SUNSHINE METALS LIMITED — Proxy Solicitation & Information Statement 2006

May 23, 2006

NOTICE OF GENERAL MEETING AND EXPLANATORY STATEMENT

General Meeting to be held at The Pilbara Room, Level C, Sheraton Perth Hotel, 207 Adelaide Terrace, Perth, Western Australia on Friday, 23 June 2006 commencing at 10.00am (WST)

PELICAN RESOURCES LIMITED

ABN 12063 388 821

This Notice of General Meeting and Explanatory Statement should be read in its entirety. If shareholders are in doubt as to how they should vote, they should seek advice from their accountant, solicitor or other professional adviser without delay.

Corporate Directory

Directors	John Palermo John Hills Daryl Lynton-Brown
Secretary	John Palermo
Registered Office	Level 1, 284 Oxford Street Leederville WA 6007 Telephone: (08) 9242 1166 Facsimile: Email: Website:	(08) 9443 2859 information@pelicanresources.com.au www.pelicanresources.com.au
Auditor	Stanton Partners 1st Floor, 1 Havelock Street West Perth WA 6005
Lawyers	Pullinger Readhead Lucas Commercial Lawyers Level 2 Fortescue House 50 Kings Park Road WEST PERTH WA 6005 Telephone: Facsimile: Website:	$(08)$ 9320 4999 $(08)$ 9320 4900 www.prllawyers.com.au
Share Registry	Level 2, Reserve Bank Building 45 St Georges Terrace Perth WA 6000 Telephone: Facsimile:	Computershare Investor Services Pty Limited $(08)$ 9323 2000 $(08)$ 9323 2033
ASX Code	PEL

Notice of General Meeting

A General Meeting of Pelican Resources Limited will be held at The Pilbara Room, Level C, Sheraton Perth Hotel, 207 Adelaide Terrace, Perth, Western Australia on Friday, 23 June 2006 commencing at 10.00am (WST).

$\overline{1}$ Approval of Option Issues

$1.1$ Non-related parties

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

That, for the purposes of ASX Listing Rule 7.1, and for all other purposes, Shareholders approve the issue of up to 55,026,308 Options to the parties, for the purposes and on the terms set out in the Explanatory Statement.

For the purposes of Listing Rule 7.3 the Company will disregard any votes cast on the 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 Shareholder) and any of their associates, unless it is cast by a person as proxy for a person who is entitled to vote (in accordance with the directions on the proxy form) or 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).

$1.2$ Related parties

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

That, for the purposes of ASX Listing Rules 7.1 and 10.11, and for all other purposes, Shareholders approve the issue of up to 12,841,736 Options to the parties, for the purposes and on the terms set out in the Explanatory Statement.

For the purposes of Listing Rule 10.13 and section 224 of the Corporations Act, the Company will disregard any votes cast on the 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 Shareholder) namely John Palermo, John Hills and Daryl Lynton-Brown, and any of their associates, unless it is cast by a person as proxy for a person who is entitled to vote (in accordance with the directions on the proxy form) or 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).

$\overline{2}$ Approval of Share and Option Issues to Convertible Noteholders

$2.1$ Non-related parties

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

That, for the purposes of ASX Listing Rule 7.1, and for all other purposes, Shareholders approve the terms of conversion contained in the convertible loan facility whereby Noteholders can elect to convert their Convertible Notes into Shares and Options, in accordance with the terms set out in the Explanatory Statement.

For the purposes of Listing Rule 7.3, the Company will disregard any votes cast on the resolution by any person who may participate in the proposed issue and a person who might obtain a benefit, (except solely in the capacity of Shareholder) namely Monarch Corporation Pty Ltd and Husif Nominees Pty Ltd and any of their associates, unless it is cast by a person as proxy for a person who is entitled to vote (in accordance with the directions on the proxy form) or 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).

$2.2$ Related parties

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

That, for the purposes of ASX Listing Rule 10.11, and for all other purposes, Shareholders approve the terms of conversion contained in the convertible loan facility whereby Noteholders can elect to convert their Convertible Notes into Shares and Options, in accordance with the terms set out in the Explanatory Statement.

For the purposes of Listing Rule 10.13, the Company will disregard any votes cast on the resolution by any person who may participate in the proposed issue and a person who might obtain a benefit, (except solely in the capacity of Shareholder) namely D.F. Lynton-Brown Pty Ltd (associated with Mr Lynton-Brown, a Director) and Veltox Pty Ltd (associated with Dr Hills, a Director) and any of their associates, unless it is cast by a person as proxy for a person who is entitled to vote (in accordance with the directions on the proxy form) or 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).

$\mathbf{3}$ Ratification of Previous Share Issue

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

That, for the purposes of ASX Listing Rule 7.4, and for all other purposes, Shareholders approve and ratify the previous allotment and issue of 10,000,000 Shares to the parties, for the purposes and on the terms set out in the Explanatory Statement.

For the purposes of Listing Rule 7.5, the Company will disregard any votes cast on the resolution by any person who received securities and any of his or her associates, unless it is cast by a person as proxy for a person who is entitled to vote (in accordance with the directions on the proxy form) or 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).

Approval for Option Issue 4

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

That, for the purposes of ASX Listing Rule 7.1, and for all other purposes, Shareholders approve the issue of 10,000,000 Options to the parties, for the purposes and on the terms set out in the Explanatory Statement.

For the purposes of Listing Rule 7.3, the Company will disregard any votes cast on the resolution by any person who received securities and any of his or her associates, unless it is cast by a person as proxy for a person who is entitled to vote (in accordance with the directions on the proxy form) or 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).

Explanatory Statement

The Explanatory Statement accompanying this Notice of General Meeting is incorporated in and comprises part of this Notice of General Meeting.

Shareholders are specifically referred to the Glossary in the Explanatory Statement which contains definitions of capitalised terms used both in this Notice of General Meeting and Explanatory Statement.

Proxies

Please note that:

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

The enclosed proxy form provides further details on appointing proxies and lodging proxy forms.

"Snap-shot" Time

The Company may specify a time, not more than 48 hours before the meeting, at which a "snapshot" of shareholders will be taken for the purposes of determining shareholder entitlements to vote at the meeting.

The Company's directors have determined that all shares of the Company that are quoted on ASX at 5.00pm (WST) on 21 June 2006 shall, for the purposes of determining voting entitlements at the General Meeting, be taken to be held by the persons registered as holding the shares at that time.

By Order of the Board of Directors

John Palermo Company Secretary

11 May 2006

Explanatory Statement

This Explanatory Statement has been prepared for the information of Shareholders in relation to the business to be conducted at the Company's General Meeting.

The purpose of this Explanatory Statement is to provide Shareholders with all information known to the Company which is material to a decision on how to vote on the resolutions in the accompanying Notice of General Meeting.

This Explanatory Statement should be read in conjunction with the Notice of General Meeting. Capitalised terms in this Explanatory Statement are defined in the Glossary.

$\mathbf{1}$ . Approvals for Options Issue

The Company proposes to issue Options under a prospectus by way of a priority placement offer to former holders of options to subscribe for Shares at 20 cents each on or before 6 April 2006 ("April 2006 Options"), which lapsed on 6 April 2006. Each former holder of April 2006 Options will be entitled to subscribe for one Option for every one April 2006 Option held on 6 April 2006.

The Company intends to issue up to 67,868,044 Options under the prospectus and the Directors intend to retain the right to allocate any shortfall under the offer as they see fit.

Holders of April 2006 Options comprise both related and non-related parties of the Company, so approval is sought separately in this regard.

$1.1$ Issue to non-related parties

Under Chapter 7 of the ASX Listing Rules, there are limitations on the capacity of the Company to enlarge its capital by the issue of equity securities.

ASX Listing Rule 7.1 provides generally that a company may not issue shares or options to subscribe for shares equal to more than 15% of the company's issued share capital in any 12 months without obtaining shareholder approval.

This resolution seeks approval for the proposed issue of Options because the intended issue represents greater than 15% of the Company's issued share capital. It will also preserve the Company's 15% capacity to issue further securities.

The Options will be offered at an issue price of 0.1 cents each. Up to a maximum of 55,026,308 Options will be issued to non-related parties. The Company will raise \$55,026 if all of these Options are issued. These funds will be used to meet the expenses of the issue and for working capital purposes. Further funds may be raised on the eventual exercise of the Options, however, there is no guarantee that the Options will be exercised at any future time. Such funds will be used for the purpose of providing working capital to the Company.

The identity of the subscribers is unknown at this stage, however the Company will make a priority offer under the prospectus to holders of April 2006 Options as at 6 April 2006. The Options will otherwise be issued to those parties determined by the Board having regard to the level of demand for them, the identification of investors with a long term commitment to the Board and other factors the Company may consider appropriate.

The issue of these Options will be equal to approximately 31.78% of the Company's fullydiluted issued capital (based on the number of Shares on issue as at the date of the Notice of General Meeting).

The Options will be allotted and issued as soon as possible but, in any case, not later than 3 months after the date of the General Meeting.

The Options will be issued on terms and conditions set out in Annexure A. The Company will apply to ASX for Official Quotation of the Options.

$1.2$ Issue to related parties

ASX Listing Rule 10.11

ASX Listing Rule 10.11 provides that a company must not issue equity securities to a related party of the company, such as a director, without the company obtaining the approval, by ordinary resolution, of its shareholders.

Under the resolution, the Company seeks from Shareholders approval for the issue of Options to Messrs Palermo, Hills and Lynton-Brown, Directors, or their nominees under the same offer as detailed in section 1.1 above. That is, on the basis of these Directors being holders of April 2006 Options, they will be given a priority offer under the prospectus to subscribe for new Options on a one for one basis, in the same way as all other holders of April 2006 Options.

The following number of Options will be issued to each Director and they represent in total approximately 7.42% of the Company's fully-diluted issued capital (based on the number of Shares on issue as at the date of the Notice of General Meeting):

Director	Number of April 2006 Options	Number of new Options	Percentage of all issued Shares (post-exercise)
Mr Palermo	3,374,208	3,374,208	3.49%
Dr Hills	6.897.455	6,897,455	6.88%
Mr Lynton-Brown	2,570,073	2,570,073	2.68%

The Company intends to issue the Options as soon as practicable following the general meeting, but in any event, within one month of the General Meeting.

Approval under ASX Listing Rule 7.1 is not required if the same issue is approved by Shareholders pursuant to Listing Rule 10.11 (as provided for by Listing Rule 7.2, exception 14).

Section 195 Corporations Act

The resolution is also put pursuant to section 195 of the Corporations Act. This section permits the Directors to seek Shareholder approval to a given matter where a majority of Directors have a material personal interest in a matter being considered by the Board and there are not sufficient remaining independent Directors to consider the resolution. Since all the Directors are materially interested in the resolution, Shareholder approval is also

sought for the purposes of section 195 of the Corporations Act and the Directors have not. as a Board, considered this resolution except for the purposes of convening the meeting of Shareholders.

Section 208 Corporations Act

Chapter 2E of the Corporations Act regulates the provision of financial benefits to related parties by a public company. The issue of Options contemplated by Resolution 1.2 may constitute the provision of a financial benefit to a related party. Section 229 of the Corporations Act includes as an example of a financial benefit, the granting of an option to a related party.

A "related party" is widely defined and includes a director of a public company and specified members of the director's family. It also includes an entity over which a director maintains control or a person who may be seen as acting in concert with the Company on the understanding that a financial benefit will be received.

A "financial benefit" is construed widely and in determining whether a financial benefit is being given, section 229 of the Corporations Act requires that any consideration that is given is disregarded, even if the consideration is adequate. It is necessary to look at the economic and commercial substance and the effect of the transaction in determining the financial benefit.

Chapter 2E of the Corporations Act prohibits the Company from giving a financial benefit to a related party of the Company unless either:

• $\mathbf{1}$ . The giving of the financial benefit falls within one of the exceptions to the provision; or
• $\overline{2}$ . Prior shareholder approval is obtained to the giving of the financial benefit.

Information Requirements

For the purposes of Chapter 2E, each of the Directors the subject of Resolution 1.2 are considered to be related parties of the Company.

For the purposes of section 219 of the Corporations Act the following information is provided to shareholders to enable them to assess the merits of the resolution.

The Related Party to Whom the Proposed Resolution Would Permit the Benefit to be Given

Mr Palermo, Dr Hills and Mr Lynton-Brown ("Related Parties").

The Nature of the Financial Benefit

The proposed financial benefit to be given is the issue of Options to the Related Parties as set out in the table above, comprising a total of 12,841,736 Options, being approximately 19% of the Options being issued under Resolutions 1.1 and 1.2. The Options will be issued on the terms set out in Annexure A.

Directors' Recommendations

Each of Mr Palermo, Dr Hills and Mr Lynton-Brown decline to make a recommendation to Shareholders in relation to Resolution 1.2 because they have a material personal interest in the outcome of Resolution 1.2.

In accordance with section 195 of the Corporations Act, the Directors have not considered the subject matter of Resolution 1.2 other than for the purposes of convening this Meeting.

Other Information that is Reasonably Required by Members to Make a Decision and that is Known to the Company or any of its Directors.

It is a requirement of ASIC that a dollar value be placed on the Options to be issued to the The Black-Scholes option price calculation method is regarded as Related Parties. acceptable by ASIC as a valuation model where the Options cannot be readily valued by some other means.

In determining the dollar value, the Company is required to disclose the following assumptions made:

• the Share price at issue date will be 6.4 cents per Share; $(a)$
• $(b)$ the Options are to be exercisable at 20 cents each;
• the Options are to be exercised on or before 31 December 2008; $(c)$
• $(d)$ price volatility of the Shares is approximately 70%; and
• the average current risk free interest rate is 5.3%. $(e)$

On this basis, the implied "value" being received by each Related Party in relation to the Options 1.154 cents per Option, or assuming each Director takes up the Priority Offer-

	Related Party Related Party (2008) Related Party (2008) 2012 2022 2023 2024 2022 2023 2024 2022 2023 2024 2023
John Palermo	\$38,938
John Hills	\$79,597
Daryl Lynton-Brown	\$29.659

The Related Parties who are Directors make the following additional disclosure.

The relevant Directors' base salaries per annum (including superannuation), or consulting fees, and the total financial benefit to be received by them to 30 May 2006, when added to the implied "value" to be received by each of the following Directors as a result of the issue of Options the subject of Resolution 1.2, is as follows:

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, Director	,,,,,,,,,,,,,,,,,,,,,,, p.a. ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1999 - Participal Alexandria (m. 1989).	Value of Options to be Issued (Resolution 1.2) (§)	Total Financial Benefit .
Tohn Palermo	116.505	38.938	155.443
Tohn Hills	273.934	79.597	353.531
Daryl Lynton-Brown	735	29 GSO

Trading History

Over the last 12 months the Shares have traded between 5.0 cents per share (lowest) and 10.0 cents per Share (highest). The latest trading price available at the time of preparing this Notice of Meeting was 9.1 cents per Share.

There is a potential benefit that accrues to each of the Related Parties if the market trading price of the Shares issued following exercise of the Options exceeds the exercise price. This benefit would accrue on the sale of the Shares for an amount in excess of the exercise price, after deducting the Option issue price of 0.1 cent each.

$2₁$ Approval of Share and Option Issues to Convertible Noteholders

The Company has issued 850 convertible notes to raise \$850,000 on the following terms:

• $(a)$ The face value of each note is \$1,000.
• $(b)$ The maturity date of each note is the date which is 13 months after the issue. This date is 17 April 2007. The Company must repay all principal and accrued interest outstanding as at the maturity date in cash, unless earlier converted into Shares and Options or repaid in cash.
• $(c)$ Interest is payable on all convertible notes issued at a rate of 12% per annum. Interest accrues daily on the unpaid principal amount of the advance and is payable monthly in arrears in cash.
• $(d)$ Noteholders can elect to convert their notes into Shares and free-attaching Options at a price per Share equal to 5 cents, or 80% of the average price of the Shares over the last 5 trading days prior to conversion, whichever is the lower.

The notes are on terms which are otherwise customary for instruments of this nature. including warranties and representations, events of default and general obligations of the issuer. Please refer to Annexure C.

Funds raised from the issue of these notes will be used to fund the acquisition of the Romblon project.

Resolution 2 seeks shareholder approval for the conversion mechanism under their terms of issue to enable the Company to issue Shares and Options to Noteholders who elect to convert their Convertible Notes.

Holders of these convertible notes comprise both related and non-related parties of the Company, so approval is sought separately in this regard.

$2.1$ Non-related parties

The conversion mechanism described above is subject to any Shareholder approval required to give effect to the mechanism. Resolution 2.1 seeks this approval in respect of those noteholders who are not related parties. If approval is not given, the relevant amount which was not approved for conversion shall continue to be repayable in the normal course.

As described above, under Chapter 7 of the Listing Rules, there are limitations on the capacity of the Company to enlarge its capital by the issue of equity securities, including securities convertible into shares and options.

ASX Listing Rule 7.1 provides generally that a company may not issue shares or options to subscribe for shares or options equal to more than 15% of the company's issued share capital in any 12 months without obtaining shareholder approval.

ASX Listing Rule 7.3 requires certain information to be given to Shareholders in relation to the issue. Such information not already set out above follows:

• $(a)$ Noteholders may elect to convert their loan notes into Shares and Options at any time up to 17 May 2007.
• $(b)$ The conversion formula is set out above. Whilst it is not possible to state with certainty what number of Shares and Options will be issued, what follows is an analysis of the number of Shares and Options that will be issued to the nonrelated party noteholders if the market price of Shares is 6 cents and 7 cents (respectively), the total number of Shares and Options that would be issued if the non-related party noteholders converted at these prices and the percentage of all issued Shares that the Share and Option totals (assuming the Options are exercised) would represent on an undiluted basis (based on the number of Shares on issue as at the date of the Notice of General Meeting). The closing price of Shares on ASX on the date of the Notice of General Meeting was 9.0 cents.

Notebolder	Market Price	Conversion Price	Notes Fleld	Shares and Options to Issue (each)	$\%$ of issued Shares
Monarch	6 cents	4.8 cents	40O	8.3 million	15.10%
Corporation Pty Ltd	7 cents	5 cents	400	8 million	14.64%
Husif Nominees Pty Ltd	6 cents	4.8 cents	150	3.125 million	6.28%
	7 cents	5 cents	150	3 million	6.04%

• The identity of the non-related party subscribers is detailed above, as the $(c)$ "Noteholder".
• $(d)$ No funds will be raised from the issue of the Shares and Options if the notes are converted, although debt will be converted to equity and interest would cease to apply. Funds may be raised on the eventual exercise of the Options, however, there is no guarantee that the Options will be exercised at any future time. Such funds will be used for the purpose of providing working capital to the Company.
• The Shares will be issued on terms and conditions set out in Annexure B. The $(e)$ Options will be issued on the terms of Annexure A. The Company will apply to ASX for official quotation of the Shares and the Options on ASX.

$2.2$ Related parties

The conversion mechanism described above is subject to any Shareholder approval required to give effect to the mechanism. Resolution 2.2 seeks this approval in respect of those noteholders who are related parties. If approval is not given, the relevant amount which was not approved for conversion shall continue to be repayable in the normal course.

As noted above, ASX Listing Rule 10.11 provides that a company must not issue equity securities to a related party of the company, such as a director or a party related to a director, without the company obtaining the approval, by ordinary resolution, of its shareholders. Listing Rule 10.11 requires certain information to be given to Shareholders in relation to the issue. Such information is already set out, except the identity of the related parties and their holdings. Approval under ASX Listing Rule 7.1 is not required if the same issue is approved by Shareholders pursuant to Listing Rule 10.11 (as provided for by Listing Rule 7.2, exception 14).

The same analysis in respect of the conversion formula is set out below for these related parties:

Noteholder	Market Price	Conversion Price	Notes Held	Shares and Options to Issue (each)	$v_{\alpha}$ of issued Shares
D-F Lynton-Brown Pty Ltd (associated	6 cents.	4.8 cents	100	2.08 million	4.27%
with Mr Lynton-Brown, a Director)	7 cents	$5 \text{ cents}$	100	2 million	4.11%
Veltox Pty Ltd (associated with	6 cents.	4.8 cents	200	4.17 million	8.21%
Dr Hills, a Director)	7 cents	5 cents	200	4 million	7.90%

$3_l$ Ratification of Previous Securities Issues

In the previous 12 months, the Company has issued equity securities to the parties detailed below.

As noted above, ASX Listing Rule 7.1 provides that a company must not, without prior approval of Shareholders, issue securities if the securities will in themselves or when aggregated with the securities issued by a company during the previous 12 months, exceed 15% of the number of securities on issue at the commencement of that 12 month period.

ASX Listing Rule 7.4 states that an issue by a company of securities made without approval under Listing Rule 7.1 is treated as having been made with approval for the purpose of Listing Rule 7.1 if the issue did not breach Listing Rule 7.1 and the company's members subsequently approve it.

Under the resolutions, the Company seeks from Shareholders approval for, and ratification of, the issues of securities set out below so as to limit the restrictive effect of ASX Listing Rule 7.1 on any further issues of securities in the next 12 months.

The Board believes that the ratification of the issue of the securities is beneficial for the Company and the Board recommends Shareholders vote in favour of the resolution. It will allow the Company to ratify the issue of the securities and retain the flexibility to issue further securities representing up to 15% of the Company's share capital during the next 12 months.

On 4 April 2006, the Company issued 10,000,000 Shares to the parties below, which represent 5.77% of the Company's fully-diluted issued capital (based on the number of Shares on issue as at the date of the Notice of General Meeting).

Allottee ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,	No. of Shares
Intercorp Pty Ltd	500,000
Bryan Welch	1,500,000
Bryan Welch & Glynda Curtin	3,000,000
Dencove Nominees Pty Ltd	500,000
Kaslam Pty Ltd	500,000
Racovani Superannuation Fund Pty Ltd	200,000
Odette Johanna Smith	100,000
Ringsford Pty Ltd	100,000
G E Fennell Pty Ltd	300,000
Central Pacific Finance Group Pty Ltd	300,000
Virtual Genius Pty Ltd	200,000
Mr Charles Blunt & Mrs Gail Blunt	200,000
Australian Sport & Recreation Link Pty Ltd	200,000
Finance Associates Pty Ltd	300,000
Success Investments Pty Ltd	200,000
Mr Kenneth Yu	300,000
Mr Rex Melville Barlow & Mrs Deborah Ann Barlow	200,000
Keisuko Sakanishi	100,000
Mr Jerome St John Borazio	100,000
SDJ Enterprises Pty Ltd	100,000
Pals Investments Pty Ltd	100,000
Megatop Nominees Pty Ltd	640,000
Ms Helen Burke Whooley & Ms Janette Burke	100,000
Mr Brett Graeme Walker	85,000
Mr Reg Ferguson	75,000
Mr Albert Peter Smith	100,000

The Shares were issued at a price of 5 cents each to raise funds totalling \$500,000. The funds will be used to finance the acquisition of the Romblon project.

The Shares were issued on the terms set out in Annexure B to this Explanatory Statement.

$\overline{\mathbf{4}}$ . Approval for Options Issue

The Company also proposes to issue 10,000,000 Options to the parties who subscribed for the Shares which are the subject of resolution 3. The Company has agreed to issue the Options subject to Shareholders approving such issue.

As described above, under Chapter 7 of the Listing Rules, there are limitations on the capacity of the Company to enlarge its capital by the issue of equity securities, including securities convertible into shares and options.

ASX Listing Rule 7.1 provides generally that a company may not issue shares or options to subscribe for shares or options equal to more than 15% of the company's issued share capital in any 12 months without obtaining shareholder approval.

ASX Listing Rule 7.3 requires certain information to be given to Shareholders in relation to the issue. Such information not already set out above follows:

• $(a)$ The maximum number of Options to be issued by the Company is 10,000,000 Options.
• $(b)$ The Options will be allotted to those parties listed as allottees in the explanatory statement accompanying resolution 3.
• $(c)$ The Options will be issued no later than 3 months after the date of the general meeting (or such later date as permitted by ASX) and it is anticipated that allotment will occur on one date.
• $(d)$ The Options will be issued for nil consideration. They are free attaching to the Shares that are the subject of resolution 3. No funds will be raised from the issue of the Options. Funds may be raised upon exercise of the Options, however there is no guarantee that they will be exercised.
• $(e)$ The Options are issued on the terms described in Annexure A. The Company will apply to ASX for Official Quotation of the Options.

The Board believes that the issue of these Options is beneficial for the Company.

The Board recommends Shareholders vote in favour of the resolution as it allows the Company to approve the above issue of securities and retain the flexibility to issue further securities representing up to 15% of the Company's share capital during the next 12 months.

5. Glossary

In this Explanatory Statement, the following terms have the following meanings unless the context otherwise requires:

Annexure	annexure to this Explanatory Statement.
ASIC	Australian Securities and Investments Commission.
ASX.	Australian Stock Exchange.
Board	board of Directors.
Company	Pelican Resources Limited ABN 12063388321.
Constitution	constitution of the Company.
Corporations Act	Corporations Act 2001 (Cth).
Director	Director of the Company.
Option	option to subscribe for a Share.
Share	fully paid ordinary share in the capital of the Company.
Shareholder	shareholder of the Company.

ANNEXURE A

Terms of Options

Exercise Date $(a)$

The options are exercisable wholly or in part at any time before 5.00pm (WST) on 31 December 2008. Options not exercised by that date shall lapse.

Exercise Price $(b)$

Each option shall entitle the optionholder to acquire one fully paid ordinary share upon payment of 20 cents per option to the Company.

Notice of Exercise $(c)$

Each option may be exercised by notice in writing to the Company at any time before their date of expiry. Any notice of exercise of an option received by the Company with payment in full of the exercise price will be deemed to be a notice of the exercise of that option as at the date of receipt.

Quotation of Options and Shares on Exercise $(d)$

Application will be made to ASX for official quotation of the options. Application will be made for official quotation of the shares issued upon exercise of options. The options are transferable as the optionholder thinks fit.

$(e)$ Participation Rights or Entitlements

There are no participating rights or entitlements inherent in the options and optionholders will not be entitled to participate in new issues of securities offered to shareholders during the currency of the options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 9 business days after the issue is announced so as to give optionholders the opportunity to exercise their options before the date for determining entitlements to participate in any issue.

$(f)$ Shares Allotted on Exercise

Shares allotted pursuant to the exercise of options will be allotted following receipt of all the relevant documents and payments and will rank equally with the issued shares.

Reconstruction of Share Capital $(g)$

In the event of a reconstruction (including consolidation, subdivision, reduction or return) of the issued capital of the Company, all rights of the optionholder shall be reconstructed in accordance with the Listing Rules.

$(h)$ Bonus Issues

If, from time to time, before the expiry of the options the Company makes a pro rata issue of shares to shareholders for no consideration, the number of shares over which an option is exercisable will be increased by the number of shares which the optionholder would have received if the option had been exercised before the date for calculating entitlements to the pro rata issue.

ANNEXURE B

Terms of Shares

The following is a broad summary (though not necessarily an exhaustive or definitive statement) of the rights attaching to Shares. Full details are contained in the Constitution, available for inspection at the Company's registered office.

$(a)$ Share Capital

All issued ordinary shares rank equally in all respects.

$(b)$ Voting Rights

At a general meeting of the Company, every holder of Shares present in person, by an attorney, representative or proxy has one vote on a show of hands and on a poll, one vote for every fully paid share held, and for every contributing share held, a fraction of a vote equal to the proportion which the amount paid up bears to the total issue price of the contributing share.

$(c)$ Dividend Rights

Subject to the rights of holders of shares issued with any special or preferential rights (at present there are none), the profits of the Company which the Directors may from time to time determine to distribute by way of dividend are divisible among the shareholders in proportion to the shares held by them respectively, according to the amount paid up or credited as paid up on the shares.

$(d)$ Rights on Winding-Up

Subject to the rights of holders with shares with special rights in a winding-up (at present there are none), on a winding-up of the Company all assets which may be legally distributed amongst the members will be distributed in proportion to the shares held by them respectively, according to the amount paid up or credited as paid up on the share.

Transfer of Shares $(e)$

Shares in the Company may be transferred by instrument in any form which complies with the Constitution, the Corporations Act, Listing Rules and SCH Business Rules.

Shares may be transferred by such means in accordance with Listing Rules and the SCH Business Rules. The Directors may refuse to register a transfer of shares only in those circumstances permitted by Listing Rules and SCH Business Rules.

$(f)$ Calls on Shares

Shares issued as fully paid are not subject to any calls for payment by the Company and will not therefore become liable for forfeiture.

Further Increases in Capital $(g)$

The allotment and issue of any new shares is under the control of the Directors and, subject to any restrictions on the allotment of shares imposed by the Constitution, Listing Rules or the Corporations Act, the Directors may allot, issue or grant options over or otherwise dispose of those shares to such persons, with such rights or restrictions as they may from time to time determine.

$(h)$ Variation of Rights Attaching to Shares

Where shares of different classes are issued, the rights attaching to the shares of a class can thereafter only be varied by a special resolution passed at a separate general meeting of the holders of those shares of that class, or with the written consent of the holders of at least three quarters of the issued shares of that class.

$(i)$ General Meeting

Each shareholder will be entitled to receive notice of, and to attend and vote at, general meetings of the Company and to receive notices, accounts and other documents required to be furnished to shareholders under the Constitution, the Corporations Act and Listing Rules.

ANNEXURE C

Terms of Convertible Notes

• Interest on the unpaid principal amount of the sum advanced ("Advance") at a rate of $(a)$ 12% per annum, calculated monthly is payable monthly in arrears in cash.
• $(b)$ The Company is required to repay to the Lender the Advance and the interest accrued on the Advance in cash on the date of expiry of the Term, being 13 months from the date of the Agreement.
• The Company may before the expiry of the Term, repay to the Lender the whole or part of $(c)$ the Advance and interest accrued on the Advance in cash by giving the Lender 5 business days' written notice to that effect.
• $(d)$ The whole or part of the Advance may be converted into fully paid ordinary shares in the capital of the Company at 5 cents per share or 80% of the average price of the shares over the last 5 trading days prior to conversion (whichever is lower) and free attaching options on the basis of one option for each share issued by either the Lender or the Company giving to the other not less than 5 business days written notice, in the case of the Lender any time during the Term and in the case of the Company, at any time during the last 30 days of the Term, stating the amount of the Advance (to be at least \$10,000 on any one occasion) and accrued interest to be converted, the number of shares and options to be issued under the conversion and the date of conversion.
• $(e)$ The Shares issued to the Lender on conversion of a convertible note rank equally with the other then existing shares from the date of allotment and shall be entitled to all dividends and other distributions.
• $(f)$ During the Term, the Company cannot accept or agree to any loan facility or other debt arrangement or grant any encumbrance over its assets where the Company borrows in excess of \$2,000,000 without obtaining the prior written consent of the Lender.
• The Company is in default if a receiver, manager, receiver and manager, trustee, $(g)$ administrator, controller, liquidator or provisional liquidator is appointed in respect of the Company or if the Company does not fully perform, observe or fulfil any provision of the Agreement.
• $(h)$ If the Company is in default, the Company is required to repay all moneys owing under the Agreement within 10 business days of the Lender issuing a written notice to the Company requiring payment. The Lender may also terminate the Agreement by notice in writing to the Company if the Company is in default.
• Any conversion by the Lender remains subject to shareholder approval of the Company. $(i)$ If approval is not obtained the Advance remains payable and becomes immediately due.

Shareholder Details

Name:
Address:
Contact Telephone Not
Contact Name (if different from above):

Appointment of Proxy

I/We being a shareholder/s of Pelican Resources Limited and entitled to attend and vote hereby appoint

The Chairman of the meeting	ЭR	Write here the name of the person you are Uappointing if this person is someone other l than the Chairman of the Meeting.
(mark with an $'X'$ )

or failing the person named, or if no person is named, the Chairman of the Meeting, as my/our proxy to attend and act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the General Meeting of Pelican Resources Limited to be held at The Pilbara Room, Sheraton Perth Hotel, 207 Adelaide Terrace, Perth, Western Australia on Friday, 23 June 2006 at 10.00am (WST) and at any adjournment of that meeting.

IMPORTANT

If the Chairman of the Meeting is your nominated proxy, or may be appointed by default, and you have not directed your proxy how to vote, please place a mark in this box with an 'X'. By marking this box you acknowledge that the Chairman of the Meeting may exercise your proxy even if he has an interest in the outcome of the resolutions and that votes cast by him, other than as a proxy holder, would be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chairman of the Meeting will not cast your votes on the resolutions and your votes will not be counted in computing the required majority if a poll is called. The Chairman of the Meeting intends to vote undirected proxies in favour of each resolution.

Voting directions to your proxy – please mark $|$ to indicate your directions $\sim$ $\sim$ $\sim$ $\sim$

Ordinary business		ror	дұаты	ADSIAIIT
Resolution 1.1:	Approval of Options Issues - Non-Related Parties
Resolution 1.2:	Approval of Options Issues - Related Parties
Resolution 2.1:	Approval of Share and Option Issues to Convertible Noteholders - Non-Related Parties
Resolution 2.2:	Approval of Share and Option Issues to Convertible Noteholders - Related Parties
Resolution 3:	Ratification of Previous Share Issue
Resolution 4:	Approvals for Option Issue

*If you mark the Abstain box for a particular Resolution, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll. Appointment of a second proxy (see instructions overleaf) $\%$

If you wish to appoint a second proxy, state the % of your voting rights applicable to the proxy appointed by this form

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

Individual or Shareholder 1

Shareholder₂

Shareholder 3

Director/Company Secretary

Sole Director and Sole Company Secretary Director

How to complete this Proxy Form

Your Name and Address

Please print your name and address as it appears on your holding statement and the company's share register. If shares are jointly held, please ensure the name and address of each joint shareholder is indicated. Shareholders should advise the company of any changes. Shareholders sponsored by a broker should advise their broker of any changes. Please note, you cannot change ownership of your securities using this form.

Appointment of a Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box. If the person you wish to appoint as your proxy is someone other than the Chairman of the Meeting please write the name of that person. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a shareholder of the company.

Votes on Resolutions

You may direct your proxy how to vote by placing a mark in one of the boxes opposite each Resolution. All your shareholding will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any Resolution by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on a given Resolution, your proxy may vote as he or she chooses. If you mark more than one box on a Resolution your vote on that Resolution will be invalid.

Appointment of a Second Proxy

You are entitled to appoint up to two persons as proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the Company Secretary on (08) 9242 1166 or you may photocopy this form.

To appoint a second proxy you must on each Proxy Form state (in the appropriate box) the percentage of your voting rights which are the subject of the relevant proxy. If both Proxy Forms do not specify that percentage, each proxy may exercise half your votes. Fractions of votes will be disregarded.

Signing Instructions

You must sign this form as follows in the spaces provided:

Individual:	where the holding is in one name, the holder must sign.
Joint Holding:	where the holding is in more than one name, all of the shareholders should sign.
Power of Attorney:	to sign under Power of Attorney, you must have already lodged this document with the company's share registry. If you have not previously lodged this document for notation, 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, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

If a representative of the corporation is to attend the meeting a "Certificate of Appointment of Corporate Representative" should be produced prior to admission. A form of the certificate is either included in the Notice of General Meeting or may be obtained from the company's share registry.

Lodgement of a Proxy

This Proxy Form (and any Power of Attorney under which it is signed) must be received at the address given below not later than 48 hours before the commencement of the meeting (ie. no later than 10.00 am WST on 21 June 2006). Any Proxy Form received after that time will not be valid for the scheduled meeting.

This Proxy Form (and any Power of Attorney and/or second Proxy Form) may be sent or delivered to the company's registered office at Level 1, 284 Oxford Street, Leederville WA 6007 or sent by facsimile to the registered office on $(08)$ 9443 2859.