PRAIRIE LITHIUM LIMITED — Proxy Solicitation & Information Statement 2011

Aug 28, 2011

ZYL LIMITED

ACN 008 720 223

NOTICE OF GENERAL MEETING

TIME : 9.00 am (WST) DATE : 30 September 2011 PLACE : The Melbourne Hotel 942 Hay Street PERTH WA 6000

This Notice of Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their professional advisers prior to voting.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on (+61 8) 9486 4036.

CONTENTS PAGE

Notice of General Meeting (setting out the proposed resolutions)	3
Explanatory Statement (explaining the proposed resolutions)	5
Glossary	14
Schedule 1 – Terms and Conditions of Options	16
Schedule 2 – Terms and Conditions of Employee Share Plan	17
Proxy Form	20

TIME AND PLACE OF ME ETING AND HOW TO VOT E

VENUE

The general meeting of the Shareholders to which this Notice of Meeting relates will be held at 9.00 am (WST) on 30 September 2011 at:

The Melbourne Hotel 942 Hay Street PERTH WA 6000

YOUR VOTE IS IMPORTANT

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

VOTING IN PERSON

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

VOTING BY PROXY

To vote by proxy, please complete and sign the enclosed Proxy Form and return by:

• (a) post to ZYL Limited, PO Box 255, West Perth 6872; or

(b) facsimile to the Company on facsimile number (+61 8) 9486 4799,

so that it is received not later than 9.00 am (Perth time) on 28 September 2011.

Proxy Forms received later than this time will be invalid.

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NOTICE OF GENERAL MEETI NG

Notice is given that the general meeting of Shareholders will be held at 9.00 am (WST) on 30 September 2011 at The Melbourne Hotel, 942 Hay Street, Perth 6000.

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

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the General Meeting are those who are registered Shareholders of the Company at 9.00 am (Perth time) on 28 September 2011.

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

AGENDA

1. RESOLUTION 1 – RATIFICATION OF PRIOR ISSUE – OPTIONS

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

“That, for the purpose of ASX Listing Rule 7.4 and for all other purposes, Shareholders ratify the allotment and issue of 20,000,000 Options on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion: The Company will disregard any votes cast on this Resolution by a person who participated in the issue and any of their associates. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

2. RESOLUTION 2 – ISSUE OF SHARES TO DR ERIC LILFORD UNDER THE EMPLOYEE SHARE PLAN

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

“That, for the purposes of ASX Listing Rule 10.14, Section 208 of the Corporations Act 2001 and for all other purposes, approval is given for the Directors to issue and allot up to 8,750,000 Shares to Dr Eric Lilford or his nominee under the Employee Share Plan on the terms and conditions set out in the Explanatory Statement”.

Voting Exclusion : The Company will disregard any votes cast on this Resolution by all the Directors (except one who is ineligible to participate in the Employee Share Plan) and any of their associates. 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 SHARES TO MR BEVAN TARRATT UNDER THE EMPLOYEE SHARE PLAN

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

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“That, for the purposes of ASX Listing Rule 10.14, Section 208 of the Corporations Act 2001 and for all other purposes, approval is given for the Directors to issue and allot up to 3,250,000 Shares to Mr Bevan Tarratt or his nominee under the Employee Share Plan on the terms and conditions set out in the Explanatory Statement”.

Voting Exclusion : The Company will disregard any votes cast on this Resolution by all the Directors (except one who is ineligible to participate in the Employee Share Plan) and any of their associates. 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 SHARES TO MR DAVID GREENWOOD UNDER THE EMPLOYEE SHARE PLAN

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

“That, for the purposes of ASX Listing Rule 10.14, Section 208 of the Corporations Act 2001 and for all other purposes, approval is given for the Directors to issue and allot up to 1,000,000 Shares to Mr David Greenwood or his nominee under the Employee Share Plan on the terms and conditions set out in the Explanatory Statement”.

Voting Exclusion : The Company will disregard any votes cast on this Resolution by all the Directors (except one who is ineligible to participate in the Employee Share Plan) and any of their associates. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

DATED: 25 AUGUST 2011

BY ORDER OF THE BOARD

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NICHOLAS ONG COMPANY SECRETARY

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EXPLANATORY STATEMEN T

This Explanatory Statement has been prepared for the information of the Shareholders in connection with the business to be conducted at the General Meeting to be held at 9.00 am (WST) on 30 September 2011 at The Melbourne Hotel, 942 Hay Street, Perth 6000.

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

1. RESOLUTION 1 – RATIFICATION OF PRIOR ISSUE – OPTIONS

1.1 General

As announced to the market on 14 July 2011, the Company has issued 20,000,000 Options to Selentium Capital as consideration for the provision of advisory services in connection with the Kangwane Project.

The subscriber pursuant to this issue was not a related party of the Company.

Resolution 1 seeks Shareholder ratification pursuant to ASX Listing Rule 7.4 for the issue of those Options ( Option Ratification ).

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

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

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

1.2 Technical information required by ASX Listing Rule 7.4

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

• (a) 20,000,000 Options were allotted;

• (b) the Options were issued for nil cash consideration;

• (c) the Options were issued on the terms and conditions set out in Schedule 1;

• (d) the Options were allotted and issued to Selentium Capital; and

• (e) no funds were raised from this issue as the Options were issued in consideration for the provision of advisory services in connection with the Kangwane Project.

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2. RESOLUTIONS 2 TO 4 – ISSUES OF SHARES TO DIRECTORS UNDER THE EMPLOYEE SHARE PLAN

2.1 Issue of Shares to Directors

As announced on 28 July 2011, the Company proposed to issue each of Dr Eric Lilford, Mr Bevan Tarratt and Mr David Greenwood ( Related Parties ) with Shares ( Plan Shares ) pursuant to the Company’s Employee Share Plan which was approved by Shareholders at the Company’s general meeting on 18 April 2011 ( Plan ).

The Company proposes to issue the Plan Shares to the Related Parties to provide further incentive to its Directors to perform and assist with the retention of the Related Parties.

The Plan Shares proposed to be issued to a Related Party will be issued upon receipt of Shareholder approval pursuant to the Resolutions contained in this Notice of Meeting, and will be subject to voluntary escrow restrictions until that Related Party satisfies the relevant performance milestones applicable to it ( Performance Milestones ). The Performance Milestones are outlined in Section 2.1(a) below. The Board considers it usual practice for the Related Parties’ remuneration to have a salary cash component and an equity component.

Specifically, the Company proposes to issue, subject to the receipt of Shareholder approval, up to 8,750,000 Plan Shares to Dr Eric Lilford (or his nominee), up to 3,250,000 Plan Shares to Mr Bevan Tarratt (or his nominee) and up to 1,000,000 Plan Shares to Mr David Greenwood, who are Directors of the Company, pursuant to the Plan and on the terms and conditions set out below:

• (a) a total of up to 13,000,000 Plan Shares to be issued as follows:

• (i) up to 8,750,000 Plan Shares to be issued to Dr Eric Lilford (or his nominee) immediately upon the receipt of the Shareholder approvals the subject of Resolution 2, which will be subject to voluntary escrow, until the following Performance Milestones are satisfied:

  • (A) 1,000,000 Plans Shares upon achievement of a market capitalisation for the Company in excess of $200 million for 5 consecutive trading days;

  • (B) 1,000,000 Plan Shares upon an announcement to ASX of a total measured resource at the Kangwane Project of not less than 40Mt;

  • (C) 750,000 Plan Shares upon an announcement to ASX of the completion of an acquisition of a new project in the same area as the Kangwane Project;

  • (D) 750,000 Plan Shares upon an announcement to ASX of the completion of the acquisition of a 50.1% interest in the Southern Anthracite Project;

  • (E) 1,000,000 Plan Shares upon an announcement to ASX of completion of the bankable feasibility study at the Kangwane Project;

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• (F) 500,000 Plan Shares upon an announcement to ASX of the completion of a successful capital raising of at least $30 million either by way of equity or debt;

• (G) 500,000 Plan Shares upon the Company and its joint venture partners obtaining all necessary regulatory approvals to allow for the development and exploitation of anthracite from the Kangwane Project;

• (H) 500,000 Plan Shares upon an announcement to ASX of the Company securing a logistics solution to enable access to export entitlement;

• (I) 750,000 Plan Shares upon the Company’s Share price reaching above $0.50 for 5 consecutive days;

• (J) 250,000 Plan Shares upon resolving all necessary agreements with the Community and the Cane Grower’s Association for commercial mining to occur on their land;

• (K) 750,000 Plan Shares upon an announcement to ASX of completion of the bankable feasibility study at the Southern Anthracite Project;

• (L) 500,000 Plan Shares upon an announcement to ASX of a resource upgrade at the Kangwane Project to 150Mt;

• (M) 500,000 Plan Shares upon the execution of a coal offtake agreement at the Kangwane Project totalling a minimum of 1Mtpa, excluding that for the International Power Utility;

• (ii) up to 3,250,000 Plan Shares issued to Mr Bevan Tarratt (or his nominee) immediately upon the receipt of the Shareholder approvals the subject of Resolution 3, which will be subject to voluntary escrow, until the following Performance Milestones are satisfied:

• (A) 400,000 Plans Shares upon achievement of a market capitalisation for the Company in excess of $200million for 5 consecutive trading days;

• (B) 100,000 Plan Shares upon an announcement to ASX of a total measured resource at the Kangwane Project of not less than 40Mt;

• (C) 200,000 Plan Shares upon an announcement to ASX of the completion of an acquisition of a new project in the same area as the Kangwane Project;

• (D) 200,000 Plan Shares upon an announcement to ASX of the completion of the acquisition of a 50.1% interest in the Southern Anthracite Project;

• (E) 500,000 Plan Shares upon an announcement to ASX of completion of the bankable feasibility study at the Kangwane Project;

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  - (F) 800,000 Plan Shares upon an announcement to ASX of the completion of a successful capital raising of at least $30million either by way of equity or debt;

  - (G) 400,000 Plan Shares upon the Company’s Share price reaching above $0.50 for 5 consecutive days;

  - (H) 200,000 upon the achievement of a successful dual listing of the Company on the Johannesburg Stock Exchange and demonstrating a market capitalisation of at least ZAR1.5billion for 5 consecutive days;

  - (I) 250,000 Plan Shares upon an announcement to ASX of completion of the bankable feasibility study at the Southern Anthracite Project;

  - (J) 100,000 Plan Shares upon an announcement to ASX of a resource upgrade at the Kangwane Project to 150Mt;

  - (K) 100,000 Plan Shares upon the execution of a coal offtake agreement at the Kangwane Project totalling a minimum of 1Mtpa, excluding that for the International Power Utility; and

• (iii) up to 1,000,000 Plan Shares issued to Mr David Greenwood (or his nominee) immediately upon the receipt of the Shareholder approvals the subject of Resolution 4, which will be subject to voluntary escrow, until the following Performance Milestones are satisfied:

  • (A) 200,000 Plans Shares upon achievement of a market capitalisation for the Company in excess of $200million for 5 consecutive trading days;

  • (B) 200,000 Plan Shares upon the Company’s Share price reaching above $0.50 for 5 consecutive days;

  • (C) 200,000 upon the achievement of a successful dual listing of the Company on the Johannesburg Stock Exchange and demonstrating a market capitalisation of at least ZAR1.5billion for 5 consecutive days;

  • (D) 200,000 Plan Shares upon an announcement to ASX of completion of the bankable feasibility study at the Southern Anthracite Project;

  • (E) 100,000 Plan Shares upon an announcement to ASX of a resource upgrade at the Kangwane Project to 150Mt;

  • (F) 100,000 Plan Shares upon the execution of a coal offtake agreement at the Kangwane Project totalling a minimum of 1Mtpa, excluding that for the International Power Utility.

• (b) the Performance Milestones must be satisfied within 3 years from the date of the General Meeting; and

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• (c) if, any of the Performance Milestones applicable to each party are not satisfied within the time period specified in Section 2.1(b) above, then the Company will buy-back the Plan Shares which relate to the Performance Milestone which is not satisfied from the relevant Related Party in accordance with the buy-back provisions in the Plan which are summarised in paragraph (g) in 0.

2.2 Related Party Transaction

For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company, the public company or entity must:

• (a) obtain the approval of the public company’s members in the manner set out in Sections 217 to 227 of the Corporations Act; and

• (b) give the benefit within 15 months following such approval,

unless the giving of the financial benefit falls within an exception set out in Sections 210 to 216 of the Corporations Act.

In addition, ASX Listing Rule 10.14 also requires shareholder approval to be obtained where an entity issues, or agrees to issue, securities under an employee incentive scheme to a director of the entity, an associate of the director, or a person whose relationship with the entity, director or associate of the director is, in ASX’s opinion, such that approval should be obtained.

The grant of Plan Shares to Dr Eric Lilford, Mr Bevan Tarratt and Mr David Greenwood under the Plan requires the Company to obtain Shareholder approval because this constitutes giving a financial benefit and, as Directors, Dr Eric Lilford, Mr Bevan Tarratt and Mr David Greenwood are related parties of the Company.

It is the view of the Directors that the exceptions set out in Sections 210 to 216 of the Corporations Act do not apply in the current circumstances. Accordingly, Shareholder approval is sought for the issue the Plan Shares to Dr Eric Lilford, Mr Bevan Tarratt and Mr David Greenwood.

2.3 Technical Information Required by Sections 217 to 227 of the Corporations Act

Pursuant to and in accordance with the requirements of Sections 217 to 227 of the Corporations Act, the following information is provided in relation to the proposed grant of Plan Shares:

• (a) the related parties are Dr Eric Lilford, Mr Bevan Tarratt and Mr David Greenwood ( Related Parties ) and they are related parties by virtue of being Directors of the Company;

(b) the maximum number of Plan Shares (being the nature of the financial benefit being provided) to be granted to each Related Party is:

Related Party	Number of Plan Shares	Total Value of Plan Shares1
Dr Eric Lilford	up to 8,750,000	up to $1,618,750
Mr Bevan Tarratt	up to 3,250,000	up to $601,250

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Mr David Greenwood up to 1,000,000 up to $185,000

1 This is based on the value of the Shares set out in Section 2.3(c) below.

(c) based on the trading price on the day before the date of this notice of $0.185, the Plan Shares have a value of $0.185;

• (d) the Plan Shares to be 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 will be subject to the voluntary escrow restrictions outlined in Section 2.1above;

• (e) in determining the number of Plan Shares to be issued to the Related Parties, consideration was given to the respective relevant experience and role of the Related Parties, their overall remuneration terms, and the terms of share packages granted to Directors of similar companies;

• (f) the Plan Shares will otherwise be issued on the terms and conditions set out in the Plan which have been summarised in 0;

• (g) the Plan Shares will be issued as part of the remuneration for Dr Eric Lilford, Mr Bevan Tarratt and Mr David Greenwood in addition to the cash salary component of their remuneration and so will be issued for a nil issue price and accordingly, no funds will be raised;

• (h) as at the date of this Notice, each Related Party has a relevant interest in the following Company securities:

Related Party	Number of Shares	Number of Options
Dr Eric Lilford1	6,583,334	2,500,0003
Mr Bevan Tarratt2	4,769,444	1,500,0004
Mr David Greenwood	Nil	Nil

1 These Share and Options are held indirectly through Dr Eric Lilford ATF .

2 These Share and Options are held indirectly through the Joe Dirt Super Pty Ltd .

3 2,500,000 Options exercisable at $0.06 each on or before 21 February 2013.

[4] 500,000 Options exercisable at $0.06 each on or before 30 September 2012

and 1,000,000 Options exercisable at $0.10 each on or before 30 September 2012.

(i) the remuneration and emoluments paid (or to be paid) by the Company to each of the Related Parties for the last financial year and current financial year (inclusive of superannuation) is as follows;

Related Party	Financial Year ended 30 June 2011	Financial Year ended 30 June 2012
Dr Eric Lilford	$250,000	$250,000
Mr Bevan Tarratt	$36,000	$36,000
Mr David Greenwood	$12,000	$36,000

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• (j) if Shareholders approve the issue of the Plan Shares to the Related Parties, the effect will be to dilute the shareholding of existing Shareholders by approximately 2.7% on an undiluted basis, comprising 1.8% by Dr Eric Lilford, 0.67% by Mr Bevan Tarratt and 0.21% by Mr David Greenwood (based on 482,585,899 Shares being currently on issue);

• (k) the trading history of the Shares on ASX in the 12 months before the date of this Notice of General Meeting is set out below:

	Price	Date
Highest	$0.26	25 July 2011
Lowest	$0.017	4 October 2010
Last	$0.185	16 August 2011

• (l) the primary purpose of the grant of the Plan Shares to Dr Eric Lilford, Mr Bevan Tarratt and Mr David Greenwood, is to provide a market linked incentive package for the future performance and cost effective consideration for their ongoing commitment and contribution to the Company in their respective roles as Directors.

The Board (other than each individual Director when considering that individual Directors’ experience) considered the extensive experience and reputation of each Director within the mining and resources industry, the current market price of Shares and current market practices when determining the number Shares to be issued to each Director. In addition, the Board considers the issue of the Plan Shares to each individual Director to be reasonable, given the necessity to attract the highest calibre of professionals to the Company whilst maintaining the Company’s cash reserves. If the Plan Shares are not issued, the Company could remunerate the Directors for additional amounts. However, the Board considers it reasonable for the remuneration each of the Directors to have a cash component and an equity component to further align the Related Parties’ interests with Shareholders and maintain a strong cash position for the Company;

As outlined above, there are alternate options available in respect of the grant of the Shares in respect of remunerating the executive Directors. Accordingly, Shareholders should consider the above matters carefully before deciding how to vote on these Resolutions. The Board does not consider that there are any significant opportunity costs to Company or benefits foregone by the Company in issuing the Plan Shares to the Related Parties upon the terms proposed; and

• (m) the Board acknowledges the grant of Plan Shares to the Related Parties, who are non executive Directors, is contrary to Recommendation 8.2 of the ASX Corporate Governance Principles and Recommendations. However, the Board considers the grant of Plan Shares to the Related Parties reasonable in the circumstances for the reasons set out in Section 2.3(l) above.

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2.4 Directors’ recommendation

• (a) The Directors (other than as set out below) recommend that Shareholders vote in favour of Resolutions 2 to 4 for the following reasons:

• (i) the benefit set out in Sections 2.3(l) and 2.3(m) above the proposed issue of Shares to the Related Parties will have on the Company;

• (ii) the issue of the Shares to the Related Parties is an appropriate form of incentive to maximise returns to Shareholders; and

• (iii) the terms of the proposed issue of Shares to the Related Parties are reasonable to the Company.

• (b) Dr Eric Lilford declines to make a recommendation to Shareholders in relation to Resolution 2 due to his material personal interest in the outcome of the Resolution. The independent Directors recommend that Shareholders vote in favour of Resolution 2. The independent Directors are not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass Resolution 2.

• (c) Mr Bevan Tarratt declines to make a recommendation to Shareholders in relation to Resolution 3 due to his material personal interest in the outcome of the Resolution. The independent Directors recommend that Shareholders vote in favour of Resolution 3. The independent Directors are not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass Resolution 3.

• (d) Mr David Greenwood declines to make a recommendation to Shareholders in relation to Resolution 4 due to his material personal interest in the outcome of the Resolution. The independent Directors recommend that Shareholders vote in favour of Resolution 4. The independent Directors are not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass Resolution 4.

2.5 ASX Listing Rule 10.14

ASX Listing Rule 10.14 provides that a company must not permit any of the following persons to acquire securities under an employee incentive scheme without the approval of holders of ordinary securities of the acquisition:

• (a) a director of the company;

• (b) an associate of a director; or

• (c) a person whose relationship with the company or a person referred to in (a) or (b) above is, in ASX’s opinion, such that approval should be obtained.

If Resolutions 2 to 4 are passed, Shares will be issued to the Directors of the Company.

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Approval pursuant to ASX Listing Rule 7.1 is not required in order to issue the Shares as approval is being obtained under ASX Listing Rule 10.14 and Exception 9(b) of ASX Listing Rule 7.2. The issue of Shares to the Director will not be included in the 15% calculation for the purposes of ASX Listing Rule 7.1.

2.6 Technical Information Required by ASX Listing Rule 10.15

A notice of meeting to obtain approval under ASX Listing Rule 10.14 must comply with either ASX Listing Rule 10.15 or 10.15A. The information required to be provided for the purposes of approval under ASX Listing Rule 10.14 is set out below, in accordance with ASX Listing Rule 10.15:

• (a) Dr Eric Lilford, Mr Bevan Tarratt and Mr David Greenwood are Directors of the Company;

• (b) the maximum number of Plan Shares to be issued to the Directors is up to 13,000,000 (which comprises up to 8,750,000 Plan Shares to Dr Eric Lilford, up to 3,250,000 Plan Shares to Mr Bevan Tarratt and up to 1,000,000 Plan Shares to Mr David Greenwood), on the terms set out in Section 2.1 above;

• (c) the Plan Shares will be issued as part of the remuneration for Dr Eric Lilford, Mr Bevan Tarratt and Mr David Greenwood in addition to the cash salary component of their remuneration and so will be issued for a nil issue price and accordingly, no funds will be raised;

• (d) no person referred to in ASX Listing Rule 10.14 has received Plan Shares under the Plan since the last approval;

• (e) the only persons referred to in ASX Listing Rule 10.14 who are eligible to participate in the Plan as at the date of this Notice are Dr Eric Lilford, Mr Bevan Tarratt, Mr David Greenwood;

• (f) no loan has or will be provided to the Related Parties in relation to the subsequent exercise of the Plan Shares; and

• (g) the Plan Shares will be issued to Dr Eric Lilford, Mr Bevan Tarratt, Mr David Greenwood (or their respective nominees) no later than 12 months after the date of the General Meeting.

A summary of the terms and conditions of the Plan is contained in 0 to this Notice of Meeting. A copy of the rules of the Plan which sets out the full terms and conditions of the Plan will be sent free to any Shareholder upon request, or may be inspected at the Company’s registered office during normal business hours.

3. ENQUIRIES

Shareholders are requested to contact Nicholas Ong on (+ 61 8) 9486 4036 if they have any queries in respect of the matters set out in these documents.

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GLOSSARY

$ means Australian dollars.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited.

ASX Listing Rules means the Listing Rules of ASX.

Board means the current board of directors of the Company.

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

Company means ZYL Limited (ACN 008 720 223).

Constitution means the Company’s constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the current directors of the Company.

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

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

Kangwane Project means the Kangwane Anthracite Project which the Company recently acquired an interest in, refer to the Company’s ASX announcements for further details.

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

Option means an option to acquire a Share with the terms and conditions set out in Schedule 1.

Optionholder means a holder of an Option or Director Option as the context requires.

Performance Milestones has the meaning given to it in Section Error! Reference source not found. .

Plan or Employee Share Plan means the Company’s Employee Share Plan approved by its Shareholders at its general meeting on 18 April 2011, the terms and conditions of which are summarised in 0.

Plan Share means Shares issued under the Plan.

Proxy Form means the proxy form accompanying the Notice.

Related Parties has the meaning given to it in Section Error! Reference source not found. .

Resolutions means the resolutions set out in the Notice of Meeting, or any one of them, as the context requires.

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

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Shareholder means a holder of a Share.

Southern Anthracite Project means the Southern Anthracite Project which the Company proposes to acquire a 56% interest in, refer to the Company’s ASX announcements dated 28 July 2011 for further details.

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

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SCHEDULE 1 – TERMS AND CONDITIONS OF OPTIONS

The Options entitle the holder to subscribe for Shares on the following terms and conditions:

• (a) Each Option gives the Optionholder the right to subscribe for one Share.

• (b) The Options will expire at 5.00pm (WST) on 18 April 2015 ( Expiry Date ). Any Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.

• (c) The amount payable upon exercise of each Option will be $0.20 ( Exercise Price ).

• (d) The Options held by each Optionholder may be exercised in whole or in part, and if exercised in part, multiples of 1,000 must be exercised on each occasion.

• (e) An Optionholder may exercise their Options by lodging with the Company, before the Expiry Date:

• (i) a written notice of exercise of Options specifying the number of Options being exercised; and

• (ii) a cheque or electronic funds transfer for the Exercise Price for the number of Options being exercised;

( Exercise Notice ).

• (f) An Exercise Notice is only effective when the Company has received the full amount of the Exercise Price in cleared funds.

• (g) Within 10 Business Days of receipt of the Exercise Notice accompanied by the Exercise Price, the Company will allot the number of Shares required under these terms and conditions in respect of the number of Options specified in the Exercise Notice.

• (h) The Options are not transferable.

• (i) All Shares allotted upon the exercise of Options will upon allotment rank pari passu in all respects with other Shares.

• (j) The Company will not apply for quotation of the Options on ASX. However, The Company will apply for quotation of all Shares allotted pursuant to the exercise of Options on ASX within 10 Business Days after the date of allotment of those Shares.

• (k) If at any time the issued capital of the Company is reconstructed, all rights of an Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

• (l) There are no participating rights or entitlements inherent in the Options and Optionholders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 6 Business Days after the issue is announced. This will give Optionholders the opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue.

• (m) An Option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the Option can be exercised.

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SCHEDULE 2 – TERMS AND CONDITIONS EMPLOYEE SHARE PLAN

The full terms and conditions of the Employee Share Plan may be obtained free of charge by contacting the Company. A summary of the terms and conditions of the Employee Share Plan is set out below.

(a) Grant of Shares

The Directors, at their discretion, may issue Shares ( Plan Shares ) to Participants (or to a nominee as the Participant directs) at any time, having regard to relevant considerations such as the Participant’s past and potential contribution to the Company, and their period of employment with the Company.

(b) Participants

Full-time employees, part-time employees and Directors of the Company, or of a related body corporate, who hold a salaried employment or office in the company or in a related body corporate, are eligible to participate in the Employee Share Plan ( Participants ). However, in the event that Directors of the Company are invited to participate in the Plan, the Company will seek Shareholder approval for that participation in accordance with Listing Rule 10.14.

(c) Issue Price of Plan Shares

Plan Shares may be issued at an Issue Price to be determined by the Board, which may be a nominal or nil Issue Price if so determined by the Board.

(d)

Maximum Number of Plan Shares

The Company must take reasonable steps to ensure that the number of Plan Shares offered by the Company under the Employee Share Plan when aggregated with:

• (i) the number of Plan Shares issued during the previous 5 years under the employee Share Plan (or any other employee share plan extended only to Eligible Employees); and

• (ii) the number of Shares that would be issued if each outstanding offer for Shares (including options to acquire unissued Shares) under any employee incentive Plan of the Company were to be exercised or accepted,

does not exceed 5% of the total number of issued Shares at the time of an offer of Plan Shares (but disregarding any offer of Shares or option to acquire Shares that can be disregarded in accordance with the ASIC Class Order 03/184.

(e) Term of Plan Shares

The Plan Shares will be issued on the same terms as the fully paid, ordinary shares of the Company and will rank equally with all of the Company’s then existing Shares.

(f) Restrictions on transfer of Plan Shares

The Board may impose conditions in an offer of Plan Shares that must be satisfied (unless waived by the Board in its absolute discretion) before the Plan Shares to

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which the condition applies can be sold, transferred, assigned, charged or otherwise encumbered ( Restriction Conditions ).

Subject to the exceptions identified below, a Participant may not sell, transfer, assign, mortgage, charge or otherwise encumber a Plan Share until any applicable Restriction Conditions are satisfied or waived by the Board in its absolute discretion.

Where any applicable Restriction Conditions in relation to Plan Shares have not been satisfied and:

• (i) the Participant dies;

• (ii) the Eligible Employee to whom the offer was originally made ceases to be employed as a result of:

• (A) bona fide retirement from the workforce (unless the retirement happens within six (6) months of the date of the issue of the Plan Shares);

• (B) bona fide redundancy; or

• (C) total and permanent disability,

the Board may elect to:

• (iii) allow the Participant to retain the Plan Shares;

• (iv) waive any of the Restriction Conditions; and/or

• (v) permit the Participant (or their personal legal representative) to sell, transfer, assign, mortgage, charge or otherwise encumber the Participant’s Plan Shares.

(g) Buy back of Plan Shares

Subject to the exemptions identified in sub-clause (f) above, where a Restriction Condition in relation to Plan Shares is not satisfied by the due date, or becomes incapable of satisfaction in the opinion of the Board, the Company must, unless the Restriction Condition is waived by the Board:

• (i) where the Plan Shares were issued for no cash consideration, subject to the Corporations Act and the ASX Listing Rules, buy back the relevant Plan Shares within 12 months of the date the Restriction Condition was not satisfied (or became incapable of satisfaction) under Part 2J.1 of the Corporations Act at a price equal to $0.0001 per Share; or

• (ii) where the Shares were issued for cash consideration, subject to the Corporations Act and the ASX Listing Rules, use its best endeavours to buy back the relevant Plan Shares within 12 months of the date the Restriction Condition was not satisfied (or became incapable of satisfaction) under Part 2J.1 of the Corporations Act at a price equal to the cash consideration paid by the Participant for the Plan Shares.

(h)

Quotation of Plan Shares

The Company will make application for official quotation of all Plan Shares as soon as practicable after their Issue Date.

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(i) Powers of the Board of Directors

The Employee Share Plan is administered by the Directors of the Company, who have the power to:

• (i) determine appropriate procedures for administration of the Employee Share Plan consistent with its terms;

• (ii) resolve conclusively all questions of fact or interpretation in connection with the Employee Share Plan;

• (iii) delegate the exercise of any of its powers or discretions arising under the Employee Share Plan to any one or more persons for such period and on such conditions as the Board may determine; and

• (iv) suspend or terminate the Employee Share Plan by giving written advice to Eligible Employees.

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PROXY FORM

APPOINTMENT OF PROXY ZYL LIMITED ACN 008 720 223

GENERAL MEETING

		GENERAL MEETING
I/We
of
	being a member of ZYL Limited entitled to attend and vote at the General Meeting, hereby
Appoint
	Name of proxy
OR		the Chair of the General Meeting as your proxy

or failing the person so named or, if no person is named, the Chair of the General Meeting, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, as the proxy sees fit, at the General Meeting to be held at 9.00am (WST), on 30 September 2011 at The Melbourne Hotel, 942 Hay Street, Perth 6000, and at any adjournment thereof.

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

If the Chair of the General Meeting is appointed as your proxy, or may be appointed by default, and you do not wish to direct your proxy how to vote as your proxy in respect of Resolutions 1 to 4 please place a mark in this box.

By marking this box, you acknowledge that the Chair of the General Meeting may exercise your proxy even if he has an interest in the outcome of Resolutions 1 to 4 and that votes cast by the Chair of the General Meeting for Resolutions 1 to 4 other than as proxy holder will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chair will not cast your votes on Resolutions 1 to 4 and your votes will not be counted in calculating the required majority if a poll is called on Resolutions 1 to 4.

OR

Voting on Business of the General Meeting

FOR AGAINST ABSTAIN

Resolution 1 – Ratification of Prior Issue - Options Resolution 2 – Issue of Shares to Dr Eric Lilford under the Employee Share Plan Resolution 3 – Issue of Shares to Mr Bevan Tarratt under the Employee Share Plan Resolution 4 – Issue of Shares to Mr David Greenwood under the Employee Share Plan

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

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

% Signature of Member(s): Date: ______ Individual or Member 1 Member 2 Member 3 Sole Director/Company Director Director/Company Secretary Secretary

Contact Name: _____ Contact Ph (daytime): ___

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ZYL LIMITED ACN 008 720 223

Instructions for Completing ‘Appointment of Proxy’ Form

1.

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

( Direction to Vote ): A member may direct a proxy how to vote by marking one of the boxes opposite each item of business. Where a box is not marked the proxy may vote as they choose. Where more than one box is marked on an item the vote will be invalid on that item.

3. ( Signing Instructions ):

• ( Individual ): Where the holding is in one name, the member must sign.

• ( Joint Holding ): Where the holding is in more than one name, all of the members should sign.

• ( Power of Attorney ): If you have not already provided the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.

• ( Companies ): Where the company has a sole director who is also the sole company secretary, that person must sign. Where the company (pursuant to Section 204A of the Corporations Act) does not have a company secretary, a sole director can also sign alone. Otherwise, a director jointly with either another director or a company secretary must sign. Please sign in the appropriate place to indicate the office held.

• ( Attending the Meeting ): Completion of a Proxy Form will not prevent individual members from attending the General Meeting in person if they wish. Where a member completes and lodges a valid Proxy Form and attends the General Meeting in person, then the proxy’s authority to speak and vote for that member is suspended while the member is present at the General Meeting.

• ( Return of Proxy Form ): To vote by proxy, please complete and sign the enclosed Proxy Form and return by:

• (a) post to ZYL Limited, PO Box 255, West Perth 6872; or

• (b) facsimile to the Company on facsimile number (+61 8) 9486 4799,

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

Proxy forms received later than this time will be invalid.

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