PRAIRIE LITHIUM LIMITED — Proxy Solicitation & Information Statement 2011

Mar 15, 2011

ZYL LIMITED

ACN 008 720 223

NOTICE OF GENERAL MEETING

TIME : 10 am (WST)

DATE : 18 April 2011

PLACE : The Country Women’s Association of Western Australia (Inc), 1176 Hay Street, West Perth WA 6005

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)	7
Glossary	18
Schedule 1 – Terms and Conditions of New Options	20
Schedule 2 – Valuation of New Options	22
Proxy Form	24

TIME AND PLACE OF ME ETI NG AND HOW TO VOT E

VENUE

The general meeting of the Shareholders to which this Notice of Meeting relates will be held at 10am (WST) on 18 April 2011 at:

The Country Women’s Association of Western Australia (Inc), 1176 Hay Street, West Perth WA 6005.

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 10 am (WST) on 15 April 2011.

Proxy Forms received later than this time will be invalid.

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IMPORTANT NOTICES

Key Dates*

Company announces that it has exercised the Exsteen Option to
acquire 100% of the issued capital of Exsteen the holder of the joint	22 February 2011
venture at the Kangwane Project
Dispatch of Notice of Meeting	18 March 2011
Lodge prospectus for re-compliance with ASIC	14 April 2011
Cut off for lodging proxy form for General Meeting	15 April 2011
Snapshot date for eligibility to vote at the General Meeting	15 April 2011
General Meeting to approve the change of activities and other matters	18 April 2011
ASX informed of Shareholder approvals	18 April 2011
Suspension of the Company’s securities from trading on ASX at the opening of trading	18 April 2011
Prospectus Offer Closes	2 May 2011
Anticipated date the suspension of trading of Shares is lifted	9 May 2011

*These dates are indicative only and may change

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RE-COMPLIANCE WITH CHAP TERS 1 AND 2 OF ASX LISTING RULES

As announced to the ASX on 22 February 2011, the Company has exercised the Call Option Deed to acquire 100% of the issued capital of Exsteen Pty Ltd ( Exsteen ), the holder of the joint venture at the Kangwane Project ( Exsteen Option ). The exercise of the Exsteen Option to acquire Exsteen will result in the Company having to re-comply with Chapters 1 and 2 of the ASX Listing Rules pursuant to ASX Listing Rule 11.1.3. Pursuant to this, the Company issued an anticipated timetable for the re-compliance with Chapters 1 and 2 of the ASX Listing Rules. The accelerated timetable for the re-compliance was announced on 16 March 2011.

NOTICE OF GENERAL MEETI NG

Notice is given that the general meeting of Shareholders will be held at 10am (WST) on 18 April 2011 at The Country Women’s Association of Western Australia (Inc), 1176 Hay Street, West Perth WA 6005.

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 7.00pm (Sydney time) on 15 April 2011.

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

AGENDA

1. RESOLUTION 1 – RATIFICATION OF PRIOR PLACEMENT OF SHARES

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 63,552,814 Shares (on a preConsolidation basis) at an issue price of $0.034 per Share (on a preConsolidation basis) 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 – CHANGE TO NATURE AND SCALE OF ACTIVITIES

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

“That, subject to the passing of Resolutions 3 and 4, for the purpose of ASX Listing Rule 11.1.2 and for all other purposes, approval is given for the Company to make a significant change to the nature and scale of its activities as described in the Explanatory Statement.”

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Voting Exclusion : The Company will disregard any votes cast on this Resolution by any person who may obtain a benefit, except a benefit solely in the capacity of a shareholder, if this 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 – CONSOLIDATION OF CAPITAL

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

“That, subject to the passing of Resolutions 2 and 4, for the purposes of Section 254H of the Corporations Act and for all other purposes, approval is given for the issued capital of the Company to be consolidated on the basis that:

• (a) every 2 Shares be consolidated into 1 Share; and

• (b) every 2 Options be consolidated into 1 Option with the exercise price amended in inverse proportion to that ratio,

and where this consolidation results in a fraction of a Share or Option being held by a Shareholder or Optionholder (as the case may be), the Directors be authorised to round that fraction up to the nearest whole Share or Option, with the consolidation taking effect on the date the resolution is passed and otherwise as described in the Explanatory Statement.”

Short Explanation: The Company must consolidate its capital in order to satisfy Chapters 1 and 2 of the ASX Listing Rules and as a condition of the Company’s securities recommencing trading on the ASX following the Acquisition.

4. RESOLUTION 4 – PLACEMENT – SHARES

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

“That, subject to the passing of Resolutions 2 and 3, for the purpose of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to allot and issue up to 150,000,000 Shares (on a post-Consolidation basis) on the terms and conditions set out in the Explanatory Statement.”

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, 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.

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5. RESOLUTION 5 – APPROVAL OF EMPLOYEE SHARE PLAN

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

“That, for the purposes of ASX Listing Rule 7.2 (Exception 9) and for all other purposes, approval is given for the Directors to issue Shares pursuant to the “ZYL Limited Employee Share Plan” ( Employee Share Plan or ESP ) in accordance with the terms and conditions of the Employee Share Plan, a summary of which is set out in the Explanatory Statement.”

Voting Exclusion: The Company will disregard any votes cast on this Resolution by any Directors of the Company and 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.

6. RESOLUTION 6 – ISSUE OF OPTIONS TO SELENTIUM CAPITAL SARL

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 7.1 and for all other purposes, approval is given for the Directors to allot and issue 15,000,000 New Options (on a pre-Consolidation basis) to Selentium Capital Sarl on the terms and conditions set out in the Explanatory Statement.”

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, 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 7 – RE-ELECTION OF DIRECTOR – DAVID GREENWOOD

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

“That, for the purpose of clause 13.4 of the Constitution and for all other purposes, David Greenwood, a Director who was appointed on 1 March 2011, retires, and being eligible, is re-elected as a Director.”

DATED: 16 MARCH 2011

BY ORDER OF THE BOARD

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GINO D’ANNA EXECUTIVE DIRECTOR / COMPANY SECRETARY

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EXP LANATORY 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 10 am (WST) on 18 April 2011 at The Country Women’s Association of Western Australia (Inc), 1176 Hay Street, West Perth WA 6005.

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 PLACEMENT OF SHARES

1.1 General

On 14 December 2010, the Company issued 63,552,814 Shares (on a preConsolidation basis) at an issue price of $0.034 per Share (on a pre-Consolidation basis) to sophisticated and professional investors of Patersons Securities Limited ( Patersons ) in order to raise $2,160,796 (before costs).

The subscribers pursuant to this issue were not related parties of the Company, and were all sophisticated and professional investors, either introduced by the Company or Patersons.

Resolution 1 seeks Shareholder ratification pursuant to ASX Listing Rule 7.4 for the issue of those Shares ( Share 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 Share Ratification:

• (a) 63,552,814 Shares were allotted (on a pre-Consolidation basis);

• (b) the issue price was $0.034 per Share (on a pre-Consolidation basis);

• (c) the Shares issued were all fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;

• (d) the Shares were allotted and issued to sophisticated and professional investor clients of Patersons Securities Limited; and

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(e) the funds raised from this issue ($2,160,796) will be used for general working capital purposes and to advance the exploration and development of the Kangwane Project.

2. RESOLUTION 2 - OVERVIEW OF CHANGE OF ACTIVITIES

2.1 Background

ZYL Limited ( ZYL or the Company ) is an Australian public company listed on the official list of ASX (ASX code: ZYL).

The Company previously operated as an information technology company which undertook research and development on the Smart G™ Enterprise Protection Software.

2.2 Background to Change of Activities – Call Option Agreement

On 20 July 2010, the Company announced that it had entered into a memorandum of understanding ( MoU ) to acquire 100% of the issued capital of Exsteen Pty Ltd ( Exsteen ), the holder of the joint venture at the advanced Kangwane Anthracite Coal Project located in the Mpumalanga province in South Africa ( Kangwane Project ).

The MoU gives Exsteen the right to earn an effective interest of up to 50.12%, in two tranches, via a joint venture in the Kangwane Project with Siyanda Resources (Proprietary) Limited ( Siyanda ). Siyanda will hold the remaining 49.88% interest as the South African partner. The MoU required the Company to enter into formal documentation to acquire 100% of the issued capital of Exsteen Pty Ltd ( Exsteen ), the holder of the joint venture at the Kangwane Project.

On 14 December 2010, the Company announced that it had executed the definitive transaction agreements with Siyanda, Exsteen, Double Ring Mineral Resources (Pty) Ltd ( Double Ring ) and Opes Capital (Pty) Ltd ( Opes ) to acquire an effective interest of up to 50.12% in the Kangwane Anthracite Project ( Definitive Agreements ).

In addition, the Company executed a call option deed ( Call Option Deed ) to acquire 100% of the issued share capital of Exsteen, the holder of the joint venture at the Kangwane Project ( Exsteen Option ).

On 22 February 2011, the Company announced that it had successfully exercised the Exsteen Option under the Call Option Deed and reaffirmed its intention to change the focus of its activities to coal exploration and production. This change of focus is as a consequence of a review of the Company’s information technology business, which resulted in the Board forming the view that it was necessary to expand its business beyond the information technology sector.

2.3 Background on the Kangwane Project

In support of the Company’s strategy to focus on high quality metallurgical coal, ZYL Limited considers the Kangwane project to be an exciting opportunity for its shareholders to participate in the development of an advanced stage, high grade coal project.

The key project developments in relation to the Kangwane Project are outlined below.

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Commencement of Bankable Feasibility Study (BFS):

• ZYL has appointed SRK Consulting ( SRK ) to manage the Bankable Feasibility Study ( BFS ) at the Kangwane Project.

• Initial discussions with SRK confirm the attractiveness of the Kangwane Anthracite deposit and emphasises the economic advantage of its close proximity to key infrastructure.

• The Company continues to progress the exploration and development at the Kangwane Project with the planning of the BFS and associated drilling program in an advanced stage.

• During the initial stage of the BFS, SRK will conduct an independent review and evaluation of the historical exploration and drilling undertaken by Mining Corporation Limited ( MCL ) in the 1980s. As part of this initial review a preliminary economic assessment of the project will be conducted. These preliminary assessments will be used as the basis for the detailed Feasibility Study.

• The BFS will initially focus on the open-pit target areas of the South pit and North pit.

• An aerial geophysical survey will be completed and an additional drilling program will commence at the Kangwane Project. The drill program will consist of a combination of confirmatory, in-fill and step-out development drilling. This drilling program is designed to enhance the quality of the existing exploration results, increase the global resource base and delineate proven and probable reserves to enable the rapid exploitation of the Kangwane deposit.

Commencement of Drilling:

• ZYL has appointed Olympic Park Trading (Pty) Ltd ( Olympic Park ), a specialist mining engineering consultant, as the independent mining engineers to the Kangwane Project.

• Olympic Park, in conjunction with SRK will oversee the drilling program during the BFS at Kangwane.

• Olympic Park and SRK have completed the review of the historical exploration and drilling undertaken by MCL in the 1980’s enabling the identification of key areas to target during the drilling program.

• The Company is presently drilling and has three (3) drill rigs mobilised on the site as part of the initial drilling program for the 7,000 metres which is being drilled on the open-cut areas only. A fourth drill rig has also recently been mobilised on site.

• The drill program is designed to complement the quality of the existing JORCcompliant resources, increase the total resource base and define reserves for development.

• The drilling and associated analysis is expected to be completed in the next 2 months, and once logged will be compiled into a geological model with resources and reserves updated and upgraded and the open-cut mine schedule completed.

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Memorandum of Understanding Executed with International Power Utility:

• ZYL, in conjunction with Siyanda Resources (Pty) Ltd ( Siyanda ), executed a nonbinding MoU for off-take with an International Power Utility at the Kangwane Anthracite Project.

• The International Power Utility specialises in the construction and operation of specifically engineered and designed modular power stations whereby the furnaces and boilers are exclusively designed to accommodate the characteristics of high energy coal.

• The MoU allows the International Power Utility to construct and operate a 600MW to 1,200MW Power Plant ( Power Plant ) in close proximity to Kangwane. It is envisaged that Kangwane will supply between 1.3Mt and 1.5Mt of anthracite per year over an initial period of 25 years, subject to renewal. Kangwane would be required to maintain a minimum stockpile of 150,000t to 200,000t of anthracite on the site at all times.

• The execution of the MoU provides for a capital expenditure funding arrangement to be implemented whereby the International Power Utility may provide loan funds to Kangwane. The funds would be principally allocated to mine development and expansion of additional open-cut resources.

• The precise terms of the coal pricing mechanism as well as the capital expenditure and investment mechanisms remain subject to further negotiation and agreement between the parties.

• The potential construction and operation of the Power Plant near Kangwane presents significant strategic advantages because it secures a consistent consumer of our product and it keeps open our rail and associated infrastructure for additional sales.

• ZYL will be able to maintain the option of product sales to the inland markets in the Highveld region and the export option via Maputo for production in excess of the minimum threshold under the MoU.

Lodgement of Section 11 and Foreign Exchange Control Approval Applications:

• ZYL, in conjunction with Siyanda, lodged an application for a Section 11 Transfer of Prospecting Right with the South African Minister of Mineral Resources .

• The Joint Venture, along with Siyanda, has also lodged an application for Foreign Exchange Control Approval with the South African Reserve Bank in relation to the Kangwane Anthracite Project.

Conceptual Pit Designs:

• Conceptual pit designs were prepared for the North and South Pits at the Kangwane Project which illustrated the anticipated depth and width of the pits including the geological dip of the coal.

• The North and South Pits, illustrated in Figure 1 below, will be the focus of the Company during the BFS due to the near surface nature of the coal. The coal is known to sub-crop on the western side of the potential mining areas and has been measured to dip gently at 6[o] to 7[o] to the east of the potential mining

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area, providing an opportunity to extend mining to an underground regime once the open-cut areas have been economically depleted.

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Figure 1: Kangwane location diagram illustrating the Northern and Southern Conceptual Pit

• It is believed that the conceptual pit designs for the proposed North and South Pits will enable the Company to plan further drilling to upgrade the status of the open-cut resources and focus the framework of the BFS around delineating proven and probable reserves in these target areas and thereafter the planned economic exploitation of these defined reserves.

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Figure 2: Conceptual Pit Design – North Pit, Kangwane Anthracite Project

• The Conceptual Pit Design for the proposed North Pit (Figure 2) has been completed to an overall depth of 70m. The coal sub-crops to the west of the proposed North Pit and gently dips at approximately 6[o] to the east. In the pit design, the minimum cumulative coal thickness to be mined from the North Pit is indicated at 6.2m with an average cumulative width of 7.2m.

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• The Conceptual Pit Design for the proposed South Pit (Figure 3) has been completed to an overall depth of 80m. The coal sub-crops to the west of the South Pit and gently dips at approximately 7[o] to the east. In the design of the South Pit, the minimum cumulative coal thickness to be mined was indicated at 4.4m with an average cumulative width of 7.7m.

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Figure 3: Conceptual Pit Design – South Pit, Kangwane Anthracite Project

• It is believed that further drilling could lead to an increase in the total resource contained within the proposed North and South Pit areas. Additional determination of the project economics combined with mine optimisation investigations could potentially increase the depth of the pit floor and extend the width of the pit, thereby possibly increasing the total resource and either extending the proposed mine life or motivating an increased extraction rate.

• The conceptual pit designs will enable the Company to plan additional drilling to further delineate and upgrade the open-cut resources and focus the BFS around the primary exploitation of these resources.

Appointment of Managing Director:

• The Group has also appointed a highly experienced Managing Director, Dr Eric Lilford. Other than notable corporate finance and project finance experience, Dr Lilford has mine production experience at multi-billion dollar underground gold, platinum, copper and coal mines. Specifically Dr Lilford was Director of Project and Business Development at Beny Steinmetz Group Resources, where he managed aspects of a $500 million copper-cobalt mine and refinery in Zambia producing 30,000tpa of copper and 6,500tpa of special grade cobalt metal. In addition Dr Lilford was in production as a Mine Overseer for Randcoal Limited’s Rietspruit and Khutala coal mines; he was responsible for producing over 3Mtpa of coal from three operating sections in the underground coal mine.

• Dr Lilford’s experience includes the completion of both pre feasibility and BFSs in numerous jurisdictions including the Democratic Republic of Congo (DRC), Zambia and Macedonia. Dr Lilford jointly managed the full bankable feasibility study of the Nikanor copper and cobalt project in the DRC and was appointed Non-Executive Director of Nikanor plc, a role he relinquished on emigration to Australia.

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Appointment of Non-Executive Technical Director:

• ZYL has appointed experienced geologist, Mr David Greenwood, as NonExecutive and Technical Director to the board of ZYL.

• Mr Greenwood is currently the Executive General Manager – External Affairs and Exploration with Straits Resources Limited where he is involved in investor relations, exploration, marketing and corporate budget development and strategic business planning.

• Mr Greenwood has 29 years of geological and mining experience with a number coal, precious metal and base metal producers. His extensive experience in the South African coal industry includes working for Johannesburg Consolidated Investment Company Limited at Tavistock Collieries and the Randfontein Estates Gold Mine and Randex Limited as the senior exploration geologist. He was previoulsy the section head of new business and international operations within the coal division at Gold Fields of South Africa Limited.

Key Project Highlights:

• The Kangwane Project, located in the Mpumalanga Province in South Africa and adjacent to an existing anthracite operation, has a current JORC compliant resource of 114.1Mt with a Measured Resource of 21.4Mt.

Coal Resource Estimate Statement (JORC Code and SAMREC Compliant)	Coal Resource Estimate Statement (JORC Code and SAMREC Compliant)
Total Measured Coal Resource (GTIS)	21.4 Mt
Total Indicated Coal Resource (GTIS)	25.5 Mt
Total Inferred Coal Resource (GTIS)	67.2 Mt
Total JORC compliant Coal Resources at Kangwane	114.1 Mt
Anthracite

• Exploration Target of 400Mt to 450Mt[1] (non-JORC compliant) at an expected calorific value of 6,635kcal to 6,712kcal.

• Independent geologists have identified and confirmed a Measured Resource of 9.7Mt within the open-cut area of the northern proposed mining area and an Indicated Resource of 6.6Mt within the open-cut area of the southern proposed mining area.

• A comprehensive drilling database of 149 diamond drill holes with a combined depth of 18,567 meters over a strike length of 33km was completed by Mining Corporation Limited (MCL) in the 1980s.

• Advanced discussions with the local community leaders are underway providing a clear path forward for the development of the Kangwane Project.

• The existing box-cut on the property provides an opportunity to access further bulk samples for metallurgical testing and marketing trials.

1 The potential quantity and grade of this exploration target is conceptual in nature, there has been insufficient exploration to define a Mineral Resource on the property and it is uncertain if further exploration will result in discovery of further Mineral Resources on the property.

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• The Kangwane Project is strategically located near key infrastructure, being within 100km by rail from the Matola Coal Terminal at the Maputo Port in Mozambique.

• An existing rail siding is located on the southern end of the Anthracite Project which has a loading capacity of 100,000 tonnes per month. The Anthracite Project is also located near well established infrastructure and coal mining support services including main power lines and reliable water sources.

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Figure 4: Kangwane Anthracite Project, Location Map

2.4 JORC Code Competent Person

The information in this Notice of Meeting that relates to exploration results, mineral resources or ore reserves is based on information compiled by Mr Dawie Van Wyk who is a consultant to the Company and is a member of a Recognised Overseas Professional Organisation. Mr Van Wyk has sufficient experience 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 JORC Code. Mr Van Wyk consents to the inclusion in this Notice of Meeting of the matters based on his information in the form and context in which it appears.

2.5 MoU, Call Option Agreement and Definitive Agreements

MoU and Joint Venture Agreement with Siyanda

The MoU sets out the terms of the grant of the Exsteen Option to the Company.

It also provides that Exsteen has the right to earn an effective interest of up to 50.12%, in two tranches, via a joint venture in the Kangwane Project with Siyanda. Siyanda will hold the remaining 49.88% interest as the South African partner. The MoU required the Company to enter into formal documentation to acquire 100% of the issued capital of Exsteen.

The MoU is subject to a number of conditions precedent including:

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• (a) the execution and exercise of the Call Option Deed between ZYL and Exsteen on or before 13 April 2011 giving the effect of Exsteen becoming a wholly owned subsidiary of ZYL;

• (a) the granting of Foreign Exchange Control Approvals from the South African Reserve Bank for the entire transaction;

• (b) the granting of Section 11 approval from the Department of Minerals and Energy ( DME ) in South Africa for the transfer of the prospecting right and the mining right;

• (c) the approval of the transaction by the South African competitive authorities (if required); and

• (d) amendments to the constitution of the JV Company (defined below) to allow for the subscription of shares by Exsteen.

Further terms of the MoU are as follows:

• (e) if the Exsteen Option is exercised and ZYL acquires Exsteen, under the terms of the MoU / Joint Venture agreement between Exsteen and Siyanda:

• (i) ZYL will commit to farm-in expenditure of ZAR20 million (approximately A$3 million) to be invested via the operational JV Company ( JV Company ) where the funds will be spent on exploration and drilling with a view to defining a suitable mine life at the Kangwane Project. This investment will fund completion of a Bankable Feasibility Study ( BFS ) on the project. Upon completion of this initial expenditure, ZYL will earn an initial 30% interest in the JV Company (which will hold the prospecting right for the Kangwane Project). Siyanda will initially own the remaining 70% interest in the JV Company and will vend its prospecting right over the Kangwane Project into the JV Company. Exsteen has the opportunity to withdraw from the transaction at any time;

ZYL will, through Exsteen, proportionally earn the 30% interest based on the amount of funds invested into the operational JV Company. For instance, an initial R4 million investment into the JV Company will entitle ZYL to an effective interest in the Project of 6%. It is only when ZYL spends the complete ZAR20 million (approximately A$3 million) that ZYL will have earned an effective interest in the Project of 30%;

• (ii) Upon the issue of a New Order Mining Right and the conclusion of the BFS to the ultimate satisfaction of ZYL, ZYL shall subscribe for such new shares in the JV Company’s capital that will deliver a shareholding of 50.12%. The new equity funds invested by ZYL will be deployed by the JV Company to capitalise the JV Company with an amount of ZAR30 million (approximately A$4.5 million) which will be the equity component required to partially fund the development of the mine and the balance of the development funds to be raised as debt;

• (iii) ZYL will extend a loan to the JV Company to pay Siyanda for its participation in the JV Company as follows:

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• (A) ZAR3.00 (approximately A$0.45) per tonne of economically minable coal (as confirmed by the BFS and Competent Persons Report to be commissioned by ZYL) to a maximum amount of ZAR100.5 million (approximately A$15.0 million), payable in two tranches, calculated off a minimum of 33.5Mt of economically mineable anthracite coal;

• (B) this consideration to Siyanda will be discharged in two tranches, ZAR60.5 million (approximately A$9.3 million) within 100 days after the completion of the BFS (as outlined above) and the issue of a New Order Mining Right. The remaining R40 million (approximately A$6.2 million) will be paid after the first shipment of anthracite coal and receipt of payment for such coal on an off-take agreement approved by the board of directors of the JV Company; and

• (C) Siyanda will be paid a deferred equity royalty of ZAR 2.00 per tonne (approximately A$0.31) for every tonne of anthracite coal sold profitably, over and above 36.6Mt, by the operational JV Company. The deferred payment will be escalated annually by the South African PPI.

Call Option Deed

Under the Call Option Deed the Company was granted the Exsteen Option.

As the Company has exercised the Exsteen Option, the Call Option Deeds provides that the Company will have the right (via Exsteen) to earn an effective interest of up to 50.12% in two tranches, via a joint venture with Siyanda in the Kangwane Project. The remaining 49.88% will be held by Siyanda, the South African partner.

The Call Option Deed also requires that Siyanda will ensure that all regulatory matters are in place to satisfy the South African Department of Minerals including the renewal and transfer of the prospecting right and the section 11 approval of the Minerals and Petroleum Resources Development Act (South Africa) transfer to the operational joint venture company.

The exercise of the Exsteen Option was subject to a number of conditions precedent including the execution of formal definitive documentation and the completion of due diligence.

The consideration for the grant of the Exsteen Option and the acquisition of the Exsteen is as follows:

• (a) ZYL has paid an option fee of US$100,000 and issued 20,000,000 Shares to the Exsteen Vendor; and

• (b) upon ZYL increasing its interest in the Kangwane Project to 50.12%, ZYL will issue an additional 20,000,000 Shares to the shareholder of Exsteen.

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Definitive Agreements

The Definitive Agreements provide that ZYL, upon satisfaction of the conditions precedent (set out below) and upon exercise of the Exsteen Option, is entitled to acquire up to a 50.12% interest in the Kangwane Anthracite Project, in two tranches, as follows:

• (a) an initial interest of 42.85% over the duration of the conduct of the BFS; and

• (b) a further 7.27% interest acquired through additional expenditure on the construction and commissioning of the mine development at the Kangwane Project.

The conditions precedent to the Definitive Agreements include:

• (a) Ministerial approval in terms of Section 11 of the Minerals and Petroleum Resources Development Act (South Africa); and

• (b) the approval of the Financial Surveillance Department of the South African Reserve Bank.

The Definitive Agreements require ZYL to meet the expenditure commitments set out below under the joint venture with Siyanda to acquire its interest in the Kangwane Project.

The following joint venture and expenditure commitments pertain to the BFS finalisation and equity purchase over the period indicated:

• (a) ZYL will expend ZAR20 million (~A$3 million) over an initial 12-14 month period to complete a BFS at the Project;

• (b) ZYL will invest ZAR30 million (~A$4.5 million) in equity for capital expenditure items in connection with mine development at the Kangwane Project;

• (c) ZYL will subscribe for preference shares in Mainstreet 795 (Pty) Ltd (the mine operating entity) with an aggregate subscription price of ZAR60.5 million (~$9.0 million). These preference shares will be redeemed after a three year moratorium period utilising 60% of the profits generated by the operating mine;

• (d) ZYL will subscribe for preference shares in Mainstreet 795 (Pty) Ltd with an aggregate subscription price of ZAR40 million (~$6.0 million). These preference shares will be redeemed after a three year moratorium period; and

• (e) after 36.6Mt of anthracite has been sold, the original shareholders (Siyanda and Double Ring) will receive a royalty of ZAR2/tonne sold (~A$0.30/tonne) above 36.6Mt (approximately 56Mt of RoM).

2.6 Pro-forma balance sheet

An unaudited pro forma balance sheet of the Company following completion of the change of activities, the Placement and other matters is set out in Annexure A to this Notice of Meeting.

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2.7 Pro-forma capital structure

The capital structure of the Company prior to the change to activities, Placement and Consolidation and other matters is set out below:

- SHARES (pre Consolidation)

Current ZYL issued share capital	665,171,572
TOTAL SHARES	665,171,572
OPTIONS (pre-Consolidation)
Options (unlisted) exercisable at $0.03 on or before 30	3,000,000
September 2012
Options (unlisted) exercisable at $0.5 on or before 30	6,000,000
September 2012
Options (unlisted) exercisable at $0.03 on or before 21 February	5,000,000
2013
TOTAL OPTIONS	14,000,000
The capital structure of the Company following the change to activities,
Placement, Consolidation and other matters is set out below:
SHARES (post-Consolidation)

Current ZYL issued share capital Shares to be issued pursuant to the Placement TOTAL SHARES OPTIONS (post-Consolidation) Options (unlisted) exercisable at $0.06 on or before 30 September 2012 Options (unlisted) exercisable at $0.1 on or before 30 September 2012 Options (unlisted) exercisable at $0.06 on or before 21 February 2013 Options (unlisted) to be issued to Selentium Capital exercisable at $0.1 on or before the date 4 years from the date of issue TOTAL OPTIONS	332,585,786 150,000,000
	482,585,786
	1,500,000 3,000,000 2,500,000 7,500,000
	14,500,000

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2.8 Advantages of the transactions

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

• (a) by changing focus and making this clear, there will no longer be confusion in the market as to the intentions of the Company;

• (b) the coal exploration and production activities represent a significant opportunity for the Company;

• (c) the Board of directors will provide an experienced set of skills to guide the growth of the Company; and

• (d) the Consolidation will provide a more simplified structure.

2.9

Disadvantages of the Acquisition

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

• (a) the Company will be changing the nature of its activities to become a company focused on coal exploration and production activities, which may not be consistent with the objectives of Shareholders;

• (b) a significant future outlay of funds may be required which will increase funding pressure on the Company in order to continue exploration of the Kangwane Project;

• (c) current Shareholders will have their interests in the Company diluted by the acquisition of Exsteen and any further equity funding undertaking by the Company; and

• (d) there are many risk factors associated with the change of nature of the Company’s activities, or rather associated with the Kangwane Project’s business and operations. Some of these risks are set out in Section 2.10 below.

2.10

Risks – Change of Activities

Shareholders should be aware that if the Resolutions are approved, the Company will be changing the nature of its activities to a coal exploration and production company which is subject to various risk factors. Based on the information available, a non-exhaustive list of risk factors are as follows:

Risks relating to the Change in Nature and Scale of Activities

Re-quotation of shares on ASX

As the Company has no prior involvement in the coal industry, the acquisition of Exsteen which holds the joint venture interest in the Kangwane Project constitutes a significant change in the nature and scale of the Company’s activities and the Company needs to comply with Chapters 1 and 2 of the ASX Listing Rules as if it were seeking admission to the official list of ASX. There is a risk that the Company may not be able to meet the requirements of the ASX for re-quotation of its Shares

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on the ASX. Should this occur, the Shares will not be able to be traded on the ASX until such time as those requirements can be met, if at all.

Risks Associated with the Kangwane Project and Kangwane Anthracite Joint Venture

Joint Venture Risk

The Directors are unable to predict the risk of financial failure or default by a participant in any joint venture to which the Company is or may become a party. As a party to the Kangwane Anthracite Joint Venture (through the Company’s acquisition of Exsteen), the Company could be exposed to such risks. There is also no guarantee that the Company will be able to meet its obligations under the Joint Venture, including its regular expenditure commitments.

Government Actions and Political Risk

The impact of actions by governments may affect the Company’s activities including such matters as access to lands and infrastructure, compliance with environmental regulations, taxation and royalties.

The Company is conducting its activities in South Africa. The Directors believe that the Government of South Africa supports the development of natural resources by foreign investors. However, there is no assurance that future political and economic conditions in South Africa will not result in the Government of South Africa adopting different policies regarding foreign development and ownership of mineral resources. Any changes in policy may result in legislative changes affecting ownership of assets, taxation, rates of exchange, environmental protection, labour relations, repatriation of income and return on capital, all of which may affect the Company's ability to develop the Prospecting Right.

International Operations

Any potential future South African operations of the Company’s are subject to a number of risks, including:

• (a) potential difficulties in enforcing agreements and collecting receivables through foreign local systems;

• (b) potential difficulties in protecting rights and interest in assets;

• (c) increases in costs for transportation and shipping; and

• (d) restrictive governmental actions, such as imposition of trade quotas, tariffs and other taxes.

Any of these factors could materially and adversely affect the Company’s business, results of operations and financial condition.

South Africa experiences economic, social and political volatility. As a result, the Company’s future operations may be impacted by currency fluctuations, political reforms, changes in South African government policies and procedures, civil unrest, social and religious conflict and deteriorating economic conditions. The likelihood of any of these changes, and their possible effects, if any, cannot be determined by the Company with any clarity at the present time, but they may include disruption, increased costs and, in some cases, total inability to establish or to continue to operate mining exploration or development activities.

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Operating Risks

The operations of the Company may be affected by various factors, including failure to locate or identify mineral deposits, failure to achieve predicted grades in exploration and mining, operational and technical difficulties encountered in mining, difficulties in commissioning and operating plant and equipment, mechanical failure or plant breakdown, unanticipated metallurgical problems which may affect extraction costs, adverse weather conditions, industrial and environmental accidents, industrial disputes, and unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment. No assurances can be given that the Company will achieve commercial viability through the successful exploration and/or mining of its tenement interests. Until the Company is able to realise value from its projects, it is likely to incur ongoing operating losses.

Resource Estimates

Resource estimates are expressions of judgment based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their very nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As further information becomes available through additional fieldwork and analysis, the estimates are likely to change. This may result in alterations to development and mining plans which may, in turn, adversely affect the Company’s operations.

Commodity Price Volatility

If the Company achieves success leading to mineral production, the revenue it will derive through the sale of commodities exposes the potential income of the Company to commodity price and exchange rate risks. Commodity prices fluctuate and are affected by many factors beyond the control of the Company. Such factors include supply and demand fluctuations for precious and base metals, technological advancements, forward selling activities and other macroeconomic factors. Furthermore, international prices of various commodities are denominated in United States dollars, whereas the income and expenditure of the Company are and will be taken into account in South African or Australian currency. This exposes the Company to the fluctuations and volatility of the rate of exchange between the United States dollar and the South African Rand or Australian dollar as determined in international markets.

Foreign Exchange Rate Risk

Any revenue received by the Company would likely be in South African Rand and US dollars derived from the sale of coal and the Company’s operating expenses would be incurred principally in South African Rand. Coal is sold throughout the world based principally on a US dollar price, however domestically within South Africa, the coal price is set in South African Rand. Furthermore the income and expenditure accounts will be initially prepared in the Australian dollars (AUD). Therefore, Australian dollar reported revenue will be directly impacted by movements in the US dollar coal price, the South African Rand coal price and the USD/AUD and ZAR/AUD exchange rates. Movements in the USD/AUD or ZAR/AUD exchange rates and/or the US dollar coal price or South African Rand coal price may adversely or beneficially affect the Company’s results or operations and cash flows.

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Environmental

The operations and proposed activities of the Company are subject to regulation concerning the environment. As with most exploration projects and mining operations, the Company’s activities are expected to have an impact on the environment, particularly if advanced exploration or mine development proceeds. It is the Company’s intention to conduct its activities to the highest standard of environmental obligation, including compliance with all environmental laws.

Occupational Health and Safety Risk

The Company is committed to providing a healthy and safe environment for its personnel, contractors and visitors. Mining activities have inherent risks and hazards. The Company provides appropriate instructions, equipment, preventative measures, first aid information and training to all stakeholders through its occupational, health and safety management systems.

No Geographical Diversification

The Company’s projects will all be located in South Africa. Any circumstance or event which negatively impacts the ownership or development of these areas or which negatively affects South Africa could materially affect the financial performance of the Company and more significantly than if it had a diversified asset base.

Coal Price Volatility

Substantially all of the Company’s revenues and cash flows (should the Company enter production) will be derived from the sale of coal. Therefore, the financial performance of the Company would be exposed to fluctuations in the coal price. Historically, the coal price has fluctuated widely and has experienced periods of significant decline. Coal prices are affected by numerous factors and events that are beyond the control of the Company. These factors and events include general economic activity, world demand, forward selling activity as well as general global economic conditions and political trends.

If coal prices should fall below or remain below the Company’s costs of production for any sustained period due to these or other factors and events, the Company’s exploration and proposed production could be delayed or even abandoned. A delay in exploration or production or the abandonment of one or more of the Company's projects may require the Company to write-down its coal resources and may have a material adverse effect on the Company's production, earnings and financial position.

Electricity Supply

The major producer and distributor of electricity in South Africa is the State-owned utility Eskom which provides over 95% of the country's energy usage. During 2008, South Africa experienced load shedding and rolling blackouts due to the shortage of electricity generating capacity. Eskom's current reserve margin is between 5% and 10% whilst an acceptable margin would be 15% to 20%. Although the situation appears to have stabilised, major new generation capacity is needed. Historically, the price of electricity in South Africa is low compared to other countries. Power rationing, increased prices and availability of electricity all pose potential risks to the viability and profit margins of the Company’s Prospecting Rights.

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Water Supply

Water supply for the Company’s Kangwane Project, and any future projects, will be sourced from individual locations. The Company will be required to apply for and obtain water use licences from the relevant governmental authorities. The process for obtaining a water use licence is a lengthy one and the Company’s operations may be adversely affected in the event that the relevant licences are not timeously obtained. An inadequate water supply would negatively affect the Kangwane Project and any future projects.

Labour Risk

The Company's operations may be adversely affected by labour disputes or changes in South African labour laws. In South Africa a number of trade unions have close links to various political parties and have had a significant influence as vehicles for social and political reform and in the collective bargaining process. Since 1995, South Africa has enacted various labour laws that enhance the rights of employees, which may impose costs on the Company. Significant labour disputes, work stoppages, increased employee expenses as a result of collective bargaining and the cost of compliance with labour laws could disrupt operations and affect the profitability of the prospecting rights and any future mining and exploration activities undertaken by the Company.

HIV/AIDS

South Africa has one of the highest HIV infection rates in the world. The exact impact of increased mortality rates due to HIV/AIDS related deaths on the cost of doing business in South Africa and the potential growth in the economy is unclear at this time although employee related costs in South Africa could increase as a result of the HIV/AIDS epidemic. The Company's results may be adversely affected by the loss of productivity and increased costs arising from any effect of HIV/AIDS on the Company's workforce.

Mining and Prospecting Rights

Acquisition and retention of prospecting rights and mining rights is a detailed and time-consuming process. There is no guarantee the Company will be granted the mining rights necessary to develop the prospecting rights on acceptable terms in a timely manner or at all. A wide range of factors and principles must be taken into account by the South African Minister of Mineral Resources when considering applications for mining rights. The factors taken into account include the applicant's access to financial resources, the applicant's technical ability to conduct the proposed mining operation optimally in accordance with the mining work programme, the mining must not result in unacceptable pollution, ecological degradation or damage to the environment, the applicant must provide financially and otherwise for the prescribed social and labour plan, the applicant must have the ability to comply with the relevant provisions of the Mine Health and Safety Act (South Africa) and the granting of the application must substantially and meaningfully expand opportunities for historically disadvantaged South Africans (including women) to enter the mineral and petroleum industry and to benefit from the exploitation of the nation's mineral resources, promote employment and advance the social and economic welfare of all South Africans in accordance with the approved social and labour plan. In addition, the grant of a mining or prospecting right may be disputed or challenged by third parties in the event that the correct procedures were not followed.

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Prospecting rights and mining rights are liable to be cancelled or suspended for breach of the terms of the right and non-compliance with MPRDA. The terms of the prospecting rights and mining rights include, inter alia , the prospecting work programme, mining work programme, the social and labour plan, the approved environmental management plan/programme, the provisions of the MPRDA and the Charter developed pursuant to the provisions of section 100(2) of the MPRDA.

Competition for Mining Rights

There is generally competition for prospecting and mining rights in South Africa. The Minerals and Petroleum Resources Development Act ( MPRDA ) provides that applications for mining rights and/or prospecting rights must be dealt with in the order of receipt (save for applications for the same mineral and land received on the same date, in which case preference must be given to applications from historically disadvantaged persons). In respect of new applications for prospecting rights and mining rights which the Company may wish to bring, as part of the Company’s future growth strategy, there is a risk that such applications may not be successful if other applicants have already applied for such minerals and land. There is also no guarantee that suitable deposits will be available in future.

In respect of the current prospecting rights which the Company holds, the risk of applications for mining rights not being successful is mitigated by the provisions of section 9(1)(b) of the MPRDA which provides that the holder of a prospecting right has the sole and exclusive right to apply for and be granted a mining right in respect of the relevant mineral(s) and land.

Despite the aforesaid mitigation, the requirements for the grant of a mining right are discretionary and there is a risk that such application may only be successful if such discretionary requirements are satisfied which may result in increased costs.

Exploration

Mining exploration is inherently associated with risk. Notwithstanding the experience, knowledge and careful evaluation a company brings to an exploration project there is no assurance that recoverable mineral resources will be identified. Even if identified, other factors such as technical difficulties, geological conditions, adverse changes in government policy or legislation or lack of access to sufficient funding may mean that the resource is not economically recoverable or may otherwise preclude the Company from successfully exploiting the resource.

Black Economic Empowerment and Social Development

The Company must comply and remain compliant with the South African Mining Charter, the Mining Codes and the black economic empowerment participation requirements and the approved social and labour plan in order to retain prospecting and mining rights. Any failure by the Company to satisfy and to continue to satisfy the black economic empowerment requirements of the MPRDA, the Charter the approved social and labour plan and/or the Mining Codes could jeopardise any prospecting rights held by the Company and impede the Company’s ability to acquire, develop or maintain any additional prospecting and mining rights.

The framework, targets and timetable for the entry of historically disadvantaged South Africans into the mining industry which allow such South Africans to benefit from the exploitation of mining and mineral resources, are set out in the Charter developed pursuant to the provisions of section 100(2) of the MPRDA.

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The amended Charter was published on 13 September 2010, which requires the following by 2014: (i) a minimum of 26% meaningful economic participation by historically disadvantage South Africans, (ii) that a minimum of 40% of capital goods, 70% of services and 50% of consumer goods are procured from BEE entities, being entities of which 25% + one vote is directly owned by historically disadvantage South Africans, (iii) 40% of board, senior management, middle management and junior management positions be populated by historically disadvantaged South Africans and (iv) that at least 5% of annual payroll is spent on essential skills development. Compliance with the requirements of the amended Charter may increase the costs of the Company’s operations and affect profitability.

On 29 April 2009, the Department of Mineral Resources published Codes of Good Practice for the minerals industry in South Africa, in terms of section 100(1)(b) of the MPRDA. The purpose of such Codes is to set out administrative principles in order to facilitate effective implementation of the minerals and mining legislation and enhance the implementation of the Charter. These Codes introduce general principles for measuring each of the nine elements to which the Charter relates and sets out compliance targets. Although published and theoretically in force, the Department of Mineral Resources has yet to implement these Codes. When implemented the principles contained in the Codes may affect the Company's compliance with the Charter and effectively increase the BEE requirements.

To satisfy the social development requirements of the MPRDA to obtain and retain prospecting and mining rights, the Company must obtain approval of, provide financially for and comply with the prescribed social and labour plan. This will be a cost which may affect the Company’s profitability should it derive revenue from the sale of coal in the future.

Exploration and operating costs

The proposed exploration expenditure of the Company is based on certain assumptions with respect to the method and timing of exploration and feasibility work. By their nature, these estimates and assumptions are subject to significant uncertainties and, accordingly, the actual costs may materially differ from these estimates and assumptions. Accordingly, no assurance can be given that the cost estimates and the underlying assumptions will be realised in practice.

General Risks

Share Market

Share market conditions may affect the value of the Company’s Shares regardless of the Company’s operating performance.

Share market conditions are affected by many factors including but not limited to the following:

• (a) general economic outlook;

• (b) interest rates and inflation rates;

• (c) currency fluctuations;

• (d) changes in investor sentiment toward particular market sectors;

• (e) the demand for, and supply of, capital;

• (f) terrorism or other hostilities; and

• (g) other factors beyond the control of the Company.

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Economic and Government Risks

The future viability of the Company is dependent on a number of other factors which may affect the performance of all industries, including, but not limited to, the following:

• (a) general economic conditions in South Africa and Australia and its major trading partners;

• (b) changes in Government policies, taxation and other laws;

• (c) the strength of the equity and share markets in Australia and throughout the world;

• (d) movement in, or outlook on, interest rates and inflation rates; and

• (e) natural disasters, social upheaval or war in South Africa, Australia or overseas.

Regulatory Risk

The Company’s proposed mining operations and exploration and development activities are subject to extensive laws and regulations relating to numerous matters, including various resource licence consent conditions pertaining to environmental compliance and rehabilitation, taxation, social and labour relations, health and worker safety, waste disposal, water use, protection of the environment, successful land claims and heritage matters, protection of endangered and protected species and other matters. The Company regularly requires permits from regulatory authorities to authorise the Company’s operations. These permits relate to exploration, development, production and rehabilitation activities.

Obtaining necessary permits can be a time consuming process and there is a risk that the Company may not obtain these permits on acceptable terms, in a timely manner or at all. The costs and delays associated with obtaining necessary permits and complying with these permits and applicable laws and regulations could materially delay or restrict the Company from proceeding with the development of a project or the operation or further development of a mine. Any failure to comply with applicable laws and regulations or permits, even if inadvertent, could result in material fines, penalties or other liabilities. In extreme cases, failure could result is suspension of the Company’s activities or forfeiture of mining tenements.

Future Capital Needs

Further funding of projects and potential acquisitions may be required by the Company to support its ongoing activities and operations. There can be no assurance that such funding will be available on satisfactory terms or at all. Any inability to obtain funding will adversely affect the business and financial condition of the Company and, consequently, its performance.

Insurance Risks

The Company intends to adequately insure its operations in accordance with industry practice. However, in certain circumstances, the Company’s insurance may not be of a nature or level to provide adequate insurance cover. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the business, financial condition and results of the Company.

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Insurance of all risks associated with the coal industry is not always available and where available the costs can be prohibitive.

Competition Risk

The industry in which the Company is involved is subject to domestic and global competition. Whilst the Company will undertake all reasonable due diligence in its business decisions and operations, the Company will have no influence or control over the activities or actions of its competitors, whose activities or actions may, positively or negatively, affect the operating and financial performance of the Company’s projects and business.

Environmental Health and Safety Matters

The Company’s exploration and future mining (if any) operations will be subject to extensive South African health and safety and environmental laws and regulations which could impose significant costs and burdens on the Company (the extent of which cannot be predicted). Financial provision for the estimated costs of rehabilitating disturbances caused by prospecting and mining activities must be provided to the Department of Mineral Resources over the life of the operation. These laws and regulations provide for penalties and other liabilities for violation of such standards and establish, in certain circumstances, obligations to rehabilitate current and former facilities and locations where operations are or were conducted. Permission to operate could be withdrawn temporarily where there is evidence of serious breaches of health and safety and environmental laws and regulations and even permanently in the case of extreme breaches.

Mining operations have inherent risks and liabilities associated with safety and damage to the environment and the disposal of waste products occurring as a result of coal exploration and production. The occurrence of any such safety or environmental incident could delay production or increase production costs. The Company’s proposed operations have been designed to comply with known or reasonably predictable conditions, however, it is not possible to predict all prevailing conditions that may affect the Company’s operations at all times in the future. Events, such as unpredictable rainfall may impact on the Company’s ongoing compliance with environmental legislation, regulations and licences. Significant liabilities could be imposed on the Company for damages, clean up costs or penalties in the event of certain discharges into the environment, environmental damage caused by previous operations or non-compliance with environmental laws or regulations.

The disposal of mining and process waste and mine water discharge are under constant legislative scrutiny and regulation. There is a risk that environmental laws and regulations become more onerous making the Company’s operations more expensive.

Approvals are required for land clearing and for ground disturbing activities. Delays in obtaining such approvals can result in the delay to anticipated exploration programmes or mining activities.

Approvals are required for rehabilitation or mine closure plan that establishes the Company’s obligation to rehabilitate the land after coal has been mined from the site. Rehabilitation by the Company of its exploration and mining sites takes place both during and after the active life of exploration and mining activities.

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Acquisitions

As part of its business strategy, the Company may make acquisitions of, or significant investments in, complementary companies or assets. Any such transactions would be accompanied by the risks inherent in making acquisitions of companies and assets.

Security Investments

Applicants should be aware that there are risks associated with any securities investment. Securities listed on the stock market, and in particular securities of mining and exploration companies have experienced extreme price and volume fluctuations that have often been unrelated to the operating performances of such companies. These factors may materially affect the market price of the securities regardless of the Company’s performance.

Mineral exploration and mining are speculative operations that may be hampered by circumstances beyond the control of the Company. Profitability depends on successful exploration and/or acquisition of reserves, design and construction of efficient processing facilities, competent operation and management and proficient financial management. Exploration in itself is a speculative endeavour, while mining operations can be hampered by force majeure circumstances and cost overruns for unforseen events.

Operating and Development Risks

The Company’s ability to achieve development, operating cost and capital expenditure estimates on a timely basis cannot be assured. The business of coal mining involves many risks and may be impacted by factors including geology, ore tonnes, yield, input prices (some of which are unpredictable and outside the control of the Company), overall availability of free cash to fund continuing development activities, labour force disruptions, cost overruns, changes in the regulatory environment and other unforeseen contingencies.

The operations of the Company may be disrupted by a variety of risks and hazards which are beyond the control of the Company, including geological, geotechnical and seismic factors, environmental hazards, industrial accidents, occupational and health hazards, technical failures, labour disputes, unusual or unexpected geological conditions, flooding and extended interruptions due to inclement or hazardous weather conditions, explosions and other acts of God. These risks and hazards could also result in damage to, or destruction of, future production facilities, personal injury, environmental damage, business interruption, monetary losses and possible legal liability. No assurance can be given that the Company will be able to obtain insurance coverage at reasonable rates (or at all), or that any coverage it obtains will be adequate and available to cover any such claims. In addition, the Company’s profitability could be adversely affected if for any reason its production and processing of coal or mine development is unexpectedly interrupted or slowed. Examples of such events which could have such an impact include unscheduled plant shutdowns or other processing problems, mechanical failures, the unavailability of materials and equipment, pit slope failures, unusual or unexpected geological formations, poor or unexpected geological or metallurgical conditions, interruptions to gas and electricity supplies, human error and adverse weather conditions.

The risks outlined above also mean that there can be no assurances as to the future development of a mining operation in relation to any of the Company’s projects described in this Prospectus or which the Company may acquire in future.

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No Profit To Date And Uncertainty Of Future Profitability

The Company has incurred losses in the past and it is therefore not possible to evaluate the Company’s future prospects based on past performance. The Company expects to make losses in the foreseeable future. Factors that will determine the Company’s future profitability are its ability to manage its costs, its ability to execute its development and growth strategies, the success of its activities in a competitive market, the actions of competitors and regulatory developments. As a result, the extent of future profits, if any, and the time required to achieve sustainable profitability, is uncertain. In addition, the level of any such future profitability (or loss) cannot be predicted and may vary significantly from period to period.

2.11 Directors’ Recommendation

The directors of the Company unanimously recommend that Shareholders approve the change in nature and scale of the Company’s activities to a coal exploration and production company.

It is the view of the Company’s directors that this transition will give the Company’s Shareholders the opportunity to participate in a potentially significant exploration, programme in respect of a highly prospective coal project.

In addition, the acquisition of Exsteen, and accordingly its interest in the Kangwane Project, presents an opportunity for the Company to acquire prospective and strategic coal assets and progress the transformation of the Company to a coal exploration company.

The acquisition of Exsteen, and accordingly its interest in the Kangwane Project, is the first step in the Company’s strategy designed at targeting world class discoveries and implementing intensive, targeted exploration programs.

For the above reasons, the current Directors of the Company consider that the transactions the subject of the Resolutions are in the best interests of the Company and recommend that Shareholders vote in favour of all Resolutions in relation to the change in the nature and scale of the Company’s activities and acquisition of Exsteen. The current Directors have agreed to put the Resolutions to Shareholders and have approved the information contained in this Explanatory Statement.

Each of the current Directors intends to vote their Shares in favour of each of the Resolutions.

3. RESOLUTION 3 – CONSOLIDATION OF CAPITAL

3.1 Background

Resolution 3 seeks Shareholder approval to consolidate the number of Shares and Options on issue on a 1 for 2 basis ( Consolidation ).

The purpose of the Consolidation is to implement a more appropriate capital structure for the Company going forward and enable the Company to satisfy Chapters 1 and 2 of the ASX Listing Rules and obtain re-quotation of the Shares on ASX should Shareholder approval be obtained pursuant to Resolution 3.

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3.2 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.

The ASX Listing Rules also require that the number of options on issue be consolidated in the same ratio as the ordinary capital and the exercise price amended in inverse proportion to that ratio.

3.3 Fractional Entitlements and Taxation

Not all Shareholders and Optionholders will hold that number of Shares and Options which can be evenly divided by two. Where a fractional entitlement occurs, the Directors will round that fraction up to the nearest whole Share or Option.

It is not considered that any taxation implications will exist for Shareholders or Optionholders arising from the Consolidation. However, Shareholders and Optionholders are advised to seek their own tax advice on the effect of the Consolidation and neither the Company, nor the Directors (or the Company’s advisors) accept any responsibility for the individual taxation implications arising from the Consolidation.

3.4 Holding Statements and Option Certificates

From the date of the Consolidation:

• (a) all holding statements for Shares will cease to have any effect, except as evidence of entitlement to a certain number of Shares on a postConsolidation basis; and

• (b) all certificates for unlisted Options (if any) will cease to have any effect, except as evidence of entitlement to a certain number of Options on a post-Consolidation basis.

After the Consolidation becomes effective, the Company will arrange for new holding statements for Shares and listed Options to be issued to holders of those securities and, to the extent required, new certificates for unlisted Options to be issued to Optionholders.

It is the responsibility of each Shareholder or Optionholder to check the number of Shares or Options held prior to disposal or exercise (as the case may be).

3.5 Effect on capital structure

The effect which the Consolidation will have on the capital structure of the Company is set out in the table in Section 2.7 of this Explanatory Statement.

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3.6 Timetable

The indicative timetable for the Consolidation is as follows:

Event	Date
Company requests trading halt from ASX prior to General Meeting to approve transaction	18 April 2011
General Meeting to approve transaction	18 April 2011
Suspension of trading of Company’s shares	18 April 2011
Notification to ASX of results of General Meeting	18 April 2011
Trading in reorganised securities on a deferred settlement basis would ordinarily occur*	20 April 2011
Last day to register transfers on a pre-reorganisation basis	29 April 2011
First day for Company to send notice to Shareholders of change of holdings as a result of reorganisation First day for Company to register securities on a post- reorganisation basis and for issue of holding statements	2 May 2011
Despatch date Deferred settlement market ends Last day for securities to be entered into the holders’ security holdings and for Company to send notice to each security holder	3 May 2011

• The Company’s securities will be suspended from trading on this date so deferred settlement trading will not occur.

4. RESOLUTION 4 – PLACEMENT - SHARES

4.1 General

Resolution 4 seeks Shareholder approval for the allotment and issue of up to 150,000,000 Shares (on a post-Consolidation basis) at an issue price of 20 cents per Share (on a post-Consolidation basis).

None of the subscribers pursuant to this issue will be related parties of the Company.

A summary of ASX Listing Rule 7.1 is set out in Section 1.1 above.

Approval under Resolution 4 is subject to the passing of Resolution 2 and 3 (inclusive).

The effect of Resolution 4 will be to allow the Directors to issue the Shares 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.

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4.2 Technical information required by ASX Listing Rule 7.1

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

• (a) the maximum number of Shares to be issued is 150,000,000 (on a postConsolidation basis);

• (b) the Shares will be issued no later than 3 months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur on the same date;

• (c) the issue price will be not less than 20 cents per Share (on a postConsolidation basis);

• (d) the Directors will determine to whom the Shares will be issued but these persons will not be related parties of the Company. Such participants in the placement will also be sophisticated and professional investors introduced by RBC Capital Markets and Patersons Securities Limited;

• (e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares; and

• (f) the Company intends to use the funds raised towards the continued development and exploration of the Kangwane Anthracite Project and expansion into new areas and general working capital.

5. RESOLUTION 5 – APPROVAL OF EMPLOYEE SHARE PLAN

5.1 Background

ASX Listing Rule 7.1 requires a listed company to obtain shareholder approval prior to the issue of equity securities representing more than 15% of the issued capital of that company in any rolling 12 month period.

An exception to ASX Listing Rule 7.1 is set out in ASX Listing Rule 7.2 (Exception 9) which provides that issues under an employee incentive Plan are exempt for a period of 3 years from the date on which shareholders approve the issue of securities under the Plan as an exception to ASX Listing Rule 7.1.

Resolution 5 seeks Shareholder approval for the Company to issue Shares under the “ZYL Limited Employee Share Plan” ( Employee Share Plan or ESP ) as an exception to ASX Listing Rule 7.1 in accordance with ASX Listing Rule 7.2 (Exception 9).

The Employee Share Plan is designed to motivate employees to meet agreed targets, provide continuity of service to the Company, and to increase profitability and returns to Shareholders.

As at the date of this Notice, no Shares have previously been issued under the 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.

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5.2 Terms of Employee Share Plan

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

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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 subclause (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.

6. RESOLUTION 6 – ISSUE OF OPTIONS TO SELENTIUM CAPITAL SARL

6.1 General

As announced to the ASX on 14 December 2010, the Company has executed the Call Option Deed with Exsteen Pty Ltd ( Exsteen ) and the Definitive Agreements with Siyanda Resources (Pty) Ltd ( Siyanda ) in relation to the acquisition of the Kangwane Anthracite Project ( Kangwane or the Project ).

The execution of the Call Option Deed allows the Company to acquire 100% of the issued share capital of Exsteen. Therefore, via the execution of the Definitive Agreements, the Company has the right to earn up to a 50.12% interest in the Kangwane Project in two tranches.

In accordance with the terms of an advisory agreement entered into between the Company and Selentium Capital Sarl ( Selentium Capital ) on 2 July 2010, Resolution 6 seeks Shareholder approval for the allotment and issue of up to 15,000,000 New Options (on a pre-Consolidation basis) (being 7,500,000 New Options on a postConsolidation basis) to Selentium Capital, should the Company exercise the Exsteen Option to acquire Exsteen. The New Options are exercisable at 5 cents per share (on a pre-Consolidation basis) (being exercisable at 10 cents per share on a postConsolidation basis) and have an expiry date which is equal to 4 years from the date of issue.

In the event that the ASX does not grant a waiver to the Company pursuant to ASX Listing Rule 1.1 (condition 11), the Company will alter the number of New Options to be issued to Selentium Capital such that the value remains unchanged, but such that the exercise price becomes 20 cents per share on a post-Consolidation basis.

Selentium Capital is an advisory firm located in South Africa which specialises in providing assistance to mining and exploration companies seeking to acquire projects in South Africa via joint venture arrangements and other acquisition structures. Pursuant to the advisory agreement entered into between Selentium Capital and the Company, Selentium Capital provided advisory services to the Company in connection with the acquisition of the Kangwane Project. This involved the negotiations with Siyanda and the liaison with the lawyers that were advising Siyanda.

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The New Options are being issued to Selentium Capital as consideration for the provision of advisory services in relation to the negotiations in connection with the agreement to acquire an interest in the Kangwane Project.

None of the subscribers pursuant to this issue are related parties of the Company.

The options to be issued to Selentium Capital will be held in escrow for 24 months pursuant to Appendix 9B clause 7 of the ASX Listing Rules.

A summary of ASX Listing Rule 7.1 is set out in Section 1.1 above.

The effect of Resolution 6 will be to allow the Directors to issue the New Options 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.

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:

• (a) the maximum number of New Options to be issued is 15,000,000 (on a preConsolidation basis) (being 7,500,000 New Options on a post-consolidation basis);

• (b) the New Options 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 allotment will occur on the same date;

• (c) the New Options will be allotted and issued as consideration to Selentium Capital in consideration for the provision of advisory services in connection with the negotiations regarding the acquisition of an interest in the Kangwane Project;

• (d)

• Selentium Capital is not a related party of the Company;

• (d) the terms and conditions of the New Options are set out in Schedule 1 to this Notice of Meeting;

• (e) the value of the New Options and the pricing methodology is set out in Schedule 2 to this Notice of Meeting; and

• (e) no funds will be raised from the issue of the New Options as they will be issued as consideration to Selentium Capital for the provision of advisory services in connection with the Kangwane Project.

7. RESOLUTION 7 – RE-ELECTION OF DIRECTOR – DAVID GREENWOOD

Clause 13.4 of the Constitution allows the Directors to appoint at any time a person to be a Director as an addition to the existing Directors, but only where the total number of Directors does not at any time exceed the maximum number specified by the Constitution.

Any Director so appointed holds office only until the next following annual general meeting and is then eligible for re-election.

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David Greenwood will retire in accordance with clause 13.4 of the Constitution and being eligible seeks re-election.

8. ENQUIRIES

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

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ANNEXURE A

The pro-forma balance sheet of the Company following completion of the change of activities, the Placement and other matters is set out below:

	Reviewed financial	Pro-forma financial
	position as at	position as at
	31/12/2010	10/03/2011
	$	$
CURRENT ASSETS
Cash and Cash Equivalents	6,742,553	35,936,312
Trade and other receivables	81,139	79,440
TOTAL CURRENT ASSETS	6,823,692	36,015,752
NON-CURRENT ASSETS
Mineral Exploration and Evaluation	1,156,092	1,156,092
Exsteen Pty Ltd - Wholly owned subsidiary	-	1,300,000
Plant and Equipment	11,101	11,309
TOTAL NON-CURRENT ASSETS	1,167,193	2,467,401
TOTAL ASSETS	7,990,885	38,483,153
CURRENT LIABILITIES
Trade and other payables	255,022	245,145
Provisions	5,466	(3,163)
TOTAL CURRENT LIABILITIES	260,488	241,982
TOTAL LIABILITIES	260,488	241,982
NET ASSETS	7,730,397	38,241,171
EQUITY
Contributed equity	23,262,717	53,807,717
Reserves	38,400	38,400
Accumulated losses	(15,570,720)	(15,604,946)
TOTAL EQUITY	7,730,397	38,241,171

Notes:

1. Cash and cash equivalents have been calculated net of brokerage fees of 5% payable on the Placement.

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GLOSSARY

$ means Australian dollars.

Associate has the meaning ascribed to it in Part 1.2 Division 2 of the Corporations Act.

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.

Call Option Deed means the call option deed entered into by the Company to acquire 100% of the issued capital in Exsteen Pty Ltd.

Company or ZYL means ZYL Limited (ACN 008 720 223).

Consolidation has the meaning given to it in Section 3.1.

Constitution means the Company’s constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Definitive Agreements means the Definitive Transaction Agreements executed between the Company, Exsteen Pty Ltd, Siyanda Resources (Pty) Ltd, Double Ring Mineral Resources (Pty) Ltd and Opes Capital (Pty) Ltd.

Directors means the current directors of the Company.

ESP or Employee Share Plan means the ZYL Limited Employee Share Plan

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

Exsteen means Exsteen Pty Ltd (ACN 137 981 134).

Exsteen Option means the option granted to the Company to acquire 100% of the issued capital in Exsteen pursuant to the MoU and Call Option Deed.

Exsteen Vendor means the vendor of Exsteen.

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

Kangwane Project means the Kangwane Anthracite Coal Project located in the Mpumalanga region of South Africa. The Kangwane Project is the subject of the MoU.

MoU has the meaning given to it in Section 2.2.

New Options means the New Options to be issued to Selentium Capital Sarl pursuant to Resolution 6 with the terms and conditions set out in Schedule 1 of this Notice of Meeting.

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.

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Option holder means a holder of an Option as the context requires.

Patersons means Patersons Securities Limited (ACN 008 896 311).

Participants has the meaning given to it in Section 5.2.

Placement means the share placement proposed to be undertaken pursuant to Resolution 4, as outlined in Section 4.1.

Plan Shares has the meaning given to it in Section 5.2.

Proxy Form means the proxy form accompanying the Notice.

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

Restriction Conditions has the meaning given to it in Section 5.2.

Selentium Capital means Selentium Capital Sarl.

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

Shareholder means a holder of a Share.

Siyanda means Siyanda Resources (Proprietary) Limited.

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

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SCHE DULE 1 – TERMS AND CONDI TIONS OF NEW OPTIONS

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

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

• (b) The New Options will expire at 5.00pm (WST) on the date which is 48 months from the date of issue ( 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 New Option will be $0.05 (on a preConsolidation basis) (being exercisable at 10 cents per share on a post-Consolidation basis) ( Exercise Price ).

• (d) The New Options held by each Option holder 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 Option holder may exercise their New Options by lodging with the Company, before the Expiry Date:

• (i) a written notice of exercise of New Options specifying the number of New 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 New Options specified in the Exercise Notice.

• (h)

• The New Options are not transferable.

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

• (j) The Company will not apply for quotation of the New Options on ASX. However, The Company will apply for quotation of all Shares allotted pursuant to the exercise of the New 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 Option holder 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 New Options and Option holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the New Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 7 Business Days after the issue is announced. This will give Option holders the opportunity to exercise their New Options prior to the date for determining entitlements to participate in any such issue.

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

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SCHE DULE 2 – VALUATION OF NEW OPTIONS

The New Options to be issued to Selentium Capital pursuant to Resolution 4 have been valued by an independent consultant to the Company who was considered to have an appropriate level of skill and experience to perform such a valuation.

Using the theoretical Black & Scholes option model and based on the assumptions set out below, the New Options were ascribed a value range, as follows:

Tranche 1 Options:

Tranche 1 Options:
Assumptions:
Valuation date	10 March 2011
Market price of Shares	13.0 cents
Exercise price (pre-Consolidation basis)	5 cents (10 cents post-Consolidation basis)
Expiry date		18 April 2015
Risk free interest rate		4%
Volatility	40%	50%	60%
Indicative value per Option	8.9 cents	9.2 cents	9.5 cents
Total Value of Options	$1,335,000	$1,380,000	$1,425,000

Note: The valuation ranges noted above are not necessarily the market prices that the New Options could be traded at and they are not automatically the market prices for taxation purposes.

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PROXY FORM

APPOINTMENT OF PROXY ZYL LIMITED ACN 008 720 223

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 10 am (WST), on 18 April 2011 at The Country Women’s Association of Western Australia (Inc), 1176 Hay Street, West Perth WA 6005, 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 7 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 7 and that votes cast by the Chair of the General Meeting for Resolutions 1 to 7 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 7 and your votes will not be counted in calculating the required majority if a poll is called on Resolutions 1 to 7.

OR

Voting on Business of the General Meeting

FOR AGAINST ABSTAIN

Resolution 1 – Ratification of Prior Placement of Shares Resolution 2 – Change to Nature and Scale of Activities Resolution 3 – Consolidation Resolution 4 – Placement – Shares Resolution 5 – Approval of Employee Share Plan Resolution 6 – Issue of Options to Selentium Capital Sarl Resolution 7 – Re-election of Director – David Greenwood

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 Secretary Director Director/Company Secretary	% 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 Secretary Director Director/Company Secretary	%
		____
	Director/Company 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.

2.

( 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 later than 10 am (WST) on 15 April 2011.

Proxy Forms received later than this time will be invalid.

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