TITANIUM SANDS LIMITED — Proxy Solicitation & Information Statement 2006

Sep 4, 2006

PRECIOUS METALS AUSTRALIA LIMITED ACN 009 131 533

PRECIOUS METALS AUSTRALIA LIMITED

NOTICE OF GENERAL MEETING OF SHAREHOLDERS

INCORPORATING

EXPLANATORY STATEMENT

AND

PROXY FORM

Date of Meeting $27^th$ September 2006

Time of Meeting $10.00am$

Place of Meeting Precious Metals Australia Limited $4^th$ Floor 76 Kings Park Road West Perth Western Australia 6005

PRECIOUS METALS AUSTRALIA LIMITED ACN 009 131 533

NOTICE OF GENERAL MEETING OF SHAREHOLDERS

NOTICE IS HEREBY GIVEN that a General Meeting of the Shareholders of Precious Metals Australia Limited ACN 009 131 533 ("PMA" or "Company") will be held at the Company's Offices Level 4, 76 Kings Park Road, West Perth WA 6005 on Wednesday 27th September 2006 at 10.00 am for the purpose of transacting the following business.

An Explanatory Memorandum containing information in relation to the following Resolutions and a Proxy Form accompanies this Notice.

AGENDA

RESOLUTION 1: ISSUE OF SHARES TO NOBLE RESOURCES LIMITED

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

"That, for the purposes of Listing Rule 7.1 and all other purposes, the Company issue 3.728.549 fully paid ordinary shares in the capital of the Company to Noble Resources Limited ("Noble") pursuant to the Vanadium Sales and Marketing Agreement entered into by the Company, Windimurra Vanadium Pty Ltd, Noble and Noble Group Ltd, dated 28 July 2006 as described in the Explanatory Memorandum attached to and forming part of this Notice of Meeting"

Short Explanation:

The Company and Windimurra Vanadium Pty Ltd entered into a Vanadium Sales and Marketing Agreement with Noble and Noble Group Ltd on 28 July 2006 that, among other things, provides for Noble to provide a minimum price for vanadium sales. In return for Noble entering into the Vanadium Sales and Marketing Agreement and providing the minimum price, the Company has agreed to pay Noble A\$10,000,000 to be satisfied by the issue of 3,728,549 fully paid ordinary Shares. Further details of the Vanadium Sales and Marketing Agreement are set out in the attached Explanatory Memorandum.

Voting Exclusion Statement:

The Company will disregard any votes cast on this resolution by Noble and any of its associates. However, the Company need not disregard a vote if it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or it is cast by a person chairing the Meeting as a proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

RESOLUTION 2: ISSUE OF A CONVERTIBLE NOTE TO NOBLE RESOURCES LIMITED

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

"That, for the purposes of Listing Rule 7.1 and all other purposes, the Company issue to Noble Resources Limited ("Noble") a Convertible Note with a face value of A\$8,202,207 which is convertible into 3,728,549 fully paid ordinary shares (subject to adjustment in accordance with the Adjustment Mechanism) pursuant to a Heads of Agreement with Noble dated 28 July 2006 as described in the Explanatory Memorandum attached to and forming part of this Notice of Meeting."

Short Explanation:

The Company and Windimurra Vanadium Pty Ltd entered into a Heads of Agreement with Noble dated 28 July 2006 whereby among other things the Company would issue a Convertible Note with a face value of A\$8.202.207 to Noble. The terms of issue of the Convertible Note and the ability of the Company to draw down on it are set out in the attached Explanatory Memorandum

Voting Exclusion Statement:

The Company will disregard any votes cast on this resolution by Noble and any of its associates. However, the Company need not disregard a vote if it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or it is cast by a person chairing the Meeting as a proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

RESOLUTION 3 - RATIFICATION OF PREVIOUS ISSUE OF SECURITIES

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

"That, for the purpose of Rule 7.4 of the Listing Rules of the Australian Stock Exchange Limited and for all other purposes, the Shareholders ratify and approve the issue of 9,680,000 fully paid ordinary shares in the Company at A\$1.44 per share which were issued on 20 December 2005 on the terms and conditions set out in the Explanatory Statement attached to and forming part of this Notice of Meeting."

Short Explanation: An equity issue can be ratified by shareholders in accordance with ASX Listing Rule 7.4. This allows the Conpany the flexibility to issue shares and options to subscribe for fully paid shares in the future up to the threshold of 15% of its total ordinary securities in any 12 month period. Please refer to the Explanatory Statement for details.

Voting Exclusion Statement: The Company will disregard any votes cast on this resolution by any person who may have participated in the issue and any of their associates. However, the Company need not disregard a vote if it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form, or it is cast by a person chairing the Meeting as a proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

RESOLUTION 4 - ELECTION OF MR A J GREY

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

"That Mr Anthony J Grey retires pursuant to clause 9.3 (f) of the Company's Constitution and, being eligible, offers himself for re election, be re-elected a director of the Company".

Short Explanation: Mr AJ Grey was appointed a Director and Non-Executive Chairman by a resolution of the board on 1 December 2005. The company's constitution provides that any director appointed since the last meeting of members, shall retire at the next meeting of members.

RESOLUTION 5: ISSUE OF OPTIONS TO A DIRECTOR - MR A J GREY

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

"That for the purposes of Chapter $2E$ of the Corporations Act and ASX Listing Rule 10.11, the Shareholders approve the issue to Mr AJ Grey (or his nominee) of $650,000$ options to subscribe for fully paid ordinary shares in the Company on the terms and conditions set out in the Explanatory Memorandum attached to and forming part of this Notice of Meeting."

Short Explanation:

Mr AJ Grey was appointed as the non-executive Chairman of the Company on 1 December 2005. At the time of his appointment it was agreed by the Board that he would be entitled to receive up to 650,000 options exercisable at A\$1.50. The price of the Company's shares on the 10 days immediate prior to his appointment was A\$1.41. The issue of options is an integral part of his remuneration. The options will be issued in 4 equal instalments, the first on commencement and thereafter each six months of service. Full terms and conditions of the options are set out in the attached Explanatory Memorandum

Voting Exclusion Statement:

The Company will disregard any votes cast on Resolution 5 by Mr AJ Grey and any person associated with him. However, the Company need not disregard a vote if it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

RESOLUTION 6- ELECTION OF MR S R BUNN

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

"That Mr Shaun R Bunn retires pursuant to clause 9.3(f) of the Company's Constitution and, being eligible, offers himself for re election, be re-elected a director of the Company".

Short Explanation: Mr SR Bunn was appointed a Director by a resolution of the board on 3 February 2006. The company's constitution provides that any director appointed since the last meeting of members, shall retire at the next meeting of members.

RESOLUTION 7: ISSUE OF OPTIONS TO A DIRECTOR - MR S R BUNN

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

"That for the purposes of Chapter $2E$ of the Corporations Act and ASX Listing Rule 10.11, the Shareholders approve the issue to Mr S R Bunn (or his nominee) of $500,000$ options to subscribe for fully paid ordinary shares in the Company on the terms and conditions set out in the Explanatory Memorandum attached to and forming part of this Notice of Meeting."

Short Explanation:

Mr S R Bunn was appointed as Director of Operations of the Company on 3 February 2006. As a part of his remuneration, it was agreed by the Board at the time of his appointment that he would be entitled to receive up to 500,000 options exercisable at prices between A\$1.50 - \$2.20. The price of the Company's shares on the 10 days immediate prior to his employment was A\$1.43. The options will be issued in 4 equal instalments, the first on completion of 3 months of service and thereafter each three months of service. Full terms and conditions of the options are set out in the attached Explanatory Memorandum.

Voting Exclusion Statement:

The Company will disregard any votes cast on Resolution 7 by Mr S R Bunn and any person associated with him. However, the Company need not disregard a vote if it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

RESOLUTION 8 - ELECTION OF MR M KIERNAN

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

"That Mr Michael Kiernan retires pursuant to clause 9.3(f) of the Company's Constitution and, being eligible, offers himself for re election, be re-elected a director of the Company".

Short Explanation: Mr Kiernan was appointed a Director by a resolution of the board on 7 August 2006 The Company's constitution provides that any director appointed since the last meeting of members, shall retire at the next meeting of members.

RESOLUTION 9: ISSUE OF OPTIONS TO A DIRECTOR - MR M KIERNAN

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

"That for the purposes of Chapter $2E$ of the Corporations Act and ASX Listing Rule 10.11, the Shareholders approve the issue to Mr M Kiernan (or his nominee) of 500,000 options to subscribe for fully paid ordinary shares in the Company on the terms and conditions set out in the Explanatory Memorandum attached to and forming part of this Notice of Meeting."

Short Explanation:

Mr M Kiernan was appointed as a non executive Director of the Company on 7 August 2006. As a part of his remuneration, it was agreed by the Board at the time of his appointment that he would be entitled to receive up to 500,000 options exercisable at a price of A\$2.20. The price of the Company's shares on the 10 days immediate prior to his appointment was A\$1.92. The options will vest as to 50% on issue and 50% 6 months from approval by Shareholders. Full terms and conditions of the options are set out in the attached Explanatory Memorandum.

Voting Exclusion Statement:

The Company will disregard any votes cast on Resolution 9 by Mr M Kiernan and any person associated with him. However, the Company need not disregard a vote if it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

WHO MAY VOTE

For the purposes of regulation 7.11.37 of the Corporations Regulations, the Company determines that members holding ordinary shares as at 10:00am on 25 September 2006 will be entitled to attend and vote at the General Meeting.

Proxies

• 1. A Shareholder of the Company entitled to attend and vote is entitled to appoint not more that two proxies. Where more than one proxy is appointed, each proxy must be appointed to represent a specified proportion of the Shareholder's voting rights. If the Shareholder appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half of the votes. A proxy need not be a Shareholder of the Company.
• 1. To be valid, a proxy form must be received by the Company by 10:00am on 25 September 2006 ("Proxy Deadline"). Proxies may be submitted:-
• $(a)$ By hand delivery to the Company's registered office at Level 4, 76 Kings Park Road West Perth Western Australia 6005;or
• By post addressed to Precious Metals Australia Limited, C/o Advanced Share Registry (b) PO Box 1156 Nedlands Western Australia 6009: or
• $(c)$ By facsimile at (08) 9389 7871.

A proxy appointment must be signed by the Shareholder or the Shareholder's attorney. Where the appointment is signed by the appointer's attorney, a certified copy of the authority, or the authority itself, must be lodged with the Company in one of the above ways by the Proxy Deadline. If facsimile transmission is used, the authority must be certified.

BY ORDER OF THE BOARD

Ham Bu

Shaun Bunn Director Date: 23 August 2006

PRECIOUS METALS AUSTRALIA LIMITED ACN 009 131 533

EXPLANATORY MEMORANDUM

This Explanatory Memorandum has been prepared for the purposes of the ASX Listing Rules and the Corporations Act. The purpose of this Explanatory Memorandum is to provide Shareholders with all the information known to the Company that is material to Shareholders in deciding whether or not to approve Resolutions 1 to 9 as set out in this Notice of Meeting.

The Directors recommend that Shareholders read this Explanatory Memorandum in full before making any decision in relation to the resolutions.

Certain capitalised terms in this Explanatory Memorandum are defined in the Glossary.

RESOLUTION 1: ISSUE OF SHARES TO NOBLE RESOURCES LIMITED

On 28 July 2006 the Company and Windimurra Vanadium Pty Ltd (Windimurra Vanadium), the special purpose subsidiary that holds the Windimurra mine assets, entered into a Vanadium Sales and Marketing Agreement ("Marketing Agreement") with Noble Resources Limited ("Noble") and Noble Group Limited (Noble Parent) for vanadium pentoxide and ferrovanadium produced from the Company's proposed Windimurra vanadium mine

Among other things the Marketing Agreement provides for the following:

• 1. Noble buys from Windimurra Vanadium 100% of the off take of vanadium products from Windimurra for the life of the mine.
• 1. For the first 7 years of the term of the Marketing Agreement, Noble must pay Windimurra Vanadium the market price, or a price equal to the cost of production. whichever is the higher, for vanadium products from the Windimurra mine. In this way, during the first 7 years, Noble will guarantee a minimum price for vanadium products from the Windimurra mine equal to at least the cost of production.
• 1. Noble will exclusively market and handle all distribution logistics for Windimurra vanadium pentoxide and ferrovanadium worldwide through its international network of offices. Noble will be paid a fee by Windimurra Vanadium based on the value of sales achieved at commercial rates for this service.
• 1. Noble Parent has agreed to guarantee the performance of Noble's payment obligations under the Marketing Agreement.
• 1. In consideration for Noble entering into the Marketing Agreement, and agreeing to pay the minimum price for vanadium, the Company has agreed pay a once off fee of A\$10,000,000 which is to be satisfied by the issue to Noble of 3,728,549 Shares ("Consideration Shares").

Conditions precedent to the issue of the above Shares to Noble (which must be satisfied on or before 31 December 2006 or any later date agreed by the parties) are:

• 1. the approval of the allotment and issue of the Consideration Shares by the members of the Company in General Meeting and the issue of those Consideration Shares once all other conditions precedent have been satisfied;
• 1. the boards of the Company and Windimurra Vanadium approve the development of the Windimurra mine; and
• 1. Windimurra Vanadium has entered into financing for the Windimurra mine on terms which, acting reasonably, are reasonably satisfactory to Windimurra Vanadium.

Listing Rule 7.1 provides that a Listed Entity may not issue more than 15% of its issued capital in a 12 month period without obtaining the approval of its members. On 20 December 2005, being within 12 months preceding this Notice, the Company issued approximately 10.183.586 Shares, via a placement and as a result of the exercise of options. As a result of these issues being more than the 15% of issued capital, as that number is calculated in accordance with Listing Rule 7.1, the Company is required to seek the approval of members for the issue of the Shares to Noble under the Marketing Agreement.

Resolution 1 seeks the approval of members to issue 3,728,549 Shares to Noble in accordance with the Marketing Agreement. Pursuant to Listing Rule 7.3, the following information is provided:

• 1. The maximum number of Shares to be issued under Resolution 1 is 3,728,549.
• 1. The shares will be issued within 3 months of approval by members and satisfaction of the conditions precedent set out in the Marketing Agreement.
• 1. The price of the Shares issued pursuant to Resolution 1 is equivalent to A\$2.68 per Share.
• 1. The Shares issued pursuant to Resolution 1 will be issued to Noble Resources Limited.
• 1. The new Shares issued pursuant to Resolution 1 will rank pari passu with, and will enjoy the same rights as, all other Shares.
• 1. The Shares issued pursuant to Resolution 1 will effectively raise A\$10,000,000 which is intended to be used to pay Noble for entering into the Marketing Agreement and providing the minimum price.

This issue will have the effect of:

• 1. Increasing the total Shares on issue from 74,720,429 to 78,448,978, the effect of which would be to dilute the shareholding of existing shareholders by approximately 4.9%.
• 1. Increasing share capital and reserves of the Company by A\$10,000,000.
• 1. Increasing intangible assets of the Company by A\$10,000,000.

The Board believes that the strategic alliance between Noble and the Company that is created by the Marketing Agreement will provide significant support to the Company's efforts to develop the Windimurra mine and ensure that the mine is a highly competitive, long life world-class mine, producing high quality vanadium at a sustainable cost.

RESOLUTION 2: ISSUE OF A CONVERTIBLE NOTE TO NOBLE RESOURCES LIMITED

$\mathbf{L}$ INTRODUCTION

On 28 July 2006 the Company and Windimurra Vanadium entered into a Heads of Agreement with Noble Resources Limited ("Noble") for an investment in the Company and Windimurra Vanadium.

$2.$ DETAILS OF CONVERTIBLE NOTE

The Head of Agreement provides that Noble agrees (at the option of the Company) to subscribe for an unlisted and unsecured convertible note ("Convertible Note") on the following terms:

• 1. face value of A\$8,202,207;
• 1. term of 3 years (from when funds are first drawn);
• 1. convertible by Noble into 3,728,548 Shares (subject to adjustment in accordance with the Adjustment Mechanism) in the Company at any time during the term;
• 1. interest at LIBOR plus 2% payable by the Company quarterly in arrears from the date the Company draws funds under the Convertible Note to the earlier of expiry of the term, conversion by Noble or redemption of the Convertible Note by the Company;
• 1. the Company may repay the Convertible Note at any time during the term prior to conversion by Noble.
• 1. If the Company seeks to redeem the Convertible Note prior to expiry of the term, Noble may convert the Convertible Note.

The Convertible Note is subject to the following Conditions Precedent:

• 1. Completion of due diligence by Noble into the Company and Windimurra Vanadium to Noble's satisfaction on or before 27 September 2006.
• 1. Approval of the issue of the Convertible Note by shareholders of the Company in General Meeting.

OPTION OVER WINDIMURRA VANADIUM $\overline{3}$ .

In addition to the Convertible Note, the Heads of Agreement further provides that:

• 1. Noble has an option to subscribe for 9.99% of the then issued capital of Windimurra Vanadium, the special purpose company which holds the Windimurra mine assets, which option may be exercised on or before 27 September 2006.
• 1. If Noble exercises the option, the subscription price for the Windimurra Vanadium shares is A\$13,500,000.

Noble may exercise the option referred to above by:

• 1. Noble executing and delivering to the Company a Windimurra Vanadium Shareholders Agreement and Windimurra Vanadium Subscription Agreement in the form agreed with the Company by 27 September 2006.
• 1. Noble paying the Company the subscription price (A\$13,500,000) for the Windimurra Vanadium shares.

$\overline{\mathbf{4}}$ . ADJUSTMENT MECHANISM

The Company, Noble and Windimurra Vanadium have agreed to adjust the number of PMA shares issued on conversion of the Convertible Note in the circumstances set out below.

• 1. If, prior to the conversion of the Convertible Note, PMA makes a Pro Rata Issue (as defined in rule 19.12 of the ASX Listing Rules) of PMA Shares or other securities (other than a Bonus Issue), the number of Shares will be increased to that number that is equal to the face value of the Convertible Note (\$8,202,207) divided by the issue price of the Shares to be issued upon conversion of the Convertible Note. The issue price of the Shares upon conversion will be calculated in accordance with the formula set out in Listing Rule 6.22.2 as if:
• the Convertible Note were an option:
• the issue price of the PMA Shares were the exercise price of that option;
• the old exercise price was \$2.20 or, if this clause is applied on more than one occasion, the old exercise price determined on the last application of this clause: and
• " $E$ " is equal to 1.
• 1. If, prior to the conversion of the Convertible Note, PMA makes a Bonus Issue (as defined in rule 19.12 of the ASX Listing Rules) of PMA Shares to the holders of PMA Shares, the number of PMA Shares to be issued upon conversion of each Convertible Note will be increased in accordance with Listing Rule 6.22.3 by the number of PMA Shares which Noble as noteholder would have received if the Convertible Note had been converted before the record date for the Bonus Issue. The bonus PMA Shares will be paid up by PMA out of profits or reserves (as the case may be) in the same manner as was applied in the bonus issue and upon issue will rank pari passu in all respects with the other PMA Shares on issue at the date of the issue of the bonus PMA Shares.
• 1. If there is any Reorganisation which affects PMA prior to the conversion of the Convertible Note, the number of PMA Shares into which the Convertible Note is convertible will be reorganised so that Noble as noteholder will not be disadvantaged by the Reorganisation in their position relative to the holders of PMA Shares but at the same time will not receive a benefit that the holders of PMA Shares do not also receive (subject to the same provisions with respect to the rounding or entitlements as are sanctioned by the meeting of shareholders, if any, approving the Reorganisation). In all other respects, the terms and conditions of the Convertible Note will remain unchanged. PMA may, on the Reorganisation becoming effective, cancel the existing Convertible Note certificate and issue a new certificate evidencing the change in Nobel's entitlements as noteholder.
• 1. "Re-organisation" means any one or more of the following:

• any distribution of cash or securities by way of a return of capital: $\bullet$

• any share split, consolidation, subdivision or other similar action in respect of $\bullet$ the share capital of PMA; and

• any other reorganisation, reclassification or similar event with respect to the share capital of PMA.
• 1. PMA must make the adjustments referred to above as often as the events requiring them occur, so that adjustments are successively and cumulatively given effect.

$\mathbf{S}$ . LISTING RULE 7.1

Listing Rule 7.1 provides that a Listed Entity may not issue Equity Securities amounting to more than 15% of its issued capital in a 12 month period without obtaining the approval of its members. Chapter 19 of the Listing Rules classifies Convertible Securities (which includes the Convertible Note) as Equity Securities.

On 20 December 2005, being within 12 months preceding this Notice, the Company issued approximately 10,183,586 Shares, via a placement and as a result of the exercise of options. As a result of these issues being more than the 15% of Issued capital, as that number is calculated in accordance with Listing Rule 7.1, the Company is required to seek the approval of members to the issue of the Convertible Note.

Resolution 2 seeks the approval of members to issue the Convertible Note. Pursuant to Listing Rule 7.3 the following information is provided:

• 1. The total number of Shares to be issued under the Convertible Note is 3,728,549 (if the Convertible Note is converted into Shares) subject to adjustment in accordance with the Adjustment Mechanism.
• 1. The Convertible Note may only be issued following the completion of due diligence by Noble into the Company and Windimurra Vanadium to Noble's satisfaction, which is required to be completed by 27 September 2006, and approval of the issue of the Convertible Note by shareholders of the Company in General Meeting.
• 1. The issue price of the Shares issued pursuant to the Convertible Note (if converted) will be equivalent to A\$2.20 per Share, subject to adjustment in accordance with the Adjustment Mechanism.
• 1. Should the Convertible Note be converted into Shares by Noble those Shares issued will rank pari passu with, and will enjoy the same rights as, all other Shares.
• 1. The Shares issued pursuant to Resolution 2 will effectively raise A\$8,202,207, being the face value of the Convertible Note. The funds will be used for development of the Windimurra vanadium mine, the Company's other business, the service of the Company's debt and as working capital for the Company.

Issue of the Convertible Note will have the effect of:

• 1. When the Company makes a call for funds under the Convertible Note, increasing liabilities by A\$8,202,207, and cash by the same amount.
• 1. Should the Convertible Note be converted into Shares by Noble, increasing the total Shares on issue at that time by $3,729,549$ (subject to adjustment in accordance with the Adjustment Mechanism), and, as a result, reducing liabilities by A\$8,202,207 and increasing share capital and reserves by the same amount.

RESOLUTION 3 - RATIFICATION OF PREVIOUS ISSUE OF SECURITIES

Resolution 3 seeks approval under Listing Rule 7.4 to ratify the past issue of ordinary Shares for the purposes of Listing Rule 7.1, which provides generally that a company may not issue shares or options to subscribe for shares equal to more than 15% of the company's issued share capital in any 12 month period without subsequently obtaining shareholder approval.

The details of the issue are:

• 1. 9,680,000 ordinary shares were issued on 20 December 2005.
• 1. The issue price was A\$1.44 per share.
• 1. The shares issued have the same conditions as existing ordinary fully paid issued shares in the Company.
• 1. The shares were issued to a small number of international sophisticated investors.
• 1. The purpose of the placement was to raise funds of approximately A\$13,939,200 to provide working capital.

RESOLUTION 4 - ELECTION OF MR A J GREY

Resolution 4 seeks the election of Mr A J Grey as a director of the Company.

Rule 9.2(a) of the Company's constitution provides that the may appoint a person to be a director. Rule 9.3(f) of the Company's constitution further stipulates that a director appointed under Rule 9.2(a) must retire at the next meeting of members and is eligible for re-election at that meeting.

Section 201G of the Corporations Act provides that a company may appoint a person as a director by resolution passed in general meeting.

Mr AJ Grey was appointed as a director by a resolution of the board of the Company on 1 December 2005 and as such is required to retire at this the next meeting of members and, in accordance with Rule 9.3(f) of the Company's constitution, is eligible for re-election, and so offers himself for re-election as a director of the Company.

RESOLUTION 5: ISSUE OF OPTIONS TO A DIRECTOR - MR A J GREY

INTRODUCTION $\mathbf{L}$

Mr AJ Grey was appointed as the Non-Executive Chairman of the Company on 1 December 2005. At the time of his appointment it was agreed by the Board that he would be entitled to receive up to 650,000 options to acquire ordinary shares exercisable at A\$1.50 each. The issue of these options is an integral part of Mr Grey's remuneration as Chairman.

$2₁$ DETAILS OF OPTIONS TO BE GRANTED

Under the terms of his letter of appointment the Company is required to issue to Mr Grey the following options (subject to shareholder approval under Listing Rule 10.11):

Number	Issue Date	Exercise	Term
		Price (A\$)
162,500	At Appointment	\$1.50	5 years from issue
162,500	Completion of 6 months as a director	\$1.50	5 years from issue
162,500	Completion of 12 months as a director	\$1.50	5 years from issue
162,500	Completion of 18 months as a director	\$1.50	5 years from issue

Table 5-1 Details of options to be issued to Mr Grey

In order to recruit and retain an executive of Mr Grey's calibre and experience, the Company believes it is important to offer Mr Grey an options package that aligns his rewards with those of shareholders over a period of time. The Board believes options are a cost effective and efficient reward and incentive for the Company, as opposed to alternative forms of incentive, such as payment of additional cash consideration.

It is important for shareholders to note that the agreement with Mr Grey to issue options was struck in December 2005 at which time the price of the Company's shares on the 10 days immediate prior to his appointment was A\$1.41, however as the issue of the options required shareholder approval the issue was deferred until the next general meeting date.

$\mathbf{3}$ . APPROVAL BY SHAREHOLDERS

$3.1$ Chapter 2E of the Corporations Act

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

• $(a)$ the giving of the financial benefit falls within one of the nominated exceptions to the prohibition; or
• (b) shareholder approval is obtained prior to the giving of the financial benefit and the benefit is given within 15 months of obtaining the approval.

The Company requires shareholder approval to issue the options to Mr AJ Grey since:

• $(a)$ For the purposes of Chapter 2E, Mr AJ Grey is a related party of the Company as he is a director and the Non-Executive Chairman.
• $(b)$ The grant of up to 650,000 options to Mr AJ Grey is a financial benefit for the purposes of Chapter 2E of the Corporations Act.
• $(c)$ None of the nominated exceptions apply.

For the purposes of section 219 of the Corporations Act, the following information is provided to members:

The related parties to whom Resolution 5 would permit the financial benefit to be $(a)$ given

Mr Anthony J Grey, a director and Non-Executive Chairman of the Company, is the related party to whom the financial benefit will be given.

$(b)$ The nature of the financial benefit

The nature of the financial benefit proposed to be given is the grant of a total of 650,000 options for no consideration in the manner noted in the above table.

These options granted on the following terms and conditions:

• The options will be issued on the dates and exercise prices as set out in the $(i)$ table above, and vest immediately upon grant.
• Each option entitles the holder to acquire one fully paid ordinary share. Upon $(ii)$ payment of the exercise price, the holder will be shares that will rank pari passu with all existing fully paid ordinary shares.
• $(iii)$ Options will have a term of 5 years from date of grant, and (subject to point $(v)$ ) below) may be exercised at any time in multiples of 50,000.
• $(iv)$ Should Mr Grey cease to be a director before any of the options are issued then those options will be forfeit.
• $(v)$ Should Mr Grey cease to be a director, he shall have a period of 3 months from the date of his ceasing to be a director to exercise any options that are outstanding, otherwise outstanding options will be forfeited.

It is a requirement of ASIC that a dollar value be placed on the options to be issued. ASIC has indicated the Black-Scholes option price calculation method is an acceptable method for valuing options. A value for the options has been estimated using the Black-Scholes method.

In determining this value, the following assumptions have been made:

• $(vi)$ the Share price at the issue dates is assumed to be the closing price of the Company shares on 8 August 2006 which was \$2.00 per share;

• $(vii)$ the options are to be exercisable at A\$1.50;

• (viii) the options are expected to mature within 5 years of their date of issue, being at the latest 1 June 2012:

• $(ix)$ price volatility of the share is approximately 35% based on price movements in the past 6 months; and
• $(x)$ the average current risk-free interest rate is $6\%$ .

On this basis, the options are valued at approximately A\$0.63 per option. Therefore, the implied "value" of the options being granted to Mr Grey is as follows:

It should be noted that as the options which are subject to this valuation are issued in several tranches over time, it is not possible to arrive at a definitive valuation, as the future price of the shares is not known. Thus the share price at the time this Explanatory Memorandum was prepared has been used as a reasonable proxy value.

$(c)$ Directors' recommendations

All the Directors were available to consider the proposed Resolution 5.

All of the Directors, other than Mr AJ Grey (who do not have an interest in the outcome of Resolution 5) recommend that Shareholders approve the grant of the options under Resolution 5 for the reasons noted above.

Any other information that is reasonably required by members to make a $(d)$ decision whether it is in the best interest of the Company to pass Resolution 5 and that is known to the Company or any of its Directors:

• Resolution 5 would have the effect of giving power to the Directors to grant a $(i)$ total of 650,000 options. At the date of this notice, the Company has on issue 74,720,429 Shares and 1,100,000 options exercisable into Shares over various exercise periods and at various exercise prices.
• $(ii)$ If all of the 650,000 options granted as proposed above are exercised, the effect would be to dilute the shareholding of existing shareholders by approximately 0.008%.
• (iii) The market price of the Shares during the period of the options will normally determine whether or not option holders exercise the options. At the time any options are exercised and shares are issued pursuant to the exercise of the options, the Shares may be trading at a price which is higher than the exercise price of the options, as they are at the date of this notice.

• $(iv)$ As at the date of this notice, Mr AJ Grey does not hold any interest in the securities of the Company.

• $(v)$ Mr Grey is director and Non-Executive Chairman and as such receives director's fees from the Company. His director's fees are currently set at A\$75,000 per annum.

• $(vi)$ As noted in the introduction, Mr AJ Grey became a director on 1 December 2005 and, at the time he was appointed, the average price of the Company's Shares over the 10 days prior to his appointment was A\$1.41. The exercise price of the options was struck in relation to that price of Shares prevailing at that time
• The Directors do not consider that from an economic and commercial point of $(vii)$ view, there are any costs or detriments including opportunity costs or taxation consequences for the Company or benefits foregone by the Company in granting the options pursuant to Resolution 5.
• Neither the Directors or the Company are aware of any other information that $(viii)$ would reasonably be required by Shareholders to make a decision in relation to the financial benefits contemplated by Resolution 5 other than as set out in this Explanatory Memorandum.

$3.2$ Listing Rule 10.11

Listing Rule 10.11 requires member approval to the issue of securities to a related party of the Company. As Mr AJ Grey is a related party of the Company, shareholder approval under Listing Rule 10.11 is required for the grant of the options as set out in Resolution 5.

The following information is provided to members for the purpose of Listing Rule 10.13:

• $(a)$ the options will be granted to Mr AJ Grey, who is a director and Non-executive Chairman of the Company, or his nominee;
• the maximum number of options to be issued is 650,000; $(b)$
• the options the subject of Resolution 5 will be granted to Mr AJ Grey as set out in $(c)$ Table 5-1 above. The options are granted in stages, the latest being granted on 1 June $2007:$
• $(d)$ the options will be granted to Mr Grey for no consideration as part of his remuneration package as Chairman of the Company;
• $(e)$ no funds will be raised by the grant of the options; and
• $(f)$ the terms and conditions of the options are set out below.
• $(i)$ The options will be issued on the dates and exercise prices as set out in the table above, and vest immediately upon grant.

• $(ii)$ Each option entitles the holder to acquire one fully paid ordinary share. Upon payment of the exercise price, the holder will be allotted shares that will rank pari passu with all existing fully paid ordinary shares.

• Options will have a term of 5 years from date of grant, and (subject to point $(v)$ ) $(iii)$ below) may be exercised at any time in multiples of 50,000.

• $(iv)$ Should Mr Grey cease to be a director before any of the options are issued then those options will be forfeit.
• $(v)$ Should Mr Grey cease to be a director, he shall have a period of 3 months from the date of his ceasing to be a director to exercise any options that are outstanding, otherwise outstanding options will be forfeited.

$3.3$ Listing Rule 7.1

Approval of members is being sought pursuant to Listing Rule 10.11. Accordingly, under Listing Rule 7.2 Exception 14, approval under Listing Rule 7.1 is not required.

RESOLUTION 6 - ELECTION OF MR SR BUNN

Resolution 6 seeks the election of Mr SR Bunn as a director of the Company.

Rule 9.2(a) of the Company's constitution provides that the may appoint a person to be a director. Rule 9.3(f) of the Company's constitution further stipulates that a director appointed under Rule 9.2(a) must retire at the next meeting of members and is eligible for re-election at that meeting.

Section 201G of the Corporations Act provides that a company may appoint a person as a director by resolution passed in general meeting.

Mr SR Bunn was appointed as a director by a resolution of the board on 3 February 2006 and as such is required to retire at this the next meeting of members and, in accordance with Rule 9.3(f) of the Company's constitution, is eligible for re-election, and so offers himself for reelection as a director of the Company.

RESOLUTION 7: ISSUE OF OPTIONS TO A DIRECTOR - MR SR BUNN

$\mathbf{1}$ . INTRODUCTION

Mr SR Bunn was appointed as the Director of Operations of the Company and an employee on 3 February 2006. At the time of his appointment it was agreed by the Board that he would be entitled to receive up to 500,000 options to acquire Shares at exercisable as shown in Table 7-1 below. The issue of these options is an integral part of Mr Bunn's remuneration as an Executive Director.

$2.$ DETAILS OF OPTIONS TO BE GRANTED

Under the terms of his letter of appointment, the Company is required to issue to Mr Bunn the following options (subject to shareholder approval under Listing Rule 10.11):

Number	Issue Date	Exercise	Term
		Price (A\$)
125,000	Completion of 3 months employment	\$1.50	5 years from issue
125,000	Completion of 6 months employment	\$1.70	5 years from issue
125,000	Completion of 9 months employment	\$1.95	5 years from issue
125,000	Completion of 12 months employment	\$2.20	5 years from issue

			Table 7-1 Details of options to be issued to Mr Bunn
--	--	--	------------------------------------------------------	--	--	--	--

In order to recruit and retain an executive of Mr Bunn's calibre and experience, the Company believes it is important to offer Mr Bunn an options package that aligns his rewards with those of shareholders over a period of time. The Board believes options are a cost effective and efficient reward and incentive for the Company, as opposed to alternative forms of incentive, such as payment of additional cash consideration.

It is important for shareholders to note that the agreement with Mr Bunn to issue options was struck in February 2006 at which time the price of the Company's shares on the 10 days immediate prior to his employment was A\$1.43, however as the issue of the options required shareholder approval the issue was deferred until the next general meeting date.

APPROVAL BY SHAREHOLDERS $3₁$

$3.1$ Chapter 2E of the Corporations Act

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

• the giving of the financial benefit falls within one of the nominated exceptions to the $(a)$ prohibition; or
• shareholder approval is obtained prior to the giving of the financial benefit and the $(b)$ benefit is given within 15 months of obtaining the approval.

The Company requires shareholder approval to issue the options to Mr SR Bunn since:

• $(a)$ For the purposes of Chapter 2E, Mr SR Bunn is a related party of the Company as he is a director.
• $(b)$ The grant up to 500,000 options to Mr SR Bunn is a financial benefit for the purposes of Chapter 2E of the Corporations Act.
• $(c)$ None of the nominated exceptions apply.

For the purposes of section 219 of the Corporations Act, the following information is provided to members:

$(a)$ The related parties to whom Resolution 7 would permit the financial benefit to be given

Mr Shaun R Bunn, a director of the Company, is the related party to whom the financial benefit will be given.

$(b)$ The nature of the financial benefit

The nature of the financial benefit proposed to be given is the grant of a total of 500,000 options for no consideration in the manner noted in the above table.

These options granted on the following terms and conditions:

• $(i)$ The options will be issued on the dates and exercise prices as set out in the table above, and vest immediately upon grant.
• $(ii)$ Each option entitles the holder to acquire one fully paid ordinary share. Upon payment of the exercise price, the holder will be allotted fully paid ordinary shares that will rank pari passu with all existing fully paid ordinary shares.
• Options will have a term of 5 years from date of grant, and (subject to point $(v)$ ) $(iii)$ below) may be exercised at any time in multiples of 50,000.
• $(iv)$ Should Mr Bunn cease to be an employee or a director before any of the options are issued then those options will be forfeit.
• $(v)$ Should Mr Bunn cease to be employee or director he shall have a period of 1 month from the date of his ceasing to be a director, or employee to exercise any options that are outstanding, otherwise outstanding options will be forfeited.

It is a requirement of ASIC that a dollar value be placed on the options to be issued. ASIC has indicated the Black-Scholes option price calculation method is an acceptable method for valuing options. A value for the options has been estimated using the Black-Scholes method

In determining this value, the following assumptions have been made:

$(vi)$ the Share price at issue dates is assumed to be the closing price of the Company shares on 8 August 2006 which was \$2.00 per share;

• the options are to be exercisable at prices of A\$1.50 and \$2.20; $(vii)$
• $(viii)$ the options are expected to mature within 5 years of their date of issue, being at the latest 3 February 2012;
• $(ix)$ price volatility of the share is approximately 35% based on price movements in the past 6 months; and
• $(x)$ the average current risk-free interest rate is 6%.

On this basis, the options are valued at approximately A\$0.59 per option. Therefore, the implied "value" of the options being granted to Mr Bunn is as follows:

It should be noted that as the options which are subject to this valuation are issued in several tranches over time, it is not possible to arrive at a definitive valuation, as the future price of the shares is not known. Thus the share price at the time this Explanatory Memorandum was prepared has been used as a reasonable proxy value.

$(c)$ Directors' recommendations

All the Directors were available to consider the proposed Resolution 7.

All of the Directors, other than Mr SR Bunn (who do not have an interest in the outcome of Resolution 7) recommend that Shareholders approve the grant of the options under Resolution 7 for the reasons noted above.

$(d)$ Any other information that is reasonably required by members to make a decision whether it is in the best interest of the Company to pass Resolution 7 and that is known to the Company or any of its Directors:

• Resolution 7 would have the effect of giving power to the Directors to grant a $(i)$ total of 500,000 options. At the date of this Notice, the Company has on issue 74,720,429 fully paid ordinary shares and 1,100,000 options exercisable into Shares over various exercise periods and at various exercise prices.
• If all of the 500,000 options granted as proposed above are exercised, the effect $(ii)$ would be to dilute the shareholding of existing shareholders by approximately $0.006\%$ .

• $(iii)$ The market price of the Shares during the period of the options will normally determine whether or not option holders exercise the options. At the time any options are exercised and shares are issued pursuant to the exercise of the options, the Shares may be trading at a price which is higher than the exercise price of the options, as they are at the date of this notice.

• $(iv)$ As at the date of this notice, Mr SR Bunn does not hold any interest in the securities of the Company.

• $(v)$ Mr Bunn is an Executive Director and as such receives a salary from the Company. His current salary (inclusive of superannuation) is set at A\$220,000 per annum. In addition, Mr Bunn may be entitled to an annual cash bonus of up to 50% of base salary, by meeting or exceeding certain performance targets that are determined by the board.
• $(vi)$ As noted in the introduction, Mr SR Bunn became an employee and director on 3 February March 2006 and, at the time of entering into his employment contract, the average price of the Company's Shares over the 10 days prior to his appointment was A\$1.43. The exercise price of the options was struck in relation to that price of Shares prevailing at that time.
• $(vii)$ The Directors do not consider that from an economic and commercial point of view, there are any costs or detriments including opportunity costs or taxation consequences for the Company or benefits foregone by the Company in granting the options pursuant to Resolution 7.
• Neither the Directors or the Company are aware of any other information that $(viii)$ would reasonably be required by Shareholders to make a decision in relation to the financial benefits contemplated by Resolution 7 other than as set out in this Explanatory Memorandum.

$3.2$ Listing Rule 10.11

Listing Rule 10.11 requires member approval to the issue of securities to a related party of the Company. As Mr S R Bunn is a related party of the Company, shareholder approval under Listing Rule 10.11 is required for the grant of the options as set out in Resolution 7.

The following information is provided to members for the purpose of Listing Rule 10.13:

• the options will be granted to Mr SR Bunn, who is a Executive Director of the $(a)$ Company, or his nominee;
• the maximum number of options to be issued is 500,000; $(b)$
• the options the subject of Resolution 7 will be granted to Mr S R Bunn as set out in $(c)$ Table 7-1 above. The options are granted in stages, the latest grant being on 1 March $2007:$
• $(d)$ the options will be granted to Mr Bunn for no consideration as part of his remuneration package as an Executive Director of the Company;
• $(e)$ no funds will be raised by the grant of the options; and
• $(f)$ the terms and conditions of the options are set out below.

• The options will be issued on the dates and exercise prices as set out in the $(i)$ table above, and vest immediately upon grant.

• $(ii)$ Each option entitles the holder to acquire one fully paid ordinary share. Upon payment of the exercise price, the holder will be allotted fully paid ordinary shares that will rank pari passu with all existing fully paid ordinary shares.

• Options will have a term of 5 years from date of grant, and (subject to point $(v)$ ) $(iii)$ below) may be exercised at any time in multiples of 50,000.
• $(iv)$ Should Mr Bunn cease to be a director or an employee before any of the options are issued then those options will be forfeit.
• Should Mr Bunn cease to be a director or an employee, he shall have a period $(v)$ of 1 month from the date of his ceasing to be a director to exercise any options that are outstanding, otherwise outstanding options will be forfeited.

$3.3$ Listing Rule 7.1

Approval of members is being sought pursuant to Listing Rule 10.11. Accordingly, under Listing Rule 7.2 Exception 14, approval under Listing Rule 7.1 is not required.

RESOLUTION 8 - ELECTION OF MR M KIERNAN

Resolution 8 seeks the election of Mr M Kiernan as a director of the Company.

Rule 9.2(a) of the Company's constitution provides that the may appoint a person to be a director. Rule 9.3(f) of the Company's constitution further stipulates that a director appointed under Rule 9.2(a) must retire at the next meeting of members and is eligible for re-election at that meeting.

Section 201G of the Corporations Act provides that a company may appoint a person as a director by resolution passed in general meeting.

Mr M Kiernan was appointed as a director by a resolution of the board on 7 August 2006 and as such is required to retire at this the next meeting of members and In accordance with Rule 9.3(f) of the Company's constitution, is eligible for re-election, and so offers himself for reelection as a Director of the Company.

RESOLUTION 9: ISSUE OF OPTIONS TO A DIRECTOR - MR M KIERNAN

INTRODUCTION $\mathbf{L}$

Mr M Kiernan was appointed as a Non Executive Director of the Company on 7 August 2006. At the time of his appointment it was agreed by the Board that he would be entitled to receive up to 500,000 options to acquire Shares at exercisable as shown in Table 9-1 below. The issue of these options is an integral part of Mr Kiernan's remuneration as a Non Executive Director.

$2₁$ DETAILS OF OPTIONS TO BE GRANTED

Under the terms of his letter of appointment, the Company is required to issue to Mr Kiernan the following options (subject to shareholder approval under Listing Rule 10.11):

Number	Issue Date	Exercise	Term
		Price (A\$)
500,000	At Appointment with 50% vesting immediately and 50% vesting 6 months from approval by shareholders	\$2.20	5 years from issue

Table 9-1 Details of options to be issued to Mr Kiernan

In order to recruit and retain an executive of Mr Kiernan's calibre and experience, the Company believes it is important to offer Mr Kiernan an options package that aligns his rewards with those of shareholders over a period of time. The Board believes options are a cost effective and efficient reward and incentive for the Company, as opposed to alternative forms of incentive, such as payment of additional cash consideration.

It is important for shareholders to note that the agreement with Mr Kiernan to issue options was struck in August 2006 at which time the price of the Company's shares on the 10 days immediate prior to his appointment was A\$1.92 however as the issue of the options required shareholder approval the issue was deferred until the next general meeting date.

$\overline{3}$ . APPROVAL BY SHAREHOLDERS

$3.1$ Chapter 2E of the Corporations Act

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

• the giving of the financial benefit falls within one of the nominated exceptions to the $(a)$ prohibition; or
• $(b)$ shareholder approval is obtained prior to the giving of the financial benefit and the benefit is given within 15 months of obtaining the approval.

The Company requires shareholder approval to issue the options to Mr M Kiernan since:

For the purposes of Chapter 2E, Mr M Kiernan is a related party of the Company as he $(c)$ is a director.

• $(d)$ The grant up to 500,000 options to Mr M Kiernan is a financial benefit for the purposes of Chapter 2E of the Corporations Act.
• $(e)$ None of the nominated exceptions apply.

For the purposes of section 219 of the Corporations Act, the following information is provided to members:

$(f)$ The related parties to whom Resolution 9 would permit the financial benefit to be given

Mr Michael Kiernan, a director of the Company, is the related party to whom the financial benefit will be given.

The nature of the financial benefit $(g)$

The nature of the financial benefit proposed to be given is the grant of a total of 500,000 options for no consideration in the manner noted in the above table.

These options granted on the following terms and conditions:

• The options will be issued on the dates and exercise prices as set out in the $(i)$ table above, and 250,000 will vest immediately upon grant and 250,000 6 months from date of approval by shareholders
• $(ii)$ Each option entitles the holder to acquire one fully paid ordinary share. Upon payment of the exercise price, the holder will be allotted fully paid ordinary shares that will rank pari passu with all existing fully paid ordinary shares.
• Options will have a term of 5 years from date of grant, and (subject to point $(v)$ ) $(iii)$ below) may be exercised at any time in multiples of 50,000.
• Should Mr Kiernan cease to be a director before any of the options are issued $(iv)$ then those options will be forfeit.
• $(v)$ Should Mr Kiernan cease to be a director he shall have a period of 1 month from the date of his ceasing to be a director to exercise any options that are outstanding, otherwise outstanding options will be forfeited.

It is a requirement of ASIC that a dollar value be placed on the options to be issued. ASIC has indicated the Black-Scholes option price calculation method is an acceptable method for valuing options. A value for the options has been estimated using the Black-Scholes method.

In determining this value, the following assumptions have been made:

• $(vi)$ the Share price at issue dates is assumed to be closing price of the Company shares on 7 August 2006 which was \$2.00 per share;

• $(vii)$ the options are to be exercisable at A\$ \$2.20;

• (viii) the options are expected to mature within 5 years of their date of issue, being at the latest 7 August 2011;

• $(ix)$ price volatility of the share is approximately 35% based on price movements in the past 6 months; and
• $(x)$ the average current risk-free interest rate is $6\%$ .

On this basis, the options are valued at approximately A\$0.48 per option. Therefore, the implied "value" of the options being granted to Mr Kiernan is as follows:

It should be noted that as the options which are subject to this valuation are issued in several tranches over time, it is not possible to arrive at a definitive valuation, as the future price of the shares is not known. Thus the share price at the time this Explanatory Memorandum was prepared has been used as a reasonable proxy value.

$(h)$ Directors' recommendations

All the Directors were available to consider the proposed Resolution 9.

All of the Directors, other than Mr M Kiernan (who do not have an interest in the outcome of Resolution 9) recommend that Shareholders approve the grant of the options under Resolution 9 for the reasons noted above.

Any other information that is reasonably required by members to make a $(i)$ decision whether it is in the best interest of the Company to pass Resolution 9 and that is known to the Company or any of its Directors:

• Resolution 9 would have the effect of giving power to the Directors to grant a $(i)$ total of 500,000 options. At the date of this Notice, the Company has on issue 74,720,429 fully paid ordinary shares and 1,100,000 options exercisable into Shares over various exercise periods and at various exercise prices.
• $(ii)$ If all of the 500,000 options granted as proposed above are exercised, the effect would be to dilute the shareholding of existing shareholders by approximately 0.006%.
• (iii) The market price of the Shares during the period of the options will normally determine whether or not option holders exercise the options. At the time any options are exercised and shares are issued pursuant to the exercise of the options, the Shares may be trading at a price which is higher than the exercise price of the options, as they are at the date of this notice.

• As at the date of this notice, Mr M Kiernan has an indirect interest in 250,000 $(iv)$ Shares of the Company.

• $(v)$ Mr Kiernan is a Non Executive Director and as such receives director's fees from the Company. His director's fees are currently set at \$30,000

• $(vi)$ As noted in the introduction, Mr M Kiernan became a director on 7 August 2006 and, at the time of his appointment, the average price of the Company's Shares over the 10 days prior to his appointment was A\$1.92 The exercise price of the options was struck in relation to that price of Shares prevailing at that time
• The Directors do not consider that from an economic and commercial point of $(vii)$ view, there are any costs or detriments including opportunity costs or taxation consequences for the Company or benefits foregone by the Company in granting the options pursuant to Resolution 9.
• Neither the Directors or the Company are aware of any other information that $(viii)$ would reasonably be required by Shareholders to make a decision in relation to the financial benefits contemplated by Resolution 9 other than as set out in this Explanatory Memorandum.

$3.2$ Listing Rule 10.11

Listing Rule 10.11 requires member approval to the issue of securities to a related party of the Company. As Mr M Kiernan is a related party of the Company, shareholder approval under Listing Rule 10.11 is required for the grant of the options as set out in Resolution 9.

The following information is provided to members for the purpose of Listing Rule 10.13:

• $(a)$ the options will be granted to Mr M Kiernan, who is a Non Executive Director of the Company, or his nominee;
• $(b)$ the maximum number of options to be issued is 500,000;
• the options the subject of Resolution 9 will be granted to Mr M Kiernan as set out in $(c)$ Table 9-1 above.
• $(d)$ the options will be granted to Mr Kiernan for no consideration as part of his remuneration package as a Non Executive Director of the Company;
• $(e)$ no funds will be raised by the grant of the options; and
• $(f)$ the terms and conditions of the options are set out below.
• $(i)$ The options will be issued on the dates and exercise prices as set out in the table above. 250,000 of the options will vest immediately upon grant and 250,000 6 months from date of approval by shareholders.
• Each option entitles the holder to acquire one fully paid ordinary share. Upon $(ii)$ payment of the exercise price, the holder will be allotted fully paid ordinary shares that will rank pari passu with all existing fully paid ordinary shares.

• Options will have a term of 5 years from date of grant, and (subject to point $(v)$ ) $(iii)$ below) may be exercised at any time in multiples of 50,000.

• $(iv)$ Should Mr Kiernan cease to be a director before any of the options are issued then those options will be forfeit.

• $(v)$ Should Mr Kiernan cease to be a director, he shall have a period of 1 month from the date of his ceasing to be a director to exercise any options that are outstanding, otherwise outstanding options will be forfeited.

$3.3$ Listing Rule 7.1

Approval of members is being sought pursuant to Listing Rule 10.11. Accordingly, under Listing Rule 7.2 Exception 14, approval under Listing Rule 7.1 is not required.

GLOSSARY

"Adjustment Mechanism" means the mechanism described on page 11 of the Explanatory Memorandum:

"ASX" means Australian Stock Exchange Limited (ACN 008 624 691);

"Board" means the board of directors of the Company;

"Company" or "PMA" means Precious Metals Australia Limited ACN 009 131 533;

"Convertible Note" means the convertible note proposed to be issued to Noble, as described on page 10 of the Explanatory Memorandum.

"Corporations Act" means the Corporations Act 2001 (Cth);

"Directors" means the directors of the Company;

"Explanatory Memorandum" means the explanatory memorandum accompanying the Notice:

"LIBOR" means the "London Inter-bank offer rate" published by the British Bankers Association.

"Notice" means the Notice of Meeting which accompany this Explanatory Memorandum;

"Windimurra Vanadium" means Windimurra Vanadium Pty Ltd (ACN 113 874 712)

"Shareholders" means holders of Shares in the Company; and

"Shares" means fully paid ordinary shares in the Company.

PRECIOUS METALS AUSTRALIA LIMITED

ABN 65 009 131 533

	PROXY FORM
--	------------	--

The Secretary Precious Metals Australia Limited PO Box 620 West Perth WA 6872

I/We $\overline{Of}$

being a shareholder/(s) of Precious Metals Australia Limited (Company) hereby appoint as proxy to vote in accordance with the following directions (or if no directions have been given, as the proxy or Chairman sees fit) at the General Meeting to be held at Precious Metals Australia Limited 4th Floor, 76 Kings Park Road, West Perth, Western Australia on 27th September 2006 at 10.00am (WST) (and at any adjournment thereof) (Meeting).

	OR	the Chairman
Name of person you are appointing (if not the Chairman)-
IF YOU DO NOT WISH TO DIRECT YOUR PROXY HOW TO VOTE, PLEASE PLACE A MARK IN THIS BOX *

* By marking this box, you acknowledge that the Chairman may exercise your proxy even if he has an interest in the outcome of the resolution and votes cast by him other than as proxy holder will be disregarded because of that interest. The Chairman intends to vote in favour of the resolution if no directions are given.

	Resolution	For	Against	Abstain**
	Issue of shares to Noble Resources Limited
2.	Issue of a convertible note to Noble Resources Limited
3.	Ratification of Previous Issue of Securities
4.	Election of Mr AJ Grey
5.	Issue of options to Mr AJ Grey
6.	Election of Mr SR Bunn
7.	Issue of options to Mr SR Bunn
8.	Election of Mr M Kiernan
9.	Issue of options to Mr M Kiernan
	**If your most the choicin hay fear a positionless item your one discribute your neares and to enter an that items.

If you mark the abstain box for a particular item, you are directing your proxy not to vote on that item.

Appointing a Second Proxy (if applicable)
	Οľ	$\%$	Contact Telephone Number
The number of Shares applicable to this proxy form		The percentage of your voting rights			Area Code	Telephone Number
Signature(s)
Shareholder 1		Shareholder 2		Shareholder 3
Sign here
Director		Director/Secretary Sole Director and Secretary
		Proxies may be lodged either by facsimile on (08) 9423 1999, or by mail to PO Box 620, West Perth WA 6872 or delivery to the registered office of the Company at Level 4, 76 Kings Park Road, West Perth WA 6005. To be valid, a proxy form (and any authority under which the proxy form is signed or a certified copy of the authority) must be received by the Company not less than 48 hours before the time scheduled for commencement of the Meeting. For further
Company Seal (if required)			instructions on voting, please refer to the rear of this form.

PRECIOUS METALS AUSTRALIA LIMITED ABN 65 009 131 533

Instructions on Voting

$\mathbf{1}$ . How to Vote

Shareholders may vote by attending the Meeting in person, by proxy or authorised representative.

$2.$ Voting in Person

To vote in person, attend the Meeting on the date and at the time and place specified in this Notice of General Meeting.

$3.$ Voting by Proxy

Shareholders are entitled to appoint up to 2 individuals to act as proxies to attend the Meeting and vote on their behalf. Where more than one proxy is appointed each proxy may be appointed to represent a specific proportion of the shareholder's voting rights. If the appointment does not specify the proportion or number of votes each proxy may exercise, each proxy may exercise half of the votes.

The proxy form must be signed by the shareholder or his/her attorney duly authorised in writing or, if the shareholder is a corporation, in a manner permitted by the Corporations Act 2001. In the case of Shares jointly held by 2 or more persons, all joint holders must sign the proxy form.

Completion of a proxy form will not prevent individual shareholders from attending the Meeting in person if they wish. Where a shareholder completes and lodges a valid proxy form and attends the Meeting in person, then the proxy's authority to speak and vote for that shareholder is suspended while the shareholder is present at the Meeting.

The proxy may, but need not, be a shareholder of the Company.

4. Voting Entitlements

For the purposes of determining voting entitlements at the Meeting, Shares will be taken to be held by the persons who are registered as holding the Shares 48 hours before the time scheduled for commencement of the Meeting. Accordingly, transactions registered after that time will be disregarded in determining entitlements to attend and vote at the Meeting.