PRAIRIE LITHIUM LIMITED — AGM Information 2016

Aug 29, 2016

ZYL Limited (Subject to Deed of Company Arrangement) ACN 008 720 223

NOTICE OF GENERAL MEETING

The General Meeting of the Company will be held at Suite 23, 513 Hay Street, Subiaco, Western Australia on Thursday, 29 September 2016 at 10.00am (WST).

In considering the Resolutions, Shareholders must bear in mind the current financial circumstances of the Company.

If the Recapitalisation Resolutions are passed and the Recapitalisation Proposal is completed, the Company will be in a position to seek reinstatement of its securities on the ASX. This requotation will be subject to compliance with ASX and Corporations Act regulatory requirements.

In addition to the Recapitalisation Resolutions, this Notice sets out further Resolutions (numbered 5, 9 and 10) that do not form part of the Recapitalisation Proposal. If those further Resolutions are not passed, that will not affect the completion of the Recapitalisation Proposal.

If Shareholders do not approve the Recapitalisation Proposal by passing the Recapitalisation Resolutions, then the Administrator will, in the absence of any other deed of company arrangement proposal or a variation to the terms of the DOCA, have no other option but to recommend to creditors that the Company be put into liquidation. In those circumstances, it is unlikely that there will be any return to Shareholders.

The Administrator has taken no part in relation to the preparation of this Notice and expresses no opinion in relation to the Recapitalisation Proposal.

The Notice of General Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their accountant, solicitor or other professional adviser prior to voting.

Should you wish to discuss any matter please do not hesitate to contact the Company Secretary by telephone on +61 8 9317 9700.

Shareholders are urged to attend or vote by lodging the proxy form attached to the Notice

ZYL Limited (Subject to Deed of Company Arrangement) ACN 008 720 223

NOTICE OF GENERAL MEETING

Notice is hereby given that the general meeting of Shareholders of ZYL Limited (Subject to Deed of Company Arrangement) (Company) will be held at Suite 23, 513 Hay Street, Subiaco, Western Australia on Thursday, 29 September 2016 at 10.00am (WST) (Meeting).

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

The Directors have determined pursuant to regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Meeting are those who are registered as Shareholders of the Company on Tuesday 27 September 2016 at 10.00am (WST).

Terms and abbreviations used in the Notice are defined in Schedule 1.

AGENDA

1. Resolution 1 – Consolidation of capital (Recapitalisation Resolution)

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

"That, subject to the Recapitalisation Resolutions in this Notice being passed, and subject to the Company raising $2,000,000 pursuant to the Capital Raising, pursuant to section 254H of the Corporations Act and for all other purposes, the issued capital of the Company be consolidated on the basis that every 100 Shares be consolidated into 1 Share, and where this Consolidation results in a fraction of a Share being held, the Company be authorised to round that fraction up to the nearest whole Share."

2. Resolution 2 – Issue of Proponent Shares (Recapitalisation Resolution)

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

"That, subject to the Recapitalisation Resolutions in this Notice being passed, for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Company to issue 40,000,000 Shares (on a post-Consolidation basis) on the terms and conditions set out in the Explanatory Memorandum."

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

3. Resolution 3 – Issue of Compliance Advisor Shares (Recapitalisation Resolution)

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

"That, subject to the Recapitalisation Resolutions in this Notice being passed, for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Company to issue 10,000,000 Shares (on a post-Consolidation basis) on the terms and conditions set out in the Explanatory Memorandum."

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

4. Resolution 4 – Issue of General Placement Shares (Recapitalisation Resolution)

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

"That, subject to the Recapitalisation Resolutions in this Notice being passed, for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Company to issue 200,000,000 Shares (on a post-Consolidation basis) on the terms and conditions set out in the Explanatory Memorandum."

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

5. Resolution 5 – Issue of Loan Conversion Shares

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

"That, subject to the Recapitalisation Resolutions in this Notice being passed, for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Company to issue 20,000,000 Shares (on a post-Consolidation basis) on the terms and conditions set out in the Explanatory Memorandum."

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

6. Resolution 6 – Re-election of Director – Mr Richard Pearce (Recapitalisation Resolution)

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

"That, subject to the Recapitalisation Resolutions in this Notice being passed, for all purposes, Mr Richard Pearce, a Director who was appointed by the Administrator on 23 February 2015, retires, and being eligible, is elected as a Director."

7. Resolution 7 – Re-election of Director – Mr Shaun Hardcastle (Recapitalisation Resolution)

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

"That, subject to the Recapitalisation Resolutions in this Notice being passed, for all purposes, Mr Shaun Hardcastle, a Director who was appointed by the Administrator on 23 February 2015, retires, and being eligible, is elected as a Director."

8. Resolution 8 – Re-election of Director – Ms Oonagh Malone (Recapitalisation Resolution)

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

"That, subject to the Recapitalisation Resolutions in this Notice being passed, for all purposes, Ms Oonagh Malone, a Director who was appointed by the Administrator on 23 February 2015, retires, and being eligible, is elected as a Director."

9. Resolution 9 – Change of Company name

To consider and, if thought fit, to pass the following resolution as a special resolution:

"That, subject to all other Resolutions in this Notice being passed and subject to completion of the Recapitalisation, for the purposes of section 157(1)(a) of the Corporations Act and for all other purposes, approval is given for the name of the Company to be changed to 'Hawkstone Mining Limited'."

10. Resolution 10 – Replacement of constitution

To consider and, if thought fit, to pass the following resolution as a special resolution:

"That, for the purposes of section 136(2) of the Corporations Act and for all other purposes, approval is given for the Company to repeal its existing Constitution and adopt a new constitution in its place in the form as signed by the chairman of the Meeting for identification purposes."

BY ORDER OF THE BOARD

Oonagh Malone Company Secretary

Dated: 29 August 2016

ZYL Limited (Subject to Deed of Company Arrangement)

ACN 008 720 223

EXPLANATORY MEMORANDUM

1. Introduction

The Explanatory Memorandum has been prepared for the information of Shareholders in connection with the business to be conducted at the Meeting to be held at Suite 23, 513 Hay Street, Subiaco, Western Australia on Thursday, 29 September 2016 at 10.00am (WST).

The Explanatory Memorandum forms part of the Notice which should be read in its entirety. The Explanatory Memorandum contains the terms and conditions on which the Resolutions will be voted.

The Explanatory Memorandum includes the following information to assist Shareholders in deciding how to vote on the Resolutions:

Section 2:	Action to be taken by Shareholders
Section 3:	Overview
Section 4:	Resolution 1 –Consolidation of capital
Section 5:	Resolution 2 –Issue of Proponent Shares
Section 6:	Resolution 3 –Issue of Compliance Advisor Shares
Section 7:	Resolution 4 –Issue of General Placement Shares
Section 8:	Resolution5–Issue of Loan Conversion Shares
Section 9:	Resolutions 6-8 –Re-election of Directors
Section 10:	Resolution 9 –Change of Company name
Section 11:	Resolution 10 –Replacement of constitution
Schedule 1:	Definitions

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

2. Action to be taken by Shareholders

Shareholders should read the Notice including the Explanatory Memorandum carefully before deciding how to vote on the Resolutions.

2.1 Proxies

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

Please note that:

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

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

3. Overview

3.1 Background

The Company was incorporated on 1 May 1969 and admitted to the Official List of ASX on 8 July 1971. Its focus since completing a re-compliance listing in July 2011 has been on coal exploration and development in South Africa.

The Company's securities have been suspended from official quotation since 1 October 2013. The day before the Company's securities had been placed in trading halt pending an announcement of the outcome of negotiations to extend the repayment date of a bridging facility.

On 8 January 2015 the Company's former directors resolved to appoint Mr Jack James of Palisade Business Consulting as voluntary administrator of the Company (Administrator).

On the date of the appointment of the Administrator the Company's main assets comprised:

• (a) a 42.85% interest in the Kangwane Central Project; and
• (b) a 70% interest in the Kangwane South Project.

The Kangwane Central Project is an anthracite project located in South Africa's Mpumalanga province. A bankable feasibility study was completed on the project in the last quarter of 2012.

The Kangwane South Project (also known as the Southern Anthracite Project) is an anthracite project located approximately 100 kilometres from the coast to the Matola Terminal at Maputo Port in Mozambique and approximately 25 kilometres to the south of the Kangwane Central Project. For further information about the Kangwane South Project see Section 3.2.

A diagram of the corporate structure at the time of the Administrator's appointment is set out below:

On or about 8 October 2012, the Company granted security over all of its assets (Security) to Prestige Glory Limited (Prestige), in consideration for Prestige providing a $2 million bridging facility as part of a broader $18 million financing facility. Prestige is a Samoan incorporated entity. Its sole director is Mr Song Kun. Currently Prestige holds approximately 14.47% of the Company's fully paid ordinary shares.

On 1 February 2015 (post-appointment of the Administrator) the Company received a conditional binding offer from Centaur Asset Management Ltd (Centaur) for the purchase of Main Street 800 (Pty) Ltd (the entity holding the Kangwane Central Project) (MS800) for a total of up to ZAR 110 million.

Subsequently, in October 2015 MS800 received a conditional binding letter of offer from Centaur superseding the February 2015 letter. In the October 2015 letter, Centaur and its partner, UMS Resources (Pty) Ltd, offer to purchase the Kangwane Central Project for ZAR 120 million, payable to MS800 as follows:

• (a) (First Tranche) ZAR 45 million is payable upon fulfilment of the conditions precedent (set out below);
• (b) (Second Tranche) five annual payments of ZAR 15 million each (for a total of up to ZAR 75 million), with the first such payment being due on the earlier of:
  • (i) the third anniversary of the date of the formal sale agreement; or
  • (ii) 12 calendar months after the date on which the first off-take of coal mined at the Kangwane Central Project is received by an offtaker; or
  • (iii) 18 calendar months after the date on which the mining right for the Kangwane Central Project is executed;
• (c) the remaining four annual instalments of ZAR 15 million each are due on each anniversary of the Second Tranche,

(the Proposed Transaction).

The Proposed Transaction is subject to the following conditions (Conditions):

• (a) due diligence;
• (b) MS800 being granted a mining right;
• (c) obtaining various regulatory and third party consents or approvals; and
• (d) entry into formal agreements.

Centaur and UMS are both unrelated parties with no connection to the Company, Konkera or Prestige.

The Administrator has advised that:

• (a) Centaur has completed due diligence;
• (b) the parties are working towards fulfilment of the Conditions; and
• (c) formal transaction documents are yet to be executed.

3.2 Kangwane South Project

The Kangwane South Project (also known as the Southern Anthracite Project) is an anthracite project located approximately 100 kilometres from the coast to the Matola Terminal at Maputo Port in Mozambique and approximately 25 kilometres to the south of the Kangwane Central Project. The Company announced the acquisition of the Kangwane South Project on 28 July 2011.

The Kangwane South Project is the southernmost area of the Kangwane anthracite deposit, as depicted below.

The Kangwane South Project area falls between the Meloma coal mine in Swaziland and the Nkomati coal mine, also in the Mpumalanga province in South Africa.

The regional geology of the Kangwane South Project is shown on the map below.

The Karroo Super Group was deposited unconformably on the Achaean granite floor. The Karroo sediments found in the area are Dwyka, Middle Ecca, Upper Ecca and the Stormberg Group. The first three formations consist of sedimentary deposits, while the Stormberg Group consists of sedimentary and volcanic extrusions. Numerous faults and sills are present in the area.

The coal seams were deposited in the Middle Ecca. The sedimentary succession was followed by the extrusion of volcanics. Dolerite dykes and sills intruded at the time of the Stormberg volcanics. It is thought that these volcanics together with minor folding caused the devolatilisation of the coal.

The devolatilisation is not localised to areas near the volcanics but is regional and thus must also be due to the structural folding. The Middle Ecca is correlated with the Vryheid Formation. The Vryheid Formation is consideration to be of fluvial origin and consists predominantly of arenaceous sediments, namely, sandstones with subordinates grits, mudstones, shales and carbonaceous sediments which include coal seams. Pebble bands are locally developed while scattered grits occur frequently. The sandstones vary from fine grained to coarse grained. No clear marker beds are present.

There are four possible causes of the anthratisation of the coal: high geothermal gradient; intrusion of dolerite sills and dykes; formation and folding of the Lebombo monocline; and the intrusion of the Mananga granophyre.

The coal in the Kangwane South Project area is essentially a medium to high ash anthracite. Drilling of 50 boreholes was completed in 1982 by the Mining Corporation, and a further 49 holes were drilled in 1987, identifying a total of 14 coal seams. The coal seams were intersected at depths varying from 20 metres below surface to 400 metres below surface. Of these 14 seams 3 (seams 3, 5 and 6) were reported as having the potential to be mined. A map of the borehole positions is set out below.

During the period 2006 to 2011 Black Ginger 285 (Pty) Ltd acquired the prospecting right for Kangwane South. Various desk top studies were completed but none of the previous drilling and analyses was captured and used in the modelling of the resource. Ten new boreholes were drilled during 2009, but no geological report was issued.

Despite several announcements by the Company in 2011 and 2012 that it would undertake a drilling program on the Kangwane South Project, the existing board cannot locate any evidence of any such work being undertaken, largely due to the Company's focus being on larger projects at the time (namely the Mbila and Kangwane Central projects).

The Company previously reported an estimate of indicated and inferred resources under the JORC Code 2004 in December 2011, as set out below:

Kangwane South –Resource estimate	Mt
Total Measured Coal Resource	-
Total Indicated Coal Resource	73.9
Total Inferred Coal Resource	25.8
Total Resources	99.7

The information in this Notice that relates to exploration results and mineral resources for the Kangwane South Project is based on, and fairly represents, information compiled by Mr Dawie van Wyk and was first reported in December 2011 by the Company under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. Mr van Wyk is a member and fellow of the Geological Society of South Africa, a Recognised Overseas Professional Organisation. Mr van Wyk was a consultant to the Company. Mr van Wyk has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a competent person as defined in the 2004 edition of the JORC Code. Mr van Wyk consents to the inclusion in this Notice of the matters based on his information in the form and context in which they appear.

The existing board proposes to undertake a review of the historical data associated with the Kangwane South Project, and determine whether a resource estimate in accordance with the JORC Code 2012 can be estimated or whether further exploration is required.

In May 2013 the Company announced a mining right was granted for the Kangwane South Project to Altius Trading 404 (Pty) Ltd (an entity in which the Company has a 70% interest) (Altius). The Company announced the mining right would be issued following the submission of statutorily prescribed information required by the South African Department of Mineral Resources (DMR).

As at the date of this Notice:

• (a) despite the mining right having been granted, Altius cannot utilise the right until such time as the right is notarially executed. Under South African law no person may go onto the property the subject of the mining/prospecting right and commence with mining and/or prospecting activities without a validly granted and notarially executed mining/prospecting right;

• (b) the Company has received confirmation from the DMR that:

• (i) the mining right has been granted and expires on 27 May 2025; and

• (ii) permission to perform further exploration and engineering work in order to delineate mine design has been granted (once the mining right has been notarially executed); and

• (c) Altius is in discussions with the DMR to arrange for the notarial execution of the mining right. There is no specified time period for when a right must be executed in terms of the relevant South African mining law. The date on which a right is notarially executed is agreed to between the DMR and right holder and is not prescribed by law. Therefore, a right cannot be invalidated if it is not notarially executed within a specific time period.

Prior to recommencing planned activities at Kangwane South (see Sections 3.5 and 3.9) the Company must also first provide the DMR with a financial provision (equivalent of an environmental bond)(unless the DMR determines otherwise).

As at the date of this Notice, and based on the Company undertaking mining activities at Kangwane South, the financial provision has been set by the DMR at ZAR 5,574,974 (approximately $530,000) (Financial Provision). Given the Company's present circumstances, the Company has requested DMR execute the mining right and include a condition that (due to the nature of the Company's planned activities for the Kangwane South Project (see Sections 3.5 and 3.9)), payment of the full Financial Provision be made within 12 months of notarial execution of the mining right.

If this request is successful, the effect is that if the Financial Provision is not paid in full within 12 months of notarial execution, then the holder of the right is not compliant with the conditions of the right and the right may be set aside or withdrawn by the relevant authority at the DMR. As at the date of this Notice the Company continues to liaise with the DMR as to the formal execution of the mining right and the amount of Financial Provision.

If the DMR does not permit the payment of the Financial Provision to be deferred for 12 months, then the Company will seek to make full payment of the Financial Provision in order for the mining right to be notarially executed and become effective. The Company intends to raise sufficient funds to cover the full Financial Provision.

3.3 Konkera Recapitalisation Proposal

A recapitalisation proposal typically involves an injection of new cash into a company that is either in financial distress or has been placed into voluntary administration. In the ordinary course, the entity will retain some or all of its assets and seek reinstatement to trading following completion of the recapitalisation.

At a creditors' meeting on 13 February 2015 it was resolved the Company execute a deed of company arrangement. On 19 February 2015 the Company, Konkera, the Administrator and Prestige executed a deed of company arrangement (DOCA), which embodied a proposal by Konkera for the recapitalisation of the Company (Recapitalisation Proposal).

If the Recapitalisation Proposal is approved and the DOCA completes, all claims of creditors against the Company will be extinguished, discharged and released.

A summary of the material terms of the Recapitalisation Proposal is set out below:

• (a) the assets of the Company (other than the Kangwane South Project which shall remain with the Company) will be transferred to either the Secured Creditor's Trust or the Unsecured Creditors' Trust, with the Administrator acting as trustee of both trusts;

• (b) the Secured Creditor's Trust will be comprised of the Company's shares in Exsteen Pty Ltd (Sale Assets). Exsteen Pty Ltd holds shares in entities that ultimately have an interest in the Kangwane Central Project, for which that project's holder, MS800, has received the conditional binding letter of offer from Centaur (see Section 3.1);

• (c) in consideration for the transfer of the Sale Assets to the Secured Creditor's Trust, Prestige shall release and discharge the Security over the Company (and any other entities associated with the Kangwane South Project). The Security over the assets and entities associated with the Kangwane Central Project remains until those assets are sold;

• (d) Prestige and the trustee will use their best endeavours to complete the Proposed Transaction (or any other transaction acceptable to the Secured Creditor) within 6 months of completion of the DOCA. Upon completion occurring the sale proceeds will be distributed as follows:

  • (i) first, payment of any outstanding administration, DOCA and trustee liabilities, claims, costs, expenses and outstanding administrator, deed administrator and trustee remuneration;
  • (ii) second, approximately $2.4 million to be distributed to Prestige (or such other amount representing the secured amount owed (including interest and fees) to Prestige); and
  • (iii) third, the remaining portion of consideration (if any) to be distributed to unsecured creditors;

• (e) where the Proposed Transaction is not completed within 6 months of completion of the DOCA, then the Sale Assets will be transferred to Prestige in full and final satisfaction its claim;

• (f) Prestige agrees to meet the trustee's costs in administering the Secured Creditor's Trust, such funds being recoverable from the proceeds of the Proposed Transaction;

• (g) Prestige will be a party to the DOCA in order to consummate the transfer of the Sale Assets and release of the Security described above;

• (h) the unsecured creditors of the Company will be required to prove their claims against the Unsecured Creditors' Trust. In certain circumstances, namely where surplus funds are available pursuant to Secured Creditor's Trust following satisfaction of the debt owing to Prestige, unsecured creditors may have an entitlement to also prove their claims against Secured Creditor's Trust;

• (i) the consideration payable by the Proponent, for distribution to unsecured creditors in full and final satisfaction of all unsecured creditor claims consists of:

  • (i) a payment of $40,000 which was paid upon execution of the DOCA (non-refundable);
  • (ii) a residual payment of $160,000 upon completion of the recapitalisation (Proponent Payment);

• (j) on receipt of a written request from the Proponent, the Administrator will do those things necessary to:

  • (i) resolve to appoint persons nominated by the Proponent as directors to the Company; and
  • (ii) remove the incumbent directors of the Company;

• (k) the Company undertaking the Consolidation;

• (l) the Proponent will complete a capital raising by the Company of up to $1,250,000 by way of a firm placement and/or underwritten rights issue (or such greater amount as required to satisfy ASX's conditions for reinstatement) (Capital Raising) (the Capital Raising is the subject of Resolution 4). In order to satisfy ASX's conditions for reinstatement, the Capital Raising will be for an amount of $2,000,000; and

• (m) upon completion of the Capital Raising, the Company will:

  • (i) issue 10,000,000 post-Consolidation shares in the Company to a compliance manager (or its nominees) appointed by the Proponent (this issue being the subject of Resolution 3);
  • (ii) issue 40,000,000 post-Consolidation shares in the Company to the Proponent (or its nominees) (this issue being the subject of Resolution 2).

Key conditions precedent for completion of the DOCA include:

• (a) the Proponent being satisfied that the effect of the DOCA and the trust deeds, is to extinguish all claims against the Company as at the completion date;

• (b) the Proponent receiving a reinstatement conditions letter from the ASX, confirming quotation of the shares in the Company will be reinstated on the ASX after the relevant conditions are satisfied, without the need for the Company to meet the requirements of chapters 1 and 2 of the Listing Rules (as at the date of this Notice this condition has been satisfied);

• (c) security over the Kangwane South Project or registered against the Company being discharged and/or released, including the Security and any other security interest;

• (d) the Security being replaced or amended so that Prestige has security over the Sale Assets (including Exsteen) in a form reasonably acceptable to Prestige and the Administrator;

• (e) transfer of the Sale Assets by the Company to the Secured Creditor's Trust, as at completion of the DOCA;

• (f) if legal title of the Sale Assets cannot be transferred due to a delay in obtaining regulatory approval (including Ministerial consent for the transfer in accordance with South African law), entry into a bare trust deed which shall provide that the Company will hold the Sale Assets without any beneficial interest in them and without any further duty to perform, except to convey the Sale Assets to the Trustee of the Secured Creditor's Trust;

• (g) payment of the Proponent Payment;

• (h) the Company raising no less than $1,250,000 pursuant to the Capital Raising (noting however the Company has determined it requires $2,000,000 to meet ASX's conditions);

• (i) all subsidiaries being excised from the Company, other than those who hold interests in the Kangwane South Project; and

• (j) shareholder approval being obtained to give effect to the Recapitalisation Proposal.

For the avoidance of doubt, upon completion of the DOCA no security will exist over the Company or its retained asset, the Kangwane South Project.

The conditions precedent must be satisfied by 19 February 2017, or such later date as may be agreed in writing between the Administrator and Proponent, acting reasonably.

From execution of the DOCA, control of the Company reverted to the officers of the Company.

3.4 Material contracts

Creditors' Trust Deeds

A creditors' trust is a mechanism used to accelerate a company's exit from external administration. Under the terms of a deed of company arrangement, a trust or trusts are created and the company's obligations to creditors which are bound by the deed of company arrangement are then compromised and transferred to the trust/s. Creditors become beneficiaries of the trust/s. The purpose of the trust/s is to deal with the debts and claims against the Company that, but for the release of claims under the deed of company arrangement, would have been payable by the Company.

The deed of company arrangement terminates upon creation of the trust/s. When the deed of company arrangement terminates, the company ceases to be externally administered and the directors regain full control of the company.

The DOCA provides for the creation of two separate creditors' trusts which the assets of the Company (other than the Kangwane South Project) will be transferred and realised in satisfaction of creditors' claims.

The Sale Assets will comprise the assets of the Secured Creditor's Trust. As discussed in section 3.1, post-appointment of the Administrator MS800 received a conditional binding offer from Centaur for the purchase of the Kangwane Central Project for a total of up to ZAR 120 million. The Company is the ultimate holder of a 42.85% interest in MS800.

Under the terms of the DOCA and the Secured Creditor's Trust deed, the Trustee of the Secured Creditor's Trust and Prestige must use their best efforts to consummate the Proposed Transaction (or any other transaction acceptable to Prestige) within six months of completion of the DOCA. Should the Sale Assets be realised, the sale proceeds are to be distributed by the Trustee first, to satisfy the Administrator's and Trustee's costs in administering the DOCA and the Secured Creditor's Trust, next to satisfy any outstanding employee entitlements, next to Prestige to the extent of the secured amount owed (which at the date of this Notice was approximately $2.4 million) and, next (if there are funds available) to unsecured creditors of the Company who have had their claims accepted by the Administrator or Trustee for the balance of an accepted claim for which a payment was received under the Unsecured Creditors' Trust, rateably.

If the Proposed Transaction or any other transaction acceptable to Prestige realising the Sale Assets is not completed within six months of completion of the DOCA (or such other time as agreed between the Trustee and Prestige) the Sale Assets are to be transferred to Prestige in full and final satisfaction of Prestige's claim.

As at the date of the Notice, due diligence for the Proposed Transaction is complete and the parties are working towards fulfilment of the Conditions.

The assets of the Unsecured Creditors' Trust will comprise the deposit of $40,000 already paid by the Proponent, the Proponent Payment of $160,000 and any remaining assets of the Company that are realised by the Administrator or Trustee. Distribution of the fund by the Trustee is first, to satisfy the Administrator's and Trustee's costs in administering the DOCA and the Unsecured Creditors' Trust, next to satisfy any outstanding employee entitlements, and next to unsecured creditors of the Company who have had their claims accepted by the Administrator or Trustee, rateably.

3.5 Capital raising and use of funds

The Company will, following all Resolutions being passed, offer the Proponent Shares and General Placement Shares to raise $2,080,000. The funds raised will enable the recapitalisation of the Company to be completed and enable the Company to meet its initial objectives and proposed expenditure plans.

The purpose of the Capital Raising is to:

• (a) provide funds to develop the Company's Kangwane South Project;

• (b) provide funds to cover the financial provision required by the DMR;

• (c) provide funds for the identification, acquisition and development of other value-creating investments; and

• (d) meet the costs of the recapitalisation and general administration costs of the Company.

The Company will lodge a transaction specific prospectus for the offer of the Proponent Shares, Compliance Advisor Shares and General Placement Shares.

The Company's expenditure plans are the best estimates available to the Company at this time. It is important to recognise that although certain parts of the budget allocations are committed expenditures, work programs are subject to changes in line with emerging results, circumstances and opportunities.

An indicative two year expenditure budget for the funds raised is set out below:

Description	Amount
Costs of recapitalisation process		$250,000
Unsecured creditors'trust payment(Proponent Payment)		$160,000
Review and development of Kangwane South Projectincluding:
Review resource estimate; convert to JORC 2012	$57,500
Coal marketing and infrastructure study	$30,500
Review mine plan, surface infrastructure andcoalwashing plant	$100,000
Extensional resource drilling and model update	$412,000
Sub-Total Existing Project		$600,000
Financial Provision (required byDepartment of MineralResources (South Africa))		$550,000
Review of new projects and/or opportunities		$200,000
Working capital		$320,000
Total		$2,080,000

3.6 Indicative capital structure

The current capital structure of the Company is as follows:

Security description	Number
Fully paid ordinary shares	612,747,560

Upon completion of the Recapitalisation Proposal (including the Consolidation), the Company's indicative capital structure will be as follows:

Security description	Number	%
	($2.0m raised)
Existing fully paid ordinary shares(post-Consolidation and subject to rounding)	6,127,476	2.2
Proponent Shares (Resolution 2)	40,000,000	14.5
Compliance Advisor Shares (Resolution 3)	10,000,000	3.6
General Placement Shares (Resolution 4)	200,000,000	72.4
Loan Conversion Shares (Resolution5)	20,000,000	7.2
Total Shares	276,127,476	100

No party, alone or by association, will have a relevant interest of more than 20% of the voting power of the Company upon reinstatement.

3.7 Pro-forma balance sheet

An un-audited pro-forma balance sheet of the Company following completion of the recapitalisation is set out in Schedule 2.

3.8 New directors

As noted above, it was a term of the DOCA that the existing directors are removed and nominees of the Proponent be appointed to the Board. Accordingly, on 23 February 2015 the Administrator removed the incumbent directors Mr Yuzheng Xie and Mr Stephen Woods and appointed Mr Richard Pearce, Mr Shaun Hardcastle and Ms Oonagh Malone as directors of the Company. Ms Malone was also appointed as company secretary.

Information about the background and experience of the new directors is set out below:

Mr Richard Pearce (non-executive director)

Mr Pearce is an experienced professional in mining and mining technology industries, and in the agricultural sector.

His experience in the mining industry spans the value chain, including board directorships, exploration, operation management, mining finance, M&A, business strategy and operational improvement. With a career of over 20 years, Mr Pearce has worked in multiple commodities and geographies, including iron ore, coal, uranium, mineral sands, gold and copper, in Europe, the Middle East, North and South America, South East Asia, New Zealand and Australia.

This experience has been gained working for global mining and technology companies, junior exploration and development companies and private investment companies.

Beyond mining, Mr Pearce has been an executive and main board director of one of Australia's largest private agricultural groups for over five years. His experience has comprised working on group structuring, finance, M&A and business strategy, supporting the domestic and international operations and expansion of the group.

Mr Pearce was previously a director of Nova Energy Limited (now Toro Energy Limited) and Wildhorse Energy Limited.

Mr Pearce holds an MBA, Bachelor of Science (Hons), Diploma in Mining Finance, Diploma in Geostatistics and is a Member of the Australian Institute of Company Directors.

Mr Pearce does not have an interest in any Shares of the Company.

Mr Shaun Hardcastle (non-executive director)

Mr Hardcastle is a resources lawyer with experience on a broad range of crossborder and domestic transactions including asset/equity sales and acquisitions, joint ventures, corporate restructuring, and project finance. He has worked both domestically and internationally for top-tier law firms, and spent time as in-house counsel for a major international oil and gas company.

Mr Hardcastle holds a Bachelor of Laws

Mr Hardcastle does not have an interest in any Shares of the Company.

Ms Oonagh Malone (non-executive director and company secretary)

Ms Malone is a member of the Governance Institute of Australia and principal of a corporate advisory firm which provides company secretarial and administration services. She currently acts as company secretary for ASX-listed Attila Resources Limited, Boss Resources Limited and Carbine Resources Limited.

Ms Malone does not have an interest in any Shares of the Company.

3.9 Corporate structure and strategy

Post-completion of the recapitalisation the Company's corporate structure will be as follows:

Upon reinstatement of its securities to quotation on ASX, the Company proposes to undertake a review of the existing resource estimate and historical data for the Kangwane South Project. The Company considers the estimate requires review given it was prepared under the JORC Code 2004 and the existing board is unable to verify its accuracy based on the information available to it to date (see Section 3.2). Following the review, the Company will look to convert the existing estimate so that it is compliant with the JORC Code 2012. Coal marketing and infrastructure studies are also planned, and depending on the outcome of the results, the Company will undertake a drilling program.

In addition, the new Board will also seek and review new projects and/or business opportunities that will generate additional shareholder value. Shareholders should note that should the Company acquire a new project and/or business that there is a risk that the Company may need to re-comply with Chapters 1 and 2 of the Listing Rules. At the present time there are no new projects and/or business opportunities under review.

3.10 Indicative timetable

An indicative timetable for the completion of the Recapitalisation Proposal is set out below.

Event	Date
Dispatch notice of meeting	29 August2016
General meeting	29 September2016
Lodge prospectus for Capital Raising	29September2016
Prospectus offer opens	30September 2016
Prospectus offer closes	21October2016
CompleteCapitalRaising(dispatchholdingstatements)	28October 2016
Complete DOCA	4November2016
Satisfy ASX conditions	11 November2016
Reinstatement	18 November2016

*The Directors reserve the right to change the above indicative timetable without requiring any disclosure to shareholders.

3.11 Reinstatement to official quotation

The Company's securities have been suspended from official quotation since 1 October 2013.

The Company has received a letter from ASX confirming that it sees no reason why the Company's securities should not be reinstated to official quotation conditional on completion of the following material conditions:

• (a) confirmation that the DOCA has been fully effectuated;

• (b) the Company's shareholders approving all resolutions the subject of this Notice;

• (c) completion of the Consolidation;

• (d) confirmation that the Company has retained its interest in the Kangwane South Project and the tenements comprising the Kangwane South Project are in good standing;

• (e) confirmation the Security has been released and discharged and there are no outstanding security interests over the Company's interest in the Kangwane South Project;

• (f) compliance with ASX Listing Rules 12.1 to 12.4, including:

• (i) the Company's business objectives meeting ASX Listing Rule 12.1;

• (ii) confirmation of completion of the Capital Raising and that, after payment of the costs of the capital raising (if any) and payments to the deed administrators to satisfy obligations under the DOCA, the Company can demonstrate to ASX that it will have a minimum of $1,000,000 in cash, net of all liabilities, at the date of reinstatement, to satisfy ASX Listing Rule 12.2;

• (iii) the Company's demonstrating to ASX that is has at least 300 Shareholders each holding at least $500 worth of fully paid ordinary shares;

• (g) lodgement of any outstanding financial reports.

The Company has until 30 September 2016 to meet the ASX conditions.

Pursuant to Guidance Note 33 to the ASX Listing Rules, any company that has been in continuous suspension for three years will be automatically delisted on the three year anniversary of their suspension. Accordingly, the Company has until 30 September 2016 to implement a transaction that will result in the resumption of trading in its securities before it will be automatically removed from the Official List.

Pursuant to Guidance Note 33, ASX may agree to a short extension of this deadline if the Company can demonstrate to ASX's satisfaction that it is in the final stages of implementing a transaction that will lead to the resumption of trading in its securities within a reasonable period. For these purposes, ASX defines "final stages" as:

• (a) having announced the transaction to the market;
• (b) having signed definitive legal agreements for the transaction (including any financing required in respect of the transaction);
• (c) if the transaction requires a prospectus or product disclosure statement to be lodged with ASIC, having lodged that document with ASIC; and
• (d) if the transaction requires security holder approval, having obtained that approval.

The Company will apply to ASX for an extension to the de-listing deadline once the above Guidance Note 33 conditions have been met (expected to be on the day of the meeting), and will also request an extension to meeting the ASX conditions.

There is no guarantee that an extension will be granted. In the event an extension is not granted and the Company is removed from the Official List, then it is likely that the Company will not be able to complete the Recapitalisation Proposal. If that occurs, the DOCA will likely be terminated and the Administrator will, in the absence of any other deed of company arrangement proposal or a variation to the terms of the DOCA, have no other option but to recommend to creditors that the Company be put into liquidation. In those circumstances, it is unlikely that there will be any return to Shareholders

3.12 Effect of the Recapitalisation Proposal

For the purposes of this Explanatory Memorandum, the information below is provided for the consideration of Shareholders.

The Company's shares were last traded on ASX on 27 September 2013 and the Administrator was appointed on 8 January 2015. Accordingly, historic ASX share trading prices for the Company are not considered a reliable basis to assess the value of the new Shares.

Due to the Company's current state of affairs, the lack of profit history and the immediate lack of a reliable future cash flow from remaining assets, maintainable earnings are not considered a reliable basis to assess the value of the Company's shares.

The Administrator estimates that, on a liquidation basis, there is a deficiency of funds and the creditors may receive a nil return if the Recapitalisation Proposal does not proceed (and no alternative proposal is received or the DOCA varied). Therefore, on a liquidation basis, the Shareholders' return from the Company is most likely to be nil. Accordingly, the current implicit value of the Company's shares as at the date of this Notice is nil.

The advantages of passing the Resolutions and subsequent completion of the Recapitalisation Proposal include:

• (a) a cash injection of $2,080,000;
• (b) the provable debts of the Company to its creditors being forgiven. This will leave the Company with minimal liabilities, compared with the Company's current position under which it is in a net liability position;
• (c) the Company's ability to seek reinstatement of its shares to quotation on ASX being enhanced. By obtaining reinstatement to trading Shareholders are offered liquidity to sell their post-Consolidation shareholdings on the ASX.

The principal disadvantage of the Recapitalisation Proposal is that existing Shareholders will have their holdings diluted following the Consolidation on a 100 for 1 basis and the issue of the Proponent Shares, Compliance Advisor Shares, General Placement Shares and Loan Conversion Shares pursuant to Resolutions 2 to 5. However, this must be balanced with the fact that the existing Shares currently have nil value and, should the Recapitalisation Proposal not proceed, the Company may be placed into liquidation. Following completion of the Recapitalisation Proposal, the existing Shareholders' reduced holdings will have value based on the cash injection to the Company and return to liquidity through reinstatement of the Company's shares to trading on ASX.

If Shareholders do not approve the Recapitalisation Proposal, then the Administrator will, in the absence of any other deed of company arrangement proposal or a variation to the terms of the DOCA, have no other option but to recommend to creditors that the Company be put into liquidation.

4. Resolution 1 – Consolidation of capital

4.1 Legal requirements

Section 254H of the Corporations Act provides that a company may, by resolution passed in a general meeting, convert all or any of its shares into a larger or smaller number.

4.2 Fractional entitlements

Not all security holders will hold that number of Shares which can be evenly divided by 100. Where a fractional entitlement occurs, the Company will round that fraction up to the nearest whole security.

4.3 Taxation

It is not considered that any taxation implications will exist for security holders arising from the Consolidation. However, security holders are advised to seek their own tax advice on the effect of the Consolidation and neither the Company, nor the Deed Administrator (nor the Deed Administrator's advisers) accept any responsibility for the individual taxation implications arising from the Consolidation.

4.4 Holding statements

From the date of the Consolidation, all holding statements for securities will cease to have any effect, except as evidence of entitlement to a certain number of securities on a post-Consolidation basis.

After the Consolidation becomes effective, the Company will arrange for new holding statements for securities to be issued to holders of those securities.

It is the responsibility of each security holder to check the number of securities held prior to disposal or exercise (as the case may be).

4.5 Effect on capital structure

The approximate effect which the Consolidation will have on the Company's current capital structure is set out in the table below. All numbers are subject to rounding. A table of the indicative capital structure of the Company post-completion of the Recapitalisation Proposal is set out in section 3.6 of this Explanatory Memorandum.

Security	Current	Post-Consolidation
Fully paid ordinary shares	612,747,560	6,127,476

4.6 Consolidation timetable

If Resolution 1 is passed, the Consolidation will only take effect if the Company raises a minimum of $2,000,000 pursuant to the Capital Raising. The Company will release a timetable in accordance with the ASX Listing Rules following satisfaction of this condition.

5. Resolution 2 – Issue of Proponent Shares

5.1 General

Resolution 2 seeks Shareholder approval for the issue (on a post-Consolidation basis) of up to 40,000,000 Shares at an issue price of $0.002 per Share to raise up to $80,000 (Proponent Shares). It is subject to all Resolutions being passed by Shareholders.

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

The effect of Resolution 2 will be to allow the Company to issue the Proponent Shares pursuant during the period of 3 months after the Meeting (or a longer period, if allowed by ASX), without using the Company's 15% annual placement capacity.

5.2 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 issue of the Proponent Shares:

• (a) the maximum number of Proponent Shares to be issued is 40,000,000;
• (b) the Proponent 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 Proponent Shares will occur on the same date;
• (c) the issue price will be $0.002 per Proponent Share;
• (d) the Proponent Shares will be issued to the Proponent and its nominees. None of these subscribers are related parties of the Company. Further, no party, alone or by association, will have a relevant interest of more than 20% of the voting power of the Company;
• (e) the Proponent 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 issue of the Proponent Shares as described in the use of funds table in section 3.5 of the Explanatory Memorandum.

6. Resolution 3 – Issue of Compliance Advisor Shares

6.1 General

Resolution 3 seeks Shareholder approval for the issue (on a post-Consolidation basis) of up to 10,000,000 Shares (Compliance Advisor Shares). It is subject to all Resolutions being passed by Shareholders.

A summary of ASX Listing Rule 7.1 is set out in section 5.1 above.

6.2 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 issue of the Compliance Advisor Shares:

• (a) the maximum number of Compliance Advisor Shares to be issued is 10,000,000;
• (b) the Compliance Advisor 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 Compliance Advisor Shares will occur on the same date;
• (c) the Compliance Advisor Shares will be issued for nil cash consideration;
• (d) the Compliance Advisor Shares will be issued to the Proponent and its nominees. None of these subscribers are related parties of the Company;
• (e) the Compliance Advisor 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) no funds are being raised from the issue of the Compliance Advisor Shares.

7. Resolution 4 – Issue of General Placement Shares

7.1 General

Resolution 4 seeks Shareholder approval for the issue (on a post-Consolidation basis) of up to 200,000,000 Shares at an issue price of $0.01 per Share to raise up to $2,000,000 (General Placement Shares). It is subject to all Resolutions being passed by Shareholders.

A summary of ASX Listing Rule 7.1 is set out in section 5.1 above.

7.2 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 issue of the General Placement Shares:

• (a) the maximum number of General Placement Shares to be issued is 200,000,000;

• (b) the General Placement 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 General Placement Shares will occur on the same date;

• (c) the issue price will be $0.01 per General Placement Share;

• (d) the General Placement Shares will be issued to those subscribers (or their nominees) invited by the Proponent to subscribe for General Placement Shares. None of these subscribers are related parties of the Company;

• (e) the General Placement 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 issue of the General Placement Shares as described in the use of funds table in section 3.5 of the Explanatory Memorandum.

8. Resolution 5 – Issue of Loan Conversion Shares

8.1 General

The Company will enter into loan agreements with unrelated parties to borrow an aggregate amount of $100,000 to assist with covering the Company's costs of the Recapitalisation (Loans).

Resolution 5 seeks Shareholder approval for the issue (on a post-Consolidation basis) of up to 20,000,000 Shares at an issue price of $0.005 per Share as consideration for the repayment of the Loans (Loan Conversion Shares). It is subject to all Resolutions being passed by Shareholders.

A summary of ASX Listing Rule 7.1 is set out in section 5.1 above.

This Resolution is not part of the Recapitalisation Proposal, and is not a condition precedent to the completion of the DOCA. If this Resolution is not passed, the DOCA can still complete and the Company will still be able to proceed with the Recapitalisation Proposal.

Under the DOCA, Konkera is required to initially cover the costs of the Recapitalisation Proposal, and the Company is required to reimburse Konkera out of the funds raised through the issue of General Placement Shares under Resolution 4. The funds raised through the Loans on the basis of this Resolution would therefore be an additional source of funding for the Recapitalisation Proposal not required under the DOCA.

8.2 Technical information required by ASX Listing Rule 7.1

Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to the issue of the Loan Conversion Shares:

• (a) the maximum number of Loan Conversion Shares to be issued is 20,000,000;

• (b) the Loan Conversion 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 Loan Conversion Shares will occur on the same date;

• (c) the issue price will be $0.005 per Loan Conversion Share;

• (d) the Loan Conversion Shares will be issued as consideration for the repayment of the Loans and will be issued to the loan lenders (or their nominees). None of these subscribers are related parties of the Company;

• (e) the Loan Conversion 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) no funds will be raised from the issue of the Loan Conversion Shares as the Loan Conversion Shares are issued in consideration for the repayment of loans made to the Company.

9. Resolutions 6-8 – Re-election of Directors

In accordance with the terms of the DOCA, on 23 February 2015 the Administrator appointed Mr Richard Pearce, Mr Shaun Hardcastle and Ms Oonagh Malone as directors of the Company (New Directors) and removed the incumbent directors Mr Stephen Woods and Mr Yuzheng Xie.

Resolutions 6 to 8 seek approval for the re-election of the New Directors. Resolutions 6 to 8 are subject to all Resolutions being approved by Shareholders.

A summary of the background and experience of the New Directors is set out in section 3.8 of the Explanatory Memorandum.

10. Resolution 9 – Change of Company name

Section 157(1)(a) of the Corporations Act provides that a company may change its name if the company passes a special resolution adopting a new name.

Resolution 9 seeks the approval of Shareholders for the Company to change its name to 'Hawkstone Mining Limited'.

If Resolution 9 is passed the change of name will take effect when ASIC alters the details of the Company's registration.

11. Resolution 10 – Replacement of constitution

11.1 General

A company may modify or repeal its constitution or a provision of its constitution by special resolution of Shareholders.

Resolution 10 is a special resolution which will enable the Company to repeal its existing Constitution and adopt a new constitution (Proposed Constitution) which is of the type required for a listed public company limited by shares updated to ensure it reflects the current provisions of the Corporations Act and ASX Listing Rules.

This will incorporate amendments to the Corporations Act and ASX Listing Rules since the current Constitution was adopted in 2002.

The Directors believe that it is preferable in the circumstances to replace the existing Constitution with the Proposed Constitution rather than to amend a multitude of specific provisions.

The Proposed Constitution is broadly consistent with the provisions of the existing Constitution. Many of the proposed changes are administrative or minor in nature including but not limited to:

• (a) updating the name of the Company to that to be adopted at the meeting;
• (b) updating references to bodies or legislation which have been renamed (e.g. references to the Australian Settlement and Transfer Corporation Pty Ltd, ASTC Settlement Rules and ASTC Transfer); and
• (c) expressly providing for statutory rights by mirroring these rights in provisions of the Proposed Constitution.

The Directors believe these amendments are not material nor will they have any significant impact on Shareholders. It is not practicable to list all of the changes to the Constitution in detail in this Explanatory Memorandum, however, a summary of the proposed material changes is set out below.

A copy of the Proposed Constitution is available for review by Shareholders at the office of the Company. A copy of the Proposed Constitution can also be sent to Shareholders upon request to the Company Secretary (+61 8 9317 9700). Shareholders are invited to contact the Company if they have any queries or concerns.

11.2 Summary of material proposed changes

(a) Minimum Shareholding (clause 181)

Clause 181 of the Constitution outlines how the Company can manage shareholdings which represent an "unmarketable parcel" of shares, being a shareholding that is less than $500 based on the closing price of the Company's Shares on ASX as at the relevant time.

The Proposed Constitution is in line with the requirements for dealing with "unmarketable parcels" outlined in the Corporations Act such that where the Company elects to undertake a sale of unmarketable parcels, the Company is only required to give one notice to holders of an unmarketable parcel to elect to retain their shareholding before the unmarketable parcel can be dealt with by the Company, saving time and administrative costs incurred by otherwise having to send out additional notices.

Schedule 4 of the Proposed Constitution continues to outline in detail the process that the Company must follow for dealing with unmarketable parcels.

(b) Fee for registration of off market transfers (clause 8.4(c))

On 24 January 2011, ASX amended ASX Listing Rule 8.14 with the effect that the Company may now charge a "reasonable fee" for registering paperbased transfers, sometimes referred to "off-market transfers".

Clause 4.6 of the Proposed Constitution is being made to enable the Company to charge a reasonable fee when it is required to register offmarket transfers from Shareholders. The fee is intended to represent the cost incurred by the Company in upgrading its fraud detection practices specific to off-market transfers.

Before charging any fee, the Company is required to notify ASX of the fee to be charged and provide sufficient information to enable ASX to assess the reasonableness of the proposed amount.

(c) Dividends (clause 21)

Section 254T of the Corporations Act was amended effective 28 June 2010.

There is now a three-tiered test that a company will need to satisfy before paying a dividend replacing the previous test that dividends may only be paid out of profits.

The amended requirements provide that a company must not a pay a dividend unless:

• (i) the company's assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend;
• (ii) the payment of the dividend is fair and reasonable to the company's shareholders as a whole; and
• (iii) the payment of the dividend does not materially prejudice the company's ability to pay its creditors.

The existing Constitution reflects the former profits test and restricts the dividends to be paid only out of the profits of the Company. The Proposed Constitution is updated to reflect the new requirements of the Corporations Act. The Directors consider it appropriate to update the Constitution for this amendment to allow more flexibility in the payment of dividends in the future should the Company be in a position to pay dividends.

(d) Partial (proportional) takeover provisions

A proportional takeover bid is a takeover bid where the offer made to each shareholder is only for a proportion of that shareholder's shares.

Pursuant to section 648G of the Corporations Act, the Company has included in the Proposed Constitution a provision whereby a proportional takeover bid for Shares may only proceed after the bid has been approved by a meeting of Shareholders held in accordance with the terms set out in the Corporations Act.

This clause of the Proposed Constitution will cease to have effect on the third anniversary of the date of the adoption of last renewal of the clause.

Information required by section 648G of the Corporations Act

Effect of proposed proportional takeover provisions

Where offers have been made under a proportional off-market bid in respect of a class of securities in a company, the registration of a transfer giving effect to a contract resulting from the acceptance of an offer made under such a proportional off-market bid is prohibited unless and until a resolution to approve the proportional off-market bid is passed.

Reasons for proportional takeover provisions

A proportional takeover bid may result in control of the Company changing without Shareholders having the opportunity to dispose of all their Shares. By making a partial bid, a bidder can obtain practical control of the Company by acquiring less than a majority interest. Shareholders are exposed to the risk of being left as a minority in the Company and the risk of the bidder being able to acquire control of the Company without payment of an adequate control premium. These amended provisions allow Shareholders to decide whether a proportional takeover bid is acceptable in principle, and assist in ensuring that any partial bid is appropriately priced.

Knowledge of any acquisition proposals

As at the date of this Notice, no Director is aware of any proposal by any person to acquire, or to increase the extent of, a substantial interest in the Company.

Potential advantages and disadvantages of proportional takeover provisions

The Directors consider that the proportional takeover provisions have no potential advantages or disadvantages for them and that they remain free to make a recommendation on whether an offer under a proportional takeover bid should be accepted.

The potential advantages of the proportional takeover provisions for Shareholders include:

• (i) the right to decide by majority vote whether an offer under a proportional takeover bid should proceed;
• (ii) assisting in preventing Shareholders from being locked in as a minority;
• (iii) increasing the bargaining power of Shareholders which may assist in ensuring that any proportional takeover bid is adequately priced; and
• (iv) each individual Shareholder may better assess the likely outcome of the proportional takeover bid by knowing the view of the majority of Shareholders which may assist in deciding whether to accept or reject an offer under the takeover bid.

The potential disadvantages of the proportional takeover provisions for Shareholders include:

• (i) proportional takeover bids may be discouraged;
• (ii) lost opportunity to sell a portion of their Shares at a premium; and
• (iii) the likelihood of a proportional takeover bid succeeding may be reduced.

Recommendation of the Board

The Directors do not believe the potential disadvantages outweigh the potential advantages of adopting the proportional takeover provisions and as a result consider that the proportional takeover provision in the Proposed Constitution is in the interest of Shareholders and unanimously recommend that Shareholders vote in favour of Resolution 10.

In the Notice, words importing the singular include the plural and vice versa.

Administrator means Mr Jack James of Palisade Business Consulting.

ASX means the ASX Limited ABN 98 008 624 691 and where the context permits the Australian Securities Exchange operated by ASX Limited.

Board means the board of Directors of the Company.

Capital Raising means the proposed raising of approximately $2,000,000.

Chairman means the person appointed to chair the Meeting of the Company convened by the Notice.

Company means ZYL Limited (Subject to Deed of Company Arrangement) ACN 008 720 223.

Compliance Advisor Shares means the Shares the subject of Resolution 3 to be issued to the Proponent or its nominees.

Consolidation means the proposed 100 for 1 consolidation of the Company's securities as set out in Resolution 1.

Corporations Act means the Corporations Act 2001 (Cth).

Deed Administrator means the Administrator, in his capacity as administrator of the DOCA.

Director means a director of the Company.

DOCA means the deed of company arrangement dated 19 February 2015 between the Company, the Administrator, the Proponent and Prestige.

Explanatory Memorandum means the explanatory memorandum which forms part of the Notice.

Financial Provision has the meaning in section 3.1 of the Explanatory Memorandum.

General Placement Shares has the meaning in section 7.1 of the Explanatory Memorandum.

Konkera or Proponent means Cranston and Sons Pty Ltd (ACN 057 245 345) trading as Konkera Corporate.

Listing Rules means the listing rules of ASX.

Meeting has the meaning given in the introductory paragraph of the Notice.

Notice means this notice of general meeting.

Option means an option which entitles the holder to subscribe for one Share.

Prestige means Prestige Glory Limited, a Samoan incorporated entity and the Company's secured creditor.

Proponent or Konkera means Cranston and Sons Pty Ltd (ACN 057 245 345) trading as Konkera Corporate.

Proponent Nominees means Konkera, any sophisticated or professional investors nominated by Konkera to receive Proponent Shares, Compliance Advisor Shares and General Placement Shares, and their associates.

Proponent Payment means $160,000.

Proponent Shares means the Shares the subject of Resolution 2 to be issued to the Proponent Nominees.

Proposed Transaction has the meaning given in section 3.1 of the Explanatory Memorandum.

Proxy Form means the proxy form attached to the Notice.

Recapitalisation Proposal means the proposal submitted by the Proponent to the Company to reconstruct and recapitalise the Company as described in section 3.3 of the Explanatory Memorandum.

Recapitalisation Resolutions means Resolutions 1 to 4 and Resolutions 6 to 8.

Resolution means a resolution referred to in the Notice.

Sale Assets has the meaning given in section 3.1 of the Explanatory Memorandum.

Schedule means a schedule to the Notice.

Section means a section of the Explanatory Memorandum.

Security has the meaning given in section 3.1 of the Explanatory Memorandum.

Secured Creditor's Trust means the trust established to hold and realise the Sale Assets for the benefit of Prestige.

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

Shareholder means a shareholder of the Company.

Trustee means Mr Jack James of Palisade Business Consulting, in his capacity of as trustee of the Secured Creditor's Trust or Unsecured Creditors' Trust, as the context requires.

Trading Day has the same meaning as in the Listing Rules.

Unsecured Creditors' Trust means the trust established for the benefit of the Company's unsecured creditors.

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

Schedule 2 – Un-audited pro-forma balance sheet

	Notes	Reviewed31December2015$	Unauditedmovementsto 30 June2016$	Unaudited30 June2016$	UnauditedPro FormaafterRecapitalisationProposal$
Current Assets
Cash and cash equivalents	2	6,045	(1,234)	4,811	1,774,811
Trade and other receivables		133,844	2,781	136,625	45,664
Total current assets		139,889	1,547	141,436	1,820,475
Non-current assets
Other financial assets	3	1,828,418	(i) 246,971	2,075,389	-
Exploration and evaluationexpenditure assets	4	536,480	-	536,480	536,480
Total non-current assets		2,364,898	246,971	2,611,869	536,480
TOTAL ASSETS		2,504,787	248,518	2,753,305	2,356,955
Current liabilities
Trade and other payables	5	753,560	58,622	812,182	273,445
Provisions		1,606	-	1,606	-
Borrowings	5	4,404,934	(ii) 315,802	4,720,736	98,000
Total current liabilities		5,160,100	374,424	5,534,524	371,445
TOTAL LIABILITIES		5,160,100	374,424	5,534,524	371,445
NET ASSETS		(2,655,313)	(125,906)	(2,781,219)	1,985,510
Equity
Contributed equity	6	55,729,051	-	55,729,051	57,793,586
Reserves	7	615,810	228,625	844,435	3,065,171
Accumulated losses	8	(59,000,174)	(324,531)	(59,354,705)	(58,873,247)
TOTAL EQUITY		(2,655,313)	(125,906)	(2,781,219)	1,985,510

(i) Foreign exchange movement on Other financial assets.

(ii) Movement in Borrowings includes $10,000 of new loan funds received and $305,802 of accrued interest on existing interest-bearing borrowings.

Notes:

The pro forma balance sheet is based on unaudited financial statements of the Company and controlled entities as at 30 June 2016. The controlled entities are as shown in section 3.1 before finalisation of the DOCA and as shown in section 3.9 subject to conclusion of the DOCA. The pro forma balance sheet is subject to finalisation of the DOCA and the Recapitalisation Proposals.

1. Incomplete Financial Information

Due to turnover of previous staff and officers, and the parent entity being subject to external administration, complete accounting records have not been able to be located. For the year ended 30 June 2013 and since, this has led to insufficient information being available to support several material contracts as well as transactions and balances of foreign subsidiaries.

The Directors are of the opinion that it is not possible to state that the unaudited 30 June 2016 balance sheet is prepared in accordance with the requirements of the Corporations Act 2001, due to the lack of records and certainty in connection with material transactions, for both the year ended 30 June 2013 and since then.

It is noted by the Directors that the intended sale of the Kangwane Central Project to satisfy the creditors' and Administrator's debts, along with the continued existence of the Kangwane South Project, means that while historical records are affected by incomplete financial information, the absence of these records is not expected to significantly detract from the Company's ability to maintain proper books and records for the period from 23 February 2015 for Australian entities, when current directors were appointed. Therefore, the absence of records due to turnover of previous staff and officers, unavailable documents of foreign subsidiaries, and the parent entity being subject to external administration, primarily affects the historical records of the economic entity rather than its ability to continue its retained business and operations. This uncertainty is mainly reflected in the unaudited pro forma balance sheet with the recognition of $128,993 in trade and other payables at 30 June 2016 by South African subsidiary ZYL Mining (SA) Pty Ltd.

• 1. Assuming:
  • a) Issue of 200,000,000 General Placement Shares at a price of $0.01 per share;
  • b) Issue of 40,000,000 Proponent Shares at a price of $0.002 each;
  • c) Costs of the recapitalisation process paid of $250,000, including capital raising costs of $115,465 and other expenses of $134,535;
  • d) Borrowing a further $100,000 that will be repaid through the issue of Loan Conversion Shares;
  • e) Payment of the Proponent payment of $160,000.
• 1. The balance of Other financial assets of $2,075,389 prior to the proposed transactions is the interest in the Kangwane Central Project before it is disposed to the Secured Creditor's trust or the Unsecured Creditors' trust.
• 1. The balance of exploration and evaluation expenditure assets of $536,480 is the interest in the Kangwane South Project which is to be retained.
• 1. Assuming:
  • a) Transfer of all liabilities of the Company that were incurred before execution of the DOCA to the Secured Creditor's Trust or the Unsecured Creditor's Trust;

• b) Recognition of $128,993 in trade and other payables at 30 June 2016 by South African subsidiary ZYL Mining (SA) Pty Ltd;

• c) No other liabilities of subsidiaries being payable.

• 1. Assuming:
  • a) Issue of 200,000,000 General Placement Shares at a price of $0.01 per share;
  • b) Issue of 40,000,000 Proponent Shares at a price of $0.002 each;
  • c) Costs of the recapitalisation process paid of $115,465;
  • d) Issue of 20,000,000 Loan Conversion Shares at a price of $0.005 per share. These have not been considered a compound financial instrument based on the nature of the transaction.

7) Assuming:

• a) Issue of 10,000,000 Compliance Adviser shares at a deemed value of $0.01 each. These are recognised as a share based payment in accordance with Australian accounting standards.
• b) Derecognition of foreign currency translation reserve balances for all disposed subsidiaries.
• 1. Includes:
  • a) Costs of the recapitalisation process paid of $134,535;
  • b) Payment of the Proponent payment of $160,000;
  • c) The net effect of the transfer of all liabilities and assets of the Company that arose before the execution of the DOCA, other than interests in the entities shown in section 3.8, to the Secured Creditor's trust or the Unsecured Creditors' trust;
  • d) Derecognition of accumulated losses for all disposed subsidiaries;
  • e) Issue of 10,000,000 Compliance Adviser shares at a deemed value of $0.01 each. These are recognised as a share based payment in accordance with Australian accounting standards.
• 1. Contingent liability:

As a condition of the granting of the Kangwane South mining right, an environmental bond of ZAR5,574,974 (approximately A$530,000) is required to be paid by the Group to the South African Department of Mineral Resources prior to the commencement of mining activities on the tenement. However, as the Group intends to undertake further exploration activities prior to any decision to mine, the environmental bond is not currently an asset or liability of the Group and, accordingly, no related liability has been included in the un-audited pro forma balance sheet shown at Schedule 2. This environmental commitment will only be recognisable as a liability in the Group's financial statements for accounting purposes once a decision to mine is made.