ACN 009 131 533

PROSPECTUS

For a pro-rata renounceable issue of 1 New Share for every 5 Shares held by Shareholders (other than Non-Qualifying Foreign Shareholders) at an issue price of \$0.07 per New Share.

UNDERWRITTEN ISSUE

The Issue is underwritten by Paterson Securities Limited

IMPORTANT INFORMATION

The circumstances in which the Underwriter may terminate the Underwriting Agreement are contained in Section 8.1 of this Prospectus.

This document is important and should be read in its entirety. If after reading this Prospectus you have any questions about the New Shares being offered under this Prospectus or any other matter, then you should consult your professional advisor. The New Shares offered by this Prospectus should be considered as speculative.

1. CORPORATE DIRECTORY
2. TIMETABLE AND IMPORTANT DATES
3. CHAIRMAN'S LETTER
4. DETAILS OF THE OFFER
5. COMPANY OVERVIEW
6. EFFECT OF THE ISSUE ON THE COMPANY
7. RIGHTS ATTACHING TO NEW SHARES
8. MATERIAL CONTRACTS
9. ADDITIONAL INFORMATION
10. DEFINITIONS
11 DIRECTORS' STATEMENT

IMPORTANT NOTICE

This Prospectus is dated 20 December 2004. The Prospectus was lodged with ASIC on 20 December 2004. No responsibility as to the contents of the Prospectus is taken by the ASIC or the ASX. No securities will be allotted or issued on the basis of the Prospectus later than 13 months after the date of this Prospectus. Application will be made within 7 days after the date of this Prospectus for admission of the New Shares to quotation on ASX.

In preparing this Prospectus regard has been had to the fact that the Company is a disclosing entity for the purposes of the Corporations Act and that certain matters may reasonably be expected to be known to investors and professional advisors who investors may consult.

The distribution of the Prospectus outside the Commonwealth of Australia may be restricted by law. Consequently, all persons who receive the Prospectus must inform themselves of all applicable laws and observe any such restrictions. The failure to comply with any applicable restrictions may constitute a violation of securities laws. This Prospectus is not intended to, and does not, constitute an issue of securities in any place in which, or to any person to whom, the making of such an issue would not be lawful under the laws of any jurisdiction outside Australia.

Shareholders should read this document in its entirety and if in any doubt should consult their professional advisors before deciding whether to accept their Entitlements. There are risks associated with an investment in the Company and the New Shares offered by this Prospectus should be considered as speculative. The New Shares carry no guarantee with respect to repayment of capital, the payment of dividends or the price at which New Shares will trade on ASX.

No person is authorised to give any information or to make any representation in connection with the Issue described in this Prospectus. Any information or representation which is not contained in this Prospectus or not disclosed by the Company pursuant to its continuous disclosure obligations may not be relied upon as having been authorised by the Company in connection with the Issue or this Prospectus.

Certain terms used in this Prospectus have defined meanings set out in Section 10.

PRIVACY

When you apply to invest in the Company, you acknowledge and agree that:

you are required to provide the Company and its share registry, Advanced Share Registry Services, with $(a)$ certain personal information to:
$\ddot{\Omega}$ facilitate the assessment of an Application;
$(ii)$ enable the Company to assess the needs of applicants and provide appropriate facilities and services for applicants; and
$(iii)$ carry out appropriate administration;
$(b)$ the Company and Advanced Share Registry Services may be required to disclose this information to:
third parties who carry out functions on behalf of the Company (including, but not limited to, $(i)$ marketing and administration functions) on a confidential basis; and
$(ii)$ third parties if that disclosure is required by law; and
$(c)$ related bodies corporate (as that term is defined in the Corporations Act) which carry out functions on behalf of the Company and/or Advanced Share Registry Services.

Under the Privacy Act 1988 (Cth) (as amended), applicants may request access to their personal information held by (or on behalf of) the Company. Applicants may request access to personal information by telephoning or writing to the Company secretary.

CORPORATE DIRECTORY $\mathbf{1}$

Directors

The Earl of Warwick (Chairman) Roderick J.H. Smith Michael J Frv Ian K Macpherson

Company Secretary Ian K Macpherson

Registered Office

Level 2, 47 Colin Street West Perth, Western Australia, 6005 Telephone 61 8 9321 3514 Facsimile 61 8 9321 3523

Principal Place of Business

$1^st$ Floor Old Theatre Lane Claremont, Western Australia, 6010 Correspondence PO Box 467. Claremont. Western Australia. 6910

ASX Code $PMA -$ (shares) PMAOB- $($ options – December 2005)

Share Registry

Advanced Share Registry Services * Level 7, 200 Adelaide Terrace East Perth. Western Australia. 6872 PO Box 6283 East Perth. Western Australia. 6892 Telephone: $(08)$ 9221 7288 Facsimile: (08) 9221 7869

Auditor

KPMG^* Chartered Accountants 152-158 St George's Terrace Perth, Western Australia, 6000

Solicitors

Richard Payne & Associates Level 2, 33Colin Street West Perth, Western Australia, 6005

Lead Manager and Underwriter to the Issue

Patersons Securities Limited Level 23, 2 The Esplanade Perth, Western Australia, 6000

Website - www.pmal.com.au

$\frac{1}{2}$ These entities have not been involved in the preparation of any part of the Prospectus. Their names are included for information purposes only.

TIMETABLE AND IMPORTANT DATES $2.$

Lodgement of this Prospectus with ASIC 20 December 2004 Notice of Issue to Shareholders 20 December 2004 Existing Shares quoted ex Rights 22 December 2004 22 December 2004 First day of Rights trading Record Date for determining Entitlements 30 December 2004 Opening Date and dispatch of Prospectus 31 December 2004 Last day of Rights Trading 10 January 2005 Closing Date 17 January 2005 Allotment of New Shares and dispatch of holding statements 20 January 2005

The timetable is indicative only and the dates may be varied by the Company without prior written notice, subject to compliance with the ASX Listing Rules.

20 December 2004

Dear Shareholders.

On behalf of the Company I am pleased to invite you to participate in a pro rata renounceable rights issue All Shareholders (other than Non-Oualifying Foreign (Issue) to raise approximately \$461,968. Shareholders) will be offered an entitlement in the ratio of 1 New Share for every 5 Shares held as at the Record Date, at an issue price of \$0.07 per New Share.

The Company's major asset is its 15% net profit royalty interest in the Windimurra Vanadium Project under the Royalty Agreement with Xstrata. The Directors believe Xstrata's conduct in suspending and then permanently closing operations of the Windimurra Vanadium Project was unlawful. As a result, your Company has issued legal proceedings in the Supreme Court of New South Wales (the Xstrata Litigation) claiming an entitlement to enforce the Company's rights under the terms of the Royalty Agreement. The Directors believe the Xstrata Litigation is worthwhile pursuing.

Xstrata has served on the Company a defence denying the Company's claims and a cross-claim in which Xstrata seeks rectification of the Royalty Agreement, alleges the Company is estopped from making the claims the Company has made in the proceedings and also seeks relief against the Company for misleading and deceptive conduct under the Trade Practices Act. At the date of this Prospectus, the Company is preparing its reply to Xstrata's defence and its defence to Xstrata's cross-claim in the Xstrata Litigation.

At a hearing in the Supreme Court of New South Wales on 14 December 2004, the Court ordered that the proceedings be listed for a 4 week trial to commence 4 July 2005 and that the parties proceed to mediation to be concluded by 25 February 2005.

Although the Directors believe the Xstrata Litigation is worthwhile pursuing, the outcome of the Xstrata Litigation is uncertain and may have a material effect on the financial position of the Company.

The purpose of the Issue is to raise funds to meet the ongoing costs of the Xstrata Litigation, to provide funds for administration and working capital and to pay the expenses of the Issue. The Directors believe it is essential for the Company to have sufficient funds to be able to properly conduct the Xstrata Litigation which is expected to be strongly contested. Xstrata is a subsidiary of one of the world's largest mining companies and is believed to have the financial capacity to fight an expensive and protracted legal action.

Mr Roderick Smith, our executive Director, and Mr Michael Fry, a non-executive Director will be taking up their full entitlement in the Issue and I, through my company, Tagora Pty Ltd, will be taking up my entitlement in the Issue to the extent of \$100,000. In addition, Mr Fry and Mr Ian Macpherson, who is also a non-executive Director, have agreed to each sub-underwrite up to \$50,000 of the Issue. Your Directors' total combined commitment to the Offer is approximately \$390,000.

We encourage Shareholders to support the Company and take up their Entitlements. We commend the Offer to you.

Yours sincerely

Earl of Warwick Chairman

DETAILS OF THE OFFER 4.

4.1 The Issne

The Company is making a pro-rata renounceable issue to Shareholders (other than Non-Oualifying Foreign Shareholders) who are registered at 5.00pm WST on 30 December 2004 of up to 6,599,543 New Shares at an issue price of \$0.07 per New Share to raise approximately \$461,968 (before costs of the Issue).

The New Shares will be offered on the basis of 1 New Share for every 5 Shares then held.

$4.2$ Purpose of the Issue

The funds raised by the Offer will be applied to working capital, to meet the costs of the Offer of approximately \$99,098 and to meet the ongoing costs of the Xstrata Litigation described in Section 5.3 of this Prospectus.

The Company intends to expend the funds raised by the Offer as follows:

Activity	Budgeted Amount
	S
Administration and working capital	\$112,870
Ongoing costs of the Xstrata Litigation	\$250,000
Expenses of the Issue	\$99,098
Total	\$461.968

In the event that the Company is required to either guarantee or lodge monies with the Court as security of costs as referred to further in Section 5.3, such funds will be met from existing and new working capital.

4.3 Issue Price

The Issue price is \$0.07 per New Share payable in full in Australian currency on acceptance of the Offer.

4.4 Entitlements

The number of Shares to which a Shareholder (other than a Non-Qualifying Foreign Shareholders) is entitled (Entitlement) under the Issue is shown on the Acceptance Form for that Shareholder. Where fractions of Shares are involved, the number of Shares to which a Shareholder is entitled is rounded down to a whole number.

The Rights are renounceable which enables Shareholders who do not wish to take up some or all of the New Shares to sell their Rights.

Rights trading will commence on 22 December 2004 and will cease at 5.00 pm WST time on 10 January 2005. You may sell your Rights between these dates should you choose not to accept your full Entitlement.

If you do not propose to take up your Entitlement in full you are advised to deal with the balance of your Rights rather than allowing them to lapse. If allowed to lapse you will receive no benefit. It is therefore important that you take action to either accept or sell your Entitlement in accordance with the above instructions.

If you are in doubt as to how to compete or deal with your accompanying Acceptance Form, you should consult your professional adviser without delay.

$4.5$ What you may do - Choices available

$4.5.1$ To accept your Entitlement in whole or part

Shareholders who wish to take up all or part of their Entitlement may only do so on the personalised Acceptance Form which is enclosed with a paper copy of this Prospectus. Instructions for completion and lodgement of acceptances are set out on the back of the Acceptance Form.

If you decide to accept all or part of your Entitlement, you must:

complete the Acceptance Form $(a)$
$(b)$ pay the relevant amount (\$0.07 per New Share accepted).
send the completed Acceptance Form with payment so that it reaches the $(c)$ Company's share registry (Advanced Share Registry Services) by 5.00 pm WST on 17 January 2005 at the following address:

Advanced Share Registry Services Level 7, 200 Adelaide Terrace EAST PERTH WA 6872

If you do not take up any part of your Entitlement, you are not required to take any action but your percentage shareholding in the Company will be diluted and the Entitlement not taken up will revert to the Underwriter. However, please note that the Offer is renounceable so that a holder of Shares may transfer all or part of their Entitlement.

The number of New Shares applied for may not exceed the Entitlement as shown on the Acceptance Form. Applications for New Shares exceeding a Shareholder's Entitlement may be accepted up to the Shareholder's Entitlement and excess New Shares will not be issued. Any excess funds tendered will be refunded without interest.

If an Acceptance Form is not completed correctly, or if the accompanying payment is for the wrong amount, it may still be accepted by the Company. The Company's decision as to whether to accept the application or how to construe, amend or complete it, shall be final, but no Applicant will be treated as having offered to purchase more New Shares than is indicated by the amount of the payment made for New Shares.

$4.5.2$ To sell your Entitlement in whole or in part only

To sell your Entitlement in whole or in part only, complete the section of the accompanying Acceptance Form marked "Instructions to Stockbroker/Agent", lodge with your Stockbroker and instruct your Stockbroker as to the number of Rights you wish to sell.

To sell your Entitlement in part and accept all or part of the balance of your Entitlement you should instruct your stockbroker.

As to the number of Rights you wish to sell; $(a)$
(b) To complete the accompanying Acceptance Form (on your behalf) setting out the number of New Shares you wish to subscribe for; and
To forward the accompanying Acceptance Form, together with a cheque made $(c)$ payable to "Precious Metals Australia Limited Share Issue Account" for the total amount payable in respect of the number of New Shares you wish to subscribe for, to the Company's share registry (Advanced Share Registry Services) by no later than 5.00 pm WST time on the Closing Date.

Refer to Section 9.2 of this Prospectus for a summary of the possible taxation implications of selling Entitlements.

$4.5.3$ To transfer your Entitlement other than on ASX

If you wish to transfer your Entitlement to another person other than on ASX then you must forward a completed and stamped standard renunciation form (obtained from your stockbroker or from the Company's share registry (Advanced Share Registry Services)), together with the accompanying Acceptance Form completed by the transferee and the transferee's cheque or bank draft for the amount due in respect of the New Shares to reach the Company's share registry no later than 5.00 pm WST time on the Closing Date. If the Company's share registry receives both a completed renunciation form and completed Acceptance Form in respect of the same Rights, the renunciation will be given effect in priority to the acceptance.

$4.5.4$ Rights not taken $up - if you do nothing$

If you:

$\bullet$ decide not to sell all or part of your Rights and do not take up all or part of your New Shares before 5.00pm WST on the Closing Date for Shareholders (other than Non-Qualifying Foreign Shareholders), or
do nothing.

then your Rights will accrue to the Underwriters in accordance with the Underwriting Agreement, the terms of which are set out in Section 8.1 of this Prospectus.

$4.5.5$ Payment

The subscription price for the New Shares is payable in full on application by a payment of \$0.07 per New Share. Acceptance Forms must be accompanied by a money order or a cheque or bank draft drawn on and payable at any Australian bank and be made payable to "Precious Metals Australia Limited Share Issue Account" and crossed "Not Negotiable". Applicants for New Shares must not forward cash. Receipts for payment will not be issued.

4.6 Underwriting

The Issue (of 6,599,543 New Shares at an issue price of \$0.07 per New Share to raise approximately \$461,968) is underwritten on the terms of the Underwriting Agreement set out in Section 8.1 of this Prospectus. Shortfall Shares will revert to the Underwriter to be dealt with in accordance with the terms of the Underwriting Agreement. The Underwriting Agreement is subject to conditions which, if triggered, could lead to the obligations of the Underwriter being terminated.

In the event that the Underwriting Agreement is terminated, the Directors reserve the right to issue the Shortfall Shares at their discretion as permitted under the ASX Listing Rules. The Directors reserve the right to pay a commission of up to 5% of the funds raised through placement of the Shortfall Shares.

There are also sub-underwriting agreements in relation to the New Shares the subject of the Prospectus. Details of these are set out in Section 8.2 of this Prospectus.

4.7 Minimum Subscription and Oversubscription

There is no minimum subscription to the Issue. Oversubscriptions will not be accepted.

4.8 Rights attaching to New Shares

A general description of the rights attaching to the New Shares which will be issued on acceptance of applications made pursuant to this Prospectus is set out in Section 7 of this Prospectus.

4.9 Allotment

The New Shares will be allotted and holding statements will be sent to subscribers as soon as practicable after the Closing Date and after ASX permission for Official Quotation of New Shares is received. In accordance with the Corporations Act, all application moneys shall, before allotment and issue of New Shares pursuant to this Prospectus be held by the Company in trust in a bank account established solely for that purpose.

4.10 ASX Listing

Application will be made by the Company to ASX within 7 days of the issue of this Prospectus for the New Shares to be granted quotation on the Official List of the ASX.

If ASX does not admit the New Shares to quotation within 3 months after the date of this Prospectus (or such longer period as may be permitted by ASIC), no New Shares will be allotted and issued and all acceptances and application moneys will be refunded without interest as soon as practicable.

4.11 Overseas Shareholders

This Prospectus contains an offer to Shareholders (other than Non-Qualifying Foreign Shareholders). Shareholders who hold Shares on behalf of persons who are not resident in Australia or New Zealand are responsible for ensuring that exercising Rights and taking up New Shares under the Issue does not breach securities laws in the relevant overseas jurisdiction. Return of a duly completed Acceptance Form will be taken by the Company to constitute a representation that there has been no breach of such laws. Shareholders who are nominees, trustees or custodians are therefore advised to seek independent advice as to how they should proceed.

The Company is of the view that it is unreasonable to extend the Issue to Non-Oualifying Foreign Shareholders having regard to the low number of foreign Shareholders, the number and value of the New Shares which would be offered to foreign Shareholders and the costs of complying with the legal requirements of the regulatory authorities in the respective overseas jurisdictions.

As required by the ASX Listing Rules and the Corporations Act, the Company will appoint the Underwriter as nominee to arrange for sale of Rights that would otherwise have been given to Non-Oualifying Foreign Shareholders and will transfer to the Underwriter the right to acquire the New Shares that would otherwise have been offered to Non-Qualifying Foreign Shareholders. The Underwriter will be obliged to arrange for the sale of those Rights and to distribute to each affected Shareholder their proportion of the proceeds of that sale, net of expenses. Any such sale will be at such price and otherwise in such manner as the Underwriter will in its sole discretion determine. The ability to sell these Rights and the price obtained for those Rights will be, amongst other things, dependent on market conditions and the market in the Company's securities. Neither the Company nor the Underwriter will be liable for a failure to sell the Rights or to sell the Rights at any particular price.

Enquiries 4.12

If you have any enquiries concerning your Entitlement or how to accept all or part of your Entitlement, please contact the Company secretary or the Company's share registry as follows or contact your professional advisor:

Company Secretary Precious Metals Australia Limited PO Box 467 Claremont, Western Australia, 6910 Telephone 61 8 9321 3514 Facsimile 61 8 9321 3523

Email: [email protected]

Advanced Share Registry Services Level 7, 200 Adelaide Terrace East Perth, Western Australia, 6872 Telephone: 61 8 9221 7288 Facsimile: 61 8 9221 7869

$5.$ COMPANY OVERVIEW

Mineral Exploration Company 5.1

The principal activity of the Company is mineral exploration and mining project development. However, at this time the company does not hold any mining tenements (the sale of the Company's interests in its remaining tenements settled in early 2004). The Company is currently focussing significant time and resources on the Xstrata Litigation in relation to Xstrata's decision to suspend and permanently close the Windimurra Vanadium Project.

$5.2$ Royalty Agreement

Pursuant to the Royalty Agreement the Company holds a 15% net profit (royalty) interest in the Windimurra Vanadium Project. A description of the rights and obligations of the parties in respect of the Royalty Agreement is set out in Section 8.3 of this Prospectus.

Xstrata is the owner of the Windimurra Vanadium Project. Xstrata is a wholly owned subsidiary of Xstrata plc, a company listed on the London Stock Exchange. In 2002, Xstrata (Schweiz) AG took an assignment of and assumed the guarantee given by Xstrata AG in the Royalty Agreement. Xstrata (Schweiz) AG is also a wholly owned subsidiary of Xstrata plc.

In February 2003 Xstrata, announced in its Annual Report for the year ended 31 December 2003 that Xstrata Windimurra Pty Limited would cease production and operations of the Windimurra Vanadium Project would be suspended whilst Xstrata assessed options which would include permanent closure. On 10 May 2004 Xstrata publicly announced the permanent closure of the Windimurra Vanadium Project and advised that it had sold all the plant and equipment at Windimurra, other than anything to do with electricity and gas supply.

Despite the permanent cessation of operations of the Windimurra Vanadium Project, the Royalty Agreement provides for the Company to continue to receive the minimum royalty at the rate of \$500,000 per annum (paid in quarterly instalments) until operations of the Windimurra Vanadium Project are 'Terminated'. Under the Royalty Agreement, the Project is not 'Terminated' until, amongst other things, all rehabilitation obligations in respect of the (Project) tenements have been fully satisfied. In the event the Company's claim in the Xstrata Litigation was to be unsuccessful, the Directors estimate it will take no less than approximately 4 years for all rehabilitation obligations to be met. Although 'Term' is defined in the Royalty Agreement, it is defined without reference to an express period of operation of the Project. However, the definition of 'Project' provides for the estimated life of the Project to be 30 years, such estimate being consistent with the presence of a viable ore body reasonably capable of being mined over that period.

5.3 Xstrata Litigation

On 16 August 2004 the Company issued legal proceedings against Xstrata (Xstrata Windimurra Pty Limited) and Xstrata (Schweiz) AG (the guarantor under the Royalty Agreement) in the Supreme Court of New South Wales. Pursuant to the substituted summons filed by the Company in the Xstrata Litigation on 4 November 2004, the Company is seeking, amongst other things:

$\mathbf{L}$ A declaration that the Royalty Agreement has been breached by Xstrata by reason of its purported permanent closure (termination) of the Windimurra Vanadium Project and that the Royalty Agreement remains on foot with the parties being bound to comply with all its terms and conditions.
$\overline{2}$ . A declaration that the Term of the Windimurra Vanadium Project (as defined in clause 1.1 of the Royalty Agreement) is to be regarded as being for such period as any open cut mine is capable of being developed and operated within the Tenements (as defined in clause 1.1 of the Royalty Agreement), for the purpose of mining, beneficiating and processing vanadium ore suitable for the production of fused vanadium pentoxide flakes.
1. Damages for breach of the Royalty Agreement.
$\overline{4}$ An injunction requiring Xstrata to do all things reasonably necessary in order to cause the Windimurra Vanadium Project to be brought back to an operational level, and operated and maintained consistent with Xstrata's obligations under clause 6.1(a) of the Royalty Agreement.
$5₁$ Interest, including on a compound basis, on such monetary award as may be made in the proceedings at the rate provided for pursuant to clauses 2.2 and 7.8 of the Royalty Agreement, being the Westpac Indicator Lending Rate (or equivalent) plus 4% or, alternatively, pursuant to s.94 of the Supreme Court Act 1970 (NSW), from 1 December 2001 until judgment.
1. An order that the Company be indemnified by the defendants in respect to any taxation which shall be levied against the Company in respect to or arising from orders as may be made by the Court in the proceedings, which include any tax imposed by A New Tax System (Goods & Services Tax) Act 1999 (Cth).

The Company has instructed Mr Bret Walker SC and Mr Peter Garling SC of the Sydney Bar and Mr Richard McCormack of the Western Australian Bar as counsel to represent the Company in the Xstrata Litigation.

At the hearing in the Supreme Court of New South Wales on 19 November 2004, the Court ordered that the question of law as to whether or not Xstrata has the right to terminate the Royalty Agreement be listed for hearing as a preliminary issue on 9 and 10 February 2005.

On 8 December 2004 Xstrata served on the Company a defence denying the Company's claims and a cross-claim in which Xstrata seeks rectification of the Royalty Agreement, alleges the Company is estopped from making the claims it has made in its substituted summons and also seeks relief under the Trade Practices Act on the basis of misleading and deceptive conduct by the Company.

At a further hearing in the Supreme Court of New South Wales on 14 December 2004, on an application by Xstrata, the Court agreed to vacate the hearing date on 9 and 10 February 2005 for the preliminary question of law and instead ordered, amongst other things that:

the proceedings be listed for a 4 week trial to commence 4 July 2005;
the parties proceed to mediation to be concluded by 25 February 2005; and
the proceedings be listed for further directions on 25 February 2005.

In vacating the hearing date for the preliminary question of law and ordering the listing of the proceedings for trial, the Court has expressly included as an issue to be tried the very issue that was scheduled to be heard on 9 and 10 February 2005. Furthermore, in directing the parties to the Xstrata Litigation to engage in mediation to be concluded by 25 February 2005, the Court has, in effect, replaced the hearing of the preliminary question of law with a mediation of the entire dispute which, if successful, would result in a final resolution of the proceedings.

At the date of this Prospectus, the Company is preparing its reply to Xstrata's defence and its defence to Xstrata's cross-claim. In addition, the Company is considering calling upon the guarantee and indemnity given by Xstrata (Schweiz) AG in the Royalty Agreement, in relation to the Company's costs and expenses of maintaining the Xstrata Litigation, by making formal demand for payment upon Xstrata (Schweiz) AG. The Company believes if it makes such a demand and it was not complied with, the Company could institute proceedings to enforce the demand and that these proceedings would have reasonable prospects of success.

The substituted summons the Company filed in the proceedings on 4 November 2004 reduced the scope of the claims the Company is making in the Xstrata Litigation. The Company believes this narrowing of the issues in dispute in the Xstrata Litigation will lead to a quicker and less expensive resolution of the proceedings. The Company has reserved its rights against Xstrata to pursue wider claims in relation to the Royalty Agreement if it sees fit.

Prior to the Court vacating the hearing date for the preliminary question of law, the defendants requested security for costs from the Company in the sum of \$290,000 in the Xstrata Litigation and foreshadowed an application to the Court seeking security for costs if the Company did not agree to give security in the sum of \$260,000. The granting of an order for security for costs is in the discretion of the Court. Security, if ordered or agreed to be given, is generally provided by way of a cash payment into Court or the provision of a bank guarantee for the relevant amount. Now that the matter has been listed for a 4 week trial, the amount of security claimed by Xstrata may be increased, although that will depend upon which party is responsible for which issues to be determined at the trial. For instance, the defence and cross-claim is directly responsible for the 2 day hearing on 9 and 10 February 2005 being vacated and replaced by a 4 week trial. Accordingly the Court may conclude that Xstrata is responsible for that expansion of issues and hence the Company may not be required to provide security.

The Directors do not believe an application for security for costs will materially impede the claims the Company is making in the Xstrata Litigation from proceeding to trial.

It is very difficult to estimate how much the Xstrata Litigation will cost, particularly as it is difficult to predict what may happen in the Xstrata Litigation. To a large extent, what may happen, and therefore the costs the Company incurs, will depend on many matters including, but not limited to, the advice of legal counsel, the conduct of the defendants, any orders or directions the Court may make, any evidentiary matters that need to be pursued, and the amount of preparation required for and the actual length of any trial.

The Company believes its legal costs in conducting the Xstrata Litigation through to and including a trial of approximately 4 weeks is likely to be some hundreds of thousands of dollars. The Company further believes it would inappropriate and unhelpful, and could be misleading to investors, to provide a more definitive estimate of such costs as, for the reasons referred to above, the actual costs which may be incurred by the Company in respect of the Xstrata Litigation may vary considerably.

Shareholders should note that the outcome of the Xstrata Litigation is uncertain, the result being necessarily for the Court to determine, unless a settlement of the Company's claims is able to be successfully negotiated. In managing the Xstrata Litigation, the Company will keep open the possibility of a settlement on the basis of a commercially pragmatic certain result being more in the interests of the Company than the fate of the claims being entirely dependent on the vagaries of the judicial process. However, on the facts presently available to the Directors, it is expected that one of the following outcomes will occur:

$\mathbf{1}$ . The Company is successful in the Xstrata Litigation. If this occurs it may have a materially beneficial effect on the financial position of the Company although to what extent cannot be said at this time. However, even if the Company is successful at trial, it will be open to the defendants to appeal against any adverse decision against them which will result in further costs, uncertainty and delay in the final outcome of the matter.
$2.$ The Company is not successful in the Xstrata Litigation, in which case this result may have a material adverse effect on the financial position of the Company. If the matter proceeds through to trial and the Company is ultimately not successful, or the Company withdraws from the proceedings prior to trial, then in addition to paying its own legal costs the Company would usually be ordered to pay the legal costs of the defendants on a party and party basis which could be significant. Costs are in the discretion of the Court.
$3.$ The parties to the Xstrata Litigation agree on a commercially pragmatic compromise of the claims made by the Company. A settlement usually occurs before the matter goes to trial. For example, a settlement could occur as a result of the mediation the Court has ordered to be concluded by 25 February 2005, although, of course, the outcome of the mediation is uncertain. The Company may take steps to protect its position on costs by way of a without prejudice confidential offer at any stage of the proceedings which usually remains open for a period of 28 days for acceptance and if not accepted, would usually provide significant cost protection to the party making such an offer, here the Company, in the event the Company was successful in obtaining an award of damages or other monetary relief in a sum or to a value not less than the offer. In this scenario the Court would usually order the defendants to pay the plaintiff's (Company's) costs on a solicitor and own client basis rather than the

considerably lower level of recovery based on an order for costs payable on a party and party basis.

If the Company is not successful in the Xstrata Litigation or it is not settled on terms acceptable to the Company, the permanent closure of the Windimurra Vanadium Project will result in the cessation of the Company's minimum royalty entitlement (of \$500,000 per annum) once all rehabilitation obligations in respect of the (project) tenements have been fully satisfied.

The Xstrata Litigation has been taken to preserve and protect the Company's major asset (its 15% net profit (royalty) interest in the Windimurra Vanadium Project) and thereby protect Shareholders' interests. As referred to above, based on Xstrata's conduct to date, the Directors expect the Xstrata Litigation to be strongly contested. The defendants are subsidiaries of one of the world's largest mining companies. Xstrata plc, which is believed to have the financial capacity to fight an expensive and protracted legal action.

The Directors believe the funds to be raised pursuant to the Offer, together with the anticipated future payments of the royalty under the Royalty Agreement, even if the Company is ultimately not successful in the action will be adequate to meet the costs of the Xstrata Litigation.

EFFECT OF THE ISSUE ON THE COMPANY $6.$

6.1 Number of Shares and Options on Issue

The Company has on issue 32,997,713 Shares and 12,896,334 Options exercisable on or before 1 December 2005 at any exercise price of \$2.00.

Under the Offer, up to 6,599,543 New Shares will be issued which will bring the number of ordinary Shares on issue to 39,597,256. This is on the basis that all the New Shares are issued and no Options are exercised before the close of the Record Date.

Number of Shares	Issued Capital	\$
32,997,713	Total issued capital as at the date of this Prospectus	49,561,192
6,599,543	Shares offered by this Prospectus (net of expenses of the Entitlements Issue)	362,870
39,597,256	Total issued capital at the close of the Entitlements Issue	49,924,062
Number of Options	Description	Exercise Price S

12,896,334	Exercisable on or before 1 December 2005	2.00
1.000.000.	Exercisable on or before 30 November 2007	0.15
13,896,334	Total options on issue at the close of the Entitlements Issue

6.2 Effect of the Issue

The principal effects of the Issue are that the company's cash funds and issued capital will increase by approximately \$461,968 less the expenses of the Issue which are estimated at approximately \$99,098, and the total number of Shares on issue will increase from 32,997,713 Shares to 39,597,256 Shares.

6.3 Financial Reporting Standards

The Financial Reporting Council ("FRC") announced in early July 2002 that Australia would adopt International Financial Reporting Standards ("IFRS"), formerly known as International Accounting Standards, for financial years beginning on or after 1 January 2005. The adoption of IFRS will be reflected in the Company's financial reporting on or before the year ended 30 June 2005.

The transition to IFRS could have a material impact on the Company's Statement of Financial Position and reported results, however it is not possible to quantify the impact at this time. The Company is working to establish an implementation program to manage the convergence.

6.4 Pro forma Statement of Financial Position

Below is the audited consolidated Statement of Financial Position as at 30 June 2004 and the unaudited pro forma consolidated Statement of Financial Position as at 31 October 2004 showing the effect of the Issue as if it had been made on 30 June 2004.

	Audited 30 June2004 \$	Unaudited Pro forma 31 October 2004 \$
Current Assets
Cash	428,518	800,888
Receivables	123,045
Other Financial Assets	45,900
Total Current Assets	597,463	800,888
Non-Current Assets
Property, plant & equipment	3,686	3,686
Windimurra royalty	2,000,000	2,000,000
Total Non-Current Assets	2,003,686	2,003,686
TOTAL ASSETS	2,601,149	2,790,872
Current Liabilities
Payables	222,611	105,611
Total Current Liabilities	222,611	105,611
Total Liabilities	222,611	105,611
NET ASSETS	2,378,538	2,698,163
Equity
Contributed equity	49,561,192	49,924,062
Option premium reserve	3,965,772	3,965,772
Accumulated losses	(51, 148, 426)	(51, 191, 671)
TOTAL EQUITY	2,378,538	2,698,163

The material assumptions taken into account in preparing the consolidated Statements of Financial Position are:

The unaudited pro forma consolidated Statement of Financial Position has been prepared on $(a)$ the basis that there have been no material movements in the assets and liabilities of the Company between 30 June 2004 and 31 October 2004, except:
the issue of 6,599,543 Shares at \$0.07 each pursuant to the Issue to raise \$461,968 (before expenses of the Issue);
expenses of the Issue of approximately \$99,098 which are to be written off to contributed equity; and
a net allowance has been made for royalty income of \$125,000 and expenditure of \$227,000 in the normal course of business.
The funds raised, net of expenses, from the Issue of the New Shares are included in the $(b)$ consolidated Statement of Financial Position as contributed equity.
No Options are exercised. $(c)$

6.5 Effect on Shareholder interests

If Shareholders take up their Entitlements in full there will be no net effect on their interests in the Company. If Shareholders decline to take up their Entitlements in full then their interests in the Company will be diluted as their Entitlements will be taken up by the Underwriter or a subunderwriter. The maximum amount by which Shareholders interests may be diluted is 17%.

6.6 Relevant Interest to more than 20% of the issued voting shares

Section 606 of the Corporations Act prohibits an acquisition of a relevant interest in issued voting shares in a listed company if, as a result of the acquisition, any person with a relevant interest in more than 20% but less than 90% of the voting shares in the company would, after the acquisition. increase his or her relevant interest in the issued voting shares in that company.

Section 606 is subject to a number of exceptions including Item 13 of Section 611 of the Corporations Act which allows a proposed acquisition of a relevant interest in issued voting shares to proceed if the acquisition results from an issue under a prospectus by an underwriter or a subunderwriter. The Corporations Act also requires that the Prospectus disclose the effect that the acquisition of shares has on the relevant persons voting power in the Company. These details are set out in Section 6.7 below.

6.7 Shareholders with a Relevant Interest in More than 20% of the Issued Voting Shares

Subject to the Company completing the Issue, and assuming no other changes, the acquisition of the New Shares pursuant to the Underwriting Agreement and the sub-underwriting agreements referred to below will increase various parties relevant interest and voting power in issued voting Shares in the Company to a maximum amount as indicated in the table below.

It is not possible to state what the final position of the persons referred to above may be. This is dependent upon the number of New Shares taken up by Shareholders in the Issue and the disposal of any Shortfall Shares.

The table below assumes:

the current shareholding of Tagora Pty Ltd (a company the Earl of Warwick is a director (a) and major shareholder) is 9,123,490 Shares;
$(b)$ the current shareholding of Mr Roderick Smith is 512,001 Shares;
$(c)$ the current shareholding of Horseshoe Exploration Pty Ltd (a company in which Mr Roderick Smith is a director and 100% shareholder) is 1,926,333 Shares;
the current shareholding of Pacific Quest Investments Pty Ltd (a company in which Mr $(d)$ Roderick Smith is a director and major shareholder) is 9,541,429 Shares;
Tagora Pty Ltd takes up its Entitlement to the extent of \$100,000 (1,428,571 New Shares) $(e)$ under the firm sub-underwriting agreement referred to in Section $8.2(a)$ of this Prospectus.
Horseshoe Exploration Ptv Ltd, Pacific Ouests Investments Ptv Ltd and Mr Roderick Smith $(f)$ take up their full Entitlement under the firm sub-underwriting agreements referred to in Section 8.2(b) of this Prospectus as follows:

Horseshoe Exploration Pty Ltd -	385,267 New Shares
Pacific Quest Investments Pty Ltd -	1,908,286 New Shares
Mr Roderick Smith -	102,400 New Shares

all New Shares have been issued pursuant to the Prospectus. $(g)$

Acquirer	Current The number of ordinary shares in which the acquirer has a relevant interest and the acquirer's voting power currently		After Issue The number of ordinary shares in which the acquirer has a relevant interest and the acquirer's voting power
	No. of Shares	Voting Power %	No. of Shares	Voting Power %
Tagora Pty Ltd	9,123,490	27.65%	10,552,061	26.65%
Earl of Warwick in his own name	Nil	Nil	Nil	Nil
Earl of Warwick by operation of law ¹	9,123,490	27.65%	10,552,061	26.65%
Horseshoe Exploration Pty Ltd	1,926,333	5.84%	2,311,600	5.84%
Pacific Quest Investments Pty Itd	9,541,429	28.92%	11,449,715	28.92%
Mr Roderick Smith in his own name	512,001	1.55%	614,401	1.55%
Mr Roderick Smith by operation of $law2$	11,979,763	36.31%	14,375,716	36.31%

Notes:

$\mathbf{I}$ These are shares held in the name of Tagora Pty Ltd.
$\overline{2}$ These are shares held in the name of Horseshoe Exploration Pty Ltd and Pacific Quest Investments Pty Ltd and shares held in the name of Mr Roderick Smith.

Set out below is some further information about these entities and how they acquired their interest in the New Shares:

By a firm sub-underwriting agreement dated 8 December 2004 made between Tagora Pty $(a)$ Ltd and the Underwriter, Tagora Pty Ltd has agreed to sub-underwrite 1,428,571 New Shares. The Earl of Warwick is a director and major shareholder of Tagora Pty Ltd. A summary of this agreement is contained in Section 8.2(a) of this Prospectus.
$(b)$ By firm sub-underwriting agreements dated 8 December 2004 made between Horseshoe Exploration Pty Ltd and the Underwriter, Pacific Quest Investments Pty Ltd and the Underwriter, and Mr Roderick Smith and the Underwriter, Horseshoe Exploration Pty Ltd, Pacific Quest Investments Pty Ltd and Mr Roderick Smith have agreed to sub-underwrite a total of 2,395,953 New Shares. Mr Roderick Smith is a director and 100% shareholder of Horseshoe Exploration Pty Ltd and a director and major shareholder of Pacific Quest Investments Pty Ltd. A summary of these agreements are contained in Section 8.2(b) of this Prospectus.

If the Underwriting Agreement is terminated for any reason, the sub-underwriting agreements referred to above are simultaneously terminated. The sub-underwriting agreements contain such other terms as are normally contained in agreements of that kind.

RIGHTS ATTACHING TO NEW SHARES $7.$

The New Shares will upon issue participate equally with all other Shares in the Company in all respects. Full details of the rights attaching to Shares are set out in the Company's current Constitution and, in certain circumstances regulated by the Corporations Act, the ASX Listing Rules and the general law.

Copies of the Company's Constitution are available for inspection at the registered office of the Company, and the Company will supply copies to any Shareholder upon request.

The following is a broad summary of the rights attaching to Shares and which will attach to New Shares issued pursuant to this Prospectus.

Voting Rights

Every holder of Shares present in person or by proxy, attorney or representative at a meeting of Shareholders has one vote on a vote taken by a show of hands, and on a poll has one vote for every fully paid Share held by him or her.

Dividend Rights

Subject to any rights or restrictions attached to a class of shares issued with any special rights (at present there are none), the profits of the Company which the Directors may from time to time determine to distribute by way of dividend are divisible among the holders of Shares in proportion to the number of Shares held by them, and if the Shares are partly paid, to a proportion of that dividend equal to the proportion which the amount paid on those Shares bears to the total amounts payable on those Shares.

Rights on Winding Up

Subject to the rights of holders of shares with special rights in a winding up (at present there are none), on a winding up of the Company all assets that may be legally distributed among the Shareholders will be distributed in the proportion which the amount paid on the Shares of a Shareholder bears to the total amount paid on the Shares of all Shareholders. This right is subject to the discretion of the liquidator of the Company, with the sanction of a special resolution, to divide the assets in such proportion as the liquidator may determine amongst the Shareholders.

Transfer of Shares

Subject to the Corporations Act and any other applicable laws, and the Constitution of the Company and the ASX Listing Rules, Shares are freely transferable.

Variation of Rights

The rights attached to Shares may only be varied or abrogated with the consent in writing of the holders of three quarters of the Shares, or with the sanction of a special resolution passed at a general meeting.

$\mathbf{S}$ . MATERIAL CONTRACTS

Apart from the contracts described below there are no contracts considered to be material in enabling Shareholders and their professional advisors to make an informed assessment of the effect of the Issue on the Company.

8.1 Underwriting Agreement

The Company has entered into an underwriting agreement dated 17 December 2004 with the Underwriter (Paterson Securities Limited) to underwrite the Issue by lodging or causing to be lodged applications for the Shortfall Shares by the date specified in the Underwriting Agreement.

The Underwriter will receive from the Company:

a lead manager fee of \$30,000: $(a)$
$(b)$ an underwriting commission of 5% of the price of all New Shares offered under the Issue being a total of \$23,098; and
$(c)$ reimbursement of expenses reasonably incurred by the Underwriter in relation to the Issue.

Pursuant to clause 13.1 of the Underwriting Agreement, the Underwriter may without cost or liability to themselves and without prejudice to any rights under clause 10 (fees and expenses) or clause 11 (GST) of the Underwriting Agreement or for damages arising out of any breach by the Company of its representations, warranties or obligations under the Underwriting Agreement, by notice in writing to the Company, upon or at any time prior to completion of the allotment of the New Shares in accordance with the Prospectus terminate its obligations under this Agreement if:

(Indices and Gold price fall): any of the S&P ASX 200 Index or the S&P ASX 200 $(a)$ Materials Index as published by ASX is at any time after the date of this Agreement 10% or more below its respective levels as at the close of business on the Business Day prior to the date of this Agreement or the price of gold on the London Metals Exchange is at anytime after the date of this Agreement 10% or more below if price at the close of business on the Business Day prior to the date of the Underwriting Agreement; or
(b) (Prospectus): the Company does not lodge the Prospectus on the date agreed with the Underwriter or the Prospectus or the Offer is withdrawn by the Company: or
(Copies of Prospectus): the Company fails to comply with clause 4.1(d) (provision of $(c)$ copies of the Prospectus) and such failure is not remedied within 2 days;
$(d)$ (No Official Quotation): official quotation of the New Shares (in accordance with the ASX Listing Rules) has not been granted within 1 business day of the Closing Date or by such other date determined by the Underwriter, or having been granted, is subsequently withdrawn, withheld or qualified; or
$(e)$ (Supplementary prospectus):
$(i)$ the Underwriter, having elected not to exercise its right to terminate its obligations under the Underwriting Agreement as a result of an occurrence as described in clause $13.1(p)(vii)$ , forms the view on reasonable grounds that a supplementary or replacement prospectus should be lodged with ASIC for any of the reasons referred to in section 719 of the Corporations Act and the Company fails to lodge a supplementary or replacement prospectus in such form and content and within such time as the Underwriter may reasonably require; or
the Company lodges a supplementary or replacement prospectus without the prior $(ii)$ written agreement of the Underwriter; or
$(f)$ (Misleading Prospectus): it transpires that there is a statement in the Prospectus that is misleading or deceptive or likely to mislead or deceive, or that there is an omission from the Prospectus (having regard to the provisions of section 713 of the Corporations Act) or if any

statement in the Prospectus becomes or misleading or deceptive or likely to mislead or deceive or if the issue of the Prospectus is or becomes misleading or deceptive or likely to mislead or deceive:

(Non-compliance with disclosure requirements): it transpires that the Prospectus does $(g)$ not contain all the information required by section 713 of the Corporations Act;
$(h)$ (Restriction on allotment): the Company is prevented from allotting the New Shares within the time required by the Underwriting Agreement, the Corporations Act, the ASX Listing Rules, any statute, regulation or order of a court of competent jurisdiction by ASIC, ASX or any court of competent jurisdiction or any governmental or semi-governmental agency or authority;
$(i)$ (Withdrawal of consent to Prospectus): any person (other than the Underwriter) who has previously consented to the inclusion of its, his or her name in the Prospectus or to be named in the Prospectus, withdraws that consent:
$(i)$ (ASIC application): an application is made by ASIC for an order under section 1324B or any other provision of the Corporations Act in relation to the Prospectus, the date the Company should have given the Underwriter notice of any shortfall has arrived, and that application has not been dismissed or withdrawn;
$(k)$ (ASIC hearing): ASIC gives notice of its intention to hold a hearing under section 739 or any other provision of the Corporations Act in relation to the Prospectus to determine if it should make a stop order in relation to the Prospectus or the ASIC makes an interim or final stop order in relation to the Prospectus under section 739 or any other provision of the Corporations Act;
$(1)$ (Takeovers Panel): the Takeovers Panel makes a declaration that circumstances in relation to the affairs of the Company are unacceptable circumstances under Pt 6.10 of the Corporations Act, or an application for such a declaration is made to the Takeovers Panel;
$(m)$ (Authorisation) any authorisation which is material to anything referred to in the Prospectus is repealed, revoked or terminated or expires, or is modified or amended in a manner unacceptable to the Underwriter:
$(n)$ (Sub-underwriters): any of the Company Sub-Underwriters (the Company introduced subunderwriters specified in Schedule 3 to the Underwriting Agreement) do not comply with its obligations under the sub-underwriting agreements or threaten to not comply with its respective obligations under the sub-underwriting agreements; or
$(0)$ (FIRB Approval) any of the Company Sub-Underwriters that are introduced by the Company and are required to obtain FIRB approval do not receive such approval by the Closing Date: or
(Termination Events): subject always to clause 13.2, any of the following events occurs: $(p)$
(Default): default or breach by the Company under the Underwriting Agreement of $(i)$ any terms, condition, covenant or undertaking; or
$(ii)$ (Incorrect or untrue representation): any representation, warranty or undertaking given by the Company in the Underwriting Agreement is or becomes untrue or incorrect: or
$(iii)$ (Contravention of constitution or Act): a contravention by the Company of any provision of its constitution, the Corporations Act, the ASX Listing Rules or any other applicable legislation or any policy or requirement of ASIC or ASX; or
$(iv)$ (Adverse change): an event occurs which gives rise to a material adverse effect or any adverse change or any development including a prospective adverse change after the date of the Underwriting Agreement in the assets, liabilities, financial position, trading results, profits, forecasts, losses, prospects, business or operations of the Company including, without limitation, if any forecast in the Prospectus

becomes incapable of being met or in the Underwriter's reasonable opinion, unlikely to be met in the projected time; or

$(v)$ (Hostilities): there is an outbreak of hostilities or a material escalation of hostilities (whether or not war has been declared) after the date of this agreement involving one or more of Australia, New Zealand, Indonesia, Japan, Russia, the United Kingdom, the United States of America, India, Pakistan, or the Peoples Republic of China, Israel or any member of the European Union, or a terrorist act is perpetrated on any of those countries or any diplomatic military, commercial or political establishment of any of those countries anywhere in the world; or
$(vi)$ (Error in Due Diligence Results): it transpires that any of the Company's due diligence results or any part of the material used by the Company to verify statements in this Prospectus was false, misleading or deceptive or that there was an omission from them: or
(Significant change): a "new circumstance" as referred to in section 719(1) of the $(vii)$ Corporations Act arises that is materially adverse from the point of view of an investor :or
$(viii)$ (Public statements): without the prior approval of the Underwriter a public statement is made by the Company in relation to the Offer, the Issue or the Prospectus; or
$(ix)$ (Misleading information): any information supplied at any time by the Company or any person on its behalf to the Underwriter in respect of any aspect of the Offer or the Issue or the affairs of the Company is or becomes misleading or deceptive or likely to mislead or deceive and having been brought to the attention of the Company, this information has not been corrected by the company within a reasonable period of time; or
$(x)$ (Official quotation qualified): the official quotation of the New Shares (in accordance with the ASX Listing Rules) is qualified or conditional other than as set out in the definition of "Official Quotation" in the ASX Listing Rules; or
$(x_i)$ (Change in Act or policy): there is introduced, or there is a public announcement of a proposal to introduce, into the Parliament of Australia or any of its States or Territories any Act or prospective Act or budget or the Reserve Bank of Australia or any Commonwealth or State authority adopts or announces a proposal to adopt any new, or any major change in, existing, monetary, taxation, exchange or fiscal policy; or
a Prescribed Occurrence (as defined in the $(xii)$ (Prescribed Occurrence): Underwriting Agreement) occurs; or
$(xiii)$ (Suspension of debt payments): the Company suspends payment of its debts generally; or
$(xiv)$ (Event of Insolvency): an Event of Insolvency occurs in respect of a Relevant Company; or
(Judgment against a Relevant Company): a judgment in an amount exceeding $(xy)$ \$25,000 is obtained against the Company and is not set aside or satisfied within 7 days; or
$(xvi)$ (Litigation): litigation, arbitration, administrative or industrial proceedings are after the date of the Underwriting Agreement commenced or threatened against the Company, other than any claims foreshadowed in the Prospectus; or
$(xvii)$ (Board and senior management composition): there is a change in the composition of the Board before completion of the Issue without the prior written consent of the Underwriter: or
(xviii) (Indictable offence): a Director or senior manager of the Company is charged with an indictable offence: or
(Change in shareholdings): there is a material change in the major or controlling $(xix)$ shareholdings of the Company or a takeover offer or scheme of arrangement pursuant to Chapter 5 or 6 of the Corporations Act is publicly announced in relation to the Company; or
(Timetable): there is a delay in any specified date in the Timetable which is greater $(xx)$ than 3 Business Days; or
(Force Majeure): a Force Majeure affecting the Company's business or any $(xxi)$ obligation under the Underwriting Agreement lasting in excess of 7 days occurs; or
$(xxi)$ (Certain resolutions passed): the Company passes or takes any steps to pass a resolution under section 254N, section 257A or section 260B of the Corporations Act or a resolution to amend its constitution without the prior written consent of the Underwriter: or
(xxiii) (Capital Structure): the Company alters its capital structure in any manner not contemplated by the Prospectus; or
(xxiv) (Investigation): any person is appointed under any legislation in respect of companies to investigate the affairs of the Company; or
(Market Conditions): a suspension or material limitation in trading generally on $(xxy)$ ASX occurs or any material adverse change or disruption occurs in the existing financial markets, political or economic conditions of Australia, Japan, the United Kingdom, the United States of America or other international financial markets; or
(xxvi) (Suspension): the Company is removed from the Official List of the ASX or the Shares become suspended from Official Quotation on ASX and that suspension is not lifted within 24 hours following such suspension.

Under clause 13.2 of the Underwriting Agreement, the Underwriter may not exercise its rights under paragraph 13.1(p) unless, in the reasonable opinion of the Underwriter reached in good faith, the occurrence of a termination event has or is likely to have, or two or more termination events together have or are likely to have a material adverse effect or could give rise to a liability of the Underwriter under the Corporations Act or otherwise.

8.2 Sub-underwriting Agreements

The Underwriter has entered in to various sub-underwriting agreements in relation to the Offer including the following agreements with Directors and their related entities:

The Underwriter has entered into a firm sub-underwriting agreement with Tagora Pty Ltd $(a)$ dated 8 December 2004 whereby Tagora Pty Ltd has agreed to sub-underwrite 1,428,571 New Shares to be issued under this Prospectus at a cost of \$100,000 by lodging or causing to be lodged an Acceptance Form for such New Shares. These New Shares comprise part of Tagora's Entitlement.

Tagora Pty Ltd will receive a fee of \$5,000 from the Underwriter representing 5% of the amount it has sub-underwritten.

The agreement is on usual and arms length commercial terms. Tagora Pty Ltd's obligations may be terminated if the Underwriter terminates the Underwriting Agreement.

$(b)$ The Underwriter has entered into firm sub-underwriting agreements with each of Horseshoe Exploration Pty Ltd, Pacific Quest Investments Pty Ltd and Mr Roderick Smith and each dated 8 December 2004 whereby Horseshoe Exploration Pty Ltd, Pacific Quest Investments Pty Ltd and Mr Roderick Smith have agreed to sub-underwrite 2,395,953 New Shares to be issued under this Prospectus at a cost of \$167,717 by lodging or causing to be lodged Acceptance Forms for such New Shares. These New Shares comprise each of Horseshoe Exploration Pty Ltd, Pacific Quest Investments Pty Ltd and Mr Roderick Smith's full Entitlement.

Horseshoe Exploration Pty Ltd, Pacific Quest Investments Pty Ltd and Mr Roderick Smith will receive a fee of \$8,386 from the Underwriter representing 5% of the amount they have sub-underwritten.

The agreement is on usual and arms length commercial terms. Horseshoe Exploration Pty Ltd, Pacific Quest Investments Pty Ltd and Mr Roderick Smith's obligations may be terminated if the Underwriter terminates the Underwriting Agreement.

$(c)$ The Underwriter has entered into firm sub-underwriting agreements with each of Inxs Pty Ltd and Mr Michael Fry and each dated 8 December 2004 whereby Inxs Pty Ltd and Mr Michael Fry have agreed to sub-underwrite 314,000 New Shares to be issued under this Prospectus at a cost of \$21,980 by lodging or causing to be lodged Acceptance Forms for such New Shares. These New Shares comprise each of Inxs Pty Ltd and Mr Michael Fry's full Entitlement. Mr Fry, a Director of the Company, is a director and major shareholder Inxs Ptv Ltd.

Inxs Pty Ltd and Mr Michael Fry will receive a fee of \$1,099 from the Underwriter representing 5% of the amount they have sub-underwritten.

The agreement is on usual and arms length commercial terms. Inxs Pty Ltd and Mr Michael Fry's obligations may be terminated if the Underwriter terminates the Underwriting Agreement.

$(d)$ The Underwriter has entered into a general sub-underwriting agreement with lnxs Pty Ltd dated 8 December 2004 whereby lnxs Pty Ltd has agreed to sub-underwrite the issue of up to 714,285 of the New Shares at a cost of up to \$50,000 by lodging or causing to be lodged applications for the number of Shortfall Shares calculated in accordance with the following formula:

$$
N = (A-B-C) \times \frac{D}{E}
$$

where:

$N =$ the number of the Shortfall Shares to be subscribed for by Inxs Pty Ltd.
$A =$ the total number of New Shares underwritten by the Underwriter.
$B =$ the total number of New Shares for which valid applications are received at the Closing Date).
$C =$ the total number of New Shares sub-underwritten firm (pursuant to the agreements referred to in subparagraphs $8.2(a)$ , (b) and (c) of this Prospectus).
$D =$ the maximum number of New Shares Inxs Pty Ltd has agreed to sub-underwrite.
$P =$ the total number of New Shares in the Issue underwritten by the Underwriter less the total number of New Shares sub-underwritten firm (pursuant to the agreements referred to in subparagraphs $8.2(a)$ , (b) and (c) of this Prospectus).

Inxs Pty Ltd will receive a fee of up to \$2,500 from the Underwriter representing 5% of the sub-underwritten amount.

The agreement is on usual and arms length commercial terms. Inxs Pty Ltd's obligations may be terminated if the Underwriter terminates the Underwriting Agreement.

$(e)$ The Underwriter has entered into a general sub-underwriting agreement with Fats Pty Ltd dated 8 December 2004 whereby Fats Pty Ltd has agreed to sub-underwrite the issue of up to 714,285 of the New Shares at a cost of up to \$50,000 by lodging or causing to be lodged applications for the number of Shortfall Shares calculated in accordance with the following formula^.

$$
N = (A-B-C) \times \frac{D}{E}
$$

where:

$N =$ the number of the Shortfall Shares to be subscribed for by Inxs Pty Ltd.
$A =$ the total number of New Shares underwritten by the Underwriter.
$B =$ the total number of New Shares for which valid applications are received at the Closing Date).
$C =$ the total number of New Shares sub-underwritten firm (pursuant to the agreements referred to in subparagraphs $8.2(a)$ , (b) and (c) of this Prospectus).
$D =$ the maximum number of New Shares Fats Pty Ltd has agreed to sub-underwrite.
$E =$ the total number of New Shares in the Issue underwritten by the Underwriter less the total number of New Shares sub-underwritten firm (pursuant to the agreements referred to in subparagraphs $8.2(a)$ , (b) and (c) of this Prospectus).

Fats Pty Ltd will receive a fee of up to \$2,500 from the Underwriter representing 5% of the sub-underwritten amount. Mr Macpherson, a Director of the Company, is a director and maior shareholder Fats Pty Ltd.

The agreement is on usual and arms length commercial terms. Fats Pty Ltd's obligations may be terminated if the Underwriter terminates the Underwriting Agreement.

All of the sub-underwriters in the sub-underwriting agreements referred to in subparagraphs $8.2(a)$ , (b), (c), (d) and (e) of this Prospectus are classified as Company Sub-underwriters for purposes of the termination clause in the Underwriting Agreement.

8.3 Royalty Agreement

The Company entered into the Royalty Agreement dated 16 October 2000 with Xstrata and Xstrata AG as guarantor. Xstrata is a wholly owned subsidiary of Xstrata plc, a company listed on the London Stock Exchange. In 2002, Xstrata (Schweiz) AG took an assignment of and assumed the guarantee given by Xstrata AG in the Royalty Agreement. Xstrata (Schweiz) AG is also a wholly owned subsidiary of Xstrata plc.

The project (that is the Windimurra Vanadium Project) is defined in the Royalty Agreement to mean the development and operation of open cut mines within the relevant tenements including a crushing, grinding and processing plant and associated infrastructure for the purpose of mining, beneficiating and processing vanadium ore initially to produce approximately 7,200 tonnes per annum of fused vanadium pentoxide flakes over an estimated 30 year period.

The Royalty Agreement provides that the term of the Windimurra Vanadium Project continues until mining and processing operations have finally and permanently ceased and all rehabilitation obligations in respect of the project tenements have been satisfied in full. Xstrata must at all times during the term cause the project to be operated (unless operations are suspended, the timing and occurrence of which is in Xstrata's discretion) and maintained in a proper and efficient manner and also must maintain the tenements in good order.

In each calendar year Xstrata agrees to pay to the Company a production royalty of 15% of the net revenue from the Windimurra Vanadium Project throughout the term. Net revenue' is defined to mean 100% of the gross revenue received by Xstrata for sales on an arm's length basis of mineral products which are produced by the project (and including the gross price paid on an arm's length basis by the purchaser of any plant and equipment no longer required for the purposes of the project) less all project operating costs incurred in generating that gross revenue and a charge for depreciation at the rate of 10% per annum in respect of expenditure of a capital nature on depreciable items purchased or constructed for the purposes of the project until that expenditure has been fully amortised.

To ensure payment of a minimum royalty, Xstrata must pay the Company on each 1 January, 1 April, 1 July and 1 October throughout the term the sum of \$125,000 (\$500,000 per annum). By 15 February after each calendar year Xstrata is required to calculate and pay its best estimate of the royalty for the previous calendar year (less the amount of the quarterly payments of royalty paid in the previous calendar year). Xstrata must provide the Company with a statement, certified by Xstrata's auditors, detailing its calculation of the royalty payment by 15 February each year. Each statement is taken to be true and correct after the expiration of 30 days from the date it is given to the Company unless within that period the Company gives Xstrata notice taking exception to the statement. If the parties are unable to resolve a dispute within 15 days of the Company giving of the notice, the dispute is subject to expert determination.

The Royalty Agreement is governed by the laws of New South Wales and the parties irrevocably submit to the non-exclusive jurisdiction of New South Wales courts.

In February 2003 Xstrata ceased production and suspended operations of the project and on 10 May 2004 Xstrata publicly announced the permanent closure (termination) of the Windimurra Vanadium Project and that Xstrata had sold all the plant and equipment at Windimurra, other than anything to do with electricity and gas supply. Since announcing the permanent closure of the Windimurra Vanadium Project, Xstrata has paid the quarterly royalty payments of \$125,000 due on 1 July and 1 October 2004.

$9.$ ADDITIONAL INFORMATION

$9.1$ Market prices of Shares

The highest and lowest recorded sale prices of the Company's Shares quoted on ASX during the 3 months immediately preceding 20 December 2004 being the date of this Prospectus was \$0.185 on 17 December 2004 and \$0.071 on 4 November 2004 respectively.

The last market sale price of the Company's Shares on ASX on the last day that trading took place in the Shares prior to the date of this Prospectus was \$0.185 cents per share on 17 December 2004.

$9.2$ Taxation

The Directors do not consider that it is appropriate to give potential applicants advice regarding the taxation consequences of disposing of Rights or applying for New Shares under this Prospectus. It is the responsibility of all persons to satisfy themselves of the particular taxation treatment that applies to them by consulting their own professional tax advisors before disposing of Rights or investing in New Shares. Taxation consequences will depend on particular circumstances. Neither the Company nor any of its officers accept any liability or responsibility in respect of the taxation consequences of the matters referred to above or any other taxation consequences connected with a disposal of Rights or an investment in the New Shares.

9.3 Continuous Disclosure and Documents Available for Inspection

This is a "reduced content" Prospectus is issued pursuant to section 713 of the Corporations Act using the special prospectus content rules for continuously quoted securities.

The Company is a disclosing entity within the meaning of the Corporations Act. As such, it is subject to regular reporting and disclosure obligations. Therefore, the Company is only required to provide in this Prospectus information on the effect of the issue of the New Shares on the Company and the rights attaching to the New Shares being offered by this Prospectus. There is no obligation to include general information in relation to the assets and liabilities, financial position and performance, profits and losses and prospects of the Company. Information which is already in the public domain has not been reported in this Prospectus, other than that which is necessary to make this Prospectus complete.

The Company believes it has fully complied with the general and specific requirements as set forth by ASIC and ASX in relation to continuous disclosure, which includes notifying ASX of any information concerning the Company that a reasonable person would expect to have a material effect on the price or value of securities of the Company.

Copies of documents lodged at ASIC in relation to the Company may be obtained from, or inspected at, the offices of the ASIC. The Company will provide a copy of each of the following documents. free of charge, to any person on request between the date of issue of this Prospectus and the Closing Date:

$(a)$ the 2004 Financial Report lodged with ASIC on 30 September 2004 (being the last financial report for a financial year to be lodged with the ASIC in relation to the Company before the issue of this Prospectus);
any continuous disclosure notices given by the Company during the period starting after $(b)$ lodgement with ASIC of the 2004 Financial Report and ending before the lodgement of this Prospectus with the ASIC.

The documents referred to in paragraph (b) are as follows:

Date	Subject Matter
16 December 2004	Xstrata Litigation Listed for Trial
30 November 2004	New Constitution
30 November 2004	Appendix 3B - As Part of Remuneration

29 November 2004	Results of AGM
16 November 2004	Government Inquiry into Vanadium Resources at Windimurra
9 November 2004	Change in substantial holding
9 November 2004	Change of Director's interest notice
8 November 2004	Ceasing to be a substantial holder
5 November 2004	Xstrata have a case to answer

As this Prospectus is issued under the special prospectus content rules set out in section 713 of the Corporations Act, it contains details specific to the Issue. If you require any further information in relation to the Company, the Directors recommend that you take advantage of the ability to inspect or obtain copies of the documents referred to above. All requests for copies of the above documents should be addressed to Company Secretary, Precious Metals Australia Limited at PO Box 467, Claremont, Western Australia, 6910 or by facsimile to +61 8 9321 3523

None of the information referred to in this Section 9.3 of this Prospectus is incorporated by reference into this Prospectus or is issued with this Prospectus.

$9.4$ Risks of Investing

The Directors strongly recommend that Shareholders examine the contents of this Prospectus and consult their professional advisors before deciding whether to apply for the New Shares offered to them. In addition to this, the Directors consider that the following summary, which is not exhaustive, represents some of the major risk factors, which may affect the future financial performance of the Company and the value of an investment in it.

Xstrata Litigation

The outcome of the Xstrata Litigation (described in Section 5.3 of this Prospectus) is uncertain. Although the Directors believe that the Company will ultimately successfully prosecute the Xstrata Litigation, there is a risk that the Company will not be successful and that this result may have a materially adverse effect on the financial position of the Company. If the matter proceeds through to trial and the Company is not successful, or the Company unilaterally withdraws from the proceedings (without the agreement of the defendants) prior to trial, then in addition to paying its own legal costs the Company would usually be ordered to pay the legal costs of the defendants on a party and party basis.

Rovalty Agreement

Despite the permanent closure of the Windimurra Vanadium Project, the Royalty Agreement (described in Section 8.3 of this Prospectus) provides for the Company to continue to receive the minimum royalty at the rate of \$500,000 per annum (paid in quarterly instalments) until operations of the Windimurra Vanadium project are 'Terminated'. Under the Royalty Agreement, the project is not 'Terminated' until, amongst other things, all rehabilitation obligations in respect of the (project) tenements have been fully satisfied. The Directors estimate it will take no less than approximately 4 years for all rehabilitation obligations to be met.

If the Company is not successful in the Xstrata Litigation or it is not settled on terms acceptable to the Company, the permanent closure of the Windimurra Vanadium Project will result in the cessation of the Company's minimum royalty entitlement (of \$500,000 per annum) under the Royalty Agreement once all rehabilitation obligations in respect of the (project) tenements have been fully satisfied.

Carrying Value of Royalty

The carrying value of the royalty payable to the Company under the Royalty Agreement as a noncurrent asset has been retained by the Directors in the 2004 Financial Report at its recoverable amount of \$2,000,000 after taking into account the Directors estimate that it will take no less than approximately 4 years for all rehabilitation obligations in respect of the (project) tenements have been fully satisfied. There is a risk that the actual value of the minimum royalty may be less than \$2,000,000 if Xstrata can complete such rehabilitation obligations in less than 4 years. Since announcing the permanent closure of the Windimurra Vanadium Project, Xstrata has paid the quarterly royalty payments of \$125,000 due on 1 July and 1 October 2004.

Future Investments

The Directors assess various potential exploration and mining projects that come to the Company from time to time but can offer no forecast of profitability of any future projects that the Company may participate in. The search for a suitable project could take a considerable length of time. There is a risk that the length of time taken to locate a future project, the nature of the project and the eventual profitability of that future project, may not be in accord with individual shareholders and investors' expectations.

The business of mineral exploration and mining project development by its nature contains elements of significant risk. Ultimate and continuous success of these activities is dependent on many factors such as the discovery and/or acquisition of economically recoverable ore reserves, successful completion of bankable feasibility studies, access to adequate capital for project development, design and construction of efficient mining and processing facilities within capital expenditure budgets, securing and maintaining title to tenements and resolution of native title claims (if any), obtaining consents and approvals necessary for the conduct of exploration and mining and access to competent operational management and prudent financial administration, including the availability and reliability of appropriately skilled and experienced employees, contractors and consultants.

Adverse weather conditions over a prolonged period can adversely affect exploration, mine development, mining operations and the timing of revenues.

Whether or not income will result from exploration projects and development programs depends on the successful establishment of mining operations. Factors including costs, actual mineralisation, consistency and reliability of ore grades and commodity prices affect successful project development and mining operations.

Mining is an industry which has become subject to increasing environmental responsibility and liability. The potential for liability is an ever-present risk. The use and disposal of chemicals in the mining industry is under constant legislative scrutiny and regulation.

General

Share market conditions may affect the price of the Company's listed securities regardless of operating performance. Share market conditions and the price of Company's securities on the ASX are affected by many factors including, but not limited to the general economic outlook, currency fluctuations, commodity prices, customer preferences, interest rates, inflation, changes in investor sentiment towards particular market sectors and the demand and supply for capital and changes in the law. These factors could also have an impact on the Company's operating costs and profit margins. The Company's future revenues and share price can thus be affected by such factors, which may be beyond the control of the Company.

Investors should note that commodity prices are influenced by physical and investment demand for those commodities. Fluctuations in commodity prices may influence individual projects in which the Company has an interest or in which the Company is looking to acquire an interest.

No undertaking can be given that the New Shares offered by this Prospectus will not decrease in value. Due to the Company's current circumstances, the New Shares offered by this Prospectus should be considered speculative. Shareholders should read this Prospectus in its entirety and, if unclear about any aspects, consult their advisors before deciding whether to accept or apply for the New Shares. Neither the Company nor the Directors warrant the future performance of the Company or any return on any investment made pursuant to this Prospectus.

$9.5$ Litigation

Other than the Xstrata Litigation, there is no litigation, arbitration or proceedings pending against or involving the company as at the date of this Prospectus.

$9.6$ Interests of Directors

$(a)$ Other than as set out in this Prospectus no Director has, or has had in the 2 years before the date of this Prospectus any interest in:
$(i)$ the formation or promotion of the Company
$(ii)$ any property of or proposed to be acquired by the Company in connection with its formation or promotion; or
$(iii)$ the offer of New Shares under this Prospectus,

and no amounts have been paid or agreed to be paid, or no benefits have been given or agreed to be given to any Director

to induce him to become or to qualify him as a Director; or $(iv)$
for the services provided by him in connection with the formation or promotion of $(v)$ the Company or the offer of New Shares under this Prospectus.
$(b)$ In the 2003 and 2004 financial years and the period 1 July 2004 to 31 October 2004 Directors or their related entities received the following benefits (including salary, Director's fees, consulting fees superannuation and other benefits):

	$1/7/2004$ to 31/10/2004 \$	2004 Financial Year \$	2003 Financial Year \$
R J H Smith	45,668	37,334
Earl of Warwick	15,332	29,924	16,350
M J Fry	3,750	4,088
I K Macpherson	21,724	25,181
J A Wall		19,364	16,350
A C Pilmer		66,864	16,350

Notes:

$\mathbf{I}$ . Messrs JA Wall and AC Pilmer resigned on 3 March 2004
$\overline{2}$ . In the period 1 July 2003 to 30 June 2004 the Company paid \$5.189 rent inclusive of outgoings and exclusive of GST on the Company's principal place of business at commercial rates or less, to an entity related to the Earl of Warwick.
1. Mr Smith is remunerated as the chief executive officer at an annual rate of \$150,000 inclusive of superannuation.
The chairman receives a fee of \$50,000 per annum inclusive of superannuation. $4.$
1. The non-executive Directors each receive a fee of \$15,000 per annum. The fees payable to Mr Macpherson are paid to Ord Group Pty Ltd, an accounting firm of which Mr Macpherson is a director and shareholder.
The interests of Directors in the Shares and Option of the Company at the date of this $(c)$ Prospectus are as follows:

	Direct		Indirect
Director	Shares	Options	Shares	Options
The Earl of Warwick			9,123,490	$\blacksquare$
M J Fry	300,000	500,000	1,270,000	$\blacksquare$
R J H Smith	512,001	$\blacksquare$	11,467,762	$\blacksquare$
I K Macpherson				500,000

Notes:

the Earl of Warwick's 9,123,490 Shares are held by Tagora Pty Ltd, a company in $\mathbf{1}$ which the Earl of Warwick is a director and maior shareholder.
$\overline{2}$ . The 11,467,762 Shares held indirectly by Mr Smith are held as to 1,926,333 Shares by Horseshoe Exploration Pty Ltd, a company in which Mr Smith is a director and 100% shareholder, and as 9,541,429 Shares by Pacific Quest Investments Pty Ltd, a company in which Mr Smith is a director and major shareholder.
The 1,270,000 Shares held indirectly by Mr Fry are held by Inxs Pty Ltd, a company 3. in which Mr Fry is a director and major shareholder.
$\overline{4}$ . These options granted to each of Mr MJ Fry and Mr IK Macpherson have an exercise price of \$0.15 each with an expiry date 3 years from the date of grant. The options held indirectly by Mr Macpherson are held by Fats Pty Ltd, a company in which Mr Macpherson is a director and major shareholder.

9.7 Interests of Experts and Named Parties

Except as set out in this Prospectus:

no person named in this Prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus (including the Underwriter to the Issue); or
a promoter of the Company.

(each a "relevant person") holds at the time of lodgement of this Prospectus with ASIC, or has held within 2 years before the lodgement of this Prospectus with ASIC, an interest in:

the formation or promotion of the Company $(a)$
$(b)$ any property of or proposed to be acquired by the Company in connection with its formation or promotion; or
$(e)$ the Offer.

Except as set out in this Prospectus, no one had paid or agreed to pay any amount or given or agreed to give any benefit for services provided by a relevant person in connection with the formation or promotion of the Company or the Offer.

Paterson Securities Limited as Underwriter will receive in consideration for its services in that capacity fees as detailed in Section 8.1 of this Prospectus. Paterson Securities Limited has been paid \$0.00 (exclusive of GST) for services provided to the Company in the two years leading up to the date of this Prospectus.

Richard Payne & Associates has been paid \$100,838 (exclusive of GST) for legal services provided to the Company in the two years leading up to the date of this Prospectus including \$11,000 (exclusive of GST) for legal services relating to the preparation of this Prospectus. Richard Payne & Associates will be paid further estimated fees for legal services relating to the preparation of this Prospectus of \$4,000 (exclusive of GST).

Ord Group Pty Limited has been paid \$47,737 (exclusive of GST) for accounting services provided to the Company in the two years leading up to the date of this Prospectus. Ord Group Pty Limited will be paid estimated fees for accounting services relating to the preparation of this Prospectus of \$17,000 (exclusive of GST).

KPMG has acted as auditors to the Company and has received approximately \$18,300 (exclusive of GST) for its services rendered in the two years leading up to the date of this Prospectus.

Advanced Share Registry Services has provided and will continue to provide services in its capacity as the Company's share registry in respect of the Offer and has been paid approximately \$18,300. (exclusive of GST) for services in the two years leading up to the date of this Prospectus.

9.8 Expenses of the Issue

The total expenses of the Issue are estimated to be \$99,098 (exclusive of GST) comprising:

Legal and due diligence costs		32,000
Underwriting and management fee		53,098
Share registry fee		3,000
Printing and postage		4,000
Other administrative expenses	п	7.000
Total		99,098

9.9 Consents

None of the parties referred to below has made any statement that is included in this Prospectus or any statement on which a statement included in this Prospectus is said to be based, other than as specified below.

Each of the parties referred to below to the maximum extent permitted by law expressly disclaims and takes no responsibility for any statements in or omissions from, this Prospectus other than reference to its name and a statement included in this Prospectus with the consent of that party as specified below.

Paterson Securities Limited has given its written consent, and not withdrawn that consent, to be named as Lead Manager and Underwriter to the Offer in the form and context in which it is named. Paterson Securities Limited was not involved in the preparation of any part of this Prospectus and did not authorise or cause the issue of this Prospectus. Paterson Securities Limited makes no express or implied representation or warranty in relation to the Company, the Prospectus or the Offer and does not make any statement in this Prospectus, nor is any statement in it based on any statement made by Paterson Securities Limited. To the maximum extent permitted by law, Patersons Securities Limited expressly disclaims and takes no responsibility for any material in, or omission from, this Prospectus other than the reference to its name.

Richard Payne & Associates has given its written consent, and not withdrawn that consent, to be named as Solicitors to the Company in the form and context in which it is named. Richard Payne & Associates has not caused or authorised the issue of the Prospectus or the making of the Offer.

Ord Group Pty Limited has given, and has not withdrawn, its written consent to being named in this Prospectus as the Company's accountants and to the inclusion in this Prospectus of the proforma statements of Financial Position as at 31 October 2004 in Section 6.3 of this Prospectus. Ord Group Pty Limited has not caused or authorised the issue of the Prospectus or the making of the Offer.

KPMG has given, and has not withdrawn, its written consent to being named in this Prospectus as auditors of the Company and to the inclusion of the audited consolidated Statements of Financial Position as at 30 June 2004 in Section 6.4 of this Prospectus. KPMG was not involved in the preparation of any part of this Prospectus, has not authorised or caused the issue of this Prospectus or the making of the Offer and makes no express or implied representation or warranty in relation to the Company, the Prospectus or the Offer.

Advanced Share Registry Services has given, and has not withdrawn, its written consent to be named in this Prospectus as share registry of the Company. Advanced Share Registry Services was not involved in the preparation of any part of this Prospectus and has not authorised or caused the issue of the Prospectus or the making of the Offer.

10. DEFINITIONS

2004 Financial Report	means the financial report for the Company for the year ended 30 June 2004 audited by KPMG, Chartered Accountants, dated 30 September 2004 and lodged with the ASIC on 30 September 2004.
Acceptance Form	means the entitlement and acceptance form accompanying this Prospectus.
Applicant	means a person who submits an Acceptance Form under this Prospectus.
ASIC	means the Australian Securities and Investments Commission.
ASX	means Australian Stock Exchange Limited.
ASX Listing Rules	means the official listing rules of ASX.
Business Day	means a day other than a Saturday or Sunday on which banks are open for business in Perth, Western Australia
Closing Date	means the date on which the Offer closes being the last date for the receipt of completed Application Forms for New Shares offered by this Prospectus being 17 January 2005 unless varied by the Company.
Corporations Act	means the Corporations Act 2001.
Director(s)	means the directors of the Company from time to time and any one of them.
Dollars or \$	means Australian dollars. All amounts in this Prospectus are in Australian dollars unless otherwise stated.
Entitlement	means the entitlement to subscribe for New Shares afforded to the holder of Rights.
Issue	means the issue of New Shares comprised in the Offer.
New Shares	means fully paid Shares issued at a price of \$0.07 per share pursuant to this Prospectus
Offer	means the offer of New Shares to Shareholders pursuant to this Prospectus on the basis of 1 New Share for every 5 Shares held at 5 pm WST on the Record Date.
Opening Date	means the first date for receipt of completed Acceptance Forms for the New Shares which is 9.00 am WST on 31 December 2004.
Options	means the existing listed options to subscribe for Shares which expire on 1 December 2005, exercisable at an exercise price of \$2.00 per Share.
PMA or Company	means Precious Metals Australia Limited ACN 009 131 533.
Project	means the Windimurra Vanadium Project.
Prospectus	means this Prospectus dated 20 December 2004.
Quoted	means quoted on the ASX.
Record Date	5.00 pm WST on 30 December 2004.

Rights	means the right to subscribe for 1 New Share for every 5 Shares held on the Record Date and Right has a corresponding meaning.
Royalty Agreement	means the Royalty Agreement dated 16 October 2000 made between the Company, Xstrata and Xstrata AG.
Share(s)	means fully paid ordinary share $(s)$ in the capital of the Company.
Shareholder	means shareholder in the Company.
Shortfall Shares	means New Shares not taken up by Shareholders pursuant to their Entitlements.
Underwriter	means Patersons Securities Limited ABN 69 008 896 311
Underwriting Agreement	means the agreement between the Company and the Underwriter dated 17 December 2004.
Xstrata Litigation	means the legal proceedings in the Commercial List of the Supreme Court of New South Wales No. 59113 of 2004 between the Company as plaintiff, Xstrata as first defendant and Xstrata (Schweiz) AG as second defendant.
Windimurra Vanadium Project	means the mine and beneficiation plant situated at Windimurra, Western Australia in which the Company has a royalty interest pursuant to the Royalty Agreement.
WST	means Western Australian Standard Time.
Xstrata	means Xstrata Windimurra Pty Ltd ACN 084 456 682

DIRECTORS' STATEMENT 11.

In accordance with section 720 of the Corporations Act, each of the Directors of the Company has consented in writing to the lodgement of this Prospectus with the ASIC and not withdrawn that consent.

Dated 20 December 2004

Signed by Roderick Smith for and on behalf of Precious Metals Australia Limited

This page has been intentionally left blank

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IT SHOULD BE READ IN ITS ENTIRETY. IF YOU ARE IN DOUBT AS TO WHAT ACTION TO TAKE YOU SHOULD CONSULT YOUR STOCKBROKER, ACCOUNTANT OR OTHER PROFESSIONAL ADVISER WITHOUT DELAY.

PRECIOUS METALS AUSTRALIA LIMITED

ABN: 65 009 131 533

REGISTERED OFFICE: Level 2, 47 Colin Street, West Perth. Western Australia, 6005 SHARE REGISTRY: Advanced Share Registry, Level 7, 200 Adelaide Terrace, Perth, Western Australia 6000

ENTITLEMENT AND ACCEPTANCE FORM

RENOUNCEABLE ISSUE CLOSING 5.00 PM WESTERN STANDARD TIME ON 17 JANUARY 2005

HIN/SRN
Form Number
Securities Sub Register
Shares held at 30 December 2004
Entitlement to New Shares @ \$0.07
Amount Payable for Full Entitlement

ISSUE OF 6,599.543 NEW SHARES ON THE BASIS OF ONE NEW SHARE FOR EVERY 5 SHARES HELD AS AT 30 DECEMBER 2004. AT AN ISSUE PRICE OF \$0.07 PER SHARE.

To the Directors. PRECIOUS METALS AUSTRALIA LIMITED

$(1)$ I/We do hereby accept:

PLEASE COMPLETE

NEW TOTAL ОF NUMBER SHARES ACCEPTED	AMOUNT ENCLOSED (AT \$0.07 PER SHARE)	CONTACT TELEPHONE NUMBER

of my/our entitlement to subscribe for the above mentioned New Shares.

CHEQUE DETAILS	. TYP AWER 79 a construction of the construction of the construction of the construction of the construction of the construction of the construction of the construction of the construction of the construction of the construction of t . .	7. . 3 A N I ---- . .	NCH. contract to the contract RRANG .	וני ממן מי האז ה . ——————————————————

$(2)$ I/We hereby authorise you to place my/our name(s) on the register of shareholders in respect of the number of shares issued to me/us.

I/We agree to be bound by the constitution of the Company. $(3)$

$(4)$ I/We acknowledge that the return of this form with the required remittance will constitute acceptance of the Shares without communication of such acceptance to me/us.

I/We enclose my/our cheque payable to PRECIOUS METALS AUSTRALIA LIMITED for the amount shown above being payment at $(5)$ the rate of \$0.07 per Share.

THIS FORM DOES NOT REQUIRE SIGNATURE UNLESS YOU WISH TO ADVISE CHANGE OF ADDRESS

CHANGE OF ADDRESS: If your address is different to that shown above and you are an Issuer Sponsored holder, please advise new details below. Broker sponsored holders must direct their change of address to the sponsoring broker.

* Signature(s): This advice is to be signed by the holder of the securities. All joint holders must sign. A Company advice is to be signed as per the Company's Constitution. If signed under Power of Attorney, a Certified Copy of the relevant Power of Attorney document must be exhibited to the Registry. The Attorney declares that he/she has had no notice of revocation of the Power of Attorney.

ADDRESS NEW	SIGNATURE *

THE ACCEPTANCE FORM WITH PAYMENT IN FULL MUST BE RECEIVED BY THE SHARE REGISTRY NO LATER THAN 5.00 PM WESTERN STANDARD TIME ON 17 JANUARY 2005. THIS FORM WILL NOT BE VALID IF ANOTHER NAME IS SUBSTITUTED FOR THE NAME PRINTED ON THE FORM.

PLEASE REFER TO INSTRUCTIONS OVERLEAF

INSTRUCTIONS FOR HANDLING ENTITLEMENT AND ACCEPTANCE FORM

PLEASE READ THESE INSTRUCTIONS CAREFULLY. YOUR ENTITLEMENT IN THIS ISSUE IS VALUABLE. ENOUIRIES SHOULD BE DIRECTED TO THE COMPANY SECRETARY, LEVEL 2, 47 COLIN STREET, WEST PERTH WA 6005

Telephone: 08 9321 3514 Fax: 08 9321 3523

If you wish to take up your Entitlement in full $\mathbf{I}$

If you are taking up your Entitlement in full, please complete this form overleaf, attach your cheque made payable to "PRECIOUS METALS AUSTRALIA LIMITED" for the amount payable in Australian currency as stated overleaf and forward it so as to reach Advanced Share Registry Services, PO Box 6283, East Perth, Western Australia 6892 or Level 7, 200 Adelaide Terrace, Perth Western Australia, 6000, by no later than 5.00 pm Perth time on 17 January 2005. This form is not to be used to take up of Shares in excess of the number to which you are entitled as set out overleaf.

$2.$ If you wish to take up your Entitlement in part

If you wish to take up part of your Entitlement attach your cheque made payable to "PRECIOUS METALS AUSTRALIA LIMITED" for the amount payable in Australian currency for that part of your Entitlement which you wish to accept and forward it so as to reach Advanced Share Registry Services, PO Box 6283, East Perth, Western Australia 6892 or Level 7, 200 Adelaide Terrace. Perth Western Australia, 6000, by no later than 5.00 pm Perth time on 17 January 2005. This form is not to be used to take up of Shares in excess of the number to which you are entitled as set out overleaf.

Payment 3.

Payment must be made in Australian currency and cheques should be made payable to "PRECIOUS METALS AUSTRALIA LIMITED" and crossed "Not Negotiable". Receipts for payments will not be issued.

4. Entitlement not taken up

If you decide not to take up all or part Entitlements to Shares these will be allotted at the discretion of the Directors as detailed in the Prospectus and you will receive no benefit from the Issue. It is therefore important that you take action to take up your Entitlement in accordance with the above instructions.

THE ISSUE CLOSES 5.00 PM W S T 17 JANUARY 2005

AI assistant

TITANIUM SANDS LIMITED — Capital/Financing Update 2004

65956_rns_2004-12-19_a004fd6a-d046-4d9e-a364-939835ad6147.pdf

PROSPECTUS

UNDERWRITTEN ISSUE

IMPORTANT INFORMATION

TABLE OF CONTENTS

IMPORTANT NOTICE

PRIVACY

CORPORATE DIRECTORY $\mathbf{1}$

Directors

Company Secretary Ian K Macpherson

Registered Office

Principal Place of Business

Share Registry

Auditor

Solicitors

Lead Manager and Underwriter to the Issue

Website - www.pmal.com.au

TIMETABLE AND IMPORTANT DATES $2.$

DETAILS OF THE OFFER 4.

4.1 The Issne

$4.2$ Purpose of the Issue

4.3 Issue Price

4.4 Entitlements

$4.5$ What you may do - Choices available

$4.5.1$ To accept your Entitlement in whole or part

$4.5.2$ To sell your Entitlement in whole or in part only

$4.5.3$ To transfer your Entitlement other than on ASX

$4.5.4$ Rights not taken $up - if you do nothing$

$4.5.5$ Payment

4.6 Underwriting

4.7 Minimum Subscription and Oversubscription

4.8 Rights attaching to New Shares

4.9 Allotment

4.10 ASX Listing

4.11 Overseas Shareholders

Enquiries 4.12

$5.$ COMPANY OVERVIEW

Mineral Exploration Company 5.1

$5.2$ Royalty Agreement

5.3 Xstrata Litigation

EFFECT OF THE ISSUE ON THE COMPANY $6.$

6.1 Number of Shares and Options on Issue

6.2 Effect of the Issue

6.3 Financial Reporting Standards

6.4 Pro forma Statement of Financial Position

6.5 Effect on Shareholder interests

6.6 Relevant Interest to more than 20% of the issued voting shares

6.7 Shareholders with a Relevant Interest in More than 20% of the Issued Voting Shares

RIGHTS ATTACHING TO NEW SHARES $7.$

Voting Rights

Dividend Rights

Rights on Winding Up

Transfer of Shares

Variation of Rights

$\mathbf{S}$ . MATERIAL CONTRACTS

8.1 Underwriting Agreement

8.2 Sub-underwriting Agreements

8.3 Royalty Agreement

$9.$ ADDITIONAL INFORMATION

$9.1$ Market prices of Shares

$9.2$ Taxation

9.3 Continuous Disclosure and Documents Available for Inspection

$9.4$ Risks of Investing

Xstrata Litigation

Rovalty Agreement

Carrying Value of Royalty

Future Investments

General

$9.5$ Litigation

$9.6$ Interests of Directors

Notes:

9.7 Interests of Experts and Named Parties

9.8 Expenses of the Issue

9.9 Consents

10. DEFINITIONS

DIRECTORS' STATEMENT 11.

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IT SHOULD BE READ IN ITS ENTIRETY. IF YOU ARE IN DOUBT AS TO WHAT ACTION TO TAKE YOU SHOULD CONSULT YOUR STOCKBROKER, ACCOUNTANT OR OTHER PROFESSIONAL ADVISER WITHOUT DELAY.

PRECIOUS METALS AUSTRALIA LIMITED

TITANIUM SANDS LIMITED Capital/Financing Update 2004