Titanium Sands Limited ACN 009 131 533

Notice of Annual General Meeting

Annual General Meeting to be held at Trident Capital, Level 24, 44 St Georges Terrace, Perth, Western Australia on 24 January 2018 commencing at 10.00am (WST).

Important

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

Shareholders should refer to the Independent Expert’s Report contained inside this Notice. The Independent Expert has determined that the control transaction referred to in this Notice is fair and reasonable to non-associated Shareholders.

NOTICE OF ANNUAL GENERAL MEETING ...................................................................... 3
EXPLANATORY STATEMENT ............................................................................................ 8
1. PROPOSED TRANSACTION ..................................................................................... 10
2. REGULATORY INFORMATION ................................................................................. 29
3. OTHER INFORMATION ............................................................................................. 51
4. DEFINITIONS ............................................................................................................. 53
SCHEDULE A – TENEMENTS .......................................................................................... 56
SCHEDULE B – TERMS OF PERFORMANCE SHARES ................................................. 57
SCHEDULE C – TERMS OF CLASS A OPTIONS ............................................................ 60
SCHEDULE D – TERMS OF CLASS B OPTIONS ............................................................ 62
SCHEDULE E – PRO FORMA STATEMENT OF FINANCIAL POSITION ........................ 64
SCHEDULE F – SRINEL FINANCIAL INFORMATION...................................................... 66
PROXY FORM ................................................................................................................... 68
ANNEXURE 1 – INDEPENDENT EXPERT’S REPORT .................................................... 71

NOTICE OF ANNUAL GENERAL MEETING

Notice is given that an annual general meeting of the shareholders of Titanium Sands Limited ACN 009 131 533 ( Company ) will be held at Trident Capital, Level 24, 44 St Georges Terrace, Perth, Western Australia on 24 January 2018, commencing at 10.00am (WST).

The Explanatory Statement that accompanies and forms part of this Notice of Meeting describes in more detail the matters to be considered.

Business

Resolution 1 – Consolidation of securities

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

“That, subject to all other Transaction Resolutions being passed, for the purposes of section 254H of the Corporations Act, and for all other purposes, approval is given for the consolidation of the Company’s existing securities on the basis that:

(a) every 3 Shares be consolidated into 1 Share; and
(b) every 3 Options be consolidated into 1 Option,

with fractional entitlements rounded down to the nearest whole number, on the terms and conditions set out in the Explanatory Statement.”

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 all other Transaction Resolutions being passed, for the purposes of 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, on the terms and conditions set out in the Explanatory Statement.”

Voting exclusion statement

The Company will disregard any votes cast in favour of this Resolution by any person who might obtain a benefit (except a benefit solely in the capacity of a Shareholder) if the Resolution is passed, and any associate of those persons. However, the Company need not disregard a vote if:

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
it is cast by the Chair 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.

Resolution 3 – Approval of Performance Shares

To consider and, if thought fit, to pass, with or without amendment, the following Resolution as a special resolution :

“That, subject to all other Transaction Resolutions being passed, for the purposes of section 246B of the Corporations Act and clause 2.3(a) of the Constitution, and for all other purposes, approval is given for the Company to issue the Performance Shares, on the terms and conditions set out in the Explanatory Statement.”

Resolution 4 – Issue of Shares and Performance Shares to Seller

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

“That, subject to all other Transaction Resolutions being passed, for the purposes of section 208 and item 7 of section 611 of the Corporations Act, and Listing Rules 10.1 and 10.11, and for all other purposes, approval is given for the Company to issue to the Seller (and/or its nominees):

(a) up to 80,595,239 Shares (on a post-Consolidation basis);
(b) 66,666,667 Class A Performance Shares (on a post-Consolidation basis);
(c) 33,333,333 Class B Performance Shares (on a post-Consolidation basis);
(d) 133,333,333 Class C Performance Shares (on a post-Consolidation basis); and
(e) any Shares upon the conversion of Performance Shares,

causing the Seller (and/or its nominees) to increase its Relevant Interest in the Company’s Shares such that the Voting Power of the Seller increases to a maximum of 43.47%, as part of the consideration for the Company acquiring 100% of the issued share capital in Srinel Holdings Limited, on the terms and conditions set out in the Explanatory Statement.”

Independent Expert’s Report

Shareholders should carefully consider the Independent Expert’s Report prepared by BDO for the purposes of Shareholder approval required under item 7 of section 611 of the Corporations Act and Listing Rule 10.1 for this Resolution. The Independent Expert’s Report comments on the fairness and reasonableness of the transaction to the non-associated Shareholders. The Independent Expert has determined that the transaction is fair and reasonable to the non-associated Shareholders.

Voting exclusion statement

The Company will disregard any votes cast on, or in favour of, this Resolution by the Seller and any associate of that person ( excluded person ). However, the Company need not disregard a vote if it is cast by an excluded person as proxy for a person who is entitled to vote in accordance with a specified direction on the Proxy Form.

Resolution 5 – Issue of Shares under the Prospectus

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

“That, subject to all other Transaction Resolutions being passed, for the purposes of Listing Rule 7.1, and for all other purposes, approval is given for the Company to issue up to 300,000,000 Shares (on a post-Consolidation basis) under the Prospectus at an issue price of $0.02 each to raise up to $6,000,000, with a minimum subscription of at least 250,000,000 Shares to raise at least $5,000,000, on the terms and conditions set out in the Explanatory Statement.”

Voting exclusion statement

The Company will disregard any votes cast in favour of 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 Shareholder) if the Resolution is passed, and any associate of those persons.

However, the Company need not disregard a vote if:

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
it is cast by the Chair 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.

Resolutions 6(a), (b) and (c) – Right for Directors to participate in the Public Offer

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

“That, subject to all other Transaction Resolutions being passed, for the purposes of Listing Rule 10.11, and for all other purposes, approval is given for the Company to issue up to:
(a) 5,000,000 Shares (on a post-Consolidation basis) to James Searle (and/or his nominees);
(b) 5,000,000 Shares (on a post-Consolidation basis) to Lee Christensen (and/or his nominees); and
(c) 5,000,000 Shares (on a post-Consolidation basis) to Jason Ferris (and/or his nominees),

at an issue price of $0.02 each under the Public Offer, on the terms and conditions set out in the Explanatory Statement.”

Voting exclusion statement

The Company will disregard any votes cast in favour of: Resolution 6(a) by James Searle; Resolution 6(b) by Lee Christensen; and Resolution 6(c) by Jason Ferris, and any associate of those persons (as applicable)

However, the Company need not disregard a vote if:

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
it is cast by the Chair 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.

Resolutions 7(a), (b) and (c) – Issue of Class B Options to Directors

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

“That, subject to all other Transaction Resolutions being passed, for the purposes of section 208 of the Corporations Act and Listing Rule 10.11, and for all other purposes, approval is given for the Company to issue:

(a) 10,875,000 Class B Options (on a post-Consolidation basis) to James Searle (and/or his nominees);
(b) 8,250,000 Class B Options (on a post-Consolidation basis) to Lee Christensen (and/or his nominees);and
(c) 10,875,000 Class B Options (on a post-Consolidation basis) to Jason Ferris (and/or his nominees),

on the terms and conditions set out in the Explanatory Memorandum.”

Voting exclusion statement

The Company will disregard any votes cast on, or in favour of: Resolution 7(a) by James Searle; Resolution 7(b) by Lee Christensen; and Resolution 7(c) by Jason Ferris, and any associate of those persons (as applicable, excluded person ). However, the Company need not disregard a vote if it is cast by an excluded person as proxy for a person who is entitled to vote in accordance with a specified direction on the Proxy Form.

Resolutions 8(a) and (b) – Issue of Shares and Class A Options under the Placement

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

“That, for the purposes of:
(a) Listing Rule 7.4, and for all other purposes, Shareholders ratify the Company’s issue of 42,857,142 Shares (on a pre-Consolidation basis) to Exempt Investors at an issue price of $0.007 each to raise approximately $300,000; and
(b) Listing Rules 7.1, and for all other purposes, approval is given for the Company to issue 42,857,142 free attaching Class A Options (on a pre-Consolidation basis) to those Exempt Investors, on the terms and conditions set out in the Explanatory Statement.”

Voting exclusion statement

The Company will disregard any votes cast in favour of this Resolution by any person who participated in the issue of Shares, or who may participate in the proposed issue of Class A Options, and a person who might obtain a benefit (except a benefit solely in the capacity of a Shareholder) if the Resolution is passed, and any associate of those persons.

However, the Company need not disregard a vote if:

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
it is cast by the Chair 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.

Resolution 9 – Issue of Shares to Trident Capital

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

“That, subject to all other Transaction Resolutions being passed, for the purposes of Listing Rule 7.1, and for all other purposes, approval is given for the Company to issue 20,000,000 Shares (on a postConsolidation basis) to Trident Capital (and/or its nominees) for services in relation to the Proposed Transaction, on the terms and conditions set out in the Explanatory Statement.”

Voting exclusion statement

The Company will disregard any votes cast in favour of this Resolution by Trident Capital and any person who might obtain a benefit (except a benefit solely in the capacity of a Shareholder) if the Resolution is passed, and any associate of those persons.

However, the Company need not disregard a vote if:

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
it is cast by the Chair 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.

Business of Annual General Meeting

Annual Report

To receive and consider the Annual Report of the Company for the financial year ended 30 June 2017, which includes the Financial Report, the Directors’ report, the Remuneration Report and the auditor’s report.

Resolution 10 – Approval of Remuneration Report

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

“That, for the purposes of section 250R(2) of the Corporations Act, and for all other purposes, the Remuneration Report for the financial year ended 30 June 2017 be adopted.”

Note: The votes on this Resolution are advisory only and do not bind the Directors or the Company.

Voting exclusion statement

The Company will disregard any votes cast in favour of this Resolution:

by or on behalf of a member of Key Management Personnel as disclosed in the Remuneration Report;
by or on behalf of a Closely Related Party of a member of Key Management Personnel; and
as a proxy by a member of Key Management Personnel or a Closely Related Party,

unless the vote is cast as proxy for a person entitled to vote in accordance with a direction on the Proxy Form or by the Chair pursuant to an express authorisation to exercise the proxy.

Resolution 11 – Re-election of Jason Ferris as a Director

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

“That, for all purposes, Jason Ferris, who retires by rotation under Rule 9.3 of the Constitution and, being eligible, offers himself for re-election, be re-elected as a Director of the Company.”

By Order of the Board of Directors

==> picture [86 x 53] intentionally omitted <==

James Searle Managing Director Titanium Sands Limited

15 December 2017

EXPLANATORY STATEMENT

Important information

This Explanatory Statement has been prepared for the information of the shareholders of Titanium Sands Limited ACN 009 131 533 ( Company ) in connection with the Resolutions to be considered at the Annual General Meeting to be held at Trident Capital, Level 24, 44 St Georges Terrace, Perth, Western Australia on 24 January 2018, commencing at 10.00am (WST).

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 Meeting.

Important: Each Transaction Resolution is subject to, and conditional on, each of the other Transaction Resolutions being passed. Accordingly, the Transaction Resolutions should be considered collectively as well as individually.

This Notice and Explanatory Statement should be read in its entirety. If Shareholders are in doubt as to how to vote, they should seek advice from their professional adviser prior to voting.

Interpretation

Capitalised terms which are not otherwise defined in this Notice and Explanatory Statement have the meanings given to those terms in Section 4.

References to “$” and “A$” in this Notice and Explanatory Statement are references to Australian currency unless otherwise stated.

References to “US$” in this Notice and Explanatory Statement are references to the currency of the United States of America.

References to time in this Notice and Explanatory Statement relate to the time in Perth, Western Australia.

Unless stated otherwise, reference to Shares, Performance Shares and Options in this Notice and Explanatory Statement assume that the Consolidation has occurred and, therefore, are to be interpreted as being on a post-Consolidation basis.

Voting exclusion statements

Certain voting restrictions apply to the Resolutions as detailed beneath the applicable Resolutions in the Notice.

Proxies

Please note that:

a Shareholder entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy;
a proxy need not be a Shareholder;
a Shareholder may appoint a body corporate or an individual as its proxy;
a body corporate appointed as a Shareholder’s proxy may appoint an individual as its representative to exercise any of the powers that the body may exercise as the Shareholder’s proxy; and
Shareholders 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. If a Shareholder appoints a body corporate as its proxy and the body corporate wishes to appoint an individual as its representative, the body corporate should provide that person with a certificate or letter executed in accordance with the Corporations Act authorising him or her to act as that company’s representative. The authority may be sent to the Company or its share registry in advance of the Annual General Meeting or handed in at the Annual General Meeting when registering as a corporate representative.

A member of the Key Management Personnel will not be able to vote as proxy on Resolutions 7(a) to (c) and 10 unless the Shareholder directs it on how to vote or, in the case of the Chair, unless the Shareholder expressly authorises it to do so. If a Shareholder intends to appoint a member of the Key Management Personnel (other than the Chair) as its proxy, the Shareholder should ensure that it directs the member of Key Management Personnel on how to vote on Resolutions 7(a) to (c) and 10.

If a Shareholder intends to appoint the Chair as its proxy for Resolutions 7(a) to (c) and 10, the Shareholder can direct the Chair how to vote by marking one of the boxes for those Resolutions (for example, if the Shareholder wishes to vote ‘for’, ‘against’ or to ‘abstain’ from voting). If the Shareholder does not direct the Chair on how to vote then, by submitting the Proxy Form, the Shareholder will be expressly authorising the Chair to exercise the proxy in respect of Resolutions 7(a) to (c) and 10 even though it is connected to the remuneration of members of the Key Management Personnel.

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

post to the Company at c/- Trident Capital, Level 24, 44 St Georges Terrace, Perth, WA 6000;
facsimile to the Company on +61 (8) 9218 8875; or
email to the Company Secretary at [email protected],

so that it is received by no later than 10.00am (WST) on 22 January 2018. Proxy Forms received later than this time will be invalid.

Voting entitlements

In accordance with Regulations 7.11.37 and 7.11.38 of the Corporations Regulations 2001 (Cth), the Board has determined that a person’s entitlement to vote at the Annual General Meeting will be the entitlement of that person set out in the register of Shareholders as at 5.00pm (WST) on 22 January 2018. Accordingly, transactions registered after that time will be disregarded in determining a Shareholder’s entitlement to attend and vote at the Annual General Meeting.

1. PROPOSED TRANSACTION

1.1 Background

The Company entered into an option agreement with Cuprum Holdings Limited ( Cuprum or Seller ) on or about 19 March 2014 ( Option Agreement or Agreement ) under which Cuprum granted the Company the sole and exclusive option ( Call Option ) to acquire 100% of the issued share capital of Srinel Holdings Limited ( Srinel ) (together with the matters described in Section 1.2, the Proposed Transaction ).

Srinel is an unlisted company registered in Mauritius which, via its subsidiaries, holds exploration licenses and applications for exploration licenses in various coastal districts of Sri Lanka that are prospective for mineral sands ( Sri Lankan Project ). The Company completed its due diligence on the Sri Lankan Project and exercised the Call Option on 29 December 2014.

The Company and Cuprum subsequently amended the Option Agreement via deeds on 29 January 2016 and 18 February 2016, which had the effect of expanding the area of the Sri Lankan Project and adjusting the purchase price. A further deed of amendment was subsequently signed and announced to ASX on 28 September 2017.

Other than its contractual right to acquire the Sri Lankan Project in accordance with the Option Agreement, the Company does not currently hold an interest in any mining projects.

ASX has determined that completion of the Proposed Transaction would constitute a significant change to the nature and scale of the Company’s activities and it has exercised its discretion under Listing Rule 11.1.3 to require the Company to re-comply with Chapters 1 and 2 of the Listing Rules in order to complete the Proposed Transaction. Accordingly, the Company is seeking approval under Listing Rule 11.1.2 (Resolution 2) and will take the necessary steps to meet the requirements of Chapters 1 and 2 as if the Company were applying for admission to the official list of ASX.

In addition, the issue of Shares to the Seller as part of the consideration payable for its shares in Srinel will give the Seller a controlling stake in the Company. Accordingly, the Company is seeking approval for the purposes of item 7 of section 611 of the Corporations Act (Resolution 4) to comply with the relevant takeover provisions.

These and other Resolutions connected with the Proposed Transaction will be put to Shareholders for approval at the Annual General Meeting.

1.2 Proposed Transaction

Under the Proposed Transaction, and subject to Shareholders approving the Transaction Resolutions, the Company will:

consolidate its securities on a 1 for 3 basis;
acquire 100% of the issued share capital of Srinel Holdings Limited;
issue to the Seller:
58,095,239 Shares;
66,666,667 Class A Performance Shares;
33,333,333 Class B Performance Shares; and
133,333,333 Class C Performance Shares;

pay to the Seller a 5% royalty on the amount received by the Company from the sale of mineral product extracted from mining activities on the Sri Lankan Project, net of all transport and sales costs ( Royalty );
make a cash payment of $450,000 to the Seller in reimbursement of expenditure in accordance with Listing Rule 1.1 (Condition 11(a)) or, to the extent that the Company is not permitted to pay the full amount of $450,000 in cash to the Seller, Shares in lieu of cash valued at $0.02 each ( Cash Reimbursement );
raise up to $6,000,000 by issuing up to 300,000,000 Shares at an issue price of $0.02 each under the Prospectus, with a minimum subscription of $5,000,000;
issue:
20,000,000 Shares to Trident Capital in consideration of services provided to the Company in connection with the Proposed Transaction; and
30,000,000 Class B Options to the Directors to remunerate and incentivise their performance; and
re-comply with Chapters 1 and 2 of the Listing Rules and re-commence trading on the ASX.

In addition, the Company has:

raised $180,000 by issuing 25,714,289 Shares to Exempt Investors at an issue price of $0.007 each (on a pre-Consolidation basis);
raised $300,000 by issuing 42,857,142 Shares to Exempt Investors at an issue price of $0.007 each (on a pre-Consolidation basis), together with one free attaching Class B Option for each Share issued (the issue of the Options is subject to Shareholder approval); and
paid to the Seller an option fee of approximately A$600,000 for the Call Option.

1.3 Option Agreement

The material terms of the Option Agreement (as amended) are as follows:

Completion of the Agreement is subject to:
Shareholders approving the Transaction Resolutions;
the Company obtaining any necessary regulatory approvals;
no material adverse change having occurred in relation to Srinel; and
no default by the Seller under the Agreement.
At completion, the Seller will transfer 100% of the issued share capital in Srinel to the Company for the purchase price.
The purchase price included a US$500,000 option fee which was paid in 2014 to Supreme Resources Mauritania SARL ( Supreme Resources ), a company that was controlled by the party who sold the Sri Lankan Project to the Seller in 2013.
The remainder of the purchase price is comprised of the following:
A$50,000 option fee (paid in 2016);
58,095,239 Shares;

66,666,667 Class A Performance Shares;
33,333,333 Class B Performance Shares;
- 133,333,333 Class C Performance Shares;
the Royalty (5%); and
the Cash Reimbursement (A$450,000).
Each Performance Share will convert into a Share in the event that the relevant performance milestone ( Milestone ) is satisfied within 5 years of the Performance Share being issued:

Performance Share	Milestone	Milestone
Class A	In respect of the Sri Lankan Project, the Company achieving either:
	(a)	a total Mineral Resource of 20 million tonnes of heavy
		mineral content of not less than 5% discovered (or
		equivalent tonnage to heavy mineral content discovered
		ratio. For example, 10 million tonnes of heavy mineral
		content of not less than 10% discovered); or
	(b)	any metal equivalent (as that term is used in paragraph 50 of
		the JORC Code) Mineral Resource (including silver, copper,
		lead, zinc, nickel, cobalt, platinum, palladium, iron, graphite,
		lithium, tin, tantalum, niobium and tungsten) independently
		valued by a qualified technical person as equivalent to the
		Mineral Resource in paragraph (a) of this definition.
Class B	The Company obtaining a grant of one or more mining licences in
	respect of all or part of the land the subject of the Sri Lankan Project.
Class C	(a)	The Company commencing commercial scale heavy mineral
		sand concentrate production or treatment of 250,000 tonnes
		of heavy mineral content of not less than 5% discovered in
		respect of any part of the Sri Lankan Project; or
	(b)	The Company achieving a Mineral Resource of 70 million
		tonnes of heavy mineral content of not less than 5%
		discovered (or equivalent tonnage to heavy mineral content
		discovered ratio. For example, 35 million tonnes of heavy
		mineral content of not less than 10% discovered).

The Option Agreement also contains additional provisions which are considered standard for agreements of this nature, including warranties and indemnities given by the Seller in favour of the Company.

1.4 Srinel Holdings Limited

Cuprum is the legal and beneficial owner of all of the fully paid ordinary shares in the capital of Srinel Holdings Limited. The group structure of Srinel is set out below. All entities within the group are wholly owned.

==> picture [445 x 269] intentionally omitted <==

Company	Place of registration
Cuprum Holdings Limited	Mauritius
Srinel Holdings Limited	Mauritius
Kilsythe Investments (Pvt) Ltd	Sri Lanka
Kilsythe Exploration (Pvt) Limited	Sri Lanka
Singha Lanka Investments (Pvt) Ltd	Sri Lanka
Hammersmith Ceylon (Pvt) Ltd	Sri Lanka
Applex Ceylon (Pvt) Ltd	Sri Lanka

1.5 Sri Lankan Project

Overview

Titanium Sands Ltd has executed an option to acquire all the issued capital of Srinel Holdings Limited which is a company holding a number of exploration licenses and license applications in Sri Lanka which cover areas prospective for heavy mineral sands. The tenure and tenure applications currently consist of 5 areas (Figure 1 and Table 2).

Previous exploration has defined a heavy mineral sand resource in license areas EL180, EL182 and COM/EL/2017/196 on Mannar Island. An initial JORC inferred mineral resource of 10.3 Mt with total heavy mineral (THM) of 11.7% (Table 1) was reported to the ASX on 22 April 2015. This resource was based on an historical drill hole data base of 785 auger drill holes and from the 115 holes drilled

in 2014. The drilling and the defined resource envelope were largely confined to within 150m of the Mannar Island shoreline.

Table 1: JORC inferred mineral resource Mannar Island Project

Tonnes	%THM	%Silt	%Oversize	%Ilm.	%Leuc.	%Rut.	%Zir
10.33Mt	11.71	2.08	8.69	5.54	1.34	0.18	0.26

Notes:

An initial JORC inferred mineral resource of 10.3 Mt with total heavy mineral (THM) of 11.7% was reported in full to the Australian Securities Exchange on the 22 April 2015. This resource was based on an historical drill hole data base of 785 auger drill holes and from the 115 holes drilled in early 2015. The drilling and the defined resource envelope were largely confined to within 150m of the Mannar Island shoreline.
The information is extracted from the report entitled ‘The Mineral Resource Estimation on the Mannar Mineral Sands Project, Srinel Holdings Limited, Sri Lanka’ created on 20 April 2015 and is available to view on http://titaniumsands.com.au/investors/asx-announcements/. TSL confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral Resources, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. TSL confirms that the form and context in which GeoActiv’s findings are presented have not been materially modified from the original market announcement.
Except where indicated, exploration results above have been compiled by James Searle BSc (hons), PhD, a Member of the Australian Institute of Mining and Metallurgy, with over 34 years of experience in metallic and energy minerals exploration and development, and as such has sufficient experience which is relevant to the style of mineralisation and type of deposits under consideration as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Dr Searle is the Managing Director of Titanium Sands Limited and consents to the inclusion of this technical information in the format and context in which it appears.

Figure 1 – Srinel controlled tenure

==> picture [242 x 335] intentionally omitted <==

Table 2: Sri Lankan tenure and tenure applications to be acquired

Applex Tenements
Tenement Area sq. km Application Submit Date Place District	Validity
	From To
EL 180 45 09/03/2015 Vankalai Mannar	28/06/2016 27/06/2018
EL 182 26 09/03/2015 Pesalai Mannar	28/06/2016 27/06/2018
Kilsythe Tenements
Tenement Area sq. km Application Submit Date Place District	Validity
	From To
EL/2017/107 0 42.5 18/09/2015 Mannar Mannar	Pending -
Hammersmith Tenements
Tenement Area sq. km Application Submit Date Place District	Validity
	From To
COM/EL/20 17/196 4 12/06/17 Talaimannar Mannar	Pending -
COM/EL/20 17/197 51 12/06/17 Mantai Mannar	Pending -

Note: EL/2017/1070, COM/EL/2017/196 and COM/EL/2017/197 are applications for exploration licences and have not been granted as at the date of this Notice. Applications have been made to extend the validity of these applications.

Proposed expenditure

The Company intends to focus its initial exploration efforts at Mannar Island to increase the definition and scale of the resources. This will involve exploration, resource extension and infill drilling which will provide the basis for an updated resource model for the project. A scoping study will then follow to define in general terms the project configuration and parameters for the project development and production economics.

Depending on how much is raised under the Public Offer, the proposed expenditure on the tenements held by Applex following completion of the Proposed Transaction is as follows:

Item	Minimum Subscription	Full Subscription
Exploration	$1,664,846	$2,264,846
Scoping study	$515,200	$852,190
Total	$2,180,046	$3,117,036

The use of funds raised from the Public Offer may change depending on any intervening events or changes in the Company’s circumstances. In accordance with Listing Rule 1.3.2(b), the proposed expenditure has been prepared on the assumption that the Kilsythe and Hammersmith Tenements are not granted. The Directors are not aware of any reason why the tenements will not be granted. Accordingly, the Board reserves the right to change the way the funds are used and applied.

1.6 Financial information

Financial information in relation to Srinel is set out in Schedule F.

1.7 Key risks

Shareholders should be aware that if the Resolutions are approved, the Company will be changing the nature and scale of its activities which will expose the Company to various risk factors. These risks are both specific to the industry in which the Company operates and also relate to the general business and economic environment in which the Company will operate. An investment in the Company is not risk free and Shareholders should consider the risk factors described below, together with information contained elsewhere in this Explanatory Statement. The following is not intended to be an exhaustive list of the risk factors to which the Company will be exposed to.

Exploration, geological and development risks

Mineral exploration and development is a speculative and high-risk undertaking that may be impeded by circumstances and factors beyond the control of the Company. Success in this process involves (amongst other things):

discovery and proving-up, or acquiring, an economically recoverable resource or reserve;
access to adequate capital throughout the acquisition/discovery and project development phases;
securing and maintaining title to mineral exploration projects;
obtaining required development consents and approvals necessary for the acquisition, mineral exploration, development and production phases; and
accessing the necessary experienced operational staff, the applicable financial management and recruiting skilled contractors, consultants and employees.

There can be no assurance that exploration of the Sri Lankan Project or any other exploration properties that may be acquired in the future will result in the discovery of an economic mineral resource. Even if an apparently viable mineral resource is identified, there is no guarantee that it can be economically exploited.

The exploration activities of the Company may be adversely affected by a range of factors including geological conditions, operational risks (as outlined in the next paragraph) and changing government laws and regulations. Further, whether positive income flows result from projects on which the Company will expend exploration and development capital is dependent on many factors including successful exploration, establishment of production facilities, cost control, commodity price movements, successful contract negotiations for production and stability in the local political environment.

In addition, significant expenditure may be required to establish necessary metallurgical and mining processes to develop and exploit any mineral reserves identified on the Sri Lankan Project. There is no assurance that the Company will have sufficient working capital or resources available to do this.

In the event that exploration programmes prove to be unsuccessful, the Sri Lankan Project may diminish in value, there will be a reduction in the cash reserves of the Company and relinquishment of part or all of the Sri Lankan Project may occur.

Future profitability

The Company’s profitability will be impacted by, among other things, the success of its exploration and mining activities, economic conditions in the markets in which it operates, competition factors and any regulatory developments. Accordingly, the extent of future profits (if any) and the time required to achieve sustained profitability are uncertain and cannot be reliably predicted.

Operational 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;
insufficient or unreliable infrastructure, such as power, water and transport;
political or civil unrest, including outbreaks of violence or other hostilities
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.

In particular, Sri Lanka does not have well developed and reliable infrastructure and services. This may impede and delay the Company’s operations which are likely to result in increased costs of exploration and development of the Sri Lankan Project. This increase in cost may have an adverse effect on the Company’s operations.

Limited operating history

The Sri Lankan Project has a very limited operating history. Although the Company’s Directors have between them significant operational experience, the Company’s ability to meet its objectives will be largely reliant upon the Company’s ability to implement its current operational plans and take appropriate action to amend those plans in respect of any unforeseen circumstances that may arise.

Since the Company intends to continue investing in its exploration and development programme, the Directors anticipate making further losses in the foreseeable future. There can be no certainty that the Company will achieve or sustain profitability or achieve or sustain positive cash flow from its operating activities.

Sri Lankan country risk

The Sri Lankan Project is located in Sri Lanka and, following completion of the Proposed Transaction, the Company will be subject to the risks associated with operating in that country, including various levels of political, economic and other risks and uncertainties.

Sri Lanka had been subject to a 26 year civil war which concluded in May 2009. Since the end of this conflict the government has enacted an ambitious program of economic development projects. In addition to efforts to reconstruct the economy, the government has resettled more than 95% of those civilians displaced during the final phase of the conflict and released the vast majority of the Liberation Tigers of Tamil Eelam (LTTE) combatants captured by the Government Security Forces.

More general risks include economic, social or political instability or change, hyperinflation, currency non-convertibility or instability and changes of law affecting foreign ownership, government participation, taxation, working conditions, rates of exchange, exchange control, exploration licensing, export duties, repatriation of income or return of capital, environmental protection, mine safety, labour relations as well as government control over mineral properties or government regulations that require the employment of local staff or contractors or require other benefits to be provided to local residents.

Failure to comply strictly with applicable laws, regulations and local practices relating to mineral rights applications and tenure, could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners with carried or other interests.

Outcomes in courts in Sri Lanka may be less predictable than in Australia, which could affect the enforceability of contracts entered into by the Company or its subsidiaries in Sri Lanka.

The occurrence of these various factors and uncertainties cannot be accurately predicted and could have an adverse effect on the operations or profitability of the Company.

Access to Sri Lankan Project

The right of the holder of an exploration license to enter onto the license to explore for minerals is subject to the consent of the occupier of the land and, where the land is proximate to certain specified locations, the ministry responsible for the protection of such locations.

Under Sri Lankan legislation, the Company may be required to enter into an agreement with the relevant landowner or occupier for the purpose of securing this consent prior to commencing any exploration activities on the affected areas within the Sri Lankan Project.

Restricted areas within Sri Lankan Project

Under the conditions of the Sri Lankan Project, the holder is not permitted to conduct exploration activities within forest boundaries (for certain licenses), nor any area specifically designated as ancient or protected monuments, archaeological reserves, national heritage wilderness areas, strict natural reserves, national parks, nature reserves, jungle corridors or botanical gardens.

Whilst the Company is not aware of the existence of any such restricted areas within the Sri Lankan Project, there is a risk that the Company’s proposed exploration activities on the Sri Lankan Project may be affected if any areas within them fall within the above restricted categories.

Tenure risk

The Sri Lankan Project comprises tenements which are granted under and governed by the laws of Sri Lanka and are granted subject to conditions, including minimum annual expenditure commitments and reporting commitments. Similar conditions may be applied to future mining permits acquired by the Company or its subsidiaries. Failure to comply with these conditions may result in forfeiture of part of the Sri Lankan Project.

Further, the tenements comprising the Sri Lankan Project (and any additional future mining permits held by the Company) are subject to periodic renewal. Whist there is no reason to believe that such renewals will not be granted, the Company cannot guarantee that this will occur. New conditions may also be imposed on the Sri Lankan Project (and any additional future mining permits held by the Company) under the renewal process which may adversely affect the Company.

In addition, certain tenement applications comprising part of the Sri Lankan Project are yet to be granted. A failure to obtain their grant may negatively affect the value of the Sri Lankan Project.

Government and regulatory risk

Operations by the Company may require approvals, consents or permits from government or regulatory authorities, including renewals of existing mining permits or title transfer to newly acquired mining permits, which may not be forthcoming or which may not be able to be obtained on terms acceptable to the Company.

Whilst there is no reason to believe that necessary government and regulatory approvals will not be forthcoming (other than as outlined above in respect of the Company’s Sri Lankan operations), the Company cannot guarantee that those required approvals will be obtained. Failure to obtain any such approvals could mean the ability of the Company to prove-up, develop or operate any project or to acquire any project, may be inhibited or negated.

Commodity price and currency exchange risk

As the Company’s potential earnings will be largely derived from the sale of mineral commodities, the Company’s future revenues and cash flows will be impacted by changes in the prices and available markets of these commodities. Any substantial decline in the price of those commodities or in transport or distribution costs may have a material adverse effect on the Company and the value of its Shares.

Commodity prices fluctuate and are affected by numerous factors beyond the control of the Company. These factors include current and expected future supply and demand, forward selling by producers, production cost levels in major mineral producing centres as well as macroeconomic conditions such as inflation and interest rates.

Furthermore, the international prices of most commodities are denominated in United States dollars while the Company cost base will be in Australian dollars. Consequently changes in the Australian dollar exchange rate will impact on the earnings of the Company. The exchange rate is affected by numerous factors beyond the control of the Company, including international markets, interest rates, inflation and the general economic outlook.

Resource and reserve estimates

Even though a JORC Code compliant mineral resource has been discovered at the Project, estimates in respect of that resource are expressions of judgement based on knowledge, experience and industry practice. Estimates which were valid when originally made may change appreciably when further information becomes available. Such resource estimates are by nature imprecise, depending on interpretations which may, with further exploration, prove to be inaccurate. Moreover, should the Company encounter ore bodies or formations which differ from those suggested by past sampling and analysis, resource estimates may have to be adjusted and any production plans altered accordingly which may adversely impact the Company’s plans.

Results of studies

Subject to the results of exploration and testing programs to be undertaken, the Company may progressively undertake a number of studies in respect to the Sri Lankan Project. These studies may include scoping, pre-feasibility, definitive feasibility and bankable feasibility studies.

These studies will be completed within parameters designed to determine the economic feasibility of the Sri Lankan Project within certain limits. There can be no guarantee that any of the studies will confirm the economic viability of the Sri Lankan Project or the results of other studies undertaken by the Company (e.g. the results of a feasibility study may materially differ to the results of a scoping study).

Even if a study confirms the economic viability of the Sri Lankan Project, there can be no guarantee that the Sri Lankan Project will be successfully brought into production as assumed or within the estimated parameters in the feasibility study (e.g. operational costs and commodity prices) once

production commences. Further, the ability of the Company to complete a study may be dependent on the Company’s ability to raise further funds to complete the study if required.

Agents and contractors

The Directors are unable to predict the risk of financial failure or default or the insolvency of any of the contractors which will be used by the Company in any of its activities or other managerial failure by any of the other service providers used by the Company for any activity. Any default or insolvency is outside the Company’s control and may have an adverse effect on the Company’s operations.

Insurance

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.

Insurance of all risks associated with mineral exploration and production is not always available. Further, where coverage is available, the costs may be prohibitive.

Environmental risks

The Company’s activities are subject to the environmental laws inherent in the mining industry and those specific to Sri Lanka. The Company intends to conduct its activities in an environmentally responsible manner and in compliance with all applicable laws. However, the Company may be the subject of accidents or unforeseen circumstances that could subject the Company to extensive liability.

In addition, environmental approvals may be required from relevant government or regulatory authorities before activities may be undertaken which are likely to impact the environment. Failure or delay in obtaining such approvals will prevent the Company from undertaking its planned activities. Further, the Company is unable to predict the impact of additional environmental laws and regulations that may be adopted in the future, including whether any such laws or regulations would materially increase the Company’s cost of doing business or affect its operations in any area.

Rehabilitation of tenements

In relation to the Company’s proposed operations, issues could arise from time to time with respect to abandonment costs, consequential clean-up costs, environmental concerns and other liabilities. In these instances, the Company could become subject to liability if, for example, there is environmental pollution or damage from the Company’s exploration activities and there are consequential clean-up costs at a later point in time.

Climate change regulation

Mining of mineral resources is relatively energy intensive and is dependent on the consumption of fossil fuels. Increase regulation and government policy designed to mitigate climate change may adversely affect the Company’s cost of operations and adversely impact the financial performance of the Company.

Dilution and reduced cash reserves

The consideration payable under the Option Agreement is a combination of Shares, Performance Shares and cash, subject to certain performance Milestones being satisfied. Therefore, the acquisition of the Sri Lankan Project will potentially result in a significant dilution of then existing Shareholders and a significant reduction in the Company’s cash reserves.

Counterparty risk

The Company’s option to acquire the Sri Lankan Project is granted under the Option Agreement. The ability of the Company to complete on the acquisition of the Sri Lankan Project will depend on the performance by Cuprum of its obligations under the Option Agreement. If Cuprum or any other counterparty defaults in the performance of its obligations, it may be necessary for the Company to institute court proceedings to seek a legal remedy. Legal action instituted in Australia or overseas can be costly.

Contract Risk

The operations of the Company will require the involvement of a number of third parties, including suppliers, contractors and customers. With respect to these third parties, and despite applying best practice in terms of pre-contracting due diligence, the Directors are unable to completely avoid the risk of:

financial failure or default by a participant in any joint venture to which the Company or its subsidiaries may become a party;
insolvency, default on performance or delivery, or any managerial failure by any of the operators and contractors used by the Company or its subsidiaries in its exploration activities; or
insolvency, default on performance or delivery, or any managerial failure by any other service providers used by the Company or its subsidiaries or operators for any activity.

Financial failure, insolvency, default on performance or delivery, or any managerial failure by such third parties may have a material impact on the Company’s operations and performance. Whilst best practice pre-contracting due diligence is undertaken for all third parties engaged by the Company, it is not possible for the Company to predict or protect itself completely against all such contract risks.

Liquidity and dilution risk

There is currently 172,583,599 Shares on issue with between 47.78% and 52.34% of the total Shares on issue following re-quotation of the Company’s shares being offered to the public pursuant to the Prospectus (assuming that the full amount of the Cash Reimbursement is paid in Shares, no Performance Shares convert into New Shares and no Options are exercised). Upon re-compliance, a significant portion of the Shares on issue will be subject to escrow restrictions imposed by the Listing Rules. Some investors may consider there to be an increased liquidity risk if a large portion of the issued capital of the Company is unable to be traded freely for a period of up to 24 months.

Upon completion of the Proposed Transaction (assuming Full Subscription) existing Shareholders will be diluted by approximately 68.89% if all Shares are issued, Performance Shares do not convert into Shares and no Options are exercised. If all Shares are issued, Performance Shares convert into Shares and all Options are exercised, existing Shareholders will be diluted by approximately 79.72%.

The following table summarises the percentages by which the shareholdings of the existing Shareholders will be diluted in a number of different scenarios:

Scenario	Minimum	Full
	Subscription	Subscription
All Shares are issued, no Performance Shares convert into New Shares and no Options are exercised	67.01%	68.89%
All Shares are issued, Milestone 1 Performance Shares
convert into New Shares, Milestone 2 and 3 Performance Shares do not convert into New Shares and no Options are	70.74%	73.03%
exercised
All Shares are issued, Milestone 1 and 2 Performance Shares
convert into New Shares and Milestone 3 Performance Shares	72.31%	74.36%
do not convert and no Options are exercised
All Shares are issued, Milestone 1, 2 and 3 Performance Shares convert into New Shares and no Options are exercised.	77.19%	78.60%
All Shares are issued, Milestone 1,2 and 3 Performance Shares convert into New Shares and all Options are exercised	78.45%	79.72%

Acquisitions

The Company may make acquisitions of, or significant investments in, companies or assets that are complementary to its business. Any such future transactions are accompanied by the risks commonly encountered in making acquisitions of companies or assets, such as integrating cultures and systems of operation, relocation of operations, short term strain on working capital requirements, achieving mineral exploration success and retaining key staff.

Safety

Safety is a fundamental risk for any exploration and production company in regards to personal injury, damage to property and equipment and other losses. The occurrence of any of these risks could result in legal proceedings against the Company and substantial losses to the Company due to injury or loss of life, damage or destruction of property, regulatory investigation, and penalties or suspension of operations. Damage occurring to third parties as a result of such risks may give rise to claims against the Company.

Litigation

The Company may in the ordinary course of business become involved in litigation and disputes, for example with service providers, customers or third parties infringing the Company’s intellectual property rights. Any such litigation or dispute could involve significant economic costs and damage to relationships with contractors, customers or other stakeholders. Such outcomes may have an adverse impact on the Company’s business, reputation and financial performance.

Share Market

Share market conditions may affect the value of the Company’s quoted securities regardless of the Company’s operating performance. The market price of the Shares may be subject to fluctuation and may be affected by many factors including but not limited to the following:

general economic outlook;
interest rates and inflation rates;
currency fluctuations;

mineral/commodity price fluctuations;
changes in investor sentiment toward particular market sectors;
the demand for, and supply of, capital;
terrorism or other hostilities; and
other factors beyond the control of the Company.

Commercialisation risks

Even if the Company discovers commercial quantities of minerals, there is a risk the Company will not achieve a commercial return. The Company may not be able to transport any minerals extracted from its operations at a reasonable cost or may not be able to sell the minerals to customers at a rate which would cover its operating and capital costs. There is also a risk that necessary regulatory approvals may not be obtained.

Competition risks

The industry in which the Company will be involved is subject to domestic and global competition. While 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, and such activities or actions may, positively or negatively, affect the operating and financial performance of the Company’s projects and business.

Future capital needs

Additional funding beyond the funds raised under the Offer may be required by the Company to support its ongoing operations and development of the Sri Lankan Project. There can be no assurance that such funding will be available on satisfactory terms to the Company or at all. Any inability to obtain funding will adversely affect the business and financial condition of the Company and, consequently, its performance and ability to take advantage of opportunities to develop projects.

Further, any additional funding raised by issue of equity will be dilutive to the then current Shareholders. Equally, debt funding, if available in the future, may involve restrictions on financing and operating activities of the Company and its subsidiaries.

Key management

The responsibility of overseeing the day-to-day operations and the strategic management of the Company depends substantially on its senior management and its key personnel. The Company may be detrimentally affected if one or more of the key management or other personnel cease their engagement with the Company.

Changes to laws and regulations

The Company may be affected by changes to laws and regulations (in Australia, Sri Lanka and other countries in which the Company may operate) concerning property, the environment, superannuation, taxation trade practices and competition, government grants, incentive schemes, accounting standards and other matters. Such changes could have adverse impacts on the Company from a financial and operational perspective.

International operations

The Company initially intends to operate in Sri Lanka. The Company may also consider expanding into other markets internationally in the future. Therefore, the Company will be exposed to risks relating to operating in those countries. Many of these risks are inherent in doing business internationally, and will include, but are not limited to:

changes in the regulatory environment;
trade barriers or the imposition of taxes;
difficulties with staffing or managing any foreign operations;
issues or restrictions on the free transfer of funds;
technology export or import restrictions; and
delays in dealing across borders caused by customers or regulatory authorities.

Economic risks

The future viability of the Company is also dependent on a number of other factors affecting performance of all industries and not just the exploration and mining industries including, but not limited to, the following:

general economic conditions;
changes in Government policies, taxation and other laws;
the strength of the equity and share markets in Australia and throughout the world, and in particular investor sentiment towards the commodities (resources) sector;
movement in, or outlook on, interest rates and inflation rates; and
natural disasters, social upheaval or war.

Force majure risk

Events may occur within or outside the markets in which the Company operates that could impact upon the global, Australian and Sri Lankan economies and the operations of the Company. These events include acts of terrorism, outbreaks of international hostilities, fires, pandemics, floods, earthquakes, labour strikes, civil wars, natural disasters, outbreaks of disease, and other man-made or natural events or occurrences that can have an adverse effect on the demand for the Company’s services and its ability to conduct business. Given the Company has only a limited ability to insure against some of these risks, its business, financial performance and operations may be materially adversely affected if any of the events described above occurs.

1.8 Public Offer

As part of the Proposed Transaction, the Company will offer up to 300,000,000 Shares under the Prospectus at an issue price of $0.02 each to raise up to $6,000,000 before costs ( Public Offer ). Subject to foreign investor restrictions, the Public Offer will be open to members of the general public.

The minimum level of subscription for the Public Offer will be 250,000,000 Shares to raise at least $5,000,000. The Public Offer will not be underwritten.

Funds raised under the Public Offer will be used in accordance with the table set out in Section 1.10.

It is currently anticipated that the Public Offer will open on 8 February 2018 and close on 8 March 2018.

1.9 Indicative timetable

The indicative timetable for the Proposed Transaction is set out below.

Event	Date
Notice of Meeting sent to Shareholders	22 December 2017
Annual General Meeting to approve the Resolutions	24 January 2018
Prospectus lodged with ASIC	31 January 2018
Public Offer opens	8 February 2018
Public Offer closes	8 March 2018
Issue of Shares under the Public Offer
Issue of Shares and Performance Shares to the Seller	14 March 2018
Completion of the Option Agreement
Expected date for Shares to be reinstated to trading on ASX	21 March 2018

Note: The dates shown in the table above are indicative only and may vary subject to the Corporations Act, the Listing Rules and other applicable laws.

1.10 Proposed use of funds

The Company intends to use the funds raised from the Public Offer as follows:

Use of funds	Minimum	Subscription	Full Subscription	Full Subscription
	Amount	%	Amount	%
Costs associated with the Proposed Transaction	$465,000	9.3%	$525,000	8.75%
Cash Reimbursement to the Seller	$450,000	9%	$450,000	7.5%
Exploration on the Sri Lankan Project	$1,664,846	33.3%	$2,264,846	37.75%
Scoping study on the Sri Lankan Project	$515,200	10.3%	$852,190	14.2%
Working capital1	$1,904,954	38.1%	$1,907,964	31.8%
Total2	$5,000,000	100%	$6,000,000	100%

Notes:

Working capital may include wages, payments to contractors, rent and outgoings, insurance, accounting, audit, legal and listing fees, other items of a general administrative nature and cash reserves which may be used in connection with any project, investment or acquisition, as determined by the Board at the relevant time.
If the amount raised under the Public Offer is between the Minimum Subscription and the Full Subscription, the Company intends to allocate the funds between each item on a pro-rata basis, other than fixed costs.

1.11 Pro forma capital structure

The table below provides a summary of the capital structure of the Company at the date of this Notice and upon completion of the Proposed Transaction.

Capital structure Existing	Completion
	Minimum Subscription Full Subscription
Existing Shares1 172,583,599	172,583,599 172,583,599
Shares under the Public Offer2 -	250,000,000 300,000,000
Shares to the Seller3 -	58,095,239 58,095,239
Shares in lieu of Cash Reimbursement4 -	22,500,000 22,500,000
Shares to Trident Capital5 -	20,000,000 20,000,000
Total Shares 172,583,599	523,178,838 573,178,838
Class A Options under Placement6 -	14,285,714 14,285,714
Class B Options to Directors7 -	30,000,000 30,000,000
Class A Performance Shares8 -	66,666,667 66,666,667
Class B Performance Shares9 -	33,333,333 33,333,333
Class C Performance Shares10 -	133,333,333 133,333,333
Fully diluted share capital 172,583,599	800,797,885 850,797,885

Notes:

Amount is on a post-Consolidation basis. Assumes no additional Shares are issued between the date of this Notice and completion of the Proposed Transaction.
See Section 1.8 for further information on the Public Offer.
Shares to be issued to the Seller under the Agreement as partial consideration for its shares in Srinel. See Section 1.3 for further information
Shares to be issued to the Seller in lieu of cash reimbursement of expenditure. Assumes the full amount of the Cash Reimbursement is paid in Shares. See Section 1.3 for further information.
Shares to be issued to Trident Capital (and/or its nominees) in consideration of services provided to the Company in connection with the Proposed Transaction.
Class A Options are to be issued to Exempt Investors under the Placement. Class A Options will be exercisable at $0.021 each and will expire 3 years from issue.
Class B Options are to be issued to the Directors to incentivise their performance. Class B Options will be exercisable at $0.05 each and will expire on 18 January 2021.
Class A Performance Shares are to be issued to the Seller under the Agreement as partial consideration for its shares in Srinel. See Section 1.3 for further information.
Class B Performance Shares are to be issued to the Seller under the Agreement as partial consideration for its shares in Srinel. See Section 1.3 for further information.
Class C Performance Shares are to be issued to the Seller under the Agreement as partial consideration for its shares in Srinel. See Section 1.3 for further information.

1.12 Pro forma statement of financial position

Assuming the Resolutions are passed and implemented, the unaudited pro forma statement of financial position for the Company is set out in Schedule E.

1.13 Independent Expert’s Report

The Independent Expert’s Report assesses whether the acquisition of Shares by the Seller under the Agreement is fair and reasonable to the Shareholders who are not associated with the Seller. The Independent Expert’s Report also contains an assessment of the advantages and disadvantages of the proposed acquisition under the Agreement. This assessment is designed to assist Shareholders in reaching their voting decision.

BDO has prepared the Independent Expert’s Report and has provided an opinion that it believes the proposal as outlined in the Agreement is, on balance, fair and reasonable to Shareholders not associated with the Seller. It is recommended that all Shareholders read the Independent Expert’s Report in full which is enclosed as Annexure 1 of this Notice.

1.14 Advantages of the Proposed Transaction

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 Resolutions:

(a) By completing the Proposed Transaction, the Company will create a portfolio of assets, comprising the Sri Lankan Project.
(b) As at the date of this Notice, the Company does not have a main undertaking for the purposes of maintaining its listing on the ASX, which exposes the Company to being delisted from the official list of ASX. The Sri Lankan Project will provide the Company with a main undertaking to maintain its listing on the ASX.
(c) As a result of the Public Offer, the Company will be well capitalised with at least an additional $5,000,000 in its bank account (before costs and repayments). These funds will primarily be used to fund exploration and other work on the Sri Lankan Project with a view to achieving capital growth for Shareholders. See Section 1.10 for further information on the proposed use of funds raised under the Public Offer.
(d) The injection of capital via the Public Offer will significantly strengthen the Company’s balance sheet. This will make the Company more attractive to investors which may improve the Company’s ability to raise further funds as and when required via equity and debt markets.
(e) A larger market capitalisation and enhanced Shareholder base resulting from the Proposed Transaction may provide a more liquid market for the Company’s Shares than that which has existed previously.
(f) The change in nature of the Company’s activities could attract new investors and may allow the Company to more readily raise additional working capital (if required) as such, the Company may increase its ability to acquire further projects.
(g) The Independent Expert has concluded that the proposed 100% acquisition of Srinel and issue of securities pursuant to Resolution 4 is fair and reasonable to non-associated Shareholders.

1.15 Disadvantages of the Proposed Transaction

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

(a) Assuming that the Public Offer is fully subscribed, all Shares are issued to the Seller and Trident Capital, all Options are exercised and the Milestones are achieved such that all Performance Shares are converted into Shares, the Proposed Transaction will result in Shareholders’ interests in the Company being diluted by approximately 79.72% based on the Company’s current capital structure. See Section 2.2(b) for further details.
(b) Upon completion of the Proposed Transaction, the Company will be changing the nature of its activities to include exploration for heavy mineral sands in Sri Lanka, which may not be consistent with the objectives of Shareholders.
(c) The Company and its Shareholders will be exposed to the risks associated with Srinel and its business including those risks set out in Section 1.7.
(d) The Seller will acquire Voting Power of greater than 10% in the Company, which may deter a takeover offer for the Company as the Seller will be able to block a compulsory acquisition of Shares under the Corporations Act for so long as they hold more than 10% of the number of Shares on issue. A takeover offer may be attractive to Shareholders as they are often made at a premium to the market price of Shares.

2. REGULATORY INFORMATION

2.1 Resolution 1 – Consolidation of securities

Resolution 1 is an ordinary resolution for the alteration of the Company’s share capital by consolidating the existing Shares and Options on a 1 for 3 basis. The record date for determining the Consolidation will be 5 Business Days after the date of the Annual General Meeting. Any fractional entitlements as a result of the Consolidation will be rounded down to the nearest whole number.

Section 245H of the Corporations Act

Section 254H of the Corporations Act enables a company to convert all of its ordinary securities into a smaller number of securities by a resolution passed at a general meeting. The conversion proposed by Resolution 1 is permitted under section 254H of the Corporations Act.

The Consolidation will not result in any change to the substantive rights and obligations of existing Shareholders. The purpose of the Consolidation is to satisfy ASX’s requirements in order to qualify for a waiver of the ‘20 cent rule’ and enable the Company to offer Shares under the Public Offer for $0.02 each. The Consolidation is also required for the purposes of re-complying with Chapters 1 and 2 of the Listing Rules.

By way of example, a Shareholder currently holding 15,000 Shares will hold 5,000 Shares as a result of the Consolidation.

The Company’s balance sheet and tax position will remain unaltered as a result of the Consolidation. However, the Company’s issued capital will be reduced from 517,750,797 Shares to approximately 172,583,599 Shares (subject to rounding) as a result of the Consolidation.

After the Consolidation becomes effective, the Company will arrange for new holding statements for the Shares to be issued to Shareholders.

Directors’ recommendations

The Directors unanimously recommend that Shareholders vote in favour of Resolution 1.

2.2 Resolution 2 – Change to nature and scale of activities

Resolution 2 seeks Shareholder approval to the change in the nature and scale of the Company’s activities contemplated by the Proposed Transaction.

Listing Rule 11.1

Listing Rule 11.1 provides that where an entity proposes to make a significant change, either directly or indirectly, to the nature or scale of its activities, it must provide full details to ASX as soon as practicable and comply with the following:

provide to ASX information regarding the change and its effect on future potential earnings, and any information that ASX asks for;
if ASX requires, obtain shareholder approval and comply with any requirements of ASX in relation to the associated notice of meeting; and
if ASX requires, meet the requirements of Chapters 1 and 2 of the Listing Rules as if the entity were applying for admission to the official list of ASX.

ASX has exercised its discretion to require the Company to seek the approval of Shareholders under Listing Rule 11.1.2 for a change in the nature and scale of its activities. Accordingly, Resolution 2 seeks approval from Shareholders for a change to the scale of the activities of the Company.

ASX has also exercised its discretion under Listing Rule 11.1.3 to require the Company to re-comply with Chapters 1 and 2 of the Listing Rules in order to complete the Proposed Transaction. Accordingly, the Company will take the necessary steps to meet the requirements of Chapters 1 and 2 as if the Company were applying for admission to the official list of ASX.

As required by ASX Guidance Note 12: Significant Changes to Activities , the following information is provided in relation to Resolution 2:

(a) Material terms of the transaction

A summary of the key terms of the Option Agreement is set out in Section 1.3, and a summary of the Proposed Transaction generally is set out in Section 1.

(b) Financial effect of the transaction on the entity and on the interests of security holders

The effect of the Proposed Transaction on the financial position of the Company is set out in Schedule E.

The effect of the Proposed Transaction on the capital structure of the Company is set out in Section 1.11. Upon completion of the Proposed Transaction, assuming Full Subscription, existing Shareholders will be diluted by approximately 68.89%. Further, there will be an additional 277,619,047 convertible securities on issue (Options and Performance Shares) which, if converted into Shares, would dilute existing Shareholders by approximately 79.72%. Please see the table below for further details.

Dilution table	Minimum Subscription	Full Subscription
All Shares are issued, Performance Shares
do not convert into Shares and no Options	67.01%	68.89%
are exercised
All Shares are issued, Performance Shares
convert into Shares but no Options are	77.19%	78.6%
exercised
All Shares are issued, Performance Shares
convert into Shares and all Options are	78.45%	79.72%
exercised

The anticipated effect of the Proposed Transaction on the Company’s total assets, total equity interests, annual revenue, annual expenditure and annual profit before tax is set out below.

Item	Existing	Change	Completion	% change
Total assets1	696,692	7,362,487	8,059,179	1,157%
Total equity interests1	(197,804)	6,746,205	6,548,401	(3,311%)
Annual	-	-	-	-
revenue2
Annual	$516,190	$3,983,810	$4,500,000	872%
expenditure1 / 3

Annual profit - - - - before tax[2 ]

Notes:

Existing figures drawn from the Company’s statement of financial position as at 30 June 2017 or statement of financial performance for the period ended 30 June 2017 (as applicable).
The Company is in the growth stage of its development. The Company’s profitability will be impacted by, among other things, the success of its exploration and mining activities, economic conditions in the markets in which it operates, competition factors and any regulatory developments. Accordingly, the extent of future revenues and profits (if any) and the time required to achieve sustained revenues and profits are uncertain and cannot be reliably predicted.
Assumes Full Subscription is achieved. Figures are a statement of current intentions as at the date of this Notice. Shareholders should note that, as with any budget, annual expenditure may change depending on a number of factors including, but not limited to, the success of the Company’s exploration and asset evaluation programs, as well as regulatory developments and economic conditions. In light of this, the Board reserves the right to alter the amount of annual expenditure it incurs.

(c) Changes the entity will be making to its business model

From completion of the Proposed Transaction, the Company will expand its focus from mineral exploration in Western Australia to include mineral exploration in Sri Lanka. The Company will adopt the business model described in Section 1.5.

(d) How the entity will pay for the acquisition

The Company has paid in aggregate approximately A$600,000 in cash to the Seller as fees for the Call Option (n.b. US$500,000 of this amount was paid to the party who sold the Sri Lankan Project to the Seller in 2013). This amount was funded through capital raisings undertaken by the Company.

At completion, the Company will be required to pay $450,000 to the Seller as reimbursement for expenditure incurred by the Seller on the Sri Lankan Project which will be paid from funds raised under the Public Offer. The balance of the purchase price payable at completion is in the form of Shares and Performance Shares which will be issued by the Company.

If the Sri Lankan Project enters production, the Royalty would likely be paid from cash reserves of the Company which would be supplemented by revenues generated from the sale of minerals.

(e) Changes proposed to the entity’s board or senior management

The Company has no current intention of changing members of its Board or senior management.

(f) Timetable for implementing the transaction

The indicative timetable for the Proposed Transaction is set out in Section 1.9.

Recommendation

Jason Ferris expresses no opinion and makes no recommendation in respect of Resolution 2 as he has a material personal interest in its outcome. Each other Director recommends that Shareholders vote in favour of Resolution 2.

2.3 Resolution 3 – Approval of Performance Shares

Resolution 3 seeks Shareholder approval to create the Class A Performance Shares, Class B Performance Shares and Class C Performance Shares as new classes of shares in the Company on the terms set out in Schedule B.

Section 246B of the Corporations Act

Section 246C(5) of the Corporations Act provides that if a company has one class of shares (e.g. ordinary shares) and seeks to issue a new class of shares, the new issue is taken to vary the rights attached to the existing shares. Under section 246B(1) of the Corporations Act, if a company has a constitution which sets out the procedure for varying or cancelling rights attached to shares in a class of shares, those rights may only be varied or cancelled in accordance with that procedure.

Clause 2.3(a) of the Constitution provides that if the share capital is divided into different classes of shares, the rights attaching to a class of shares may be varied or cancelled by a special resolution of holders of shares of that class.

Despite being ‘shares’, the Performance Shares proposed to be issued under Resolution 3 are of a different class to ordinary Shares as their respective rights and liabilities differ. Accordingly, the issue of the Performance Shares under Resolution 3 must be approved by a special resolution of ordinary Shareholders.

As Resolution 3 is a special resolution, at least 75% of the votes cast on the Resolution must be cast in favour in order for it to be passed.

Full terms of the Class A Performance Shares, Class B Performance Shares and Class C Performance Shares are set out in Schedule B.

Directors’ recommendations

Jason Ferris expresses no opinion and makes no recommendation in respect of Resolution 3 as he has a material personal interest in its outcome. Each other Director recommends that Shareholders vote in favour of Resolution 3.

2.4 Resolution 4 – Issue of Shares and Performance Shares to Seller

Resolution 4 seeks Shareholder approval for the issue of 58,095,239 Shares, 66,666,667 Class A Performance Shares, 33,333,333 Class B Performance Shares and 133,333,333 Class C Performance Shares to the Seller as part of the consideration for acquiring 100% of the issued share capital in Srinel, and 22,500,000 Shares to the Seller in lieu of the Cash Reimbursement if the Company is not permitted to pay the full amount of $450,000 in cash under the Listing Rules.

Takeover prohibition

Section 606 of the Corporations Act prohibits a person from acquiring a Relevant Interest in the issued voting shares of a listed company if the acquisition would result in that person’s (or another person’s) Voting Power in the company increasing:

from 20% or below to more than 20%; or
from a starting point that is above 20% and below 90%.

Voting Power

The Voting Power of a person in a company is determined in accordance with section 610 of the Corporations Act. It is aimed at grouping together and counting the percentage of all voting shares in a company that are controlled by a person and its associates (i.e. their Relevant Interests).

Relevant Interests

Section 608(1) of the Corporations Act provides that a person has a Relevant Interest in securities if that person:

is the holder of the securities;

has power to exercise, or control the exercise of, a right to vote attached to the securities; or
has power to dispose of, or exercise control over the disposal of, the securities.

It is immaterial whether the power or control is direct or indirect, and it does not matter how remote the Relevant Interest is or how it arises. If two or more people can jointly exercise one of these powers, each of them is taken to have that power.

In addition, section 608(3) of the Corporations Act provides that, if a body corporate has a Relevant Interest in securities, a person will also have a Relevant Interest in those securities if:

the person has Voting Power in the body which is above 20%; or
the person controls the body.

Associates

In determining who is an associate for the purposes of calculating a person’s Voting Power, section 12(2) of the Corporations Act provides that:

the following entities are associates of a body corporate:
another body corporate which it controls;
another body corporate which controls it; and
another body corporate that is controlled by the same entity which controls it;
a person will be an associate of another person if they have, or propose to enter into, a relevant agreement for the purpose of controlling or influencing:
the composition of a body’s board; or
the conduct of the body’s affairs; and
a person will be an associate of another person if they are acting, or propose to act, in concert in relation to the affairs of a body.

Item 7 of section 611 of the Corporations Act

Item 7 of section 611 of the Corporations Act provides an exception to the prohibition in section 606 where the acquisition of the Relevant Interest has been approved by shareholders in general meeting, provided that:

no votes are cast in favour of the resolution by the person proposing to make the acquisition or their associates; and
shareholders are given all information known to the acquirer or the company that was material to the decision on how to vote.

The acquisition of Shares by the Seller as a result of being issued Shares at completion of the Agreement, and Shares upon any conversion of Performance Shares, will result in the Seller acquiring a Relevant Interest in the Company’s Shares which will potentially increase its Voting Power in the Company:

from 20% or below to more than 20%; and
from a starting point that is above 20% and below 90%.

Under section 606(6) of the Corporations Act, a person is taken to acquire a Relevant Interest in voting shares in a company if securities in which the person already had a Relevant Interest become voting shares in the company. Therefore, in respect of the Performance Shares, the acquisition occurs when the Performance Shares convert into Shares (if at all).

Based on certain assumptions, the maximum Voting Power that the Seller may obtain in the Company as a result of being issued Shares at completion of the Agreement, and Shares upon any conversion of Performance Shares, is 43.47%. Please refer below for further information on the Voting Power that may be acquired by the Seller pursuant to the Agreement.

Accordingly, Resolution 4 seeks Shareholder approval for the purposes of item 7 of section 611 of the Corporations Act.

Prescribed information

The following information is required to be provided to Shareholders under the Corporations Act and ASIC Regulatory Guide 74: Acquisitions approved by members for the purposes of obtaining approval under item 7 of section 611 of the Corporations Act. Shareholders are also referred to the Independent Expert’s Report prepared by BDO contained in Annexure 1 of this Notice.

Identity of the acquirer and its associates

The Shares and Performance Shares to be issued under Resolution 4 will be issued to the Seller (and/or its nominees) in consideration of all of the issued capital in Srinel and assumes that the full amount of the Cash Reimbursement is to be paid in Shares.

The Seller is controlled and beneficially owned by Robert Nelson who is a private investor with over 40 years of experience in the mining industry. Mr Nelson is the father in law of Jason Ferris who is a Non-Executive Director of the Company.

At the date of this Notice, the Seller has a Relevant Interest in 14,965,000 Shares.

The Company has been informed that the Seller does not have an associate relationship with any other existing Shareholders.

Effect on the acquirer’s Voting Power

At the date of this Notice, the Seller has a Relevant Interest in 14,965,000 Shares, giving it Voting Power in the Company of 8.67%.

The maximum Voting Power that the Seller may obtain in the Company as a result of being issued Shares at completion of the Agreement, and Shares upon any conversion of Performance Shares, is 43.47%. Among other assumptions, this level of Voting Power would only be achieved if the Milestones are satisfied and the Performance Shares convert into Shares.

The table below sets out the potential effect of the issue of Shares and Performance Shares on the Seller’s Voting Power in the Company.

	Seller’s Relevant Interest in	Total Shares on issue2	Seller’s Voting Power
	Shares1
Existing position	14,965,000	172,583,599	8.67%
Issue of Shares at completion3	95,560,239	523,178,838	18.26%
Conversion of Class A Performance	162,226,906	589,845,505	27.50%
Shares4
Conversion of Class B Performance	195,560,239	623,178,838	31.38%
Shares5
Conversion of Class C	328,893,572	756,512,171	43.47%
Performance Shares6

Notes :

Assumes that neither the Seller nor any its associates apply for Shares under the Public Offer. The Relevant Interest of the Seller in Shares and therefore its Voting Power will increase to the extent that it or any of its associates apply for, and are issued, Shares under the Public Offer.
Assumes that no additional Shares are issued other than the Shares under the Public Offer (assuming only the Minimum Subscription is raised), the Shares to the Seller and to Trident Capital at completion of the Agreement and any Shares to the Seller pursuant to the conversion of the Performance Shares (as applicable).
Shares to be issued to the Seller under the Agreement as partial consideration for its shares in Srinel. Assumes that the Cash Reimbursement is fully paid in Shares. See Section 1.3 for further information.
Class A Performance Shares to be issued to the Seller under the Agreement as partial consideration for its shares in Srinel. See Section 1.3 for further information. Class A Performance Shares convert into voting Shares upon the satisfaction of Milestone 1.
Class B Performance Shares to be issued to the Seller under the Agreement as partial consideration for its shares in Srinel. See Section 1.3 for further information. Class B Performance Shares convert into voting Shares upon the satisfaction of Milestone 2.
Class C Performance Shares to be issued to the Seller under the Agreement as partial consideration for its shares in Srinel. See Section 1.3 for further information. Class C Performance Shares convert into voting Shares upon the satisfaction of Milestone 3.

Reasons for the proposed acquisition

In accordance with the Option Agreement, the Seller is to acquire the Shares and Performance Shares in consideration of the Seller transferring all of the issued share capital in Srinel to the Company. Upon completion of the Agreement, the Company will wholly own Srinel, which in turn owns the Sri Lankan Project. Summaries of the key advantages and disadvantages of the Proposed Transaction are set out in Sections 1.14 and 1.15.

Timing of the proposed acquisition

The Seller will acquire up to 80,595,239 Shares at completion of the Agreement, which is anticipated to be on or about 14 March 2018. The Seller will acquire a Relevant Interest in those Shares once they have been issued.

At completion of the Agreement, the Seller will also acquire 66,666,667 Class A Performance Shares, 33,333,333 Class B Performance Shares and 133,333,333 Class C Performance Shares. However, the Performance Shares will only give rise to a Relevant Interest in voting Shares if they convert into Shares in accordance with their terms (e.g. through the satisfaction of the Milestones). As the Milestones must be satisfied within 5 years of the Performance Shares being issued, any acquisition of voting Shares through the conversion of the Performance Shares will happen during the 5 year period following completion of the Agreement.

The indicative timetable for the Proposed Transaction is set out in Section 1.9.

Material terms of the proposed acquisition

A summary of the key terms of the Option Agreement is set out in Section 1.3, and a summary of the Proposed Transaction generally is set out in Section 1.

Other relevant agreements

Other than the Option Agreement and an agreement governing the terms and conditions of the Royalty, no relevant agreements exist between the Company and the Seller, or any of its associates.

Acquirer’s intentions regarding the future of the Company

Other than as disclosed elsewhere in this Notice, the Seller:

has no current intention of making any changes to the business of the Company;
does not propose to inject further capital into the Company;
does not intend to change the employment arrangements of the Company;
does not propose to transfer any assets between the Company and the Seller, or its associates;
has no intention to otherwise redeploy the fixed assets of the Company; and
does not intend to change the financial or dividend distribution policies of the Company.

These intentions are based on information concerning the Company, its business and the business environment which is known to the Seller at the date of this Notice. Final decisions regarding these matters will only be made by the Seller in light of material information and circumstances at the relevant time. Accordingly, the statements set out above are statements of current intention only, which may change as new information becomes available to them or as circumstances change.

Directors’ interests

The Company has taken the view that Jason Ferris has a material personal interest in Resolution 4 and certain other Resolutions due to him being the son in law of Robert Nelson – the controller and beneficial owner of the Seller. No other Director has a material personal interest in the issue of Shares and Performance Shares to the Seller under Resolution 4.

Additional directors

There is no current intention of changing the Board in connection with Resolution 4.

Independent Expert’s Report

BDO has prepared the Independent Expert’s Report and has provided an opinion that it believes the proposal as outlined in the Agreement is, on balance, fair and reasonable to Shareholders not associated with the Seller. It is recommended that all Shareholders read the Independent Expert’s Report in full which is enclosed as Annexure 1 of this Notice.

Section 208 of the Corporations Act

Section 208(1)(a) of the Corporations Act prohibits a company from giving a financial benefit (including an issue of securities) to a related party of the company without the approval of shareholders by a resolution passed at a general meeting at which no votes are cast in relation to the resolution in respect of any shares held by the related party or by an associate of the related party.

The Seller is a related party of the Company under section 228 of the Corporations Act as it is controlled by Robert Nelson, who is the father in law of Jason Ferris, who is a Director. The Company notes that Robert Nelson became a related party of the Company when Jason Ferris became a Director on 31 July 2014 i.e. after the Option Agreement was entered into.

Out of an abundance of caution, rather than relying on the ‘arm’s length’ exception in section 210 of the Corporations Act, the Company is seeking Shareholder approval to Resolution 4 for the purposes of section 208 of the Corporations Act.

As required by section 219 of the Corporations Act, the following information is provided in relation to Resolution 4:

(a) Related party to whom the financial benefit is to be given

Cuprum Holdings Limited which is controlled and beneficially owned by Robert Nelson.

(b)

Nature of the financial benefit

Up to 80,595,239 Shares, 66,666,667 Class A Performance Shares, 33,333,333 Class B Performance Shares and 133,333,333 Class C Performance Shares.

(c)

Valuation of the financial benefit

The Company is offering its Shares to the public under the Public Offer at an issue price of $0.02 each, which implies that each Share will initially have a market value of $0.02. Based on this Share price, the indicative maximum value of the financial benefit to be given to the related party is $1,611,904.78. However, the value of the benefit of the Shares will depend on the price at which the Shares trade on the ASX from time to time.

The Performance Shares are inherently difficult to value as their value is contingent on uncertain outcomes in the future. Further, the negative impact of the dilution of the share capital in the Company upon the conversion of the Performance Shares into Shares is arguably offset by the positive impact the achievement of the Milestone will have on the Company. As a result, the Performance Shares have been ascribed a nil value.

(d)

Current Relevant Interest

The Seller currently has a Relevant Interest in 14,965,000 Shares.

(e) Terms of the securities

The Shares will rank equally in all respects with existing Shares on issue.

The terms and conditions of the Performance Shares are set out in Schedule B.

(f) Dilution

Assuming that the Minimum Subscription is raised under the Public Offer, Trident Capital is issued 20,0000,000 Shares at completion, up to 80,595,239 Shares are issued to the Seller at completion, and all Performance Shares convert into Shares, Resolution 4 will result in Shareholders being diluted by approximately 77.19%.

(g) Opportunity costs to the Company

If Shareholders do not approve Resolution 4 then the Company will not be able to complete the Proposed Transaction.

The Company does not consider that there are any opportunity costs to the Company or benefits foregone by the Company in issuing Shares and Performance Shares to the Seller under Resolution 4.

(h) Intended use of funds raised

No funds will be raised from the issue of Shares and Performance Shares as they are being issued as partial consideration for 100% of the issued share capital in Srinel.

(i) Directors’ interests

Jason Ferris has a material personal interest in the outcome of Resolution 4 due to being related to the Seller. No other Director has a material personal interest in the outcome of Resolution 4.

(j) Directors’ recommendations

Jason Ferris abstains from expressing an opinion or making a recommendation on Resolution 4 due to having a material personal interest in its outcome. Each other Director recommends that Shareholders vote in favour of Resolution 4 for the reasons set out in Section 1.14.

(k) Other information

Other than as set out in this Explanatory Statement, there is no further information that is known to the Company or any of the Directors which Shareholders would reasonably require in order to decide whether or not it is in the Company’s best interests to pass Resolution 4.

Listing Rule 10.1

Listing Rule 10.1 provides that an entity must ensure that neither it, nor any of its child entities, acquires a substantial asset from, or disposes of a substantial asset to, amongst other persons, a related party of the entity, a substantial holder or one of its associates, without the prior approval of shareholders.

An asset is substantial if its value, or the value of the consideration for it is, or in ASX’s opinion is, 5% or more of the equity interests of the entity as set out in the latest accounts given to ASX under the Listing Rules. Srinel and its assets constitute a ‘substantial asset’ for the purposes of the Listing Rules.

Cuprum is a related party of the Company as it is controlled by Robert Nelson who is the father in law of Jason Ferris – a Non-Executive Director of the Company. Cuprum is also a substantial holder of the Company as it has a Voting Power in the Company of more than 5%.

Therefore, the Company is required to obtain Shareholder approval for the purposes of Listing Rule 10.1 in order to complete the acquisition of Srinel under the Option Agreement. Listing Rule 10.10.2 requires a notice of meeting containing a resolution under Listing Rule 10.1 to include a report on the transaction from an independent expert.

Listing Rule 10.11

Listing Rule 10.11 provides that a company must not issue equity securities to a related party without the approval of holders of ordinary securities. Further, exception 14 of Listing Rule 7.2 states that approval pursuant to Listing Rule 7.1 is not required if shareholder approval is obtained under Listing Rule 10.11.

As set out above, the Seller is a related party of the Company for the purposes of section 228 of the Corporations Act. Accordingly, Shareholder approval is sought under Listing Rule 10.11 to permit the issue of Shares and Performance Shares to the Seller.

If Resolution 4 is approved, the Shares issued will not affect the capacity of the Company to issue securities in the next 12 months under Listing Rule 7.1 as those securities, once issued, will be excluded from the calculations under Listing Rule 7.1.

For the purposes of Listing Rule 10.13, the following information is provided to Shareholders in relation to Resolution 4:

(a) Name of the person

Cuprum Holdings Limited.

(b)

Maximum number of securities to be issued

Up to 80,595,239 Shares, 66,666,667 Class A Performance Shares, 33,333,333 Class B Performance Shares and 133,333,333 Class C Performance Shares.

(c)

Date by which the entity will issue the securities

The Shares and Performance Shares will be issued at completion of the Option Agreement, which is anticipated to be on or about 14 March 2018. In any event, however, no Shares or Performance Shares will be issued to the Seller later than 1 month after the Meeting (other than to the extent permitted by any waiver or modification of the Listing Rules).

(d)

Relationship that requires shareholder approval

The Seller is a related party of the Company under section 228 of the Corporations Act as it is controlled by Robert Nelson, who is the father in law of Jason Ferris, who is a Director.

(e)

Issue price of the securities

Nil cash consideration as the Shares and Performance Shares are being issued as partial consideration for 100% of the issued share capital in Srinel.

(f)

Terms of the issue

The Shares will rank equally in all respects with existing Shares on issue. The terms and conditions of the Performance Shares are set out in Schedule B.

(g) Intended use of funds raised

No funds will be raised as the Shares and Performance Shares are being issued as partial consideration for 100% of the issued share capital in Srinel.

Directors’ recommendations

2.5 Resolution 5 – Issue of Shares under the Prospectus

Resolution 5 is an ordinary resolution which seeks approval for the issue of up to 300,000,000 Shares at an issue price of $0.02 each to raise up to $6,000,000 under the Prospectus ( Public Offer ). The Public Offer will have a minimum subscription of 250,000,000 Shares to raise $5,000,000.

Listing Rule 7.1

Listing Rule 7.1 provides that, subject to certain exceptions, prior approval of shareholders is required for an issue of securities by a company if those securities, when aggregated with the securities issued by the company without approval and which were not subject to an exception during the previous 12 months, exceed 15% of the number of shares on issue at the commencement of that 12 month period.

Listing Rule 7.1 provides that where a company approves an issue of securities, the company’s 15% capacity will be replenished and the company will be able to issue further securities up to that limit.

Resolution 5 seeks approval for the issue of up to 300,000,000 Shares to raise up to $6,000,000. If Resolution 5 is approved, the Shares issued will not affect the capacity of the Company to issue securities in the next 12 months under Listing Rule 7.1 as those securities, once issued, will be excluded from the calculations under Listing Rule 7.1.

For the purposes of Listing Rule 7.3, the following information is provided in relation to Resolution 5:

(a) Maximum number of securities the entity is to issue

Up to 300,000,000 Shares.

(b) Date by which the entity will issue the securities

The Shares will be issued at completion of the Proposed Transaction, which is anticipated to be on or about 14 March 2018. In any event, however, no Shares will be issued under the Public Offer later than 3 months after the Meeting (other than to the extent permitted by any waiver or modification of the Listing Rules).

(c) Issue price of the securities

$0.02 each.

(d) Names of the persons to whom the entity will issue the securities (if known) or basis upon which those persons will be identified or selected

The Shares will be issued to persons who apply for Shares under the Public Offer. Subject to foreign investor restrictions, the Public Offer will be open to members of the general public. No Shares will be issued to related parties of the Company except to the extent permitted by Resolution 6, and no Shares will be issued in contravention of the takeover prohibition in section 606 of the Corporations Act.

(e) Terms of the securities

The Shares will rank equally in all respects with existing Shares on issue.

(f) Intended use of the funds raised

Funds raised from the Public Offer will be used in accordance with the table set out in Section 1.10.

Recommendation

The Directors unanimously recommend that Shareholders approve Resolution 5

2.6 Resolutions 6(a), (b) and (c): Right for Directors to participate in the Public Offer

Resolutions 6(a), (b) and (c) seek Shareholder approval to enable each Director to apply for, and the Company to issue to each Director (and/or its nominees), up to 5,000,000 Shares at an issue price of $0.02 each under the Public Offer.

If Resolutions 6(a) to (c) are approved, and each Director were to apply for, and be issued, 5,000,000 Shares under the Public Offer, then this would raise approximately $300,000 for the Company.

Lee Christensen, James Searle and Jason Ferris are related parties of the Company for the purposes of section 228 of the Corporations Act as they are all directors of the Company.

Section 208 of the Corporations Act

As noted above, the Directors are related parties of the Company under section 228 of the Corporations Act. However, the Company considers that the proposed issues of Shares under Resolutions 6(a) to (c) fall within the ‘arm’s length’ exception in section 210 of the Corporations Act for the following reasons and, therefore, Shareholder approval is not required:

Directors who wish to participate in the Public Offer will only be entitled to apply for Shares under the Public Offer on the same terms (including the offer price of $0.02 per Share) as those that apply to other applicants who are not related parties of the Company;
the ability of the Directors to participate in the Public Offer may assist the Company with raising at least the Minimum Subscription. Therefore, the participation of the Directors in the Public Offer may facilitate the Company’s ability to complete the Proposed Transaction;
the dilutionary impact on existing Shareholders would be the same irrespective of whether the Shares are issued to Directors or any other person under the Public Offer;
the issue of Shares to the Directors under the Public Offer would be reasonable in the circumstances if the Company were dealing at arm’s length; and
there are benefits to the Directors holding or otherwise having an interest in Shares in the Company as this will help to incentivise their performance as Directors and, in doing so, further align their interests with those of Shareholders.

Listing Rule 10.11

As set out above, each Director is a related party of the Company for the purposes of section 228 of the Corporations Act. Accordingly, Shareholder approval is sought under Listing Rule 10.11 to permit the issue of Shares to the Directors under the Public Offer.

Resolutions 6(a) to (c) seek approval for the issue of up to 5,000,000 Shares to each Director for the purpose of satisfying the requirements of Listing Rule 10.11. If Resolutions 6(a) to (c) are approved, the Shares issued will not affect the capacity of the Company to issue securities in the next 12

months under Listing Rule 7.1 as those securities, once issued, will be excluded from the calculations under Listing Rule 7.1.

For the purposes of Listing Rule 10.13, the following information is provided to Shareholders in relation to Resolutions 6(a) to (c):

(a) Names of the persons

Lee Christensen, James Searle and Jason Ferris (and/or their nominees).

(b) Maximum number of securities to be issued

The maximum number of securities that may be issued pursuant to Resolutions 6(a) to (c) is as follows:

Recipient	Shares
Lee Christensen	5,000,000
James Searle	5,000,000
Jason Ferris	5,000,000
Total	15,000,000

(c) Date by which the entity will issue the securities

Any Shares to be issued to Directors under the Public Offer will be issued at the same time as Shares are issued to other applicants under the Public Offer, which is anticipated to be on or about 14 March 2018. In any event, however, no Shares will be issued to Directors (and/or their nominees) later than 1 month after the Meeting (other than to the extent permitted by any waiver or modification of the Listing Rules).

(d) Relationship that requires shareholder approval

Lee Christensen, James Searle and Jason Ferris are related parties of the Company under section 228 of the Corporations Act by virtue of being Directors.

(e) Issue price of the securities

$0.02 each.

(f) Terms of the issue

The Shares will rank equally in all respects with existing Shares on issue.

(g)

Intended use of funds raised

Funds raised from the Public Offer will be used in accordance with the table set out in Section 1.10.

Directors’ recommendations

Other than to the extent that a Director has a material personal interest in the outcome of the Resolution as the proposed recipient of Shares, the Directors recommend that Shareholders vote in favour of Resolutions 6(a) to (c).

2.7 Resolutions 7(a), (b) and (c) – Issue of Class B Options to Directors

Resolutions 7(a) (b) and (c) are ordinary resolutions which seek approval for the issue of 30,000,000 Class B Options in aggregate to James Searle, Lee Christensen and Jason Ferris, all of whom are Directors.

Each Class B Option will have an exercise price of $0.05, an expiry date of 18 January 2021, and will otherwise be issued on the terms set out in Schedule D.

As James Searle, Lee Christensen and Jason Ferris are related parties of the Company by virtue of being Directors, the Company is seeking the approval of Shareholders to Resolutions 7(a) to (c) in accordance with section 208 of the Corporations Act and Listing Rule 10.11.

Section 208 of the Corporations Act

Section 208(1)(a) of the Corporations Act prohibits a company from giving a financial benefit (including an issues of shares) to a related party of the company without the approval of shareholders by a resolution passed at a general meeting at which no votes are cast in relation to the resolution in respect of any shares held by the related party or by an associate of the related party.

James Searle, Lee Christensen and Jason Ferris are related parties of the Company under section 228 of the Corporations Act by virtue of being Directors of the Company. Accordingly, Shareholder approval is sought under section 208 of the Corporations Act to permit the issue of Class B Options under Resolutions 7(a) to (c).

As required by section 219 of the Corporations Act, the following information is provided in relation to Resolutions 7(a) to (c):

(a) Related parties to whom the financial benefits are to be given

James Searle, Lee Christensen and Jason Ferris (and/or their nominees).

(b) Nature of the financial benefit

The issue of Class B Options at an exercise price of $0.05 each, on a post-Consolidation basis. The number of Class B Options that each related party will be issued is set out in the table below:

Name	Class B Options
James Searle	10,875,000
Lee Christensen	8,250,000
Jason Ferris	10,875,000
Total	30,000,000

(c) Terms of the securities

Each Class B Option will have an exercise price of $0.05, an expiry date of 18 January 2021, and will otherwise be issued on the terms set out in Schedule D. New Shares issued upon any exercise of the Class B Options will rank equally in all respects with Shares (on a postConsolidation basis).

(d) Valuation of the financial benefits

The value of the benefit of the Class B Options is determined by the Black-Scholes valuation in accordance with the following assumptions and inputs:

Class B Options	Value
Number of Class B Options	30,000,000
Underlying share price	$0.02
Exercise price	$0.05
Expected volatility	95%
Expiry date (years)	3.47
Expected dividends	Nil
Risk free rate	1.79%
Value per Class B Option	$0.009
Total value	$272,944

Accordingly, the value of the Class B Options to be issued to each Director is as follows:

Name	Value
James Searle	$97,875
Lee Christensen	$74,250
Jason Ferris	$97,875
Total	$272,944

(e) Current remuneration and security interests

Details of the Existing Directors’ current annualised remuneration, as well as their security interests (both direct and indirect) in the Company as at the date of the Notice, are outlined below.

Director	Salary/fees	Security interests
Lee Christensen	$60,000	3,660,000 Shares
James Searle1	$60,000	1,500,000 Shares
Jason Ferris2	$48,000	1,000,000 Shares

Notes:

James Searle is a director of Earthsciences Pty Ltd, which provided the Company with consultancy services. The services provided were based upon normal commercial terms and conditions no more favourable than those available to other parties.

Jason Ferris is a director of J2J Investments Pty Ltd, which provided the Company with consultancy services. The services provided were based upon normal commercial terms and conditions no more favourable than those available to other parties.

(f)

Dilution

If all New Shares are issued pursuant to the Resolutions in this Notice and no other Shares are issued by the Company (including pursuant to the conversion of Performance Shares and Class A Options), then the conversion of all of the Class B Options into Shares would dilute Shareholders by approximately 5.4%.

(g) Opportunity costs to the Company

The Directors do not consider that there are any opportunity costs to the Company or benefits foregone by the Company in issuing Class B Options to James Searle, Lee Christensen or Jason Ferris under Resolutions 7(a) to (c).

(h)

Intended use of funds raised

No cash consideration is payable for the Class B Options as they are being issued to incentive the performance of the Directors.

The proceeds from any future exercise of the Class B Options are intended to be applied towards meeting working capital requirements of the Company relevant at, or about, the time of the exercise of the Class B Options at the discretion of the Board.

(i)

Directors’ interests

James Searle has a material personal interest in the outcome of Resolution 7(a) as the potential recipient of the Class B Options. No other Director has a material personal interest in the outcome of Resolution 7(a).

Lee Christensen has a material personal interest in the outcome of Resolution 7(b) as the potential recipient of the Class B Options. No other Director has a material personal interest in the outcome of Resolution 7(b).

Jason Ferris has a material personal interest in the outcome of Resolution 7(c) as the potential recipient of the Class B Options. No other Director has a material personal interest in the outcome of Resolution 7(c).

(j)

Directors’ recommendations

Other than to the extent that a Director has a material personal interest in the outcome of the Resolution as the proposed recipient of Class B Options, the Directors recommend that Shareholders vote in favour of Resolutions 7(a) to (c) as the Class B Options will incentivise the performance of the Directors and in doing so further align their interests with those of Shareholders.

(k) Other information

Listing Rule 10.11

Listing Rule 10.11 provides that a company must not issue equity securities to a “related party” without the approval of holders of ordinary securities. Further, Listing Rule 7.2 (Exception 14) states that approval pursuant to Listing Rule 7.1 is not required if shareholder approval is obtained under Listing Rule 10.11.

As set out above, James Searle, Lee Christensen and Jason Ferris are related parties of the Company for the purposes of section 228 of the Corporations Act. Accordingly, Shareholder approval is sought under Listing Rule 10.11 to permit the issue of Class B Options under Resolutions 7(a) to (c) to James Searle, Lee Christensen and Jason Ferris.

The issue of Class B Options under Resolution 7 will not affect the capacity of the Company to issue securities in the next 12 months under Listing Rule 7.1, as those securities (once issued) will be excluded from the calculations under Listing Rule 7.1.

For the purposes of Listing Rule 10.13, the following information is provided to Shareholders in respect of Resolutions 7(a) to (c):

(a) Names of the persons

James Searle, Lee Christensen and Jason Ferris (and/or their nominees).

(b) Maximum number of securities to be issued

The maximum number of securities to be issued is as follows:

Name	Class B Options
James Searle	10,875,000
Lee Christensen	8,250,000
Jason Ferris	10,875,000

(c) Date by which the entity will issue the securities

It is proposed that the Class B Options will be issued at completion of the Proposed Transaction in accordance with the timetable set out in section 1.9. In any event, however, the Class B Options will be issued no later than 1 month after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the Listing Rules).

(d) Relationship that requires Shareholder approval

James Searle, Lee Christensen and Jason Ferris are related parties of the Company under section 228 of the Corporations Act by virtue of being Directors of the Company.

(e) Issue price of the securities

No cash consideration is payable for the Class B Options as they are being issued to incentivise the performance of the Directors.

(f)

Terms of the issue

(g)

Intended use of the funds raised

No funds will be raised by the issue of Class B Options under Resolutions 7(a) to (c) as they are being issued to incentivise the performance of the Directors. The proceeds from any future exercise of the Class B Options are intended to be applied towards meeting working

capital requirements of the Company relevant at, or about, the time of the exercise of the Class B Options at the discretion of the Board.

Directors’ recommendations

2.8 Resolutions 8(a) and (b) – Issue of Shares under the Placement

Resolutions 8(a) and (b) are ordinary resolutions and seek Shareholder approval under Listing Rule 7.4 and 7.1 respectively to ratify the issue of 42,857,142 Shares to Exempt Investors at an issue price of $0.007 each (on a pre-Consolidation basis) to raise $300,000,and to pre-approve the issue of 42,857,142 free attaching Class A Options to those Exempt Investors ( Placement ).

Listing Rule 7.4

Listing Rule 7.4 provides that an issue of Shares made without prior approval under Listing Rule 7.1 can be treated as having been made with that approval if Shareholders subsequently approve it and the issue did not breach Listing Rule 7.1.

If Resolution 8(a) is approved it will have the effect of refreshing the Company’s ability to issue further Shares without the need to obtain further Shareholder approval (subject to the Listing Rules and the Corporations Act).

For the purposes of Listing Rule 7.5 the Company provides the following information in relation to Resolution 8(a):

(a) Number of Securities issued

42,857,142 Shares (on a pre-Consolidation basis).

(b) Issue price of the Securities issued
$0.007 each (on a pre-Consolidation basis).
(c) Terms of the issued Securities

The Shares rank equally in all respects with existing Shares on issue.

(d) Recipients of the issued Securities

The Shares were issued to Exempt Investors that are not related parties of the Company.

(e) Use of funds

The funds raised from the issue of the Shares will be applied towards costs associated with the Proposed Transaction.

Listing Rule 7.1

Resolution 8(b) seeks approval for the issue of 42,857,142 free attaching Class A Options for the purpose of satisfying the requirements of Listing Rule 7.1. If Resolution 8(b) is approved, the Shares issued will not affect the capacity of the Company to issue securities in the next 12 months under Listing Rule 7.1 as those securities, once issued, will be excluded from the calculations under Listing Rule 7.1.

For the purposes of Listing Rule 7.3, the following information is provided to Shareholders in relation to Resolution 8(b):

(a) Maximum number of securities the entity is to issue

42,857,142 Class A Options (on a pre-Consolidation basis).

(b) Date by which the entity will issue the securities

The Class A Options will be issued to the Exempt Investors on or about the date of the Annual General Meeting. In any event, however, no Class A Options will be issued to the Exempt Investors later than 3 months after the Meeting (other than to the extent permitted by any waiver or modification of the Listing Rules).

(c) Issue price of the securities

No cash consideration is payable for the Class A Options as they are being issued free attaching to the Shares issued under the Placement.

(d) Names of the persons to whom the entity will issue the securities (if known) or basis upon which those persons will be identified or selected

The Class A Options will be issued to Exempt Investors that are not related parties of the Company.

(e) Terms of the securities

The terms of the Class A Options are set out in Schedule C.

(f) Intended use of the funds raised

No funds will be raised from the issue of the Shares as they are being issued free attaching to the Shares issued under the Placement.

Directors’ recommendations

The Directors unanimously recommend that Shareholders vote in favour of Resolutions 8(a) and (b).

2.9 Resolution 9 – Issue of Shares to Trident Capital

Resolution 9 is an ordinary resolution and seeks Shareholder approval under Listing Rule 7.1, for the issue of 20,000,000 Shares (on a post-Consolidation basis) to Trident Capital for services provided in relation to the Proposed Transaction.

Listing Rule 7.1

Resolution 9 seeks approval for the issue of 20,000,000 Shares for the purpose of satisfying the requirements of Listing Rule 7.1. If Resolution 9 is approved, the Shares issued will not affect the capacity of the Company to issue securities in the next 12 months under Listing Rule 7.1 as those securities, once issued, will be excluded from the calculations under Listing Rule 7.1.

For the purposes of Listing Rule 7.3, the following information is provided to Shareholders in relation to Resolution 9:

(a) Maximum number of securities the entity is to issue

20,000,000 Shares.

(b) Date by which the entity will issue the securities

The Shares will be issued to Trident Capital at completion of the Proposed Transaction, which is anticipated to be on or about 14 March 2018. In any event, however, no Shares will be issued to Trident Capital later than 3 months after the Meeting (other than to the extent permitted by any waiver or modification of the Listing Rules).

(c) Issue price of the securities

No cash consideration is payable for the Shares as they are being issued in consideration of services provided to the Company in relation to the Proposed Transaction.

The Shares will have a deemed issue price of $0.02 each, being the issue price of the Shares under the Public Offer.

(d) Names of the persons to whom the entity will issue the securities (if known) or basis upon which those persons will be identified or selected

Trident Capital (and/or its nominees).

(e)

Terms of the securities

The Shares will rank equally in all respects with existing Shares on issue.

(f)

Intended use of the funds raised

No funds will be raised from the issue of the Shares as they are being issued in consideration of services provided by Trident Capital to the Company in relation to the Proposed Transaction.

Directors’ recommendations

The Directors recommend that Shareholders vote in favour of Resolution 9.

2.10 Annual Report

The Annual Report, Directors’ reports and auditor’s reports for the Company for the year ended 30 June 2017 will be laid before the Annual General Meeting.

There is no requirement for Shareholders to approve these reports. However, the Chair will allow a reasonable opportunity for Shareholders to ask questions or make comments about these reports and the management of the Company. Shareholders will also be given an opportunity to ask the auditor questions about the:

conduct of the audit;
preparation and content of the auditor’s report;

accounting policies adopted by the Company in relation to the preparation of the financial statements; or
independence of the auditor in relation to the conduct of the audit.

In addition to taking questions at the Meeting, written questions to the Chair about the management of the Company, or to the Company’s auditor about the content of the auditor’s reports of the conduct of the audit may be submitted no later than 5 Business Days before the Annual General Meeting date to the Company Secretary at c/- Trident Capital Level 24, 44 St Georges Terrace Perth WA 6000, or by facsimile on (08) 9218 8875.

2.11 Resolution 10 – Approval of Remuneration Report

The Remuneration Report of the Company for the financial year ended 30 June 2017 is included in the Directors’ report in the Annual Report. The Remuneration Report sets out the Company’s remuneration arrangements for the Directors and senior management of the Company.

Section 249L(2) of the Corporations Act requires a company to inform shareholders that a resolution on the Remuneration Report will be put at the Annual General Meeting. Section 250R(2) of the Corporations Act requires a resolution that the remuneration report adopted be put to the vote. Resolution 10 seeks this approval.

In accordance with section 250R(3) of the Corporations Act, Shareholders should note that Resolution 10 is an “advisory only” resolution which does not bind the Directors. Pursuant to section 250SA of the Corporations Act, the Chair will provide a reasonable opportunity for Shareholders to participate in a discussion of the Remuneration Report at the Annual General Meeting. The Directors take the discussion at the Meeting and the outcome of the vote into account when considering the Company’s remuneration practices.

If at least 25% of the votes on Resolution 10 are voted against the adoption of the Remuneration Report at the Annual General Meeting, and then again at the Company’s 2018 annual general meeting, the Company will be required to put to Shareholders a resolution proposing the calling of an extraordinary general meeting ( Spill Meeting ) to consider the appointment of the Directors ( Spill Resolution ).

If more than 50% of Shareholders vote in favour of the Spill Resolution, the Company must convene the Spill Meeting within 90 days of the Company’s 2018 annual general meeting. All of the Directors who are in office when the Company’s 2018 Directors’ Report is approved, other than the Managing Director of the Company, will cease to hold office immediately before the end of the Spill Meeting but may stand for re-election at the Spill Meeting. Following the Spill Meeting those persons whose election or re-election as Directors is approved will be the directors of the Company.

The Directors encourage all Shareholders to vote on Resolution 10.

2.12 Resolution 11 – Re-election of Jason Ferris as a Director

Rule 9.3 of the Constitution requires that one third of the Company’s director’s must retire at each annual general meeting. Accordingly, Mr Ferris retires by rotation and, being eligible, offers himself for re-election.

Resolution 11 is an ordinary resolution, requiring it to be passed by a simple majority of votes cast by the Shareholders entitled to vote. Brief background information on Mr Ferris is set out in Section 3.2.

Directors’ recommendations

Jason Ferris abstains from expressing an opinion or making a recommendation on Resolution 11 due to having a material personal interest in its outcome. Each other Director recommends that Shareholders vote in favour of Resolution 11.

3. OTHER INFORMATION

3.1 Scope of disclosure

The law requires that this Explanatory Statement sets out all other information that is reasonably required by Shareholders in order to decide whether or not it is in the Company’s interests to pass the Resolutions and which is known to the Company.

The Company is not aware of any relevant information that is material to the decision on how to vote on the Resolutions other than as is disclosed in this Explanatory Statement or previously disclosed to Shareholders by the Company by notification to the ASX.

3.2 Director profiles

Brief background information on each Director is set out below.

Lee Christensen

Non-Executive Chairman

Lee Christensen is a lawyer and former senior partner at Gadens Perth, specialising in dispute resolution, insolvency and restructures. He has many years of law experience having acted in major assignments and providing consultancy services for entities across a number of sectors.

Dr James Searle

Managing Director

Dr James Searle has 34 years of experience in base metals, precious metals and mineral sand deposits. He has led successful exploration, project development and operational teams in Australia, Africa, Northern Europe, and Central Asia.

Dr Searle has a BSc(Hons) in geology and a PhD from the University of Western Australia. He has 22 years of experience in executive and non-executive director roles on ASX listed public company boards.

Dr Searle is currently a non-executive director of ASX listed Kinetiko Energy Ltd (ASX:KKO).

Jason Ferris

Non-Executive Director

Jason Ferris is an experienced company director having served on the board of numerous public and private companies in Australia, South Africa and United Kingdom. Mr Ferris currently serves as Executive Chairman of Connected IO Limited an ASX listed wireless communications company. He has worked in financial services, property and corporate finance industries for more than 25 years.

Mr Ferris is a Fellow of the Australian Institute of Management (FAIM) and is a Member of the Australian Institute of Company Directors (MAICD). He has also facilitated many joint venture opportunities in the property, tech and mining sectors.

Mr Ferris also currently holds a board position on Connected IO Limited (ASX:CIO).

3.3 Relevant Interests of the Directors

The table below sets out the Relevant Interests of the Directors in the Shares of the Company as at the date of this Notice.

Director	Shares	Voting Power1
Mr Lee Christensen	3,660,000	0.71%

Dr James Searle	1,500,000	0.28%
Mr Jason Ferris	1,000,000	0.19%
Total	6,160,000	1.19%

Note:

Based on the total number of 517,750,797 (pre-consolidation) Shares of the Company.

3.4 Directors’ recommendations

The Directors unanimously recommend that Shareholders vote in favour of all Resolutions, other than to the extent that a Director abstains from expressing an opinion or making a recommendation due to having a material personal interest in the relevant Resolution, as disclosed in this Notice.

3.5 Voting intentions of the Chair

The Chair intends to vote all available proxies in favour of all Resolutions.

3.6 Taxation

The Proposed Transaction and the passing of the Resolutions may give rise to income tax implications for the Company and Shareholders. Shareholders are advised to seek their own taxation advice on the effect of the Resolutions on their personal position. Neither the Company, nor any Director or adviser to the Company accepts any responsibility for any individual Shareholder’s taxation consequences on any aspect of the Proposed Transaction or the Resolutions.

3.7 ASIC and ASX disclaimer

The fact that the Notice, Explanatory Statement and any other relevant documentation has been received by ASX and ASIC is not to be taken as an indication of the merits of the Resolutions or the Company. ASIC, ASX and their respective personnel take no responsibility for the contents of such documentation or any decision a Shareholder may make in reliance on that documentation.

4. DEFINITIONS

Applex Ceylon means Applex Ceylon (Pvt) Ltd (formerly known as Supreme Solutions Limited).

Annexure means an annexure to this Explanatory Statement.

Annual General Meeting or Meeting means the annual general meeting convened by this Notice of Annual General Meeting

Annual Report the annual report of the Company for the financial year ended 30 June 2017.

ASIC means Australian Securities and Investments Commission.

ASX means ASX Limited ABN 98 008 624 691 or the Australian Securities Exchange, as the context requires.

Board means the board of Directors.

Business Day means a day that is not a Saturday, Sunday, public holiday or bank holiday in Perth, Western Australia.

Cash Reimbursement has the meaning given in Section 1.3.

Chair means the chairperson of the Meeting.

Class A Option means an Option on the terms and conditions set out in Schedule C.

Class A Performance Share means a performance share on the terms and conditions set out in Schedule B.

Class B Option means an Option on the terms and conditions set out in Schedule D.

Class B Performance Share means a performance share on the terms and conditions set out in Schedule B.

Class C Performance Share means a performance share on the terms and conditions set out in Schedule B.

Closely Related Party means a closely related party of a member of Key Management Personnel as defined in Section 9 of the Corporations Act, being:

(a) a spouse or child of the member;
(b) a child of that member’s spouse;
(c) a dependant of that member or of that member’s spouse;
(d) anyone else who is one of that member’s family and may be expected to influence that member, or be influenced by that member, in that member’s dealings with the Company;
(e) a company that is controlled by that member; or
(f) any other person prescribed by the regulations.

Company means Titanium Sands Limited ACN 009 131 533.

Consolidation means the consolidation of the existing securities of the Company on the basis of 1:3, as described in Section 2.1.

Constitution means the constitution of the Company.

Corporations Act means the Corporations Act 2001 (Cth).

Cuprum means Cuprum Holdings Limited (Mauritius).

Director means a director of the Company.

Exempt Investor means a sophisticated and/or professional investor to whom securities may be offered by the Company without disclosure under section 708 of the Corporations Act.

Explanatory Statement means this explanatory statement including any schedules or annexures to the explanatory statement.

Full Subscription means the subscription of 300,000,000 Shares at an issue price of $0.02 each to raise $6,000,000 under the Prospectus.

JORC means the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2012 Edition).

Key Management Personnel means the key management personnel of the Company as defined in section 9 of the Corporations Act and Australian Accounting Standards Board accounting standard 124, being 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).

Listing Rules means the official listing rules of the ASX.

Milestone 1 means, in respect of the Sri Lankan Project, the Company achieving either:

(a) a total Mineral Resource of 20 million tonnes of heavy mineral content of not less than 5% discovered (or equivalent tonnage to heavy mineral content discovered ratio. For example, 10 million tonnes of heavy mineral content of not less than 10% discovered); or
(b) any metal equivalent (as that term is used in paragraph 50 of the JORC Code) Mineral Resource (including silver, copper, lead, zinc, nickel, cobalt, platinum, palladium, iron, graphite, lithium, tin, tantalum, niobium and tungsten) independently valued by a qualified technical person as equivalent to the Mineral Resource in paragraph (a) of this definition.

Milestone 2 means the Company obtaining a grant of one or more mining licences in respect of all or part of the land the subject of the Sri Lankan Project.

Milestone 3 means the Company:

(a) commencing commercial heavy mineral sand concentrate production or treatment of 250,000 tonnes of heavy mineral content of not less than 5% discovered in respect of any part of the Sri Lankan Project; or
(b) achieving a Mineral Resource of 70 million tonnes of heavy mineral content of not less than 5% discovered (or equivalent tonnage to heavy mineral content discovered ratio. For example, 35 million tonnes of heavy mineral content of not less than 10% discovered).

Milestones means Milestone 1, Milestone 2 and/or Milestone 3, as the context requires.

Minimum Subscription means the subscription of 250,000,000 Shares at an issue price of $0.02 each to raise $5,000,000 under the Public Offer.

Notice of Annual General Meeting or Notice of Meeting means the notice of annual general meeting attached to this Explanatory Statement.

Option Agreement or Agreement means the option deed entered into between the Company and the Seller on 19 March 2014, as amended by deeds dated 29 January 2016, 18 February 2016, 27 July 2017 and 28 September 2017.

Performance Shares means the Class A Performance Shares, Class B Performance Shares and/or the Class C Performance Shares, as the context requires.

Proposed Transaction has the meaning given in Section 1.2.

Prospectus means the prospectus to be issued by the Company for the purposes of the Public Offer, including any supplementary or replacement prospectus.

Proxy Form means the proxy form annexed to this Explanatory Statement and the Notice of Annual General Meeting.

Relevant Interest has the meaning given to that term in the Corporations Act.

Remuneration Report the section of the Annual Report entitled “Remuneration Report”.

Resolution means a resolution to be put to the Shareholders as set out in the Notice.

Placement means the placement of 42,857,142 Shares to Exempt Investors at an issue price of $0.007 each (on a pre-Consolidation basis) to raise $300,000 together with 42,857,142 free attaching Class A Options.

Seller means Cuprum Holdings Limited.

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

Shareholder means a holder of one or more Shares.

Sri Lankan Project means the exploration licenses and applications for exploration license in various coastal districts of Sri Lanka that are prospective for mineral sands, as described in Section 1.5.

Srinel means Srinel Holdings Limited, a company registered in Mauritius.

Transaction Resolutions means Resolutions 1 to 7 (inclusive) and 9.

Trident Capital means Trident Capital Pty Ltd ACN 100 561 733.

Voting Power has the meaning given to that term in the Corporations Act.

WST means Western Standard Time in Australia.

SCHEDULE A – TENEMENTS

Applex Tenements
Tenement Area sq. km Application Submit Date Place District	Validity
	From To
EL 180 45 09/03/2015 Vankalai Mannar	28/06/2016 27/06/2018
EL 182 26 09/03/2015 Pesalai Mannar	28/06/2016 27/06/2018
Kilsythe Tenements
Tenement Area sq. km Application Submit Date Place District	Validity
	From To
EL/2017/1070 42.5 18/09/2015 Mannar Mannar	Pending -
Hammersmith Tenements
Tenement Area sq. km Application Submit Date Place District	Validity
	From To
COM/EL/2017 /196 4 12/06/17 Talaimannar Mannar	Pending -
COM/EL/2017 /197 51 12/06/17 Mantai Mannar	Pending -

Notes: EL/2017/1070, COM/EL/2017/196 and COM/EL/2017/197 are applications for exploration licences and have not been granted as at the date of this Notice. Applications have been made to extend the validity of these applications.

SCHEDULE B – TERMS OF PERFORMANCE SHARES

1. Issue price

Each performance share ( Performance Share ) will be issued for nil cash consideration.

2. Rights

(a) The Performance Shares do not carry any voting rights in the Company.
(b) The Performance Shares confer on the holder the right to receive notices of general meetings and financial reports and accounts of the Company that are circulated to shareholders. Holders of Performance Shares have the right to attend general meetings of shareholders.
(c) The Performance Shares do not entitle the holder to any dividends.
(d) The Performance Shares do not confer any right to participate in the surplus profits or assets of the Company upon winding up of the Company.
(e) The Performance Shares do not confer any right to a return of capital, whether in a winding up, upon a reduction of capital or otherwise.
(f) The Performance Shares do not confer the right to participate in new issues of securities such as entitlement issues. If the Company makes a bonus issue of Shares or other securities to existing shareholders (other than an issue in lieu or in satisfaction of dividends or by way of dividend reinvestment) the number of Shares which must be issued on the conversion of a Performance Share will be increased by the number of Shares which the holder would have received if the relevant Performance Share had converted before the record date for the bonus issue.
(g) If at any time the issued capital of the Company is reorganised, the Performance Shares are to be treated in the manner set out in Listing Rule 7.21 (or other applicable Listing Rule), being that the number of Performance Shares or the conversion ratio or both will be reorganised so that the holder of the Performance Shares will not receive a benefit that holders of ordinary shares do not receive and so that the holders of ordinary shares will not receive a benefit that the holder of the Performance Shares does not receive.
(h) The Performance Shares give the holder no rights other than those expressly provided by these terms and conditions and those provided at law where such rights at law cannot be excluded by these terms and conditions.

3. Conversion

(a) Subject to clause 3(b) each Performance Share is convertible into a fully paid ordinary share in the capital of the Company ( Conversion Share ) subject to the Company achieving the following applicable milestone ( Milestone ):

Performance Share	Milestone
Class A	In respect of the Sri Lankan Project, the Company achieving either:
	(a) a total Mineral Resource of 20 million tonnes of heavy mineral
	content of not less than 5% discovered(or equivalent tonnage
	to heavy mineral content discovered ratio. For example, 10
	million tonnes of heavy mineral content of not less than 10%
	discovered); or
	(b) any metal equivalent (as that term is used in paragraph 50 of
	the JORC Code)Mineral Resource (including silver, copper,

Performance Share	Milestone
	lead, zinc, nickel, cobalt, platinum, palladium, iron, graphite,
	lithium, tin, tantalum, niobium and tungsten) independently
	valued by a qualified technical person as equivalent to the
	Mineral Resource in paragraph (a) of this definition.
Class B	The Company obtaining a grant of one or more mining licences in
	respect of all or part of the land the subject of the Sri Lankan
	Project.
Class C	(a) The Company commencing commercial scale heavy mineral
	sand concentrate production or treatment of 250,000 tonnes of
	heavy mineral content of not less than 5% discovered in
	respect of any part of the Sri Lankan Project; or
	(b) The Company achieving a Mineral Resource of 70 million
	tonnes of heavy mineral content of not less than 5% discovered
	(or equivalent tonnage to heavy mineral content discovered
	ratio. For example, 35 million tonnes of heavy mineral content
	of not less than 10% discovered).

(b) Despite anything else contained in these terms and conditions, the conversion of any Performance Shares is subject to the Company obtaining all required (if any) shareholder or regulatory approval for the purpose of issuing the Conversion Shares. If conversion of all or part of the Performance Shares would result in any person being in contravention of section 606(1) of the Corporations Act then the conversion of each Performance Share that would cause the contravention will be deferred until such time or times that the conversion would not at a later date result in a contravention of section 606(1) of the Corporations Act. The holder must give prior notification to the Company in writing if it considers that the conversion of all or part of its Performance Shares may result in the contravention of section 606(1) of the Corporations Act, failing which the Company will be entitled to assume that the conversion of the Performance Shares under these terms and conditions will not result in any person being in contravention of section 606(1) of the Corporations Act.
(c) The Company must issue any Conversion Shares in the name of the holder (or its nominee) within 7 days of the relevant Performance Shares becoming convertible into Conversion Shares under these terms and conditions.
(d) Each Conversion Share will rank equally with a fully paid ordinary share in the capital of the Company.
(e) The Performance Shares will not be quoted on any securities exchange and the Company will not make an application for quotation in respect of them. However, if the Company is listed on the ASX at the relevant time, upon conversion of any Performance Shares into Conversion Shares, the Company must within 7 days after the conversion apply for quotation of the Conversion Shares on the ASX, subject always to the requirements of the Listing Rules, including those relating to escrow.

4. Expiry

If a Milestone is not satisfied on or before the date 5 years from the issue of the Performance Shares, the relevant Performance Shares will immediately be redeemed by the Company for nil cash consideration.

5. Transferability

The Performance Shares are not transferable.

6. Compliance with Corporations Act, Listing Rules and Constitution

(a) Despite anything else contained in these terms and conditions, if the Corporations Act, Listing Rules or Constitution prohibits an act being done, that act must not be done.
(b) Nothing contained in these terms and conditions prevents an act being done that the Corporations Act, Listing Rules or Constitution require to be done.
(c) If the Corporations Act, Listing Rules or Constitution conflict with these terms and conditions, or these terms and conditions do not comply with the Corporations Act, Listing Rules or the Constitution, the holder authorises the Company to do anything necessary to rectify such conflict or non-compliance, including but not limited to unilaterally amending these terms and conditions.
(d) The terms of the Performance Shares may be amended as necessary by the directors of the Company in order to comply with the Listing Rules, or any directions of ASX regarding the terms.

7. Change of Control Event

(a) A change of control event ( Change of Control Event ) occurs where:
(i) an offer is made for Shares pursuant to a takeover bid under Chapter 6 of the Corporations Act and is, or is declared, unconditional; or
(ii) the Court sanctions under Part 5.1 of the Corporations Act a compromise or arrangement relating to the Company or a compromise or arrangement proposed for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies.
(b) If a Change of Control Event occurs, the Board may in its sole and absolute discretion, and subject to the Listing Rules and 7(c) below, determine how unconverted Performance Shares will be treated, including but not limited to determining that unconverted Performance Shares (or a portion of unconverted Performance Shares) will become immediately convertible into Conversion Shares with such conversion deemed to have taken place immediately prior to the effective date of the Change of Control Event.
(c) The total number of Conversion Shares issued under 7(b) above shall not exceed 10% of the issued ordinary capital of the Company as at the date of conversion.
(d) Whether or not the Board determines to accelerate the conversion of any Performance Shares, the Company shall give written notice of any proposed Change of Control Event to each holder of Performance Shares.

SCHEDULE C – TERMS OF CLASS A OPTIONS

(a) Entitlement

Each Option entitles the holder to subscribe for one Share upon exercise of the Option.

(b)

Expiry Date

Each Option will expire at 5.00pm (WST) on the date that is 3 years from issue ( Expiry Date ).

(c)

Exercise Price

Each Option will have an exercise price equal to $0.021 (on a post-Consolidation basis) ( Exercise Price ).

(d) Exercise period and lapsing

Subject to clause (i) (Shareholder and regulatory approvals), Options may be exercised at any time after the date of issue and prior to the Expiry Date. After this time, any unexercised Options will automatically lapse.

(e)

Exercise Notice and payment

Options may be exercised by notice in writing to the Company ( Exercise Notice ) together with payment of the Exercise Price for each Option being exercised. Any Exercise Notice for an Option received by the Company will be deemed to be a notice of the exercise of that Option as at the date of receipt. Cheques paid in connection with the exercise of Options must be in Australian currency, made payable to the Company and crossed “Not Negotiable”.

(f)

Shares issued on exercise

Shares issued on exercise of Options will rank equally in all respects with then existing fully paid ordinary shares in the Company.

(g)

Quotation of Shares

Provided that the Company is quoted on ASX at the time, application will be made by the Company to ASX for quotation of the Shares issued upon the exercise of the Options.

(h)

Timing of issue of Shares

Subject to clause (i) (Shareholder and regulatory approvals), within 5 business days after the later of the following:

(i) receipt of an Exercise Notice given in accordance with these terms and conditions and payment of the Exercise Price for each Option being exercised by the Company if the Company is not in possession of excluded information (as defined in section 708A(7) of the Corporations Act); and
(ii) the date the Company ceases to be in possession of excluded information with respect to the Company (if any) following the receipt of the Exercise Notice and payment of the Exercise Price for each Option being exercised by the Company,

the Company will allot and issue the Shares pursuant to the exercise of the Options and, to the extent that it is legally able to do so:

(iii) give ASX a notice that complies with section 708A(5)(e) of the Corporations Act; and
(iv) apply for official quotation on the ASX of the Shares issued pursuant to the exercise of the Options.

(i) Shareholder and regulatory approvals

Notwithstanding any other provision of these terms and conditions, exercise of Options into Shares will be subject to the Company obtaining all required (if any) Shareholder and regulatory approvals for the purpose of issuing the Shares to the holder. If exercise of the Options would result in any person being in contravention of section 606(1) of the Corporations Act then the exercise of each Option that would cause the contravention will be deferred until such time or times that the exercise would not result in a contravention of section 606(1) of the Corporations Act. Holders must give notification to the Company in writing if they consider that the exercise of the Options may result in the contravention of section 606(1) of the Corporations Act, failing which the Company will be entitled to assume that the exercise of the Options will not result in any person being in contravention of section 606(1) of the Corporations Act.

(j) Participation in new issues

There are no participation 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 ensure that for the purposes of determining entitlements to any such issue, the record date will be at least four business days after the issue is announced. This is intended to give the holders of Options the opportunity to exercise their Options prior to the announced record date for determining entitlements to participate in any such issue.

(k) Adjustment for bonus issues of Shares

If the Company makes a bonus issue of Shares or other securities to existing Shareholders (other than an issue in lieu or in satisfaction of dividends or by way of dividend reinvestment):

(i) the number of Shares which must be issued on the exercise of an Option will be increased by the number of Shares which the holder would have received if the holder had exercised the Option before the record date for the bonus issue; and
(ii) no change will be made to the Exercise Price.

(l) Adjustment for rights issue

If the Company makes an issue of Shares pro rata to existing Shareholders there will be no adjustment to the Exercise Price.

(m) Adjustments for reorganisation

If there is any reconstruction of the issued share capital of the Company, the rights of the holders may be varied to comply with the Listing Rules which apply to the reconstruction at the time of the reconstruction.

(n) Quotation

The Company will not apply for quotation of the Options on ASX.

(o) Transferability

Options can only be transferred with the prior written consent of the Company (which consent may be withheld in the Company’s sole discretion).

SCHEDULE D – TERMS OF CLASS B OPTIONS

(a) Entitlement

Each Option entitles the holder to subscribe for one Share upon exercise of the Option.

(b)

Expiry Date

Each Option will expire at 5.00pm (WST) on 18 January 2021 ( Expiry Date ).

(c)

Exercise Price

Each Option will have an exercise price equal to $0.05 (on a post-Consolidation basis) ( Exercise Price ).

(d) Exercise period and lapsing

(e)

Exercise Notice and payment

(f)

Shares issued on exercise

Shares issued on exercise of Options will rank equally in all respects with then existing fully paid ordinary shares in the Company.

(g)

Quotation of Shares

Provided that the Company is quoted on ASX at the time, application will be made by the Company to ASX for quotation of the Shares issued upon the exercise of the Options.

(h)

Timing of issue of Shares

Subject to clause (i) (Shareholder and regulatory approvals), within 5 business days after the later of the following:

(i) receipt of an Exercise Notice given in accordance with these terms and conditions and payment of the Exercise Price for each Option being exercised by the Company if the Company is not in possession of excluded information (as defined in section 708A(7) of the Corporations Act); and
(ii) the date the Company ceases to be in possession of excluded information with respect to the Company (if any) following the receipt of the Exercise Notice and payment of the Exercise Price for each Option being exercised by the Company,
the Company will allot and issue the Shares pursuant to the exercise of the Options and, to the extent that it is legally able to do so:
(iii) give ASX a notice that complies with section 708A(5)(e) of the Corporations Act; and
(iv) apply for official quotation on the ASX of the Shares issued pursuant to the exercise of the Options.

(i) Shareholder and regulatory approvals

(j) Participation in new issues

(k) Adjustment for bonus issues of Shares

If the Company makes a bonus issue of Shares or other securities to existing Shareholders (other than an issue in lieu or in satisfaction of dividends or by way of dividend reinvestment):

(iii) the number of Shares which must be issued on the exercise of an Option will be increased by the number of Shares which the holder would have received if the holder had exercised the Option before the record date for the bonus issue; and
(iv) no change will be made to the Exercise Price.

(l) Adjustment for rights issue

If the Company makes an issue of Shares pro rata to existing Shareholders there will be no adjustment to the Exercise Price.

(m) Adjustments for reorganisation

(n) Quotation

The Company will not apply for quotation of the Options on ASX.

(o) Transferability

Options can only be transferred with the prior written consent of the Company (which consent may be withheld in the Company’s sole discretion).

SCHEDULE E – PRO FORMA STATEMENT OF FINANCIAL POSITION

==> picture [483 x 321] intentionally omitted <==

Basis of preparation

The pro forma statement of financial position has been prepared in accordance with the recognition and measurement, but not all the disclosure requirements of the Australian equivalents to International Financial Reporting Standards (‘AIFRS’), other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act 2001. The pro forma statement of financial position is also prepared on an accrual basis and is based on historic costs and does not take into account changing money values or, except where specifically stated, current valuations of non-current assets.

Adjustment 1

The acquisition of Srinel has been treated as an 'asset acquisition' as Srinel has not been deemed to be a business under AASB3: Business Combinations. Contributed equity is increased to account for the 80,595,239 Shares issued to the Seller (this includes an amount of 22,500,000 shares issued in lieu of a $450,000 Cash Reimbursement). For the purposes of compiling the pro-forma balance sheet, these Shares have been valued at $0.02, being the issue price of Shares under the Public Offer. The equity balances of Srinel have been eliminated and exploration assets have been increased to account for the fair value of the Shares issued to the Seller. We note that the Company will also issue a total of 233.33 million Performance Shares, however given that reasonable grounds do not exist for assuming the Milestones will be met for each class, a value of these Performance Shares has not been included. In accordance with AASB 2 Share based payments, the Company will be required to re-assess the probability of the Milestones being achieved at each reporting date up until expiry of the Performance Shares.

Adjustment 2

Completion of Public Offer of $5 million based on the Minimum Subscription or $6 million based on the Full Subscription less proposed costs of the Public Offer totalling $465,000 based on the Minimum Subscription or $525,000 based on the Full Subscription. The pro forma balance sheet shows the Minimum Subscription.

Adjustment 3

The issue of up to 42,857,142 Shares (pre-Consolidation) to Exempt Investors at an issue price of $0.007, raising $300,000.

Adjustment 4

The Company will issue 20 million Shares to Trident Capital in consideration for services performed in relation to the Proposed Transaction. These Shares have been valued at $0.02 each, being the issue price under the Public Offer.

Adjustment 5

The Company will issue 42,857,142 Class A Options (Pre-Consolidation). Each Class A Option will be exercisable at $0.021 and will expire three years from the date of issue. The Company will issue 30 million Class B Options to Directors to incentivise their performance. Each Class B Option will be exercisable at $0.05 each and will expire on 18 January 2021. These New Options have been valued using the Black Scholes option pricing model.

SCHEDULE F – SRINEL FINANCIAL INFORMATION

The financial statements for the financial years ended 31 March 2017 and 31 March 2016 for Srinel Holdings Limited have been prepared by Ranwatta & Co. in accordance with International Financial Reporting Standards and in compliance with the requirements of the Mauritius Companies Act 2001.

The financial information in this Schedule F is presented in an abbreviated form insofar as it does not contain all of the disclosures, statements or comparative information as required by International Financial Reporting Standards that is usually provided in an annual report prepared in accordance with the Mauritius Companies Act 2001. Notes to the financial information are contained in the annual reports for Srinel for the financial years ended 31 March 2017 and 31 March 2016 which will be made available on the Company’s ASX announcements platform at www.asx.com.au.

Consolidated Statement of Comprehensive Income

Revenue Cost of Sales Gross Profit Other Income Administrative Expenses Finance & Other Cost Loss before Taxation Income Tax Expense Loss for the Year Other Comprehensive Income Total Comprehensive Income Total Comprehensive Income attributable to - Owners of the company - Non Controlling interest Loss Per Share (Basic)	2017 2016 US$ US$ - - - -
	- - 24 - (189,907) (81,588) - (1)
	(189,907) (81,589) - -
	(189,907) (81,589)
	- -
	(189,907) (81,589)
	(189,907) (81,589) - -
	(189,907) (81,589)
	(18,991) (8,159)

Consolidated Statement of Financial Position

Assets Non Current Assets Exploration & Evaluation Assets Investment in Subsidiaries Intangible Assets Other Investments Current Assets Trade & Other Receivable Amount Due from Related Parties Cash & Cash Equivalent Total Assets Equity & Liabilities Capital & Reserves Stated Capital Advance toward Shares Accumulated Loss Retranslation Reserve Total Equity Non Current Liability Loan From Shareholders Current Liabilities Trade & Other Payables Amount Due to Related Parties Total Equity & Liability	2017 2016 US$ US$ 26,731 - - - 56,078 56,078 30,040 -
	112,848 56,078 33 33 10,050 - 181 14
	10,263 47
	123,111 56,125
	100 100 52,600 - (206,333) (16,426) 2,021 992
	(151,612) (15,334) 94,850 37,193
	94,850 37,193 168,373 34,266 11,500 -
	179,873 34,266
	123,111 56,125

PROXY FORM

Titanium Sands Limited ACN 009 131 533

	Titanium Sands Limited ACN 009 131 533
I/We Of Appoint OR
	the

or failing the person so named or, if no person is named, the Chair of the Annual 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 Annual General Meeting to be held at 10.00am (WST) on 24 January 2018 at Level 24, 44 St Georges Terrace, Perth, Western Australia, and at any adjournment thereof.

Important for Resolutions 4 and 7(a) to (c): The Company will disregard any votes cast in favour of Resolutions 4 and 7(a) to (c) by your proxy if your proxy is an excluded person for the purposes of the relevant Resolution, unless you are not an excluded person and you mark the appropriate box opposite the relevant Resolution in the panel below (directing your proxy to vote for or against, or to abstain from voting).

Important for Resolutions 7(a) to (c) and 10: Subject to the foregoing in the case of Resolutions 7(a) to (c), if I/we have appointed the Chair as my/our proxy or the Chair becomes my/our proxy by default, by signing and submitting this Proxy Form I/we expressly authorise the Chair to exercise my/our proxy in respect of Resolutions 7(a) to (c) and Resolution 10 (except where I/we have indicated a different voting intention below) even though Resolutions 7(a) to (c) and Resolution 10 are connected directly or indirectly with the remuneration of a member of Key Management Personnel or their Closely Related Parties and even if the Chair has an interest in the outcome of Resolutions 7(a) to (c) and Resolution 10 and that votes cast by the Chair, other than as proxy holder, would be disregarded because of that interest.

The Chair intends to vote all available proxies in favour of all Resolutions. If you have appointed the Chair as your proxy (or the Chair becomes your proxy by default), and you wish to give the Chair specific voting directions on a Resolution, you should mark the appropriate box(es) opposite those Resolutions in the panel below (directing the Chair to vote for, against or to abstain from voting).

OR

Voting on business of the Annual General Meeting	Voting on business of the Annual General Meeting	For	Against	Abstain
Resolution 1	Consolidation of securities
Resolution 2	Change to nature and scale of activities
Resolution 3	Approval of Performance Shares
Resolution 4	Issue of Shares and Performance Shares to Seller
Resolution 5	Issue of Shares under the Prospectus
Resolution 6(a)	Right for James Searle to participate in the Public Offer
Resolution 6(b)	Right for Lee Christensen to participate in the Public Offer
Resolution 6(c)	Right for Jason Ferris to participate in the Public Offer
Resolution 7(a)	Issue of Class B Options to James Searle
Resolution 7(b)	Issue of Class B Options to Lee Christensen
Resolution 7(c)	Issue of Class B Options to Jason Ferris

Resolution 8(a) Issue of Shares under the Placement Resolution 8(b) Issue of Class A Options under the Placement Resolution 9 Issue of Shares to Trident Capital Resolution 10 Approval of Remuneration Report Resolution 11 Re-election of Jason Ferris as a Director

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.

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

Contact Ph (daytime): _____

Contact Name:

Instructions for Proxy Form

1. 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.

2. Appointment of a proxy

You are entitled to appoint no more than two proxies to attend and vote on a poll on your 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 your voting rights. If you appoint two proxies and the appointment does not specify this proportion, each proxy may exercise half of your votes.

If you wish to appoint the Chair of the Annual General Meeting as your proxy, please mark the box. If you leave this section blank or your named proxy does not attend the Annual General Meeting, the Chair will be your proxy. A proxy need not be a Shareholder.

3. Voting on Resolutions

You 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 your vote will be invalid on that item.

4. 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 ) If you have not already lodged the power of attorney with the Company’s share 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, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act) does not have a company secretary, as 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.

5. Return of a Proxy Form

To vote by proxy, please complete and sign the enclosed Proxy Form (and any power of attorney and/or second Proxy Form) and return by:

post to the Company at c/- Trident Capital, Level 24, 44 St Georges Terrace, Perth, WA 6000;
facsimile to the Company on +61 (8) 9218 8875; or
email to the Company Secretary at [email protected],

so that it is received by no later than 10.00am (WST) on 22 January 2018.

Proxy Forms received later than this time will be invalid.

ANNEXURE 1 – INDEPENDENT EXPERT’S REPORT

TITANIUM SANDS LIMITED Independent Expert’s Report

15 December 2017

OPINION: Fair and reasonable

==> picture [92 x 37] intentionally omitted <==

Financial Services Guide

15 December 2017

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 (‘ we ’ or ‘ us ’ or ‘ ours ’ as appropriate) has been engaged by Titanium Sands Limited (‘ TSL’ ) to provide an independent expert’s report on the proposed transaction whereby TSL will acquire 100% of the issued capital of Srinel Holdings Limited (‘ Srinel ’) from Cuprum Holdings Limited (‘ Cuprum ’). You will be provided with a copy of our report as a retail client because you are a shareholder of TSL.

Financial Services Guide

In the above circumstances we are required to issue to you, as a retail client, a Financial Services Guide (‘ FSG ’). This FSG is designed to help retail clients make a decision as to their use of the general financial product advice and to ensure that we comply with our obligations as financial services licensees.

This FSG includes information about:

Who we are and how we can be contacted;
The services we are authorised to provide under our Australian Financial Services Licence, Licence No. 316158;
Remuneration that we and/or our staff and any associates receive in connection with the general financial product advice;
Any relevant associations or relationships we have; and
Our internal and external complaints handling procedures and how you may access them.

Information about us

BDO Corporate Finance (WA) Pty Ltd is a member firm of the BDO network in Australia, a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International). The financial product advice in our report is provided by BDO Corporate Finance (WA) Pty Ltd and not by BDO or its related entities. BDO and its related entities provide services primarily in the areas of audit, tax, consulting and financial advisory services.

We do not have any formal associations or relationships with any entities that are issuers of financial products. However, you should note that we and BDO (and its related entities) might from time to time provide professional services to financial product issuers in the ordinary course of business.

Financial services we are licensed to provide

We hold an Australian Financial Services Licence that authorises us to provide general financial product advice for securities to retail and wholesale clients.

When we provide the authorised financial services we are engaged to provide expert reports in connection with the financial product of another person. Our reports indicate who has engaged us and the nature of the report we have been engaged to provide. When we provide the authorised services we are not acting for you.

General Financial Product Advice

We only provide general financial product advice, not personal financial product advice. Our report does not take into account your personal objectives, financial situation or needs. You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice.

BDO CORPORATE FINANCE (WA) PTY LTD

Financial Services Guide

Page 2

==> picture [92 x 38] intentionally omitted <==

Fees, commissions and other benefits that we may receive

We charge fees for providing reports, including this report. These fees are negotiated and agreed with the person who engages us to provide the report. Fees are agreed on an hourly basis or as a fixed amount depending on the terms of the agreement. The fee payable to BDO Corporate Finance (WA) Pty Ltd for this engagement is approximately $24,000.

Except for the fees referred to above, neither BDO, nor any of its directors, employees or related entities, receive any pecuniary benefit or other benefit, directly or indirectly, for or in connection with the provision of the report.

Other Assignments

BDO Audit and Assurance (WA) Pty Ltd is the appointed Auditor of Titanium Sands. We do not consider that this impacts on our independence in accordance with the requirements of Regulatory Guide 112 ‘Independence of Experts’. We have completed a conflict search of BDO affiliated organisations within Australia. This conflict search incorporates all Partners, Directors and Managers of BDO affiliated organisations. We are not aware of any circumstances that, in our view, would constitute a conflict of interest or would impair our ability to provide objective assistance in this matter.

Remuneration or other benefits received by our employees

All our employees receive a salary. Our employees are eligible for bonuses based on overall productivity but not directly in connection with any engagement for the provision of a report. We have received a fee from Client for our professional services in providing this report. That fee is not linked in any way with our opinion as expressed in this report.

Referrals

We do not pay commissions or provide any other benefits to any person for referring customers to us in connection with the reports that we are licensed to provide.

Complaints resolution

Internal complaints resolution process

As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing addressed to The Complaints Officer, BDO Corporate Finance (WA) Pty Ltd, PO Box 700 West Perth WA 6872.

When we receive a written complaint we will record the complaint, acknowledge receipt of the complaint within 15 days and investigate the issues raised. As soon as practical, and not more than 45 days after receiving the written complaint, we will advise the complainant in writing of our determination.

Referral to External Dispute Resolution Scheme

A complainant not satisfied with the outcome of the above process, or our determination, has the right to refer the matter to the Financial Ombudsman Service (‘ FOS ’). FOS is an independent organisation that has been established to provide free advice and assistance to consumers to help in resolving complaints relating to the financial service industry. FOS will be able to advise you as to whether or not they can be of assistance in this matter. Our FOS Membership Number is 12561. Further details about FOS are available at the FOS website www.fos.org.au or by contacting them directly via the details set out below.

Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Toll free: 1800 367 287 Facsimile: (03) 9613 6399 Email: [email protected]

Contact details

You may contact us using the details set out on page 1 of the accompanying report.

==> picture [77 x 30] intentionally omitted <==

1.	Introduction	1
2.	Summary and Opinion	1
3.	Scope of the Report	4
4.	Outline of the Transaction	5
5.	Profile of TSL	9
6.	Profile of Srinel	13
7.	Economic analysis	15
8.	Industry analysis	17
9.	Valuation approach adopted	20
10.	Valuation of TSL prior to the Transaction	23
11.	Valuation of TSL following the Transaction	31
12.	Is the Transaction fair?	34
13.	Is the Transaction reasonable?	34
14.	Conclusion	36
15.	Sources of information	36
16.	Independence	37
17.	Qualifications	37
18.	Disclaimers and consents	38

Appendix 1 – Glossary and copyright notice Appendix 2 – Valuation Methodologies

==> picture [77 x 30] intentionally omitted <==

==> picture [276 x 90] intentionally omitted <==

15 December 2017

The Directors Titanium Sands Limited Level 24, 44 St Georges Terrace Perth WA 6000

Dear Directors

INDEPENDENT EXPERT’S REPORT

1. Introduction

On 19 March 2014, Titanium Sands Limited (‘ TSL ’ or ‘ the Company ’) entered into an option agreement (‘ Original Option Deed ’) with Cuprum Holdings Limited (‘ Cuprum ’), for the sole and exclusive option to acquire 100% of the issued capital of Srinel Holdings Limited (‘ Srinel ’), an unlisted company that holds exploration licences and licence applications in Sri Lanka that are prospective for mineral sands (‘ Mannar Island Project ’ or ‘ the Project ’). The Original Option Deed was exercised on 29 December 2014.

The terms of the Original Option Deed were amended via deeds entered into on 29 January 2016 and 18 February 2016 (together ‘ Amended Option Deed ’) to reflect an expanded project area following the restructure of mining tenements held by subsidiaries of Srinel. The revised terms for the acquisition of 100% of the issued capital of Srinel was announced to the market on 29 January 2016 (‘ the Transaction ’). A further Deed of Amendment was subsequently signed and announced to the market on 29 September 2017 which adjusted the number of shares to be issued to Cuprum and amended the milestones attached to the Performance Shares.

The Transaction is subject to shareholder approval which is to be sought under:

item 7 of section 611 of the Corporations Act, as the proposed issue of shares will result in Cuprum holding more than 20% of the issued capital in TSL; and
Listing Rule 10.1 as Cuprum is a related party of TSL under section 228 of the Corporations Act, as Cuprum is controlled by Mr Robert Nelson, the father in law of Mr Jason Ferris (a director of TSL).

As at the date of this Report Cuprum has a relevant interest in approximately 8.67% of TSL’s issued shares.

2. Summary and Opinion

2.1 Purpose of the report

The directors of TSL have requested that BDO Corporate Finance (WA) Pty Ltd (‘ BDO ’) prepare an independent expert’s report (‘ our Report ’) to express an opinion as to whether or not the Transaction is fair and reasonable to the non-associated shareholders of TSL (‘ Shareholders ’).

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 AFS Licence No 316158 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Corporate Finance (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.

==> picture [77 x 30] intentionally omitted <==

Our Report is prepared pursuant to ASX Listing Rule 10.1 and section 611 of the Corporations Act 2001 Cth (‘ Corporations Act ’ or ‘ the Act ’) and is to be included with the Notice of Meeting for TSL in order to assist the Shareholders in their decision whether to approve the Transaction.

2.2 Approach

Our Report has been prepared having regard to Australian Securities and Investments Commission (‘ ASIC ’) Regulatory Guide 74 ‘Acquisitions Approved by Members’ ( ‘RG 74’ ), Regulatory Guide 111 ‘Content of Expert Reports’ (‘ RG 111 ’) and Regulatory Guide 112 ‘Independence of Experts’ (‘ RG 112 ’).

In arriving at our opinion, we have assessed the terms of the Transaction as outlined in the body of this report. We have considered:

How the value of a TSL share prior to the Transaction on a control basis compares to the value of a TSL share following the Transaction on a minority basis;
The likelihood of a superior alternative offer being available to TSL;
Other factors which we consider to be relevant to the Shareholders in their assessment of the Transaction; and
The position of Shareholders should the Transaction not proceed.

2.3 Opinion

We have considered the terms of the Transaction as outlined in the body of this report and have concluded that the Transaction is fair and reasonable to the Shareholders of TSL.

2.4 Fairness

In section 12 we determined that the value of TSL prior to the Transaction compares to the value of TSL following the Transaction on a minority basis, as detailed below.

		Low	Preferred	High
	Ref
		$	$	$
Value of a TSL share prior to the Transaction on a control basis	10.3	Nil	Nil	Nil
Value of a TSL share following the Transaction on a	11.1	0.008	0.010	0.013
minority basis

Source: BDO analysis

2.5 Reasonableness

We have considered the analysis in section 13 of this report, in terms of both:

advantages and disadvantages of the Transaction; and
other considerations, including the position of Shareholders if the Transaction does not proceed, and the consequences of not approving the Transaction.

==> picture [77 x 30] intentionally omitted <==

In our opinion, the position of Shareholders if the Transaction is approved is more advantageous than the position of Shareholders if the Transaction is not approved. Accordingly, in the absence of any other relevant information and/or an alternate proposal we believe that the Transaction is reasonable for Shareholders.

The respective advantages and disadvantages considered are summarised below:

ADVANTAGES AND DISADVANTAGES
Section Advantages	Section	Disadvantages
13.4 The Transaction is fair	13.5	Dilution of existing shareholders’ interests
13.4 TSL shareholders will gain exposure to, and have a share in, any future success of the Mannar Island Project	13.5	Change in operations may not be consistent with Shareholders’ risk profile
13.4 The Transaction will provide the Company with a cash injection and put the Company under less cash flow strain as the consideration payable is in the form of shares
13.4 The ability of TSL to raise additional funds may increase due to the shift in the scale and nature of the Company’s activities
13.4 The liquidity of the Company’s shares may improve if the Transaction is approved

Other key matters we have considered include:

Section	Description
13.1	Alternative Proposal
13.2	Practical level of control
13.3	Consequences of not approving the Transaction

==> picture [77 x 30] intentionally omitted <==

3. Scope of the Report

3.1 Purpose of the Report

ASX Listing Rule 10.1

ASX Listing Rule 10.1 requires that a listed entity must obtain shareholders’ approval before it acquires or disposes of a substantial asset, when the consideration to be paid for the asset or the value of the asset being disposed of constitutes more than 5% of the equity interest of that entity at the date of the latest published accounts.

Listing Rule 10.1 applies where the vendor or acquirer of the relevant assets is a related party of the listed entity. Cuprum, the legal and beneficial owner of Srinel is controlled by Mr Robert Nelson, who is the father in law of Mr Jason Ferris, a director of TSL.

Listing Rule 10.10.2 requires the Notice of Meeting for shareholders’ approval to be accompanied by a report by an independent expert expressing their opinion as to whether the transaction is fair and reasonable to the shareholders whose votes are not to be disregarded.

Accordingly, an independent experts’ report is required for the Transaction. The report should provide an opinion by the expert stating whether or not the terms and conditions in relation thereto are fair and reasonable to non-associated shareholders of TSL.

Section 611 of the Act

Section 606 of the Corporations Act expressly prohibits the acquisition of shares by a party if that acquisition will result in that person (or someone else) holding an interest in 20% or more of the issued shares of a public company, unless a full takeover offer is made to all shareholders.

Section 611 permits such an acquisition if the shareholders of that entity have agreed to the issue of such shares. This agreement must be by resolution passed at a general meeting at which no votes are cast in favour of the resolution by any party who is associated with the party acquiring the shares, or by the party acquiring the shares. Section 611 states that shareholders of the company must be given all information that is material to the decision on how to vote at the meeting.

RG 74 states that the obligation to supply shareholders with all information that is material can be satisfied by the non-associated directors of TSL, by either:

undertaking a detailed examination of the Transaction themselves, if they consider that they have sufficient expertise, experience and resources; or
by commissioning an Independent Expert's Report.

The directors of TSL have commissioned this Independent Expert's Report to satisfy this obligation.

3.2 Regulatory guidance

Neither the Listing Rules nor the Corporations Act defines the meaning of ‘fair and reasonable’. In determining whether the Transaction is fair and reasonable, we have had regard to the views expressed by ASIC in RG 111. This regulatory guide provides guidance as to what matters an independent expert should consider to assist security holders to make informed decisions about transactions.

This regulatory guide suggests that where the transaction is a control transaction, the expert should focus on the substance of the control transaction rather than the legal mechanism used to effect it. RG 111

==> picture [77 x 30] intentionally omitted <==

suggests that where a transaction is a control transaction, it should be analysed on a basis consistent with a takeover bid.

In our opinion, the Transaction is a control transaction as defined by RG 111 and we have therefore assessed the Transaction as a control transaction to consider whether, in our opinion, it is fair and reasonable to Shareholders.

3.3 Adopted basis of evaluation

RG 111 states that a transaction is fair if the value of the offer price or consideration is equal to or greater than the value of the securities subject of the offer. This comparison should be made assuming a knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm’s length.

When considering the value of the securities subject of the offer in a control transaction it is inappropriate for the expert to apply a discount on the basis that the shares being acquired represent a minority or portfolio interest as such the expert should consider this value inclusive of a control premium. Further to this, RG 111 states that a transaction is reasonable if it is fair. It might also be reasonable if despite being ‘not fair’ the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher bid.

Having regard to the above, BDO has completed this comparison in two parts:

A comparison between the value of a TSL share prior to the Transaction on a control basis and the value of a TSL share following the Transaction on a minority interest basis (fairness – see Section 12 ‘Is the Transaction Fair?’); and
An investigation into other significant factors to which Shareholders might give consideration, prior to approving the resolution, after reference to the value derived above (reasonableness – see Section 13 ‘Is the Transaction Reasonable?’).

This assignment is a Valuation Engagement as defined by Accounting Professional & Ethical Standards Board professional standard APES 225 ‘Valuation Services’ (‘ APES 225 ’).

A Valuation Engagement is defined by APES 225 as follows:

‘an Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Valuer is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Valuer at that time.’

This Valuation Engagement has been undertaken in accordance with the requirements set out in APES 225.

4. Outline of the Transaction

On 19 March 2014, TSL entered into the Original Option Deed with Cuprum for the sole and exclusive option to acquire 100% of the issued capital of Srinel, an unlisted company that holds exploration licences and licence applications in Sri Lanka that are prospective for mineral sands. The Original Option Deed was exercised on 29 December 2014 and an option fee of US$500,000 was paid to Cuprum.

The terms of the Original Option Deed were amended via deeds entered into on 29 January 2016 and 18 February 2016 to reflect an expanded project area following the re-structure of mining tenements held by subsidiaries of Srinel. An option fee of $50,000 was paid to Cuprum under the Amended Option Deed.

==> picture [77 x 30] intentionally omitted <==

On 29 January 2016, TSL announced the revised terms for the acquisition of 100% of the issued capital of Srinel. A further Deed of Amendment was subsequently signed and announced to the market on 29 September 2017, reducing the number of shares to be issued to Cuprum and amended the milestones attached to the Performance Shares. The consideration payable by TSL to Cuprum comprises:

US$500,000 option fee under the Original Option Deed (paid 2014 and on-paid to the seller of the tenements to Cuprum);
$50,000 option fee under the Amended Option Deed (paid 2016);
58,095,239 shares (post-consolidation) at $0.02 per share (‘ Consideration Shares ’);
22,500,000 shares at $0.02 per share in lieu of a cash reimbursement of $450,000 advanced by Cuprum to Srinel to maintain the Project area (assuming the full amount of the cash reimbursement is settled via shares);
66,666,6667 performance shares (post-consolidation) (‘ Class A Performance Shares ’);
33,333,333 performance shares (post-consolidation) (‘ Class B Performance Shares ’);
133,333,333 performance shares (post-consolidation) (‘ Class C Performance Shares ’) (collectively ‘ Performance Shares ’); and
a 5% royalty from the sale of mineral product extracted from mining activities on the Mannar Island Project.

As part of the Transaction, TSL is seeking shareholder approval to:

consolidate its shares on a 1 for 3 basis;
undertake a capital raising through the issue of up to 300 million shares at $0.02 per share raising $6 million, with a minimum subscription of 250 million shares (‘ Capital Raising ’);
issue 20 million shares (post-consolidation) to Trident Capital Pty Ltd (‘ Trident ’) as consideration for services performed in connection with the Transaction;
seek approval for Mr James Searle, Mr Lee Christensen and Mr Jason Ferris, directors of TSL, to participate in the Capital Raising and subscribe for a maximum of 15 million shares (postconsolidation) at $0.02 per share;
issue 30 million Class B options (post-consolidation) with an exercise price of $0.05 and an expiry date of 18 January 2021 to Mr James Searle, Mr Lee Christensen and Mr Jason Ferris, directors of TSL (‘ Class B Options ’); and
ratify the issue of 42,857,142 shares (pre-consolidation) at $0.07 per share to raise $300,000 and pre-approve the issue of 42,857,142 free attaching Class A options (pre-consolidation) with an exercise price of $0.021 (post-consolidation) and expiry date of three years from the date of issue (‘ Class A Options ’)(‘ Placement ’).

All references in our Report hereon is on a post-consolidation basis unless otherwise stated.

4.1 Performance Shares

The Performance Shares will convert to shares in TSL on satisfaction of the following milestones:

Class A Performance Shares

66,666,667 performance shares will convert to 66,666,667 shares in TSL upon:

==> picture [77 x 30] intentionally omitted <==

a) a total Mineral Resources of 20 million tonnes of heavy mineral content of not less than 5% discovered; or
b) any metal equivalent independently valued by a qualified technical person.

Class B Performance Shares

33,333,333 performance shares will convert to 33,333,333 shares in TSL upon:

a) the Company obtaining a grant of one or more mining licences in respect of all or part of the land subject of the Mannar Island Project.

Class C Performance Shares

133,333,333 performance shares will convert to 133,333,333 shares in TSL upon:

a) the Company commencing commercial scale heavy mineral sand concentrate production or treatment of 250,000 tonnes of heavy mineral content of not less than 5% discovered in respect of any part of the Mannar Island Project; or
b) the Company achieving a Mineral Resource of 70 million tonnes of heavy mineral content of not less than 5% discovered.
4.2 Shareholding in TSL following the Transaction

As part of the Transaction, TSL will consolidate its share capital on a 1 for 3 basis. The proposed capital structure of TSL is contingent on whether the milestones above are met and the number of shares subscribed for under the Capital Raising. The following table shows the maximum numbers of shares that may be issued if the Transaction is approved (assuming a maximum capital raising).

Shareholding following the Transaction	Existing Shareholders	Cuprum	Other	Total
Number of shares on issue as at the date of our Report	472,855,797	44,895,000	-	517,750,797
Share consolidation: 1 for 3	157,618,599	14,965,000	-	172,583,599
% holdings at the date of our Report	91.33%	8.67%	0.00%	100.00%
Shares to be issued under the Capital Raising	15,000,000	-	285,000,000	300,000,000
Shares to be issued to Cuprum	-	80,595,239	-	80,595,239
Shares to be issued to Trident	-	-	20,000,000	20,000,000
Number of shares on issue following the Transaction	172,618,599	95,560,239	305,000,000	573,178,838
% holdings following the Transaction	30.12%	16.67%	53.21%	100.00%
Shares to be issued on conversion of the Performance Shares	-	233,333,333	-	233,333,333
Number of shares on issue following the conversion of Performance Shares	172,618,599	328,893,572	305,000,000	806,512,171
% holdings following the conversion of Performance Shares	21.40%	40.78%	37.82%	100.00%
Shares to be issued on exercise of the Class A and Class B Options	44,285,714	-	-	44,285,714
Number of shares on issue following the exercise of Class A and Class B Options	216,904,313	328,893,572	305,000,000	850,797,885
% holdings following the exercise of Class A and Class B Options	25.49%	38.66%	35.85%	100.00%

==> picture [77 x 30] intentionally omitted <==

As outlined above, Cuprum’s holding in TSL will increase from 8.67% to 16.67% of the Company’s issued capital prior to the satisfaction of the milestones under Class A Performance Shares, Class B Performances Shares and Class C Performance Shares, and the exercise of Class A Options and Class B Options.

The Company is seeking approval for Cuprum to increase its holding following the achievement of the milestones above, which will result in Cuprum holding up to 43.47% of the Company’s issued capital, assuming a minimum capital raising and prior to the exercise of Class A Options and Class B Options. The following table shows the numbers of shares that may be issued if the Transaction is approved assuming a minimum capital raising.

Shareholding following the Transaction	Existing Shareholders	Cuprum	Other	Total
Number of shares on issue as at the date of our Report	472,855,797	44,895,000	-	517,750,797
Share consolidation: 1 for 3	157,618,599	14,965,000	-	172,583,599
% holdings at the date of our Report	91.33%	8.67%	0.00%	100.00%
Shares to be issued under the Capital Raising	15,000,000	-	235,000,000	250,000,000
Shares to be issued to Cuprum	-	80,595,239	-	80,595,239
Shares to be issued to Trident	-	-	20,000,000	20,000,000
Number of shares on issue following the Transaction	172,618,599	95,560,239	255,000,000	523,178,838
% holdings following the Transaction	32.99%	18.27%	48.74%	100.00%
Shares to be issued on conversion of the Performance Shares	-	233,333,333	-	233,333,333
Number of shares on issue following the conversion of Performance Shares	172,618,599	328,893,572	255,000,000	756,512,171
% holdings following the conversion of Performance Shares	22.82%	43.47%	33.71%	100.00%
Shares to be issued on exercise of the Class A and Class B Options	44,285,714	-	-	44,285,714
Number of shares on issue following the conversion of Class A and Class B Options	216,904,313	328,893,572	255,000,000	800,797,885
% holdings following the conversion of Class A and Class B Options	27.09%	41.07%	31.84%	100.00%

==> picture [77 x 30] intentionally omitted <==

5. Profile of TSL

5.1 History

TSL, formerly known as Windimurra Vanadium Limited, is a mineral exploration company that listed on the Australian Securities Exchange (‘ ASX ’) on 22 December 1988. The Company’s proposed primary focus is the Mannar Island Project which comprises exploration licences and licence applications in Sri Lanka that are prospective for mineral sands. The current board of directors of TSL are:

Mr James Searle, Managing Director;
Mr Jason Ferris, Non-Executive Director; and
Mr Lee Christensen, Non-Executive Director and Chairman.

5.2 Key Projects

Mannar Island Mineral Sands Project

On 19 March 2014, TSL entered into the Original Option Deed with Cuprum, under which TSL was granted the sole and exclusive option to acquire 100% of the issued capital in Srinel, an unlisted Company that holds exploration licences and licence applications in Sri Lanka that are prospective for mineral sands.

On 29 December 2014, the Company announced it had completed its due diligence and exercised its option under the Original Option Deed to acquire 100% of the issued capital of Srinel. As consideration, TSL paid an option fee of US$500,000 to Cuprum, which was on-paid to the party who sold the tenements to Cuprum.

Subsequent to the execution of the Original Option Deed, Srinel restructured the mining tenements held by its subsidiaries. After restructuring, Srinel held exploration licences and applications for exploration licences covering 168 km[2] . Subsequently, TSL and Cuprum entered into an Amended Option Deed to acknowledge the expanded area and revise the consideration payable. To secure this additional exploration area, TSL paid an additional option fee of $50,000 to Cuprum on 2 March 2016.

The project area is located on Mannar Island in the north west of Sri Lanka, and joined to the mainland shore by road and rail connections. An initial JORC inferred mineral resource was announced by the Company on 22 April 2015.

During 2016 Srinel carried out a drilling program and identified a defined area of heavy mineral concentration. The Company anticipates a revised resource statement will be released following the processing of samples collected.

Windimurra Vanadium Project

During 2016 the Company’s Board reviewed the future exploration activities of its sole exploration asset, the Windimurra Vanadium Project located in the Murchison Goldfield in Western Australia. On 1 September 2016 the Company resolved to surrender its mining lease.

==> picture [77 x 30] intentionally omitted <==

5.3 Historical Balance Sheet

Statement of Financial Position	Audited as at Audited as at Audited as at
	30-Jun-17 30-Jun-16 30-Jun-15
	$ $ $
CURRENT ASSETS
Cash and cash equivalents	3,948 8,253 64,483
Trade and other receivables	28,595 26,129 158,377
TOTAL CURRENT ASSETS	32,543 34,382 222,860
NON-CURRENT ASSETS
Investment in Srinel Projects	599,149 599,149 652,955
Loan receivable	65,000 65,000 65,000
Exploration and evaluation	- - 300,000
TOTAL NON-CURRENT ASSETS	664,149 664,149 1,017,955
TOTAL ASSETS	696,692 698,531 1,240,815

CURRENT LIABILITIES
Trade and other payables	(798,649) (377,859) (74,150)
Loanpayable	(95,847) - -
TOTAL CURRENT LIABILITIES	(894,496) (377,859) (74,150)
TOTAL LIABILITIES	(894,496) (377,859) (74,150)
NET ASSETS	(197,804) 320,672 1,166,665

EQUITY
Issued capital	3,259,868 3,259,868 3,079,868
Accumulated losses	(3,457,672) (2,939,196) (1,913,203)
TOTAL EQUITY	(197,804) 320,672 1,166,665

Source: Audited financial statements of TSL for the years ended 30 June 2015, 30 June 2016 and 30 June 2017.

We note that auditor issued an Emphasis of Matter paragraph for the years ended 30 June 2015, 30 June 2016 and 30 June 2017 outlining the existence of a material uncertainty that may cast doubt about the Company’s ability to continue as a going concern. The auditor indicated that the Company’s ability to continue as a going concern is dependent upon the Company’s ability to raise funds and the continued support of its creditors and shareholders.

We note the following in relation to TSL’s financial position:

Loan receivable of $65,000 as at 30 June 2017 relates to the Company’s loan agreement with Cuprum. The loan will become immediately repayable if the Transaction does not proceed for any reason other than the Amended Option Deed being terminated as a result of a breach by the Company.
Investment in Srinel Projects relates to consideration paid of US$500,000 under the Original Option Deed and $50,000 under the Amended Option Deed to acquire 100% of the issued capital in Srinel. The option fees totalling $599,149 as at 30 June 2017 are non-refundable. The recovery of this amount is dependent on the successful acquisition of Srinel.
Tenement M58/272 was fully impaired as at 30 June 2016 and subsequently surrendered on 1 September 2016, as no further substantive expenditure was budgeted for further exploration and evaluation of the Windimurra Vanadium Project.

==> picture [77 x 30] intentionally omitted <==

Loan payable of $95,847 relates to advances of $20,000 and $22,000 made by IML Holdings Pty Ltd in August and October of 2016 and $25,000 made by Aegean Capital Pty Ltd in November 2016. The advances accrue interest at 7% per annum and are repayable by 31 December 2017.

5.4 Historical Statement of Comprehensive Income

Statement of Comprehensive Income	Audited for the Audited for the Audited for the
	year ended 30-Jun-17 year ended 30-Jun-16 year ended 30-Jun-15
	$ $ $
Administrative Expenses	(331,565) (305,153) (320,470)
Director Fees	(168,000) (174,800) (177,418)
Exploration & Consultancy Fees	(16,625) (141,812) (97,471)
Gain on Deed of Company Arrangement	- - -
Impairment	- (300,000) -
Other Expenses	- (103,806) -
Loss from operating activities	(516,190) (1,025,571) (595,359)
Net finance expense	(2,286) (422) 320,080
Loss before income tax	(518,476) (1,025,993) (275,279)
Income tax expense	- - -
Total comprehensive loss for the year	(518,476) (1,025,993) (275,279)

Source: Audited financial statements of TSL for the years ended 30 June 2015, 30 June 2016 and 30 June 2017.

We note the following in relation to TSL’s recent financial performance:

Impairment expense of $300,000 for the year ended 30 June 2016 relates to the full impairment of tenement M58/272.
Other expenses of $103,806 for the year ended 30 June 2016 relates to a write-down to cost of the investment in Srinel.

==> picture [77 x 30] intentionally omitted <==

5.5 Capital Structure

The share structure of TSL as at 24 November 2017 is outlined below:

	Number
	Total ordinary shares on issue 517,750,797
	Top 20 shareholders 316,983,713
	Top 20 shareholders - % of shares on issue 61.22%

Source: Share Registry Report

The range of shares held in TSL as at 24 November 2017 is as follows:

	Number of	Number of	Percentage of
Range of Shares Held	Ordinary Shareholders	Ordinary Shares	Issued Shares (%)
1 - 1,000	1,450	515,384	0.10%
1,001 - 5,000	557	1,187,985	0.23%
5,001 - 10,000	77	538,573	0.10%
10,001 - 100,000	78	3,479,125	0.67%
100,001 - and over	206	512,029,730	98.90%
TOTAL	2,368	517,750,797	100.00%

Source: Share Registry Report

The ordinary shares held by the most significant shareholders as at 24 November 2017 are detailed below:

	Number of Ordinary Shares Held	Percentage of Issued Shares (%)
Name
Heedful Pty Ltd	57,157,142	11.04%
King George V Nominees Ltd*	44,895,000	8.67%
Mr Laurent Leyendecker	38,142,000	7.37%
Sunset Capital Management Pty Ltd	30,000,000	5.79%
Subtotal	170,194,142	32.87%
Others	347,556,655	67.13%
Total ordinary shares on Issue	517,750,797	100.00%

Source: Share Registry Report

*King George V Nominees Ltd is controlled by Mr Robert Nelson

==> picture [77 x 30] intentionally omitted <==

6. Profile of Srinel

6.1 History

Srinel is an unlisted investment holding company, incorporated on 21 June 2012 in the Republic of Mauritius. Through its subsidiaries, Srinel holds exploration licences and license applications in Sri Lanka prospective for mineral sands. Cuprum is the legal and beneficial owner of Srinel.

6.2 Historical Balance Sheet

Statement of Financial Position	Audited as at Audited as at Audited as at
	30-Sep-17 31-Mar-17 31-Mar-16
	US$ US$ US$
CURRENT ASSETS
Cash and cash equivalents	169 181 14
Trade and other receivables	33 33 33
Amount due from relatedparties	40,050 10,050 -
TOTAL CURRENT ASSETS	40,252 10,264 47
NON-CURRENT ASSETS
Exploration and evaluation assets	43,993 26,731 -
Intangible assets	56,078 56,078 56,078
Other investments	30,040 30,040 -
TOTAL NON-CURRENT ASSETS	130,111 112,849 56,078
TOTAL ASSETS	170,363 123,113 56,125

CURRENT LIABILITIES
Trade and other payables	291,686 168,373 34,266
Amount due to relatedparties	41,500 11,500 -
TOTAL CURRENT LIABILITIES	333,186 179,873 34,266
NON-CURRENT LIABILITIES
Loan from shareholders	136,976 94,850 37,193
TOTAL NON-CURRENT LIABILITIES	136,976 94,850 37,193
TOTAL LIABILTIES	470,162 274,723 71,459
NET ASSETS	(299,799) (151,610) (15,334)

EQUITY
Stated Capital	100 100 100
Advance toward shares	52,600 52,600 -
Accumulated loss	(355,579) (206,333) (16,426)
Retranslation reserve	3,078 2,021 992
TOTAL EQUITY	(299,801) (151,612) (15,334)

Source: Audited financial statements of Srinel for the years ended 31 March 2016 and 31 March 2017, and for the half year ended 30 September 2017.

We note the following in relation to Srinel’s financial position:

Exploration assets relate to the Mannar Island Project
Intangible assets of US$56,078 as at 30 September 2017 comprise goodwill
Other investments of US$30,040 as at 30 September comprises fees payable in advance
Trade and other payables are primarily attributable to consultancy fees
Loan from shareholders comprises an advance from subsidiaries and loans from directors

==> picture [77 x 30] intentionally omitted <==

6.3 Historical Statement of Comprehensive Income

Statement of Comprehensive Income	Audited for the Audited for the Audited for the
	half year ended 30-Sep-17 year ended 31-Mar-17 year ended 31-Mar-16
	US$ US$ US$
Revenue
Revenue	- - -
Cost of sales	- - -
Gross Profit	- - -
Other income	- 24 -
Expenses
Administrative expenses	(149,234) (189,907) (81,588)
Other expenses	(12) - (1)
Loss before income tax	(149,246) (189,883) (81,589)
Income tax expense	- - -
Total comprehensive income	(149,246) (189,883) (81,589)
Goodwill	- - -
Retranslation reserve	(1,058) (1,029) -
Total comprehensive loss	(150,304) (190,912) (81,589)

Source: Audited financial statements of Srinel for the years ended 31 March 2016 and 31 March 2017, and for the half year ended 30 September 2017.

==> picture [77 x 30] intentionally omitted <==

7. Economic analysis

7.1 Australia

Domestic growth

The Australian economy expanded by 0.8% in the June 2017 quarter, and according to available information, seems to have expanded at a modestly slower rate in the September 2017 quarter. However, the economy is expected to strengthen over the coming years, reducing spare capacity in the labour market further and leading to a gradual increase in wage growth and inflation.

Inflation in the country remains below the Reserve Bank of Australia’s (‘ RBA ’) target of 2% to 3%, with Australia’s consumer price index (‘ CPI ’) recording approximately 1.9% for September 2017 (excluding volatile items). As noted above, this is expected to pick up gradually as the economy strengthens.

Housing market conditions continue to differ between states, with prices increasing in some markets and conditions starting to ease in others such as Sydney. Housing credit growth has eased a little, and the profile of new lending has shifted away from interest only and other forms of riskier lending. This suggests that recent measures introduced by the Australian Prudential Regulatory Authority are assisting in targeting the risks associated with household balance sheets. However, household debt still remains high and continues to increase at a rate faster than household income.

Commodity prices

Prices of industrial commodities continued to strengthen in the September 2017 quarter (compared to the September 2016 quarter), while most agricultural prices remained broadly stable. The iron ore spot price has pulled back from recent highs, with weaker sentiment in the market fuelled partly by impending cuts to steel production in China that have been mandated to improve environmental outcomes.

Energy prices increased by 2% in the September 2017 quarter (compared to the September 2016 quarter), largely due to a 17% leap in coal prices due to China’s environmentally-motivated measures to cut back on coal production.

Metals prices surged by approximately 10% in the September 2017 quarter due to strengthening demand, largely due to China’s needs for various metals to support its property, infrastructure and manufacturing sectors. This was also coupled with supply constraints enforced by Chinese authorities.

Currency movements

The Australian dollar has appreciated since mid-year, partially reflecting a lower US dollar. This higher exchange rate is expected to contribute to the subdued price pressures in the economy, and is also impacting the outlook for output and employment.

Outlook

The outlook for the Australian economy based on the September 2017 quarter is little changed from that of the June 2017 quarter. Growth in resource exports is expected to largely offset the diminishing drag from lower levels of mining investment. Along with other categories of exports, the mining sector is expected to contribute to economic growth over the next few years.

==> picture [77 x 30] intentionally omitted <==

In terms of business investment, the outlook is more positive than what it had been for a while. A considerable amount of public infrastructure work is planned or underway, contributing to private-sector activity.

Overall, growth is forecast by the RBA to average approximately 3% over the next few years.

Source: www.rba.gov.au Statement by Philip Lowe, Governor: Monetary Policy Decision 7 November 2017, www.worldbank.org Commodity Markets Outlook, October 2017

7.2 Sri Lanka

Sri Lanka’s economy grew at an average rate of 6.4% over 2010 to 2015, with growth largely due to a ‘peace dividend’ following a 25-year-long civil war that ended in 2009. The growth rate fell to 4.4% over 2016 and to 3.8% in the first quarter of 2017, largely due to unfavourable weather conditions.

Beginning in October 2016, Sri Lanka experienced one of its’ worst droughts in decades affecting all but two of the country’s 25 districts. Some districts experienced a 60-70% reduction in rainfall, causing widespread land degradation, with the biggest impact on rice where production is forecast to fall by 40% over 2017.

Two months after the end of the drought, many parts of the country experienced widespread flooding and landslides, displacing more than a half million people and forcing the country to lean on the United Nations and neighbouring countries for emergency assistance.

Despite facing back-to-back humanitarian crises, the economy is continuing to grow driven by construction investment and strong household spending. In 2016, service related activities accounted for 56.5% of real gross domestic product (‘ GDP ’), followed by industry related activities accounting for 26.8% and agriculture related activities accounting for 7.1%. Over this period, service related activities grew by 4.2% driven by an expansion in financial services, insurance and telecommunications, industry related activities grew by 6.7% led by construction and mining, and agriculture related activities fell by 4.2% as a result of the adverse weather conditions. The unemployment rate decreased from 4.7% over 2015 to 4.4% over 2016 with the number of people employed increasing in line with expansion of the industry and service related activities.

Economic development in Sri Lanka is contingent on the success of reforms to reduce the country’s large fiscal and trade deficits. Public debt is roughly 80% of GDP and the Government has increased its valueadded tax rate to 15% and imposed various other taxes as part of its fiscal consolidation program.

The key to stronger growth prospects will be fiscal tightening without constraining consumer spending or public investment. The economy is projected to grow at 5% in 2017 and increasing to 7% by 2020, driven by increased investment from the private sector.

Source: Central Bank of Sri Lanka Annual Report 2016, The World Bank in Sri Lanka

==> picture [77 x 30] intentionally omitted <==

8. Industry analysis

8.1 Mineral Sands

Mineral sands is a class of ore which is an important source of zirconium, titanium, thorium, tungsten, rare earth elements and other industrial minerals used in many products. The mineral sands industry consists of two core product streams: titanium minerals and zircon. Titanium minerals (ilmenite, leucoxene and rutile) are far more prevalent in mineral sand ore bodies than zircon.

8.1.1. Titanium Dioxide

Titanium dioxide (‘ TiO2 ’) is mined as ilmenite, rutile, and leucoxene, and its primary use is as a whitening pigment in paints, plastics and paper. TiO2 feedstocks are graded by their TiO2 content ranging from 50% for sulphate ilmenite to 95% for natural rutile. Feedstocks are either sold as raw minerals (rutile and chloride or sulphate ilmenite) or as upgraded feedstocks, which involves chloride or sulphate ilmenite being heated to remove impurities and increase the TiO2 content.

Ilmenite

Ilmenite is the most abundant titanium mineral which contains approximately 35% to 65% TiO2, and accounts for approximately 92% of global consumption of titanium minerals. It is black and opaque, and known to be slightly magnetic with a specific gravity around 4.5 to 5.0. Ilmenite is predominantly used a direct feedstock for sulphate or chloride route titanium pigment plants. According to the United States Geological Survey (‘ USGS ’), global mine production of ilmenite was 5.9 million metric tonnes in 2016.

Prices are set under long-term contracts, with the value of ilmenite substantially lower than rutile. Ninety per cent of titanium metal is sourced from ilmenite.

Rutile

Rutile is composed of approximately 95% to 100% TiO2. The mineral is typically red to black in colour and is predominantly used as direct feedstock for chloride route titanium pigment plants. Some rutile is also used in the manufacture of welding electrodes. According to the USGS, global mine production of rutile was 6.6 million metric tonnes in 2016.

Prices are set under long-term contracts between producers and consumers.

Leucoxene

Leucoxene is not a pure mineral species but rather refers to a range of commercial titanium bearing products typically containing between 65% and 92% TiO2. Leucoxene is predominantly used as direct feedstock for chloride route titanium pigment plants and in the manufacture of welding electrodes.

Titanium pigment is the largest end use of titanium feed stocks, accounting for roughly 90% of demand, and is used in paints, plastics and paper.

Titanium metal demand has been growing, with its high strength to weight ratio and high corrosive resistance ideal for aerospace, heat exchanges, offshore oil and gas drilling component and industrial chemicals and desalination plants.

8.1.2. Zircon

Zircon is a colourless to off-white mineral, and usually occurs in lower quantities (lower assemblage) than TiO2 in mineral sands deposits. Zircon is primarily used in the ceramics industry and is also used as a raw

==> picture [77 x 30] intentionally omitted <==

material for making foundry mouldings and bricks, and furnace linings due to its melting point of over 2500 degrees Celsius. Zircon is the world’s major source of zirconium products which are used as alloying agents in materials that are exposed to corrosive agents such as space vehicle parts, surgical appliances and explosive primers.

Australia is the world’s largest zircon producing country, followed by South Africa and China, together accounting for approximately 80% of global production.

Demand for zircon is driven by urbanisation, construction and industrial production. The ceramics sector is the largest end user of zircon, accounting for roughly 50% of demand. Demand from the chemicals sector is the fastest growing with annual average growth of over ten per cent. This sector caters to an increasingly diverse range of end applications utilising zircon’s unique properties that few materials can provide the properties required. These include catalytic converters, nuclear fuel, electronics and pressure and oxygen sensors. Growth of this sector is linked to increased usage of electronics and communications, energy efficiency and emission controls.

8.2 Current market conditions

The industry is subject to considerable demand and price volatility. Barriers to entry are high due to large capital requirements to establish operations and limited mineral sand mining sites. The three largest producers, Rio Tinto Limited, Exxaro Resources Limited and Illuka Resources Limited, account for approximately two thirds of global production.

Construction is a key end use sector for both zircon and TiO2 with industry demand linked to urbanisation and construction. Price plays a limited role in demand for mineral sands due to the generic nature of these products, with demand driven by the demand for the final manufactured products.

Over the last five years’ industry volumes have decreased as a result of volatile pricing and mixed downstream demand. Output is expected to increase over the five years to 2020 as a result of the ramp-up of production at new operations and increased demand as global conditions improve, with steady growth from Chinese manufacturers is expected to drive demand.

8.3 Prices

Zircon, rutile and ilmenite prices, while different in terms of price, tend to follow similar trends. Prices are set under long-term contracts between producers and consumers. Due to the generic nature of the industry’s products price plays a limited role in driving demand. The graphs below show the historical spot prices for zircon, ilmenite and rutile for the past ten years and the forecast prices to 2020.

Zircon

There has been consistent oversupply in the zircon market which is expected to persist for at least the next four years, according to TZ Minerals International. Demand growth is expected to improve progressively to 2020, driven by increased growth rates in mature economies and improved demand in emerging economies.

After historic highs during 2011 and 2012 of just over US$2,500 per tonne (‘ US$/t ’), zircon prices have since fallen to approximately US$1,100/t in October 2015. During this time Chinese demand for zircon fell significantly as glazed tile output volumes declined. Prices are expected to increase slightly to US$1,158/t by 2022.

==> picture [77 x 30] intentionally omitted <==

==> picture [410 x 129] intentionally omitted <==

----- Start of picture text -----

Zirconium Ore
3000
2000
1000
0
Spot Forecast
US$ per tonne
----- End of picture text -----

Source: Bloomberg and Consensus Forecasts

Rutile

Rutile followed a similar trend to zircon, peaking at US$2,225/t in mid-2012 before decreasing at the start of 2013 to US$1,250/t. The price decreased further to US$675/t in the second half of August 2016. Prices increased to US$740/t per tonne over 2017 is expected to continue this trend to approximately US$900/t in 2018, with a long term forecast of US$1,055/t by 2022.

==> picture [26 x 8] intentionally omitted <==

----- Start of picture text -----

Rutile
----- End of picture text -----

==> picture [417 x 123] intentionally omitted <==

----- Start of picture text -----

3000
2000
1000
0
Spot Forecast
US$ per tonne
----- End of picture text -----

Source: Bloomberg and Consensus Forecasts

Ilmenite

Ilmenite followed a slightly different trend to that of zircon and rutile, as it peaked at US$300/t in mid2012 before decreasing to US$165/t July 2014. The price dropped as low as US$105/t in March 2016, recovering to US$177/t in the first half of 2017. The price is forecast to drop again with a long term forecast of US166/t by 2022.

==> picture [36 x 8] intentionally omitted <==

----- Start of picture text -----

Ilmenite
----- End of picture text -----

==> picture [415 x 121] intentionally omitted <==

----- Start of picture text -----

400
300
200
100
0
Spot Forecast
US$ per tonne
----- End of picture text -----

Source: Bloomberg and Consensus Forecasts

==> picture [77 x 30] intentionally omitted <==

9. Valuation approach adopted

There are a number of methodologies which can be used to value a business or the shares in a company. The principal methodologies which can be used are as follows:

Capitalisation of future maintainable earnings (‘ FME ’)
Discounted cash flow (‘ DCF ’)
Quoted market price basis (‘ QMP ’)
Net asset value (‘ NAV ’)

A summary of each of these methodologies is outlined in Appendix 2.

Different methodologies are appropriate in valuing particular companies, based on the individual circumstances of that company and available information.

9.1 Valuation of a TSL share prior to the Transaction

In our assessment of the value of TSL shares we have chosen to employ the following methodologies:

NAV as our primary method; and
QMP as our secondary method.

We have chosen these methodologies for the following reasons:

The NAV approach on a going concern basis is usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. In undertaking an NAV approach we considered the value of option fee paid by TSL. We note that should the Transaction not be approved TSL would have no exposure to the underlying tenements. We considered the potential application of a real option valuation method but concluded that it was not appropriate for the following reasons
The real option valuation approach requires the determination of the probability of a range of values of the Srinel assets to be determined. We note that for exploration projects the appropriate valuation approaches do not allow for such an analysis to be undertaken as would be the case for an advanced project with a discounted cash flow model in place which could potentially be sensitised to enable this to be undertaken.
The volatility of the Srinel assets would need to be determined, we note that the independent specialist who we instructed to value the Srinel assets identified a limited number of comparable transactions which varied significantly and as such we are unable to construct a suitable data set on which this could be undertaken.
The Transaction requires a capial raising of $5 million to be completed and recompliance with Chapter 1 & 2 of the listing rules, both of which may or may not be achieved.

Accordingly we have not relied upon a real option valution pre transaction as we do not have reasonable grounds to do so;

The QMP basis is a relevant methodology to consider as TSL’s shares are listed on the ASX. This means there is a regulated and observable market where TSL’s shares can be traded. However, in order for the QMP methodology to be considered appropriate, the Company’s shares should be

==> picture [77 x 30] intentionally omitted <==

liquid and the market should be fully informed as to its activities. We have considered these factors in section 10.2 of our Report;

TSL does not generate a regular trading income. Therefore, there are no historic profits that could be used to represent future earnings. This means that the FME valuation approach is not appropriate; and
TSL has no foreseeable future net cash inflows and therefore the application of the DCF valuation approach is not appropriate.

9.2 Valuation of a TSL share following the Transaction

In our assessment of the value of a TSL share following the Transaction we have adopted the Sum-of-Parts approach, which estimates the market value of a company by separately valuing each asset and liability of the company. The value of each asset may be determined using different methods.

The value of a TSL share following the Transaction consists of the following component values:

The value of TSL prior to the Transaction;
The value of Srinel;
The amount of cash raised under the Capital Raising; and
The number of shares on issue following the Transaction.

In our assessment of the value of Srinel we have taken into consideration the following items when assessing the appropriate valuation methodology:

The NAV method on a going concern basis is usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. The core value of Srinel is in the exploration and development assets it holds. We have instructed Continental Resource Management Pty Ltd (‘ CRM ’) to act as independent specialist and provide an independent market valuation of the Company’s mineral assets in accordance with the Australian Code for Public Reporting of Technical Assessments and Valuations of Minerals Assets (‘ the Valmin Code 2015 ’) and the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (‘ JORC Code 2012 ’). CRM’s full report may be found in Appendix 3. We have considered this in the context of Srinel’s other assets and liabilities on a NAV basis. A previous valuation was undertaken in July 2017, this was not in compliance with the Valmin Code 2015 and accordingly has not been relied upon for this report. We have considered the difference between the CRM report and the July 2015 report and note that the differences related to the application of the Valmin Code 2015.;
Srinel’s shares are not listed on the ASX (or any other exchange) and hence, there is no regulated and observable market when Srinel’s shares are traded. Accordingly, we cannot value the shares of Srinel using the QMP methodology;
Srinel does not generate regular trading income, and therefore there are no historic profits that could be used to represent future earnings. This means that the FME valuation approach is not appropriate; and
We have not been provided with forecast cash flows and therefore are not able to use the DCF methodology.

==> picture [77 x 30] intentionally omitted <==

We have not included the Options and Performance Shares in the number of shares on issue following the Transaction as the outcome cannot be determined with a degree of certainty at this stage. We do not have reasonable grounds upon which to conclude whether the milestones for the conversion of the Performance Shares into ordinary shares in TSL will be achieved. The achievement of these milestones would be value accretive to the Company and we do not have reasonable grounds for quantifying this potential value uplift. We have shown the maximum dilution arising out of the conversion of the Options and Performance Shares in section 4.2 and considered this in our reasonableness assessment.

==> picture [77 x 30] intentionally omitted <==

10. Valuation of TSL prior to the Transaction

10.1 Net Asset Valuation of TSL

The value of TSL’s assets on a going concern basis is reflected in our valuation below:

		As at
NAV prior to the Transaction	Note	30-Jun-17	Low value	Preferred value	High value
		$	$	$	$
CURRENT ASSETS
Cash and cash equivalents	1	3,948	137,403	137,403	137,403
Trade and other receivables	2	28,595	16,755	16,755	16,755
TOTAL CURRENT ASSETS		32,543	154,158	154,158	154,158
NON-CURRENT ASSETS
Investment in Srinel Projects	3	599,149	599,149	599,149	599,149
Loan receivable		65,000	65,000	65,000	65,000
TOTAL NON-CURRENT ASSETS		664,149	664,149	664,149	664,149
TOTAL ASSETS		696,692	818,307	818,307	818,307
CURRENT LIABILITIES
Trade and other payables	4	(798,649)	(808,317)	(808,317)	(808,317)
Loan payable		(95,847)	(95,847)	(95,847)	(95,847)
TOTAL CURRENT LIABILITIES		(894,496)	(904,164)	(904,164)	(904,164)
TOTAL LIABILITIES		(894,496)	(904,164)	(904,164)	(904,164)
NET ASSETS		(197,804)	(85,857)	(85,857)	(85,857)
Number of shares on issue	5		172,583,599	172,583,599	172,583,599
Net asset value per share ($)			Nil	Nil	Nil

Source: BDO analysis

The table above indicates the net asset value of a TSL share prior to the Transaction is nil.

We have been advised that there has not been a significant change in the net assets of TSL since 30 June 2017, other than as noted below. We have assumed that the fair market value of the assets and liabilities as at 30 June 2017 are not materially different to their carrying values, therefore we have not made any adjustments to these values, apart from the adjustments set out below.

The following adjustments were made to the net assets of TSL as at 30 June 2017 in arriving at our value: Note 1: Cash and cash equivalents

We have adjusted cash and cash equivalents as at 30 June 2017 to reflect an increase as per Management Accounts (and bank statements) as at 31 October 2017. TSL received $300,000 in July 2017 following the placement of 42,857,142 shares (pre-consolidation) at $0.07 per share, which was offset by outflows of approximately $170,000 over the period to 31 October 2017. The adjustment to increase cash and cash equivalents is set out in the table below.

Cash and cash equivalents	Low Preferred High
	$ $ $
Cash and cash equivalents at 30 June 2017	3,948 3,948 3,948
Adjustment to cash and cash equivalents	133,455 133,455 133,455
Cash and cash equivalents at 31 October 2017	137,403 137,403 137,403

==> picture [77 x 30] intentionally omitted <==

Note 2: Trade and other receivables

We have adjusted trade and other receivables as at 30 June 2017 to reflect a decrease in trade and other receivables as per Management Accounts as at 31 October 2017. The adjustment to decrease trade and other receivables is set out in the table below.

Trade and other receivables	Low Preferred High
	$ $ $
Trade and other receivables at 30 June 2017	28,595 28,595 28,595
Adjustment	(11,840) (11,840) (11,840)
Trade and other receivables at 31 October 2017	16,755 16,755 16,755

Note 3: Investment in Srinel Projects

TSL holds an option to acquire Srinel and as a result does not hold any interest in Srinel or the Mannar Island Project as at the date of our Report. Therefore, we do not consider it appropriate to reflect CRM’s value of the Mannar Island Project in TSL prior to the Transaction.

We note that the acquisition of the Mannar Island Project is dependent on the performance by Cuprum of its obligations under the Original Option Deed and Amended Option Deed, and that the terms and conditions under the Amended Option Deed no longer warrants the repayment of the option fees paid by TSL to Cuprum, totalling $599,149 as at 30 June 2017. Therefore, in the event the Transaction is not approved, the carrying value of the investment in Srinel would be reduced to nil.

However, TSL completed a due diligence exercise prior to exercising its option and nothing has come to the Company’s attention between 29 December 2014, when the Original Option Deed was exercised, and the date of our Report that would suggest its Investment in Srinel would not be realised. Therefore, we have no reason to believe that the carrying value of the investment in Srinel will not be recovered if the Transaction is completed. As a result, we have not adjusted the carrying value of TSL’s option to acquire to Srinel.

Note 4: Trade and other payables

We have adjusted trade and other payables as at 30 June 2017 to reflect an increase in trade and other payables as per Management Accounts as at 31 October 2017. The adjustment to increase trade and other payables is set out in the table below.

Trade and other payables	Low Preferred High
	$ $ $
Trade and other payables at 30 June 2017	(798,649) (798,649) (798,649)
Adjustment	(9,668) (9,668) (9,668)
Trade and other payables at 31 October 2017	(808,317) (808,317) (808,317)

Note 5: Number of shares on issue

We have adjusted the number of shares on issue following the proposed share consolidation in order to provide a like-for-like comparison of the value of a TSL share following the Transaction.

Number of shares on issue	Low Preferred High
Number of shares on issue as at the date of this report	517,750,797 517,750,797 517,750,797
Share consolidation: 1 for 3	172,583,599 172,583,599 172,583,599
Adjusted number of shares on issue	172,583,599 172,583,599 172,583,599

==> picture [77 x 30] intentionally omitted <==

10.2 Quoted Market Prices for TSL Securities

To provide a comparison to the valuation of TSL in Section 10.1, we have also assessed the quoted market price for 1:3 basis, when arriving at our quoted market price.

The quoted market value of a company’s shares is reflective of a minority interest. A minority interest is an interest in a company that is not significant enough for the holder to have an individual influence in the operations and value of that company.

RG 111.11 suggests that when considering the value of a company’s shares for the purposes of approval under Item 7 of s611 the expert should consider a premium for control. An acquirer could be expected to pay a premium for control due to the advantages they will receive should they obtain 100% control of another company. These advantages include the following:

control over decision making and strategic direction;
access to underlying cash flows;
control over dividend policies; and
access to potential tax losses.

Whilst Cuprum will not be obtaining 100% of TSL, RG 111 states that the expert should calculate the value of a target’s shares as if 100% control were being obtained. RG 111.13 states that the expert can then consider an acquirer’s practical level of control when considering reasonableness. Reasonableness has been considered in Section 13.

Therefore, our calculation of the quoted market price of a TSL share including a premium for control has been prepared in two parts. The first part is to calculate the quoted market price on a minority interest basis. The second part is to add a premium for control to the minority interest value to arrive at a quoted market price value that includes a premium for control.

Minority interest value

Our analysis of the quoted market price of a TSL share is based on the pricing prior to the announcement of the Transaction. This is because the value of a TSL share after the announcement may include the effects of any change in value as a result of the Transaction. However, we have considered the value of a TSL share following the announcement when we have considered reasonableness in Section 13.

Information on the Transaction was announced to the market on 29 January 2016. Therefore, the following chart provides a summary of the share price movement over the 12 months to 28 January 2016 which was the last trading day prior to the announcement.

==> picture [455 x 143] intentionally omitted <==

----- Start of picture text -----

TSL share price and trading volume history
0.020 15.0
0.015
10.0
0.010
5.0
0.005
0.000 -
Volume Closing share price
Source: Bloomberg
Share Price ($) Volume (millions)
----- End of picture text -----

==> picture [77 x 30] intentionally omitted <==

The daily price of TSL’s shares from 29 January 2015 to 28 January 2016 has ranged from a low of $0.005 on 6 October 2015 to a high of $0.015 on 27 February 2015. The highest single day of trading was on 25 November 2015 where 10,000,000 shares were traded. The daily price displayed a downwards trend from it’s high for the period of $0.015 in February 2015, before plateauing to trade within a range of $0.005 and $0.010. In October 2015 the share price peaked at $0.013; however, there was no announcement around this date to explain the price movement. The share price peaked again at $0.013 on 25 November 2015, following the announcement of Mr Ryan Rockwood’s resignation from the Board.

During this period a number of announcements were made to the market. The key announcements are set out below:

Date	Announcement	Closing Share Price Following Announcement Closing Share Price Three Days After Announcement	Closing Share Price Following Announcement Closing Share Price Three Days After Announcement	Closing Share Price Following Announcement Closing Share Price Three Days After Announcement	Closing Share Price Following Announcement Closing Share Price Three Days After Announcement
		$ (movement) $ (movement)
26/11/2015	Results of Annual General Meeting	0.012  7.69%	0.012		0.00%
24/11/2015	Board Resignation	0.011  0.00%	0.012		9.09%
30/10/2015	Quarterly Activities and Cash flow Report	0.008  0.00%	0.008		0.00%
26/10/2015	Notice of Annual General Meeting/Proxy Form	0.009  0.00%	0.008		11.11%
01/10/2015	Appendix 4G	0.005  16.67%	0.005		0.00%
01/10/2015	Annual Report 2015	0.005  16.67%	0.005		0.00%
07/09/2015	Response to ASX Query	0.005  0.00%	0.005		0.00%
31/07/2015	Quarterly Activities Report and Appendix 5B	0.008  0.00%	0.006		25.00%
12/06/2015	Change of Share Registry Address	0.009  28.57%	0.009		0.00%
27/05/2015	Updated Corporate Presentation	0.006  0.00%	0.006		0.00%
25/05/2015	WVL Corporate Presentation	0.006  0.00%	0.006		0.00%
30/04/2015	Activities Report and Appendix 5B - Quarterly	0.008  0.00%	0.008		0.00%
22/04/2015	Achieves Maiden JORC Inferred Mineral Resource	0.009  0.00%	0.009		0.00%
21/04/2015	Initial Director's Interest Notice	0.009  10.00%	0.009		0.00%
21/04/2015	Final Director's Interest Notice	0.009  10.00%	0.009		0.00%
16/04/2015	Board Changes	0.010  0.00%	0.009		10.00%
15/04/2015	Change in substantial holding	0.010  0.00%	0.010		0.00%
02/04/2015	Total Heavy Minerals Sands Results - Sri Lanka	0.012  0.00%	0.013		8.33%
17/03/2015	Half Year Accounts	0.013  7.14%	0.013		0.00%
30/01/2015	Activities Report and Appendix 5B - Quarterly	0.014  0.00%	0.014		0.00%

Source : Bloomberg and BDO analysis

On 2 April 2015, the Company released results from exploration drilling carried out at its Mannar Island Project. On the day of the announcement, the share price remained unchanged; however, in the subsequent three days the share price increased by 8.33% to $0.013.

On 16 April 2015, the Company announced Mr Lee Christensen had been appointed as Chairman of the Company replacing Mr Paul Price. On the day of the announcement, the share price remained unchanged; however, in the subsequent three days following the share price fell by 10.00% to $0.009.

On 22 April 2015, the Company announced that it had achieved a JORC Inferred mineral resource at its Mannar Island Project. On the day of the announcement and in the subsequent three days the share price remained unchanged.

==> picture [77 x 30] intentionally omitted <==

On 24 November 2015, the Company announced the resignation of Mr Ryan Rockwood as Non-Executive Director of the Company. On the day of the announcement, the share price remained unchanged; however, in the subsequent three days the share price increased by 9.09% to $0.012.

To provide further analysis of the market prices for a TSL share, we have also considered the weighted average market price for 10, 30, 60 and 90 day periods to 28 January 2016.

Share Price per unit	28-Jan-16	10 Days	30 Days	60 Days	90 Days
Closing price	$0.009
Volume weighted average price (VWAP)		$0.009	$0.010	$0.011	$0.010

Source: Bloomberg, BDO analysis

The above weighted average prices are prior to the date of the announcement of the Transaction, to avoid the influence of any increase in price of TSL’s shares that has occurred since the Transaction was announced.

An analysis of the volume of trading in TSL’s shares for the twelve months to 28 January 2016 is set out below:

Trading days	Share price	Share price	Cumulative volume	As a % of
	low	high	traded	Issued capital
1 Day	$0.009	$0.009	142,252	0.03%
10 Days	$0.008	$0.009	2,948,065	0.62%
30 Days	$0.008	$0.012	6,666,223	1.40%
60 Days	$0.007	$0.013	26,835,716	5.65%
90 Days	$0.005	$0.015	37,808,686	7.96%
180 Days	$0.005	$0.015	45,852,608	9.66%
1 Year	$0.005	$0.015	91,335,671	19.23%

Source: Bloomberg, BDO analysis

This table indicates that TSL’s shares display a low level of liquidity, with only 7.55% of the Company’s current issued capital being traded in a six-month period. For the quoted market price methodology to be reliable there needs to be a ‘deep’ market in the shares. RG 111.69 indicates that a ‘deep’ market should reflect a liquid and active market. We consider the following characteristics to be representative of a deep market:

Regular trading in a company’s securities;
Approximately 1% of a company’s securities are traded on a weekly basis;
The spread of a company’s shares must not be so great that a single minority trade can significantly affect the market capitalisation of a company; and
There are no significant but unexplained movements in share price.

A company’s shares should meet all of the above criteria to be considered ‘deep’, however, failure of a company’s securities to exhibit all of the above characteristics does not necessarily mean that the value of its shares cannot be considered relevant. Removing the impact of the shares traded on 25 November 2015, only 7.55% of the total number of shares outstanding have been traded in the last six months leading up to the announcement of the Transaction.

==> picture [77 x 30] intentionally omitted <==

In the case of TSL, we do not consider there to be a deep market given the low level of liquidity and unexplained price and volume movements over the period.

Our assessment is that a range of values for TSL’s shares based on market pricing, after disregarding post announcement pricing, is between $0.008 and $0.010.

Control Premium

We have reviewed the control premiums paid by acquirers of mining companies listed on the ASX. We have summarised our findings below:

Year	Number of Transactions	Average Deal Value (AU$m)	Average Control Premium (%)
2017	7	153.12	51.77
2016	34	1052.44	48.13
2015	37	940.05	41.72
2014	42	518.19	34.56
2013	38	206.79	51.55
2012	49	345.13	46.38
2011	62	743.04	53.38
2010	64	841.15	42.12
2009	60	453.56	49.86
	Mean	583.72	46.61
	Median	518.19	48.13

Entire Data Set Metrics	Average Deal Value (AU$m)	Average Control Premium (%)
Mean	624.55	46.37
Median	94.49	36.22

Source: Bloomberg/BDO Analysis

The table above indicates that the long term average control premium paid by acquirers of mining companies listed on the ASX is approximately 46%, with a median of 36%. In assessing the sample of transactions for mining companies listed on the ASX, we excluded transactions where the acquirer obtained a controlling interest at a discount (i.e. less than 0%) to remove the effects of outliers. In arriving at an appropriate control premium to apply we note that observed control premiums can vary due to the:

Nature and magnitude of non-operating assets;
Nature and magnitude of discretionary expenses;
Perceived quality of existing management;
Nature and magnitude of business opportunities not currently being exploited;
Ability to integrate the acquiree into the acquirer’s business;
Level of pre-announcement speculation of the transaction;
Level of liquidity in the trade of the acquiree’s securities.

==> picture [77 x 30] intentionally omitted <==

The data in the table above indicates that the average control premium from 2010 to 2017 has been fairly steady, with the number of control transactions dropping off in recent years. In assessing an appropriate control premium to apply to TSL, we have considered the following;

TSL’s auditor outlined the existence of a material uncertainty in relation to the Company’s ability to continue as a going concern given the dependence upon the Company’s ability to raise sufficient funds. The Company’s current financial situation may impact the premium that an acquirer would likely be willing to pay to acquire the Company; and
The current market capitalisation of TSL is considerably smaller than a number of the sample companies determined above, we note that larger transactions tended to have higher control premiums.

Based on the above research, we believe that an appropriate control premium to apply in our valuation of TSL’s shares is between 20% and 30%.

Quoted market price including control premium

Applying a control premium to TSL’s quoted market share price results in the following quoted market price value including a premium for control:

	Low	Midpoint	High
	$	$	$
Quoted market price value (pre-consolidation)	0.008	0.009	0.010
Quoted market price value (post-consolidation)	0.024	0.027	0.030
Control premium	20%	25%	30%
Quoted market price valuation including a premium for control	0.029	0.034	0.039

Source: BDO analysis

Therefore, our valuation of a TSL share based on the quoted market price method and including a premium for control is between $0.029 and $0.039, with a midpoint value of $0.034.

==> picture [77 x 30] intentionally omitted <==

10.3 Assessment of TSL Value

The results of the valuations performed are summarised in the table below:

	Low	Preferred	High
	$	$	$
Net assets value (Section 10.1)	Nil	Nil	Nil
ASX market prices (Section 10.2)	0.029	0.034	0.039

Source: BDO analysis

We note that the values obtained under the QMP method are higher than the values obtained under the NAV method. The difference between the values obtained under the QMP method and the NAV method may be explained by the following:

The NAV value is lower than the QMP value which is not uncommon for exploration companies which often trade at a premium to their net asset value as a result of the potential for favourable exploration results being factored in to the market price which may not be reflected in the NAV;
The Original Option Deed was exercised and announced to the market on 29 December 2014, with the revised terms subsequently announced on 29 January 2016. Therefore, it is likely that the market has already factored in the value of the acquisition into the QMP value; and
Under RG111.69 (d), the QMP methodology is considered appropriate when a liquid and active market exists for the securities. From our analysis of the QMP of a TSL share in section 10.2, we note that only 9.66% of the Company’s issued capital has been traded in the six months prior to the announcement of the Transaction, which represents a low level of liquidity over the period.

On 16 March 2017, the Company requested a trading halt and was subsequently suspended from official quotation on 20 March 2017. During the period from the date of the announcement of the Transaction to the trading halt on 16 March 2017 the Company made a number of price sensitive announcements to the market. Additionally, on 20 April 2016, ASX issued a letter to the Company querying unexplained price and volume movements.

As a result of the time that has passed since the Transaction was announced to the market, the change in economic conditions, and the unexplained price and volume movements over this period we have not relied on the QMP method in assessing the value of a TSL share prior to the Transaction.

For the reasons described above and the lack of a ‘deep’ market for the trading of TSL’s shares, we conclude that the value obtained under the NAV approach is the most appropriate methodology and consider the value of a TSL share prior to the transaction to be nil.

==> picture [77 x 30] intentionally omitted <==

11. Valuation of TSL following the Transaction

11.1 Sum-of-parts methodology

NAV following the Transaction	Ref	Low value	Preferred value	High value
		$	$	$
NAV of TSL prior to the Transaction	10.1	(85,857)	(85,857)	(85,857)
NAV of Srinel	11.2	1,492,726	2,574,206	3,824,206
Cash raised under Capital Raising	11.3	5,000,000	5,000,000	6,000,000
Elimination of Investment in Srinel	11.4	(599,149)	(599,149)	(599,149)
Value of TSL following the Transaction (control basis)		5,807,720	6,889,200	9,139,200
Discount for minority interest	11.5	23%	20%	17%
Value of TSL following the Transaction (minority basis)		4,471,945	5,511,360	7,585,536
Number of shares on issue	11.6	537,464,552	537,464,552	587,464,552
Value per share ($)		0.008	0.010	0.013

Based on the above, we consider the value of a TSL share following the Transaction on a minority interest basis to be between $0.008 and $0.013, with a preferred value of $0.010. We note the following in relation to the sum-of-parts valuation above:

11.2 NAV of Srinel

The value of Srinel’s assets on a going concern basis is reflected in our valuation below:

Statement of Financial Position Note	As at
	30-Sep-17 Low value Preferred value High value
	US$ A$ A$ A$
CURRENT ASSETS
Cash and cash equivalents	181 237 237 237
Trade and other receivables	33 43 43 43
Amount due from relatedparties	10,050 13,173 281 281
TOTAL CURRENT ASSETS	10,264 13,454 561 561
NON-CURRENT ASSETS
Exploration and evaluation assets 1	26,731 1,800,000 3,100,000 4,350,000
Intangible assets 2	56,078 - - -
Other investments	30,040 39,376 39,376 39,376
TOTAL NON-CURRENT ASSETS	112,849 1,839,376 3,139,376 4,389,376
TOTAL ASSETS	123,113 1,852,830 3,139,937 4,389,937

CURRENT LIABILITIES
Trade and other payables	168,373 220,701 220,701 220,701
Amount due to relatedparties	11,500 15,074 220,701 220,701
TOTAL CURRENT LIABILITIES	179,873 235,775 441,403 441,403
NON-CURRENT LIABILITIES
Loan from shareholders	94,850 124,328 124,328 124,328
TOTAL NON-CURRENT LIABILITIES	94,850 124,328 124,328 124,328

==> picture [77 x 30] intentionally omitted <==

Statement of Financial Position Note	As at
	30-Sep-17 Low value Preferred value High value
	US$ A$ A$ A$
TOTAL LIABILTIES	274,723 360,104 565,731 565,731
NET ASSETS	(151,610) 1,492,726 2,574,206 3,824,206

*The financial statements from Srinel Holdings Limited as at 30 September 2017 are denominated in US dollars. We have considered the average AUD/USD exchange rate over 1 November 2017 to 27 November 2017 of 0.7629 as TSL’s functional and presentation currency is in Australian dollars.

The table above indicates that the net asset value of Srinel is between $1.49 million and $3.82 million, with a preferred value of $2.57 million. We have been advised that there has not been a significant change in the net assets of Srinel since 30 September 2017. We have assumed that the fair market value of the assets and liabilities as at 30 September 2017 are not materially different to their carrying values, therefore we have not made any adjustments to these values, apart from the adjustment set out below.

The following adjustment was made to the net assets of Srinel as at 30 September 2017 in arriving at our value:

Note 1: Valuation of the Mannar Island Project

We instructed CRM to provide an independent market valuation of the exploration assets held by Srinel, through its subsidiaries. CRM considered a number of different valuation methods when valuing the exploration assets of Srinel. The valuation prepared by CRM is based upon analysis of comparable transactions and exploration expenditure to date. It should be noted that the valuation only applies to the granted tenements, should the tenements that are subject to applications be granted there would be an increase in value. A copy of the Independent Technical Valuation is attached as Appendix 3 to this Report.

The range of values for Srinel’s Mannar Island Project as calculated by CRM is set out below:

	Low value Preferred value High value
Mineral Asset Valuation	A$ A$ A$
Mannar Island Project	1,800,000 3,100,000 4,350,000
Total	1,800,000 3,100,000 4,350,000

Source: Independent Technical Valuation prepared by CRM

The table above indicates a range between A$1.80 million and A$4.35 million, with a preferred value of A$3.10 million.

Note 2: Intangible assets

Intangible assets comprise exploration and evaluation expenditure in relation to the Mannar Island Project. Therefore, we have eliminated intangible assets of US$56,078 as at 30 September 2017 as this value is reflected in CRM’s valuation of the Mannar Island Project.

11.3 Cash raised under the Capital Raising

As part of the Transaction, TSL will undertake a capital raising for up to $6 million through the issue of 300 million shares at $0.02 per share, with a minimum subscription of 250 million shares to raise $5 million. We have assumed the minimum subscription for our low and preferred value and the maximum subscription for our high value.

==> picture [77 x 30] intentionally omitted <==

11.4 Elimination of Investment in Srinel

We have eliminated TSL’s carrying value of its Investment in Srinel totalling $599,149, as the value of TSL following the Transaction incorporates 100% of the value of Srinel.

11.5 Minority discount

The net asset value of a TSL share following the Transaction is reflective of a controlling interest. This suggests that the acquirer obtains an interest in the Company which allows them to have an individual influence in the operations and value of the Company. Therefore, if the Transaction is approved, the current Shareholders of TSL may become minority interest shareholders in TSL, meaning that Shareholders’ individual holdings will not be considered significant enough to have an individual influence in the operations and value of the Company.

Therefore, we have adjusted our valuation of a TSL share following the Transaction to reflect a minority interest holding. A minority interest discount is the inverse of a premium for control and is calculated using the formula 1 – [1 / (1+control premium)]. As discussed in Section 10.2, we consider an appropriate control premium for TSL to be in the range of 20% to 30%. This gives rise to a minority interest discount in the range of 17% to 23%.

11.6 Number of shares on issue

The number of shares on issue following the Transaction is set out in the table below.

Number of shares on issue	Low	Preferred	High
Shares on issue prior to the Transaction (post consolidation)	172,583,599	172,583,599	172,583,599
Shares to be issued under the Capital Raising	250,000,000	250,000,000	300,000,000
Shares to be issued to Cuprum	80,595,239	80,595,239	80,595,239
Shares to be issued to Trident	20,000,000	20,000,000	20,000,000
Shares to be issued on conversion of Class A Options	14,285,714	14,285,714	14,285,714
Shares on issue following the Transaction	537,464,552	537,464,552	587,464,552

We have not included the Class B Options in the number of shares on issue following the Transaction as they are out of the money. We have not included the Performance Shares in the number of shares on issue following the Transaction as the outcome cannot be determined with a degree of certainty at this stage. We have shown the maximum dilution arising out of the conversion the Class B Options and Performance Shares in section 4.2 and considered this in our reasonableness assessment in section 13.

==> picture [77 x 30] intentionally omitted <==

12. Is the Transaction fair?

The value of TSL prior to the Transaction on a control basis and the value of a TSL share following the Transaction on a minority basis is compared below:

		Low	Preferred	High
	Ref
		$	$	$
Value of TSL prior to the Transaction on a control basis	10.3	Nil	Nil	Nil
Value of TSL following the Transaction on a minority basis	11.1	0.008	0.010	0.013

We note from the table above that the value of a share in TSL on a minority basis following the Transaction is greater than the value of a TSL share prior to the Transaction on a control basis. Therefore, we consider that the Transaction is fair.

13. Is the Transaction reasonable?

13.1 Alternative Proposal

We are unaware of any alternative proposal that might offer the Shareholders of TSL a premium over the value ascribed to, resulting from the Transaction.

13.2 Practical Level of Control

If the Transaction is approved, then Cuprum will hold an interest of approximately 18.27% (assuming a minimum capital raising) in TSL, prior to the conversion of Options and Performance Shares. If all Performances shares are converted to shares in TSL, Cuprum’s relevant interest will be 43.74% (assuming a minimum capital raising).

When shareholders are required to approve an issue that relates to a company there are two types of approval levels. These are general resolutions and special resolutions. A general resolution requires 50% of shares to be voted in favour to approve a matter and a special resolution requires 75% of shares on issue to be voted in favour to approve a matter. If the Transaction is approved and the Options and Performances shares convert to shares in TSL, then Cuprum will be able to block special resolutions.

Therefore, in our opinion, while Cuprum will be able to significantly influence the activities of TSL, it will not be able to exercise a similar level of control as if it held 100% of TSL.

13.3 Consequences of not Approving the Transaction

Continued quotation on ASX

TSL is a mineral exploration company which has not generated revenue during the historical period. On 1 September 2016, the Company surrendered its only mining lease and the book value of its exploration assets were fully impaired during the year ended 30 June 2016. If the Transaction is not approved, it is likely that the Company’s operations will not be sufficient to warrant the continued quotation of its securities on the ASX.

Therefore, if the Transaction is not approved, TSL would have to explore other avenues, including alternative transactions and growth opportunities to satisfy the ASX listing requirements and provide a return to Shareholders.

==> picture [77 x 30] intentionally omitted <==

13.4 Advantages of Approving the Transaction

We have considered the following advantages when assessing whether the Transaction is reasonable.

Advantage		Description
The Transaction is fair	As	set out in Section 12 the Transaction is fair. RG 111 states that
	an offer is reasonable if it is fair.
TSL shareholders will gain exposure to, and	As	at the date of our Report, TSL does not hold an interest in any
have a share in, any future success of the	exploration or mining licence. If the Transaction is approved,
Mannar Island Project	shareholders will gain exposure to the Mannar Island Project and
	have a share in any future success of the Project.
	Furthermore, the proposed acquisition provides a growth
	opportunity for the Company and the ability to provide a return to
	Shareholders.
The Transaction will provide the Company	As	part of the Transaction, the Company will undertake a capital
with a cash injection and put the Company	raising for up to $6 million through the issue of 300 million shares at
under less cash flow strain as the	$0.02 per share, with a minimum subscription of 250 million shares
consideration payable is in the form of	raising $5 million.
shares	If the Transaction is approved, the consideration to be paid to
	Cuprum is in the form of shares allowing the Company to retain cash
	raised through the capital raising to meet its working capital
	requirements and for the development of the Mannar Island Project.
The ability of TSL to raise additional funds	The change in nature and scale of the Company’s activities may
may increase due to the shift in the scale	attract a new pool of investors, increasing the Company’s ability to
and nature of the Company’s activities	raise addition working capital if required.
The Transactions provides the Company	Under ASX Listing Rule 12.1, an entity’s level of operations must be
with a level of operations that warrants the	sufficient to warrant the continued quotation of its’ securities on
continued quotation of its’ securities on the	the ASX.
ASX	Therefore, if the Transaction is approved TSL will meet the
	‘sufficient’ level of operations to warrant continued quotation of
	its’ securities on the ASX.
	Furthermore, as outlined in section 10.2, the Company’s shares prior
	to	the Transaction display a low level of liquidity, with only 9.66% of
	the Company’s issued capital traded over the six months prior to the
	announcement of the Transaction. If the Transaction is approved,
	TSL will continue the development of the Mannar Island Project, and
	therefore we consider it likely that the liquidity of the Company’s
	shares may improve.

==> picture [77 x 30] intentionally omitted <==

13.5 Disadvantages of Approving the Transaction

If the Transaction is approved, in our opinion, the potential disadvantages to Shareholders include those listed in the table below:

Disadvantage	Description
Dilution of existing shareholders’ interests	The issue of new shares will dilute exiting shareholders’ interest. As
	set out in section 4.2, existing shareholders will have their interest
	diluted to 30.12% and Cuprum’s interest in TSL will increase from
	8.67% to 16.67% (assuming a maximum capital raising of $6 million
	and prior to the conversion of Options and Performance Shares).
	In our assessment of fairness, we have not included the issue of
	shares pursuant to the Performance Shares as we do not have
	reasonable grounds to assume that the milestones will be achieved.
	However, if the Performance Shares convert to shares in TSL,
	existing shareholders will have their interest diluted to 21.40% and
	Cuprum’s interest will increase to 40.78%, assuming a maximum
	capital raising. Under a minimum Capital Raising, existing
	shareholders will have their interest diluted to 22.82% and Cuprum’s
	interest will increase to 43.74%.
Change in operations may not be consistent	The change in nature and scale of the Company’s activities to
with Shareholders’ risk profile	include heavy minerals sands in Sri Lanka may not be consistent with
	the objectives of Shareholders.

14. Conclusion

We have considered the terms of the Transaction as outlined in the body of this report and have concluded that the Transaction is fair and reasonable to the Shareholders of TSL.

15. Sources of information

This report has been based on the following information:

Draft Notice of General Meeting and Explanatory Statement on or about the date of this report;
Audited financial statements of TSL for the years ended 30 June 2015, 30 June 2016 and 30 June 2017;
Management accounts of TSL for the period to 31 October 2017;
Audited financial statements of Srinel Holdings Limited for the years ended 31 March 2016 and 31 March 2017, and for the half year ended 30 September 2017;
Independent Valuation Report dated 17 November 2017 performed by Continental Resource Management Pty Ltd;
Share registry information;
Information in the public domain; and
Discussions with Directors and Management of Titanium Sands Limited.

==> picture [77 x 30] intentionally omitted <==

16. Independence

BDO Corporate Finance (WA) Pty Ltd is entitled to receive a fee of $24,000 (excluding GST and reimbursement of out of pocket expenses). The fee is not contingent on the conclusion, content or future use of this Report. Except for this fee, BDO Corporate Finance (WA) Pty Ltd has not received and will not receive any pecuniary or other benefit whether direct or indirect in connection with the preparation of this report.

BDO Corporate Finance (WA) Pty Ltd has been indemnified by Titanium Sands Limited in respect of any claim arising from BDO Corporate Finance (WA) Pty Ltd.’s reliance on information provided by the Titanium Sands Limited, including the non-provision of material information, in relation to the preparation of this report.

Prior to accepting this engagement BDO Corporate Finance (WA) Pty Ltd has considered its independence with respect to Srinel Holdings Limited and Titanium Sands Limited and any of their respective associates with reference to ASIC Regulatory Guide 112 ‘Independence of Experts’. In BDO Corporate Finance (WA) Pty Ltd.’s opinion it is independent of Srinel Holdings Limited and Titanium Sands Limited and their respective associates.

The provision of our services is not considered a threat to our independence as auditors under Professional Statement APES 110 – Professional Independence. The services provided have no material impact on the financial report of Titanium Sands Limited

A draft of this report was provided to Titanium Sands Limited and its advisors for confirmation of the factual accuracy of its contents. No significant changes were made to this report as a result of this review.

BDO is the brand name for the BDO International network and for each of the BDO Member firms.

BDO (Australia) Ltd, an Australian company limited by guarantee, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of Independent Member Firms. BDO in Australia, is a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International).

17. Qualifications

BDO Corporate Finance (WA) Pty Ltd has extensive experience in the provision of corporate finance advice, particularly in respect of takeovers, mergers and acquisitions.

BDO Corporate Finance (WA) Pty Ltd holds an Australian Financial Services Licence issued by the Australian Securities and Investment Commission for giving expert reports pursuant to the Listing rules of the ASX and the Corporations Act.

The persons specifically involved in preparing and reviewing this report were Sherif Andrawes and Adam Myers of BDO Corporate Finance (WA) Pty Ltd. They have significant experience in the preparation of independent expert reports, valuations and mergers and acquisitions advice across a wide range of industries in Australia and were supported by other BDO staff.

Sherif Andrawes is a Fellow of the Institute of Chartered Accountants in England & Wales and a Fellow of Chartered Accountants Australia & New Zealand. He has over 30 years’ experience working in the audit and corporate finance fields with BDO and its predecessor firms in London and Perth. He has been responsible for over 300 public company independent expert’s reports under the Corporations Act or ASX Listing Rules and is a CA BV Specialist. These experts’ reports cover a wide range of industries in Australia

==> picture [77 x 30] intentionally omitted <==

with a focus on companies in the natural resources sector. Sherif Andrawes is the Chairman of BDO in Western Australia, Corporate Finance Practice Group Leader of BDO in Western Australia and the Natural Resources Leader for BDO in Australia.

Adam Myers is a member of Chartered Accountants Australia and New Zealand. Adam’s career spans 19 years in the Audit and Assurance and Corporate Finance areas. Adam is a CA BV Specialist and has considerable experience in the preparation of independent expert reports and valuations in general for companies in a wide number of industry sectors.

18. Disclaimers and consents

This report has been prepared at the request of Titanium Sands Limited for inclusion in the Explanatory Memorandum which will be sent to all Titanium Sands Limited Shareholders. Titanium Sands Limited engaged BDO Corporate Finance (WA) Pty Ltd to prepare an independent expert's report to consider the transaction whereby TSL will acquire 100% of the issued capital of Srinel Holdings Limited from Cuprum Holdings Limited for consideration comprising cash and ordinary shares in TSL.

BDO Corporate Finance (WA) Pty Ltd hereby consents to this report accompanying the above Explanatory Memorandum. Apart from such use, neither the whole nor any part of this report, nor any reference thereto may be included in or with, or attached to any document, circular resolution, statement or letter without the prior written consent of BDO Corporate Finance (WA) Pty Ltd.

BDO Corporate Finance (WA) Pty Ltd takes no responsibility for the contents of the Explanatory Memorandum other than this report.

We have no reason to believe that any of the information or explanations supplied to us are false or that material information has been withheld. It is not the role of BDO Corporate Finance (WA) Pty Ltd acting as an independent expert to perform any due diligence procedures on behalf of the Company. The Directors of the Company are responsible for conducting appropriate due diligence in relation to Srinel Holdings Limited. BDO Corporate Finance (WA) Pty Ltd provides no warranty as to the adequacy, effectiveness or completeness of the due diligence process.

The opinion of BDO Corporate Finance (WA) Pty Ltd is based on the market, economic and other conditions prevailing at the date of this report. Such conditions can change significantly over short periods of time.

With respect to taxation implications it is recommended that individual Shareholders obtain their own taxation advice, in respect of the Transaction, tailored to their own particular circumstances. Furthermore, the advice provided in this report does not constitute legal or taxation advice to the Shareholders of Titanium Sands Limited, or any other party.

BDO Corporate Finance (WA) Pty Ltd has also considered and relied upon independent valuations for mineral assets held by Srinel Holdings Limited.

The valuer engaged for the mineral asset valuation, Continental Resource Management Pty Ltd, possess the appropriate qualifications and experience in the industry to make such assessments. The approaches adopted and assumptions made in arriving at their valuation is appropriate for this report. We have received consent from the valuer for the use of their valuation report in the preparation of this report and to append a copy of their report to this report.

The statements and opinions included in this report are given in good faith and in the belief that they are not false, misleading or incomplete.

==> picture [77 x 30] intentionally omitted <==

The terms of this engagement are such that BDO Corporate Finance (WA) Pty Ltd is required to provide a supplementary report if we become aware of a significant change affecting the information in this report arising between the date of this report and prior to the date of the meeting or during the offer period.

Yours faithfully BDO CORPORATE FINANCE (WA) PTY LTD

==> picture [148 x 87] intentionally omitted <==

==> picture [253 x 51] intentionally omitted <==

Adam Myers Director Director

Sherif Andrawes

==> picture [77 x 30] intentionally omitted <==

A endix 1 – Glossar of Terms pp y

Reference	Definition
The Act	The Corporations Act 2001 Cth
Amended Option Deed	The terms of the Original Option Deed were amended via deeds entered into on 29
	January 2016 and 18 February 2016 reflect an expanded project area following the
	re-structure of mining tenements held by subsidiaries of Srinel and an adjusted
	purchase price
APES 225	Accounting Professional & Ethical Standards Board professional standard APES 225
	‘Valuation Services’
ASIC	Australian Securities and Investments Commission
ASX	Australian Securities Exchange
ATO	Australian Tax Office
BDO	BDO Corporate Finance (WA) Pty Ltd
Capital Raising	The issue of up 300 million shares at $0.02 per share raising $6 million, with a
	minimum subscription of 250 million shares
Class A Options	42,857,142 free attaching options (pre-consolidation) with a post-consolidation
	exercise price of $0.021, expiring three years from the date of issue
Class B Options	30 million options with an exercise price of $0.05 and an expiry date of 18 January
	2021 to Mr James Searle, Mr Lee Christensen and Mr Jason Ferris, directors of TSL
The Company	Titanium Sands Limited or TSL
Consideration Shares	The issue of 58,095,239 shares to Cuprum
Corporations Act	The Corporations Act 2001 Cth
CRM	Continental Resource Management Pty Ltd
Cuprum	Cuprum Holdings Limited
DCF	Discounted Future Cash Flows
EBIT	Earnings before interest and tax
EBITDA	Earnings before interest, tax, depreciation and amortisation

==> picture [77 x 30] intentionally omitted <==

Reference	Definition
FME	Future Maintainable Earnings
FOS	Financial Ombudsman Service
GDP	Gross domestic product
IML Holdings	IML Holdings Pty Ltd
JORC Code	The Australasian Code for Reporting of Exploration Results, Mineral Resources and
	Ore Reserves (2012 Edition)
Mannar Island Project	Exploration licences and licence applications covering a project area located on
	Mannar Island in the north west of Sri Lanka prospective for mineral sands
NAV	Net Asset Value
Options	Collectively, Class A Options and Class B Options
Original Option Deed	On 19 March 2014, Titanium Sands Limited entered into an option agreement with
	Cuprum Holdings Limited, for the sole and exclusive option to acquire 100% of the
	issued capital of Srinel Holdings Limited
Performance Shares	233,333,333 performance shares to be issued to Cuprum, that will convert to
	233,333,333 shares in TSL, subject to relevant performance milestones set out in
	section 4.1
Placement	The issue of 42,857,142 shares (pre-consolidation) at $0.07 per share to raise
	$300,000 and the issue of 42,857,142 free attaching Class A options (pre-
	consolidation) with an exercise price of $0.021 (post-consolidation) and expiry date
	of three years from the date of issue
QMP	Quoted market price
RBA	Reserve Bank of Australia
Regulations	Corporations Act Regulations 2001 (Cth)
Our Report	This Independent Expert’s Report prepared by BDO
RG 74	Acquisitions approved by Members (December 2011)
RG 111	Content of expert reports (March 2011)
RG 112	Independence of experts (March 2011)
Section 611	Section 611 of the Corporations Act

==> picture [77 x 30] intentionally omitted <==

Reference Definition	Reference Definition

Shareholders	Shareholders of Titanium Sands Limited not associated with Srinel Holdings Pty Ltd

Srinel	Srinel Holdings Limited

Sum-of-Parts	A combination of different methodologies used together to determine an overall value where separate assets and liabilities are valued using different methodologies

TiO2 Titanium Dioxide

The Transaction The proposal to acquire 100% of the issued capital in Srinel Holdings Pty Ltd

Trident Trident Capital Pty Ltd

USGS United States Geological Survey

Valmin Code Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets (2015 Edition)

Valuation Engagement An Engagement or Assignment to perform a Valuation and provide a Valuation Report where the Valuer is free to employ the Valuation Approaches, Valuation Methods, and Valuation Procedures that a reasonable and informed third party would perform taking into consideration all the specific facts and circumstances of the Engagement or Assignment available to the Valuer at that time.

VWAP Volume Weighted Average Price

WACC Weighted Average Cost of Capital

All rights reserved. No part of this publication may be reproduced, published, distributed, displayed, copied or stored for public or private use in any information retrieval system, or transmitted in any form by any mechanical, photographic or electronic process, including electronically or digitally on the Internet or World Wide Web, or over any network, or local area network, without written permission of the author. No part of this publication may be modified, changed or exploited in any way used for derivative work or offered for sale without the express written permission of the author.

For permission requests, write to BDO Corporate Finance (WA) Pty Ltd, at the address below:

The Directors

BDO Corporate Finance (WA) Pty Ltd

38 Station Street SUBIACO, WA 6008 Australia

==> picture [77 x 30] intentionally omitted <==

A endix 2 – Valuation Methodolo ies pp g

Methodologies commonly used for valuing assets and businesses are as follows:

1 Net asset value (‘NAV’) Asset based methods estimate the market value of an entity’s securities based on the realisable value of its identifiable net assets. Asset based methods include:

Orderly realisation of assets method
Liquidation of assets method
Net assets on a going concern method

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to entity holders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the entity is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the entity may not be contemplated, these methods in their strictest form may not be appropriate. The net assets on a going concern method estimates the market values of the net assets of an entity but does not take into account any realisation costs.

Net assets on a going concern basis are usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. All assets and liabilities of the entity are valued at market value under this alternative and this combined market value forms the basis for the entity’s valuation.

Often the FME and DCF methodologies are used in valuing assets forming part of the overall Net assets on a going concern basis. This is particularly so for exploration and mining companies where investments are in finite life producing assets or prospective exploration areas.

These asset based methods ignore the possibility that the entity’s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as management, intellectual property and goodwill. Asset based methods are appropriate when an entity is not making an adequate return on its assets, a significant proportion of the entity’s assets are liquid or for asset holding companies.

2 Quoted Market Price Basis (‘QMP’) A valuation approach that can be used in conjunction with (or as a replacement for) other valuation methods is the quoted market price of listed securities. Where there is a ready market for securities such as the ASX, through which shares are traded, recent prices at which shares are bought and sold can be taken as the market value per share. Such market value includes all factors and influences that impact upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume trading, creating a liquid and active market in that security.

3 Capitalisation of future maintainable earnings (‘FME’) This method places a value on the business by estimating the likely FME, capitalised at an appropriate rate which reflects business outlook, business risk, investor expectations, future growth prospects and other entity specific factors. This approach relies on the availability and analysis of comparable market data.

==> picture [77 x 30] intentionally omitted <==

The FME approach is the most commonly applied valuation technique and is particularly applicable to profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure requirements and non-finite lives.

The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings before interest and tax (‘ EBIT ’) or earnings before interest, tax, depreciation and amortisation (‘ EBITDA ’). The capitalisation rate or ‘earnings multiple’ is adjusted to reflect which base is being used for FME.

4 Discounted future cash flows (‘DCF’) The DCF methodology is based on the generally accepted theory that the value of an asset or business depends on its future net cash flows, discounted to their present value at an appropriate discount rate (often called the weighted average cost of capital). This discount rate represents an opportunity cost of capital reflecting the expected rate of return which investors can obtain from investments having equivalent risks.

Considerable judgement is required to estimate the future cash flows which must be able to be reliably estimated for a sufficiently long period to make this valuation methodology appropriate.

A terminal value for the asset or business is calculated at the end of the future cash flow period and this is also discounted to its present value using the appropriate discount rate.

DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are in a start-up phase, or experience irregular cash flows.

5 Market Based Assessment

The market based approach seeks to arrive at a value for a business by reference to comparable transactions involving the sale of similar businesses. This is based on the premise that companies with similar characteristics, such as operating in similar industries, command similar values. In performing this analysis it is important to acknowledge the differences between the comparable companies being analysed and the company that is being valued and then to reflect these differences in the valuation.

==> picture [77 x 30] intentionally omitted <==

Appendix 3 – Independent Valuation Re ort p

==> picture [112 x 111] intentionally omitted <==

TECHNICAL VALUATION REPORT

SRINEL HOLDINGS LIMITED’S

MANNAR MINERAL SANDS PROJECT

SRI LANKA

Prepared for

BDO Corporate Finance (WA) Pty Ltd

Report Number WA17/08

AUTHOR: J.J.G. Doepel BSc (Hons), GradDipForSci, DipTeach, MAusIMM, MAIG Principal Geologist Continental Resource Management Pty Ltd

Signature:

==> picture [101 x 38] intentionally omitted <==

DATE: 17 November 2017

TABLE OF CONTENTS
EXECUTIVE SUMMARY	5
INTRODUCTION	6
Compliance with the VALMIN and JORC Codes	6
Location	7
Sources of Data	8
Site Inspection	8
Previous Valuation	8
Valuation Approach and Methods	8
MINERAL ASSET	9
Description	9
Tenure and Status	9
Project History	11
Merit	11
GEOLOGY	12
Sri Lankan Geology	12
Project Geology	15
EXPLORATION 2011 - MARCH 2014	17
Supreme 2011	17
GSMB 2011	17
GeoActiv March 2014	19
EXPLORATION July 2014	21
GeoActiv July-August 2014	21
GSMB and GeoActiv drilling results comparison	25
RESOURCES	26
2015 Resource Estimate	26
EXPLORATION 2016-2017	29
COMMENTS ON EXPLORATION & RESOURCES	30
Exploration Coverage	30
Drilling, Sampling, and Testing Methodologies	30
Drilling Coverage	30
Resource Estimation	31
Resource Classification	31
VALUATION	32

Continental Resource Management Pty Ltd

Comparable Transactions 32
Adjustment for Classification 37
Discussion of Comparable Transactions 38
Exploration Expenditure 40
Reasonableness Check 41
Discussion 42
Statement of Valuation 42
REFERENCES 43
GLOSSARY OF TECHNICAL TERMS AND ABBREVIATIONS 44
DECLARATION 51
Tables
Table 1 Mineral Asset Valuations .................................................................................................... 5
Table 2 Project Tenure .................................................................................................................... 9
Table 3 Results of Magnetic Separation of HM Concentrates ..........................................................22
Table 4 Summary of Comparable Transactions ...............................................................................38
Table 5 PEM Values ........................................................................................................................40
Table 6 Project Resources - Yardstick Calculations ..........................................................................41
Table 7 Mineral Asset Valuations ...................................................................................................42
Table 8 Reasonableness Check Values ............................................................................................42

Figures Figure 1 Sri Lanka – showing Project Location ................................................................................. 7 Figure 2 Tenement boundaries over Google Earth Image ................................................................10 Figure 3 Geological Map of Sri Lanka ..............................................................................................13 Figure 4 Sri Lankan Heavy Mineral Deposits and Occurences ..........................................................14 Figure 5 Geological Map of Mannar Island (after GSMB, 2010b) .....................................................15 Figure 6 Diagrammatic geological section along Mannar Island (after GSMB, 2010b) .....................16 Figure 7 2011 Auger-hole HM results .............................................................................................18 Figure 8 HM mineralisation on beach within EL 180 (from Badenhorst, 2014) ................................19 Figure 9 HM concentrate from sample from southern area of EL 180 (from Badenhorst, 2014) ......20 Figure 10 Pit into HM mineralisation dug in berm area within EL 182 (from Badenhorst, 2014) ......20 Figure 11 Locations of 2014 drill-holes (from Siebrits and Badenhorst, 2015) .................................22 Figure 12 Stereomicroscopic image of ilmenite fraction .................................................................23

Continental Resource Management Pty Ltd

Figure 13 Stereomicroscopic image of magnetic-others fraction ....................................................24 Figure 14 Stereomicroscopic image of non-magnetic fraction.........................................................24 Figure 15 Plan of OBM – coloured by THM% ..................................................................................28 Figure 16 2016 Auger-hole results (after TSL, 2017)........................................................................29 Figure 17 Plot of Comparable Transactions (Price/t v Grade) ..........................................................39

Continental Resource Management Pty Ltd

EXECUTIVE SUMMARY

Srinel’s Mannar Island Project Mineral Asset comprises two granted Exploration Licences (“ELs”) and three EL applications, situated on and near Mannar Island, NW Sri Lanka.

The tenements have been explored for heavy mineral sands by four auger-drill programmes between 2011 and 2017. Inferred Resources of 10.0Mt @ 11.7% Total Heavy Minerals have been estimated within the two granted tenements. The estimation was carried out and reported in 2015, in accordance with the 2012 JORC Code, by the independent geological consultant GeoActiv.

CRM’s valuation of the two granted tenements within Srinel’s Mineral Asset is based upon:

An analysis of comparable transactions: with consideration given to the mineral assemblages, valuable heavy mineral grades, deposit sizes, and classification of Mineral Resources and Ore Reserves; and
The exploration expenditure to date for the tenements, adjusted for the positive or negative results of the exploration.

CRM’s assigned values for the Mineral Asset are set out in Table 1.

Table 1 Mineral Asset Valuations

	Table 1 Mineral	Asset Valuations
Valuation Method	Low Value($M)	Preferred Value($M)	High Value($M)
Comparative Transactions	1.6	3.1	6.3
Exploration Expenditure	2.0	2.4	2.4

CRM considers the value of the granted tenements to be within the range of $1.8M to $4.35M, which figures are the average of the low and high values obtained from the two valuation methods. CRM’s preferred value is $3.1M, the preferred value obtained from the analysis of Comparative Transactions, as CRM believes the high value obtained from range obtained by the Exploration Expenditure method did not take into account the mineralisation that has been shown to be present inland of the resource areas within the granted tenements, as the majority of the exploration related only to the intensely drilled near-shore resource areas and not to the larger inland areas.

CRM considers the value of the Mineral Asset to be within the range of $1.8 million to $4.35 million, with a preferred value of $3.1 million.

CRM further considers that both the range of values and the preferred value are fair and reasonable evaluations of the Mineral Asset.

Continental Resource Management Pty Ltd

INTRODUCTION

Titanium Sands Limited (“TSL” or “Company”) requested that Continental Resource Management Pty Ltd (“CRM”) provide an Independent Valuation Report (“Valuation Report”) on the Sri Lankan tenements (“Tenements”) to be acquired by the Company from Srinel Holdings Limited (“Srinel”). The Valuation Report is to be included in an Independent Expert’s Report (“IER”), being prepared by BDO Corporate Finance (WA) Pty Ltd (“BDO”). The IER is to be included in the Company’s Notice of Meeting seeking shareholder approval for the acquisition of the Tenements. The IER is to assess whether the acquisition of shares by the seller of the Tenements is fair and reasonable to the Company’s shareholders who are not associated with the seller. The IER is also to contain an assessment of the advantages and disadvantages of the proposed acquisition under the Agreement. This assessment is designed to assist the Company’s shareholders in reaching their voting decision.

The Srinel Tenements comprise Srinel’s Mannar Island Project (“The Project”). They are situated on and near Mannar Island in NW Sri Lanka and contain significant Heavy Mineral (“HM”) mineralisation. Inferred Resources of 10.0Mt @ 11.7% Total Heavy Minerals have been estimated within the two granted tenements.

All monetary figures stated in this Valuation Report are expressed in Australian dollars (AUD) unless indicated otherwise. Similarly, all coordinates included in this report are stated in the Universal Transverse Mercator (UTM) Zone 44 N - World Geodetic System (WGS) 84 coordinate system, unless indicated otherwise.

The Valuation Date is as at 2 November 2017 and this report is issued on 17 November 2017.

Compliance with the VALMIN and JORC Codes

The Report has been prepared in accordance with the VALMIN Code, which is binding upon Members of the Australian Institute of Geoscientists (“AIG”) and the Australasian Institute of Mining and Metallurgy (“AusIMM”), the JORC Code, and the rules and guidelines issued by such bodies as the Australian Securities and Investments Commission (“ASIC”) and ASX that pertain to IERs.

The author has taken due note of the rules and guidelines issued by such bodies as ASIC and ASX, including ASIC Regulatory Guide 111 – Content of Expert Reports, and ASIC Regulatory Guide 112 – Independence of Experts.

The valuation and the preparation of the Valuation Report has been primarily carried out by John Doepel, Director and Principal Geologist of CRM, a practitioner with the requisite qualifications, standing, and experience, who is considered to be a Specialist under the requirements of Section 2.1 of the VALMIN Code (2015). He is also considered to be a Competent Person under the terminology of the JORC Code (2012).

Continental Resource Management Pty Ltd

Location

The project location is shown on Figure 1. Mannar Island is approximately 225km north of Sri Lanka’s capital, Colombo. Mannar Island is joined to the mainland by both highway and railway, through Anuradapura, the capital city of the North Central Province.

Sri Lanka country risk is discussed elsewhere in the IER, but it should be noted that the Sri Lankan civil War concluded in 2009, since when the government has enacted a programme of economic development.

==> picture [423 x 489] intentionally omitted <==

Figure 1 Sri Lanka – showing Project Location

Continental Resource Management Pty Ltd

Sources of Data

TSL provided CRM with details of the proposed acquisition of Srinel by TSL, tenement details including licence documents for the granted tenements, legal reports on the tenure ownership, relevant technical reports, maps, GIS data, drilling database, original assay files from the 2014 and 2016 drill programmes, a digital file of the ore block model (“OBM”), and expenditure details.

Site Inspection

CRM did not visit the Project, as is CRM’s experience of heavy mineral deposits that little additional information was to be gained from a site inspection that could not be obtained from available satellite imagery and the information that had been supplied by TSL. The Independent Geological Report by Badenhorst (2014), of GeoActiv consultants, describes and provides photos of the near surface heavy mineral mineralisation that is visible within the Mannar Island tenement areas. Further, clear details of the topography, land use, and infrastructure are visible on Google Earth images.

Previous Valuation

A valuation of the Mineral Assets was carried out in July 2017. No details of the valuation are provided here, as it is considered not to have been prepared in accordance with the VALMIN Code, 2015 Edition.

Valuation Approach and Methods

For this Mineral Asset Valuation, it is CRM’s opinion that:

The Valuation should only be based on Mineral Resources within the granted tenements;
The Mineral Resources should be valued on the basis of their Valuable Heavy Minerals (“VHM”) content, rather than on the basis of their Total Heavy Minerals (“THM”) content; and
The Mineral Resources should be valued on the basis of their mineral assemblage. .

The valuation is based upon:

An analysis of comparable transactions; with consideration given to the mineral assemblages, valuable heavy mineral grades, deposit sizes, and classification of Mineral Resources and Ore Reserves; and
The exploration expenditure to date for the tenements, adjusted for the positive or negative results of the exploration.

A Yardstick Method check was carried out to confirm that the valuations made by the other methods were reasonable. The method involved the use of the estimated HM Resources, current mineral prices, and an accepted discount for resource category.

Continental Resource Management Pty Ltd

MINERAL ASSET

Description

Srinel’s Mannar Island Project Mineral Asset comprises two granted Exploration Licences (“ELs”) and three EL applications, situated on and near Mannar Island, NW Sri Lanka.

Tenure and Status

Srinel’s Mannar Mineral Sands Project comprises two granted ELs and three EL applications. Details of these tenements are shown in Table 2. The two granted tenements are held by Applex Ceylon (Pvt) Ltd (“Applex”). The applications are by Kilsythe Explration (Pvt) Ltd (“Kilsythe”), and Hammersmith Ceylon (Pvt) Ltd (“Hammersmith”). All three companies are wholly owned subsidiaries of Srinel.

Table 2 Project Tenure

Tenement	Holder or Applicant	Application Date	Validity From	Validity To	Area (km2)
EL 180	Applex		28/06/2016	27/06/2018	45
EL 182	Applex		28/06/2016	27/06/2018	26
COM/EL/2015/1101	Kilsythe	18/09/2015	Pending		41
EL 1812	Hammersmith	12/06/2017	Pending		51
EL 2033	Hammersmith	12/06/2017	Pending		4

Notes:[1] COM/EL/2015/110 has been renumbered as EL/2017/1070

2 EL 181 has been renumbered as COM/EL/2017/197
3 EL 203 has been renumbered as COM/EL/2017/196

CRM has received a copy of a Legal Report on the Licences written by Sharm Fernando Associates, Legal and Investment Consultants, Colombo, Sri Lanka documenting the legal status of the tenements. The report is dated 29 August 2017. This valuation has been prepared and issued on the assumption that this information is correct and that the tenements are lawfully allowable.

An Exploration license grants the license-holder the exclusive right to explore for all mineral categories authorized by the license. The two granted licences are for all minerals saving and excepting building materials, uranium, thorium, beryllium, lithium and coral. The applications are for Mineral Sand / Beach Sand. Exploration licences are for two-year terms, which may be renewed four times for further two-year periods. Coastal Conservation approval and Urban Development authority have been obtained for exploration within the granted tenements.

Continental Resource Management Pty Ltd

Registration Fees

The Issuance fees for the initial two years of an EL are 1000 Sri Lankan Rupees (“LKR”)/ha (GSMB, 2010a). Thus, the issuance fees for the two granted licences totalled 7.1M LKR (about $60,000). Should the applications be granted, their issuance fees would be of the order of $83,000.

The renewal fees for the second two-year term of an EL are 1000 LKR/km[2] /year. Thus the annual fees for the granted Els will total about $600.

Exploration Commitments

During the initial two years of an EL the annual minimum value of acceptable documented technical work is 20,000 LKR/km[2] /year. This amount doubles for each subsequent two-year period (GSMB, 2010a). Current granted tenement expenditure is thus 1.42M LKR ($12,000).

Royalties

The GSMB classifies mineral sands as Industrial minerals, the royalty rates for which are 4% if not exported and 5% if exported (GSMB, 2010a).

Tenement Locations

The tenement locations are shown on Figure 2. Not that the tenement shown as ELA KIL is the Kilsythe application.

==> picture [452 x 331] intentionally omitted <==

Figure 2 Tenement boundaries over Google Earth Image

Continental Resource Management Pty Ltd

Project History

Badenhorts (2014) stated, “In July 2011, Technical Consultants of Supreme Solutions (Pvt) Ltd (Supreme) reportedly completed a preliminary field visit to EL 180, EL 181 and EL 182 and collected an unspecified number of mineral sand samples from tidal, beach and berm zones (Supreme, 2011a; 2011b; 2011c). These samples were subject to mineralogical analysis and returned 5 to 25 % heavy minerals. However, the sample details, collection and analysis methodology and precise results are unknown.

In August 2011, Supreme submitted Exploration Licence applications for the areas of interest to the Sri Lanka Geological Survey and Mines Bureau (GSMB). In September 2011, Supreme was granted the exploration rights to all 3 licences.

Between October and November 2011, a fieldwork exploration program was completed in EL 180 and EL 182 by personnel of the GSMB (GSMB, 2012a)”

In 2014 Srinel commissioned GeoActiv (Pty) Ltd (“GeoActiv”) to conduct an exploration and resource modelling program on ELs 180, 182, and 183, Srinel being the legal and beneficial owner of all of the fully paid ordinary shares in the capital of Singha Lanka Investments (Private) Limited, which in turn is the legal and beneficial owner of all of the fully paid ordinary shares in the capital of Supreme Solutions Pvt Ltd (Supreme), the holder of the licences (Siebrits and Badenhorts, 2015). The new exploration program of drilling and sampling took place during July and August 2014 and GeoActiv reported Inferred Mineral Resources for the three tenements in April 2015 (Siebrits and Badenhorts, 2015).

At some time prior to 9 March 2015 ELs 180 and 182 appear to have lapsed, as they were reapplied for on that date and were later granted; and at some time prior to 12 June 2017 ELs 181 and 203 appear to have lapsed, as they were reapplied for on that date (see Table 2).

During 2016 and 2017 two further programmes of hand-auger sampling were carried out by GeoActiv for Srinel. The majority of the samples were taken from the COM/EL/2015/110 application, with a minority from within ELs 180 and 182.

The exploration programmes and the resource modelling are described later in this valuation report.

Merit

It is the Competent Person’s view that the tenements (both granted and in application) are highly prospective for economic heavy mineral mineralisation. Exploration between 2011 and 2015 resulted in the estimation of Inferred Resources within ELs 180 and 182. The mineral assemblage is high value, the resources having an estimated ilmenite equivalent grade of 13.7%. The resources are restricted to the few metres above the water table and to the vicinity of the coastline. As there is a significant probability that the heavy minerals extend below the water table and, as drilling has shown that heavy mineral mineralisation extends inland from the island’s north coast for at least 2.5km, it is likely that the resource tonnage will be able to be significantly upgraded by deeper and more extensive drilling within the granted tenements. Should the tenement applications be granted, the recently announced results from the 2016 drilling indicate that significant mineralisation is likely to be present within COM/EL/2015/110.

Continental Resource Management Pty Ltd

GEOLOGY

Sri Lankan Geology

Most of Sri Lanka is made up of Precambrian metamorphic and granitic rocks. Granulite facies rocks of the Highland Complex (gneisses, sillimanite-graphite gneisses, quartzite, marbles, and some charnokites) extend across the centre of the island from southwest to northeast; and mphibolite facies gneisses, granites, and granitic gneisses of the Vinjayan and Wanni Complexes occur in the eastern and southeastern lowlands and in the northwest respectively (Figure 3).

The coastal regions of the northern portion of the island contain more recent sediments: lithified Miocene limestones and sandstones and younger largely unconsolidated Quaternary units. The limestone units are reportedly irregular, underlain by sandstone units and lie unconformably on the Precambrian basement. The Quaternary units consist of clastic sediments in the form of largely unconsolidated beach sands, dune sands, and lagoonal and estuarine sediments.

Heavy minerals are widely distributed in the basement complexes typically as fine disseminations, particularly within gneisses, granulites, pegmatites, dolomites, and quartz veins. These heavy minerals include the valuable heavy minerals ilmenite, rutile, zircon, monazite, and garnet. Erosion of the basement rocks, down-river transport to the coast, and longshore movement by currents and waves has led to the accumulation of heavy mineral deposits in the coastal sands (Figure 4).

Continental Resource Management Pty Ltd

==> picture [421 x 652] intentionally omitted <==

Figure 3 Geological Map of Sri Lanka

Continental Resource Management Pty Ltd

==> picture [448 x 520] intentionally omitted <==

Figure 4 Sri Lankan Heavy Mineral Deposits and Occurences

The Pullmoddai Deposit has been mined by Lanka Mineral Sands Limited (“LMSL”) since 1959 (Herath, 2008);Iluka Resources Limited (“Illuka”) has completed a scoping study on its Puttalam Deposits, which contain 689Mt at an average grade of 8.2% HM (Iluka, 2013); and Capital Metals Limited is developing its Oluvil Deposit, which contains 17.2Mt @ 17.6% THM (Capital Metals, 2017).

Continental Resource Management Pty Ltd

Project Geology

The project tenements are situated on Mannar Island and adjacent mainland coastline to the south and northeast. A portion of the 1.100,000 Geological Map of the area is shown as Figure 5.

==> picture [452 x 557] intentionally omitted <==

Figure 5 Geological Map of Mannar Island (after GSMB, 2010b)

Continental Resource Management Pty Ltd

The geological units within the project area are all Quaternary in age. They comprise active beach and sea-floor sands, younger white dune sands, finer-grained lagoonal and estuarine deposits, and older red or brown sands (both beach and dunal). Figure 6 displays a diagrammatic cross-section through Mannar Island, showing the relationship between these units. Heavy mineral mineralisation is present within both the younger and older beach sand units.

==> picture [452 x 129] intentionally omitted <==

Figure 6 Diagrammatic geological section along Mannar Island (after GSMB, 2010b)

Continental Resource Management Pty Ltd

EXPLORATION 2011 - MARCH 2014

This section is sourced, and largely copied from, a 2014 report by GeoActiv (Badenhorst, 2014), which company was appointed to complete an Independent Geological Report (IGR) describing 13 exploration licences in Sri Lanka that were to be acquired from Supreme Solutions (Pvt) Ltd (“Supreme”). Four of these licences, EL 180, EL 181, EL 182, and EL 203 are now held, or applied for, by Srinel.

Supreme 2011

In July 2011, Technical Consultants of Supreme Solutions (Pvt) Ltd (“Supreme”) reportedly completed a preliminary field visit to EL 180, EL 181 and EL 182 and collected an unspecified number of mineral sand samples from tidal, beach and berm zones. These samples were subject to mineralogical analysis and returned 5% to 25% heavy minerals.

GSMB 2011

Between October and November 2011, a fieldwork exploration programme was carried out within EL 180 and EL 182 by the Sri Lankan Geological Survey & Mines Bureau (“GSMB”). Observational traverses were followed by auger-hole sampling across the tidal, beach and berm zones throughout much of the licences at a spacing of 10m to 60m on lines 200m apart perpendicular to the coastline. Of note is that the auger-hole sampling program only encompassed a narrow section of the foreshore sediments, with very few holes located in the backshore sediments. In the tidal zone, each hole was typically drilled to a depth of 0.3m with a single sample being collected from each hole. In the beach zone, each hole was typically drilled to a depth of 1.0m with two samples being collected from each hole (0m to 0.5m and 0.5m to 1.0m). In the berm zone, each hole was typically drilled to a depth of 2.0m with between one and three samples were collected from each hole (0m to 0.5m, 0.5m to 1.0m and 1.0m to 2.0m m).

The samples were provided to Supreme and subsequently submitted to the VV Minerals (Pvt) Ltd laboratory in Tamil Nadu, India for mineralogical analysis. Heavy mineral separation and analysis was conducted on the -2mm +63µ fraction, but the proportions of oversize and clay fractions were not recorded. No QAQC data is known.

The HM contents of the samples are displayed in Figure 7. It is evident that the grade of the sampled zone within EL 182 increases to the west, whereas within EL 180 it increases to the southeast.

Significantly, the GSMB did drill two outlying auger-holes in EL 180 that were located about 750m inland (Figure 7). Hole PP/DU99 was drilled to a depth of 2m and averaged 6.9% HM. Hole PP/BM103 was also drilled to 2m and averaged 12.4% HM. The grade within both holes was greater than the grade within nearby holes closer to the coast.

Continental Resource Management Pty Ltd

==> picture [447 x 634] intentionally omitted <==

Figure 7 2011 Auger-hole HM results

Continental Resource Management Pty Ltd

JORC Disclosure

An initial description of the exploration programme were reported to the ASX on 9 December 2014 by Windimurra Vanadium Limited (“WVL”). (TSL was named WVL prior to a name change on 6 December 2016).

Environmental Report

In February 2012, the GSMB produced an Initial Environmental Examination (IEE) report relating to the proposed mining of heavy mineral sands in EL 180 and EL 182 for Supreme. The IEE report includes descriptions of the project, the existing environment, the anticipated environmental impacts, proposed mitigatory measures, a monitoring programme, and conclusions and recommendations (GSMB, 2012b).

GeoActiv March 2014

GeoActiv visited EL 180, EL 181, and EL 182 during March 2014 and confirmed the presence of heavy minerals within the areas drilled by GSMB (Figures 8, 9, and 10).

==> picture [458 x 311] intentionally omitted <==

Figure 8 HM mineralisation on beach within EL 180 (from Badenhorst, 2014)

Continental Resource Management Pty Ltd

==> picture [453 x 314] intentionally omitted <==

Figure 9 HM concentrate from sample from southern area of EL 180 (from Badenhorst, 2014)

==> picture [446 x 305] intentionally omitted <==

Figure 10 Pit into HM mineralisation dug in berm area within EL 182 (from Badenhorst, 2014)

Continental Resource Management Pty Ltd

EXPLORATION JULY 2014

GeoActiv July-August 2014

During July and August 2014 GeoActiv carried out exploration on behalf of Srinel within EL180, EL 182, and EL 203 (Siebrits and Badenhorst, 2015). The programme was designed to:

Drill infill holes where there were gaps in the GSMB data;
Twin a reasonable percentage of the GSMB drillholes;
Do some minor checking of mineralisation inland of the GSMB drilling;
Drill some of the areas and holes deeper than managed by GSMB; and
Conduct some preliminary handheld auger drilling within EL 203.

Analytical work was to consist of TBE heavy fraction separation, followed by magnetic separation work to generate the different magnetic and non-magnetic fractions, followed by quantitative XRF and optical microscope work to determine the HM assemblage. Defendable QAQC procedures were to be carried out.

GeoActiv was also contracted to commission a satellite based (GeoEye) Digital Terrain Model (“DTM”) and to carry out a “JORC compliant” resource estimation.

The exploration programme and the resource estimation was reported by Siebrits and Badenhorst (2015). They stated, “The exploration program met all initial goals, ultimately proving the presence of significant amounts of heavy mineral mineralisation within the licenses.”

A hand-held auger was used for the drilling, with a total of 103 new holes and 31 twinned holes drilled within the three licenses. The programme used a similar geological logging and sampling process to that carried out by the GSMB. The GeoActiv auger did manage to generally penetrate deeper than did the GSMB drilling (NS06 within EL182 was drilled to 3.7m), but below the water table sample recovery again presented difficulties.

Significantly, the deepest hole drilled, NS06, averaged 9.6% HM from 0m to 2m, 4.2% HM from 2m to 3.5m, and 2.6% from 3.5m to its base at 3.7m. NS06 was drilled within EL 182, about 270m inland.

Figure 11 shows the locations of the holes drilled during the programme.

Continental Resource Management Pty Ltd

==> picture [429 x 316] intentionally omitted <==

Figure 11 Locations of 2014 drill-holes (from Siebrits and Badenhorst, 2015)

All the samples, including assumed low-grade samples, were reduced to ca. 1.5kg. Duplicates were prepared from every 20th sample. The samples were analysed by Scientific Services CC in Cape Town, South Africa.

410 of the 468 samples were assumed by geological examination to have HM contents of at least 1% HM. These were de-slimed and subjected to TBE separation on the -1mm +45µ fraction.

JORC Disclosure

Initial results from the exploration programme were reported to the ASX on 2 April 2015 by WVL. Mineralogy

Subsequently 152 composites were prepared from the heavy mineral fractions. The composites were subjected to magnetic separation into four separate fractions, the components of which are set out in Table 3.

Table 3 Results of Magnetic Separation of HM Concentrates

Fraction	Minerals	% of HMC
Highlymagnetic susceptible	Magnetite	0.06
Magnetic susceptible(Cl)	Ilmenite	50
Slightlymagnetic susceptible(MO)	Ilmenite,altered ilmenite,leucoxene, gangue	26
Non-magnetic(NM)	Rutile,zircon, gangue	24

Continental Resource Management Pty Ltd

The three main fractions from nine initial samples underwent mineralogical examination by Reneke (2015), who estimated the average composition of the nine heavy mineral concentrates to be 45.7% Ilmenite, 12.7% Leucoxene, 2.5% Rutile, and 2.4% Zircon.

Figures 12 to 14 display Stereomicroscopic images of these fractions.

==> picture [413 x 310] intentionally omitted <==

Figure 12 Stereomicroscopic image of ilmenite fraction

Continental Resource Management Pty Ltd

==> picture [397 x 301] intentionally omitted <==

Figure 13 Stereomicroscopic image of magnetic-others fraction

==> picture [390 x 293] intentionally omitted <==

Figure 14 Stereomicroscopic image of non-magnetic fraction

Continental Resource Management Pty Ltd

XRF analyses were conducted on the three main fractions of the 152 composite samples. The results from these analyses and the results of the average mineralogical compositions for each fraction were used to estimate the mineralogical compositions of each composite sample.

JORC Disclosure

A full description of the exploration programme and its results was reported to the ASX on 22 April 2015 by WVL.

GSMB and GeoActiv drilling results comparison

GeoActiv compared the THM% results from the 2011 GSMB and the GeoActiv 2014 drilling campaigns. The reported 0.5m composites from the earlier drilling had a mean THM content of 10.93%; and the 0.5m composites from the later drilling returned a mean content of 9.30%, i.e. 85% of the former. Consequently, GeoActiv decided to apply a factor of 85% to the THM% values from the earlier drilling and to use the derived values for its resource estimation.

Continental Resource Management Pty Ltd

RESOURCES

2015 Resource Estimate

Introduction

GeoActiv (Pty) Ltd (“GeoActiv”) prepared a Mineral Resource Estimation of the Mannar Mineral Sands Project for Srinel Holdings Limited (Siebrits and Badenhorst, 2015). The resource was announced to the ASX on 22 April 2015 by WVL.

Parts of GeoActiv’s Executive Summary are copied below.

“Executive Summary

Srinel Holdings Limited (Srinel) commissioned GeoActiv (Pty) Ltd to conduct an exploration and resource modelling program on three (3) of their exploration projects on Mannar Island, Sri Lanka.

Historical work took place on the licenses during October and November 2011 by the Sri Lanka Geological Survey and Mines Bureau (GSMB). The work entailed a hand-held auger drilling and sampling program that took place across the narrow strip of the tidal, beach and berm zone throughout much of the licences at a spacing of 10 m to 60 m on lines 200 m apart, perpendicular to the coastline. All the samples collected were submitted to the VV Minerals (Pvt) Ltd laboratory in Tamil Nadu, India, for mineralogical analysis. The laboratory conducted tetrabromoethane (TBE) heavy fraction separation to produce the heavy mineral concentrate (HMC) %, the heavy mineral (HM) assemblage was determined by a microscope grain count method. Questions about the lack of available Quality Assurance and Quality Control (QAQC) information and method of HM assemblage determination of this data necessitated the exploration program conducted by GeoActiv (Pty) Ltd.

The new exploration program of drilling and sampling took place during July and August 2014. The work approximated the techniques followed by the GSMB in terms of drilling, sampling, TBE heavy fraction separation and mineralogical studies, but XRF and XRD work was also conducted.

The exploration program confirmed the presence of significant amounts of heavy mineral concentrations within the licenses. The tables below indicate the Inferred total heavy mineral (THM) resource from the licenses. Resource figures without using any bottom cut-off, as well as when a 2 % bottom cut-off is being used, are shown. XRF and mineralogical studies were done to determine the mineral assemblage within the different TBE sourced heavy fractions, especially the valuable heavy minerals present in the HMC. The table therefore also indicates the ilmenite, leucoxene, rutile and zircon % within the THM.

The Inferred mineral resource estimations for Mannar without a cut-off .

EL Area	Tonnes	%THM	%Silt	%Oversize	%Ilm*	*%Leu **	%Rut	%Zir
180	6 667 500	7.43	3.35	10.66	3.46	0.84	0.08	0.15
182	6 914 688	10.19	2.40	6.77	4.77	1.15	0.19	0.25
203	304 063	11.71	2.69	1.15	5.42	1.50	0.25	0.25
Grand Total	13 886 250	8.90	2.86	8.51	4.16	1.01	0.14	0.20

Continental Resource Management Pty Ltd

The Inferred mineral resource estimations for Mannar with a 2% THM cut-off.

EL Area	Tonnes	%THM	%Silt	%Oversize	%Ilm*	*%Leu **	%Rut	%Zir
180	4 049 063	11.78	1.89	12.06	5.61	1.35	0.13	0.24
182	5 978 984	11.67	2.17	6.79	5.49	1.32	0.22	0.28
203	304 063	11.71	2.69	1.15	5.42	1.50	0.25	0.25
Grand Total	10 332 109	11.71	2.08	8.69	5.54	1.34	0.18	0.26

As with the historic work, the new exploration program was largely restricted to a narrow strip around the beach area, the drilling depth was also restricted due to the drilling technique and water table. Significant potential exists to increase the resource inland, but also to depth.”

Resource Estimation Procedures

Parts of GeoActiv’s resource estimation procedures are copied below.

“Grade interpolation was implemented with hard boundary conditions by EL area. The % THM historic data multiplied with 85%, compositing to 0.5 m and then combined with the 0.5 m composites of the recent data were used for the % THM estimation. The recent 0.5 m composite data was used for the estimation of silt and oversize. The 1 m composite data of the magnetic separation and XRF data were used for the estimation of the variables; CI_yield, MO_yield, NM_yield, CI_TiO2, MO_TiO2, NM_TiO2 and NM_ZrO2. Inverse distance to the power of 3 was used for in situ grade interpolation for all the variables.

Calculated attributes were created in the block model for the calculating of the minerals ilmenite, leucoxene, rutile and zircon…. “

Block Model Parameters

A single block model was created with parent block size of 100m x 100m x 2m and sub-block size of 25m x 25m x 0.5m. The resource blocks were constrained by the boundaries of EL 180 and EL 182, the coastline, and the land surface,

Specific Gravity (“SG”)

GeoActiv applied a SG of 1.75 to the mineralisation, based on “an average of known mineral sand deposits”.

Resource Classification

GeoActiv classified the resources as Inferred, “primarily based on the drill-hole density and data type”.

Ore Block Model

A plan of the resultant OBM is presented in Figure 15, coloured by grade. The grade distribution can be seen to be similar to that of the GSMB drilling (Figure 7).

JORC Disclosure

The estimated Mineral Resources were reported to the ASX on 22 April 2015 by WVL. A copy of the Resource Report was included in the announcement, along with a complete JORC Table 1, which described out the exploration and resource estimation.

Continental Resource Management Pty Ltd

==> picture [452 x 440] intentionally omitted <==

Figure 15 Plan of OBM – coloured by THM%

Continental Resource Management Pty Ltd

EXPLORATION 2016-2017

Srinel carried out a programme of hand auger drilling during 2016 and 2017. It has recently received and released analytical THM% results for 372 of these holes (TSL, 2017). The results are mainly from holes drilled within COM/EL/2015/110, which is a pending EL application and which is labelled on Figure 16 as ELA KIL. This first set of results is from holes that contained visual HM concentration. The results appear to confirm the logging (Figure 16). Holes were drilled to the water table. Their average depth was 1.3m and the maximum hole depth was 6m.

The drilled mineralisation appears to have a strike length of around 12km and to extend up to 2.5km inland. The average content of those holes returning >2% THM was 4.7% THM. The maximum THM content was 22.5%. Mineralisation was present from the surface.

The released results are from the 2016 drilling, which was carried out on an 800m by 50m pattern. TSL (2017) stated that, “The infill drilling carried out during 2017 will be analysed at a later date. Determination of the mineralogy of heavy mineral assemblages will also be undertaken, but visual logging indications are that it will be similar to the previously reported resources.”

==> picture [452 x 317] intentionally omitted <==

Figure 16 2016 Auger-hole results (after TSL, 2017)

JORC Disclosure

A description of the exploration and the results to date were reported to the ASX by TSL on 30 October 2017.

Continental Resource Management Pty Ltd

COMMENTS ON EXPLORATION & RESOURCES

Exploration Coverage

The exploration between 2011 and 2014 concentrated on the near-shore portions of EL 180 and 182 and was only between the surface and the water table. Within these areas however, coverage was detailed and adequate for the preparation of the resource estimate.

The 2016 and 2017 auger-drilling systematically extended the drilled area inland through the highgrade eastern portion of EL 182 and through the application COM/EL/2015/110. Again however, the drilling did not penetrate the water table.

Drilling, Sampling, and Testing Methodologies

The drilling and sampling methodologies, as described by Badenhorst (2014) and Siebrits and Badenhorst (2015), were reasonable to achieve good standard sampling above the water table, which was the base of drilling.

The 2014 laboratory separations as described by Siebrits and Badenhorst (2015), were carried out to industry standards and the results from them should adequately reflect the grade of the mineralisation.

The laboratory separations carried out for the 2011 programme, however, were apparently poorly documented. For this reason, GeoActiv carried out the 2014 drill programme, which included 31 holes that twinned 2011 drill-holes. The grade distributions from the two programmes were reasonably comparable, but the overall HM grade of the GeoActiv holes was 15% lower than that of the 2011 holes. The subsequent decision to apply a 15% downgrade to the 2011 grades enables confidence to be given to the grades of the estimated resources.

For the 2014 programme Quality Assurance Quality Control (“QAQC”) samples were inserted according to industry standards by GeoActiv and by the laboratory. The results showed reasonable repeatability (Siebrits and Badenhorst, 2015).

Drilling Coverage

Within the two granted tenements, the near-shore drill coverage of the 2011 and 2014 programmes, as shown on Figures 7 and 11, adequately sampled the HM mineralisation in the near-shore areas above the water table and was adequate to provide grade data for the estimation of the Inferred Resources in these areas. Further, the 2014 drilling adequately confirmed the 2011 drilling.

These programmes, however, did not test potential mineralisation below the water table. Nor did they test the full width of the granted tenements, which as was shown by the 2016 and 2017 drill programmes contain significant HM mineralisation. Once again, however, these later drill programmes did not test below the water table.

Continental Resource Management Pty Ltd

Resource Estimation

The resource estimation carried out by GeoActiv was well documented and was carried out to industry standards. The interpolation methodology was suitable for the deposits, the block size suitable for the sample spacing, and the sample compositing was also suitable.

CRM has reviewed the input and output grades, both globally and locally, and found them to be both comparable and possibly conservative.

For the global comparisons, CRM compared composited input assays for the high-grade areas in ELs 180 and 182. For EL 180 the input assays averaged 14.6% HM and the output OBM blocks averaged 12.6% HM; and for EL 182 the input assays averaged 12.1% HM and the output OBM blocks averaged 10.9% HM.

For the local comparisons, CRM loaded the drill-hole database and the OBM into the mining and exploration software program Micromine; and then viewed sections through the deposit, comparing the drill-hole HM grades with the interpolated block grades. CRM found that the variation in block model grades followed the variation in input assay grades.

CRM believes that the SG used (1.75t/m[3] ) is conservative. An industry standard is to use the formula SG = 1.686 + (0.0108 x HM%). If this formula had been used, the average SG of the resource would have been 1.81t/m[3 ] and the tonnage accordingly larger.

CRM is of the opinion that the grade of the estimated resources reasonably reflects the grade of the mineralisation within the resource boundaries.

Resource Classification

GeoActiv classified the resources as Inferred, in part because of lack of adequate documentation of the laboratory methods used for the 2011 programme; and also because of the lack of SG testwork. CRM agrees with this classification, as, although the tonnage, grade, and mineral content have been estimated with a degree of confidence, they have not been estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit, which would have enabled them to be classified as Indicated.

CRM is of the opinion that, with further drilling, SG testwork, mineral assemblage characterisations, and detailed analytical work on the titanium minerals, the deposits are likely to be shown to be economic. The work to date has shown that the both the THM and VHM contents are towards the high end of the range of comparable deposits, many of which have been classified as Indicated or Measured (see Table 4).

The VHM mineral assemblage is appropriate for standard industry separation processes, the estimated silt content (2.1%) is low compared to many other deposits, and the fact that the mineralisation extends to the surface throughout the deposit makes the potential for the economic viability of the deposit high. Given these Modifying Factors it is reasonable to expect that the VHMs could be recovered economically. CRM envisages no significant technical risks for the deposits.

Continental Resource Management Pty Ltd

VALUATION

For this Mineral Asset Valuation, it is CRM’s opinion that:

The Valuation should be based on only the granted tenements;
The Mineral Resources should be valued on the basis of their Valuable Heavy Minerals), rather than on the basis of their Total Heavy Minerals; and
The Mineral Resources should be valued on the basis of their mineral assemblage.

The valuation is based upon:

An analysis of comparable transactions: with consideration given to the mineral assemblages, valuable heavy mineral grades, deposit sizes, and classification of Mineral Resources and Ore Reserves; and
The exploration expenditure to date for the tenements, adjusted for the positive or negative results of the exploration.

Comparable Transactions

CRM has examined eleven transactions involving HM deposits. The transactions took place between 2010 and 2017.

To compare the different transactions, CRM converted the various mineral assemblages to ”Ilmenite Equivalent %” (“Il Eq %”), using the following factors:

	<54% TiO2Ilmenite	0.9
	Ilmenite	1
	Garnet	1.1
	Altered Ilmenite	1.75
	HiTi	3.2
	Leucoxene	4.35
	Rutile	4.5
	Zircon	5.8

For example, a deposit containing only zircon as a valuable HM grading 2% would be given an Il Eq grade of 11.6% (2 x 5.8); and a deposit grading 2% ilmenite and 2% zircon would be given an Il Eq grade of 13.6% [(2 x 1) + (2 x 5.8)]

The factors were based on the following USD prices, ascertained on or about 28 September 2017 (Industrial Minerals, 2017):

	<54% TiO2Ilmenite	$160
	Ilmenite	$160 - 185
	Garnet	$190
	Altered Ilmenite	$300
	HiTi	$550
	Leucoxene	$700 - 800
	Rutile	$710 - 850
	Zircon	$950 – 1050

Continental Resource Management Pty Ltd

The transactions are briefly described below and are summarised in Table 4. They are ordered in terms of decreasing grade, with the Mannar Island Deposit included.

Metal Sands’ Cooljarloo Joint Venture

In July 2011 Image Resources NL (“Image”) purchased Metal Sands Pty Ltd’s 30% interest in Image’s Cooljarloo Joint Venture for $100,000 cash and 3M Image shares (subject to a 1 year escrow) (ASX:IMA announcement 29 July 2011). At the time Image shares had been trading around 44c. Applying a 10% discount to this price for the escrow period, CRM assumes that the 3M shares had a value of $1.188M; and that the total consideration had a value of $1.288M.

The Joint Venture, in the Perth Basin, WA, contained the Atlas Deposit, which had, at a 2.0% cut-off, Indicated and Measured Resources of 0.878Mt of HM with an assemblage comprising 56% Ilmenite, 3% HiTi, 1.1% Leucoxene, 7.0% Rutile, and 10.6% Zircon, for an Il Eq grade of 13.7% and Il Eq tonnage of 1.37Mt. The resources were 5% Indicated and 95% Measured.

As the transaction was for a 30% interest in the deposit, the consideration of $1.288M was for 0.49Mt of Il Eq HM, which gives a value of $2.63/t.

Srinel’s Mannar Island Project

The two granted tenements within Srinel’s Mannar Island Project contain, at a 2.0% cut-off, Inferred Resources of 1.174Mt of HM with an assemblage comprising 56% Ilmenite, 3% HiTi, 1.1% Leucoxene, 7.0% Rutile, and 10.6% Zircon, for an Il Eq grade of 15.3% and Il Eq tonnage of 1.63Mt.

Image Resources’ Perth Basin Projects

In April 2015 Image announced the signing of a non-binding Memorandum of Understanding (“MOU”) with Murray Zircon Pty Ltd (“Murray Zircon”) whereby Murray Zircon would acquire 42% of Image’s consequently expanded shares. Image’s major assets were its Perth Basin Boonanarring and Atlas HM Deposits (ASX:IMA announcement 30 April 2014). A major point of the agreement was for Murray Zircon to provide plant and equipment valued at ca. $20M; and CRM assumes that the transaction had this value. The transaction was settled in June 2016.

At the time of the announcement the Boonanarring and Atlas Deposits had a mining inventory containing 2.135Mt of HM grading 50.1% Ilmenite, 4.2% Leucoxene, 5.1% Rutile, and 19.0% Zircon. 92% of the inventory was of Probable Reserves and the reminder was of Inferred Resources ((Image 2015 Annual Report). CRM has estimated that the inventory had an Il Eq grade of 16.0% and contained VHMs of equivalent value to 4.30Mt of Ilmenite.

In addition to the Boonanarring and Atlas Deposits, Image’s Gingin Nth, Gingin Sth, Cooljarloo Nth, and Red Gully Deposits had Total Resources containing 1.905Mt HM (Image 2015 Annual Report). CRM has estimated that these resources had an Il Eq grade of 9.6% and contained VHMs of equivalent value to 3.04Mt of Ilmenite. The contained tonnes of Il Eq minerals comprised 4% Measured Resources, 78% Indicated Resources, and 18% Inferred Resources.

Continental Resource Management Pty Ltd

For Image’s total mining inventory and resources, the contained tonnes of Il Eq minerals comprised 54% Probable Reserves, 2% Measured Resources, 32% Indicated Resources, and 12% Inferred Resources.

As the transaction was for a 42% interest in the Image, CRM has assumed the $20M to be for 42% of Image’s total mining inventory and resources, i.e. for 42% of 7.34Mt of Il Eq HM 3.08Mt). Thus, CRM values the transaction at $6.49/t Il Eq HM.

Iluka Resources’ Gingin Deposit

In March 2011 Image reached agreement to acquire four Mining Leases from Iluka Resources Limited (“Iluka”) in consideration for $190,000 cash and 1.2M Image shares (subject to a 1 year escrow) (ASX:IMA announcement 9 March 2011). At the time Image shares had been trading around 45c. Applying a 10% discount to this price for the escrow period, CRM assumes that the 1.2M shares had a value of $486,000; and that the total consideration had a value of $676,000.

The Mining Leases were in the Perth Basin, WA near Gingin. They contained four deposits that together had resources at a 2.5% HM cut-off, of 0.955Mt HM with an assemblage comprising 58.9% Ilmenite, 7.7% Leucoxene, 3.4% Rutile, and 11.3% Zircon, for an Il Eq grade of 11.6% and Il Eq tonnage of 1.65Mt. The resources were 26% Inferred, 44% Indicated, and 30% Measured.

As the transaction was for a 100% interest in the deposits, the consideration of $0.676M for 1.65Mt of Il Eq HM gives a value of $0.41/t.

Relentless Resources’s Murray Basin Deposits

In June 2017 Broken Hill Prospecting Ltd (“BHM”) announced the transfer of BHM’s 50% Participating interest in the Farm-In and Joint Venture Agreement between BHM and Relentless Resources Limited (“RRL”) (ASX:BPL announcement 28 June 2017). The agreement was for $2.35M. The agreement was settled in September 2017.

The agreement covered tenements containing the Copi North and Magic HM Deposits, which, at the time of the announcement, had Indicated and Inferred Resources containing 1.47Mt HM, the combined assemblage of which contained 52% Ilmenite, 12% Zircon, 9% Rutile, and 10% Leucoxene. CRM has estimated that the resources had an Il Eq grade of 10.7% and contained VHMs of equivalent value to 3.12Mt of Ilmenite, of which 53% was Inferred and 47% was Indicated.

As the transaction was for a 50% interest in the tenements, the $2.35M can be assumed to be for 1.56Mt of Il Eq HM, or $1.51/t.

Image Resources’ Cyclone Extended Project 2014

In November 2014 Diatreme Resources Limited (“Diatreme”) announced the execution of a conditional purchase agreement with Image whereby Diatreme would acquire Image’s remote WA Eucla Basin tenement that included the Cyclone Extended HM resource (ASX:DRX announcement 11 Nov. 2014). The agreement was for 0.435M cash plus an 1% royalty at an agreed value of $0.435M. CRM assumes that the transaction had a value of $0.87. The agreement was settled in March 2015.

Continental Resource Management Pty Ltd

At the time of the announcement the Cyclone Extended Deposit had reported Indicated Resources of 25.7Mt @ 3.2 % HM (using a 2.0% HM cut-off) for 0.819Mt of HM, the assemblage of which contained 20% Zircon, 12% Rutile plus Leucoxene, 39% HiTi, and 21% Altered Ilmenite. CRM has estimated that the resources had an Il Eq grade of 10.6% and contained VHMs of equivalent value to 2.71Mt of Ilmenite.

As the transaction was for a 100% interest in the deposit, the $0.87M can be assumed to be for 2.71Mt of Il Eq HM, or $0.32/t.

Austpac Resources’ WIM 150 Deposit

In August 2012, Austpac Resources N.L. (“Austpac”) agreed to sell its 100% interest in EL 4521 to Orient Zirconic Resources (Australia) Pty Ltd (“Orient Zircon”) for $7.5M, subject to the consent of Australian Zircon N.L. (“AZC”) as farminee. AZC had the right to earn 80% of the WIM 150 Deposit, which is within the tenement, by completing a Bankable Feasibility Study. AZC announced on 6 September 2013 that it had earnt the 80%. CRM assumes that Austpac and Orient Zircon were aware that this was likely to happen and that the $7.5M was for a likely 20% of the deposit.

In August 2012 the deposit had, at a cut-off of 2% HM, 750Mt of Reserves, containing 7.5Mt of Rutile & HiTi, 12.5Mt Ilmenite, and 5.1Mt Zircon, for an Il Eq grade of 9.4% and Il Eq tonnage of 70.2Mt.

As CRM assumes that the transaction was for a 20% interest in the project, the consideration of $7.5M for 14Mt of Il Eq HM gives a value of $0.54/t.

Diatreme Resources’ Cyclone Zircon Project 2013

In July 2013 Diatreme announced a Farm-in Commitment for its Cyclone Zircon Project, which is in the remote Eucla Basin of WA. The farm-in was for $2.0M to earn a 6% Equity in the project (ASX:DRX announcement 26 July 2013). The agreement was signed in January 2014 and payments were completed in September 2014. The farm-in was to Perpetual Mining Holding Limited.

At the time of the July 2013 announcement the Cyclone Deposit had Probable Reserves of 97Mt @ 2.5% HM for 2.41Mt of HM, the assemblage of which contained 32% Zircon, 3% Rutile, 7% Leucoxene, 21% HiTi, 10% Altered Ilmenite, and 23% Silica bearing Ti-oxides. CRM has estimated that the Reserves had an Il Eq grade of 8.2% and contained VHMs of equivalent value to 7.96Mt of Ilmenite.

As the transaction was for a 6% interest in the deposit, the $2M can be assumed to be for 0.478Mt of Il Eq HM, or $4.18/t.

Tiomin’s Kwale Project, Kenya

In February 2010 Base Iron Ltd (“Base”) announced that it had entered into a binding heads of agreement to acquire the Kwale Mineral Sands Project from Tiomin Resources Inc (ASK:BSE announcement 26 February 2010). The consideration was US$3M (ca. $3.3M AUD) and a 2% royalty. For the purpose of this valuation CRM assumes that the value of the royalty was equal to twice the value of the cash component, based on the Image Resources’ Cyclone Extended 1% Royalty being valued by Image and Diatreme to be equal to the cash component of their transaction. Thus, CRM values the transaction at $9.9M

Continental Resource Management Pty Ltd

The project is situated in Kenya, 50km from an existing deep-water port. Base stated that the project had been the subject of a Definitive Feasibility Study and that all material project approvals, permits, and licences required for development were in place. Proven and Probable Reserves (of which 53% were Proven) contained 9.22Mt Il Eq HM, at a grade of 6.5% Il Eq (Langridge et al , 2006, p. 45).

As the transaction was for a 100% interest in the project, the assumed consideration of $9.9M for 9.22Mt of Il Eq HM gives a value of $1.07/t.

Altura Mining’s Balline Garnet Project

In February 2014, Altura Mining Limited (“Altura”) advised that it had agreed to sell its Balline Garnet Project to Garnet Australia Pty Ltd for a cash consideration of $4.5M (ASX:AJM announcement 20 Feb. 2014).

The project is situated about 120km by road north of the port of Geraldton in WA. At the time, the project was at a pre-feasibility stage, and had Probable Ore reserves of 3.7Mt of HM, the assemblage comprising 77% Garnet, 0.6% Rutile, 1.6% Ilmenite, and 13.8% Altered Ilmenite, for an Il Eq of 4.2Mt. The Il Eq grade of the reserves was 6.4%.

As the transaction was for a 100% interest in the project, the assumed consideration of $4.5M for 4.2Mt of Il Eq HM gives a value of $1.07/t

Governor Well’s Governor Broome Deposit – 80%

In Sept 2011 Astro Resources NL (“Astro”) acquired 80% equity in Governor Well Minerals Scott Coastal Plain Mineral Sands Project east of Augusta, WA (ASX:ARO announcement 20 September 2011). The consideration was $1M cash, 200M shares with a 1-year escrow period, and 1.5% net royalty. The shares had been trading at $0.004. Applying a 10% discount to this price for the escrow period, CRM assumes that the 200M shares had a value of $0.72M and that the cash plus shares portion of the consideration had a total value of $1.72M. For the purpose of this valuation CRM assumes that the value of the royalty was equal to 1.5 times the value of the cash component, based on the Image Resources’ Cyclone Extended 1% Royalty being valued by Image and Diatreme to be equal to the cash component of their transaction. Thus, CRM values the transaction at 2.5 x $1.72M or $4.3M.

The significant deposit within the Project was the Governor Broome Deposit, which had an Inferred Resource containing 1.94Mt HM with an assemblage comprising 63.5% Ilmenite, 4.1% Rutile, and 4.3% Zircon, for an Il Eq grade of 5.6% and Il Eq tonnage of 2.87Mt.

As the transaction was for an 80% interest in the deposit, the consideration of $4.3M was for 2.3Mt of Il Eq HM, which gives a value of $1.87/t.

Governor Well’s Governor Broome Deposit – 20%

In August 2013 Astro entered into an agreement to acquire the remaining 20% shareholding in Governor Well Minerals Scott Coastal Plain Mineral Sands Project east of Augusta, WA (ASX:ARO announcement 15 August 2013). The consideration was $0.75M cash and 1.5% net royalty. For the purpose of this valuation CRM assumes that the value of the royalty was equal to 1.5 times the value

Continental Resource Management Pty Ltd

of the cash component, based on the Image Resources’ Cyclone Extended 1% Royalty being valued by Image and Diatreme to be equal to the cash component of their transaction. Thus, CRM values the transaction at 2.5 x $0.75M or $1.875M.

The significant deposit within the Project was the Governor Broome Deposit, which by August 2013 had Inferred Resources containing 6.68Mt HM with an assemblage comprising 52.6% Ilmenite, 6.2% Secondary Ilmenite, 3.5% Leucoxene, 1.7% HiTi, and 5.3% Zircon, for an Il Eq grade of 5.0% and Il Eq tonnage of 7.67Mt.

As the transaction was for a 20% interest in the deposit, the consideration of $1.875M was for 1.53Mt of Il Eq HM, which gives a value of $1.22/t.

Adjustment for Classification

The value of a deposit, in addition to its grade, depends upon the classification of its contained Mineral Resources or Ore Reserves. CRM has adjusted the Il Eq values per tonne of the transactions by multiplying them by the following factors, to reflect the notional value of each transaction if the deposit had only been explored to enable the estimation of Inferred Resources:

Inferred Resources Il Eq% x 1
Indicated Resources Il Eq% x 0.67  Measured Resources Il Eq% x 0.5  Probable Reserves Il Eq% x 0.4  Proven Reserves Il Eq% x 0.33

For example, a deposit containing Indicated Resources with an Il Eq value of $2/t, would have the value adjusted to a $/t Inferred Equivalent value of $1.34/t (2 x 0.67).

The adjusted values are set out in Table 4, in which the final column displays the adjusted $/t of Il Eq HM on an Inferred Resource basis.

Continental Resource Management Pty Ltd

Discussion of Comparable Transactions

Table 4 Summary of Comparable Transactions

Vendor	Project	Classification	Transaction $M	Il Eq %	Il Eq Mt1	$/t	$/t Inf. Eq
Metal Sands	Cooljarloo	95 % Measured 5% Ind.	1.29	15.3	0.49	2.63	1.33
*Srinel*	*Mannar*	*Inferred*		*13.7*	*1.37*
Image	Perth Basin	Reserves to Inferred	20	12.5	3.08	6.49	3.26
Iluka	Perth Basin	Indicated	0.676	11.6	1.65	0.41	0.27
BPL	Murray Basin	47% Indicated 53% Inferred	2.35	10.7	1.56	1.51	1.22
Image	Cyclone Ext.	Indicated	0.87	10.6	2.71	0.32	0.21
Austpac	WIM 150	Reserves	7.5	9.4	14	0.54	0.21
Diatreme	Cyclone	Probable Reserve	2	8.2	0.478	4.18	1.67
Tiomin	Kwale	53 % Proven Reserve 47% Probable Res.	9.9	6.5	9.22	1.07	0.43
Altura	Balline	Probable Reserve	4.5	6.4	4.22	1.07	0.43
Governor Well	Governor Broome	Inferred	1.87	5.6	2.29	1.11	1.11
Governor Well	Governor Broome	Inferred	1.875	5.0	1.53	1.22	1.22

Note:[1] : Il Eq Mt is tonnage of transaction

For three of the transactions (shaded grey in Table X), the calculated $/t values would, if applied to the Mannar Island Project, give unreasonably low values for the Project ($0.29M or $0.37M). They were therefore not included in further analysis.

For the remaining eight transactions there is, as would be expected, a general relationship between grade and price per tonne of Il Eq HM. This is shown in Figure 17, a log normal plot of price/t versus grade.

Continental Resource Management Pty Ltd

==> picture [452 x 269] intentionally omitted <==

Figure 17 Plot of Comparable Transactions (Price/t v Grade)

The grade of the Mannar Island Resources is shown in Figure 17, plotted within a trend channel that CRM has used to interpolate high and low range $/t values for the Project, based on the Il Eq. grade of the resources. The high value is $4.60/t, the low value is $1.15/t, and the preferred value, interpolated from the trend line, is $2.25/t. As the granted tenements contain resources totalling 1.37Mt Il Eq HM, CRM ascribes the Comparable Transaction derived value of the Mineral Asset to be $3.1M within a range of $1.6M to $6.3M.

Continental Resource Management Pty Ltd

Exploration Expenditure

The VALMIN Code indicates that a cost based method is appropriate for valuation of an exploration project. Under this method, the previous exploration expenditure is assessed as either improving or decreasing the potential of the project. A prospectivity enhancement multiplier (“PEM”) may be used to apply a factor that is related to the success of the exploration expenditure in terms of project to advancement. The PEM ranking criteria set out in Table 5 are commonly used.

Table 5 PEM Values

	Table 5 PEM Values
PEM Range	Criteria
0.2 – 0.5	Exploration has downgraded thepotential
0.5 – 1.0	Exploration has maintained thepotential
1.0 – 1.3	Exploration has slightlyincreased thepotential
1.3 – 1.5	Exploration has considerablyincreased thepotential
1.5 – 2.0	Limitedpreliminarydrillingintersected interestingmineralised intersections
2.0 – 2.5	Detailed drillinghas defined targets withpotential economic interest
2.5 – 3.0	An Inferred Mineral Resource has been estimated

As Inferred Mineral Resources have been estimated in both EL 180 and EL 182, it is appropriate to use a PEM of between 2.5 and 3. Further, as recent exploration has shown the presence of more extensive mineralisation than was modelled in the resource estimation, it appears reasonable to use the upper end of the range as the multiplier for the preferred value.

Reported Expenditure

TSL has provided CRM with tables of audited expenditure incurred to date, for in-ground exploration, geological evaluation, tenement costs, and administration. Significant items, the majority of which was related to granted tenements are:

Initial exploration, drilling, HM analysis, tenement costs, and associated costs to June 2014, the majority of which was related to the granted tenements - US$500,000.
Srinel exploration 2014 – 2015, the majority of which was for ELs 180 and 182 - US$41,661
Tenement Costs - US$30,308
Exploration by Srinel during 2016 and 2017 was mainly over the application COM/EL/2015/110, however some of the work was within the granted tenements. The expenditure was US$56,731. CRM assigns 10% of this to the granted tenements, i.e. US$5673.
Administration costs post June 2014 (20% of Items 2 to 4) – US$15,529. (In the absence of a detailed breakdown of the administrative costs supplied by TSL, it is not possible to assign a definite amount that might contribute to enhancing the value of the Mineral Asset. Consequently, CRM has used a notional 20% figure for administration, as 20% is the maximum amount allowed by the WA Department of Mines, Industry Regulation and Safety as a legitimate administration cost for tenement expenditure. TSL provided audited figures that showed greater administrative costs had been spent, however CRM has only used the lower figure of 20% of actual exploration costs for this valuation. CRM, however, acknowledges that, in many cases, administrative expenditure adds significant value to projects.)

The total of the expenditure listed above is US$608,700, which, at the 2 Nov 2017 exchange rate (1 AUD = 0.77USD), equates to $790,519.

Continental Resource Management Pty Ltd

TSL also reported 2016 and 2017 geological work expended in AUD, which totalled $72,460. Again, the majority of this was related to the tenement applications; and CRM has assigned 10% of this expenditure to the granted tenements. With 20% added for administration, the applicable 2016 and 2017 expenditure becomes $8695.

The total applicable expenditure for the granted tenements is thus $799,114. CRM is of the opinion that this amount is reasonable expenditure for the work that has been carried out.

Valuation

CRM is of the opinion that the total applicable expenditure for the granted tenements is $799,114 and believes that the valuation range should be obtained by using a PEM multiplier of 2.5 to 3. The resulting valuation range is thus $1.998M to $2.397M – or $2.0M to $2.4M. CRM’s preferred value is $2.4M. CRM has used the upper end of the range as it is apparent that deeper or more extensive drilling within the granted tenements would have enabled additional resources to be estimated within the Mineral Assets.

CRM ascribes the Exploration Expenditure derived value of the Mineral Asset to be $2.4M within a range of $2.0M to $2.4M.

Reasonableness Check

CRM considers that it is appropriate to use a Yardstick Method as a check on the valuations produced by the Comparable Transaction and Exploration Expenditure methods.

Yardstick valuation factors have been commonly applied to Mineral Resources and Ore Reserves, with 0.5% to 1% of the spot price being the usual factor applied to Inferred Resources.

As Srinel’s Mannar Island resources are classified as Inferred, an appropriate factor would thus be in the range of 0.5% to 1%.

The resources within the granted ELs 180 and 182 are 10.0Mt @ 5.54% Ilmenite, 1.34% Leucoxene, 0.18% Rutile, and 0.26% Zircon, which equate to 0.556Mt Ilmenite, 0.134Mt Leucoxene, 0.018Mt Rutile, and 0.026Mt Zircon. Current prices for these minerals (based on an USD : AUD rate of 0.77) are of the order of, respectively, $225, $975, $1015, and $1300. The yardstick calculations are set out in Table 6.

Table 6 Project Resources - Yardstick Calculations

Mineral	Tonnes	Price (AUD)	$ Value x 0.5%	$ Value x 1%
Ilmenite	556,000	225	625,500	1,251,000
Leucoxene	134,000	975	653,250	1,306,500
Rutile	18,000	1015	91,350	182,700
Zircon	26,000	1300	169,000	338,000
Totals	734,000		1,539,100	3,078,200

Thus, a yardstick valuation of the granted tenements is in the range of $1.5M to $3.1M. Further, as recent exploration has shown the presence of more extensive mineralisation than was modelled in the resource estimation, it appears reasonable to use the upper end of the range as the preferred value.

Continental Resource Management Pty Ltd

Discussion

The assigned values for the two granted tenements are set out in Table 7 and those of the Reasonableness Check in Table 8.

Table 7 Mineral Asset Valuations

	Table 7 Mineral	Asset Valuations
Valuation Method	Low Value($M)	Preferred Value($M)	High Value($M)
Comparative Transactions	1.6	3.1	6.3
Exploration Expenditure	2.0	2.4	2.4

Table 8 Reasonableness Check Values

Reasonableness Check	Low Value($M)	Preferred Value($M)	High Value($M)
	1.5	3.1	3.1

CRM considers that the yardstick check values indicate that the values obtained from the other two methods are reasonable.

Statement of Valuation

CRM considers the value of the Mineral Asset to be within the range of $1.8 million to $4.35 million, with a preferred value of $3.1 million.

CRM further considers that both the range of values and the preferred value are fair and reasonable evaluations of the Mineral Asset.

Continental Resource Management Pty Ltd

REFERENCES

Badenhorst, J.N., 2014, Independent Geological Report describing the Windimurra Vanadium Limited heavy mineral sands exploration licences, Sri Lanka , GeoActiv rpt, March 2014, unpub.

- Capital Metals, 2017, https://www.weare121.com/121mininginvestment hk/clients/capital metals/, accessed Nov 10 2017.

GSMB, 2010a, Compendium, Mines and minerals Act, No. 33 of 1992 as Amended by Act, No. 66 of 2009 & Relevant Regulations , Geological Survey and Mines Bureau (Sri Lanka), April 2010.

GSMB, 2010b, SRI LANKA 1:100 000 Geology (Provisional Map Series) TALAIMANNAR – PALAMPIDDI Sheet 3.

GSMB, 2012a, Report on the geological investigations of heavy mineral sand occurrence along the coastal stretches covering Upputharavai - Pesalai - Errukkalampiddy and Parikanmadu - SW of Mannar - Pavilukkilayan areas in Mannar District (Northern Province) , Geological Survey and Mines Bureau (Sri Lanka), Report No: MRG/68/201 by de Silva, K. T. U. S., Ajith Prema, M. M. J. P., Abeywickrama, K. A. J. T. A., Samarakoon, S. R. R. P., Kanchana Jayathilake, January 2012, 232 p. (Not sighted, but referenced by Badenhorst, 2014).

GSMB, 2012b, Initial Environmental Examination (IEE) report. Proposed project on mining of heavy mineral sands along the coastal stretches covering Upputharavai - Pesalai and South Bar - Thalvupadu areas and establishment of mineral sand processing plant at Salvapuram near Pesalai in Mannar District , Geological Survey and Mines Bureau (Sri Lanka). February 2012. 318 p. (Not sighted, but referenced by Badenhorst, 2014).

Herath, M.M.J.M., 2008, Beach Mineral Sands in Sri Lanka, Occurrence, Global Trends and Current Issues , Geological Survey & Mines Bureau, Colombo-Sri Lanka.

Iluka, 2013, Acquisition of Sri Lankan Tenement and Heavy Mineral Resource Base , ASX Announcement, 5 August 2013 (unpub).

Industrial Minerals, 2017, http://www.indmin.com/Prices/Prices.aspx , accessed Sept 28 2017.

Langridge et al , 2006, Kwale Mineral Sands Project, Amended Technical Report , Ausenco Limited rpt for Tiomin Kenya Limited, May 2006, unpub

Reyneke, L., 2015, Mineralogical examination of magnetic separation fractions produced from a HMbearing deposit, Sri-Lanka , Laboratory for Microscopy and Microanalysis, University of Pretoria Rpt (unpub) . (Not sighted, but referenced by Siebtits and Badenhorst, 2015).

Siebrits, B. and Badenhorst, J.N., 2015, The Mineral Resource Estimation on the Mannar Mineral Sands Project, Srinel Holdings Limited, Sri Lanka, GeoActiv Rpt, April 2015 (unpub).

TSL, 2017, Mannar Assay Results Confirm Extensive Heavy Minerals Area , ASX Announcement, 30 October 2017 (unpub).

Continental Resource Management Pty Ltd

GLOSSARY OF TECHNICAL TERMS AND ABBREVIATIONS

Auger	A method of drilling by which a sample of unconsolidated material is brought to the surface up the inclined flights of an auger.

Amphibolite facies	A classification of metamorphic rocks which formed under conditions of moderate to high temperatures (500° C, or about 950° F, maximum) and pressures. Amphibole, diopside, plagioclase, epidote, garnet, and wollastonite are minerals typically found in these rocks.
Backshore	The zone of the shore or beach above the high-water line, acted upon only by severe storms or exceptionally high tides.

Basement	The oldest layer of igneous and metamorphic rocks in the earth’s crust, covered by layers of more recent, usually unconformably overlain sedimentary rocks.

Berm	The terrace of a beach that has formed in the backshore, above the water level at high tide. Berms are commonly found on beaches that have fairly coarse sand and are the result of the deposition of material by low-energy waves.

Beryllium	Symbol Be. A hard, lightweight, steel-gray metallic element of the alkaline-earth group, found in various minerals, especially beryl.

Charnockite	Charnockite is a granofels that contains orthopyroxene, quartz, and feldspar. Charnockite is frequently described as an orthopyroxene granite.

Clastic	A sedimentary rock composed of grains or fragments derived at a different locality.

Clay	A rock or mineral fragment or a detrital particle of any composition with a diameter <4 microns.

Composite	A number of discrete samples collected from a body of material into a single homogenized sample for the purpose of analysis.

Concentrate	Heavy mineral concentrates are usually prepared by tabling or wet sieving a very large sample of till or stream sediments (up to 20 kg may be routine). The heavy mineral concentrate collected at this stage is then further processed with heavy liquids using methylene iodide (SG = 3.3). The resultant concentrate then is separated into magnetic and non-magnetic fractions and it is the non-magnetic fraction which is usually analyzed.

Continental Resource Management Pty Ltd

Coral	A hard, stony substance secreted by certain marine coelenterates as an external skeleton, typically forming large reefs in warm seas.

Cut-off grade	The lowest grade of mineralised material that qualifies as ore or resource in a given deposit.

Definitive feasibility study	An extensive technical and financial study to assess the commercial viability of a project. The definitive feasibility study provides the basis for the decision on whether in fact further study is required, whether the project is worth pursuing or whether to advance the project to design and construction.

De-slimed	Clay-sized particles have been removed from crushed rock.

Digital terrain model (DTM)	A digital terrain model (DTM) provides a bare earth representation of terrain or surface topography and can be described as a three – dimensional representation of a terrain surface consisting of X, Y, Z coordinates stored in digital form. It includes not only heights and elevations but other geographical elements and natural features such as rivers, ridge lines, etc.

Foreshore	The seaward-sloping area of a shore that lies between the average high tide mark and the average low tide mark.

Garnet	An aluminosilicate metamorphic mineral.

GIS	Geographic information system. It is a system designed to capture, store, manipulate, analyse, manage, and present spatial or geographic data.

Gneiss	High-grade metamorphic rock composed of alternating bands respectively rich in light and dark coloured minerals

Grade	Expression of relative quality of mineralisation (e.g. high-grade) or of numerical quality (e.g. 1.2% Ni).

Granitic	Descriptive term used for igneous rocks with a holocrystalline texture and anhedral constituents of a similar grainsize, composed chiefly of orthoclase and albite feldspars and of quartz, usually with lesser amounts of one or more other minerals, as mica, hornblende, or augite.

Continental Resource Management Pty Ltd

Granulite	A granular high-grade metamorphic rock formed as a result of extreme heat and pressure at depth beneath the Earth’s surface.

Granulite facies	A classification of metamorphic rocks which formed under the most intense temperature-pressure conditions.

Graphite	Graphite is a naturally-occurring form of crystalline carbon. Chemical symbol C. It is a native element mineral found in metamorphic and igneous rocks.
Heavy mineral (HM)	An accessory detrital mineral of a sedimentary rock, of high specific gravity (> 2.9 t/m3), e.g., magnetite, ilmenite, zircon, rutile.

Heavy mineral assemblage	The suite of heavy minerals contained in a deposit.

HiTi	High grade titanium with a TiO2content of 70% to 95%, sometimes produced by blending rutile and leucoxene.

Ilmenite	A titanium-iron oxide mineral (FeTiO3).

Indicated Mineral Resource	That part of a Mineral Resource forquantity, grade (or quality), densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit.

Inferred Mineral Resource	That part of a Mineral Resource for which tonnage, grade, and mineral content can be estimated with a low level of confidence.

JORC Code	The Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves (2012 Edition). Prepared by The Joint Ore Reserves Committee. A compliance standard for professional and public reporting of Ore Reserves and Mineral Resources.

Kg	Kilogram

Leucoxene	A titanium oxide-rich heavy mineral formed by the alteration of ilmenite.

Limestone	A sedimentary rock composed principally of the mineral calcium carbonate.

Continental Resource Management Pty Ltd

Lithified	The process by which a sediment composed of individual particles is converted into a coherent rock through cementation or compaction.

Lithium	Chemical element with symbol Li. It is the lightest metal and the lightest solid element.

Logging	The practice of making a detailed record (a log) of the geological formations penetrated by a borehole.

Marble	A metamorphic rock consisting largely of calcium and or magnesium carbonate; formed by the metamorphism of limestone or dolomite.

Measured Mineral Resource	That part of a Mineral Resource forquantity, grade (or quality), densities, shape and physical characteristics are estimated with with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit.

Metamorphic	Descriptive of rock that has been altered by physical and chemical processes involving heat, pressure and/or fluids.

Mineral assemblage	Group of minerals commonly associated with another.

Mineral Asset	All property including (but not limited to) tangible property, intellectual property, mining and exploration Tenure and other rights held or acquired in connection with the exploration, development of and production from those Tenures. This may include the plant, equipment and infrastructure owned or acquired for the development, extraction and processing of Minerals in connection with that Tenure.

Mineral Resource	In-situ mineral occurrence for which there are reasonable prospects for eventual economic extraction. The location, quality, quantity, grade, geological characteristics, and continuity are known, estimated, or interpreted from specific geological evidence and knowledge. A ‘Mineral Resource’ is a concentration or occurrence of material of intrinsic economic interest in or on the Earth's crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction.

Mineralisation	The concentration of metals and their minerals within a body of rock.

Mineralogical	Connected with the scientific study of minerals.

Continental Resource Management Pty Ltd

-2mm+63μ fraction	Particles, that are greater than 63μ (micron) and less than 2mm (millimeter) in size.

Miocene	The epoch of geological time within the Cenozoic Era between about 5 and 23 million years ago.

Monazite	A rare phosphate mineral with a chemical composition of (Ce,La,Nd,Th)(PO4,SiO4). It usually occurs in small isolated grains, as an accessory mineral in igneous and metamorphic rocks such as granite, pegmatite, schist, and gneiss.

(Ore) block model	An (ore) block model is created using geostatistics and the geological data gathered through drilling of the prospective ore zone. The block model is essentially a set of specifically sized "blocks" in the shape of the mineralized orebody. Although the blocks all have the same size, the characteristics of each block differ. Once the block model has been developed and analyzed, it is used to determine the ore resources and reserves (with project economics considerations) of the mineralised orebody.

Ore Reserve	The economically minable part of a Measured and/or Indicated Mineral Resource.

Pegmatite	Very coarse-grained igneous intrusive body, usually granitic and in dyke or sill form; may contain economically important minerals.

Precambrian	That portion of geological time older than about 545 million years ago.

Pre-feasibility stage	A project at a stage where a pre-feasibility study has been undertaken or is about to be commenced. A pre-feasibility study of a project is a precursor to a feasibility study. Its purpose is to examine the size, cost and value of the main components of the project in sufficient detail to ensure there is a solid basis for proceeding to the more costly and rigorous feasibility study.

Probable Reserve	A measured and/or indicated mineral resource which is not yet proven, but where technical economic studies show that extraction is justifiable at the time of the determination and under specific economic conditions.

Proven Reserve	A measured mineral resource, where technical economic studies show that extraction is justifiable at the time of the determination and under specific economic conditions.

QAQC	QA/QC is the combination of quality assurance, the process or set of processes used to measure and assure the quality of a product, and quality control, the process of ensuring products and services meet consumer expectations.

Continental Resource Management Pty Ltd

Quaternary	The period of geological time from about 2.6 million years ago to the present.

Quarzite	A granular metamorphic rock composed predominantly of quartz; derived from quartz sandstone.

Resource category	Category of a mineral resource, such as Inferred, Indicated, Measured, Proven or Probable.

Resource modelling	Creating a model of a mineral resource through assessment of the quantity and quality of the data available including database management and verification, the creation of 2D and/or 3D geological and mineralisation models for the deposit, statistical and geostatistical analyses of the data and the determination of the most appropriate grade and densityinterpolation methods.

Royalty	A payment to the owner of mineral rights for the privilege of extracting the mineral from the ground based on a lease agreement. The royalty payment is based on a portion of earnings from production and varies depending on the type of mineral and the market conditions.

Rutile	A mineral containing titanium dioxide (TiO2).

Sandstone	A sedimentary rock composed primarily of sand sized grains.

Sillimanite	Sillimanite is an aluminosilicate mineral with the chemical formula Al2SiO5.

Specific gravity	The term specific gravity refers to the ratio of the density of a solid or liquid to the density of water at 4 degrees Celsius.

Stereomicroscopic	The attribute of a microscope having a set of optics for each eye to make an object appear in three dimensions.

Tetrabromoethane (TBE)	A halogenated hydrocarbon, chemical formula C₂H₂Br₄.

THM	Total heavy minerals (concentrate). Components are typically rutile ilmenite, zircon and leucoxene.
Thorium	A chemical element with symbol Th. Thorium metal is silvery and tarnishes black when exposed to air, forming a dioxide.

Continental Resource Management Pty Ltd

Twin (Twinned holes)	A pair of parallel holes drilled close together.

Unconformably	The attribute of a series of younger strata that do not succeed the underlying older rocks in age or in parallel position, as a result of a long period of erosion or non-deposition.

Uranium	A chemical element with symbol U. It is a silvery-white metal in the actinide series of the periodic table.

VALMIN Code	Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets (2015 Edition). Prepared by The VALMIN Committee. A compliance standard for professional and public reporting of Mineral Asset valuations.

Valuable heavy minerals (VHM)	Heavy minerals with economic value. The principal valuable heavy minerals are ilmenite, leucoxene, rutile, and zircon.

µ or µm	Micron; a millionth of a metre.

XRD	X-ray powder diffraction (XRD) is a rapid analytical technique primarily used for phase identification of a crystalline material and can provide information on unit cell dimensions. The analyzed material is finely ground, homogenized, and average bulk composition is determined.

XRF	An X-ray fluorescence (XRF) spectrometer is an x-ray instrument used for routine, relatively non-destructive chemical analyses of rocks, minerals, sediments and fluids. It works on wavelength-dispersive spectroscopic principles that are similar to an electron microprobe. It is typically used for bulk analyses of larger fractions of geological materials. The relative ease and low cost of sample preparation, and the stability and ease of use of x-ray spectrometers make this one of the most widely used methods for analysis of major and trace elements in rocks, minerals, and sediment.

Zircon	A mineral belonging to the group of nesosilicates. Its chemical name is zirconium silicate and its corresponding chemical formula is ZrSiO4.

Continental Resource Management Pty Ltd

DECLARATION

The information in this report that relates to Technical Assessment and Valuation of Mineral Assets reflects information compiled and conclusions derived by J. John G. Doepel, who is a Member of The Australasian Institute of Mining and Metallurgy and of the Australian Institute of Geoscientists. Mr Doepel, a Principal Geologist with Continental Resource Management Pty Ltd (“CRM”), has more than 35 years’ experience as a geologist in the mineral industry and more than ten years’ recent and relevant experience in relation to mineral sand deposits. Further he has more than five yearsrecent and relevant experience in the valuation of Mineral Assets. Mr Doepel holds a Bachelor of Science with Honours and a Graduate Diploma in Forensic Science from the University of Western Australia; and a Diploma of Teaching from the Western Australian Institute of Technology.

Mr Doepel has sufficient experience relevant to the Technical Assessment and Valuation of the Mineral Assets under consideration and to the activity which he is undertook to qualify as a Specialist Practitioner as defined in the 2015 edition of the ‘Australasian Code for the Public Reporting of Technical Assessments and Valuations of Mineral Assets’. Mr Doepel consents to the inclusion in the report of the matters based on his information in the form and context in which they appear.

The report provides a fair representation of Technical Assessment and Valuation reported within it. The statements and opinions contained in this report are given in good faith and in the belief that they are not false or misleading. The conclusions are based on the reference date of the 2 November 2017 and could alter over time depending on exploration and metallurgical testwork results, metal prices, and other relevant market factors.

Where Mineral Resources and Ore Reserves are referred to, the terminology is consistent, unless specifically stated to the contrary, with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves as per the Joint Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and the Australian Mining Industry Council and dated December 2012. The report is written to conform to the AusIMM's Code and Guidelines for Assessment and Valuation of Mineral Assets and Mineral Securities for Independent Expert Reports (Valmin Code) as revised 2015.

No member or employee of CRM is, or is intended to be, a director, officer or other direct employee of the Company. No member or employee of CRM has, or has had, any share-holding, or the right (whether enforceable or not) to subscribe for securities, or the right (whether legally enforceable or not) to nominate persons to subscribe for securities in the Company. There is no agreement or understanding between CRM and the Company as to CRM performing further work for the Company. Fees for the preparation of this report are being charged at a commercial rate, the payment of which are not contingent upon the conclusions of the report. They total about $20,000.

The report was peer reviewed by Dr J. M. Chisholm, Principal Geologist of CRM and a Fellow of the AusIMM.

Yours faithfully

==> picture [113 x 42] intentionally omitted <==

John Doepel Continental Resource Management Pty Ltd

17[th] November 2017

Continental Resource Management Pty Ltd

AI assistant

TITANIUM SANDS LIMITED — AGM Information 2017

65956_rns_2017-12-20_b515379f-a342-428d-8a04-b2fb39440db2.pdf

Titanium Sands Limited ACN 009 131 533

Notice of Annual General Meeting

Important

CONTENTS

NOTICE OF ANNUAL GENERAL MEETING

Business

Resolution 1 – Consolidation of securities

Resolution 2 – Change to nature and scale of activities

Voting exclusion statement

Resolution 3 – Approval of Performance Shares

Resolution 4 – Issue of Shares and Performance Shares to Seller

Independent Expert’s Report

Voting exclusion statement

Resolution 5 – Issue of Shares under the Prospectus

Voting exclusion statement

Resolutions 6(a), (b) and (c) – Right for Directors to participate in the Public Offer

Voting exclusion statement

Resolutions 7(a), (b) and (c) – Issue of Class B Options to Directors

Voting exclusion statement

Resolutions 8(a) and (b) – Issue of Shares and Class A Options under the Placement

Voting exclusion statement

Resolution 9 – Issue of Shares to Trident Capital

Voting exclusion statement

Business of Annual General Meeting

Annual Report

Resolution 10 – Approval of Remuneration Report

Voting exclusion statement

Resolution 11 – Re-election of Jason Ferris as a Director

By Order of the Board of Directors

EXPLANATORY STATEMENT

Important information

Interpretation

Voting exclusion statements

Proxies

Voting entitlements

1. PROPOSED TRANSACTION

1.1 Background

1.2

Proposed Transaction

1.3 Option Agreement

1.4 Srinel Holdings Limited

1.5 Sri Lankan Project

Overview

Notes:

Proposed expenditure

1.6 Financial information

1.7

Key risks

Exploration, geological and development risks

Future profitability

Operational risks

Limited operating history

Sri Lankan country risk

Access to Sri Lankan Project

Restricted areas within Sri Lankan Project

Tenure risk

Government and regulatory risk

Commodity price and currency exchange risk

Resource and reserve estimates

Results of studies

Agents and contractors

Insurance

Environmental risks

Rehabilitation of tenements

Climate change regulation

Dilution and reduced cash reserves

Counterparty risk

Contract Risk

Liquidity and dilution risk

Acquisitions

Safety

Litigation

Share Market

Commercialisation risks

Competition risks

Future capital needs

Key management

TITANIUM SANDS LIMITED AGM Information 2017