announced the signing of a Farm-In Agreement with Talisman Mining Limited (ASX:TLM, “Talisman”) in respect to the Halloween West Project (ASX:CYS announcement 16th May 2012). Under the terms of the Farm-In Agreement, Talisman had the right to earn a 60% undivided interest in the Halloween West project subject to spending $500,000 on exploration within three years. Talisman must expend a minimum of $150,000 in the first 12 months after which it has the option to either:

i. Expend a further $350,000 within the next two years from signing of the farm-in agreement to earn a 60% interest or; ii. Withdraw from the agreement with no further expenditure commitment required and no interest in the tenement earned.

Under the terms of the Farm-in Agreement Talisman would manage all exploration activities during the farm-in period including acting as the Joint Venture Manager of the Project. Chrysalis has the right to maintain a 40% interest in the project by contributing to exploration expenditure associated with the project on a pro-rata basis or dilute on an industry-standard basis.

Upon accessing the ground, Talisman completed mapping, a focused soil survey, a ground fixed-loop EM survey and interpretation of available geophysics over the prospective corridor, and this work has defined two conductive zones that may be associated with sulphide mineralisation within areas of structural complexity (Figure 8).

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Figure 7: Chrysalis Location, Tenure, and Areas of Interest, Halloween West JV Project area

In November 2012 a 1,750 m 13 drill hole Reverse Circulation (RC) drilling program commenced at the Halloween West Project to test newly-defined geophysical and copper-gold soil geochemical anomalies on four wide-spaced lines across the Halloween target horizon. This drilling programme represented the first phase of drilling to be conducted by Talisman at the Halloween West JV project.

Drilling intersected the Halloween target host sediment horizon on each drill fence with intercalated chlorite-talc schist, magnetite-altered shales and clastic sediments logged on at least three drill sections, although minimal sulphide mineralisation was observed. Initial assay results returned weakly anomalous copper and gold values from three holes out of the 13 drilled, associated with the target sediment horizon and adjacent fractured basalt.

Work is ongoing at Halloween West to determine the significance of the first-pass results and to assess the prospectivity of the broader project area.

Talisman advised Chrysalis that as at 31 December 2012, Talisman had fulfilled its minimum expenditure commitment and has consequently earned the right to be transferred a 60% interest in the Halloween West Project. As a result, a Joint Venture between Talisman and Chrysalis Resources was formally established.

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5 Horseshoe South Project

5.1 Property Location, Access and Infrastructure

The Horseshoe South Project is located 60km to the east of the Great Northern Highway. The project is located 12km east of the Horseshoe Mine and 10km south east from the Horseshoe Lights Mine (refer Figure 9).

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Figure 8: Location of Chrysalis’s Horseshoe South Project (Note P52/1351 and 52 were surrendered

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5.2 Description of the Mineral Assets

The tenement package consists of two Exploration Leases and three Prospecting licences (refer Table 7) located in the Peak Hill Mineral Field in the shire of Meekatharra. The ground is a combination of Vacant Crown Land and the Bryah Pastoral Lease.

Table 8: Horseshoe South Project Tenements

	*Tenement* ID		*Share* %		*Area* *km2*	*Grant* *Date*	*Expiry* *Date*		*Expenditure* *Commitment*
*Project*		*Status*		*Blocks*				*Rent*

Horseshoe South	E52/2523	Live	100	2	6.19	26-Feb-10	25-Feb-15	$370.20	$20,000
	E52/2524	Live	100	1	3.10	26-Feb-10	25-Feb-15	$286.25	$10,000
	P52/1351	Surrender pending	100	-	1.92	9-Mar-10	8-Mar-14
	P52/1352	Surrender pending	100	-	0.38	9-Mar-10	8-Mar-14
	P52/1363	Live	100	-	1	27-May-10	26-May-14	$230.00	$4,000
	Totals				12.59			$1,415.45	$43,680

CSA reviewed the status of the licence using the WA Department of Mines and Petroleum eMiTs (Mineral Titles Online) system on 13th August 2013. The tenements have generally exceeded their expenditure commitments (but P52/1351 had an exemption from underexpenditure refused), and rent has been paid in full for the current licence terms. CSA makes no other assessment or assertion as to the legal title of tenements and is not qualified to do so.

Total recorded expenditure to the latest anniversary date for each tenement was

$42.7k against a commitment of $45k for E52/2523;
$37.2k versus $30k commitment for E52/2524; and,
$19.8k versus $12k commitment for P52/1363.

5.3 Project Details

5.3.1 Geology

The project area is largely covered by alluvial and colluvial deposits, except for the southeast comer of E52/2523 where outcropping shale and chert of the Proterozoic Collier Group is observed (refer Figure 9), which is thought to occur under cover for most of the tenure, terminating against a NE-trending fault that crosses the NW comer of EL then through the middle of P52/1351. A thin sliver of Archaean granite is interpreted along this fault.

West of the fault is interpreted to be the Ravelstone Formation, consisting of lithic wacke and siltstone with minor chert. Underlying the Ravelstone Formation to the northeast is felsic schist and dolerite in the upper part of the Narracoota Formation, with metabasalt and mafic-ultramafic schist lower in the Formation.

A small inlier of Narracoota Formation abuts the NNE fault to the west of E52/2523. Lithological trends in the Bryah Group are generally NW-SE, but disrupted by local NW-trending folds and faults. Later faults trend NE to NNE.

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Figure 9: Geology of Chrysalis’s Horseshoe South Project

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5.3.2 Mineralisation and Prospectivity

The Horseshoe Lights Cu-Au deposit is located within a broad NW-trending shear in felsic and mafic schist near the top of the Narracoota Formation. Primary mineralization occurs in massive sulphide lenses within disseminated and stringer mineralization, although much of the historic mining has been in oxidised gossan and ironstone, underlain by rich supergene mineralization. The primary mineralization was probably a structurally remobilized volcanic-hosted massive sulphide deposit. This constitutes the main target at the Horseshoe South project.

5.3.3 Historical Exploration

The only significant previous exploration in the Horseshoe South area was undertaken by St Barbara Mines during 1992-97. St Barbara undertook geochemical sampling, mainly lag sampling with some stream-sediment sampling of trap sites and adjacent overbank samples. Lag and overbank samples were assayed for Au, Sb, As, Bi, Co, Cu, Pb, Mn, Ni, Ag and Zn. Trap sites were assayed for Au only. No significant anomalism was reported from the Horseshoe South area.

An extensive regional RAB drilling programme by St Barbara only partly tested the Horseshoe South area, with seven holes (BYRI45-BYRI51) near the centre of E52/2523 and five holes (BYRI52-BYRI56) near the western boundary. All holes terminated in sedimentary rocks, and gold assays of 6-m composites showed no anomalous values

5.3.4 Recent Exploration

Chrysalis completed a 578 hole auger drilling programme in February and April 2011 which covered the project area on east-west lines spaced at 400 m with a 50¬m hole spacing. Hole depths ranged from 0.12.0 m. Bottom-of-hole samples were assayed for Ag, As, Au, Co, Cr, Cu, Mo, Ni, Pb, W and Zn. Only silver and tungsten reported maximum values that were considered to be significantly above background. The higher silver values, to a maximum 8.4 ppm, were all from the southern part of E52/2523, as was the highest tungsten value (2.5 ppm). Grouping of these elevated values suggested a stratigraphic or structural relationship. The maximum gold value of 4 ppb (3 samples) was not considered significant.

The project has been reviewed in 2012 for additional exploration direction, including geophysical interpretation, database compilation, and other conceptual targeting.

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6 Gregory Range Project

6.1 Property Location, Access and Infrastructure

The Gregory Range Project is located on the western edge of the Great Sandy Desert approximately 110km NW of Telfer and 250kms southeast of Port Hedland, with the project location shown in Figure 10.

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Figure 10: Location of Chrysalis’s Gregory Range Project

The Gregory Range Project is a large tenement package covering some 930km[2] . Access in the north is along the Telfer road and in the south is along the Woodie Woodie to Nifty Road. A gas pipeline access

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track in the northern area provides additional access, but requires contact with the pipe operator. Additional access is along previous exploration tracks which are of variable quality.

6.2 Description of the Mineral Assets

The Gregory Range Project consists of 3 exploration licences held by Chrysalis Resources Ltd and related entities. The project is located in the Marble Bar Mineral District of the Pilbara Mineral Field

Table 9: Gregory Range Project Tenements

	*Tenement* ID		*Share* %		*Area* *km2*	*Grant* *Date*	*Expiry* *Date*		*Expenditure* *Commitment*
*Project*		*Status*		*Blocks*				*Rent*

Gregory Range	E45/3120-I	Live	100	28	89.2	23-Sept-09	22-Sept-14	$5,182.80	$42,000
	E45/3313-I	Live	100	117	372.6	31-July-13	30-July-18	$13,923.00	$117,000
	E45/3314-I	Live	100	148	471.4	31-July-13	30-July-18	$17,612.00	$148,000
	Totals				933.2			$36,717.80	$307,000

CSA reviewed the status of licences using the WA Department of Mines and Petroleum eMiTs (Mineral Titles Online) system on 13th August 2013. The latter two tenements have only just been granted at the time of writing. The original tenement has met its expenditure commitments, and rent has been paid in full for the current licence terms. CSA makes no other assessment or assertion as to the legal title of tenements and is not qualified to do so.

Total expenditure versus commitment for the project is $109.2k versus $84k for E45/3120.

6.3 Project Details

6.3.1 Regional Geology

For this review the project has been separated into two sections covering different geological terranes: the northeastern section “Isabella” covers dominantly Proterozoic sediments and is prospective dominantly for copper (±uranium); and the western section tenements “Gregory” are prospective for base metals (±uranium-iron-gold) (see Figure 11).

Geologically, the Gregory Range Project covers Archaean Gregory Granitic Complex overlain by Archaean Fortescue Group west of the Vines Fault. Eastwards thrusting along the Vines Fault has exposed the Gregory Granitic Complex that underlies the Fortescue Group. East of the Vines Fault in the Isabella Project, the Throssell Shelf is unconformably overlain by the Canning Basin. The Rudall Complex and Throssell Shelf are thought to have been moved into place from the south along the Vines Fault.

6.3.2 Local Geology

The Gregory Project geology consists of the base of the Archaean Fortescue Group, comprising the Koongaling Volcanic Member, Kylena Basalt and Maddina Basalt, in faulted contact with the Gregory Granitic Complex. The Koongaling Volcanic Member is thought to be the volcanic equivalent to the Gregory Granitic Complex and that complex has been brought up from deeper levels by reverse faults. The Proterozoic Tarcunyah Group unconformably overlies the Gregory Granitic Complex

East of the Vines Fault, the Isabella Project geology consists of the Rudall Complex (not exposed), unconformably overlain by the Proterozoic Coolbro and Broadhurst Formations which, in turn, are unconformably overlain by the Neoproterozoic Tarcunyah Group and the Permian Paterson Formation. This area is referred as the Throssell Shelf.

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Figure 11. Gregory Range Project Geological Interpretation and Mineral occurrences/deposits (note this map includes previous application areas that have not been progressed)

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6.3.3 Historical Exploration

Historical work includes a range of geophysical surveys and mapping, backed by regional geochemistry. Around 937 samples are known, along with 145 holes in five separate programmes in the region that provide a basis for the geology of the region and for the prospectivity comments below.

6.3.4 Prospectivity

The Gregory Range Project covers a large area and past work has demonstrated the potential for a range of commodities each with several applicable exploration models.

Base metals probably represent the best potential in the Project area, especially in the Broadhurst Formation east of the Vines Fault – the classic sediment-hosted style of the Nifty and related deposits. The northern part of the Project contains, both in outcrop and under cover, dolomite and carbonaceous shale in the lower part of the Broadhurst Formation, and includes the Baton Pb-Zn-Cu prospect. This area also has potential for other, perhaps more exotic, exploration models for base metals, including Kipushi-style breccia deposits, skarn mineralization, and gold associated with black shale. Recent exploration activity in the region (e.g. by Encounter Resources) has shown that there remains significant exploration potential in the rocks of this area including those within the Gregory Range Project.

The basal part of the Throssell Range Group of the Yeneena Basin has typical features of host rocks to a sediment-hosted base-metal deposit:

a metal-rich metamorphic basement (Rudall Complex);
a permeable and oxidized thick coarse-grained clastic sediment (Coolbro Sandstone) to allow passage of hot oxidised fluids as well as supplying metals by leaching;
mafic sills in the Neoproterozoic sequence as a source of copper;
long-lived regional and local structures as conduits for mineralizing fluids;
reducing carbonaceous shale and carbonate as a depositional centre (Broadhurst Formation).

Sediment-hosted base-metal deposits in the Throssell Range Group are very varied in terms of metals present (Cu, Cu-Zn-Pb, Zn-Pb), host rock (black shale, dolomite) and form (stratiform, disseminated, fault-related, supergene). The only production, so far, is from the Nifty Cu mine, which probably started as a syngenetic stratiform body within the Broadhurst Formation, but with a significant component of structurally re-mobilized and supergene ore. The significant Maroochydore Cu deposit is also stratiform.

The Isabella domain of the project area covers extensive prospective Throssell Range stratigraphy (in the northern part of the project). As discussed above this stratigraphy underpins the prospectivity of the district. Past exploration has been very limited, generally empirical and constrained by cover. Modern exploration using airborne EM, new geochemical and mineralogical tools, improved understanding of mineral systems and increased geological knowledge of the region provides better tools to address the exploration challenges of this prospective area.

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7 Valuation

Valuation of mineral exploration assets is subjective. If exploration results in identification or upgrading of Mineral Resources the valuation will likely be higher, or alternatively when exploration is unsuccessful then that is likely to result in a reduced valuation.

There are a number of generally accepted procedures for establishing the value of exploration tenements and, where relevant, the use of more than one approach to enable a balanced analysis and cross check on the results is recommended.

The valuation is always presented as a range, with the Preferred Value identified. The Preferred Value need not be the median value and is determined by the independent expert based on their experience.

7.1 Methodology and Assumptions

Mineral assets are defined in the VALMIN Code as all property including, but not limited to real property, intellectual property, and/or mining and exploration tenements held or acquired in connection with the exploration, development and/or production from those tenements together with all plant, equipment and infrastructure owned or acquired for the development, extraction and processing of minerals in connection with those tenements.

Business valuers typically define market value as “The price that would be negotiated in an open and unrestricted market between a knowledgeable, willing, but not anxious buyer, and a knowledgeable, willing but not anxious seller acting at arm’s length.” The accounting criterion for a market valuation is that it is an assessment of “fair value”, which is defined in the accounting standards as “the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction.” The VALMIN Code defines the value of a mineral asset as its Fair Market Value, which is “the estimated amount of money or the cash equivalent of some other consideration for which, in the opinion of the expert or specialist reached in accordance with the provisions of the VALMIN Code, the mineral asset should change hands on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, wherein each party has acted knowledgeably, prudently and without compulsion.”

Fair Market Value usually consists of two components: the underlying or technical value, and a premium or discount relating to market, strategic or other considerations. The VALMIN Code recommends that a preferred or most-likely value be selected as the most likely figure within a range after taking into account those factors which might impact on Value.

The concept of Fair Market Value hinges upon the notion of an asset changing hands in an arm’s length transaction. Fair Market Value must therefore take into account, inter alia, market considerations, which can only be determined by reference to “comparable transactions”. Generally, truly comparable transactions for mineral assets are difficult to identify due to the infrequency of transactions involving producing assets and/or resources, the great diversity of mineral exploration properties, the stage to which their evaluation has progressed, perceptions of prospectivity, tenement types, the commodity involved and so on.

For exploration tenements, the notion of value is very often based on considerations unrelated to the amount of cash which might change hands in the event of an outright sale, and in fact, for the majority

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of tenements being valued, there is unlikely to be any “cash equivalent of some other consideration”. Whilst acknowledging these limitations, CSA has identified what it considers to be comparable transactions that have been used in assessing the values to be attributed to the mineral assets.

CSA’s valuations are based on information provided by Chrysalis and public domain information. This information has been supplemented by independent enquiries, but has not been independently verified. No audit of any financial data has been conducted. The valuations discussed in this Report have been prepared at a valuation date of 16[th] August 2013. It is stressed that the values are opinions as to likely values, not absolute values, which can only be tested by going to the market.

7.2 Valuation Methods for Exploration Projects

The choice of valuation methodology applied to mineral assets, including exploration licences, will depend on the amount of data available and the reliability of that data.

The VALMIN Code classifies mineral assets into categories that represent a spectrum from areas in which mineralisation may or may not have been found through to operating mines which have welldefined Ore Reserves, as listed below:

“ Exploration Areas ” – properties where mineralisation may or may not have been identified, but where a Mineral Resource has not been identified.
“ Advanced Exploration Areas ” – properties where considerable exploration has been undertaken and specific targets have been identified that warrant further detailed evaluation, usually by drill testing, trenching or some other form of detailed geological sampling. A Mineral Resource estimate may or may not have been made but sufficient work will have been undertaken on at least one prospect to provide both a good understanding of the type of mineralisation present and encouragement that further work will elevate one or more of the projects to the resource category.
� “ Pre-Development Projects ” – properties where Mineral Resources have been identified and their extent estimated (possibly incompletely) but where a decision to proceed with development has not been made.
“ Development Projects ” – properties for which a decision has been made to proceed with construction and/or production, but which are not yet commissioned or are not yet operating at design levels.
“ Operating Mines ” - mineral properties, particularly mines and processing plants that have been commissioned and are in production.

Each of these categories will require different valuation methodologies, but regardless of the technique employed, consideration must be given to the perceived Fair Market Valuation.

The Fair Market Value of exploration properties and undeveloped Mineral Resources can be determined by four general approaches, viz.:

The Appraised Value Method which considers the costs and results of historical exploration.
The Market Approach or Comparable Transaction Method which looks at recent arm’s length transactions for comparable properties.
The Geoscience Factor Method which seeks to rank and weight geological aspects, including proximity to mines and other deposits, the significance of the mineralised district and the commodity sought.

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The Income Approach which is relevant to exploration properties on which undeveloped Mineral Resources or Ore Reserves are present or to operating mines. When sufficiently detailed studies into the mining and processing of the Mineral Resources and/or Ore Reserves have been completed, value can be derived with a reasonable degree of confidence by forecasting the cash flows that would accrue from mining the deposit and discounting these to the present day to determine their Net Present Value (NPV).

For this Report the former two methods have been used.

7.2.1 Appraised Value or Exploration Expenditure Method

This method considers the costs and results of historical exploration.

The Appraised Value method utilises a Multiple of Exploration Expenditure (“MEE”) which involves the allocation of a premium or discount to past expenditure through the use of the Prospectivity Enhancement Multiplier (“PEM”). This involves a factor which is directly related to the success (or failure) of the exploration completed to date, during the life of the current tenements.

Guidelines for the selection of a PEM value have been proposed by several authors in the field of mineral asset valuation (Onley, 1994). Table 10 lists the PEM and criteria used in this report.

Table 10: Prospectivity Enhancement Multiplier (PEM) factors

PEM Range
	Criteria

0.2–0.5	Exploration (past & present) has downgraded the tenement prospectivity, no mineralisation identified
0.5–1.0	Exploration potential has been maintained (rather than enhanced) by past and present activity from regional mapping
1.0–1.3	Exploration has maintained, or slightlyenhanced(but not downgraded)theprospectivity
1.3–1.5	Exploration has considerably increased the prospectivity (geological mapping, geochemical or geophysical activities)
1.5–2.0	Scout drilling (RAB, aircore, RCP)has identified interestingintersections of mineralisation
2.0–2.5	Detailed drillinghas defined targets withpotential economic interest
2.5–3.0	A Mineral Resource has been estimated at Inferred JORC category, no concept or scoping study has been completed
3.0–4.0	Indicated Mineral Resources have been estimated that are likely to form the basis of a Pre- feasibilityStudy
4.0–5.0	Indicated and Measured Resources have been estimated and economic parameters are available for assessment

7.2.2 Market Approach Method or Comparable Transactions

This method looks at prior transactions for the property and recent arm’s length transactions for comparable properties.

The Comparable Transaction method provides a useful guide where a mineral asset that is comparable in location and commodity has in the recent past been the subject of an “arm’s length” transaction, for either cash or shares.

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In an exploration joint venture or farm-in, an equity interest in a tenement or group of tenements is usually earned in exchange for spending on exploration, rather than a simple cash payment to the tenement holder.

The joint venture or farm-in terms, of themselves, do not represent the value of the tenements concerned. To determine a value, the expenditure commitments should be discounted for time and the probability that the commitment will be met. Whilst some practitioners invoke complex assessments of the likelihood those commitments will be met, these are difficult to justify at the outset of a joint venture, and it seems more reasonable to assume a 50/50 chance that a joint venture agreement will run its term.

Therefore, in analysing joint venture terms, a 50% discount may be applied to future committed exploration, which is then “grossed up” according to the interest to be earned to derive an estimate of the value of the tenements at the time that the agreement was entered into.

Where a progressively increasing interest is to be earned in stages, it is likely that a commitment to the second or subsequent stages of expenditure will be so heavily contingent upon the results achieved during the earlier phases of exploration that assigning a probability to the subsequent stages proceeding will in most cases be meaningless.

A commitment to a minimum level of expenditure before an incoming party can withdraw must reflect that party’s perception of minimum value and should not be discounted. Similarly, any up-front cash payments should not be discounted.

The terms of a sale or joint venture agreement should reflect the agreed value of the tenements at the time, irrespective of transactions or historical exploration expenditure prior to that date. Hence the current value of a tenement or tenements will be the value implied from the terms of the most recent transaction involving it/them, plus any change in value as a result of subsequent exploration.

Where the tenements comprise applications over previously open ground, little to no exploration work has been completed and they are not subject to any dealings, it is thought reasonable to assume that they have minimal, if any value, except perhaps, the cost to apply for, and therefore secure a prior right to, the ground, unless of course there is competition for the ground and it was keenly sought after. Such tenements are unlikely to have any value until some exploration has been completed, or a deal has been struck to sell or joint venture them, implying that a market for them exists.

High quality mineral assets are likely to trade at a premium over the general market. On the other hand exploration tenements that have no defined attributes apart from interesting geology or a “good address” may well trade at a discount to the general market. Market values for exploration tenements may also be impacted by the size of the land holding, with a large, consolidated holding in an area with good exploration potential attracting a premium due to its appeal to large companies.

7.3 Technical Valuation of Mineral Assets

7.3.1 Previous Valuations

CSA is not aware, nor have we been made aware, of any valuations over Chrysalis ’s projects.

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7.3.2 Tenements included in the Valuation

Exploration tenements have not been included in the valuation where tenure or permits have not been granted to the relevant company and the company does not therefore have any ownership over tenement mineral assets or any exploration value within the tenements. While a tenement is under application there is uncertainty as to whether it will be granted in full or in part due to environmental, Native Title or other reasons. A full list of the Chrysalis ’s tenements is included as Appendix 1.

7.3.3 Comparable Transactions

CSA has completed a search for publicly available relevant market transactions involving iron ore, gold and copper and copper-gold projects within Western Australia.

Note that individual market transactions are rarely completely identical to the relevant project area or may not necessarily contain all the required information for compilation. In practice, a range of implied dollar values per square kilometre of tenement holding will suffice. The transactions identified along with the implied cash-equivalent values are summarised in Appendices 2–4.

7.3.4 West Angelas Project

7.3.4.1 Selection of Valuation Method

The West Angelas Project, in which Chrysalis has a 100% interest, can be classified as an Exploration Area, where some initial drilling has intersected interesting zones of mineralisation.

CSA has elected to apply the Comparable Transaction method and Appraised Value (using a MEE) to value the project after consideration of the various valuation methods outlined in Section 7.2 and the geological / exploration information outlined in this report.

7.3.4.2 Appraised Value – Multiples of Exploration Expenditure (MEE)

Reported exploration expenditure on the West Angelas Project tenements by Chrysalis were reviewed, and relevant costs summarised in Table 11 and PEM factors applied for the components of this expenditure.

Table 11: PEM factors for West Angelas Iron Project

	Exp.		PEM	PEM	PEM

Work Carried Out	($M)	Results of Work	Low	Hi	Preferred

Geological and Geophysical consulting	0.05	Define targets for drilling	0.5	1.1	0.8
Drilling and Assaying	0.30	2 of 3 drilling targets intersected low grade material	0.3	1.0	0.5
TOTAL RELEVANT EXPENDITURE	0.35	Expenditure Weighted PEM	0.33	1.01	0.59

VALUATION		West Angelas Project Value ($M)	0.12	0.36	0.21

Based on the recorded exploration expenditure and work-related expenditure weightings of PEM ranging from 0.3-1.0, the value of the West Angelas Project exploration tenements would lie between $0.12M and $0.36M , with a Preferred Value of $0.21M .

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7.3.4.3 Market Approach – Analysis of Comparable Transactions

CSA has conducted a review of West Australian market transactions involving early exploration stage iron ore projects. A range of transactions considered relevant to the West Angelas Project were identified and are shown in Appendix 2.

The range of comparable transactions for more grassroots/greenfields iron ore exploration projects in Western Australia is quite limited, the transactions located by CSA range from $1000/km[2] to $2100/km[2] . The surge in interest in iron ore projects in 2007-2010 saw most areas with potential iron ore mineralisation acquired in this phase. The transactions located by CSA reflect this period. After 20092010, most projects had undergone various degrees of exploration commonly resulting in reporting of Exploration Targets or Mineral Resources, so no relevant transactions post-2010 were located. An additional factor that needs to considered in assessing Comparable Transactions is the premium on transactions values due the surging iron ore prices and the strong market interest in iron ore projects. CSA conclude that the subsequent easing of iron prices and reduced market interest in the sector require a discount be applied to transactions in 2009–10. However, yet another compounding factor is that the iron transactions located are mostly for magnetite projects, whereas the focus at West Angelas has been in CID exploration. There is some potential for magnetite at West Angelas but CSA consider this a minor aspect of the prospectivity. Overall CSA believe that the most appropriate range of comparable transactions should be $500–1000/km[2] , with a Preferred Value of $800/km[2 ]

Applied to the to the West Angelas Project tenements, with an area of 88.6km[2] , the derived value for the project has a range of $0.04M to $0.09M , with a Preferred Value of $0.07M .

Table 12 summarises the values for the West Angelas Project exploration tenements derived using the Comparable Transactions method.

Table 12: Summary of Values for West Angelas, Selected for Comparable Transactions Valuations

	Low Value	High Value	Preferred Value
Value/Km2	$500	$1000	$800
Valuation	$0.04M	$0.09M	$0.07M
Exploration Area	100%	100%	100%
Total Valuation	A$0.04M	A$0.09M	A$0.07M

7.3.4.4 Valuation Summary

By using the Appraised Value and Comparable Transactions valuation methods for valuing the tenements a range of selected values from $0.04M to $0.36M can be derived.

CSA has elected to assign a Preferred Value of $0.1M, at the first quartile of the overall range of values, representing top end of the range of the Comparable Transactions method, and at the bottom of the range of the Appraised Value method.

There is significant range in the values derived for the West Angelas Project. CSA has considered this range and concludes that it provides a reasonable representation of possible valuation outcomes for the projects, given the uncertainties inherent in valuing early stage exploration projects.

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7.3.5 Pioneer Project

7.3.5.1 Selection of Valuation Method

The Pioneer Project, in which Chrysalis has a 93.3% interest, can be classified as an Exploration Area mineral asset. CSA has elected to apply the Comparable Transaction method and Appraised Value (using a MEE) to value the project after consideration of the various valuation methods outlined in Section 7.2 and the geological / exploration information outlined in this report.

7.3.5.2 Appraised Value – Multiples of Exploration Expenditure (MEE)

Table 13 summarises the exploration work and provides PEM factors for the components of the expenditure.

Table 13: PEM factors for Pioneer Gold Project

	Exp.		PEM	PEM	PEM
Work Carried Out		Results of Work
	($M)		Low	Hi	Preferred

Historic Work	na	Mineralisation outlined, economic gold results to follow up
Aircore Drilling	0.11	Further shallow results to follow up	1.0	1.3	1.2
2011 Drilling Programme	0.30	Mostly sub economic results	0.5	1.3	0.6
2012 RC Drilling Programme	0.14	Sub economic results, downgraded primary mineralisation	0.5	1.0	0.6
TOTAL RELEVANT EXPENDITURE	0.55	Expenditure Weighted PEM	0.60	1.22	0.72

VALUATION		Pioneer Project Value($M)	0.33	0.67	0.40
		Chrysalis Proportion: 93.3%($M)	0.31	0.62	0.37

Based on the recent relevant exploration expenditure and work-related expenditure weightings of PEM ranging from 0.6-1.2, the value of the Pioneer Gold Project exploration tenements would lie between $0.33M and $0.67M , with a Preferred Value of $0.40M, with Chrysalis’s interest (93.3%) valued at between $0.31M and $0.62M , with a Preferred Value of $0.37M .

7.3.5.3 Market Approach – Analysis of Comparable Transactions CSA has conducted a review of Australian market transactions involving exploration stage gold projects. A range of transactions considered relevant to the Pioneer Project were identified and are shown in Appendix 3.

The range of comparable transactions for gold exploration projects in Western Australia range from $750/km[2] to $6400/km[2] ; with a Preferred Value of $3000/km[2] (refer Table 14) selected to apply to the granted Pioneer Project tenements, which have an area of 22.3km[2] .

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Table 14: Summary of Values for Pioneer Gold Project, Selected for Comparable Transactions Valuations

	Low Value	High Value	Preferred Value
Value/Km2	$750	$6400	$3000
Valuation	$0.02M	$0.14M	$0.07M
Exploration Area	93.3%	93.3%	93.3%
Total Valuation	A$0.02M	A$0.13M	A$0.06M

Based on this range, the value of the Pioneer Project would lie between $0.02M and $0.14M with a Preferred Value of $0.07M, with Chrysalis’s interest (93.3%) valued at between $0.02M and $0.13M , with a Preferred Value of $0.06M .

7.3.5.4 Valuation Summary

By using the Appraised Value and Comparable Transactions valuation methods for valuing the tenements a range of selected values from $0.02M to $0.67M can be derived for the project, with Chrysalis’s interest (93.3%) valued at between $0.02M and $0.62M . This reflects the difficulty in assessing the potential of a relatively mature exploration project without defined resources.

CSA has elected to assign a Preferred Value of $0.2M for Chrysalis’s interest in the Project, which falls between the respective preferred values from each methodology.

7.3.6 Halloween West Project

7.3.6.1 Selection of Valuation Method

The Halloween West Project, in which Chrysalis has a 40% interest, can be classified as an Exploration Area.

CSA has elected to apply the Appraised Value (using a MEE) and Comparable Transaction methods to value the project after consideration of the various valuation methods outlined in Section 7.2 and the geological / exploration information outlined in Section 5.

7.3.6.2 Appraised Value – Multiples of Exploration Expenditure (MEE)

Table 15 summarises the exploration work and provides PEM factors for the components of the expenditure.

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Table 15: PEM factors for Halloween West

	Exp.		PEM	PEM	PEM
Work Carried Out		Results of Work
	($ M)		Low	Hi	Preferred


VTEM Survey	0.11	5 ‘De Grussa’ targets defined	1.3	1.5	1.4
RC Drilling	0.22	Targets downgraded	0.5	0.7	0.5
Downhole EM	0.08	No offhole targets identified >200m vd	0.2	0.5	0.3
Consulting and Review	0.03	Additional scope outlined	1.0	1.2	1.1
Talisman Soils	0.1	2 target areas defined	1.0	1.3	1.0
Talisman Drilling	0.4	3 weakly anomalous intercepts	0.2	0.5	0.4

TOTAL RELEVANT EXPENDITURE	0.94	Expenditure Weighted PEM	0.51	0.77	0.62

VALUATION		Halloween West Value($M)	0.48	0.73	0.58
		Chrysalis Proportion: 40% ($M)	0.19	0.29	0.23

Based on the recorded exploration expenditure and work-related expenditure weightings of PEM ranging from 0.5 to 0.8, MEE provides a range of values of $0.48M to $0.73M , with a likely value using a work-related expenditure weighted PEM of 0.6 giving a value of $0.58M . Chrysalis’s 40% share would have a range of $0.19M to $0.29M , with a preferred value of $0.23M.

7.3.6.3 Market Approach – Analysis of Comparable Transactions

CSA has conducted a review of Australian market transactions involving exploration stage copper gold projects. A range of transactions considered relevant to the Halloween West Project were identified and are shown in Appendix 2. The transactions provide a wide range of implied acquisition values. Those assets interpreted to hold strategic value lie at the highest end of the range of values.

CSA has derived an implied range of $3,150 to $22,500/km[2] , with a Preferred Value of $11,000/km[2] , to apply to the Halloween West Project tenements, which has an area of 18.5 km[2] . These are at the high end of the scale, as a result of the relative proximity to Doolgunna.

Table 16: Summary of Values for Halloween West Project, Selected for Comparable Transactions Valuations

	Low Value	High Value	Preferred Value
Value/Km2	$3150	$22,500	$11,000
Valuation	$0.06M	$0.42M	$0.20M
Exploration Area	40%	40%	40%
Total Valuation	A$0.02M	A$0.17M	A$0.08M

Based on this range, the value of the Halloween West Project would lie between $0.06M and $0.42M , with a Preferred Value of $0.20M , with Chrysalis’s proportion of value (40%) falling between $0.02M and $0.17M , with a Preferred Value of $0.08M .

7.3.6.4 Valuation Summary

By using the Appraised Value and Comparable Transactions valuation methods for valuing the Halloween West tenements a range of values from $0.06M to $0.73M can be derived for the project, with Chrysalis’s interest (40%) valued at between $0.02M and $0.29M .

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CSA has elected to assign a Preferred Value of $0.2M for Chrysalis’s interest in the Project, weighted towards the MEE methodology and at the upper end of data from the comparable transactions.

7.3.7 Horseshoe South Project

7.3.7.1 Selection of Valuation Method

CSA has conducted a review of Australian market transactions involving exploration stage uranium The Gregory Range Project, in which Chrysalis has a 100% interest, can be classified as an Exploration Area.

CSA has elected to apply the Comparable Transaction and Geoscience Factor methods to value the project after consideration of the various valuation methods outlined in Section 7.2 and the geological exploration information outlined in Section 5.

7.3.7.2 Market Approach – Analysis of Comparable Transactions

During CSA’s review of West Australian market transactions the authors observed regional, conceptual exploration stage projects have an implied range of $1700 to $4250/km[2 ] (refer Appendix 5), with a Preferred Value of $3,000/km[2] and applied them to the Horseshoe South Project tenements, which have an area of 9.0km[2] .

Based on this range, the value of the Horseshoe South Project would lie between $0.02M and $0.04M , with a Preferred Value of $0.03M .

7.3.7.3 Geoscience factor Method (Kilburn)

Application of Kilburn rankings to the in the Geoscience method Value methodology discussed in Section 7.2 gave rise to a Preferred Value of $0.01M, as outlined below in Table 17.

Table 17: Kilburn Table for Horseshoe South Project

Tenement	Area	BAC	Off Property	Off Property	On Property	On Property	Anomaly	Anomaly	Geology	Geology
											Lower	Higher	Preferred
			Low	High	Low	High	Low	High	Low	High

E52/2523	6.2	350	1.2	1.5	1.0	1.0	1.0	1.0	0.4	1.5	1,000	5,000	5,000
E52/2524	3.1	350	1.2	1.5	1.0	1.0	1.0	1.0	0.4	1.5	1,000	2,000	2,000
P52/1363	1.0	350	1.2	1.5	1.0	1.0	1.0	1.0	0.4	1.5	-	1,000	1,000
											2,000	8,000	8,000

7.3.7.4 Valuation Summary

Based on this range, the value of the Horseshoe South would lie between $0.01M and $0.04M , with a Preferred Value of $0.03M , falling in the middle of the preferred values for both methodologies.

This reflects the small area of the tenement package. CSA considers that the Horseshoe Range Project remains prospective and warrants further review.

7.3.8 Gregory Range Project

7.3.8.1 Selection of Valuation Method

The Gregory Range Project, in which Chrysalis has a 100% interest, can be classified as an Exploration Area. CSA has elected to apply the Comparable Transaction and Geoscience Factor methods to value the

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project after consideration of the various valuation methods outlined in Section 7.2 and the geological exploration information outlined in Section 6.

7.3.8.2 Market Approach – Analysis of Comparable Transactions

During CSA’s review of West Australian market transactions the authors observed regional, conceptual exploration stage projects have an implied range of $1700 to $4250/km[2] (refer Appendix 5). The range of comparable transactions for more grassroots/greenfields base metals exploration projects in Western Australia is quite limited, and highly influence by proximity to new discoveries and operating mines. Furthermore, the Gregory range project is located in a very remote area with significant cover, and because of these factors CSA believe it is appropriate to discount the implied values to $500–1000/km[2] , with a Preferred Value of $800/km[2] , and applied them the Gregory Range Project tenements, which have an area of 933km[2] .

Based on this range, the value of the Gregory Range Project would lie between $0.47M and $0.93M , with a Preferred Value of $0.75M .

7.3.8.3 Geoscience factor Method (Kilburn)

Application of Kilburn rankings to the in the Geoscience method Value methodology (refer Table 18) discussed in Section 7.2 gave rise to low and high valuations of $0.19M and $0.73M , with a Preferred Value of $0.38M .

Table 18: Kilburn Table for Gregory Range Project

Tenement	Area	BAC	Off Property	Off Property	On Property	On Property	Anomaly	Anomaly	Geology	Geology
											Lower	Higher	Preferred
			Low	High	Low	High	Low	High	Low	High

E45/3120	89	350	1.2	1.5	1.0	1.0	1.0	1.0	0.4	1.5	10,000	70,000	40,000
E45/3313	373	350	1.2	1.5	1.0	1.0	1.2	1.0	0.4	1.5	80,000	290,000	150,000
E45/3314	471	350	1.2	1.5	1.0	1.0	1.2	1.0	0.4	1.5	100,000	370,000	190,000
											190,000	730,000	380,000

7.3.8.4 Valuation Summary

Based on this range, the value of the Gregory Range Project would lie between $0.2M and $0.9M , with a Preferred Value of $0.7M , just below the Preferred Value from the analysis of Comparable Transactions, and close to the upper range of the Geoscience Factor approach.

This reflects the untested nature of the tenement package, albeit with a range of identified conceptual targets. CSA considers that the Gregory Range Project is prospective and warrants continuing exploration.

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7.4 Preferred Value of the Projects

CSA has concluded that Chrysalis ’s Projects are of merit (although at varying stages of exploration and subsequent mineral asset classification), and warrant further exploration.

It is CSA’s opinion that the Fair Market Value of the Chrysalis mineral assets is best ascribed using the Market Approach (Comparable Transactions). As a validation of the Market Approach method the Appraised Value (MEE) Approach has also been considered where suitable data was available, and the Geoscience factor Method (Kilburn) brought in where data was limited.

Table 19 provides an overall summary of the values derived in this report. The applicable date is 16[th] August 2013.

The total value of Chrysalis ’s projects is considered to lie in arrange from $0.29M to $2.21M , within which range CSA has chosen a Preferred Value of $1.23M .

There is significant range in the values derived for the Chrysalis Projects. CSA has considered this range and concludes that it provides a reasonable representation of possible valuation outcomes for the projects, given the uncertainties inherent in valuing early stage exploration projects.

It is stressed that the valuation is an opinion as to likely values, not absolute values, which can only be tested by going to the market.

Table 19: Summary Valuation of Chrysalis’s Projects

			*Granted* *Area*
		*Ownership*		*Valuation*
*Project*	*Mineral Asset*
				*Low*	*High*	*Preferred*
		%	*km2*
				$M	$M	$M

West Angelas	Exploration Area	100	88.6	0.04	0.36	0.10
Pioneer	Exploration Area	93.3	22.3	0.02	0.62	0.20
Halloween West	Exploration Area	40	18.5	0.02	0.29	0.20
Horseshoe South	Exploration Area	100	11.3	0.01	0.04	0.03
Gregory Range	Exploration Area	100	933.2	0.20	0.90	0.70
*Totals*			*1073.9*	*0.29*	*2.21*	*1.23*

The valuation has been compiled to an appropriate level of precision and minor rounding errors may occur.

~~Report No: R292.2013~~

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Report No: R292.2013

Chrysalis Resources Ltd Valuation of Mineral Assets

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8 Bibliography

8.1 Mineral Property Valuation References

AusIMM (1998): "Valmin 94 – Mineral Valuation Methodologies". Conference Proceedings.

AusIMM (2012): “VALMIN Seminar Series 2011-12”. Conference Proceedings, 161pp

CIMVAL (2003). Standards and Guidelines for Valuation of Mineral Properties.

Gregg, L. T. and Pickering, S.M. (2007). Methods for Valuing Previous Exploration Programs during Consideration of Prospective Mineral Ventures in 42nd Industrial Minerals Forum in Asheville, NC.
Lawrence, R.D. (2000). Valuation of Mineral Properties without Mineral Resources: A Review of MarketBased Approaches in Special Session on Valuation of Mineral Properties, Mining Millennium 2000, Toronto, Canada.
Onley, P.G. (2004). Multiples of Exploration Expenditure as a Basis for Mineral Property Valuation. In Mineral Valuation Methodologies Conference. AusIMM. pp191–197.
Thompson, I.S. (2000) A critique of Valuation Methods for Exploration Properties And Undeveloped Mineral Resources in Special Session on Valuation of Mineral Properties, Mining Millennium 2000, Toronto, Canada.
VALMIN Committee (2005). “Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports”, 2005 edition.

8.2 Geological references

Bunting, J (2011): “West Angelas Project Review”, Report for Chrysalis Resources Limited

Wu, F (2012): “C10/2012 Annual Report West Angelas Project", CSA report for Chrysalis Resources Limited.

Sergeev, N (2012): “Pioneer Project C10/2002”, Co-funded Government Industry Drilling Program Final Report- CSA report for Chrysalis Resources Limited

Porter, R (2013): “ Review of the Pioneer Project Spongelite Gold System”, memo dated 5[th] August to Chrysalis Resources Limited

Bunting, J (2011): “Doolgunna West Project Review”, Report for Chrysalis Resources Limited

Wilson, N (2012): “Exploration in the Horseshoe South Project 2011-12”, Annual Technical Report, by CSA on behalf of Chrysalis Resources Limited

Oxenburgh, S and Jones, S (2012) “Gregory Range Project Exploration Review, CSA report to Chrysalis Resources Limited.

~~Report No: R292.2013~~ Report No: R292.2013

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Chrysalis Resources Ltd Valuation of Mineral Assets

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9 Glossary

The reader is referred to online resources such as Wikipedia for explanations of unfamiliar terms.

Report No: R292.2013

Chrysalis Resources Ltd Valuation of Mineral Assets

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Appendix 1: Tenement Schedule


	*Tenement* ID		*Share* %			*Grant* *Date*	*Expiry* *Date*		*Expenditure* *Commitment*
*Project*		*Status*		*Blocks*	*Area km2*			*Rent*


West Angelas	E47/1838	Live	100	31	87.7	16-Sept-09	15-Sept-14	$5,738.10	$46,500
	P47/1538	Live	100	-	0.9	25-Nov-11	24-Dec-15	$197.80	$3,440
	Totals				88.6			$5,935.90	$49,940

Pioneer	E63/1117	Live	93.33	5	11.07	7-Oct-08	6-Oct-13	$1,255.50	$20,000
	M63/0329	Live	93.33	-	0.68	23-Jul-01	22-Jul-22	$1067.60	$10,000
	M63/0368	Live	93.33	-	3.83	23-Jul-96	22-Jul-22	$6013.10	$38,300
	P63/1429	Live	93.33	-	1.28	7-Oct-08	6-Oct-16	$294.40	$5,120
	P63/1468	Live	93.33	-	0.13	3-June-08	2-June-16	$29.90	$2,000
	E63/1413	Live	93.33	-	0.1	12-Jan-11	11-Jan-16	$286.25	$10,000
	E63/1414	Live	93.33	-	5.23	20-Dec-10	19-Dec-15	$370.20	$15,000
	Totals				22.3			$9316.95	$100,420

Halloween West	E52/2275	Live	40	6	18.5	9-Feb-09	8-Feb-14	$1,506.60	$30,000
	Totals				18.5			$1,506.60	$30,000

Horseshoe South	E52/2523	Live	100	2	6.19	26-Feb-10	25-Feb-15	$370.20	$20,000
	E52/2524	Live	100	1	3.10	26-Feb-10	25-Feb-15	$286.25	$10,000
	P52/1351	Live	100	-	1.92	9-Mar-10	8-Mar-14	$441.60	$7,680
	P52/1352	Live	100	-	0.38	9-Mar-10	8-Mar-14	$87.40	$2,000
	P52/1363	Live	100	-	1	27-May-10	26-May-14	$230.00	$4,000
	Totals				12.6			$1,415.45	$43,680

Gregory Range	E45/3120-I	Live	100	28	89.2	23-Sept-09	22-Sept-14	$5,182.80	$42,000
	E45/3313-I	Live	100	117	372.6	31-July-13	30-July-18	$13,923.00	$117,000
	E45/3314-I	Live	100	148	471.4	31-July-13	30-July-18	$17,612.00	$148,000
	Totals				933.2			$36,717.80	$307,000

Report No: R292.2013

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Implied Value/km2 (A$)	$2100	$1000	$1,300*	$1,150*	$3,000*
Area (km2)	28.4	218	841	214	84
Price 100% Basis (A$M)	0.06	0.225	2.19	0.5	0.5

Transaction Details	A purchase agreement to earn 100% with a $0.02M cash and 200,000 shares (around $0.04M)	A purchase agreement to earn 100% with $0.225M cash	A farm in/JV agreement to earn 80%with a $1.75M exploration spend over 3 years.	A farm-in/JV agreement to earn 10% with a $0.05M buyin (in shares).	A farm in/JV agreement with Mawson West Ltd to earn 60% with a $0.3M exploration spend over 3 years.
Asset Details	The project area is prospective for BIF.	The project area is considered prospective for magnetite BIF.	The project area is considered prospective for magnetite BIF.	The project area is considered prospective for hematite (60 to 65% Fe)	The project area is considered prospective for iron, base metal and gold.
Company_2	Mt Alexander Resources Pty Ltd	Thundelarra Exploration	De Grey Mining Ltd	Independence Group NL	Mawson West Ltd
Company_1	Zinc Co Australia Ltd	Apollo Minerals Ltd	Emergent Resources Ltd	Montezuma Mining Corp	Silver Swan Group
Date	Oct- 09	July- 09	May- 08	April- 08	Jan- 08
Country	Australia	Australia	Australia	Australia	Australia
State	WA	WA	WA	WA	WA
Commodities	Fe	Fe	Fe	Fe	Fe

Project	Mt Alexander, Pilbara,	Mt Oscar, Pilbara,	Beyondie, Mid West,	Mt Padbury, Mid West,	Kiaby Well, Mid West,

									West Musgrave Au WA Australia Jan- 10 Tortuga Advisors Ltd Strzelecki Metals Ltd The tenement area is considered prospective for uranium, gold and base metal mineralisation. A farm in/JV agreement to earn 80% with an exploration spend of $4.0M over 5 years. 5.0 1489 $1,700 Report No: R292.2013* 42
Implied Value/sq.km. (A$)	$1,100	$2,150*	$5,500	$750	$6,400	$3,000*	$4,250*	$3,250*	$1,700*
Area (km2)	650	156	9.04	1147	3.42	141	125.23	184	1489
Price 100% Basis (A$M)	0.74	0.666	0.05	0.85	.022	0.857	1.07	1.2	5.0
Transaction Details	100% of Hollerton Gold Project for $0.74M in shares	A farm-in/JV agreement to earn 75% interest in the project with an exploration spend of $0.50M over three years	100% of an exploration licence for $0.05M in cash	100% of exploration tenements for 0.85M in cash	90% interest for $20,000 in cash	A farm-in/JV agreement to earn 70% with a $0.6M shares and exploration spend over 3 years.	A farm-in/JV agreement to earn 70% with an exploration spend of $0.75M over 5 years.	A farm in/JV agreement to earn 76% with a $0.45M exploration spend over 3 years, with the balance of the property then available for an additional $0.75M	A farm in/JV agreement to earn 80% with an exploration spend of $4.0M over 5 years.
Asset Details	The project area is prospective for gold mineralisation	The project area is prospective for gold mineralisation.	The project area is prospective for gold mineralisation.	The project area is prospective for gold mineralisation.	The project area is prospective for gold mineralisation	The project area is prospective for gold mineralisation.	The tenement is prospective for gold and base metal mineralisation.	The project area is prospective for gold and base metal mineralisation.	The tenement area is considered prospective for uranium, gold and base metal mineralisation.
Company_2	Evolution Mining	Midas Resources Ltd	Exterra Resources	Saracen	Power Resources	Cullen Resources Ltd	Image Resources NL	La Mancha Resources Pty Ltd	Strzelecki Metals Ltd
Company_1	Independence Group NL	Cazador Resources Ltd	Unknown	Rubicon Resources Ltd	Private Party	Matsa Resources Ltd	Integra Mining Limited	Empire Resources Ltd	Tortuga Advisors Ltd
Date	June- 12	April- 12	Nov- 11	Nov- 11	Sept- 11	Dec - 10	Sept- 10	Apr- 10	Jan- 10
Country	Australia	Australia	Australia	Australia	Australia	Australia	Australia	Australia	Australia
State	WA	WA	WA	WA	WA	WA	WA	WA	WA
Commodities	Au	Au	Au	Au	Au	Au	Au	Au	Au

Project	Holleton	Leonora	Linden	Red October	Linden and Pelt Well	Killaloe, Norseman	Erayinia, Kalgoorlie	Yuinmery, Murchison	West Musgrave

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Implied Value/sq.km. (A$)	$22,500*	$11,000
Area (km2)	18.5	315
Price 100% Basis (A$M)	0.833	3.5
Transaction Details	Farm in agreement to earn a 60 % interest by spending $500,000 on exploration within three years. A minimum spend of $150,000 is required in the first 12 months after which it has the option to withdraw or expend a further $350,000 within the next 2 years.	Acquisition of 100% of tenement package for 26,923,077 shares at $0.13E
Asset Details	The ground is considered prospective for Cu-Au and Au mineralisation	The ground is considered prospective for Cu-Au and Au mineralisation
Company_2	Chrysalis Resources Ltd	Grosvenor Gold
Company_1	Talisman Mining Ltd	Alchemy resources
Date	May-12	Mar- 2012
Country	Australia	Australia
State	WA	WA
Commodities	Cu Au	Cu Au
Project	Doolgunna West	Bryah Basin

				West Musgrave Au, Cu, Ni, U WA Australia Jan-10 Tortuga Advisors Ltd Strzelecki Metals Ltd The tenement area is considered prospective for uranium, gold and base metal mineralisation. A farm in/JV agreement to earn 80% with an exploration spend of $4.0M over 5 years. 5.0 1489 $1,700 50% discount applied for JV
Implied Value/sq.km. (A$)	$3,150*	$4,250*	$3,250*	$1,700*
Area (km2)	298	125.23	184	1489
Price 100% Basis (A$M)	1.88	1.07	1.2	5.0
Transaction Details	A Tenement Sale, Farm-In and Joint Venture Agreement have been reached with 3D Resources Ltd. Broad terms include: · Payment of $100,000 cash and issuing 1,250,000 fully paid Cazaly shares ($0.22 at time of announcement) for the outright purchase of an initial 20% interest.	A farm-in/JV agreement to earn 70% with an exploration spend of $0.75M over 5 years.	A farm in/JV agreement to earn 76% with a $0.45M exploration spend over 3 years, with the balance of the property then available for an additional $0.75M	A farm in/JV agreement to earn 80% with an exploration spend of $4.0M over 5 years.
Asset Details	The ground is considered prospective for Cu.	The tenement is prospective for gold and base metal mineralisation.	The project area is prospective for gold and base metal mineralisation.	The tenement area is considered prospective for uranium, gold and base metal mineralisation.
Company_2	3D Resources	Image Resources NL	La Mancha Resources Pty Ltd	Strzelecki Metals Ltd
Company_1	Cazaly Resources	Integra Mining Limited	Empire Resources Ltd	Tortuga Advisors Ltd
Date	Oct-12	Sept-10	Apr-10	Jan-10
Country	Australia	Australia	Australia	Australia
State	WA	WA	WA	WA
Commodities	Cu	Au, Zn, Cu	Au, Cu	Au, Cu, Ni, U
Project	Halls Creek	Erayinia, Kalgoorlie	Yuinmery, Murchison	West Musgrave

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Chrysalis Resources Limited ACN 125 931 964 Churchill Court Unit 2, Level 1 331-335 Hay Street SUBIACO WA AUSTRALIA 6008 T (08) 9380 4430 F (08) 9481 5044 www.chrysalisresources.com.au

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