RED METAL LIMITED — Proxy Solicitation & Information Statement 2012

Dec 30, 2012

Red Metal Limited

ACN 103 367 684

NOTICE OF GENERAL MEETING

– and –

PROXY FORM

DATE AND TIME OF MEETING: 31 January 2013 at 11.00am

VENUE:

Level 15, 323 Castlereagh Street Sydney NSW 2000, Australia

These documents should be read in their entirety. If shareholders are in any doubt as to how they should vote, they should seek advice from their accountant, solicitor or other professional advisor.

NOTICE OF MEETING

NOTICE IS HEREBY GIVEN that a General Meeting (“Meeting”) of the members of Red Metal Limited ACN 103 367 684 (“Red Metal” or “the Company”) will be held on Thursday, 31 January 2013 at 11.00am at the Level 15, 323 Castlereagh Street, Sydney NSW 2000, Australia.

The enclosed Explanatory Memorandum accompanies and forms part of this Notice of Meeting.

AGENDA

ORDINARY BUSINESS

1. Resolution 1 – Ratification of Prior Issue of Options

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

"That, for the purpose of ASX Listing Rule 7.4 and for all other purposes, this meeting ratifies the issue of 1,475,000 Options, on the terms and conditions set out in the Explanatory Memorandum”.

Voting Exclusion applies – refer below.

2. Resolution 2 – Ratification of Prior Share Issue

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

"That, for the purpose of ASX Listing Rule 7.4 and for all other purposes, this meeting ratifies the issue of 19,444,445 Shares, on the terms and conditions set out in the Explanatory Memorandum”.

Voting Exclusion applies – refer below.

3. Resolution 3 – Approval for the Issue of Director Options to Mr Russell Barwick

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

“ That, for the purposes of ASX Listing Rule 10.11, Chapter 2E of the Corporations Act 2001 and all other purposes, the Directors be authorised to issue up to a maximum of 300,000 Director Options to Mr Russell Barwick or his nominee, the details of which are set out in the accompanying Explanatory Memorandum .”

Voting Exclusion applies – refer below.

4. Resolution 4 – Approval for the Issue of Director Options to Mr Robert Rutherford

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

“ That, for the purposes of ASX Listing Rule 10.11, Chapter 2E of the Corporations Act 2001 and all other purposes, the Directors be authorised to issue up to a maximum of 600,000 Director Options to Mr Robert Rutherford or his nominee, the details of which are set out in the accompanying Explanatory Memorandum .”

Voting Exclusion applies – refer below.

5. Resolution 5 – Approval for the Issue of Director Options to Mr Joshua Pitt

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

“ That, for the purposes of ASX Listing Rule 10.11, Chapter 2E of the Corporations Act 2001 and all other purposes, the Directors be authorised to issue up to a maximum of 300,000 Director Options to Mr Joshua Pitt or his nominee, the details of which are set out in the accompanying Explanatory Memorandum .”

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Voting Exclusion applies – refer below.

VOTING EXCLUSIONS

Voting restrictions apply to Resolutions 1 and 2 under the ASX Listing Rules and to Resolutions 3, 4 and 5 under both the ASX Listing Rules and the Corporations Act.

In respect of Resolutions 1 and 2, 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 will not disregard a vote if:

• (i) 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

• (ii) 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.

In respect of Resolutions 3, 4 and 5, a vote must not be cast (in any capacity) by or on behalf of any of the following persons:

• (a) a member of the Key Management Personnel; or

• (b) a Closely Related Party of such a member.

However, a person (the Voter ) described above may vote on this Resolution as a proxy vote if the vote is not cast on behalf of a person described above and either:

• (a) the voter is appointed as a proxy by writing that specifies the way the proxy is to vote on the Resolution; or

• (b) the voter is the Chair and the appointment of the Chair as proxy:

• (i) does not specify the way the proxy is to vote on this Resolution; and

• (ii) expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel for the Company, or if the Company is part of a consolidated entity, for the entity.

Additionally, as required by the ASX listing rules, the Company will disregard any votes cast on Resolutions 3, 4 and 5 by any director of the Company and any of their associates. However the Company need not disregard a vote if:

• (i) 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

• (ii) 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.

PROXIES

In accordance with section 249L of the Corporations Act 2001, members are advised that:

• each member has a right to appoint a proxy;

• the proxy need not be a member of the Company;

• a member who is entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If no proportion or number is specified, then in accordance with section 249X(3) of the Corporations Act 2001, each proxy may exercise half of the votes.

In accordance with section 250BA of the Corporations Act 2001, the Company specifies the following information for the purposes of receipt of proxy appointments:

LEVEL 15, 323 CASTLEREAGH STREET By mail to: SYDNEY, NSW, 2000 AUSTRALIA

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By facsimile to: (61 2) 9281 5747

Each member entitled to vote at the Meeting has the right to appoint a proxy to attend and vote at the Meeting on his behalf. The member may specify the way in which the proxy is to vote on each resolution or may allow the proxy to vote at his discretion. The instrument appointing the proxy must be received by the Company at the address specified above at least 48 hours before the time notified for the Meeting . Members who do not plan to attend the Meeting are encouraged to complete and return a proxy form.

The Meeting Chairman intends to vote all undirected proxies in favour of the (relevant) resolution(s).

In accordance with regulation 7.11.37 of the Corporations Regulations 2001, the Company determines that ordinary shares held as at 5.00pm (AEDT) on 29 January 2013 will be taken, for the purposes of the Meeting, to be held by the persons who held them at that time.

BY ORDER OF THE BOARD

Patrick Flint Company Secretary 20 December 2012

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RED METAL LIMITED (ACN 103 367 684)

EXPLANATORY MEMORANDUM

1. INTRODUCTION

This Explanatory Memorandum has been prepared for the information of shareholders of Red Metal Limited (“ Red Metal ” or the “ Company ”) in connection with the business to be conducted at the General Meeting (“Meeting”) to be held on Thursday, 31 January 2013 at 11.00am at the Level 15, 323 Castlereagh Street, Sydney NSW 2000, Australia.

This Explanatory Memorandum should be read in conjunction with the accompanying Notice of Meeting.

2. RESOLUTION 1 - Ratification of Prior Issue of Options

General

On 30 November 2012, the Company issued a total of 1,475,000 Options to staff and consultants of the Company in recognition of their efforts and as an incentive for future activities ( Staff Options ). None of the parties that were issued Staff Options were related parties of the Company. The Staff Options were issued under the 15% placement capacity under the Listing Rules.

Resolution 1 seeks Shareholder ratification pursuant to ASX Listing Rule 7.4 of this issue. By ratifying this issue, the Company will retain 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.

Specific information required by ASX Listing Rule 7.5

For the purposes of ASX Listing Rule 7.5, information is provided as follows:

• (i) A total of 1,475,000 Staff Options were issued to technical and administrative staff and consultants of the Company on 30 November 2012.

• (ii) The Staff Options were not issued for cash consideration and no funds were raised from their issue. The Staff Options were issued in recognition of efforts to date and as an incentive for future activities.

(iii) The proceeds from the exercise of the Staff Options will be used for working capital purposes.

• (iv) The terms and conditions of the Staff Options are set out in Schedule 1 of this Explanatory Memorandum.

A voting exclusion statement is included in the Notice.

3. RESOLUTION 2 – Ratification of Prior Share Issue

On 21 November 2012 the Company announced that that it had completed the placement of 19,444,445 shares at an issue price of $0.18 each to raise $3.5 million. The shares were placed to selected Australian institutions and professional investors. Veritas Securities Limited acted as lead manager to the issue. The net proceeds of this placement will be used to fund drilling on the Maronan silver-lead project and exploration of the Company’s other projects, and also for working capital purposes.

The placement was completed under the ASX Listing Rule 7.1 15% discretionary limit for new issues of securities (to the extent of 7,111,698 shares), and also under ASX Listing Rule 7.1A 10% discretionary limit for new issues of securities (to the extent of 12,442,747 shares). Consequently, Resolution 2 seeks shareholder ratification for the allotment and issue of the 19,444,445 shares that comprise the placement, which will have the effect of refreshing the Company’s 15% limit for new issues of securities under ASX Listing Rule 7.1, and also the Company’s 10% limit for new issues of securities under ASX Listing Rule 7.1A.

Specific information required by ASX Listing Rule 7.5

For the purposes of ASX Listing Rule 7.5, information is provided as follows:

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• (i) A total of 19,444,445 shares were issued on 21 November 2012.

• (ii) The issue price of the shares was A$0.18 each.

• (iii) The shares are fully paid ordinary shares in the Company.

• (iv) The shares have been issued to Australian institutions and professional investors, including certain existing shareholders of the Company (none of whom are related parties of the Company). Veritas Securities Limited acted as lead manager to the issue.

• (v) The funds raised from the share issue will be used to fund drilling on the Maronan silver-lead project and exploration of the Company’s other projects, and also for working capital purposes.

A voting exclusion statement is included in the Notice.

4. RESOLUTIONS 3, 4 AND 5 – Issue of Options to Directors

Shareholder approval is being sought for the issue of options to the following directors:

	Number of Director Options
Russell Barwick –Non-executiveChairman	300,000
Robert Rutherford – ManagingDirector	600,000
Joshua Pitt – Non-executive Director	300,000

The options to be issued to directors will expire on 31 January 2016 with an exercise price of 33 cents each. Detailed terms and conditions of the Director Options are provided in Appendix 2.

The purpose of the issue of options is to provide Messrs Barwick, Rutherford and Pitt an incentive for future services. The issue of options as part of the remuneration packages of directors is an established practice of junior public listed companies and, in the case of the Company, has the benefit of conserving cash whilst properly rewarding each of the Directors. Whilst the Directors to whom the Directors Options are to be issued do not make a recommendation as they each have a personal interest in the proposed issue, they believe that the quantum of Directors Options together with the cash fees to which they are entitled are reasonable in the context of the size and complexity of the Company’s activities and also by comparison to other similar sized junior explorers.

The ASX Listing Rules and the Corporations Act 2001 (in certain circumstances) require shareholder approval to be obtained for the issue of options to directors. Accordingly, approval for the issue of the Director Options is sought in accordance with the provisions of Listing Rules 7.1 and 10.11 of the ASX Listing Rules (“Listing Rules”) and Part 2E of the Corporations Act 2001. If approval for the issue of the Director Options is obtained under Listing Rule 10.11, approval is not required under Listing Rule 7.1.

(A) Requirement for Shareholder Approval

The proposed Resolutions 3, 4 and 5, if passed, will issue securities to and confer financial benefits upon Messrs Barwick, Rutherford and Pitt who are directors of the Company and the Company seeks to obtain member approval in accordance with the requirements of Chapter 2E of the Corporations Act and ASX Listing Rule 10.11. Accordingly, information required under the Listing Rules and the Corporations Act as well as information that will properly enable shareholders to consider Resolutions 3, 4 and 5 is presented below.

(B) Potential Benefits – Issue of Director Options

If the Director Options are issued pursuant to the proposed Resolutions 3, 4 and 5, the Company considers the following benefits arise:

• (i) Messrs Barwick, Rutherford and Pitt will have a vested interest in the affairs of the Company, as the holders of Director Options and as shareholders upon exercise of the Director Options, particularly as the Director Options are not transferable.

• (ii) The issue of the Director Options to Messrs Barwick, Rutherford and Pitt is a non-cash form of remuneration, thus conserving the Company’s cash reserves. The issue enables the Company to provide its

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Directors with reward for services provided and/or as an incentive for future services they will provide to the Company to further progress the Company in a cost-effective manner, as opposed to other forms of remuneration, such as cash.

The Directors are cognisant of the ASX Corporate Governance Council’s Guideline that non-executive directors should not be awarded options as part of their remuneration package. However, Mr Rutherford considers that the proposed grant of options to the non-executive Chairman, Russell Barwick, and to the non-executive Director, Joshua Pitt, is appropriate in the circumstances and it is a practice that a large number of junior listed companies adopt. Mr Barwick’s cash remuneration of $48,000 per annum and Mr Pitt’s cash remuneration of $24,000 per annum is considered modest in comparison to peers. In recognition of the Company’s circumstances where there is no operating revenue and where the Company is dependent on raising new equity capital from time to time to carry on its activities, an award of options in lieu of cash is justified.

• (iii) The exercise of the Director Options will provide working capital for the Company at no significant cost. If all of the proposed Director Options are ultimately exercised, an amount of $396,000 would be raised.

(C) Potential Costs – Issue of Director Options

The Director Options are to be granted for nil consideration and thus no funds will be raised by the Company in granting those options.

The potential cost to the Company of the issue of an aggregate of 1,200,000 Director Options to Messrs Barwick, Rutherford and Pitt is that there will be a dilution of the issued share capital of the Company if the Director Options are exercised. Based on 143,271,919 ordinary shares presently on issue, the exercise of the proposed Director Options (1.2 million) would have a dilution effect of approximately 0.8% (with a corresponding increase in cash reserves of $396,000).

The price of the Company’s shares quoted on the ASX over the past 12 months has ranged from a low of 9.5 cents on 15 and 18 June 2012 to a high of 42 cents on 10 December 2012, with a closing price of 31.5 cents on 19 December 2012, the date on which this Explanatory Memorandum was prepared.

Accounting standard, AASB 2 “Share Based Payments” requires that these payments shall be measured at the more readily determinable fair value of the equity instrument. Under the accounting standards this amount will be expensed in the Income Statement – ie the value attributed to the Director Options (See Section D below) will be expensed in the profit and loss account of the Company. Where the grant date and the vesting date are different the total expenditure calculated will be allocated between the two dates taking into account the terms and conditions attached to the instruments and the counterparties as well as management’s assumptions about probabilities of payments and compliance with and attainment of the set out terms and conditions.

(D) Valuation of Director Options

The Company does not have any ASX quoted options with identical or similar terms and conditions as these proposed Director Options and as such there is no comparable market value. Each Director Option grants the holder a right to be allotted one Share upon exercise of the Director Option and payment of the exercise price of the Director Option. Accordingly, the Director Options arguably have a value at the date of their grant. The Director Options may acquire future value dependent upon the extent to which the market value of Shares exceeds the exercise price of the Director Options during the term of the Director Options.

As a general proposition, options to subscribe for ordinary fully paid shares in a company have value. Various factors impact upon the value of options including things such as:

• (i) the period outstanding before the expiry date of the options;

• (ii) the exercise price of the options relative to the underlying price or value of the securities into which they may be converted;

• (iii) the proportion of the issued capital as expanded consequent upon exercise represented by the shares issued upon exercise (ie whether or not the shares that might be acquired upon exercise of the options represent a controlling or other significant interest);

• (iv) the value of the shares into which the options may be converted; and

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(v) whether or not the options are listed (ie readily capable of being liquidated).

There are various formulae which can be applied to determining the theoretical value of options (including the formula known as the Black-Scholes Model option valuation formula).

The Company has estimated the value of the Director Options using the Black-Scholes Model, which is the most widely used and recognised model for pricing options. The value of an option calculated by the Black-Scholes Model is a function of the relationship between a number of variables, being the share price, the exercise price, the time to expiry, the risk-free interest rate and the volatility of the Company’s underlying share price.

Inherent in the application of the Black-Scholes Model are a number of inputs, some of which must be assumed. The data relied upon in applying the Black-Scholes Model in the present case were as follows:

• (i) an exercise price of the Director Option of 33 cents;

• (ii) length of period prior to conversion being 3 years (January 2013 to January 2016). For the purposes of the analysis it was assumed that the Director Options would not be exercised any earlier than the expiration date, being 31 January 2016;

• (iii) the Company has not forecast any future dividend payments. For the purposes of the analysis, it was assumed that the Company’s share price is “ex-dividend”;

• (iv) the risk free rate used for the purposes of the analysis is the Reserve Bank of Australia cash rate as at 12 December 2012 being 3.00%;

• (v) a volatility measure of 90%; and

• (vi) the valuation of the Company’s share price being 31.5 cents, being the value of the Company’s share price as at 19 December 2012.

Using the Black-Scholes Model and the assumed data outlined above, the directors have valued the Director Options as at 19 December 2012 at 18.1 cents each.

Using this analysis (18.1 cents attributed to each Director Option), the total value of the proposed Director Options to be granted to each of Messrs Barwick, Rutherford and Pitt is as follows:

Mr Barwick Mr Rutherford Mr Pitt TOTAL	Number of Director Options Total Value of Director Options 300,000 $54,300 600,000 $108,600 300,000 $54,300
	1,200,000 $217,200

(E) Identifying the Related Parties

The related parties to whom Resolutions 3, 4 and 5 would permit financial benefits to be given are the directors of the Company, or their nominees, being Messrs Barwick (in respect of Resolution 3), Rutherford (in respect of Resolution 4) and Pitt (in respect of Resolution 5).

(F) Financial Benefit

The nature of the financial benefit is:

• (i) in respect of Resolution 3, the grant of 300,000 Director Options to Mr Barwick for no consideration;

• (ii) in respect of Resolution 4, the grant of 600,000 Director Options to Mr Rutherford for no consideration; and

• (iii) in respect of Resolution 5, the grant of 300,000 Director Options to Mr Pitt for no consideration.

(G) Related Parties' Existing Interest

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Excluding the Director Options the subject of Resolutions 3, 4 and 5, the current interests of Messrs Barwick, Rutherford and Pitt (and entities associated with them) in the Company’s securities are as follows:

Director	Shares	Options (Note 1)
Mr Barwick	2,6202,400	500,000
Mr Rutherford	10,270,002	1,000,000
Mr Pitt	13,176,404	500,000

Note 1 – These options were granted in November 2010 to Messrs Barwick, Rutherford and Pitt, and are exercisable at 22 cents each on or before 31 October 2013.

(H) Directors' Emoluments

Other than the Director Options, the directors' current remuneration is as follows:

Director	Position	Annual Remuneration
Mr Barwick	Non - Executive Chairman	$48,000
Mr Rutherford	Managing Director	$239,800
Mr Pitt	Non - Executive Director	$24,000

(I) Directors' Recommendation

Messrs Barwick, Rutherford and Pitt express no opinion and make no recommendation in respect of the resolutions that apply specifically to them. Otherwise, each of the Directors recommend that shareholders approve Resolutions 3, 4 and 5 for the reasons set out in this Explanatory Memorandum, including:

• (i) Messrs Barwick, Rutherford and Pitt will have a vested interest in the affairs of the Company, as existing shareholders and the holders of the Director Options; and

• (ii) The issue of Directors Options to Messrs Barwick, Rutherford and Pitt is a non-cash form of remuneration, thus conserving the Company’s cash reserves. The issue enables the Company to provide its Directors with reward for services provided and provide an incentive with respect to future services they will provide to the Company to further progress the Company,

and on the basis that, in their opinion, the proposed issue of Director Options is fair and reasonable having regard to the terms of the Director Options.

(J) Other Information

No stamp duty will be payable in respect of the grant of the Director Options. No GST will be payable by the Company in respect of the grant of the Director Options (or if it is then it will be recoverable as an input credit). Payroll tax at normal rates may be payable in the future by the Company, subject to the exercise of the Director Options.

Subject to receipt of shareholder approval, the options will be granted no later than a month after the Meeting.

Other than the information above and otherwise set out in this Explanatory Memorandum and the accompanying cover letter, the directors believe that there is no other information known to the Company or its directors that will be reasonably required by shareholders to make a decision in relation to benefits contemplated by the proposed Resolutions 3, 4 and 5.

Cautionary Notes

The Directors recognise and acknowledge the importance of Shareholders making their decision on the basis of the best possible information. However, once this material for the Notice of Meeting and Explanatory Memorandum is prepared and despatched to Shareholders, the Company has no legal obligation to continuously update the content of this material nor is it practical and logistically possible to do that and inform each Shareholder individually.

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By its nature, the mining industry is subject to numerous risks and the Company’s share price is affected by a range of factors. From the time of preparing this material to the date of the Meeting, the Company’s share price may go up or down. The Company will continue to comply with its continuous disclosure obligations and make appropriate announcements as required by applicable securities laws.

Shareholders are strongly encouraged to keep track of any announcements that the Company may make and of the Company’s share price up to the date of the Meeting as that information may have an effect on the calculations and the data that is provided in this Notice and the Explanatory Memorandum. If you do not understand the effect of such information, you should consult your professional advisor.

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GLOSSARY

General Meeting or GM or Meeting means the meeting convened by the notice.

ASX means ASX Limited.

ASX Listing Rules means the Listing Rules of ASX.

Board means the current board of directors of the Company.

Closely Related Party of a member of the Key Management Personnel means:

• a) a spouse or child of the member;

• b) a child of the member’s spouse;

• c) a dependent of the member or the member’s spouse;

• d) anyone else who is one of the member’s family and may be expected to influence the member, or be influenced by the member, in the member’s dealing with the entity;

• e) a company the member controls; or

• f) a person prescribed by the Corporations Regulations 2001 (Cth ).

Company means Red Metal Limited (ACN 103 367 684).

Constitution means the Company's constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Directors mean the current directors of the Company.

Director Options means an option to acquire a Share on the terms and conditions set out in Schedule 2 (for the purposes of Resolutions 3, 4 and 5).

AEDT means Australian Eastern Standard Daylight Savings Time as observed in Sydney, New South Wales.

Explanatory Memorandum means the explanatory memorandum accompanying the Notice.

Key Management Personnel has the same meaning as in the accounting standards and broadly includes those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, including any director (whether executive or otherwise) of the Company.

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

Options means an option to acquire a Share on the terms and conditions set out in Schedule 1 (for the purposes of Resolution 1).

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.

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

Shareholder means a holder of a Share.

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SCHEDULE 1

Terms of issue applicable to Options to be issued under Resolution 1

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

• 1) Each Option entitles the holder to subscribe for and be allotted one fully paid ordinary share in the Company upon payment of the exercise price of $0.33 per share until 30 November 2015 (the Expiry Date).

• 2) The Options vest as follows;

• First (1[st] ) Tranche of 737,500 Options – 30 November 2012.

• Second (2[nd] ) Tranche of 737,500 Options – 30 November 2013.

• 3) The options will lapse upon the expiration of 60 days if the holder ceases to be an employee and/or consultant to the Company.

• 4) Shares will be allotted and issued pursuant to the exercise of Options not more than 10 business days after receipt of a properly executed notice of exercise and payment of the requisite application moneys.

• 5) The Options are not transferable except to an offeror under a takeover offer or under a scheme of arrangement proposed by the Company, or except with the consent of the Directors of the Company in circumstances where the proposed transfer is to an entity wholly owned and controlled by the optionholder.

• 6) All Shares issued upon exercise of the Options will rank pari passu in all respects with the Company's then existing fully paid ordinary shares. The Company will apply for Official Quotation by the ASX of all Shares issued upon exercise of the Options.

• 7) There are no participating rights or entitlements inherent in the Options and holders will not be entitled to participate in new issues of capital offered to shareholders during the currency of the Options. However, the Company will send a notice to each holder of Options at least nine business days before the record date for any proposed pro-rata issue of capital. This will give optionholders the opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue.

• 8) There is no right to a change in the exercise price of the Options or to the number of Shares over which the Options are exercisable in the event of a new issue of capital (other than a bonus issue) during the currency of the Options.

• 9) In the event of any reorganisation of the issued capital of the Company on or prior to the Expiry Date, the rights of an optionholder will be changed to the extent necessary to comply with the applicable ASX Listing Rules in force at the time of the reorganisation.

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SCHEDULE 2

Terms of issue applicable to Director Options to be issued under Resolutions 3, 4 and 5

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

• 1) Each Director Option entitles the holder to subscribe for and be allotted one fully paid ordinary share in the Company upon payment of the exercise price of $0.33 per share until 31 January 2016 (the Expiry Date).

• 2) The Director Options vest as follows;

• First (1[st] ) Tranche of 1,000,000 Director Options – from the date of issue.

• Second (2[nd] ) Tranche of 1,000,000 Director Options – 31 January 2014.

• 3) Shares will be allotted and issued pursuant to the exercise of Director Options not more than 10 business days after receipt of a properly executed notice of exercise and payment of the requisite application moneys.

• 4) The Director Options are not transferable except to an offeror under a takeover offer or under a scheme of arrangement proposed by the Company, or except with the consent of the Directors of the Company in circumstances where the proposed transfer is to an entity wholly owned and controlled by the optionholder.

• 5) All Shares issued upon exercise of the Director Options will rank pari passu in all respects with the Company's then existing fully paid ordinary shares. The Company will apply for Official Quotation by the ASX of all Shares issued upon exercise of the Director Options.

• 6) There are no participating rights or entitlements inherent in the Director Options and holders will not be entitled to participate in new issues of capital offered to shareholders during the currency of the Director Options. However, the Company will send a notice to each holder of Director Options at least nine business days before the record date for any proposed pro-rata issue of capital. This will give optionholders the opportunity to exercise their Director Options prior to the date for determining entitlements to participate in any such issue.

• 7) There is no right to a change in the exercise price of the Director Options or to the number of Shares over which the Director Options are exercisable in the event of a new issue of capital (other than a bonus issue) during the currency of the Director Options.

• 8) In the event of any reorganisation of the issued capital of the Company on or prior to the Expiry Date, the rights of an optionholder will be changed to the extent necessary to comply with the applicable ASX Listing Rules in force at the time of the reorganisation.

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Red Metal Limited (ACN 103 367 684)

PROXY FORM

Shareholder

Name and address of shareholder of Red Metal Limited. Name

Address

Appoint a Proxy to vote on your behalf

I/We being a member/s of Red Metal Limited and entitled to attend and vote hereby appoint

==> picture [36 x 37] intentionally omitted <==

The Chairman of the Meeting OR (mark with an “X”)

==> picture [181 x 36] intentionally omitted <==

If you are not appointing the Chairman of the Meeting as your proxy please write here the full name of the individual or body corporate (excluding your own name) you are appointing 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, and subject to the relevant laws as the proxy sees fit, at the General Meeting to be held on Thursday, 31 January 2013 at 11.00am at the Level 15, 323 Castlereagh Street, Sydney, NSW 2000, Australia, and at any adjournment thereof.

Important Note for Resolution 3: If the Chairman of the Meeting is your proxy and you have not directed the Chairman how to vote on Resolution 3 below, please mark the box in this section. If you do not mark this box and you have not otherwise directed your proxy how to vote on Resolution 3, the Chairman of the Meeting will not cast your votes on Resolution 3 and your votes will not be counted in computing the required majority if a poll is called on this Resolution. The Chairman of the meeting intends to vote undirected proxies in favour of Resolution 3.

I / We acknowledge that the Chairman of the Meeting may exercise my/our proxy even if the Chairman has an interest in the outcome of Resolution 3 and that votes cast by the Chairman, other than as proxy holder, would be disregarded because of that interest.

Important Note for Resolutions 4 and 5: Where shareholders have appointed the Chairman of the Meeting as their proxy, the Chairman will vote in favour of Resolutions 4 and 5 unless the shareholder has expressly indicated a different voting intention. This is so notwithstanding that the resolutions are connected directly or indirectly with the remuneration of members of key management personnel, which includes the Directors of the Company.

Voting directions to your proxy – please mark  to indicate your directions ( If you mark the Abstain box for an item, you are directing your proxy not to vote on your behalf on a show of hands or a poll and your votes will not be counted in computing the required majority.)

For Against Abstain

Resolution 1 – Ratification of Prior Issue of Options Resolution 2 – Ratification of Prior Share Issue

Resolution 3 – Approval or Issue of Director Options to Russell Barwick Resolution 4 – Approval or Issue of Director Options to Robert Rutherford Resolution 5 – Approval or Issue of Director Options to Joshua Pitt

The Chairman of the Meeting intends to vote all available proxies in favour of each item of business

PLEASE SIGN HERE - This section must be signed in accordance with the instructions overleaf to enable your directions to be implemented.

Individual or Securityholder 1 Securityholder 2 Securityholder 3 Sole Director and Director Director/Company Secretary Sole Company Secretary

Dated: //2013

RED METAL LIMITED ACN 103 367 684

Instructions for Completing ‘Appointment of Proxy’ Form

1.

( Appointing a Proxy ): A member entitled to attend and vote at a 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. The direction may specify the proportion or number of votes that the proxy may exercise by writing the percentage or number of Shares next to the box marked for the relevant item of business. Where a box is not marked the proxy may vote as they choose. 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. In addition, if a representative of a company is appointed pursuant to Section 250D of the Corporations Act to attend the Meeting, the documentation evidencing such appointment should be produced prior to admission to the Meeting. A form of a certificate evidencing the appointment may be obtained from the Company.

4.

• ( 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 Red Metal Limited, Level 15, 323 Castlereagh Street, Sydney NSW 2000; or

• (b) facsimile to the Company on facsimile number +61 2 9281 5747,

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

Proxy forms received later than this time will be invalid.