UNION STAR METALS LTD - Proxy Solicitation & Information Statement 2010

PROMESA LIMITED

ACN 124 541 566

NOTICE OF GENERAL MEETING

TIME : 8:30am (WST) DATE : 30 December 2010 PLACE : The Board Room Parkinson Chartered Accountants Level 1, 322 Hay Street SUBIACO WA 6008

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

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary, Phil Re on (+61 8) 9388 9744.

CONTENTS PAGE

Notice of General Meeting (setting out the proposed resolutions)	3
Explanatory Statement (explaining the proposed resolutions)	5
Glossary	16
Schedule 1 – Terms and Conditions of Vendor Options	17
Schedule 2 – Terms and Conditions of Caldwell Options	19
Proxy Form	21
Annexure A – Independent Expert’s Report

TIME AND PLACE OF MEETING AND HOW TO VOTE

VENUE

The general meeting of the Shareholders to which this Notice of Meeting relates will be held at 8:30am (WST) on 30 December 2010 at:

The Board Room

Parkinson Chartered Accountants Level 1, 322 Hay Street SUBIACO WA 6008

YOUR VOTE IS IMPORTANT

The business of the General Meeting affects your shareholding and your vote is important.

VOTING IN PERSON

To vote in person, attend the General Meeting on the date and at the place set out above.

VOTING BY PROXY

To vote by proxy, please complete and sign the enclosed Proxy Form and return by the time and in accordance with the instructions set out on the Proxy Form.

NOTICE OF GENERAL MEETING

Notice is given that the general meeting of Shareholders will be held at 8:30am (WST) on 30 December 2010 at:

The Board Room

Parkinson Chartered Accountants Level 1, 322 Hay Street SUBIACO WA 6008

The Explanatory Statement provides additional information on matters to be considered at the General Meeting. The Explanatory Statement and the Proxy Form are part of this Notice of Meeting.

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the General Meeting are those who are registered Shareholders of the Company at 7:00pm (Sydney time) on 28 December 2010.

Terms and abbreviations used in this Notice of Meeting are defined in the Glossary.

AGENDA

1. RESOLUTION 1 – APPROVAL FOR ISSUE OF SECURITIES TO MINEROIL ENERGY SAC AND GRUPO PEGASUS SA

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

“That, subject to Resolution 2 being passed, for the purpose of ASX Listing Rule 11.1.2, section 611 (Item 7) of the Corporations Act and for all other purposes, approval is given for the Directors to allot and issue the following securities to Mineroil Energy SAC and Grupo Pegasus SA (in proportions to be determined) on the terms and conditions set out in the Explanatory Statement:

(a) 40,000,000 Shares; and
(b) 20,000, options exercisable at $0.20.

Expert’s Report : Shareholders should carefully consider the report prepared by the Independent Expert for the purposes of the Shareholder approval required under Section 611 Item 7 of the Corporations Act. The Independent Expert’s Report comments on the fairness and reasonableness of the transactions the subject of Resolution 1 to the nonassociated Shareholders in the Company.

Voting Exclusion : The Company will disregard any votes cast on this Resolution by Mineroil Energy SAC and Grupo Pegasus SA and any of their associates or any other person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed. However the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or 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.

2. RESOLUTION 2 – APPROVAL FOR ISSUE OF OPTIONS TO CALDWELL

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

“That, subject to Resolution 1 being passed, for the purpose of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to allot and issue 20,000,000 options to Caldwell on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by Caldwell and any of its associates (including any associates of the nominee if appropriate) or any other person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, if the Resolution is passed. However the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form or 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.

3. RESOLUTION 3 – PLACEMENT OF SHARES

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

“That, for the purpose of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to allot and issue up to 10,000,000 Shares on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by any person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form or 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.

DATED: 29 NOVEMBER 2010

BY ORDER OF THE BOARD

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PHIL RE COMPANY SECRETARY

EXPLANATORY STATEMENT

This Explanatory Statement has been prepared for the information of the Shareholders in connection with the business to be conducted at the General Meeting to be held at 8:30am (WST) on 30 December 2010 at:

The Board Room Parkinson Chartered Accountants Level 1, 322 Hay Street SUBIACO WA 6008

This purpose of this Explanatory Statement is to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions in the Notice of Meeting.

1. OVERVIEW

1.1 Background

On 3 November 2010 the Company announced that it had executed a Heads of Agreement with Mineroil Energy SAC ( Mineroil ) and Pegasus Grupo SA ( Pegasus ) (together, the Vendors ). The Heads of Agreement was executed by the parties on 29 October 2010.

Pursuant to the Heads of Agreement, the Vendors have agreed to sell and the Company has agreed to buy a 100% interest in Peru Minerals SAC ( Peru Minerals ) which includes three mining licences for Victoadal, Bacata and Santa Rosita located in Peru ( Licences ).

The Vendors and their associates are not related parties of the Company.

1.2 The Licences

The Licences comprise three to ten graticular blocks, equating to 18 sq km, and are located in the Otuzco district, about 42 km north-east of Trujillo City.

The Company considers that the Licences are prospective for gold, copper and associated minerals and, following completion of due diligence on the proposed acquisition and completion of the Heads of Agreement, plans to undertake a diamond drilling program commencing in the first-half of 2011 with the aim of outlining an inferred JORC resource estimate.

In tandem with resource delineation drilling, surface prospecting and geological mapping will be undertaken at various scales, as well as soil geochemistry and alteration mapping to identify structural position/elevation in the porphyryepithermal system. A programme of channel/chip sampling of veins to quantify horizontal parameters of gold will also be completed.

An independent technical valuation of the Licences has been prepared by Malcolm Castle, Consulting Geologist, which contains information about each of the licences. The independent technical valuation forms part of the Independent Expert’s Report which is Annexure A to this Notice of Meeting.

1.3 Details of the Heads of Agreement

Pursuant to the Heads of Agreement, the Company has agreed to acquire Peru Minerals on the following material terms and conditions:

(a) ( Conditions Precedent ): the Heads of Agreement is conditional upon:
(i) the Company’s Shareholders passing whatever approvals are required under the laws and Listing Rules applicable to it, which is being sought pursuant to Resolutions 1 and 2; and
(ii) the Company conducting due diligence to its satisfaction on Peru Minerals and its assets and liabilities.
(b) ( Consideration ): the consideration for the acquisition of Peru Minerals, and subject to the satisfaction of the conditions set out in paragraph (a) above, the company will issue:
(i) 40,000,000 Shares ( Vendor Shares ) and 20,000,000 options exercisable at $0.20 within 2 years of the issue date ( Vendor Options ) to the Vendors. On exercise of the Vendor Options the Company must issue 20,000,000 Shares and Secondary Options; and
(ii) 20,000,000 options exercisable at $0.20 within 2 years of the issue date to Caldwell ( Caldwell Options ).

The Vendor Shares and Vendor Options will be divided equally between Mineroil and Pegasus.

Mineroil will receive 20,000,000 Vendor Shares and 10,000,000 Vendor Options and Pegasus will receive 20,000,000 Vendor Shares and 10,000,000 Vendor Options.

Caldwell is the party which introduced the Company to Peru Minerals and will be paid the Caldwell Options as a facilitation fee.

In consideration of Pegasus having entered into the Heads of Agreement and having procured Mineroil to do the same, the Company has agreed to pay a facilitation fee to Pegasus as follows:

(i) US$200,000 by way of non-refundable deposit on execution of the Heads of Agreement; and
(ii) US$800,000 at completion of due diligence.
(c) ( Escrow ): it is acknowledged by the Vendors that it is possible that any or all of the Shares and Options that are issued may be the subject of restrictions imposed by ASX. In that case it is acknowledged that and agreed by the Vendors that the recipients of such securities will be required to enter into such restriction agreement as ASX may require.
(d) ( Board appointment ): upon completion of the Heads of Agreement the Vendors will be entitled to appoint 2 members out of 4 directors to the board of the Company.
(e) ( Warranties ): the Heads of Agreement contains warranties given by the Vendors to the Company in respect of Peru Minerals and the Licences which are standard for an agreement of this nature, including that the

Vendors are free to transfer Peru Minerals to the Company and the Licences are in good standing and free from encumbrances.

A formal agreement comprising the terms of the Heads of Agreement will be entered into shortly.

1.4 Pro forma capital structure

The pro forma capital structure of the Company, upon completion of the Company’s acquisition of Peru Minerals, is as follows:

Shares	Number

Current Shares on issue	53,533,333
Shares to be issued pursuant to the Heads of Agreement	40,000,000
Shares to be issued pursuant to the Share Placement	10,000,000
Total	103,533,333

Options	Number

Current Options on issue	43,766,667 - $0.20, 2 year quoted Options 3,500,000 – $0.20, 31 December 2013 unquoted Options
Options to be issued pursuant to the Heads of Agreement	20,000,000 - $0.20, 2 year options (Vendor Options) 20,000,000 - $0.20, 2 year options (Caldwell Options) 20,000,000 - $0.20, 1 year options (Secondary Options)
Total	107,266,667

1.5 Risk factors

Shareholders should be aware that the Company will be subject to a number of risks if the heads of Agreement is completed.

If the Heads of Agreement is completed, some of the material risk factors include:

(a) ( exploration and development ): by its nature, the exploration and development of a resource project is a high risk undertaking with no assurance of the economic exploitation of mineral resources;
(b) ( resource exploration ): resource estimations are expressions of judgment which are imprecise;
(c) ( commodity price volatility ): an adverse fall in the prices of commodities including gold or copper may adversely affect the development of the Licenses; and

(d) ( operating risks in Peru ): the Licences are located at the northern end of Western Cordillera in Peru. Changes to Peru’s minerals exploration and development or investment policies and legislation or a shift in political attitude may adversely affect the Company’s operations and profitability.
(e) ( environmental risks ): the Company will be subject to environmental laws and regulations in connection with operations it may pursue in the mining industry, which operations are currently in Peru. Further, the Company may require approval from the relevant authorities before it can undertake activities that are likely to impact the environment. Failure to obtain such approvals will prevent the Company from undertaking its desired activities.
(f) ( general economic and political risks ): changes in the general economic and political climate in Peru, Australia and on a global basis could impact on economic growth, minerals prices, interest rate and the taxation and tariff laws which may affect the value and viability of any mineral mining activity that may be conducted by the Company.
(g) ( funding ): the successful realisation of the Company’s plans will be dependent upon obtaining financing for any additional projects that the Company may wish to invest in.

1.6 Directors’ Recommendations

The Directors consider that the Heads of Agreement represents an opportunity for the Company to acquire the prospective gold, copper and associated minerals Licences offering Shareholders exposure to the potential of Peru Minerals’ gold and copper mining and exploration assets.

The Licences are situated at the northern end of the gold and copper rich Western Cordillera in the Peruvian Andes and are located in an area which hosts worldclass, epithermal gold and porphyry copper-gold deposits such as Yanacocha, held by Newmont and Lagunas Norte, held by Barrick.

For the above reasons, the Directors of the Company consider that the transactions the subject of the Resolutions are in the best interests of the Company and recommend that Shareholders vote in favour of all Resolutions. The current Directors have agreed to put the Resolutions to Shareholders and have approved the information contained in this Explanatory Statement.

Each of the current Directors intends to vote their Shares in favour of each of the Resolutions.

Shareholders are also referred to the Independent Expert’s Report in Annexure A which concludes that the proposed transaction is fair and reasonable.

1.7 Conditionality of Resolutions

Resolution 1 is conditional upon Resolution 2 being passed, so that it will not have effect unless and until Resolution 2 is passed.

Resolution 2 is conditional upon Resolution 1 being passed, so that it will not have effect unless and until Resolution 1 is passed.

1.8 Future of the Company if Resolutions 1 and 2 are not passed

If Resolutions 1 and 2 are not passed and the Heads of Agreement is not completed, the Company will continue to focus on:

(a) its current ventures; and
(b) seeking alternative, suitable projects for investment.

2. RESOLUTION 1 – APPROVAL FOR ISSUE OF SECURITIES TO MINEROIL ENERGY SAC AND GRUPO PEGASUS SA

2.1 General

Resolution 1 seeks Shareholder approval for the allotment and issue of the Shares and Vendor Options to the Vendors for the purpose of ASX Listing Rule 11.1.2, Item 7 of Section 611 of the Corporations Act and for all other purposes.

2.2 ASX Listing Rule 11.1

ASX Listing Rule 11.1 provides that where an entity proposes to make a significant change, either directly or indirectly, to the scale of its activities, it must provide full details to ASX as soon as practicable. ASX Listing Rule 11.1.2 provides that, if ASX requires, the entity must get the approval of Shareholders and must comply with any requirements of ASX in relation to the Notice of Meeting.

Whilst Promesa remains focussed on its existing oil and gas activities, its proposed acquisition of Peru Minerals represents a significant investment by the Company and for this reason, the Company is seeking Shareholder approval under ASX Listing Rule 11.1.2.

2.3 Item 7 of Section 611 of the Corporations Act

Section 606 of the Corporations Act – Statutory Prohibition

Pursuant to Section 606(1) of the Corporations Act, a person must not acquire a relevant interest in issued voting shares in a listed company if the person acquiring the interest does so through a transaction in relation to securities entered into by or on behalf of the person and because of the transaction, that person’s or someone else’s voting power in the company increases:

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

Voting Power

The voting power of a person in a body corporate is determined in accordance with Section 610 of the Corporations Act. The calculation of a person’s voting power in a company involves determining the voting shares in the company in which the person and the person’s associates have a relevant interest.

Associates

For the purpose of determining voting power under the Corporations Act, a person (second person) will be an “associate” of the other person (first person) if:

(a) the first person is a body corporate and the second person is:
(i) a body corporate the first person controls;
(ii) a body corporate that controls the first person; or

(iii) a body corporate that is controlled by an entity that controls the person;
(b) the second person has entered or proposed to enter into a relevant agreement with the first person for the purpose of controlling or influencing the composition of the company’s board or the conduct of the company’s affairs; or
(c) the second person is a person with whom the first person is acting or proposed to act, in concert in relation to the company’s affairs.

For the purpose of section 12 of the Corporations Act, the Vendors are deemed to be associates as at the time of completion of the Heads of Agreement. However there is no determination that the Vendors will continue to be associates for the purposes of the Corporations Act following completion of the Heads of Agreement.

Relevant Interests

Section 608(1) of the Corporations Act provides that a person has a relevant interest in securities if they:

are the holder of the securities;

(a) have the power to exercise, or control the exercise of, a right to vote attached to the securities; or
(b) have power to dispose of, or control the exercise of a power to dispose of, the securities.

It does not matter how remote the relevant interest is or how it arises. If two or more people can jointly exercise one of these powers, each of them is taken to have that power.

2.4 Reason Why Section 611 Approval Required

Item 7 of Section 611 of the Corporations Act provides an exception to the prohibition described in Section 2.2 above, whereby a person may acquire a relevant interest in a company’s voting shares with shareholder approval.

For the purposes of the Corporations Act, the following persons are deemed to be associates of the Vendors:

(a) Julio Valdez – Mineroil Energy SAC
(b) Mario Bolvier – Grupo Pagasus SA

(together, the Vendors’ Associates )

As a result of the Heads of Agreement, the Vendors and the Vendors’ Associates will acquire a relevant interest in 40,000,000 Shares and 20,000,000 options.

Assuming that:

(a) the Vendor Shares have been issued pursuant to the Heads of Agreement;
(b) the Shares to be issued pursuant to the Share Placement are issued; and
(c) no Options on issue as at the date of this Notice of Meeting have been exercised,

then this relevant interest will represent 38.6%of the issued ordinary capital of the Company, and the Vendors having a voting power of 38.6%.

If the Vendor Options are exercised, the Vendors will acquire a relevant interest of up to 40,000,000 Shares issued upon the exercise of the Vendor Options and Secondary Options.

This will result in the Vendors holding 55.7% of the issued ordinary capital of the Company, and the voting power of the Vendors further increasing to 55.7 % (on the basis of the assumptions set out in paragraphs (a),(b) and (c) above).

Accordingly, Resolution 1 seeks Shareholder approval for the purpose of Section 611 Item 7 and for all other purposes to enable the Company to issue the Shares and Vendor Options (together, the Vendor Securities ) to the Vendors, and to enable the Vendors to exercise the Vendor Options.

Approval pursuant to ASX Listing Rule 7.1 is not required in order to issue the Vendor Securities to the Vendors if approval is obtained under Section 611 Item 7 of the Corporations Act. Accordingly, the issue of the Vendor Securities to the Vendors will not be included in the 15% calculation of the Company’s annual placement pursuant to ASX Listing Rule 7.1.

2.5 Specific Information Required by Section 611 Item 7 of the Corporations Act and ASIC Regulatory Guide 74

The following information is required to be provided to Shareholders under the Corporations Act and ASIC Regulatory Guide 74 in respect of obtaining approval for Item 7 of Section 611 of the Corporations Act. Shareholders are also referred to in the Independent Expert’s Report prepared by BDO Corporate Finance (WA) Pty Ltd annexed to this Explanatory Statement.

Relevant Interests and Voting Power

As at the date of this Notice, the following parties have a relevant interest in Shares as follows:

Party	Relevant Interest	Capacity
Vendors	Nil	N/A

The figure in column 3 assumes that:

(a) the Vendor Shares have been issued pursuant to the Heads of Agreement; and
(b) no Options on issue at the date of this Notice of Meeting have been exercised.

The relevant interests of the Vendors and Vendors’ Associates are set out in the table below:

Party	Current	After the issue of the 40,000,000 Vendor Shares and the issue and exercise of 20,000,000 Vendor Options and Secondary Options

Vendors	Nil	80,000,000

The voting power of the Vendors and the Vendors’ Associates is set out in the table below:

Party	Current	After the issue of the 40,000,000 Vendor Shares and the issue and exercise of 20,000,000 Vendor Options and Secondary Options

Vendors	Nil	55.7%

The maximum relevant interest that the Vendors will hold after completion of the Heads of Agreement (and after the exercise of all of the Vendor Options) is 60,000,000 Shares, and the maximum voting power that the Vendors will hold is 55.7%. This represents an increase from 0% to 55.7%.

Further details on the voting power of the Vendors is set out in Section 14.2 of the Independent Expert’s Report prepared by BDO Corporate Finance (WA) Pty Ltd.

Intentions of the Vendors in relation to the Company

Other than as disclosed elsewhere in this Explanatory Statement or as contemplated pursuant to or in accordance with the Tanami Agreement, the Company understands that the Vendors:

(a) have no intention of making any significant changes to the business of the Company;
(b) do not propose to change the employment arrangements of the present employees of the Company;
(c) do not intend to redeploy any fixed assets of the Company;
(d) do not have any present intention to inject capital into the Company (other than the potential exercise of the Vendor Options);
(e) do not intend to transfer any property between the Company and the Vendors or any person associated with any of them (other than pursuant to the Heads of Agreement); and
(f) have no current intention to change the Company’s existing policies in relation to financial matters or dividends.

These statements are based on the present intentions of the Vendors on the basis of facts and information concerning the Company and the existing circumstances that affect the Company that are known to the Vendors at the date of this

Explanatory Statement. These present intentions may change as new information becomes available, as circumstances change or in the light of all material information, facts and circumstances necessary to assess the operational, commercial, taxation and financial implications of those decisions at the relevant time.

Capital structure

The proposed capital structure of the Company following completion of the Heads of Agreement and all the transactions the subject of the Resolutions is set out in Section 1.4 of this Explanatory Statement.

Identity, associations and qualifications of proposed directors

The Vendors have the right to nominate two additional directors to the board of the Company upon completion of the Heads of Agreement.

As at the date of this Notice of Meeting, the Vendors have not determined who they will nominate to the board of the Company. Further details will be released to the market in due course.

Interests and recommendations of Directors

None of the current Directors have any personal interests in the outcome of Resolution 1. All of the current Directors are of the opinion that the Heads of Agreement is in the best interests of Shareholders and accordingly, the Directors unanimously recommend Shareholders to vote in favour of Resolution 1. The Directors have approved the proposal to put Resolution 1 to Shareholders.

Shareholders should note that if Resolutions 1 and 2 are not passed, the Heads of Agreement will not proceed.

The Director’s recommendations are based on the reasons set out in Section 1.7 of this Explanatory Statement.

Independent Expert’s Report

The Independent Expert's Report prepared by BDO Corporate Finance (WA) Pty Ltd. assesses whether the issue of the Vendor Securities is fair and reasonable to the non-associated Shareholders of the Company. The advantages and disadvantages of the Heads of Agreement are outlined in sections 14.4 and 14.5 of the Independent Expert’s Report.

The Independent Expert’s Report concludes that the issue of the Vendor Securities, on balance, is fair and reasonable.

Shareholders are urged to carefully read the Independent Expert’s Report to understand the scope of the report, the methodology of the valuation and the sources of information and assumptions made.

3. RESOLUTION 2 – APPROVAL FOR ISSUE OF OPTIONS TO CALDWELL

3.1 General

Resolution 2 seeks Shareholder approval for the allotment and issue of 20,000,000 Options ( Caldwell Options ) to Caldwell.

The Caldwell Options are being issued to Caldwell pursuant to the Heads of Agreement entered into by the Company, Mineroil and Pegasus.

ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to issue during any 12 month period any equity securities, or other securities with rights to conversion to equity (such as an option), if the number of those securities exceeds 15% of the number of securities in the same class on issue at the commencement of that 12 month period.

The effect of Resolution 2 will be to allow the Directors to issue the Caldwell Options during the period of 3 months after the General Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

3.2 Technical Information required by ASX Listing Rule 7.1

Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to the issue of the Caldwell Options

(a) the maximum number of Caldwell Options to be granted is 20,000,000;
(b) the Caldwell Options will be issued no later than 3 months after the date of the Annual General Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur on the same date;
(c) the Caldwell Options will be issued for nil cash consideration;
(d) the Caldwell Options will be allotted and issued to Caldwell;
(e) the Caldwell Options will be issued on the terms and conditions set out in Schedule 1; and
(f) no funds will be raised from the issue of the Caldwell Options as the Caldwell Options are being issued as part of the Heads of Agreement entered into by the Company, Mineroil and Pegasus.

4. RESOLUTION 3 – PLACEMENT OF SHARES

4.1 General

Resolution 3 seeks Shareholder approval for the allotment and issue of up to 10,000,000 Shares at an issue price of not less than 80% of the average market price for Shares calculated over the 5 days on which sales in the Shares are recorded before the day on which the issue is made or, if there is a prospectus, over the last 5 days on which sales in the securities were recorded before the date the prospectus is signed ( Share Placement ).

None of the subscribers pursuant to this issue will be related parties of the Company.

ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to issue more equity securities during any 12 month period than that amount which represents 15% of the number of fully paid ordinary securities on issue at the commencement of that 12 month period

The effect of Resolution 3 will be to allow the Directors to issue the Shares pursuant to the Share Placement during the period of 3 months after the Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

4.2 TECHNICAL INFORMATION REQUIRED BY ASX LISTING RULE 7.1

Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to the Share Placement:

(a) the maximum number of Shares to be issued is 10,000,000;
(b) the Shares will be issued no later than 3 months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur on the same date;
(c) the issue price will not be less than 80% of the average market price for Shares calculated over the 5 days on which sales in the Shares are recorded before the day on which the issue is made or, if there is a prospectus, over the last 5 days on which sales in the securities were recorded before the date the prospectus is signed;
(d) the Directors will determine to whom the Shares will be issued but these persons will not be related parties of the Company;
(e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares; and
(f) the Company intends to allocate 20% of the funds raised to the Peru Minerals project and the remainder of the funds raised will be used for ongoing expenses relating to the Company’s oil and gas exploration activities.

5. ENQUIRIES

Shareholders are requested to contact Phil Re on (+ 61 8) 9388 9744 if they have any queries in respect of the matters set out in these documents.

GLOSSARY

$ means Australian dollars.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited.

ASX Listing Rules means the Listing Rules of ASX.

Board means the current board of directors of the Company.

Business Day means Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day.

Caldwell Option means an Option with the terms and conditions set out in Schedule 2.

Company means Promesa Limited (ACN 124 541 566).

Constitution means the Company’s constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the current directors of the Company.

Explanatory Statement means the explanatory statement accompanying the Notice of Meeting.

General Meeting or Meeting means the meeting convened by the Notice.

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

Option means an option to acquire a Share.

Optionholder means a holder of an Option.

Proxy Form means the proxy form accompanying the Notice.

Resolutions means the resolutions set out in the Notice of Meeting, or any one of them, as the context requires.

Secondary Option means the issue of an Option pursuant to Clause (e) of Schedule 1.

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

Shareholder means a holder of a Share.

Vendor Option means an Option with the terms and conditions set out in Schedule 1.

WST means Western Standard Time as observed in Perth, Western Australia.

SCHEDULE 1 – TERMS AND CONDITIONS OF VENDOR OPTIONS

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

(a) Each Option gives the Optionholder the right to subscribe for one Share.
(b) The Options will expire at 5.00pm (WST) on 2 years from the issue date ( Expiry Date ). Any Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.
(c) The amount payable upon exercise of each Option will be $0.20 ( Exercise Price ).
(d) The Options will vest as follows:
(i) 5 million will vest after Shares have traded on ASX at $0.20 or more for at least 20 consecutive trading days;
(ii) 5 million will vest after Shares have traded on ASX at $0.25 or more for at least 20 consecutive trading days;
(iii) 5 million will vest after Shares have traded on ASX at $0.30 or more for at least 20 consecutive trading days; and
(iv) 5 million will vest after Shares have traded on ASX at $0.35 or more for at least 20 consecutive trading days.
(e) For each Option that vests and is exercised, a new Option will be issued for no consideration to the Optionholder at the time of exercise, exercisable at a price of $0.20 within 1 year from the date of issue.
(f) The Options held by each Optionholder may be exercised in whole or in part, and if exercised in part, multiples of 1,000 must be exercised on each occasion.
(g) An Optionholder may exercise their Options by lodging with the Company, before the Expiry Date:
(i) a written notice of exercise of Options specifying the number of Options being exercised; and
(ii) a cheque or electronic funds transfer for the Exercise Price for the number of Options being exercised;

( Exercise Notice ).

(h) An Exercise Notice is only effective when the Company has received the full amount of the Exercise Price in cleared funds.
(i) Within 10 Business Days of receipt of the Exercise Notice accompanied by the Exercise Price, the Company will allot the number of Shares required under these terms and conditions in respect of the number of Options specified in the Exercise Notice.
(j) The Options are not transferable.
(k) All Shares allotted upon the exercise of Options will upon allotment rank pari passu in all respects with other Shares.

(l) The Company will not apply for quotation of the Options on ASX. However, The Company will apply for quotation of all Shares allotted pursuant to the exercise of Options on ASX within 10 Business Days after the date of allotment of those Shares.
(m) If at any time the issued capital of the Company is reconstructed, all rights of an Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.
(n) There are no participating rights or entitlements inherent in the Options and Optionholders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 7 Business Days after the issue is announced. This will give Optionholders the opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue.
(o) An Option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the Option can be exercised.

SCHEDULE 2 – TERMS AND CONDITIONS OF CALDWELL OPTIONS

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

(a) Each Option gives the Optionholder the right to subscribe for one Share.
(b) The Options will expire at 5.00pm (WST) on 2 years from the issue date ( Expiry Date ). Any Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.
(c) The amount payable upon exercise of each Option will be $0.20 ( Exercise Price ).
(d) The Options will vest as follows:
(i) 5 million will vest after Shares have traded on ASX at $0.20 or more for at least 20 consecutive trading days;
(ii) 5 million will vest after Shares have traded on ASX at $0.25 or more for at least 20 consecutive trading days;
(iii) 5 million will vest after Shares have traded on ASX at $0.30 or more for at least 20 consecutive trading days; and
(iv) 5 million will vest after Shares have traded on ASX at $0.35 or more for at least 20 consecutive trading days.
(e) The Options held by each Optionholder may be exercised in whole or in part, and if exercised in part, multiples of 1,000 must be exercised on each occasion.
(f) An Optionholder may exercise their Options by lodging with the Company, before the Expiry Date:
(i) a written notice of exercise of Options specifying the number of Options being exercised; and
(ii) a cheque or electronic funds transfer for the Exercise Price for the number of Options being exercised;

( Exercise Notice ).

(g) An Exercise Notice is only effective when the Company has received the full amount of the Exercise Price in cleared funds.
(h) Within 10 Business Days of receipt of the Exercise Notice accompanied by the Exercise Price, the Company will allot the number of Shares required under these terms and conditions in respect of the number of Options specified in the Exercise Notice.
(i) The Options are not transferable.
(j) All Shares allotted upon the exercise of Options will upon allotment rank pari passu in all respects with other Shares.
(k) The Company will not apply for quotation of the Options on ASX. However, The Company will apply for quotation of all Shares allotted pursuant to the exercise of Options on ASX within 10 Business Days after the date of allotment of those Shares.

(l) If at any time the issued capital of the Company is reconstructed, all rights of an Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.
(m) There are no participating rights or entitlements inherent in the Options and Optionholders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 7 Business Days after the issue is announced. This will give Optionholders the opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue.
(n) An Option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the Option can be exercised.

PROXY FORM

APPOINTMENT OF PROXY PROMESA LIMITED ACN 124 541 566

GENERAL MEETING

I/We of being a member of Promesa Limited entitled to attend and vote at the General Meeting, hereby Appoint Name of proxy OR the Chair of the General Meeting as your proxy

or failing the person so named or, if no person is named, the Chair of the General Meeting, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, as the proxy sees fit, at the General Meeting to be held at 8:30am (WST), on 30 December 2010 at The Board Room, Parkinson Chartered Accountants, Level 1, 322 Hay Street, SUBIACO, WA 6008, and at any adjournment thereof.

If no directions are given, the Chair will vote in favour of all the Resolutions.

If the Chair of the General Meeting is appointed as your proxy, or may be appointed by default, and you do not wish to direct your proxy how to vote as your proxy in respect of Resolutions 1 to 3 please place a mark in this box.

By marking this box, you acknowledge that the Chair of the General Meeting may exercise your proxy even if he has an interest in the outcome of Resolutions 1 to 3 and that votes cast by the Chair of the General Meeting for Resolutions 1 to 3 other than as proxy holder will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chair will not cast your votes on Resolutions 1 to 3 and your votes will not be counted in calculating the required majority if a poll is called on Resolutions 1 and 3.

OR

Voting on Business of the General Meeting

FOR AGAINST ABSTAIN Resolution 1 – Issue of Securities to Mineroil Energy SAC and Grupo Pegasus SAC Resolution 2 – Issue of Options to Caldwell Resolution 3 – Placement of Shares Please note : If you mark the abstain box for a particular Resolution, you are directing your proxy not to vote on that Resolution on a show of hands or on a poll and your votes will not to be counted in computing the required majority on a poll. % If two proxies are being appointed, the proportion of voting rights this proxy represents is Signature of Member(s): Date: ____ Individual or Member 1 Member 2 Member 3 Sole Director/Company Secretary Director Director/Company Secretary

Please note : If you mark the abstain box for a particular Resolution, you are directing your proxy not to vote on that Resolution on a show of hands or on a poll and your votes will not to be counted in computing the required majority on a poll.

Contact Name: _ Contact Ph (daytime): _____

PROMESA LIMITED ACN 124 541 566

Instructions for Completing ‘Appointment of Proxy’ Form

1.

( Appointing a Proxy ): A member entitled to attend and vote at the General Meeting is entitled to appoint not more than two proxies to attend and vote on a poll on their behalf. The appointment of a second proxy must be done on a separate copy of the Proxy Form. Where more than one proxy is appointed, such proxy must be allocated a proportion of the member’s voting rights. If a member appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half the votes. A duly appointed proxy need not be a member of the Company.

( Direction to Vote ): A member may direct a proxy how to vote by marking one of the boxes opposite each item of business. Where a box is not marked the proxy may vote as they choose. Where more than one box is marked on an item the vote will be invalid on that item.

3. ( Signing Instructions ):

( Individual ): Where the holding is in one name, the member must sign.
( Joint Holding ): Where the holding is in more than one name, all of the members should sign.
( Power of Attorney ): If you have not already provided the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.
( Companies ): Where the company has a sole director who is also the sole company secretary, that person must sign. Where the company (pursuant to Section 204A of the Corporations Act) does not have a company secretary, a sole director can also sign alone. Otherwise, a director jointly with either another director or a company secretary must sign. Please sign in the appropriate place to indicate the office held.
( Attending the Meeting ): Completion of a Proxy Form will not prevent individual members from attending the General Meeting in person if they wish. Where a member completes and lodges a valid Proxy Form and attends the General Meeting in person, then the proxy’s authority to speak and vote for that member is suspended while the member is present at the General Meeting.
( Return of Proxy Form ): To vote by proxy, please complete and sign the enclosed Proxy Form and return by:
(a) post to Promesa Limited, Level 1, 322 Hay Street, Subiaco WA 6008; or
(b) facsimile to the Company on facsimile number +61 8 9388 9755.

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

Proxy forms received later than this time will be invalid.

ANNEXURE A – INDEPENDENT EXPERT’S REPORT

PROMESA LIMITED Independent Expert’s Report

17 November 2010

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Financial Services Guide

17 November 2010

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 (“ BDO ” or “ we ” or “ us ” or “ ours ” as appropriate) has been engaged by Promesa Ltd (“ Promesa ”) to provide an independent expert’s report on the acquisition of Peru Minerals SAC (“ Peru Minerals ”) which owns three mineral licenses in Peru, South America (“ the Transaction ”). You will be provided with a copy of our report as a retail client because you are a shareholder of Promesa.

Financial Services Guide

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

This FSG includes information about:

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

Information about us

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

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

Financial services we are licensed to provide

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

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

General Financial Product Advice

We only provide general financial product advice, not personal financial product advice. Our report does not take into account your personal objectives, financial situation or needs.

You should consider the appropriateness of this general advice having regard to your own objectives, financial situation and needs before you act on the advice

BDO CORPORATE FINANCE (WA) PTY LTD

Financial Services Guide

Page 2

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Fees, Commissions and Other Benefits that we may receive

We charge fees for providing reports, including this report. These fees are negotiated and agreed with the person who engages us to provide the report. Fees are agreed on an hourly basis or as a fixed amount depending on the terms of the agreement. The fee for this engagement is approximately $30,000.

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

Remuneration or other benefits received by our employees

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

Referrals

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

Complaints resolution

Internal complaints resolution process

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

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

Referral to External Dispute Resolution Scheme

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

Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Toll free: 1300 78 08 08 Facsimile: (03) 9613 6399 Email: [email protected]

Contact details

You may contact us using the details set out at the top of our letterhead on page 1 of this FSG.

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1.	Introduction	1
2.	Summary and Opinion	1
3.	Scope of the Report	4
4.	Outline of the Transaction	6
5.	Profile of Promesa Ltd	7
6.	Assets held by Peru Minerals SAC	11
7.	Economic Analysis	12
8.	Gold Industry Analysis	13
9.	Copper Industry Analysis	15
10.	Valuation Approach Adopted	18
11.	Valuation of a Promesa share prior to the Transaction	19
12.	Value of a Promesa share following the implementation of the Transaction	26
13.	Is the Transaction Fair?	30
14.	Is the Transaction Reasonable?	31
15.	Conclusion	34
16.	Sources of Information	34
17.	Independence	34
18.	Qualifications	35
19.	Disclaimers and Consents	35

Appendix 1 – Glossary Appendix 2 – Valuation Methodologies

Appendix 3 – Summary Valuation Report

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17 November 2010

The Directors Promesa Limited C/- Parkinson Corporate Pty Ltd Level 1, 322 Hay Street SUBIACO WA 6008

Dear Sirs

Independent Expert's Report

1. Introduction

On 3 November 2010, Promesa Ltd (“ Promesa ” or “ the Company ”) announced that it had entered into a Heads of Agreement (“ HOA ” or “ the Agreement ”) to acquire Peru Minerals SAC (“ Peru Minerals ”) which owns three mineral licenses in Peru, South America (“ the Transaction ”). Promesa will issue shares, unlisted options and cash as consideration for the Transaction.

2. Summary and Opinion

2.1 Purpose of the report

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

Our Report is prepared pursuant to Section 611 of the Corporations Act and to be included in the Explanatory Memorandum in order to assist the Shareholders in their decision whether to approve the Transaction.

2.2 Approach

Our Report has been prepared having regard to Australian Securities and Investments Commission (“ ASIC ”) Regulatory Guide 111 (“ RG 111 ”), ‘Content of Expert’s Reports’ and Regulatory Guide 112 (“ RG 112 ”) ‘Independence of Experts’.

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

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

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2.3 Opinion

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

2.4 Fairness

In Section 13 we determined that the value of a Promesa share prior to the Transaction compares to the value of a Promesa share following the implementation of the Transaction, as detailed below:

		Low $	Preferred $	High $
Fairness
	Ref


Value of a Promesa share prior to the Transaction	11	0.064	0.073	0.081

Value of a Promesa share following the implementation of the Transaction	12	0.116	0.133	0.151

The above valuation ranges are graphically presented below: $0.06 $0.07 $0.08 $0.09 $0.10 $0.11 $0.12 $0.13 $0.14 $0.15 $0.16 Value of a Promesa share following the implementation of the Transaction Value of a Promesa share prior to the Transaction Valuation Summary
$0.06 $0.07 $0.08 $0.09 $0.10 $0.11 $0.12 $0.13 $0.14 $0.15 $0.16 Value of a Promesa share following the implementation of the Transaction Value of a Promesa share prior to the Transaction Valuation Summary

The range of values of a Promesa share following the implementation of the Transaction is greater than the range of the values of a Promesa share prior to the Transaction. Accordingly, in our opinion the Transaction is fair.

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2.5 Reasonableness

We have considered the analysis in Section 14 of this report, in terms of both

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advantages and disadvantages of the Transaction; and
alternatives, including the position of Shareholders if the Transaction does not proceed.

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

Advantages and Disadvantages	Advantages and Disadvantages	Advantages and Disadvantages	Advantages and Disadvantages

Section	Advantages	Section	Disadvantages

14.4.1	The Transaction is fair	14.5.1	Dilution of existing shareholders

14.4.2	Potential to provide future cash flows from exercise of options	14.5.2	The Vendors will increase its control of Promesa


14.4.3	Diversification

Other key matters we have considered include:

Section	Description

14.1	Alternative Transaction

14.2	Practical level of control

14.3	Potential decrease in share price

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3. Scope of the Report

3.1 Purpose of the Report

The current shareholders of Peru Minerals, Mineroil Energy SAC (“ Mineroil ”) and Grupo Pegasus SA (“ Pegasus ”), together do not own any of the shares in Promesa.

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

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

Regulatory Guide 74 issued by ASIC deals with "Acquisitions Agreed to by Shareholders". It states that the obligation to supply shareholders with all information that is material can be satisfied by the non-associated directors of Promesa, by either:

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

The Directors of Promesa have commissioned this Independent Expert's Report to satisfy this obligation.

3.2 Regulatory guidance

In determining whether the Transaction is fair and reasonable, we have had regard to the views expressed by ASIC in RG 111. This regulatory guide provides guidance as to what matters an independent expert should consider to assist security holders to make informed decisions about transactions.

RG 111 states:

“A control transaction, when a person acquires, or increases, a controlling stake in a company, can be achieved by way of a number of different legal mechanisms. It is important for an expert to focus on the substance of a control transaction, rather than the legal mechanism used to affect it.”

RG 111 suggests that where a transaction is a control transaction it should be analysed on a basis consistent with a takeover bid.

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

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3.3 Adopted basis of evaluation

RG 111 states that a transaction is fair if the value of the offer price or consideration is greater than the value of the securities subject of the offer. When considering the value of the securities subject of the offer in a control transaction the expert should consider this value inclusive of a control premium. Further to this, RG 111 states that a transaction is reasonable if it is fair. It might also be reasonable if despite being ‘not fair’ the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher bid.

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

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A comparison between the value of a Promesa share prior to the Transaction and the value of a Promesa share following the implementation of the Transaction (fairness – see Section 13 “Is the Transaction Fair?”); and
An investigation into other significant factors to which Shareholders might give consideration, prior to approving the resolution, after reference to the value derived above (reasonableness – see Section 14 “Is the Transaction Reasonable?”).

This assignment is a Valuation Engagement as defined by APES 225 Valuation Services. A Valuation Engagement means an engagement or assignment to perform a valuation and provide a valuation report where we determine an estimate of value of the Company by performing appropriate valuation procedures and where we apply the valuation approaches and methods that we consider to be appropriate in the circumstances.

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4. Outline of the Transaction

Promesa announced on 3 November 2010 that it intends to acquire a 100% interest in Peru Minerals from its two shareholders, Mineroil and Pegasus, collectively (“ the Vendors ”).

Peru Minerals owns three mineral licenses in Peru, South America, namely Victoadal 500ha, Bacata 300ha and Santa Rosita 1000ha.

Under the Agreement, cash, shares and unlisted options will be issued as consideration not only to the Vendors, but also to a company named Caldwell, entity details of which will be provided to Promesa in due course.

As part of the Transaction, Promesa will issue the following consideration to the following parties:

The Vendors:

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40 million ordinary fully paid shares in Promesa to the Vendors;
20 million unlisted options, exercisable at $0.20 within two years from issue (“ Primary Options ”). If a Primary Option is exercised, the holder will be granted one fully paid ordinary share in Promesa, and one unlisted option exercisable at $0.20 within one year after the date of issue (“S econdary Options ”). The Primary Options have the following vesting conditions:
5 million will vest after the Shares have traded on the ASX at $0.20 or more for at least 20 consecutive trading days;
5 million will vest after the Shares have traded on the ASX at $0.25 or more for at least 20 consecutive trading days;
5 million will vest after the Shares have traded on the ASX at $0.30 or more for at least 20 consecutive trading days; and
5 million will vest after the Shares have traded on the ASX at $0.35 or more for at least 20 consecutive trading days.

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The payment of US$200,000 as a non refundable deposit and US$800,000 at the completion of due diligence.

Caldwell:

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The issue of 20 million unlisted options, exercisable at $0.20 within two years from issue. These options have the same vesting criteria as the Primary Options; however, they do not exercise into Secondary Options.

The issue of the scrip and options will have the following affect on the share capital of Promesa:

Promesa Share Structure					If the consideration options are exercised	If the consideration options are exercised	If all other options are exercised	If all other options are exercised
	Pre Transaction		Initial Consideration


Current Shareholders	49,333,333	100.0%	49,333,333	55.2%	49,333,333	33.0%	74,000,000	42.5%

Vendors of Peru Minerals	-	-	40,000,000	44.8%	80,000,000	53.6%	80,000,000	46.0%

Caldwell	-	-	-	-	20,000,000	13.4%	20,000,000	11.5%

Total	49,333,333	100.0%	89,333,333	100.0%	149,333,333	100.0%	174,000,000	100.0%

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5. Profile of Promesa Ltd

5.1 History

Promesa was incorporated on 22 March 2007 as an unlisted public company with the objective to become an oil and gas producer. At the beginning of the 2010 financial year, Promesa went through the process of raising more share capital and listing on the ASX. Promesa’s prospectus offered 12,500,000 shares at an issue price of $0.20 per share to raise $2,500,000; however, the prospectus closed oversubscribed with Promesa issuing 13,500,000 shares at $0.20 per share raising $2,700,000 before costs. Subsequently, Promesa was admitted to the official list of the ASX on 11 November 2009. Promesa’s registered office is at Level 1, 332 Hay Street, Subiaco, Western Australia.

5.2 Projects

Promesa entered into two farmout agreements with Pryme Oil and Gas Inc, which is a wholly owned subsidiary of ASX listed company Pryme Oil and Gas Limited (“ Pryme ”). The first of these agreements covers the Atocha Area of Mutual Interest in Louisiana (“ the Atocha Project ”). The second agreement covers the Four Rivers Area of Mutual Interest in Louisiana and Mississippi.

The Atocha Project's aim is to target oil and gas in Louisiana United States in partnership with Pryme. Upon ASX listing, Promesa completed its obligations under the Atocha Farmout Agreement to earn a 25% interest.

The first entry of the Atocha project was via the HM Brian No. 1 well. The re-entry was completed and on perforation the well produced hydrocarbons but not at commercial rates. Accordingly the well was abandoned with focus on evaluating a second well within the Atocha project area.

Promesa and Pryme is continuing with evaluating the data from the re-entry to assist in the generation of a possible second test location.

The work completed on the re-entry and perforation on the first and second zones have been completed within budget. The Company is continuing with evaluating data from the re-entry to assist in the generation of a possible second test location.

Source : Promesa Annual Report 2010 and Quarterly activities report for the three months ended 30 September 2010.

5.3 Underwritten Entitlement Issue

As at 30 June 2010 Promesa had 37,000,000 ordinary shares on issue. On 22 September 2010 the Company announced that it proposed to conduct an underwritten, non-renounceable pro-rata entitlement offer to eligible shareholders and a private placement. The offer to shareholders was for the issue of:

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Approximately 18,500,000 listed loyalty options, on the basis of 1 option for every 2 shares held at the record date, at an issue price of 1 cent per option;
Approximately 12,333,333 new shares, on the basis of 1 share for every 3 shares held at the record date, at an issue price of 12 cents per share; and
Approximately 6,166,667 listed subscription options on the basis of 1 subscription option for every 2 new shares subscribed for, at an issue price of 1 cent per option.

The anticipated share capital of Promesa following the completion of the offer is 49,333,333 ordinary shares (of which 3,312,500 are not quoted on the ASX) and 24,666,667 listed options quoted on the ASX, exercisable at $0.20 per option on or before 23 November 2012.

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5.4 Historical Balance Sheet

	Unaudited As at 30-Sep-10 $ Audited As at 30-Jun-10 $	Unaudited As at 30-Sep-10 $ Audited As at 30-Jun-10 $	Audited As at 30-Jun-09 $
Balance Sheet



CURRENT ASSETS


Cash and cash equivalents	1,388,322	1,559,143	2,777


Trade and other receivables	-	17,820	-

Other assets	-	24,594	-


	1,388,322	1,601,557	2,777


NON-CURRENT ASSETS


Financial Assets	2,000	2,000	-


Exploration expenditure	1,139,956	1,029,664	-


	1,141,956	1,031,664	-





TOTAL ASSETS	2,530,278	2,633,221	2,777





CURRENT LIABILITIES


Trade and other payables	58,348	77,760	195,029


	58,348	77,760	195,029





TOTAL LIABILITIES	58,348	77,760	195,029





NET ASSETS	2,471,930	2,555,461	(192,252)




EQUITY


Issued Capital	3,648,401	3,648,401	563,643


Accumulated losses	(1,176,471)	(1,092,940)	(755,895)


TOTAL EQUITY	2,471,930	2,555,461	(192,252)

Source: Unaudited financial statements for the three month period ended 30 September 2010 and the audited financial statements for the years ended 30 June 2010 and 30 June 2009.

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5.5 Historical Income Statements

	Unaudited 3 months ended 30-Sep-10 $ Audited Year ended 30-Jun-10 $ Audited Year ended 30-Jun-09 $	Unaudited 3 months ended 30-Sep-10 $ Audited Year ended 30-Jun-10 $ Audited Year ended 30-Jun-09 $	Unaudited 3 months ended 30-Sep-10 $ Audited Year ended 30-Jun-10 $ Audited Year ended 30-Jun-09 $
Income Statement



Revenue


Other income	13,249	49,022	718





Administration expenses	(1,230)	(21,289)	(42,877)


Employee benefit (expense)/recovery	(54,500)	(184,622)	87,890


Financial administration and compliance expenses	(35,881)	(129,603)	(70,599)


Legal expenses	(631)	(1,165)	(50,281)


Project evaluation expenses	-	-	(34,924)


Travel and accommodation expenses	(4,537)	(46,627)	(8,393)


Other expenses	-	(2,761)	(2,617)





Loss before income tax	(83,531)	(337,045)	(121,083)


Income tax expense	-	-	-


Loss for the period after income tax	(83,531)	(337,045)	(121,083)

Source: Unaudited financial statements for the three month period ended 30 September 2010 and the audited financial statements for the years ended 30 June 2010 and 30 June 2009.

5.6 Commentary on Historical Financial Statements

Cash and contributed equity both increased significantly from 30 June 2009 to 30 June 2010 as Promesa lodged a prospectus with ASIC on 16 October 2009 to raise $2.5 million. Promesa was successful with its capital raising, issuing 13,500,000 shares at $0.20 to raise $2,700,000 before costs.

In October 2010, Promesa announced an entitlement issue to its current shareholders, to raise $1,726,667 before costs. The funds raised will be used to increase Promesa’s working capital and acquire supplementary assets to complement its existing oil and gas interests.

Over FY2010, Promesa made payments for exploration and evaluation of the Atocha project, which has been recorded at cost as a non current asset on the balance sheet. The costs are carried forward to the extent that they are expected to be recouped in the future, or, the activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves.

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5.7 Capital Structure

The share structure of Promesa as at 23 August 2010 is outlined below:

Description	Number
Total Ordinary Shares on Issue	37,000,000
Top 20 Shareholders	20,506,648
Top 20 Shareholders - % of shares on issue	55.44%

Source: Promesa’s annual financial report for the year ended 30 June 2010

The range of shares held in Promesa as at 23 August 2010 is as follows:

Range of Shares Held	No. of Ordinary Shareholders	No. Of Ordinary Shares
1-1,000	-	-
1,001-5,000	8	30,056
5,001-10,000	162	1,606,350
10,001-100,000	102	4,640,252
100,001 – and over	64	30,723,342
TOTAL	336	37,000,000

Source: Promesa’s annual financial report for the year ended 30 June 2010

The ordinary shares held by the most significant shareholders as at 23 August 2010 are detailed below:

	No of Ordinary Shares Held Percentage of Issued Shares (%)
Name


NJ Family Pty Ltd	4,000,000 10.81%

Twins Pines Investments Pty Ltd	2,000,000 5.41%

Paremea Pty Ltd	1,920,000 5.19%

Merrill Lynch (Australia) Nominees Pty Ltd	1,800,000 4.86%

Total Top 4	9,720,000 26.27%

Others	27,280,000 73.73%

Total Ordinary Shares on Issue	37,000,000 100.00%

Source: Promesa’s annual financial report for the year ended 30 June 2010

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6. Assets held by Peru Minerals SAC

Peru Minerals SAC owns three mineral licenses for Victoadal, Bacata and Santa Rosita (“ the Licenses ”) situated at the northern end of the gold and copper rich Western Cordillera in the Peruvian Andes.

The Licences comprise three to ten graticular blocks, equating to 18 sq km, and are located in the Otuzco district, about 42 km north-east of Trujillo City.

Promesa considers that the Licences are prospective for gold, copper and associated minerals and, following completion of due diligence on the proposed acquisition and completion of the Heads of Agreement, plans to undertake a diamond drilling program commencing in the first-half of 2011 with the aim of outlining an inferred JORC resource estimate.

Further information on the Licenses is outlined in Appendix 3 – Independent Valuation of the Peru Minerals SAC Acquisition.

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7. Economic Analysis

The global economy grew faster than trend over the year to mid 2010. Global growth will probably ease back to about trend pace over the coming year as strong recoveries in the emerging world give way to a more sustainable pace of expansion and growth remains subdued in the United States and Europe. At the same time, concerns about the possibility of a larger than expected slowing in Chinese growth have lessened recently and most commodity prices have firmed, after a fall earlier in the year. The prices most important to Australia remain at very high levels, with the result that the terms of trade are at their highest since the early 1950s. The turmoil in financial markets earlier in the year has abated, though sentiment remains fragile.

Information on the Australian economy indicates growth around trend over the past year. Public spending was prominent in driving aggregate demand for several quarters but this impact is now lessening. While there has been a degree of caution in private spending behaviour thus far, the rise in the terms of trade, which is now boosting national income very substantially, is likely to lead to stronger private spending over the next couple of years, especially in business investment.

Asset values are not moving notably in either direction, and overall credit growth remains quite subdued at this stage notwithstanding evidence of some greater willingness to lend. The exchange rate has risen significantly this year, reflecting the high level of commodity prices and the respective outlooks for monetary policy in Australia and the major countries. This will assist, at the margin, in containing pressure on inflation.

The demand for labour has continued to firm. While the labour market is not as tight as in 2007 and 2008, some further strengthening would appear to be in prospect, judging by the trends in job vacancies. After the significant decline last year, growth in wages has picked up somewhat, as had been expected. Some further increase is likely over the coming year.

Given these conditions, the moderation in inflation that has been under way for the past two years is probably now close to ending. Recent information suggests underlying inflation running at about 2½ per cent, with the CPI inflation rate a little higher due mainly to increases in tobacco taxes. Both results were helped somewhat in the latest quarter by unusual softness in food prices. Inflation is likely to rise over the next few years. This outlook, which is largely unchanged from the Bank's earlier forecasts, assumes some tightening in monetary policy.

The economy is now subject to a large expansionary shock from the high terms of trade and has relatively modest amounts of spare capacity. Looking ahead, notwithstanding recent good results on inflation, the risk of inflation rising again over the medium term remains.

Source: www.rba.gov.au

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8. Gold Industry Analysis

8.1 Supply and Demand

Gold is both a commodity and an international store of monetary value. Once mined, gold continues to exist indefinitely, often melted down and recycled to produce alternative or replacement products. This characteristic means that gold demand is supported by both mine production and gold recycling. According to GFMS Limited, at the end of 2007 the above ground stocks of gold were approximately 161,000 tonnes. Approximately two-thirds of annual demand for gold is driven by jewellery fabrication, with the remainder driven by industrial use and investment in gold.

As illustrated in the chart below, gold mine production was approximately 2,502 metric tonnes in 2009 and gold consumption was 4,003 metric tonnes. While demand for gold consistently exceeds supply, the escalated level of economic and financial uncertainly during the past 18 months has caused investors to move capital from risky assets to gold assets, which are perceived to be to be a good store of monetary value. As a result, total gold demand increased by approximately 4% between 2008 and 2009.

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

2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0 1000 2000 3000 4000 5000
Metric tonn
Gold Demand Gold Mine Supply
----- End of picture text -----

Source: Bloomberg

Until the late 1980’s South Africa produced approximately half of total gold production. More recently, gold production has become geographically segmented, as shown in the chart below. In 2008 production was dominated by China (288 metric tonnes), USA (234 metric tonnes), South Africa (232 metric tonnes) and Australia (225 metric tonnes).

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

12.2%
29.0%
9.9%
9.8%
3.4%
3.6%
9.6%
3.8%
4.2%
7.4%
7.0%
----- End of picture text -----

China United States South Africa Australia Peru Russia Canada Indonesia Uzbekistan Ghana

Source: Data from GFMS Limited

8.2 Current and future gold prices

The price of gold fluctuates on a daily basis depending on global demand and supply factors. As can be seen in the graph below, the value of gold has increased over the past 5 years to USD$1350.75 per ounce at 10 October 2010. This trend is reflective of high demand for gold due to weak economic conditions during the past 18 months. The consensus view is that gold prices will fall over the next 3 years to approximately $1084 in 2014. The current forward rate suggests that the price of gold will stabilise at current levels over the next three years.

Gold Price

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

1,600
1,400 1,350.75
1,200
1,000
800
600
400
200
0
Spot price Consensus Forecast Current foward rate
$USD/lb
----- End of picture text -----

Source: Bloomberg

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9. Copper Industry Analysis

9.1 Supply and Demand

Copper is a soft malleable, ductile metal used primarily for its excellent electrical and thermal conductive properties and its resistance to corrosion. As well as electrical and electronic applications copper is utilised extensively as an alloy. Copper, as a major industrial metal, ranks third after iron and aluminum in terms of quantity consumed ( World Mineral Production 2003-2007 , British Geological Survey).

Copper is produced from an oxide or sulphide ore from which it is converted to copper metal. The majority of copper ore bodies can be classified as either porphyries (where copper occurs in igneous rock), stratabound orebodies (where copper occurs in sedimentary rock), and volcanic hosted massive sulphide deposits (where copper occurs in volcanic rock along with other base metal sulphides). In these deposits copper is mined in very low concentrations and consequently is a volume intensive process. For this reason open pit mining is the preferred method of extraction, however underground mining and leach mining are also used in limited circumstances.

According to the International Copper Study Group (“ ICSG ”), the growth in copper supply and copper demand is expected to match each other for 2010. Over the last 10 years, copper supply and copper demand have shown a gradual increase mainly through China’s strong economic growth.

In 2010, China’s copper consumption is forecast to remain relatively high at around 7 million tonnes. In the first five months of 2010, China’s refined copper consumption was 3.8 million tonnes, an increase of around 2 per cent on the same period in 2009. Copper consumption is likely to be supported in the second half of 2010 and into 2011 by policies aimed at improving access to affordable housing. The Chinese government plan to expand the housing market in China will continue to help drive demand for more copper required for plumbing, electrical wiring and household appliances.

As observed in the table below, copper demand has always exceed copper mine production and refined copper production. ICSG expects that that the copper market for 2011 will show a deficit of 400,000 tonnes as increased economic activity is expected in all major consuming regions as it recovers from the global economic crisis.

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

2011e
2010e
2009e
2008
2007
2006
2005
2004
2003
2002
2001
2000
0 5,000 10,000 15,000 20,000 25,000
Metric Tonne
Refined Usage Refined Production Mine Production
----- End of picture text -----

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

Source: ICSG
e - Estimated
----- End of picture text -----

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

World Economic Copper Reserves
Australia
4% 6% Canada
7% 3%
Chile
5%
3% China
Indonesia
8%
Kazakhstan
34%
Mexico
14% Other Countries
Peru
6% 6% Poland
1% 3% Russia
----- End of picture text -----

Source: Mineral Commodity Summary January 2010 , US Geological Survey

Chile accounts for the bulk of the worldwide economically recoverable copper resource with approximately 34 percent, while Australia is responsible for 6 percent. While physical reserves are considerably higher than those above, the volume intensive high production cost nature of copper extraction means a considerable portion of copper resources are not economically viable to extract.

Australia’s reserves are centred primarily at Olympic Dam, South Australia, and Mount Isa, Queensland. Other significant copper operations are located at Rio Tinto’s Northparkes project and Newcrest Mining’s Cadia-Ridge project in New South Wales, Newmont Mining’s Golden Grove project in Western Australia, Xstrata’s Ernest Henry in Northern Queensland.

Current and future copper price

Copper is a global commodity and, as such, prices are determined by global supply and demand factors. Due to this, copper prices have historically reflected global economic cycles and experienced major fluctuations reflecting equity market movements. At the beginning of 2008, supply concerns, falling inventories and increased demand from emerging economies provoked a significant and accelerated rise in the copper price. Prices were sustained around US$8,000/t for the middle part of the year, fluctuating around this mark predominantly due to the varying strength of the US dollar. The copper price peaked in early July 2008 at US$8,900/t on the back of record oil prices, mine strikes and a weakening US dollar.

Consistent with the trend of historical economic conditions following a global downturn, prices deteriorated rapidly in the latter half of 2008 before steadily recovering from a low of US$2,809/t on 24 December 2008. In 2009 one of the key drivers of demand has been continued stockpiling by China. This is reflected in China Customs data showing imports of refined copper and alloys increasing 151% in the first half of 2009 to 1.8 million tonnes ( Australian Mining Report Q4 2009 , Business Monitor International). These record imports, coupled with tentative signs that the worst of the global recession may be over have provided the basis for the strength in copper prices.

Over the first half of 2010, copper prices continued its increase as demand outstrips supply due in part of miners having been slow to bring capacity back on stream following the global financial crisis of 2008-09.

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

London Metals Exchange Copper
Price
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Copper Spot Price Copper Forecast
Metric Tonne
----- End of picture text -----

Source: Bloomberg

Looking forward analysts are predicting a continued appreciation of the copper price, with consensus forecasts of around US$8,271/t, US$8,612/t, US$7,186/t and US$8,081/t for 2011, 2012, 2013 and 2014 respectively ( Bloomberg ).

The future price outlook for copper will depend on the ability of copper mines to recommence operations or expand operations in order to outpace demand. According to ICSG, operational problems faced by mines, falling ore grades, labour unrest and cutbacks initiated in 2009 will see production limited to 16.2 million tonnes in 2010.

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10. Valuation Approach Adopted

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

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Net Tangible Assets on a going concern basis (“ NTA ”)
Quoted Market Price Basis (“ QMP ”)
Capitalisation of future maintainable earnings (“ FME ”)
Discounted Cash Flow (“ DCF ”)
Multiple of Exploration Expenditure (“ MEE ”)

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

Different methodologies are appropriate in valuing particular companies, based on the individual circumstances of that company and available information. In our assessment of the value of Promesa shares we have chosen to employ the following methodologies:

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Net Tangible Assets on a going concern basis (“ NTA ”)
Quoted Market Price Basis (“ QMP ”)

We have chosen these methodologies for the following reasons:

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Being an exploration company, the core value of Promesa is in the exploration assets it holds. These assets are recorded in the balance sheet. We have considered these in the context of Promesa’s other assets and liabilities.
Promesa’s exploration assets are still in the exploration stage. As such, Promesa is not able to prepare reliable forecasts on the future cash flows of any mining activity. This means that the DCF method is not appropriate.
Promesa is an exploration company and does not generate any regular trading income. Therefore, there are no historic profits that could be used to represent future earnings. This means that the FME valuation methodology will not be appropriate.
Promesa’s shares are traded on the ASX. This means there is a regulated, liquid and observable market where Promesa’s shares can be traded. However, in order for the quoted market price to be considered appropriate the Company’s shares should be liquid and the market should be fully informed as to Promesa’s activities. We have considered these factors in Section 14.

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11. Valuation of a Promesa share prior to the Transaction

In valuing a Promesa share prior to the Transaction, we have utilised the NTA and QMP valuation methodologies as outlined in section 10.

11.1 Net Tangible Asset Valuation of Promesa

The value of a Promesa share on a going concern basis is reflected in our valuation below:

		Unaudited
Promesa Energy Ltd		as at 30-Sep-2010	Low Value	Preferred Value	High Value
	Ref	$	$	$	$
TANGIBLE ASSETS
Cash and cash equivalents	a	1,388,322	2,910,907	2,910,907	2,910,907
Financial assets		2,000	2,000	2,000	2,000
Exploration expenditure	b	1,139,956	306,122	723,039	1,139,956
TOTAL TANGIBLE ASSETS		2,530,278	3,219,029	3,635,946	4,052,863
TANGIBLE LIABILITIES
Trade and other payables		58,348	58,348	58,348	58,348
TOTAL TANGIBLE LIABILITIES		58,348	58,348	58,348	58,348
NET TANGIBLE ASSETS		2,471,930	3,160,681	3,577,598	3,994,515
Shares on issue	c	37,000,000	49,333,333	49,333,333	49,333,333
Value of a Promesa share
prior to the Transaction			0.064	0.073	0.081

The table above indicates the value of a Promesa share after adjustments on a net asset basis is between $0.064 and $0.081 with a preferred value of $0.073 per share. We have adjusted cash & cash equivalents, exploration expenditure, and shares on issue as set out below:

a) Cash and cash equivalents

As mentioned in Section 5.3, Promesa announced an entitlement offer to current shareholders for the following:

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18,500,000 loyalty options exercisable at $0.20 on or about 23 November 2012 at an issue price of 1 cent per option;
12,333,333 new shares at an issue price of 12 cents per share; and
6,166,667 subscription options exercisable at $0.20 on or about 23 November 2012 at an issue price of 1 cent per option.

The combined cash raised as a result of the following entitlement offer totals $1,726,667 (before costs).

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We also note that Promesa paid a non refundable cash payment of US$200,000 to Pegasus under a separate agreement. As we are performing our analysis in Australian Dollars, we have converted this cash payment from US Dollars into Australian Dollars.

The below graph outlines the AUD/USD exchange rate from 1 July 2010 to 2 November 2010, the date prior to the announcement of the Transaction:

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

$1.00
$AUD/$USD
$0.96
$0.92
$0.88
$0.84
$0.80
01-Jul-10 01-Aug-10 01-Sep-10 01-Oct-10 01-Nov-10
----- End of picture text -----

Source : www.oanda.com

From the historic AUD/USD exchange rate, we believe a reasonable exchange rate to adopt in converting the US$200,000 cash payment is $0.98.

	$

Non fundable cash payment to Pegasus ($USD)	200,000

AUD/USD exchange rate	0.98

Non fundable cash payment to Pegasus ($AUD)	204,082

The table above indicates the non refundable cash payment made to Pegasus totals A$204,082.

The two cash items detailed above equates to a pre transaction cash balance for Promesa of $2,910,907.

Cash	$

Cash balance as at 30 September 2010	1,388,322

Cash raised from entitlement offer	1,726,667

Non fundable cash payment to Pegasus	(204,082)

Total	2,910,907

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b) Exploration & evaluation expenditure

We have not relied upon an independent valuation of the existing assets currently held by Promesa. This is due to the abandonment of the first wells and further work being required to determine a second test well which may be valued by a specialist.

We have instead considered two amounts:

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the amount expensed in Promesa’s management accounts as at 30 September 2010, totalling $1,139,956; and
Promesa has been provided with an offer to sell the Project at a price of US$1.2 million at a base level price. This offer is preliminary and whilst it can be considered to be an indication of market value, alternatives are yet to be considered by the Board. Due to this we have also included cost in our assessment of this range. As Promesa currently owns 25% of the Atocha project, this equates to a value of US$300,000, which if converted at the USD/AUD exchange rate calculated previously of $0.98, equates to a value of A$306,122.

We have adopted these two values as our high and low values of Promesa’s current value of exploration and evaluation expenditure, and our preferred value is the midpoint of these two values.

Exploration & evaluation expenditure	$

Value offered for Promesa’s 25% interest in Atocha (Low)	306,122

Midpoint of low and high values (Preferred)	723,039

Exploration at cost as stated in Promesa’s balance sheet (High)	1,139,956

c) Shares on issue

Under the entitlement offer outlined in Section 5.3, Promesa will issue 12,333,333 new shares. As a result, we have increased the number of shares on issue in Promesa from 37,000,000 to 49,333,333.

We note that options were also issued under the entitlement offer; however, our analysis of a Promesa share prior to the Transaction is less than the exercise price of these options of $0.20. Therefore, we have concluded that these options are out of the money and for the purpose of our valuation of a Promesa share prior to the Transaction, will not be exercised.

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11.2 Quoted Market Prices for Promesa Shares

To provide a comparison to the valuation of Promesa in Section 11.1, we have also assessed the quoted market price for a Promesa share.

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

RG 111.22 suggests that when considering the value of a company’s shares for the purposes of approval under Item 7 of s611 the expert should consider a premium for control. An acquirer could be expected to pay a premium for control due to the advantages they will receive should they obtain 100% control of another company. These advantages include the following:

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

Whilst Peru Minerals will not be obtaining 100% of Promesa, RG 111 states that the expert should calculate the value of a target’s shares as if 100% control were being obtained. RG 111.24 states that the expert can then consider an acquirer’s practical level of control when considering reasonableness. Reasonableness has been considered in Section 14.

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

11.2.1 Minority interest value

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

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Information on the Transaction was announced to the market on Wednesday 3 November 2010. Promesa requested to be placed in a trading halt on Monday 1 November 2010. Therefore, the following chart provides a summary of the share price movement over the year to Friday 29 October 2010 which was the last trading day prior to the announcement.

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

900,000 $0.25
800,000
$0.20
700,000
600,000
$0.15
500,000
400,000
$0.10
300,000
200,000 $0.05
100,000
0 $0.00
12-Nov-09 03-Dec-09 24-Dec-09 19-Jan-10 10-Feb-10 03-Mar-10 24-Mar-10 16-Apr-10 10-May-10 31-May-10 22-Jun-10 13-Jul-10 03-Aug-10 24-Aug-10 14-Sep-10 05-Oct-10 26-Oct-10
----- End of picture text -----

Source: Bloomberg

The daily price of Promesa shares from 11 November 2009 to 29 October 2010 has ranged from a high of $0.205 on 18 November 2009 to a low of $0.065 on 7 September 2010. We note the increase in the Promesa share price since approximately mid September 2010 has co-incided with the announcement of the entitlement offer of options and new shares at a price of $0.12, however, the increase may also be attributed to speculation of a transaction.

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

		Closing Share Price Day of Announcement $ (movement)	Closing Share Price Three Days After Announcement $ (movement)
Date	Announcement


11 November 2009	Admission to official list	$0.200	$0.200

16 November 2009	Atocha Project update	$0.200	$0.195

20 November 2009	Atocha Project update	$0.165	$0.160

27 November 2009	Atocha Project update	$0.180	$0.180

30 November 2009	Trading Halt / Atocha Project update	$0.180	$0.125

9 December 2009	Atocha Project update	$0.080	$0.080

17 December 2009	Atocha Project update	$0.080	$0.080

5 January 2010	Atocha Project update	$0.080	$0.090

22 September 2010	Underwritten rights issue and placement	$0.095	$0.100

11 October 2010	Underwritten entitlement issue update	$0.135	$0.135

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To provide further analysis of the market prices for an Promesa share, we have also considered the weighted average market price for 10, 30, 60 and 90 day periods to 29 October 2010.

	29 October 2010	10 Days	30 Days	60 Days	90 Days

Closing Price	$0.155

Weighted Average		$0.137	$0.115	$0.108	$0.102

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

An analysis of the volume of trading in Promesa shares for the twelve months to 2 November 2010 is set out below:

			Cumulative Volume traded	As a % of Issued capital
	Share price low	Share price high


1 day	$0.155	$0.155	66,592	0.13%

10 days	$0.105	$0.170	1,405,058	2.85%

30 days	$0.080	$0.170	4,335,892	8.79%

60 days	$0.065	$0.170	5,296,651	10.74%

90 days	$0.065	$0.170	6,284,484	12.74%

180 days	$0.065	$0.170	9,950,732	20.17%

Since 11 November 2009	$0.065	$0.205	16,828,432	34.11%

This table indicates that Promesa’s shares display a low level of liquidity, with 20% of the Company’s current issued capital being traded in a six month period. For the quoted market price methodology to be reliable there needs to be a ‘deep’ market in the shares. RG 111.53 indicates that a ‘deep’ market should reflect a liquid and active market. We consider the following characteristics to be representative of a deep market:

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

A company’s shares should meet all of the above criteria to be considered ‘deep’, however, failure of a company’s securities to exhibit all of the above characteristics does not necessarily mean that the value of its shares cannot be considered relevant.

Our assessment is that a range of values for Promesa shares based on market pricing, after disregarding post announcement pricing, is between $0.10 and $0.15.

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11.2.2 Control Premium

We have also reviewed control premiums paid by acquirers of Australian mining companies, both listed and unlisted. We have summarised our findings below:

		Average Deal Value (US$m)
Transaction Period	Number of Transactions		Average Control Premium


2010	9	1,166	51.36%

2009	23	43.75	37.38%

2008	10	548.10	18.04%

2007	17	212.04	24.27%

Total	59	353.25	32.46%

Source : Bloomberg data service

We have concluded that an appropriate control premium to use in our valuation is between 30% and 35%

11.2.3 Quoted market price including control premium

Applying a control premium to Promesa’s quoted market share price results in the following quoted market price value including a premium for control:

	Low $	High $
Quoted market price including control premium


Quoted market price value	$0.10	$0.15

Control premium	30%	35%

Quoted market price valuation including a premium for control	$0.130	$0.202

Therefore, our valuation of a Promesa share based on the quoted market price method and including a premium for control is between $0.130 and $0.202.

11.3 Conclusion on value of a Promesa share prior to the Transaction

The results of the valuations performed are summarised in the table below:

	Low $	Preferred $	High $
Value of an Promesa Share


Net tangible assets (Section 11.1)	0.064	0.073	0.081

ASX market prices (Section 11.2)	0.130	0.166	0.202

BDO Preferred Valuation	0.064	0.073	0.081

Based on the results above, our preferred value of a Promesa share prior to the Transaction is between $0.064 and $0.081 with a preferred value of $0.073 per share. We have relied on the NTA valuation as Promesa shares are illiquid and do not give a reliable reflection of the value of the Company. An NTA valuation incorporates a premium for control and as such a control premium does not need to be added to the NTA value as determined in Section 11.1.

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12. Value of a Promesa share following the implementation of the Transaction

Under the terms of the Transaction, Promesa will obtain a 100% interest in Peru Minerals.

In summary, Promesa will issue:

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40 million ordinary fully paid shares to the Vendors;
20 million unlisted options, exercisable at $0.20 within two years from issue (“ Primary Options ”). If a Primary Option is exercised, the holder will be granted one fully paid ordinary share in Promesa, and one unlisted option exercisable at $0.20 within one year after the date of issue (“S econdary Options ”). The Primary Options have the following vesting conditions:
5 million will vest after the Shares have traded on the ASX at $0.20 or more for at least 20 consecutive trading days;
5 million will vest after the Shares have traded on the ASX at $0.25 or more for at least 20 consecutive trading days;
5 million will vest after the Shares have traded on the ASX at $0.30 or more for at least 20 consecutive trading days;
5 million will vest after the Shares have traded on the ASX at $0.35 or more for at least 20 consecutive trading days;

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The issue of 20 million unlisted options, exercisable at $0.20 within two years from issue. These options have the same vesting criteria as the Primary Options, however, they do not exercise into a Secondary Option.
The payment of US$200,000 as a non refundable deposit and US$800,000 at the completion of due diligence.

In valuing a Promesa share after the implementation of the Transaction, we have utilised the NTA valuation methodology as outlined in Section 10.

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12.1 Net Tangible Asset Valuation of Promesa

The value of a Promesa share following the implementation of the Transaction is reflected in our valuation below:

		Pre Transaction
Promesa Energy Ltd		Preferred Value (Section 11.1)	Low Value	Preferred Value	High Value
	Ref	$	$	$	$
TANGIBLE ASSETS
Cash and cash equivalents	a	2,910,907	2,110,907	2,110,907	2,110,907
Financial assets		2,000	2,000	2,000	2,000
Exploration expenditure	b	723,039	8,306,122	9,823,039	11,439,956
TOTAL TANGIBLE ASSETS		3,635,946	10,419,030	11,935,946	13,552,863
TANGIBLE LIABILITIES
Trade and other payables		58,348	58,348	58,348	58,348
TOTAL TANGIBLE LIABILITIES		58,348	58,348	58,348	58,348
NET TANGIBLE ASSETS		3,577,598	10,360,681	11,877,598	13,494,515
Shares on issue	c	49,333,333	89,333,333	89,333,333	89,333,333
Value of a Promesa share
following the implementation
of the Transaction			0.116	0.133	0.151

The table above indicates the value of a Promesa share following the implementation of the Transaction after adjustments on a net asset basis is between $0.116 and $0.151 with a preferred value of $0.133 per share. We have adjusted cash & cash equivalents, exploration expenditure, and shares on issue as set out below:

a) Cash and cash equivalents

We have adjusted cash by the US$800,000 payable to Pegasus at the completion of due diligence on the Transaction. As we are performing our analysis in Australian Dollars, we have converted this cash payment from US Dollars into Australian Dollars.

The below graph outlines the AUD/USD exchange rate from 1 July 2010 to the date of our report:

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

$1.05
$AUD/$USD
$1.00
$0.95
$0.90
$0.85
$0.80
01-Jul-10 01-Aug-10 01-Sep-10 01-Oct-10 01-Nov-10
----- End of picture text -----

Source : www.oanda.com

From the historic AUD/USD exchange rate, we believe a reasonable exchange rate to adopt in converting the US$800,000 cash payment is $1.00. This equates in the $US800,000 being equal to A$800,000.

b) Exploration & evaluation expenditure

We instructed Malcolm Castle to prepare valuations of the Licenses in Peru Minerals which Promesa intends to acquire. A summary of the valuations is attached as Appendix 3 to this report. The results of the market value of Promesa’s exploration interests are set out below:

	Low $	Preferred $	High $
Exploration & evaluation expenditure


Value prior to the Transaction (11.1)	306,122	723,039	1,139,956

Valuation of the Licenses to be acquired (Appendix 3)	8,000,000	9,100,000	10,300,000

Value post the implementation of the Transaction (12.1)	8,306,122	9,823,039	11,439,956

c) Shares on issue

As part of the Transaction, Promesa will issue the Vendors 40,000,000 Promesa shares for nil consideration. As a result, we have increased the number of shares on issue in Promesa following the implementation of the Transaction from 49,333,333 to 89,333,333.

We note that options were also issued under the Transaction; however, our analysis of a Promesa share following the implementation of the Transaction is less than the exercise price of these options of $0.20. We also note there are vesting conditions with these options (detailed is Section 4) which are all greater than or equal to $0.20. Therefore, we have concluded that these options are out of the money and for the purpose of our valuation of a Promesa share following the implementation of the Transaction, will not be exercised.

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12.2 Fully Diluted Net Tangible Asset Valuation of Promesa

Our valuations of a Promesa share both before and after the Transaction assumes that the options currently issued in the Company will not be exercised, due to them being out of the money. For illustrative purposes, we have provided a valuation of a Promesa share following the implementation of the Transaction, assuming that all options in the Company will be exercised:

	Post Transaction
Net Tangible Asset Valuation	(Preferred) $	Low Value $	Preferred Value $	High Value $
TANGIBLE ASSETS
Cash and cash equivalents	2,110,907	19,044,241	19,044,241	19,044,241
Financial assets	2,000	2,000	2,000	2,000
Exploration expenditure	9,823,039	8,306,122	9,823,039	11,439,956
TOTAL TANGIBLE ASSETS	11,935,946	27,352,363	28,869,280	30,486,196
TANGIBLE LIABILITIES
Trade and other payables	58,348	58,348	58,348	58,348
TOTAL TANGIBLE LIABILITIES	58,348	58,348	58,348	58,348
NET TANGIBLE ASSETS	11,877,598	27,294,015	28,810,931	30,427,848
Shares on issue	89,333,333	174,000,000	174,000,000	174,000,000
Value of a Promesa share following the
implementation of the Transaction		0.157	0.166	0.175

The options that can potentially be exercised are:

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Primary Options: 20 million unlisted options, exercisable at $0.20 within two years from issue, exercising into one ordinary share, and one Secondary Option, with the following vesting conditions:
5 million will vest after the Shares have traded on the ASX at $0.20 or more for at least 20 consecutive trading days;
5 million will vest after the Shares have traded on the ASX at $0.25 or more for at least 20 consecutive trading days;
5 million will vest after the Shares have traded on the ASX at $0.30 or more for at least 20 consecutive trading days; and
5 million will vest after the Shares have traded on the ASX at $0.35 or more for at least 20 consecutive trading days.

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Secondary Options: potentially 20 million unlisted options, exercisable at $0.20 within one year after the date of issue.
Caldwell options: The issue of 20 million unlisted options, exercisable at $0.20 within two years from issue. These options have the same vesting criteria as the Primary Options.
Entitlement Options: 24,666,667 listed options quoted on the ASX, exercisable at $0.20 per option on or before 23 November 2012 (Section 5.3).

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13. Is the Transaction Fair?

The value of a Promesa share prior to the Transaction and following the implementation of the Transaction is compared below:

		Low $	Preferred $	High $
Fairness
	Ref


Value of a Promesa share prior to the Transaction	11	0.064	0.073	0.081

Value of a Promesa share following the implementation of the Transaction	12	0.116	0.133	0.151

The above valuation ranges are graphically presented below:

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

Valuation Summary
Value of a Promesa
share prior to the
Transaction
Value of a Promesa
share following the
implementation of
the Transaction
$0.06 $0.07 $0.08 $0.09 $0.10 $0.11 $0.12 $0.13 $0.14 $0.15 $0.16
----- End of picture text -----

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14. Is the Transaction Reasonable?

14.1 Alternative Transaction

We are unaware of any alternative transaction that might offer the non-associated shareholders of Promesa a premium over the value ascribed to that resulting from the Transaction. Given Peru Minerals’ does not currently have an interest in Promesa, we do not consider it likely that an alternative transaction will arise before the Transaction is put to Shareholders.

14.2 Practical Level of Control

If the Transaction is approved then the Vendors of Peru Minerals will hold an initial interest of approximately 44.8% in Promesa, with the potential to hold a 61.9% interest (if the Vendors exercised their options while Caldwell and existing option holders do not exercise their options). In addition to this, Promesa will have two Board members nominated by the Vendors.

When shareholders are required to approve an issue that relates to a company there are two types of approval levels. These are general resolutions and special resolutions. A general resolution requires 50% of shares to be voted in favour to approve a matter and a special resolution required 75% of shares on issue to be voted in favour to approve a matter. If the Transaction is approved, Peru Minerals will initially hold 44.8% of the shares on issue and will be able to block but not pass special resolutions, and not block or pass general resolutions.

Promesa’s Board currently comprises four directors. The Vendors will nominate two directors, who will replace two of the current Board members, with Promesa’s Board remaining at four directors. This means that the Vendors’ nominated directors will make up 50% of the Board.

The Vendor’s control of Promesa following the Transaction will be significant when compared to all other shareholders. Therefore, in our opinion, while the Vendors will be able to significantly influence the activities of Promesa, it will not be able to exercise a similar level of control as if it held 100% of Promesa. As such, the Vendors should not be expected to pay a similar premium for control as if it were acquiring 100% of Promesa.

14.3 Potential decrease in share price

We have analysed movements in Promesa’s share price since the Transaction was announced. A graph of Promesa’s share price since the announcement is set out below.

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

3,500,000 $0.50
3,000,000
Transaction announced $0.40
2,500,000
$0.30
2,000,000
1,500,000 $0.20
1,000,000
$0.10
500,000
0 $0.00
25-Oct-10 28-Oct-10 02-Nov-10 05-Nov-10 10-Nov-10 15-Nov-10
Volume
----- End of picture text -----

Source : Bloomberg

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Promesa’s shares were placed in a trading halt on 1 November 2010, at which point the price quoted on the ASX was $0.155. Upon re-quotation to the ASX on 3 November 2010 (the day the Transaction was announced) Promesa’s share price opened at $0.205, reached a high of $0.360, and closed at $0.320. In the five trading days following the announcement of the Transaction, Promesa’s shares traded between a low of $0.300 and a high of $0.435. This represents a significant increase to the value calculated using the QMP methodology in Section 11.2, of between $0.100 and $0.150 without a control premium.

Given the above analysis it is possible that if the Transaction is not approved then Promesa’s share price may decline to a price similar to that before the announcement of the Transaction.

14.4 Advantages of Approving the Transaction

We have considered the following advantages when assessing whether the Transaction is reasonable.

Ref	Advantage	Description

14.4.1	The Transaction is fair	As set out in Section 13 the Transaction is fair. RG 111 states that a Transaction is reasonable if it is fair


14.4.2	Potential to provide future cash flows from exercise of options	If the Vendors and Caldwell wanted to exercise the options it receives under the Transaction it would be required to provide Promesa with a total of $12 million in cash. The exercise of such options would provide Promesa with additional cash for working capital requirements and fund further exploration costs. The issue of options as part of the consideration for the Projects does not initially dilute Shareholders’ interests in Promesa. The dilution only occurs at such time that the options are exercised.



14.4.3	Diversification	By acquiring an interest in the Projects, Promesa will be exposed to gold and copper assets in Peru, South America, as well as their existing oil and gas interests in Louisiana and Mississippi, United States of America.

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14.5 Disadvantages of Approving the Transaction

If the Transaction is approved, in our opinion, the potential disadvantages to Shareholders include those listed in the table below:

Ref	Disadvantage	Description

14.5.1	Dilution of existing shareholders	The consideration to be paid involves the issue of 40 million shares in Promesa. This will result in an initial dilution in the interest held by Shareholders in Promesa from 100% to 55.2%. In addition to the shares noted above, Promesa also issued 20 million options in Promesa to the Vendors (which can be exercised into a further 20 million options, totalling 40 million options for the Vendors). If these options were exercised, and assuming no other options are exercised, then Shareholders interests in Promesa would be further diluted to 38.1%. Any dilution in the percentage of shares held by a shareholder reduces the interest they have in any potential dividends and distributions that may be paid by a company.



14.5.2	The Vendors will increase its control of Promesa	The Vendors will hold an initial interest of at least 44.8% in the shares of Promesa. This means that the Vendors will be able to influence any voting required on the activities of Promesa.

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15. Conclusion

We have considered the terms of the Transaction as outlined in the body of this report and have concluded that the Transaction is Fair and Reasonable to the Shareholders of Promesa.

16. Sources of Information

This report has been based on the following information:

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Draft Explanatory Statement on or about the date of this report;
Financial statements of Promesa for the years ended 30 June 2009 and 30 June 2010;
Management accounts of Promesa for the three month period ended 30 September 2010;
Independent specialist valuation report prepared by Malcolm Castle dated 16 November 2010;
Draft notice of meeting dated on or about the date of this report;
Heads of Agreement between Peru Minerals and Promesa;
Share registry information;
Information in the public domain; and
Discussions with Directors and Management of Promesa.

17. Independence

BDO Corporate Finance (WA) Pty Ltd is entitled to receive a fee of $30,000 (excluding GST and reimbursement of out of pocket expenses). Except for this fee, BDO Corporate Finance (WA) Pty Ltd has not received and will not receive any pecuniary or other benefit whether direct or indirect in connection with the preparation of this report.

BDO Corporate Finance (WA) Pty Ltd has been indemnified by Promesa in respect of any claim arising from BDO Corporate Finance (WA) Pty Ltd's reliance on information provided by the Promesa, including the non provision of material information, in relation to the preparation of this report.

Prior to accepting this engagement BDO Corporate Finance (WA) Pty Ltd has considered its independence with respect to Promesa and Peru Minerals and any of their respective associates with reference to ASIC Regulatory Guide 112 “Independence of Experts”. In BDO Corporate Finance (WA) Pty Ltd’s opinion it is independence of Promesa and Peru Minerals and their respective associates.

Neither the two signatories to this report nor BDO Corporate Finance (WA) Pty Ltd, have had within the past two years any professional relationship with Promesa, or their associates, other than in connection with the preparation of this report.

The provision of our services is not considered a threat to our independence as auditors under Professional Statement APES 110 – Professional Independence. The services provided have no material impact on the financial report of Promesa.

A draft of this report was provided to Promesa and its advisors for confirmation of the factual accuracy of its contents. No significant changes were made to this report as a result of this review.

BDO is the brand name for the BDO International network and for each of the BDO Member firms.

BDO (Australia) Ltd, an Australian company limited by guarantee, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of Independent Member Firms. BDO in Australia, is a national association of separate entities (each of which has appointed BDO (Australia) Limited ACN 050 110 275 to represent it in BDO International).

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18. Qualifications

BDO Corporate Finance (WA) Pty Ltd has extensive experience in the provision of corporate finance advice, particularly in respect of takeovers, mergers and acquisitions.

BDO Corporate Finance (WA) Pty Ltd holds an Australian Financial Services Licence issued by the Australian Securities and Investment Commission for giving expert reports pursuant to the Listing rules of the ASX and the Corporations Act.

The persons specifically involved in preparing and reviewing this report were Adam Myers and Kelly Alchin of BDO Corporate Finance (WA) Pty Ltd. They have significant experience in the preparation of independent expert reports, valuations and mergers and acquisitions advice across a wide range of industries in Australia and were supported by other BDO staff.

Adam Myers is a member of the Australian Institute of Chartered Accountants. Adam’s career spans 11 years in the Audit and Assurance and Corporate Finance areas.

Kelly Alchin is a member of the Chartered Institute of Management Accountants and is an associate member of the Australian Institute of Chartered Accountants. Kelly’s Corporate Finance career spans 10 years.

19. Disclaimers and Consents

This report has been prepared at the request of Promesa for inclusion in the Explanatory Memorandum which will be sent to all Promesa Shareholders. Promesa engaged BDO Corporate Finance (WA) Pty Ltd to prepare an independent expert's report to consider the acquisition of Peru Minerals.

BDO Corporate Finance (WA) Pty Ltd hereby consents to this report accompanying the above Explanatory Memorandum. Apart from such use, neither the whole nor any part of this report, nor any reference thereto may be included in or with, or attached to any document, circular resolution, statement or letter without the prior written consent of BDO Corporate Finance (WA) Pty Ltd.

BDO Corporate Finance (WA) Pty Ltd takes no responsibility for the contents of the Explanatory Memorandum other than this report.

BDO Corporate Finance (WA) Pty Ltd has not independently verified the information and explanations supplied to us, nor has it conducted anything in the nature of an audit or review of Promesa in accordance with standards issued by the Auditing and Assurance Standards Board. However, we have no reason to believe that any of the information or explanations so supplied are false or that material information has been withheld. It is not the role of BDO Corporate Finance (WA) Pty Ltd acting as an independent expert to perform any due diligence procedures on behalf of the Company. The Directors of the Company are responsible for conducting appropriate due diligence in relation to Promesa. BDO Corporate Finance (WA) Pty Ltd provides no warranty as to the adequacy, effectiveness or completeness of the due diligence process.

The opinion of BDO Corporate Finance (WA) Pty Ltd is based on the market, economic and other conditions prevailing at the date of this report. Such conditions can change significantly over short periods of time.

BDO Corporate Finance (WA) Pty Ltd has also considered and relied upon an independent valuation for properties held by Peru Minerals. The valuer engaged for the valuations possesses the appropriate qualifications and experience in the industry to make such assessments. The approaches adopted and assumptions made in arriving at the valuations are appropriate for this report. We have received consents from the valuer for the use of their valuation reports in the preparation of this report.

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The statements and opinions included in this report are given in good faith and in the belief that they are not false, misleading or incomplete.

The terms of this engagement are such that BDO Corporate Finance (WA) Pty Ltd has no obligation to update this report for events occurring subsequent to the date of this report.

Yours faithfully

BDO CORPORATE FINANCE (WA) PTY LTD

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Kelly Alchin Director

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Adam Myers Associate Director Authorised Representative

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Appendix 1 – Glossary of Terms

Reference	Definition

APES	Accounting Professional and Ethical Standards Board

ASIC	Australian Securities and Investments Commission

ASX	Australian Securities Exchange

AUD or $	Australian Dollar

BDO	BDO Corporate Finance (WA) Pty Ltd

BFS	Bankable Feasibility Study

CPI	Consumer Price Index

DCF	Discounted Future Cash Flows

EBIT	Earnings before interest and tax

EBITDA	Earnings before interest, tax, depreciation and amortisation

FME	Future Maintainable Earnings

FSG	Financial Services Guide

HOA	Heads of Agreement between Promesa and Peru Minerals

Mineroil	Mineroil Energy SAC

MEE	Multiple of Exploration Expenditure

NTA	Net Tangible Assets

Our Report	This Independent Expert’s Report prepared by BDO

Pegasus	Grupo Pegasus SA

PEM	Prospectivity Enhancement Multiplier

Peru Minerals	Peru Minerals SAC

Promesa	Promesa Limited

Pryme	Pryme Oil and Gas Limited

QMP	Quoted Market Price Basis

RG 111	Regulatory Guide 111 ‘Content of Expert Reports’

RG 112	Regulatory Guide 112 ‘Independence of Experts’

Shareholders	Shareholders of Promesa Limited

The Act	The Corporations Act

The Company	Promesa Limited

The Licenses	The three mineral licenses held by Peru Minerals: Victoadal, Bacata and Santa Rosita

The Transaction	The acquisition of Peru Minerals SAC

The Vendors	The vendors of Peru Minerals SAC: Mineroil and Pegasus

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Appendix 2 – Valuation Methodologies

Methodologies commonly used for valuing assets and businesses are as follows:

1 Net tangible asset value on a going concern basis (“NTA”)

Asset based methods estimate the market value of an entity’s securities based on the realisable value of its identifiable net assets. Asset based methods include:

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Orderly realisation of assets method
Liquidation of assets method
Net assets on a going concern method

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to entity holders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the entity is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the entity may not be contemplated, these methods in their strictest form may not be appropriate. The net assets on a going concern method estimates the market values of the net assets of an entity but does not take into account any realisation costs.

Net assets on a going concern basis are usually appropriate where the majority of assets consist of cash, passive investments or projects with a limited life. All assets and liabilities of the entity are valued at market value under this alternative and this combined market value forms the basis for the entity’s valuation.

Often the FME and DCF methodologies are used in valuing assets forming part of the overall Net assets on a going concern basis. This is particularly so for exploration and mining companies where investments are in finite life producing assets or prospective exploration areas.

These asset based methods ignore the possibility that the entity’s value could exceed the realisable value of its assets as they do not recognise the value of intangible assets such as management, intellectual property and goodwill. Asset based methods are appropriate when entities are not profitable, a significant proportion of the entity’s assets are liquid or for asset holding companies.

2 Quoted Market Price Basis (“QMP”)

A valuation approach that can be used in conjunction with (or as a replacement for) other valuation methods is the quoted market price of listed securities. Where there is a ready market for securities such as the ASX, through which shares are traded, recent prices at which shares are bought and sold can be taken as the market value per share. Such market value includes all factors and influences that impact upon the ASX. The use of ASX pricing is more relevant where a security displays regular high volume trading, creating a “deep” market in that security.

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3 Capitalisation of future maintainable earnings (“FME”)

This method places a value on the business by estimating the likely FME, capitalised at an appropriate rate which reflects business outlook, business risk, investor expectations, future growth prospects and other entity specific factors. This approach relies on the availability and analysis of comparable market data.

The FME approach is the most commonly applied valuation technique and is particularly applicable to profitable businesses with relatively steady growth histories and forecasts, regular capital expenditure requirements and non-finite lives.

The FME used in the valuation can be based on net profit after tax or alternatives to this such as earnings before interest and tax (“ EBIT ”) or earnings before interest, tax, depreciation and amortisation (“ EBITDA ”). The capitalisation rate or "earnings multiple" is adjusted to reflect which base is being used for FME.

4 Discounted future cash flows (“DCF”)

The DCF methodology is based on the generally accepted theory that the value of an asset or business depends on its future net cash flows, discounted to their present value at an appropriate discount rate (often called the weighted average cost of capital). This discount rate represents an opportunity cost of capital reflecting the expected rate of return which investors can obtain from investments having equivalent risks.

A terminal value for the asset or business is calculated at the end of the future cash flow period and this is also discounted to its present value using the appropriate discount rate.

DCF valuations are particularly applicable to businesses with limited lives, experiencing growth, that are in a start up phase, or experience irregular cash flows.

5 Multiple of Exploration Expenditure (“MEE”)

The Past Expenditure method is a method of valuing exploration assets in the resources industry. It is applicable for areas which are at too early a stage of prospectivity to justify the use of alternative valuation methods such as DCF. The Past Expenditure method is often referred to as the Multiple of Exploration Expenditure method.

Past expenditure, or the amount spent on exploration of a tenement, is commonly used as a guide in determining value. The assumption is that well directed exploration adds value to a property. This is not always the case and exploration can also downgrade a property. The Prospectivity Enhancement Multiplier (“ PEM ”) which is applied to the effective expenditure therefore commonly ranges from 0.5 to 3.0. The PEM generally falls within the following ranges:

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0.5 to 1.0 where work to date or historic data justifies the next stage of exploration;
to 2.0 where strong indications of potential for economic mineralisation have been identified; and
to 3.0 where ore grade intersections or exposures indicative of economic resources are present.

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Appendix 3 – Independent Valuation Report

Malcolm Castle Consulting Geologist P.O. Box 473, South Perth, WA 6951 Phone: 08 9368 4923 Fax: 08 9368 4932 Mobile: 04 1234 7511 Email: [email protected] ABN: 84 274 218 871

16 November 2010

The Directors

BDO Kendalls Level 8, 256 St Georges Terrace, Perth WA 6000 PO Box 7426 Cloisters Square WA 6850

Dear Sirs,

Re: INDEPENDENT VALUATION OF THE PERU MINERALS SAC ACQUISITION : GOLD PROJECT IN PERU (VICTOADAL, BACATA AND SANTA ROSITA LICENSES)

I have been commissioned by Promesa Ltd (“Promesa” or “the Company”) to provide a Mineral Asset Valuation Report (“Report”) of the Mineroil Energy S.A.C. gold and copper project in Peru. The independent technical valuation report is to be used in connection with a Report being prepared by BDO Corporate Finance (WA) Pty Ltd.

The present status of the tenements/licenses listed in this report is based on information provided by Promesa and their independent consulting geologist. The Report has been prepared on the assumption that the tenements are lawfully accessible for evaluation.

This report serves to comment on the geological setting and exploration results on the properties and presents a technical and market valuation for the exploration assets based on the information in this Report.

Details in respect to the legal status and tenure of the tenements comprising the Project have not been considered in this report.

DECLARATIONS

Relevant codes and guidelines

This report has been prepared as a technical assessment and valuation in accordance with the Code for Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for

Independent Expert Reports (the “VALMIN Code”) , which is binding upon Members of the Australasian Institute of Mining and Metallurgy (“AusIMM”) and the Australian Institute of Geoscientists (“AIG”), as well as the rules and guidelines issued by the Australian Securities and Investments Commission (“ASIC”) and the ASX Limited (“ASX”) which pertain to Independent Expert Reports (Regulatory Guides RG111 and RG112).

Where mineral resources have been referred to in this report, the classifications are consistent with the ”Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (“JORC Code”), prepared by the Joint Ore Reserves Committee of the AusIMM, the AIG and the Minerals Council of Australia, effective December 2004.

Under the definition provided by the VALMIN Code, the properties are classified as ‘exploration areas’, which are inherently speculative in nature. The properties are considered to be sufficiently prospective, subject to varying degrees of risk, to warrant further exploration and development of their economic potential.

Sources of Information

The statements and opinion contained in this report are given in good faith and this review is based on information provided by the title holders, along with technical reports by consultants, previous tenements holders and other relevant published and unpublished data for the area. I have endeavoured, by making all reasonable enquiries, to confirm the authenticity, accuracy and completeness of the technical data upon which this report is based. A final draft of this report was provided to Promesa Ltd, along with a written request to identify any material errors or omissions prior to lodgement.

The independent technical report has been compiled based on information available up to and including the date of this report. Consent has been given for the distribution of this report in the form and context in which it appears. I have no reason to doubt the authenticity or substance of the information provided.

Qualifications and Experience

The person responsible for the preparation of this report is:

Malcolm Castle, B.Sc.(Hons), GCertAppFin (Sec Inst), MAusIMM

Malcolm Castle has over 40 years’ experience in exploration geology and property evaluation, working for major companies for 20 years as an exploration geologist. He established a consulting company 20 years ago and specialises in exploration management, technical audit, due diligence and property valuation at all stages of development. He has wide experience in a number of commodities including gold, base metals, iron ore and mineral sands. He has been responsible for project discovery through to feasibility study in Australia, Fiji, Southern Africa and Indonesia and technical Audits in many countries.

Mr. Castle completed studies in Applied Geology with the University of New South Wales in 1965 and has been awarded a B.Sc.(Hons) degree. He has completed postgraduate studies

with the Securities Institute of Australia in 2001 and has been awarded a Graduate Certificate in Applied Finance and Investment in 2004.

Mr. Castle is a Member of the Australasian Institute of Mining and Metallurgy (AusIMM) and has the appropriate relevant qualifications, experience, competence and independence to be considered as an “Expert” and “Competent Person” under the Australian Valmin and JORC Codes, respectively.

He is a non executive director of East Energy Resources (www.eer.com.au) a coal company with a project in central Queensland and is an executive director of Regalpoint Resources Limited, a uranium company with projects in Australia.

Independence

I am not, nor intend to be a director, officer or other direct employee of the Company and have no material interest in the Projects or the Company. The relationship with the Company is solely one of professional association between client and independent consultant. The review work and this report are prepared in return for professional fees based upon agreed commercial rates and the payment of these fees is in no way contingent on the results of this Report.

Yours faithfully

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Malcolm Castle

B.Sc.(Hons) MAusIMM, MSME, GCertAppFin (Sec Inst)

MINEROIL AU-CU PROJECT

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Project Location

REGIONAL GEOLOGICAL SETTING

The North Peruvian Andes contain a complete sequence of Jurassic - Cretaceous sedimentation (Mesozoic Sedimentary Belt of the Cordillera Occidental), accumulated during a strong subsidence, which was affected by significant structural and intrusive events during the Cenozoic. This is typical of the convergence between the Nazca and the South American plates by subduction processes, generating a system of folds and thrust faults verging to the east. This thick sequence has been intruded by numerous porphyritic subvolcanic stocks and domes of acid to intermediate composition, with Andean direction (NW-SE), which served as a source of mineralizing fluids for different mineralized belts through the departments of Cajamarca, La Libertad and Ancash.

Many deposits and mineral occurrences of precious and base metals are associated with complex shearing zones and siliciclastic sedimentary host rock sequences the Chimú and Chicama Formations (as at Cerro Curunday). They have suffered the effects of tectonism at the end of the Middle Eocene, with structural conditions that were mineralized during the Miocene. The deposits of Au - Ag and other metals in the region are controlled by NW - SE structures that are cut off by other striking NE - SW often with economic mineralization.

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LOCAL GEOLOGICAL SETTING

Within the limits of the Victoadal licence, Jurassic - Cretaceous sedimentary rocks are developed as the Chimú and Chicama Formations of marine origin and Quaternary alluvial deposits. The oldest rocks are traversed by igneous intrusive bodies of varying magnitude and the highest outcrop occurs toward the eastern half of the area, apparently a tectonic - intrusive contact with Chimú Formation, and in the west, cut the shales of the Chicama Formation.

The Chicama Formation is Tithonian Upper Jurassic age (150 Ma), consists of black shales, laminated, brittle, with thin interbeds of gray sandstone. It contains abundant black pyrite nodules sometimes with pyritized fossils. Yellow spots are commonly seen with the appearance of alum, and pink colour due to weathering. Many gray-green andesite sills over 1km long and veins of gypsum are intertwined in the sequences. Occasionally shales present interbedded brown sandstone and clay alumina-rich horizons are used for the ceramic industry. The thickness is about 800-1000m.

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Relative tenement locations

The upper contact with the Chimú Formation (125 Ma) is discordant parallel, while the lower contact is discordant with the Pucará Formation limestone or other older formation. The latter formation has little development within the limits of the license, being composed of medium-grained sandstone, massive white quartzite and shale thin interbedded brown and grey on top, with a thickness of 200-500m.

STRUCTURAL GEOLOGY, ALTERATION AND MINERALIZATION

VICTOADAL LICENSE

In the area of development of the intrusive (Samne sector, east of license, called by Zárate Lower Cerro Curunday), an outcrop of quartz veins area with abundant oligisto and some traces of galena, molybdenite and sphalerite, was observed which had been previously sampled returned interesting

contents of silver, lead, molybdenum, zinc and some copper. These veins of the outer zones of mineralized core, in this structural-geological environment, are usually in groups of parallel and conjugate veins, which may become economic deposits of molybdenum, silver and bismuth, sometimes with economic content of base metals. Similar indications are known in other sites (Rosicler - La Virgen deposit) that the greatest thickness appears in the veins within the intrusive.

The area is overwhelmed by the presence of advanced argillic altered rocks and phyllic (pervasive silicification, quartz-pyrophyllite, quartz-sericite, quartz- kaolinite and patches of potassic alteration by biotite) both to the east.

There are a lot of loose blocks intrusive by the upper bound of the Hill and its surroundings, which without exception have porphyritic character: They are a quartzdiorite - granodiorite porphyry, green-grey color, calc-alkaline, with quartz-chlorite alteration, with hornblende phenocrysts in a finely crystalline matrix.

The territory seen in greater detail, presents a great analogy with present tectonic framework in the high sulphidation epithermal gold deposit "Lagunas Norte”, where it is located in the contact areas of the Chimú sedimentary Formation with Calipuy volcanic Formation (the latter not shown here), but where the greatest concentration of the deposit is in the altered Chimú sandstones and siltstones, as is the case here.

The geological model that best fits the mineralization present is that of a possible high-sulphidation epithermal deposit on the surface, which should include an upper zone of ore oxidized with gold and a lower zone of primary sulphide ores of gold-copper (with enargite), which in the deeper must find the porphyry mineralization type, which could also be gold-copper. In fact, it appears, on the basis of height differences in the sector and identified mineral occurrences, that the depth can exceed 700m vertical.

BACATÁ LICENSE

All work has been done in the areas of development of intrusive Coast Batholith (Batolito de la Costa), Upper Cretaceous - Lower Tertiary in age, with granodiorites, quartzdiorites, quartzmonzonites and diorites, equigranulars mostly medium to fine grain. Sometimes distinct phases are porphyroid textured, given by the isolated phenocrysts of hornblende up to 5-6mm older and fewer and minor plagioclase (2-3mm) in a millimetre matrix.

The essential object of interest was the presence of series of parallel fractures, filled with products of metasomatic-hydrothermal alteration, unfortunately, we only saw clearly sodium-feldspar alteration, the highest temperature as initial event in rocks strongly weathered which does not load gold normally, in isolated areas there appears to be potassic alteration, but it is added to the abundant presence of duplex faults, typical of intrusion related gold deposits. This means that the favorable tectonic setting for this type of deposits is present.

The subsequent photos show two different outcrops along the road to Campo Nuevo Samne, in which clearly shows the parallel provision of fractures filled with oxides and clay minerals (original minerals pyrite and other sulphides and perhaps, sodium calcium and potassium feldspar alteration). These are part of the criteria for assimilation of mineralization with the model of intrusion related gold deposits (IRGD).

SANTA ROSITA LICENSE

This license is located entirely in intrusive Coast Batholith, as well as Bacatá. In this, as above, there were some important and abundant parallel fracture zones, duplexes and fault zones. The presence of a quartz vein system of low angle (2200-2300 m height) exists that, under these geotectonic conditions, are usually important for gold and silver and base metals.

In the upper area, above 3000 m in its northern border, there was a microgranular rock (microdiorite to microquartzdiorite), With significant chlorite-pyrite alteration and the presence the typical intermediate sulphidation alteration of silver and gold deposits with antimony and bismuth in general.

VALUATION OPINION

VALUATION OF THE EXPLORATION POTENTIAL – GEOSCIENTIFIC RATING METHOD

This valuation is based on an assessment of the exploration potential of the project. No resources or reserves have been delineated at the project at this stage in accordance with the JORC code and no financial studies are possible to assess the impact of the net profits interest and royalty at this stage. Elements of the valuation are as follows.

TENURE

The project area is composed of three Business Licences at Santa Rosita 2008 (1000 Ha), Victodal (500 Ha) and Bacata (300 Ha). Total area covered by the licences is 18 square kilometres.

BAC – BASE ACQUISITION COST

This represents the exploration cost for the current period of the tenements. The Peruvian tenement and the work undertaken is considered to be equivalent to a Prospecting Licence in Western Australia though still considered pre mining. The BAC is estimated at $4,500 to $4,700.

PROSPECTIVE AREA

An estimate has been made of the percentage of the tenement area that may be prospective base metals. The tenement area is large and the exploration focus will be throughout the major host rock types. An estimate of 80% to 85% has been applied.

GRANT FACTOR

The tenements/licenses are granted and there is no uncertainty to consider.

TENEMENT AND BASE COST FACTORS

Prospect Name	Equity	Size (km2)	Base Acquitition	Cost	Prospective	Area	Grant Factor
			Low	High	Low	High
Victoadal	100%	5.00	4500	4700	80%	85%	1
Bacata	100%	3.00	4500	4700	80%	85%	1
Santa Rosita	100%	10.00	4500	4700	80%	85%	1

REGIONAL SETTING – METAL ENDOWMENT (OFF PROPERTY)

The project area is part of the Gold-Copper Belt in Northern Peru and the Middle Tertiary metallogenic epoch in the Mesozoic Sedimentary Belt of the Western Cordillera. This zone has a

width of 40-75 km and length up to 350 km. It includes the eastern flank of the northwestern Cordillera of the Peruvian Andes, with several important deposits of gold, copper-gold and to a lesser extent Ag-Au-Cu-Zn- Pb, with some world-class Yanacocha, Lagunas Norte, Quiruvilca, Pierina,

A factor of 4.00 to 4.10 has been allocated representing abundant workings with historical production >400,000 oz or equivalent.

LOCAL SETTING – METAL ENDOWMENT (ON PROPERTY)

The presence of a high sulfidation epithermal gold-copper mineralization on the surface has been established which has been investigated only in the oxidation zone. There is a high degree of heterogeneity of the spatial distribution of gold. In this area, copper easily migrates by exogenous conditions of weathering, as well as silver, lead and zinc, whereas the major metals. Gold, considering that is inert under these conditions, migrates to the depth mechanically (socalled residual concentration), which suggests its larger and more continuous presence into the depths. These ores are easily and economically cyanide as expressed by the results of metallurgical studies.

A factor of 2.00 to 2.10 has been allocated representing several old workings present within the tenements.

ANOMALY FACTOR – KNOWN TARGETS ON THE PROJECTS

The mineral paragenesis and alteration suggests the possibility of the presence of high sulfidation epithermal mineralization, closer to the porphyry environments and a combination of different styles of telescoping mineral deposits is suggested.

The overall architecture of the system of veins and veinlets in the intrusive bodies in other areas of the Bacatá and Santa Rosita licenses, are more reminiscent of the gold deposits associated with intrusions (Intrusion Related Gold Deposits, IRGD) which are not always related to porphyritic intrusives. While the mineralization is distributed in narrow sub parallel veins and veinlets, stockwork rarely in low-density and alterations are confined to the selvage of the mineralized structures.

A factor of 3.25 to 3.35 has been allocated representing several well defined surface targets but with no indication of volume or drilling results.

GEOLOGY FACTOR

The Cerro Curunday sector is expected to define a complex pattern of models, where the mineralized column near surface mineralization is represented by the high-sulphidation epithermal gold, to be subdivided into an upper layer oxidized ore bodies only gold with some silver and a lower horizon of the primary sulphide ores with pyrite-enargite massive-semi massive sulphides where useful elements are gold and copper. Further down a mineralized porphyry mineralization, presumably of gold-copper, may be present. The depth is expected to exceed 700m. In the periphery of this system may appear low sulphidation epithermal veins

with precious and base metals, especially to the southwest of Cerro Curunday, as well as the socalled Curunday Inferior.

A factor of 2.00 to 2.10 has been allocated representing generally favourable lithology over 75 to 80% of the prospective area.

PROSPECTIVITY ASSESSMENT FACTORS:

Prospect	Off Site	Off Site	On Site	On Site	Anomaly	Anomaly	Geology	Geology
Name
	Low	High	Low	High	Low	High	Low	High
Victoadal	4.00	4.10	2.00	2.10	3.25	3.35	2.00	2.10
Bacata	4.00	4.10	2.00	2.10	3.25	3.35	2.00	2.10
Santa
Rosita	4.00	4.10	2.00	2.10	3.25	3.35	2.00	2.10

MARKET VALUE

In arriving at a fair market value for a particular exploration tenement, I have considered the current market for exploration properties in Australia and overseas. It is considered appropriate to apply a market premium to the technical value of the exploration potential of its tenements and the low perceived country risk associated with investments in Peru.

World metal markets are currently very buoyant. This situation has led to an increase in spot market predictions and, for the purpose of this valuation, to a stronger market outlook for new entrants to the market. A comparison was made of the Commodity Metals Price Index (2005 = 100) which includes Copper, Aluminum, Iron Ore, Tin, Nickel, Zinc, Lead, and Uranium Price Indices over the last 25 years from November 1985 to September 2010.

Based on this review a market factor of 2.37 was chosen to bring the historical technical value into line with the current market for metal properties.

Commodity MPI	Long Term	Current Range	Market Factor
	Average	Average
	1985 - 2005	2006 - 2010
Base Metals	66.59	157.92	2.37

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Commodity Metals Price index 1985 - 2010

VALUATION

The valuation of the explora t ion potential has been arrived at from a c o nsideration of the existence of surrounding min e s and deposit available within the project a r ea. In this report, I have systematically establish e d the value of the mineral assets as at 10 N o vember 2010.

Prospect	Tech nical Value	Tech nical Value	Tech nical Value		Market Va lue
Name
	Low	High	Preferred	Low	High	Preferred
Victoadal	0.94	1.21	1.07	2.22	2.87	2.53
Bacata	0.56	0.73	0.64	1.33	1.72	1.52
Santa Rosita	1.87	2.42	2.14	4.44	5.74	5.07
Total	3.37	4.36	3.85	7.99	10.33	9.12

VALUATION OPINION

In this report, I have systemati c ally established the value of the mineral asset s as at 10 November 2010.

Based on an assessment of the fa ctors involved I estimate the value of the proje c t area to be in the range A$8.0 to A$10.3 million with a preferred value of A$9.1 million.

APPENDIX

MINERAL ASSETS VALUATION METHODOLOGY

FAIR MARKET VALUE OF MINERAL ASSETS

Mineral assets include, but are not limited to, mining and exploration tenements held or acquired in connection with the exploration, the development of, and the production from those tenements together with all plant, equipment and infrastructure owned or acquired for the development, extraction and processing of minerals in connection with those tenements.

Mineral assets classification

	Mineral assets classification
Exploration areas	Mineralisation may or may not have been identified, but where a mineral
	resource has not been defined.
Advanced exploration areas	Mineral resources have been identified and their extent estimated (possibly
	incompletely). This includes properties at the early stage of assessment.
Pre-development projects	A positive development decision has not been made. This includes properties
	where a development decision has been negative, properties on care and
	maintenance and properties held on retention titles.
Development projects	Committed to production, but which, are not yet commissioned or not
	initially operating at design levels.
Operating Mines	Mineral properties, particularly mines and processing plants, which have been
	fully commissioned and are in production.

The fair market value, of a mineral asset is the estimated amount of money or the cash equivalent or some other consideration for which the mineral asset should change hands between a willing buyer and a willing seller in an arm’s length transaction. Each party is assumed to have acted knowledgeably, prudently and without compulsion.

The value of a mineral asset usually consists of two components,

The underlying or Technical Value which is an assessment of a mineral asset’s future net economic benefit under a set of appropriate assumptions, excluding any premium or discount for market, strategic or other considerations.
The Market Component, which is a premium relating to market, strategic or other considerations which, depending on circumstances at the time, can be either positive, negative or zero.

When the technical and market components of value are combined the resulting value is referred to as the market value. A consideration of country risk should also be taken into account for overseas projects.

The value of mineral assets is time and circumstance specific. The asset value and the market premium (or discount) changes, sometimes significantly, as overall market conditions, commodity prices, exchange rates, political and country risk change.

REGULATORY AUTHORITIES

Mineral asset valuations are governed by the VALMIN code and ASIC Practice Note 43 in Australia and by the CIMVAL code, NI43-101 and TSXV Appendix 3G in Canada

THE VALMIN CODE

The four main requirements of the VALMIN Code are

Transparency The report needs to explain how the valuation was done and the assumptions used in calculating the value. The objective is to provide sufficient information that other people can come up with the same answer.

Materiality This means the valuer has to ensure that all important data that could have a significant impact on the valuation is included in the report.

Competence The valuer must be competent at doing valuations. The person needs to be an expert in the particular exploration target being evaluated. Typically the person needs at least 5 years experience in that commodity.

Independence . The valuer must act in a professional manner and not favour the buyer or the seller. In other words the price must be set at a “fair market value”. To achieve independence, the valuer must not receive any special benefit from doing the study.

The decisions as to the valuation methodology or methodologies to be used and the content of the Report are solely the responsibility of the Expert or Specialist whose decisions must not be influenced by the Commissioning Entity. The Expert or Specialist must state the reasons for selecting each methodology used in the Report. Methods chosen must be rational and logical and be based upon reasonable grounds.

The Expert or Specialist should make use of valuation methods suitable to the Mineral or Petroleum Assets or Mineral or Petroleum Securities under consideration. Selection of the appropriate valuation method will depend on, inter alia:

(a) the purpose of the Valuation;
(b) the development status of the Mineral or Petroleum Assets;
(c) the amount and reliability of relevant information;
(d) the risks involved in the venture; and
(e) the relevant market conditions for commodities and/or shares.

The Expert or Specialist should choose, discuss and disclose the selected valuation method(s) appropriate to the Mineral or Petroleum Assets or Mineral or Petroleum Securities under consideration, stating the reasons why the particular valuation method(s) have been selected in relation to those factors set out in Paragraph 39 and to the adequacy of available data. It may also be desirable to discuss why a particular valuation method has not been used. The disclosure should give a sufficient account of the valuation method(s) used so that another Expert could understand

the procedure used and assess the Valuation. Should more than one valuation method be used and different valuations result, the Expert or Specialist should comment on the reason(s) for selecting the Value adopted.

Australian Securities and Investment Commission – Regulatory Guides RG111 and RG112

It is not the ASIC’s role or intention to limit the expert’s exercise of skill and judgment in selecting the most appropriate method or methods of valuation. However, it is appropriate for the expert to consider:

(a) the discounted cash flow method;
(b) the amount which an alternative acquirer might be willing to offer if all the securities in the target company were available for purchase;

The ASIC does not suggest that this list is exhaustive or that the expert should use all of the methods of valuation listed above. The expert should justify the choices of valuation method and give a sufficient account of the method used to enable another expert to replicate the procedure and assess the valuation. It may be appropriate for the expert to compare the figures derived by more than one method and to comment on any differences.

The complex valuations in an expert’s report necessarily contain significant uncertainties. Because of this an expert who gives a single point value will usually be implying spurious accuracy to his or her valuation. An expert should, however, give as narrow a range of values as possible. An expert report becomes meaningless if the range of values is too wide. An expert should indicate the most probable point within the range of values if it is feasible to do so.

The expert should carry out sufficient enquiries or examinations to establish reasonable grounds for believing that any profit forecasts, cash flow forecasts and unaudited profit figures that are used in the expert’s report, and have been prepared on a reasonable basis. If there are material variations in method or presentation the expert should adjust for or comment on them in the report.

The expert should discuss the implications to his or her valuation if:

(a) the current market value of the subject of the report is likely to change because of market volatility (for example, boom or depression); or
(b) the current market value differs materially from that derived by the chosen method.

VALUATION METHODOLOGY FOR EXPLORATION TENEMENTS

Valuation of exploration properties is exceptionally subjective. If an economic resource is subsequently identified then a new valuation will be dramatically higher, or alternatively if expenditure of further exploration dollars is unsuccessful then it is likely to decrease the value of the Tenements. There are a number of generally accepted procedures for establishing the value of exploration properties and, where relevant, the use of more than one such method to enable a balanced analysis and a check on the result has been undertaken. The value will always be presented as a range with the preferred value identified. The preferred value need not be the median value, and will be determined by the Independent Expert based on his experience.

The Independent Expert, when determining a value for a mineral asset, must assess a range of technical issues prior to selection of a valuation methodology. Often this will require seeking advice from a specialist in specific areas. The key issues are:

geological setting and style of mineralisation
level of knowledge of the geometry of mineralisation in the district
mining history, including mining methods
location and accessibility of infrastructure
milling and metallurgical characteristics of the mineralisation
results of exploration including geological mapping, costeaning and drilling of interpretation of geochemical anomalies
parameters used to identify geophysical and remote sensing data anomalies
location and style of mineralisation identified on adjacent properties
appropriate geological models

In addition to these technical issues the Independent Expert needs to make a judgement about the market demand for the type of property, commodity markets, financial markets and stock markets. The technical value of a property should not be adjusted by a “market factor” unless there is a marked discrepancy between the technical value and the market value. When this is done the factor should be clearly identified.

Where there are identified reserves it is appropriate to use financial analysis methods to estimate the net present value (NPV) of the properties. This technique has deficiencies which include assessment of only a very narrow area of risk, namely the time value of money given the real discount rate, and the underlying assumption that a static approach is applicable to investment decision making, which is clearly not the case.

When assessing value of exploration properties with no identified mineral resources or only inferred resources it is inappropriate to prepare any form of financial analysis to determine the net present value. The valuation of exploration tenements or licences, particularly those without identified resources, is highly subjective and a number of methods are appropriate to give a guide as discussed below.

All of these valuation methods are relatively independent of the location of the mineral property. Consequently the valuer will make allowance for access to infrastructure etc when choosing a preferred value. It is observed that the Prospectivity Exploration Multiplier (PEM) is heavily based on the expenditure, while the Kilburn Geoscience Rating (Kilburn) is more heavily based on opinions of the prospectivity hence tenements can have marked variation in value between the methods. If the Kilburn assessment is high and the PEM is low it indicates effective well focussed exploration, if the Kilburn is low and the PEM high it suggests that the tenement is considered to have lower prospectivity.

PROSPECTIVITY ENHANCEMENT MULTIPLIER (PEM) OR MULTIPLE OF EXPLORATION EXPENDITURE (MEE)

Past expenditure on a tenement and/or future committed exploration expenditure can establish a base value from which the effectiveness of exploration can be assessed. Where exploration has produced documented results a PEM can be derived which takes into account the valuer’s judgment of the prospectivity of the tenement and the value of the database. Future committed exploration expenditure is discounted to 60% by some valuers to reflect the uncertainty of results and the possible variations in exploration programmes caused by future undefined events. Expenditure estimates for tenements under application are often discounted to 60% of the estimated value by some valuers to reflect uncertainty in the future granting of the tenement. The PEM technique has been employed on the exploration properties in this portfolio. The assigning of PEM factors has to a large extent followed that described by Lawrence (2007) and is defined in the following table. The PEM method has been used as an audit check in this work.

PEM Factors Used in this valuation method

PEM Range	Criteria
0.2 – 0.5	Exploration (past and present) has downgraded the tenement prospectivity, no mineralisation identified
0.5 – 1.0	Exploration potential has been maintained (rather than enhanced) by past and present activity from regional mapping
1.0 – 1.3	Exploration has maintained, or slightly enhanced (but not downgraded) the prospectivity
1.3 – 1.5	Exploration has considerably increased the prospectivity (geological mapping, geochemical or geophysical)
1.5 – 2.0	Scout Drilling has identified interesting intersections of mineralisation
2.0 – 2.5	Detailed Drilling has defined targets with potential economic interest.
2.5 – 3.0	A resource has been defined at Inferred Resource Status, no feasibility study has been completed
3.0 – 4.0	Indicated Resources have been identified that are likely to form the basis of a prefeasibility study
4.0 – 5.0	Indicated and Measured Resources have been identified and economic parameters are available for assessment.

KILBURN GEOSCIENCE RATING METHOD

Valuation is based on a calculation in which the geological prospectivity, commodity markets, financial markets, stock markets and mineral property markets are assessed independently. The Kilburn method is essentially a technique to define a value based on geological prospectivity. The method appraises a variety of mineral property characteristics:

location with respect to any off‐property mineral occurrence of value, or favourable geological, geochemical or geophysical anomalies;
location and nature of any mineralisation, geochemical, geological or geophysical anomaly within the property and the tenor of any mineralisation known to exist on the property being valued;
number and relative position of anomalies on the property being valued;
geological models appropriate to the property being valued.

The Kilburn Method systematically assesses and grades these four key technical attributes of a tenement to arrive at a series of multiplier factors. The Basic Acquisition Cost (BAC) is the important input to the Kilburn Method and it is calculated by summing the application fees, annual rent, work required to facilitate granting (e.g. native title, environment etc) and statutory expenditure for a period of 12 months. This has been established at $525 to $575 per square kilometre for Exploration Licences in Western Australia. Each factor then multiplied serially to the BAC to establish the overall technical value of each mineral property.

Tenement Type	Expenditureper square kilometre(BAC)
Exploration License and equivalents	$525 to$575
ProspectingLicense and equivalents	$4,500 to$4,700
MiningLease and equivalents	$14,250 to$14,750

The multipliers or ratings and the criteria for rating selection across these 6 factors are summarised in the following table.


KILBURN RATING CRITERIA -SIMPLIFIED
Rating	Off Property Factor	On Property Factor	Anomaly Factor	Geological Factor
0.1				Unfavourable geological environment
0.5			Extensive previous exploration with poor results - no encouragement	Minor favourable geological environment
0.9			Extensive previous exploration with encouraging results -regional targets	Generally favourable geological environment under cover
1	Indications of Prospectivity	Indications of Prospectivity	No targets outlined	Generally favourable geological environment
2	Resource targets Identified	Targets identified with successful early drilling	Exposure of mineralised zones or surface drilling (RAB)	Generally favourable lithology with structures or exposures of mineralised zones
3	Along Strike or adjacent to known mineralisation	Grade intercepts on adjacent sections - Exploration Targets Estimated from sound evidence	Significant grade intercepts not yet linked on cross and long sections	Significant mineralised zones exposed in prospective host rocks

	Inferred Resource identified not yet estimated	Grade intercepts on adjacent sections

VALUATION REFERENCES

AusIMM, (2004), “Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC Code), prepared by the Joint Ore Reserves Committee (JORC) of the AusIMM, the Australian Institute of Geoscientists (AIG) and the Minerals Council of Australia (MCA)”, (The JORC Code) effective December 2004.

AusIMM. (2005), “Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (the VALMIN Code)” 2005 Edition

AusIMM, (1998), “Valmin 94 – Mineral Valuation Methodologies”

Barnett, D W and Sorentino, C, 1994. Discounted cash flow methods and the capital asset pricing ‐ model, in Proceedings Mineral Valuation Methodologies 1994 (VALMIN ‘94) pp 17 35 (The Australasian Institute of Mining and Metallurgy: Melbourne).

CANADIAN INSTITUTE OF MINING, METALLURGY AND PETROLEUM, (2000), “CIM Standards on Mineral Resources and Reserves-Definitions and Guidelines”. Prepared by the CIM Standing Committee On Reserve Definitions. Adopted by CIM Council August 20, 2000.

CIM, (April 2001), “CIM Special Committee on Valuation of Mineral Properties (CIMVAL)” Discussion paper

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UNION STAR METALS LTD — Proxy Solicitation & Information Statement 2010

65987_rns_2010-11-29_ed7985e4-5e95-4fea-9112-9e3391a5f75e.pdf

PROMESA LIMITED

ACN 124 541 566

NOTICE OF GENERAL MEETING

CONTENTS PAGE

TIME AND PLACE OF MEETING AND HOW TO VOTE

VENUE

YOUR VOTE IS IMPORTANT

VOTING IN PERSON

VOTING BY PROXY

NOTICE OF GENERAL MEETING

AGENDA

1. RESOLUTION 1 – APPROVAL FOR ISSUE OF SECURITIES TO MINEROIL ENERGY SAC AND GRUPO PEGASUS SA

2. RESOLUTION 2 – APPROVAL FOR ISSUE OF OPTIONS TO CALDWELL

3. RESOLUTION 3 – PLACEMENT OF SHARES

DATED: 29 NOVEMBER 2010

BY ORDER OF THE BOARD

PHIL RE COMPANY SECRETARY

EXPLANATORY STATEMENT

1. OVERVIEW

1.1 Background

1.2 The Licences

1.3 Details of the Heads of Agreement

1.4 Pro forma capital structure

1.5

Risk factors

1.6 Directors’ Recommendations

1.7 Conditionality of Resolutions

1.8 Future of the Company if Resolutions 1 and 2 are not passed

2. RESOLUTION 1 – APPROVAL FOR ISSUE OF SECURITIES TO MINEROIL ENERGY SAC AND GRUPO PEGASUS SA

2.1 General

2.2

ASX Listing Rule 11.1

2.3 Item 7 of Section 611 of the Corporations Act

Section 606 of the Corporations Act – Statutory Prohibition

Voting Power

Associates

Relevant Interests

2.4 Reason Why Section 611 Approval Required

(together, the Vendors’ Associates )

2.5 Specific Information Required by Section 611 Item 7 of the Corporations Act and ASIC Regulatory Guide 74

Relevant Interests and Voting Power

Intentions of the Vendors in relation to the Company

Capital structure

Identity, associations and qualifications of proposed directors

Interests and recommendations of Directors

Independent Expert’s Report

3. RESOLUTION 2 – APPROVAL FOR ISSUE OF OPTIONS TO CALDWELL

3.1 General

3.2 Technical Information required by ASX Listing Rule 7.1

4. RESOLUTION 3 – PLACEMENT OF SHARES

4.1 General

4.2 TECHNICAL INFORMATION REQUIRED BY ASX LISTING RULE 7.1

5. ENQUIRIES

GLOSSARY

SCHEDULE 1 – TERMS AND CONDITIONS OF VENDOR OPTIONS

( Exercise Notice ).

SCHEDULE 2 – TERMS AND CONDITIONS OF CALDWELL OPTIONS

( Exercise Notice ).

PROXY FORM

APPOINTMENT OF PROXY PROMESA LIMITED ACN 124 541 566

GENERAL MEETING

OR

Voting on Business of the General Meeting

Contact Name: _____ Contact Ph (daytime): _________

PROMESA LIMITED ACN 124 541 566

Instructions for Completing ‘Appointment of Proxy’ Form

1.

3.

( Signing Instructions ):

Proxy forms received later than this time will be invalid.

Financial Services Guide

17 November 2010

Financial Services Guide

Information about us

Financial services we are licensed to provide

General Financial Product Advice

Fees, Commissions and Other Benefits that we may receive

UNION STAR METALS LTD Proxy Solicitation & Information Statement 2010

Contact Name: _ Contact Ph (daytime): _____