PRAIRIE LITHIUM LIMITED — Capital/Financing Update 2011

Jul 12, 2011

ZYL LIMITED

ACN 008 720 230

SUPPLEMENTARY PROSPECTUS

IMPORTANT INFORMATION

This Supplementary Prospectus is dated 13 July 2011 and is supplementary to the replacement prospectus dated 3 May 2011 (Prospectus) issued by ZYL Limited (ACN 008 720 230) (Company).

This Supplementary Prospectus was lodged with the Australian Securities and Investments Commission (ASIC) on 13 July 2011. The ASIC does not take any responsibility for the contents of this Supplementary Prospectus.

This Supplementary Prospectus must be read together with the Prospectus. If there is a conflict between the Prospectus and this Supplementary Prospectus, this Supplementary Prospectus will prevail. Terms and abbreviations defined in the Prospectus have the same meaning in this Supplementary Prospectus.

This Supplementary Prospectus will be issued with the Prospectus as an electronic prospectus and may be accessed on the internet at www.zyllimited.com.au.

This document is important and should be read in its entirety. Please consult your legal, financial or other professional adviser if you do not fully understand the contents.

Other than the changes set out below, all other details in relation to the Prospectus remain unchanged. The Directors believe that the changes in this Supplementary Prospectus are not materially adverse from the point of view of an investor.

Accordingly, no action needs to be taken if you have already subscribed for Shares under the Prospectus. A copy of this Supplementary Prospectus will be available on the Company's website and the Company will send a letter to all Applicants who have subscribed for Shares in the Prospectus to the date of this Supplementary Prospectus advising them of the Supplementary Prospectus.

ZYL LIMITED ACN 008 720 230

SUPPLEMENTARY PROSPECTUS

1. FIRST ADDENDUM TO CERTAIN DEFINITVE AGREEMENTS

On 2 June 2011, the Company, Siyanda, Exsteen, Main St 795, Main St 800, Double Ring and Opes Capital, as applicable, entered into addenda in respect of the Sale of prospecting Right Agreement, the Exsteen Subscription Agreement, the Call Option, Subscription and Shareholders' Agreement, Newco Subscription Agreement, the Newco Shareholders' Agreement, the ZYL Siyanda Loan Agreement, the ZYL Double Ring Loan Agreement and the Pledge of Shares Agreement (defined below) (First Addendum).

The First Addendum deletes the condition precedent in the above agreements which required the execution of the Community Subscription Agreement. Accordingly, all conditions precedent under the Definitive Agreements are now satisfied (see below).

The effect of removing this condition precedent is that the Community Trust will obtain an interest in Main St 800 at a later date.

2. SECOND ADDENDUM TO CERTAIN DEFINITIVE AGREEMENTS

On 7 July 2011, the Company, Siyanda, Exsteen, Main St 795, Main St 800, Double Ring and Opes Capital, as applicable, also entered into a second set of addenda in respect of each of the Exsteen Subscription Agreement, the Call Option, Subscription and Shareholders' Agreement, the Newco Subscription Agreement, the Newco Shareholders' Agreement, the BFS Loan Agreement and the Pledge of Shares Agreement (defined below) (Second Addendum).

The reason the Second Addendum has been entered into by the parties is that under Section 8E of the current South African Income Tax Act No. 58 of 1962 (Tax Act), preference shares which are redeemable within 3 years from the date of issue will constitute "hybrid equity instruments". This is proposed to be amended under the South African Taxation Laws Amendment Bill 2011 (TLAB), which will extend the 3 year period to 10 years and therefore causes the preference shares issued to Exsteen and Main St 795 to be "hybrid equity instruments".

Under Section 8E of the Tax Act, the holder of "hybrid equity instruments" is deemed to have received taxable interest income as opposed to an income tax exempt dividend and the issuer is still deemed to have declared a dividend. Furthermore, the dividends declared by the issuer will be subject to secondary tax on companies (STC) until 1 April 2012 and thereafter subject to the new dividend tax (unless any of the exemptions apply). If the TLAB is enacted the proposed amendments will cause Main St 795 to earn taxable income, and therefore Main St 795 will only have 72% (100% less 28% (i.e. the corporate tax rate)) of the previously anticipated dividend income to service the preference shares issued to Exsteen. In addition, if a dividend is declared before 1 April 2012 Main St 795 will also trigger an STC charge which means that a further 6.55% (72% x 10/110) of the income earned would need to be withheld to settle this charge.

The preference share dividend declared by Main St 795 will be deemed to be interest earned by Exsteen from a source in South Africa. There is an income tax exemption for foreigners earning "deemed interest" pursuant to holding "hybrid equity instruments". However, it is expected that this exemption will be removed upon the introduction of the proposed withholding tax on interest. The tax is expected to come into effect on 1 January 2013 as a final 10% interest withholding tax levied in South Africa. The Double Tax Agreements (DTAs) between South Africa and several countries currently reduce the rate of such withholding to 0%. However, all South Africa's DTA with tax havens and low tax jurisdictions will be renegotiated in order to allow South Africa to tax such interest at 10%. Main St 795 will also trigger STC upon dividends declared before 1 April 2012 and thereafter dividends will be subject to dividends tax. The Second Addendum causes the preference shares not to constitute "hybrid equity instruments" and ensures that the parties are returned to the same commercial position as envisaged prior to the TLAB being published (i.e. only being liable for STC / dividend tax on the preference share dividends declared).

The Second Addendum extends the time:

• (a) for the BFS Committee, amongst other things, to operate with appointees of ZYL and Siyanda instead of Main St 795 and Double Ring by 30 business days after all the Definitive Agreements become unconditional under the Newco Shareholders' Agreement;
• (b) for Main St 795 to: i) subscribe for deferred ordinary shares in Main St 800 from 5 to 30 business days after all the Definitive Agreements become unconditional; and ii) not have the right to redeem or re-purchase any Main St 795 "B" preference shares from before 3 years to 10 years, under the Newco Subscription Agreement;
• (c) for Main St 795 to: i) replace its articles to include the amendments under the Call Option, Subscription and Shareholders' Agreement from the date the Companies Act, 71 of 2008 (South Africa) has effect to as soon as reasonable possible; and ii) not have the right to redeem or repurchase any Main St 795 "A" preference shares from 3 years to 10 years, under the Call Option, Subscription and Shareholders' Agreement;
• (d) to complete the repayment of the BFS Loan by Siyanda to ZYL from 30 business days to 45 business days after all the Definitive Agreements become unconditional;
• (e) for the Pledge of Shares Agreement to have effect from the date on which Definitive Agreements become unconditional to 30 business days after this date.

In addition, the Second Addendum varies the terms of the Main St 800 "A" preferences shares such that a prior limit on paying a dividend equal to a maximum of 60% of the cash available for distribution to shareholders has been removed (meaning that up to 100% of the cash could be distributed to the holder of these shares). As Exsteen will be the only holder of these shares, this variation is to the benefit of the Company.

A similar change was also made to the Newco Shareholders' Agreement to remove a restriction that only allowed 60% of profit to be distributed to shareholders.

3. SECURITY OVER SHARES IN MAIN STREET 795 (PTY) LIMITED

On 8 December 2010, Exsteen, Siyanda and Main St 795 entered into Cession and Pledge of Shares Agreement (Pledge of Shares Agreement) whereby

This is a supplementary prospectus intended to be read with the replacement prospectus dated 3 May 2011 issued by ZYL Limited (ACN 008 720 230) 2

Exsteen has agreed to provide Siyanda with a share mortgage over its right, title and interest in all of the shares Exsteen will hold in Main St 795. The Pledge of Shares Agreement is subject to the Call Option, Subscription and Shareholders' Agreement becoming unconditional and will be discharged and released upon the earlier of: i) the obligations owed by Exsteen to Siyanda under the Call Option, Subscription and Shareholders' Agreement being discharged unconditionally and in full; or ii) the Call Option, Subscription and Shareholders' Agreement is terminated.

4. SATISFACTION OF CONDITIONS PRECEDENT TO DEFINITIVE AGREEMENTS

On 7 July 2011, the Company, Siyanda, Exsteen, Main St 795, Main St 800, Double Ring and Opes Capital entered into a Confirmation in Respect of Fulfilment of Conditions Precedent Agreement (CP Agreement). The CP Agreement provides written confirmation from each of the parties to the Definitive Agreements that the conditions precedent under each of the Definitive Agreements have been satisfied, including (without limitation):

• (a) the granting of Section 11 approval from the DME in South Africa for transfer of the Prospecting Right; and
• (b) the Exchange Control Department of the South African Reserve Bank approving the transactions contemplated by the Definitive Agreements.

5. REPAYMENT AND CAPITALISATION OF BFS LOAN

The Company is pleased to confirm that Exsteen has subscribed for 69,900 ordinary shares in Main St 795 and these funds have been used by Main St 795 to subscribe for 30,000 Main St 800 "A" deferred ordinary shares.

These shares subscriptions have settled the BFS Loan and result in Exsteen:

• (a) owning 100% of the outstanding ordinary shares in Main St 795; and
• (b) owning 46.15% of the issued shares in Main St 800. The Main St 800 "A" deferred ordinary shares owned by Exsteen have full voting rights (but no economic rights), but will only convert into ordinary shares with full economic rights on the conversion date (being the date that Main St 800 declares and pays a dividend of R60.5 million).

As at the date of this Supplementary Prospectus, the shares in each of Main St 795 and Main St 800 are held by the following parties:

• (a) Main St 795 69,901 ordinary shares held by Exsteen (for 100% of the issued shares); and
• (b) Main St 800:
  • (i) Siyanda 25,000 ordinary shares (38.46%);
  • (ii) Double Ring 10,000 ordinary shares (15.38%);
  • (iii) Opes 2,500 Main St 800 "B" preference shares (3.85%); and
  • (iv) Main St 795 30,000 Main St 800 "A" deferred ordinary shares (46.15%).

Exteen's interest (through Main St 795) has increased from 42.85% to 46.15% at this stage of the transaction due to the deferral of the issue of shares to the Community Trust.

Through the various equity injections that occur under the Definitive Agreements, Exteen's interest will increase to 60%, but will ultimately revert to an effective full economic interest (through Main St 795 and Main St 800) of 50.12% in the Kangwane Project.

The group structure diagram on page 24 of the Replacement Prospectus remains an accurate representation of the final structure.

6. CALL OPTION AGREEMENT

The Call Option Agreement with Opes Capital (Pty) Ltd summarised in clause 13.5 of the Replacement Prospectus has fallen away. There is no material impact on the transaction as a result.

7. DIRECTORS' AUTHORISATION

This Supplementary Prospectus is issued by the Company and its issue has been authorised by a resolution of the Directors.

In accordance with Section 720 of the Corporations Act, each Director has consented to the lodgement of this Supplementary Prospectus with the ASIC.