YOJEE LIMITED - Proxy Solicitation & Information Statement 2012

SOUTHERN CROWN RESOURCES LIMITED ABN 52 143 416 531

NOTICE OF MEETINGS

General Meeting of Shareholders

TIME : 12.00pm (WST) DATE : 11 June 2012 PLACE : The Celtic Club 48 Ord Street West Perth, Western Australia

Special Meeting of REI Purchaser Shareholders

TIME : 12.30pm (WST) DATE : 11 June 2012 PLACE : The Celtic Club 48 Ord Street West Perth, Western Australia

The Independent Expert has concluded that the transaction the subject of Resolution 2 of the General Meeting is FAIR AND REASONABLE to Shareholders.

All Shareholders should refer to the Independent Expert’s Report enclosed with this Notice of General Meeting.

CONTENTS PAGE

Business of the General Meeting (setting out the proposed resolutions)	3
Business of the Special General Meeting (setting out the proposed resolutions)	5
Explanatory Statement (explaining the proposed resolutions)	6
Glossary	14
Schedule 1 – Terms and Conditions of Performance Shares	15
Schedule 2 – REI Purchaser Shareholders	23
Independent Expert’s Report	Enclosed

IMPORTANT INFORMATION

TIME AND PLACE OF MEETING

A General Meeting of Shareholders will be held at 12.00pm (WST) on 11 June 2012 at:

The Celtic Club 48 Ord Street West Perth, Western Australia

A Special Meeting of REI Purchaser Shareholders will be held at 12.30pm (WST) on 11 June 2012, or as soon as the General Meeting of Shareholders has concluded or been adjourned, whichever is earlier, at:

The Celtic Club 48 Ord Street West Perth, Western Australia

YOUR VOTE IS IMPORTANT

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

VOTING ELIGIBILITY

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Meetings are those who are registered Shareholders at 5.00pm (WST) on 9 June 2012.

VOTING IN PERSON

To vote in person, attend the Meetings at the time, date and place set out above.

VOTING BY PROXY

To vote by proxy at either the General Meeting or the Special General Meeting, please complete and sign the relevant enclosed Proxy Form and return by the time and in accordance with the instructions set out on that Proxy Form.

In accordance with section 249L of the Corporations Act, members are advised that:

each member has a right to appoint a proxy;
the proxy need not be a member of the Company; and
a member who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the member appoints 2 proxies and the appointment does not specify the proportion or number of the member’s votes, then in accordance with section 249X(3) of the Corporations Act, each proxy may exercise one-half of the votes.

New sections 250BB and 250BC of the Corporations Act came into effect on 1 August 2011 and apply to voting by proxy on or after that date. Shareholders and their proxies should be aware of these changes to the Corporations Act, as they will apply to these Meetings. Broadly, the changes mean that:

if proxy holders vote, they must cast all directed proxies as directed; and
any directed proxies which are not voted will automatically default to the Chair, who must vote the proxies as directed.

Further details on these changes are set out below.

Proxy vote if appointment specifies way to vote

Section 250BB(1) of the Corporations Act provides that an appointment of a proxy may specify the way the proxy is to vote on a particular resolution and, if it does :

the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed); and
if the proxy has 2 or more appointments that specify different ways to vote on the resolution – the proxy must not vote on a show of hands; and
if the proxy is the chair of the meeting at which the resolution is voted on – the proxy must vote on a poll, and must vote that way (i.e. as directed); and
if the proxy is not the chair – the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed).

Transfer of non-chair proxy to chair in certain circumstances

Section 250BC of the Corporations Act provides that, if:

an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a meeting of the Company's members; and
the appointed proxy is not the chair of the meeting; and
at the meeting, a poll is duly demanded on the resolution; and
either of the following applies:
the proxy is not recorded as attending the meeting;
the proxy does not vote on the resolution,

the chair of the meeting is taken, before voting on the resolution closes, to have been appointed as the proxy for the purposes of voting on the resolution at the meeting.

BUSINESS OF THE GENERAL MEETING

AGENDA

SPECIAL BUSINESS

The Explanatory Statement which accompanies and forms part of this Notice describes the matters to be considered as special business.

1. RESOLUTION 1 – APPROVAL FOR A SELECTIVE REDUCTION OF CAPITAL

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

“That, subject to the passing of each of Resolution 2 at the General Meeting and Resolution 1 at the Special General Meeting, in accordance with Section 256C(2) of the Corporations Act and for all other purposes, approval is given for the Company to make a selective reduction of capital and cancel:
(a) 5,000,000 Shares;
(b) 7,000,000 Class A Performance Shares;
(c) 7,500,000 Class B Performance Shares;
(d) 7,500,000 Class C Performance Shares; and
(e) 15,000,000 Class D Performance Shares,

held by the REI Purchaser Shareholders on the terms and conditions and for the purpose set out in the Explanatory Statement accompanying this Notice.”

Voting Exclusion : The Company will disregard any votes cast on this resolution by any person who is to receive consideration as part of the reduction or whose liability to pay amounts unpaid on shares is to be reduced, or any associates of those persons.

2. RESOLUTION 2 – LISTING RULE 10.1 APPROVAL

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

“That, subject to the passing of each of Resolution 1 at the General Meeting and Resolution 1 at the Special General Meeting, for the purpose of Listing Rule 10.1 of the Listing Rules of ASX and for all other purposes, approval is given for the Company to dispose of its interest in Rare Earth International Limited to the REI Purchaser Shareholders on the terms and conditions and for the purpose set out in the Explanatory Statement accompanying this Notice.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by the REI Purchaser Shareholders and any of their associates. 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: 8 MAY 2012

BY ORDER OF THE BOARD

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ADRIAN HILL COMPANY SECRETARY

BUSINESS OF THE SPECIAL GENERAL MEETING

AGENDA

SPECIAL BUSINESS

The Explanatory Statement which accompanies and forms part of this Notice describes the matters to be considered as special business.

1. RESOLUTION 1 – APPROVAL FOR CANCELLATION OF SHARES AND PERFORMANCE SHARES

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

“That, subject to passing of each of Resolutions 1 and 2 at the General Meeting, in accordance with Section 256C(2) of the Corporations Act and for all other purposes, approval is given by the REI Purchaser Shareholders for the Company to cancel the following Shares and Performance Shares held by the REI Purchaser Shareholders:
(a) 5,000,000 Shares;
(b) 7,000,000 Class A Performance Shares;
(c) 7,500,000 Class B Performance Shares;
(d) 7,500,000 Class C Performance Shares; and
(e) 15,000,000 Class D Performance Shares,

on the terms and conditions and for the purpose set out in the Explanatory Statement accompanying this Notice.”

DATED: 8 MAY 2012

BY ORDER OF THE BOARD

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ADRIAN HILL COMPANY SECRETARY

EXPLANATORY STATEMENT

This Explanatory Statement has been prepared to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions which are the subject of the business of the General Meeting and the Special General Meeting.

1. BACKGROUND

1.1 History

On 3 June 2011, the Company completed the acquisition of Rare Earth International Limited ( REI ) from the REI Purchaser Shareholders on the basis of REI’s interest in a number of rare earth projects in Zambia, Mozambique and Burundi, to complement the Company’s then existing exploration assets in Queensland and New South Wales, whilst also appointing David Reeves and Jock Harmer as additional Directors of the Company.

Following the acquisition of REI, the Company learned that REI had been unsuccessful with securing the title to the rare earth project in Burundi, and commenced focussing its exploration programmes at the Nkombwa Project in Zambia and the Xiluvo Project in Mozambique.

The Company has continued to update the market in relation to the progress, issues and developments that have occurred in relation to those two projects.

On 19 March 2012, the Company announced that Mr David Reeves had resigned as a Director of the Company to pursue his other business interests.

Subsequently, on 20 April 2012, following an approach by representatives of the REI Purchaser Shareholders to determine whether the Company would consider selling the shares in REI back to them in consideration for the cancellation of all of the Shares and Performance Shares in the Company, the Company announced that it had entered into a binding heads of agreement to dispose of 100% of the shares it held in REI back to the original parties from which it acquired REI ( Heads of Agreement ).

The effect of the sale of REI will be that the Company and the REI Purchaser Shareholders will be returned to the same position that they each held before settling the acquisition of REI by the Company in June 2011, save for exploration expenditure incurred by the Company since that time on the projects.

Ultimately, on the basis of the exploration work done to date and considering the various issues relating to those projects, which the Company has previously announced to ASX, the Directors have determined that the offer from the REI Purchaser Shareholders provides an opportunity for the Company to:

(a) continue work on its exploration assets in Queensland and New South Wales; and
(b) seek to identify additional projects or assets which would add value to the Company for Shareholders.

The key terms of the Heads of Agreement are as follows:

(a) the Company agrees to sell, and the REI Purchaser Shareholders agree to acquire the Company’s interest in REI;

(b) the consideration for the sale will be the cancellation of all of the Shares and Performance Shares issued to the REI Purchaser Shareholders together with the extinguishment of any future right to receive any further shares in the Company;
(c) the Heads of Agreement is conditional upon the satisfaction of the following remaining conditions precedent:
(i) Southern Minerals Limited ( Southern Minerals ) entering into agreements to acquire all of the Shares and Performance Shares that it received as consideration for its shares in REI from its various shareholders;
(ii) approval of Shareholders at the General Meeting; and
(iii) approval of the REI Purchaser Shareholders at the Special General Meeting; and
(d) prior to settlement of the Heads of Agreement, the Company has granted to the REI Purchaser Shareholders the right to enter and undertake exploration work on the Nkombwa Project. Where the disposal of REI is not completed, the Company has agreed to reimburse the REI Purchaser Shareholders for any exploration costs incurred on the Nkombwa Project during this time, up to a limit of $50,000.

At the time of the original acquisition of REI, Southern Minerals, one of the original vendors, elected to distribute all of the Shares and Performance Shares that it was entitled to receive to its shareholders via an in specie distribution.

As outlined in (c)(i) above, it is a condition of the Heads of Agreement that Southern Minerals acquire all of the Shares and Performance Shares that were distributed to its shareholders back from those shareholders.

1.2 ASX Waivers

The Company has applied to ASX, and ASX has granted certain waivers from the Listing Rules to enable the sale of REI to occur.

Those waivers include:

(a) a waiver from Listing Rule 9.7 to the extent necessary to permit the Company to allow the shareholders of Southern Minerals Limited to transfer their Shares and Performance Shares back to Southern Minerals, on the condition that Southern Minerals then enter into a restriction agreement with the Company in relation to those Shares and Performance Shares and a holding lock is reinstated over those Shares and Performance Shares; and
(b) a waiver from Listing Rule 9.7 to the extent necessary to permit the Company to amend the existing restriction agreements entered into with each of the REI Purchaser Shareholders such that all of the Shares and Performance Shares can be cancelled as contemplated under the Heads of Agreement.

The waivers received by the Company from ASX are conditional upon Shareholders approving Resolutions 1 and 2 of the Notice of Meeting and the Company completing the selective reduction of capital in accordance with the Corporations Act.

The purpose of the General Meeting and the Special General Meeting are to give effect to the Heads of Agreement and to meet the various requirements under the Corporations Act and the Listing Rules to enable the disposal by the Company of REI to proceed.

2. RESOLUTION 1 – APPROVAL FOR SELECTIVE REDUCTION OF CAPITAL

2.1 General

The purpose of Resolution 1 is to seek the requisite approval of Shareholders required under the Corporations Act for the cancellation of the Shares and the Performance Shares.

As set out in Section 1 above, the Company entered into the Heads of Agreement for the disposal of its interest in REI in consideration for the cancellation of the 5,000,000 Shares and 37,000,000 Performance Shares on issue held by the REI Purchaser Shareholders. The cancellation of those Shares and Performance Shares constitutes a selective reduction of capital for the purposes of the Corporations Act, and accordingly, the approval the subject of Resolution 1 is required to undertake the cancellation of the Shares and Performance Shares.

Resolution 1 will only come into effect if Resolution 2 at the General Meeting and Resolution 1 at the Special General Meeting are both passed by the requisite majorities.

Resolution 1 is a special resolution, and therefore requires not less than 75% of all votes cast on the Resolution to be in favour of the Resolution for it to be passed.

2.2 Corporations Act

Pursuant to Section 256C of the Corporations Act, a company may make a selective capital reduction if it is approved by a special resolution passed at a general meeting of the Company, with no votes being cast in favour of the resolution by any person who is to receive consideration as part of the reduction or whose liability to pay amounts unpaid on shares is to be reduced.

The Corporations Act provides that the rules relating to a reduction of share capital are designed to protect the interests of shareholders and creditors by:

(a) addressing the risk of the transaction leading to the Company’s solvency;
(b) seeking to ensure fairness between the shareholders of the Company; and
(c) requiring the Company to disclose all material information.

In particular, Section 256B of the Corporations Act requires that a Company may only reduce its capital if:

(a) it is fair and reasonable to the shareholders as a whole;
(b) it does not materially prejudice the Company’s ability to pay its creditors; and
(c) it is approved by shareholders in accordance with Section 256C of the Corporations Act.

Section 256C(4) of the Corporations Act requires that the Company must include with the Notice a statement setting out all information known to the Company that is material to the decision on how to vote on the resolution. However, the Company does not have to disclose information if it would be unreasonable to require the Company to do so because the Company had previously disclosed the information to shareholders.

The Directors believe that the capital reduction as proposed is fair and reasonable to shareholders for the following reasons:

(a) the capital reduction will only result in the cancellation of the Shares and Performance Shares issued to the REI Purchaser Shareholders when the Company originally acquired REI from those REI Purchaser Shareholders;
(b) in light of the security of tenure issues in Zambia, the loss of the Gakara Project in Burundi, the cooling of the rare earth market and change in the global economic conditions generally, the Directors consider that the offer presents an opportunity to dispose of its interests in rare earths and pursue new opportunities;
(c) by disposing of its interest in REI, the Company will save money that it would have otherwise been required to expend on the Nkombwa and Xiluvo Projects to ensure that those Projects remained in good standing;
(d) by disposing of its interest in REI, the Company will not be required to make the expenditure commitments on the Nkombwa and Xiluvo Projects to ensure that the earn-in requirements under the respective joint venture agreements are satisfied, which will assist to preserve the Company’s cash assets;
(e) the cancellation of the Shares and Performance Shares will enhance the ability of the Company to attract and acquire additional projects for the Company; and
(f) the reduction in capital will not prejudice the Company’s ability to pay its creditors.

Pursuant to Section 256C(2) of the Corporations Act, a selective reduction of capital must be approved by either:

(a) a special resolution passed at a general meeting of the Company, with no votes being cast in favour of the resolution by any person who is to receive consideration as part of the reduction or whose liability to pay amounts unpaid on shares is to be reduced, or by their associates; or
(b) a resolution agreed to, at a general meeting by all ordinary shareholders.

2.3 Summary of and Effect of Proposed Selective Capital Reduction

The overall effect of the selective capital reduction and cancellation of the Cancellation Shares is as follows:

Existing Capital Structure	Number
Shares	35,001,482
Performance Shares: 1
Class A Performance Shares	7,000,000
Class B Performance Shares	7,500,000
Class C Performance Shares	7,500,000
Class D Performance Shares	15,000,000
Options
Exercisable at $0.35 on or before 31/12/2012	9,994,355
Exercisable at $0.25 on or before 23/07/2013	2,000,000
Exercisable at $0.25 on or before 24/11/2013	2,000,000
Exercisable at $0.25 on or before 23/07/2015	500,000
Exercisable at $0.25 on or before 2/06/2016	500,000
Exercisable at $0.35 on or before 2/06/2016	500,000
After Selective Reduction of Capital
Shares	30,001,482
Performance Shares	Nil
Options
Exercisable at $0.35 on or before 31/12/2012	9,994,355
Exercisable at $0.25 on or before 23/07/2013	2,000,000
Exercisable at $0.25 on or before 24/11/2013	2,000,000
Exercisable at $0.25 on or before 23/07/2015	500,000
Exercisable at $0.25 on or before 2/06/2016	500,000
Exercisable at $0.35 on or before 2/06/2016	500,000

The terms and conditions of each class of Performance Shares are outlined in Schedule 1.

The Shares the subject of the selective capital reduction and cancellation represent 14.3% of the issued capital of the Company as at the date of this Notice. The Performance Shares the subject of the selective capital reduction and cancellation represent 100% of the Performance Shares currently on issue.

The primary effects of the capital reduction on the control of the Company will be to decrease the REI Purchaser Shareholders’ shareholding in the Company as set out in Schedule 2 and increase the remaining Shareholders percentage interest in the Company. In addition, the effect of the cancellation of the Performance Shares will mean that the interest of the remaining Shareholders will not be diluted as a result of the satisfaction of the current performance hurdles of those Performance Shares.

2.4 Company Focus following Disposal of REI

As outlined above, following the disposal of its interest in REI, the Company intends to continue exploration at its existing Queensland and New South Wales projects (details of which were outlined in the initial public offering prospectus of the Company dated 18 October 2010.

In addition, the Directors intend to assess and consider additional acquisitions which they consider could complement the Company’s exploration assets or otherwise have the potential to add value for Shareholders.

2.5 Directors’ Recommendation

The Directors believe that the proposed capital reduction and the disposal of REI is in the best interests of Shareholders. The Directors have determined that the Company has a greater chance of increasing shareholder value by focussing its financial resources on its remaining Australian projects and seeking to find other projects. In addition, the Directors have noted that the Independent Expert has determined that the disposal of REI on the terms outlined in this Notice is fair and reasonable to the non-associated Shareholders of the REI Purchaser Shareholders.

For these reasons, the Directors recommend that Shareholders vote in favour of the capital reduction.

In addition, the Directors consider that it is in the interests of the REI Purchaser Shareholders to approve the Resolution at the Special General Meeting as the passing of this Resolution will allow the REI Purchaser Shareholders to retain their interest in REI and the assets held by REI.

2.6 Other Material Information

There is no information material to the making of a decision by a Shareholder whether or not to approve Resolution 1 being information that is known to any of the Directors and which has not been previously disclosed to shareholders in the Company, other than as disclosed in this Explanatory Statement.

Once the Resolutions are passed by Shareholders, the Company will not make the reduction of capital until at least 14 days after lodgement of the Resolution with the ASIC.

3. RESOLUTION 2 – LISTING RULE 10.1 APPROVAL

3.1 Background

ASX has notified the Company that it has determined that the Company should seek the approval of its Shareholders under Listing Rule 10.1 for the disposal of its interest in REI.

3.2 Listing Rules

ASX Listing Rule 10 deals with transactions between an entity (or any of its subsidiaries) and persons in a position to influence the entity.

ASX Listing Rule 10.1 provides that an entity (or any of its subsidiaries) must not acquire a substantial asset from, or dispose of a substantial asset to, any of the following persons without the approval of the entity’s security holders. These persons include:

(a) a related party;

(b) a subsidiary;
(c) a substantial holder, if the person and the person’s associates have a relevant interest, or had a relevant interest at any time in the 6 months before the transaction, in at least 10% of the total votes attached to the voting securities;
(d) an associate of a person referred to in (a) to (c) above; or
(e) a person whose relationship to the entity is such that, in ASX’s opinion, the transaction should be approved by security holders.

ASX has determined that the interest of the REI Purchaser Shareholders in the Company, when considered together, result in the REI Purchaser Shareholders being ‘substantial holders’ for the purpose of ASX Listing Rule 10.1, and that the disposal of REI constitutes the disposal of a substantial asset.

Accordingly, ASX requires the Company to seek approval under Listing Rule 10.1 for the disposal of REI.

The Company notes that a previous Director of the Company, Mr David Reeves is a Director and substantial shareholder of Southern Minerals, one of the REI Purchaser Shareholders. As such, Mr Reeves may obtain a financial benefit from the decision of the Company to dispose of REI back to the REI Purchaser Shareholders. Mr Reeves has also been involved in the approach to the Company regarding the disposal of REI.

The Directors have outlined their reasons why they consider the disposal of REI (through the reduction of capital) to be in the best interests of Shareholders in Sections 1 and 2.2 above. The Directors consider that these reasons are relevant to all Shareholders whether or not any of the REI Purchaser Shareholders are related parties of the Company. The reasons are also consistent with the advantages listed by the Independent Expert in the Independent Expert’s Report enclosed with this Notice of meeting.

Resolution 2 will only come into effect if Resolution 1, together with Resolution 1 at the Special General Meeting, are both passed.

All material information required for Shareholders to consider Resolution 2 is outlined in Sections 1 and 2 above, as well as in the Independent Expert’s Report.

3.3 Independent Expert’s Report

Under the Listing Rules, the Company is required to engage an independent expert to advise Shareholders whether the disposal the subject of the Listing Rule 10.1 approval is fair and reasonable to the non-associated Shareholders of the Company.

The Company has engaged BDO Corporate Finance (WA) Pty Ltd ( BDO ) to prepare the Independent Expert’s Report which is included together with this Notice of Meeting.

BDO has determined that the disposal of REI and the cancellation of the Shares and Performance Shares held by the REI Purchaser Shareholders is FAIR AND REASONABLE to the non-associated Shareholders of the Company.

All Shareholders are encouraged to read the Independent Expert’s Report in detail and should you have any questions, speak to your professional adviser.

4. SPECIAL GENERAL MEETING RESOLUTION 1 – APPROVAL FOR CANCELLATION OF SHARES AND PERFORMANCE SHARES

4.1 Background

As outlined above, Section 256C(2) of the Corporations Act requires that in order for a selective reduction of capital to be completed, the selective reduction of capital must also be approved by a special resolution passed at a meeting of the shareholders whose shares are to be cancelled.

The Special General Meeting is being held for this purpose, and the only parties entitled to attend and vote at the Special General Meeting are the REI Purchaser Shareholders.

Details of the proposed transaction are outlined in Section 1 above, and the Company considers that all other information has been made available to the REI Purchaser Shareholders at the time that the REI Purchaser Shareholders entered into the Heads of Agreement with the Company.

Resolution 1 to be considered at the Special General Meeting is a special resolution, and therefore requires not less than 75% of all votes cast on the Resolution to be in favour of the Resolution for it to be passed.

GLOSSARY

$ means Australian dollars.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited.

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.

Company means Southern Crown Resources Limited (ACN 143 416 531).

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.

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

Heads of Agreement means the binding heads of agreement entered into between the Company and the REI Purchaser Shareholders referred to in Section 1 of the Notice of Meeting.

Independent Expert means BDO Corporate Finance (WA) Pty Ltd.

Independent Expert’s Report means the report enclosed with this Notice of Meeting prepared by the Independent Expert.

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

Proxy Form means the proxy form accompanying the Notice.

REI means Rare Earth International Limited.

REI Purchaser Shareholders means those Shareholders outlined in Schedule 2.

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

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

Shareholder means a holder of a Share.

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

SCHEDULE 1 – TERMS AND CONDITIONS OF PERFORMANCE SHARES

1. CLASS A PERFORMANCE SHARES

The terms and conditions of the Class A Performance Shares are as follows:

1.1 Rights attaching to the Class A Performance Shares

(a) ( Class A Performance Shares ) Each Class A Performance Share is a share in the capital of the Company.
(b) ( General Meetings ) The Class A Performance Shares shall confer on the holder ( Holder ) the right to receive notices of general meetings and financial reports and accounts of the Company that are circulated to shareholders. Holders have the right to attend general meetings of shareholders of the Company.
(c) ( No Voting Rights ) The Class A Performance Shares do not entitle the Holder to vote on any resolutions proposed at a general meeting of shareholders of the Company.
(d) ( No Dividend Rights ) The Class A Performance Shares do not entitle the Holder to any dividends.
(e) ( Rights on Winding Up ) The Class A Performance Shares participate in the surplus profits or assets of the Company upon winding up of the Company only to the extent of $0.000001 per Class A Performance Share.
(f) ( Not Transferable ) The Class A Performance Shares are not transferable.
(g) ( Reorganisation of Capital ) If at any time the issued capital of the Company is reconstructed, all rights of a Holder will be changed to the extent necessary to comply with the applicable ASX Listing Rules at the time of reorganisation.
(h) ( Application to ASX ) The Class A Performance Shares will not be quoted on ASX. However, upon conversion of the Class A Performance Shares into fully paid ordinary shares ( Shares ), the Company must within seven (7) days after the conversion, apply for the official quotation of the Shares arising from the conversion on ASX.
(i) ( Participation in Entitlements and Bonus Issues ) Holders of Class A Performance Shares will not be entitled to participate in new issues of capital offered to holders of Shares such as bonus issues and entitlement issues.
(j) ( No Other Rights ) The Class A Performance Shares give the Holders no rights other than those expressly provided by these terms and those provided at law where such rights at law cannot be excluded by these terms.

1.2 Conversion of the Class A Performance Shares

(a) ( Conversion on achievement of milestone ) Each Class A Performance Share will convert into one (1) Share upon satisfaction of the following performance hurdles to the reasonable satisfaction of the Company:

(i) the grant of all tenements, licences or concessions relating to the Gakara Project in Burundi or the Rodeo de los Molles project in Argentina (including access rights to commence full exploration activities) to REI within one (1) year of the date of issue of the Class A Performance Shares ( Milestone ).
(b) ( Redemption if Milestone not Achieved ) If a Milestone is not achieved by the required date, or by such later date as the Parties may have agreed upon in writing prior to that date, then each Class A Performance Share held by a Holder will be automatically redeemed by the Company for the sum of $0.000001 within 10 Business Days of non satisfaction of the Milestone.
(c) ( Conversion Procedure ) The Company will issue the Holder with a new holding statement for the Shares as soon as practicable following the conversion of the Class A Performance Shares into Shares.
(d) ( Ranking of Class A Performance Shares ) The Shares into which the Class A Performance Shares will convert will rank pari passu in all respects with existing Shares.

2. CLASS B PERFORMANCE SHARES

The terms and conditions of the Class B Performance Shares are as follows:

2.1 Rights attaching to the Class B Performance Shares

(a) ( Class B Performance Shares ) Each Class B Performance Share is a share in the capital of the Company.
(b) ( General Meetings ) The Class B Performance Shares shall confer on the holder ( Holder ) the right to receive notices of general meetings and financial reports and accounts of the Company that are circulated to shareholders. Holders have the right to attend general meetings of shareholders of the Company.
(c) ( No Voting Rights ) The Class B Performance Shares do not entitle the Holder to vote on any resolutions proposed at a general meeting of shareholders of the Company.
(d) ( No Dividend Rights ) The Class B Performance Shares do not entitle the Holder to any dividends.
(e) ( Rights on Winding Up ) The Class B Performance Shares participate in the surplus profits or assets of the Company upon winding up of the Company only to the extent of $0.000001 per Class B Performance Share.
(f) ( Not Transferable ) The Class B Performance Shares are not transferable.
(g) ( Reorganisation of Capital ) If at any time the issued capital of the Company is reconstructed, all rights of a Holder will be changed to the extent necessary to comply with the applicable ASX Listing Rules at the time of reorganisation.
(h) ( Application to ASX ) The Class B Performance Shares will not be quoted on ASX. However, upon conversion of the Class B Performance Shares into fully paid ordinary shares ( Shares ), the Company must within seven (7) days after the conversion, apply for the official quotation of the Shares arising from the conversion on ASX.
(i) ( Participation in Entitlements and Bonus Issues ) Holders of Class B Performance Shares will not be entitled to participate in new issues of capital offered to holders of Shares such as bonus issues and entitlement issues.
(j) ( No Other Rights ) The Class B Performance Shares give the Holders no rights other than those expressly provided by these terms and those provided at law where such rights at law cannot be excluded by these terms.

2.2 Conversion of the Class B Performance Shares

(a) ( Conversion on achievement of milestone ) Each Class B Performance Share will convert into one Share upon satisfaction of the following performance hurdles to the reasonable satisfaction of the Company:
(i) REI successfully earning a 50% interest in the Nkombwa Project in Zambia pursuant to the agreement entered into on 31 May 2010 between African Consolidated Resources Plc and REI within two (2) years of the date of issue of the Class B Performance Shares ( Milestone ).

(b) ( Redemption if Milestone not Achieved ) If a Milestone is not achieved by the required date, or by such later date as the Parties may agree upon in writing prior to that date, then each Class B Performance Share held by a Holder will be automatically redeemed by the Company for the sum of $0.000001 within 10 Business Days of non satisfaction of the Milestone.
(c) ( Conversion Procedure ) The Company will issue the Holder with a new holding statement for the Shares as soon as practicable following the conversion of the Class B Performance Shares into Shares.
(d) ( Ranking of Class B Performance Shares ) The Shares into which the Class B Performance Shares will convert will rank pari passu in all respects with existing Shares.

3. CLASS C PERFORMANCE SHARES

The terms and conditions of the Class C Performance Shares are as follows:

3.1 Rights attaching to the Class C Performance Shares

(a) ( Class C Performance Shares ) Each Class C Performance Share is a share in the capital of the Company.
(b) ( General Meetings ) The Class C Performance Shares shall confer on the holder ( Holder ) the right to receive notices of general meetings and financial reports and accounts of the Company that are circulated to shareholders. Holders have the right to attend general meetings of shareholders of the Company.
(c) ( No Voting Rights ) The Class C Performance Shares do not entitle the Holder to vote on any resolutions proposed at a general meeting of shareholders of the Company.
(d) ( No Dividend Rights ) The Class C Performance Shares do not entitle the Holder to any dividends.
(e) ( Rights on Winding Up ) The Class C Performance Shares participate in the surplus profits or assets of the Company upon winding up of the Company only to the extent of $0.000001 per Class C Performance Share.
(f) ( Not Transferable ) The Class C Performance Shares are not transferable.
(g) ( Reorganisation of Capital ) If at any time the issued capital of the Company is reconstructed, all rights of a Holder will be changed to the extent necessary to comply with the applicable ASX Listing Rules at the time of reorganisation.
(h) ( Application to ASX ) The Class C Performance Shares will not be quoted on ASX. However, upon conversion of the Class C Performance Shares into fully paid ordinary shares ( Shares ), the Company must within seven (7) days after the conversion, apply for the official quotation of the Shares arising from the conversion on ASX.
(i) ( Participation in Entitlements and Bonus Issues ) Holders of Class C Performance Shares will not be entitled to participate in new issues of capital offered to holders of Shares such as bonus issues and entitlement issues.
(j) ( No Other Rights ) The Class C Performance Shares give the Holders no rights other than those expressly provided by these terms and those provided at law where such rights at law cannot be excluded by these terms.

3.2 Conversion of the Class C Performance Shares

(a) ( Conversion on achievement of milestone ) Each Class C Performance Share will convert into one Share upon satisfaction of the following performance hurdles to the reasonable satisfaction of the Company:
(i) REI successfully earning an 85% interest in the Xiluvo Project in Mozambique pursuant to the agreement entered into on 15 December 2009 between REE International (subsequently assigned to REI) and Promac within two (2) years of the date of issue of the Class C Performance Shares ( Milestone ).

(ii) within 3 years of the date of issue of the Class C Performance Shares ( Milestone ).
(b) ( Redemption if Milestone not Achieved ) If a Milestone is not achieved by the required date, or by such later date as the Parties may agree upon in writing prior to that date, then each Class B Performance Share held by a Holder will be automatically redeemed by the Company for the sum of $0.000001 within 10 Business Days of non satisfaction of the Milestone.
(c) ( Conversion Procedure ) The Company will issue the Holder with a new holding statement for the Shares as soon as practicable following the conversion of the Class A Performance Shares into Shares.
(d) ( Ranking of Class C Performance Shares ) The Shares into which the Class C Performance Shares will convert will rank pari passu in all respects with existing Shares.

4. CLASS D PERFORMANCE SHARES

The terms and conditions of the Class D Performance Shares are as follows:

4.1 Rights attaching to the Class D Performance Shares

(a) ( Class D Performance Shares ) Each Class D Performance Share is a share in the capital of the Company.
(b) ( General Meetings ) The Class D Performance Shares shall confer on the holder ( Holder ) the right to receive notices of general meetings and financial reports and accounts of the Company that are circulated to shareholders. Holders have the right to attend general meetings of shareholders of the Company.
(c) ( No Voting Rights ) The Class D Performance Shares do not entitle the Holder to vote on any resolutions proposed at a general meeting of shareholders of the Company.
(d) ( No Dividend Rights ) The Class D Performance Shares do not entitle the Holder to any dividends.
(e) ( Rights on Winding Up ) The Class D Performance Shares participate in the surplus profits or assets of the Company upon winding up of the Company only to the extent of $0.000001 per Class D Performance Share.
(f) ( Not Transferable ) The Class D Performance Shares are not transferable.
(g) ( Reorganisation of Capital ) If at any time the issued capital of the Company is reconstructed, all rights of a Holder will be changed to the extent necessary to comply with the applicable ASX Listing Rules at the time of reorganisation.
(h) ( Application to ASX ) The Class D Performance Shares will not be quoted on ASX. However, upon conversion of the Class D Performance Shares into fully paid ordinary shares ( Shares ), the Company must within seven (7) days after the conversion, apply for the official quotation of the Shares arising from the conversion on ASX.
(i) ( Participation in Entitlements and Bonus Issues ) Holders of Class D Performance Shares will not be entitled to participate in new issues of capital offered to holders of Shares such as bonus issues and entitlement issues.
(j) ( No Other Rights ) The Class D Performance Shares give the Holders no rights other than those expressly provided by these terms and those provided at law where such rights at law cannot be excluded by these terms.

4.2 Conversion of the Class D Performance Shares

(a) ( Conversion on achievement of milestone ) Each Class D Performance Share will convert into one Share upon satisfaction of the following performance hurdles to the reasonable satisfaction of the Company:

(i) a pre-feasibility study conducted by the Purchaser in relation to any of the Gakara Project, Nkombwa Project or Xiluvo Project or the Rodeo de los Molles Project in San Luis Province, Argentina, to be based upon independent studies and approved metal pricing and formal Board approval of the Company to undertake a full bankable feasibility study, within 3 years of the date of issue of the Class D Performance Shares ( Milestone ).
(b) ( Redemption if Milestone not Achieved ) If a Milestone is not achieved by the required date, or by such later date as the Parties may agree upon in writing prior to that date, then each Class B Performance Share held by a Holder will be automatically redeemed by the Company for the sum of $0.000001 within 10 Business Days of non satisfaction of the Milestone.
(c) ( Conversion Procedure ) The Company will issue the Holder with a new holding statement for the Shares as soon as practicable following the conversion of the Class A Performance Shares into Shares.
(d) ( Ranking of Class D Performance Shares ) The Shares into which the Class D Performance Shares will convert will rank pari passu in all respects with existing Shares.

Entitlement to REI	Shares	100	100	5	205
Consideration Shares	Class D Performance Shares (%)	7,317,073 (48.78%)	7,317,073 (48.78%)	365,854 (2.44%)	15,000,000
	Class C Performance Shares (%)	3,658,537 (48.78%)	3,658,537 (48.78%)	182,927 (2.44%)	7,500,000
	Class B Performance Shares (%)	3,658,537 (48.78%)	3,658,537 (48.78%)	182,927 (2.44%)	7,500,000
	Class A Performance Shares (%)	3,414,634 (48.78%)	3,414,634 (48.78%)	170,732 (2.44%)	7,000,000
	Ordinary Shares (%)	2,439,024 (48.78%)	2,439,024 (48.78%)	121,952 (2.44%)	5,000,000
Shareholder		Southern Minerals Limited	Umbono Capital Partners LLC	Swan Bridge Resources	Total

SOUTHERN CROWN RESOURCES LTD Independent Expert’s Report

7 May 2012

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Financial Services Guide

7 May 2012

BDO Corporate Finance (WA) Pty Ltd ABN 27 124 031 045 (“ we ” or “ us ” or “ ours ” as appropriate) has been engaged by Southern Crown Resources Limited (“ Southern Crown ”) to provide an independent expert’s report on the proposal to sell 100% of the shares that it holds in Rare Earth International Limited (“ REI ”) in consider for cancelling all of the shares and performance shares granted to the shareholders of REI in a previous transaction. You will be provided with a copy of our report as a retail client because you are a shareholder of Southern Crown.

Financial Services Guide

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

This FSG includes information about:

Who we are and how we can be contacted;
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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.

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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

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 $22,000.

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

Other Assignments

BDO prepared an independent expert’s report for Southern Crown in March 2011 in relation to the original transaction when it was proposed that Southern Crown acquire shares in REI.

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 Southern Crown for our professional services in providing this report. That fee is not linked in any way with our opinion as expressed in this report.

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

Complaints resolution

Internal complaints resolution process

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

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

Referral to External Dispute Resolution Scheme

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

Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Toll free: 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.

This is a draft document and must not be relied on or disclosed or referred to in any document. We accept no duty of care or liability to you or any third party for any loss suffered in connection with the use of this document.

1.	Introduction	1
2.	Summary and Opinion	1
3.	Scope of the Report	5
4.	Outline of the Proposed Transaction	7
5.	Profile of Southern Crown	10
6.	Economic analysis	15
7.	Industry analysis	16
8.	Valuation approach adopted	19
9.	Valuation of Southern Crown if the Proposed Transaction is approved	21
10.	Valuation of Southern Crown if the Proposed Transaction is not approved	23
11.	Is the Proposed Transaction fair?	44
12.	Is the Proposed Transaction reasonable?	45
13.	Conclusion	47
14.	Sources of information	47
15.	Independence	47
16.	Qualifications	48
17.	Disclaimers and consents	49

Appendix 1 – Glossary

Appendix 2 – Valuation Methodologies

Appendix 3 - Independent Valuation Report prepared by Agricola

7 May 2012

The Directors Southern Crown Resources Limited Level 1, Suite 2 415 Riversdale Road HAWTHORN EAST VIC 3123

Dear Sirs

INDEPENDENT EXPERT’S REPORT

1. Introduction

On 3 June 2011, Southern Crown Resources Limited (“ Southern Crown ”) acquired 100% of the shares in Rare Earth International Limited (“ REI ”) from Southern Minerals Limited (“ Southern Minerals ”), Swan Bridge Resources (“ Swan Bridge ”) and Umbono Capital Partners LLC (“ Umbono ”) (together “ the Purchasers ”) in consideration for the issue of up to 8,000,000 shares and 37,000,000 performance shares (“ the Acquisition ”).

On 20 April 2012, Southern Crown entered into a Binding Heads of Agreement (“ Heads of Agreement ”) with the Purchasers to sell 100% of the shares in REI to the Purchasers (“ the Sale ”) in consideration for cancelling all of the shares and performance shares granted via the Acquisition (“ the Proposed Transaction ”).

2. Summary and Opinion

2.1 Purpose of the report

The directors of Southern Crown have requested that BDO Corporate Finance (WA) Pty Ltd (“ BDO ”) prepare an Independent Expert Report (“ our Report ”) to express an opinion as to whether or not the Proposed Transaction is fair and reasonable to the non associated shareholders of Southern Crown (“ Shareholders ”).

Our Report is prepared pursuant to Australian Securities Exchange (“ ASX ”) Listing Rule 10.1 in order to assist Shareholders in their decision whether or not to approve the Proposed Transaction.

2.2 Approach

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

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

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

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

2.3 Opinion

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

We have based our opinion on a comparison between our assessed value of a Southern Crown share if the Proposed Transaction is not approved (i.e. prior to the Proposed Transaction) and our assessed value of a Southern Crown share if the Proposed Transaction is approved.

Due to the contingent nature of the performance shares to be cancelled as part of the consideration comprising the Proposed Transaction, our assessed value of a Southern Crown share if the Proposed Transaction is not approved has been addressed under a number of scenarios as described in Section 12.

Based on our analysis of the scenarios, we determined that:

under the Base Case and scenarios 1, 2, 4, 5 and 6 the Proposed Transaction is fair; and
under scenario 3 the Proposed Transaction is not fair.

However, we are of the opinion that the Base Case, which is fair, is the most likely outcome.

As such we must conclude that overall, in our opinion, the Proposed Transaction is fair and reasonable to Shareholders.

2.4 Fairness

In Section 12 we compared the value of a Southern Crown share before the Proposed Transaction with the value of a Southern Crown share following the Proposed Transaction. We made this comparison using various scenarios relating to the achievement (or not) of the performance hurdles relating to the Performance Shares issued under the Acquisition and consequent conversion of the Performance Shares into fully paid ordinary shares.

We assessed the value of a Southern Crown share after the Proposed Transaction in the range from $0.255 to $0.319. The table below summarises the value of a Southern Crown share if the Proposed Transaction is not approved under various scenarios.

			Low	Preferred	High	Analysis
	Characteristics of the Scenario		$	$	$
Approved		Ordinary shares cancelled	0.255	0.287	0.319
Not approved
-Base Case		No Performance Shares convert	0.201	0.227	0.252	Fair
-Scenario 1		Class B – Performance Shares convert into	0.234	0.268	0.302	Fair
		shares
-Scenario 2		Class C – Performance Shares convert into	0.251	0.281	0.310	Fair
		shares
-Scenario 3		Class B & C – Performance Shares convert into	0.272	0.308	0.345	Not fair
		shares
-Scenario 4		Class B & D – Performance Shares convert into	0.176	0.202	0.227	Fair
		shares
-Scenario 5		Class C & D – Performance Shares convert into	0.189	0.211	0.233	Fair
		shares
-Scenario 6		Class B, C & D – Performance Shares convert	0.212	0.240	0.269	Fair
		into shares

Source: BDO Analysis

We concluded that the scenarios 1, 3, 4 and 6 are unlikely outcomes based on the following reasons:

The Directors of Southern Crown have indicated that it is unlikely that they will be making any additional expenditure on the Nkombwa Project at this stage;
It is unlikely that the Company will fulfil the expenditure required to achieve its interest in the Nkombwa Project within the timeframe of the existing agreements; and
Even if Southern Crown expends further cash funds on the Nkombwa Project, there remain concerns surrounding the legal ownership of the mineralised area of the tenement.

We concluded that the Base Case, Scenario 2 and Scenario 5 are the most likely outcomes based on the following reasons:

To meet the additional expenditure requirements to achieve its interest in the Xiluvo Project, the Company will have to invest a large portion of its cash assets so that that further cash will have to be raised by the Company to further develop its projects which may be dilutive to Shareholders;
The Xiluvo Project has a JORC indicated resource with the next stage in developing the project being the process of metallurgical analysis. It is possible that the Company will satisfy the Xiluvo Additional Expenditure within the required timeframe, particularly given that there is some doubt over when/if the required period commenced;
The ability to market the Xiluvo Project to other parties is limited by the existence of the associated Performance Shares; and
The cancellation of the Shares and Performance Shares will enhance the ability of the Company to attract and acquire additional projects for the Company.

As such, on the basis that our assessed value of a Southern Crown share before the Proposed Transaction (under the Base Case, Scenario 2 and Scenario 5), is less than our assessed value of a Southern Crown share after the Proposed Transaction in the range from $0.255 to $0.319 with a preferred value of $0.287, we conclude that in our opinion the Proposed Transaction is fair for Shareholders.

The above valuation ranges for the different scenarios before the Proposed Transaction and after the Proposed Transaction are presented graphically below:

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

Approved
Not approved - Base case
Scenario 2
Scenario 5
Scenario 1
Scenario 3
Scenario 4
Scenario 6
0.15 0.20 0.25 0.30 0.35 0.40
Value ($)
Low Preferred High
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2.5 Reasonableness

We have considered the analysis in Section 12 of this report, in terms of both:

Advantages and disadvantages of the Proposed Transaction; and
Alternatives, including the position of Shareholders if the Proposed Transaction does not proceed.

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

The respective advantages and disadvantages of the Proposed Transaction considered are summarised below:

ADVANTAGES AND DISADVANTAGES	ADVANTAGES AND DISADVANTAGES
Section	Advantages	Section	Disadvantages
12.3	The Proposed Transaction is fair when	12.4	The Proposed Transaction is not fair under
	compared with the most likely		one of the scenarios
	outcomes being the base case, scenario
	2 and scenario 5
12.3	The Proposed Transaction is also fair	12.4	Disposal of the Xiluvo Project represents
	under certain other scenarios		the disposal of a project with a JORC
			indicated resource

12.3	Concentration of existing shareholders’	Full benefit from Southern Crown’s past
	interest	expenditure on the projects not realised
12.3	No possibility of future dilution of
	existing shareholders’ interests
12.3	Avoids further expenditure on project
	where the tenure is in doubt
12.3	Opportunity to exit the rare earth
	market
12.3	Ability to pursue new opportunities
12.3	Avoids the necessity to re-negotiate the
	existing agreements for the Nkombwa
	and Xiluvo projects

Other key matters we have considered include:

Section	Description
12.1	No other alternative Transactions that we are aware of

3. Scope of the Report

3.1 Purpose of the Report

ASX Listing Rule 10.1 requires that a listed entity must obtain shareholders’ approval before it acquires or disposes of a substantial asset, when the consideration to be paid for the asset or the value of the asset being disposed constitutes more than 5% of the equity interest of that entity at the date of the last audited accounts. Based on the reviewed accounts of Southern Crown as at 31 December 2011, the carrying value of the REI assets was $1,708,364 representing 33.8% of net assets.

Listing Rule 10.1 applies where the vendor or acquirer of the relevant assets is a substantial holder of the listed entity. Under the ASX listing rules a person is considered a substantial holder if the person and the person’s associates have a relevant interest, or had a relevant interest at any time in the 6 months before the transaction in at least 10% of the votes attached to the voting securities. As per the Notice of Meeting, the ASX has determined that the interest held by the Purchasers in the Company, when considered together, result in the Purchasers being substantial holders, for the purposes of ASX listing rule 10.1, and the disposal of REI constitutes the disposal of a substantial asset. Based on the reviewed accounts of Southern Crown as at 31 December 2011 there were 35,001,482 ordinary shares on issue of which 5,000,000 (or 14.3%) are the subject of this Proposed Transaction.

Listing Rule 10.2 requires the Notice of Meeting for shareholders’ approval to be accompanied by a report by an independent expert expressing their opinion as to whether the Proposed Transaction is fair and reasonable to the shareholders whose votes are not to be disregarded in respect of the Proposed Transaction (“ non-associated shareholders ”).

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

3.2 Regulatory guidance

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

This regulatory guide suggests that, where an expert assesses whether a related party transaction is ‘fair and reasonable’ for the purposes of ASX Listing Rule 10.1, this should not be applied as a composite test— that is, there should be a separate assessment of whether the transaction is ‘fair’ and ‘reasonable’, as in a control transaction. An expert should not assess whether the transaction is ‘fair and reasonable’ based simply on a consideration of the advantages and disadvantages of the proposal.

The Proposed Transaction effectively represents a reversal of the Acquisition of 3 June 2011 which was addressed as a control transaction because it had the potential to allow the then vendors of REI (Southern Minerals, Umbono and Swan Bridge) (currently referred to as the Purchasers) to increase their shareholding interest in Southern Crown from nil to 21.05% with the potential of increasing to a maximum of 60.00%.

(We note however that the Ordinary Shares and Performance Shares to which Southern Minerals were entitled under the Acquisition were issued directly to Southern Minerals shareholders in proportion to their holding in Southern Minerals rather than to Southern Minerals as an entity.)

In our opinion, the Proposed Transaction is not a control transaction as defined by RG 111 but because of the nexus to the 3 June 2011 Acquisition we consider that it is similar to a control transaction and we have therefore assessed the Proposed Transaction to consider whether, in our opinion, it is fair and reasonable to Shareholders.

It is important to note that there has been no ongoing association between the Purchasers.

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.

Further to this, RG 111 states that a transaction is reasonable if it is fair. It might also be reasonable if despite being ‘not fair’ the expert believes that there are sufficient reasons for security holders to accept the offer in the absence of any higher bid.

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

A comparison between the value a Southern Crown share before the Proposed Transaction and the value of a Southern Crown share after the Proposed Transaction (fairness – see Section 11 “Is the Proposed 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 12 “Is the Proposed 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.

4. Outline of the Proposed Transaction

4.1. Background

On 5 May 2011, the shareholders of Southern Crown approved a transaction (“ the Acquisition ”) to purchase all of the shares in the capital of REI through the issue of:

5 million Southern Crown fully paid ordinary shares;
3 million Southern Crown fully paid ordinary shares contingent on the granting of a prospecting licence to a Mozambique registered company in which REI will have an interest in relation to the Xiluvo Project in Mozambique; and
37 million performance shares.

The 37 million performance shares were divided into 4 different classes that will convert to fully paid ordinary shares upon the satisfaction of the following performance hurdles:

a) The conversion of 7 million Performance Shares when Southern Crown has the right to commence exploration on any application submitted by REI in relation to the Gakara Project in Burundi and the Rodeo de los Molles project in Argentina within one year of the date of issue of the Performance Shares. (“ Class A - Performance Shares ”)
b) The conversion of 7.5 million Performance Shares when Southern Crown earns its 50% interest in the Nkombwa Project, Zambia pursuant to the agreement between REI and African Consolidated Resources Plc (“ ACR ”) entered into on 31 May 2010 (“ ACR Agreement ”) within two years of the date of issue of the Performance Shares. To achieve an initial 30% interest, Southern Crown must spend US$750,000 and develop the licence to the point of a Joint Ore Reserves Committee (“ JORC ”) compliant Mineral Resource. An additional 20% interest is earned by Southern Crown spending US$600,000 and converting at least half of the JORC compliant Mineral Resource to a JORC compliant Inferred Resource. (“ Class B - Performance Shares ”)
c) The conversion of 7.5 million Performance Shares when Southern Crown earns its 85% interest in the Xiluvo Project, Mozambique pursuant to a joint venture heads of agreement with Promac, a Mozambique incorporated company (“ Promac ”), dated on or about 15 December 2009 (“ Promac Agreement ”) in relation to a licence held by Promac in Mozambique and which was to be extended to include rare earth elements, within two years of the date of issue of the Performance Shares. To achieve an initial 50% interest, Southern Crown must spend US$300,000 undertaking exploration on the licence and is able to achieve an additional 35% by spending a further US$700,000. (“ Class C - Performance Shares ”)
d) The conversion of 15 million Performance Shares upon completion of a pre-feasibility by Southern Crown (based on independent studies and conservative metal pricing) and a resolution of the Independent Directors of Southern Crown to undertake a full Bankable Feasibility Study ( “BFS ”)

on any of REI’s mining assets (Gakara Project or Nkombwa Project or Xiluvo Project or the Rodeo de los Molles Project), within 3 years of the date of issue of the Performance Shares. (“ Class D - Performance Shares ”)

The Acquisition was approved by Southern Crown shareholders in general meeting on 5 May 2011 and was finalised and announced to the market on 9 June 2011.

4.2. Updated information on REI’s mining assets

Since the announcement of the Acquisition, the following has occurred in relation to each of REI’s mineral assets which underlie and impact on the Performance shares.

Gakara Project, Burundi and Rodeo de los Molles Project, Argentina

The Gakara Project in Burundi was awarded to another party in August 2011. Southern Crown was never officially informed of this outcome but discovered this outcome through it being published in the official gazette in October 2011. As such REI has no right to the Gakara Project and the Class A Performance Shares cannot convert to ordinary shares in the Company.

The Rodeo de los Molles Project in Argentina related to a previously applied for exploration tenure in Argentina during 2010. Subsequent to lodging the application, REI was made aware that the area of the application covered an area that was already subject to a granted exploration tenure that was due to expire at the end of December 2010. REI did not lodge a new application for any exploration tenure in Argentina.

Nkombwa Project, Zambia

On 4 October 2011 Southern Crown announced that ACR had received information that the portion of the licence covering the Nkombwa Project may have been excised to another party without ACR’s knowledge or consent.

On 20 February 2012, ACR received a letter from the Acting Director of Mines at the Ministry of Mines and Natural Resources (“ Director of Mines Letter ”) stating its opinion that ACR holds the sole valid mining right existing over the Nkombwa Hill exploration licence area and that the excision of the Nkombwa Hill area to a third party was invalid as it contravened the provisions of the Zambian Mines and Minerals Development Act of 2008. On 24 February 2012 Southern Crown provided news on progress regarding this excision of part of the Nkombwa Project.

Although this is viewed by Southern Crown as a positive development, the resolution of the issue is dependent on a physical change within the registry system which in turn remains contingent on the lifting of a general moratorium on the licensing system, announced by the Ministry of Mines and Natural Resources on 7 October 2011, to remove irregularities that had accumulated in the licensing system, including the invalid licence over Nkombwa Hill. Southern Crown has sought a legal opinion on the Director of Mines Letter before making a decision to resume exploration activities.

Exploration by Southern Crown in 2011 identified two highly prospective drill-ready targets of high grade REE mineralisation on Nkombwa Hill. Plans to drill these prior to the summer rains were suspended as a consequence of the tenure uncertainty.

Total eligible spend to date on the Nkombwa Project is approximately $350,184. We note that this amount includes the director fees associated with the Project.

Xiluvo Project, Mozambique

On 10 November 2011, Southern Crown announced the results of exploration drilling which commenced in July 2011. A JORC compliant resource estimate on the soil target was announced described as:

“An indicated category mineral resource of 1.1 million tonnes at 2.05% total rare earth oxides (“TREO”) has been estimated at a cut-off grade of 1% TREO”.

Total eligible spend to date on the Xiluvo Project is approximately $168,233. We note that this amount includes the director fees associated with the Project.

The next step for Southern Crown is to commence metallurgical testwork on a representative sample of the resource to allow a scoping study to be undertaken and Southern Crown is actively seeking a joint venture partner to assist with this stage of the project. The required expenditure for Southern Crown to achieve its interest in the Xiluvo Project is considered from the date of the granting of a Mineral Right. There is currently doubt over when and if this date occurred due to issues with the local incorporating company.

4.3. The Proposed Transaction

On 20 April 2012, the Purchasers entered into a Binding Heads of Agreement with Southern Crown for the Purchasers to acquire 100% of the shares in REI from Southern Crown.

The consideration for the Purchasers’ acquisition of all the shares in REI is in the form of the cancellation of the Purchasers’ holding of shares and performance shares in Southern Crown.

The Purchasers currently hold:

5,000,000 ordinary shares and
37,000,000 performance shares.

The cancellation also covers the extinguishment of any future right to receive any future shares in Southern Crown including the Purchasers’ right to receive 3,000,000 shares upon the granting of a prospecting licence to REI in Mozambique pursuant to the terms of the original Acquisition agreement.

The Purchasers comprise Southern Minerals, Swan Bridge and Umbono but it should be noted that the Southern Crown shares and Southern Crown performance shares issued to Southern Minerals under the original Acquisition were distributed to Southern Minerals’ individual shareholders under an in specie distribution so it is a condition precedent that Southern Minerals enter into binding agreements with its shareholders to acquire all the Southern Crown shares and Southern Crown performance shares.

When REI was acquired by Southern Crown its share capital structure was as detailed below and this represents the percentage of Southern Crown shares owned by the Purchasers:

	No of Ordinary Shares	Percentage of
Name	Held	Issued Shares (%)
Umbono Capital Partners LLC	100	48.8
Southern Minerals Limited	100	48.8
Swan Bridge Resources	5	2.4
Total Ordinary Shares on Issue	205	100.0
Source: REI register of members

Umbono is an investment group in Africa focussed on mining, energy and other natural resources within the country. The company specialises in providing asset management, investing, financing and advisory services to clients in the mining, energy and telecommunications sectors.

5. Profile of Southern Crown

5.1 History

Southern Crown was incorporated on 30 April 2010 and was admitted to the ASX on 30 November 2010. Southern Crown entered into an agreement with Centaurus Resources Limited (“ Centaurus ”) and SC Resources Pty Ltd (“ SC Resources ”), a wholly owned subsidiary of Southern Crown. As part of the agreement with Centaurus, Southern Crown acquired the Dish Project located in New South Wales and the North East Queensland Project in Queensland.

The Dish

The Dish Project (78km²) is located approximately 15km southeast of Peak Hill in western New South Wales and is located 20km east of the North Parkes deposit owned in joint venture between Rio Tinto and Sumitomo.

The Dish Project is considered prospective for gold. Southern Crown is planning to undertake a detailed geophysical survey followed by a targeted reverse circulation drilling programme to test the coincident geological and geochemical targets.

The North East Queensland Projects (Percyvale and Ropewalk)

The North East Queensland Project is located 35km south of Einasleigh comprising of one granted Exploration Permit for all minerals others than coal Exploration Permit Minerals (“ EPM ”) and three other EPM applications. The project is located 50km west of Kidston gold deposit which produced approximately 3.4 Moz of gold between 1985 and 2001.

The North East Queensland Projects are also considered prospective for gold, copper, uranium and base metal mineralisation. The Company plans to conduct further geochemical and geophysical surveying on the project.

5.2 REI Acquisition

REI is a 100% wholly owned subsidiary of Southern Crown Resources Limited. REI has two advanced Rare Earth Elements (“ REE ”) projects in Southern Africa consisting of the Nkombwa Project in Zambia and the Xiluvo Project at Mozambique. Both projects are located with 25km of major national roads close to regional centres.

The Xiluvo Project (REI earning up to 85%)

The Xiluvo Project is located 100km North West of the port of Beira which is adjacent to a major paved road and rail linking Zimbabwe with the port. There is a 25 year mining permit in place with the existence of a quarry for construction aggregate.

The Xiluvo Project is held as a joint venture project with Promac, a Mozambique quarrying and construction company which holds a valid mining license and operates the quarrying operations exploiting

calcitic carbonite for use as a construction aggregate. As part of the joint venture farm-in agreement with Promac, REI can earn:

50% of the REE assets after spending US$300,000 within 3 years;
75% by spending an additional US$300,000; and
85% by spending an additional US$400,000.

The Xiluvo Project has two drilling targets, the primary REE enriched carbonatite target with petrological evidence of elevated LREE concentration and the secondary LREE enriched unconsolidated soil horizon at the base of the carbonatite hill.

The Nkombwa Project (REI earning up to 75%)

The Nkombwa Project is located in the North East of Zambia, 22km East of the major T2 paved national road between Lusaka (Zambian capital) and the Tanzanian border. The project includes the Nkombwa Hill carbonatite intrusion along with several kimberlite dykes that form part of the Isoka kimberlite swarm investigated by De Beers between 1959 and 1973. The Nkombwa Project is known to be prospective for REE, Niobium and Phosphate enriched carbonatite.

REI entered into a joint venture agreement with African Consolidated Resources Plc (“ ACR ”) to secure the rights to explore for REE. ACR retains the rights to all non rare earth elements. Under the joint venture agreement with ACR, REI can earn:

30% of the REE assets on completion of a JORC Inferred Resource and expenditure of US$750,000 within 2 years ending on 31 August 2012. However this date is extendable subject to negotiation by both parties;
An additional 20% interest by converting half of the JORC Inferred Resource to an Indicated Resource and spending an additional US$600,000 within an additional 18 months;
ACR can elect thereafter to co-contribute from this stage. If they elect not to, REI may increase its earning:
to 65% by completing a pre-feasibility study; and
to 75% by completing a bankable feasibility study.

5.3 Historical Balance Sheet

Set out below is a summary of Southern Crown’s unaudited balance sheet as at 31 March 2012 with comparatives as at 31 December 2011 (reviewed) and as at 30 June 2011 (audited).

Southern Crown Resources Limited	Unaudited as at	Reviewed as at	Audited as at
Statement of Financial Position	31-Mar-12	31-Dec-11	30-Jun-11
	$	$	$
Current Assets
Cash and equivalents	2,580,722	2,740,597	3,328,481
Trade and other receivables	27,137	13,637	45,870
Other current assets	33,262	73,421	106,620
	2,641,121	2,827,655	3,480,971
Non-current assets
Property, plant and equipment	3,833	4,125	2,300
Other non-current assets	5,005	5,005	5,005
Tenement acquisition and exploration costs	2,352,055	2,281,710	1,960,264
	2,360,893	2,290,840	1,967,569
Total assets	5,002,014	5,118,495	5,448,540

Current Liabilities
Trade and other payables	49,006	56,424	70,189
Provisions	3,860	4,846	2,060
	52,866	61,270	72,249
Total Liabilities	52,866	61,270	72,249

Net Assets	4,949,148	5,057,225	5,376,291
Equity
Share capital	5,819,717	5,819,717	5,819,717
Option reserve	292,371	292,371	292,371
Accumulated losses	(1,162,940)	(1,054,863)	(735,797)
Total Equity	4,949,148	5,057,225	5,376,291

Source: Annual report for year to 30 June 2011, Half year report for period to 31 December 2011 and management accounts for 3 months to 31 March 2012

We have not undertaken a review of Southern Crown’s unaudited management accounts in accordance with Australian Auditing and Assurance Standard 2405 “Review of Historical Financial Information” and do not express an opinion on this financial information. However nothing has come to our attention as a result of our procedures that would suggest the financial information within the unaudited management accounts has not been prepared on a reasonable basis.

We note the following in relation to the significant items in Southern Crown’s balance sheet:

As at 31 March 2012 Southern Crown had $2,580,722 in cash representing the unused funds raised through its $4,000,000 initial public offering (“ IPO ”). The cash has been spent on the acquisition of REI as well as continuing exploration costs for the Nkombwa Project, the Xiluvo Project and on the Company’s Australian tenements;
The capitalised value for Southern Crown’s tenement acquisition and exploration costs asset increased slightly from $2,281,710 as at 31 December 2011 to $2,352,055 as at 31 March 2012 reflecting the circumspect approach to exploration expenditure in view of the licence problems associated with the Nkombwa Project.

5.3 Historical Statement of Comprehensive Income

Southern Crown Resources Limited	Reviewed 6m to	Audited Year to
Income Statement	31-Dec-11	30-Jun-11
	$	$
Revenue
Interest income	85,669	140,810
Other income	-	1,625
	85,669	142,435
Expenses
Administrative expense	(119,583)	(115,461)
Professional fees	(167,704)	(469,826)
Employee benefits expenses	(117,448)	(96,372)
Share based payments	-	(196,573)
Loss from continuing operations before income tax	(319,066)	(735,797)
Income tax expense	-	-
Total comprehensive loss for the year	(319,066)	(735,797)

Source: Annual report for year to 30 June 2011, Half year report for period to 31 December 2011

5.4 Capital Structure

The share structure of Southern Crown as at 3 April 2012 is outlined below:

	Number
Total ordinary shares on issue	35,001,482
Top 20 shareholders	16,686,063
Top 20 shareholders - % of shares on issue	47.67%
Source: Computershare

The ordinary shares held by the most significant shareholders as at 3 April 2012 are detailed below:

Southern Crown Resources Limited	Number of Ordinary Shares Held	Percentage of Issued Shares (%)
WESTORIA RESOURCE INVESTMENTS LIMITED	3,083,334	8.81%
UMBONO CAPITAL PARTNERS LLC	2,439,024	6.97%
CENTAURUS METALS LTD	1,562,500	4.46%
MRS KATRINA FRANCES {BANKS-SMITH}	1,064,000	3.04%
KIMBRIKI NOMINEES PTY LTD	1,000,000	2.86%
TEMPO CAPITAL PTY LTD	966,250	2.76%
INVICTUS CAPITAL PTY LTD	800,000	2.29%
Subtotal	10,915,108	31.18%
Others	24,086,374	68.82%
Total ordinary shares on Issue	35,001,482	100.00%

Source: Computershare

6. Economic analysis

Growth in the world economy slowed in the second half of 2011, and is likely to continue at a below-trend pace this year. A deep downturn is not occurring at this stage, however, and in fact some forecasters have recently revised upwards their global growth outlook. Growth in China has moderated, as was intended, and is likely to remain at a more measured and sustainable pace in the future. Conditions in other parts of Asia softened in 2011, partly due to natural disasters, but have recently shown some tentative signs of improving. Among the major countries, conditions in Europe remain very difficult, while the United States continues to grow at a moderate pace. Commodity prices have been little changed, at levels below recent peaks but which are nonetheless still quite high. Australia's terms of trade similarly peaked about six months ago, though they too remain high.

Financial market sentiment has generally improved this year, and capital markets are supplying funding to corporations and well-rated banks. At the margin, wholesale funding costs have declined over recent months, though they remain higher, relative to benchmark rates, than in mid 2011. Market sentiment remains skittish, however, and the tasks of putting European banks and sovereigns onto a sound footing for the longer term, and of improving Europe's growth prospects, remain large. Hence Europe will remain a potential source of adverse shocks for some time yet.

In Australia, output growth was somewhat below trend over the past year, notwithstanding that growth in domestic demand ran at its fastest pace for four years. Output growth was affected in part by temporary factors, but also by the persistently high exchange rate. Considerable structural change is also occurring in the economy. Labour market conditions softened during 2011, though the rate of unemployment has so far remained little changed at a low level.

Recent data for inflation show that after a pick up in the first half of last year, underlying inflation has declined again, and was a little over 2 per cent over the latest four quarters. CPI inflation has also declined, from about 3½ per cent to a little over 1½ per cent at the latest reading, as the weather-driven rises in food prices in the first half of last year have, as expected, now been fully reversed. Over the coming one to two years, and abstracting from the effects of the carbon price, inflation will probably be lower than earlier expected, but still in the 2–3 per cent range.

As a result of changes to monetary policy late last year, interest rates for borrowers have been close to their medium-term averages over recent months, albeit tending to increase a little as lenders passed on the higher costs of funding their books. Credit growth remains modest overall. Housing prices have shown some signs of stabilising recently, after having declined for most of 2011, but generally the housing market remains subdued. The exchange rate remains high even though the terms of trade have declined somewhat.

Since it last changed the cash rate in December, the Board has maintained the view that the setting of policy was appropriate for the time being, but that the inflation outlook would provide scope for easier monetary policy, if needed, to support demand. The accretion of evidence over recent months suggests that it is now appropriate for a further step in that direction.

In considering the appropriate size of adjustment to the cash rate at today's meeting, the Board judged it desirable that financial conditions now be easier than those which had prevailed in December. A reduction of 50 basis points in the cash rate was, in this instance, therefore judged to be necessary in order to deliver the appropriate level of borrowing rates.

Source: www.rba.gov.au Statement by Glenn Stevens, Governor: Monetary Policy Decision 1 May 2012

7. Industry analysis

7.1 Rare Earth Element analysis

Overview

REE consist of 15 lanthanides plus scandium and yttrium that have similar chemical properties to the lanthanides. The REE are conventionally divided into “Light” REE (“ LREE ”) and “Heavy” REE (“ HREE ”). REE are more abundant in the Earth’s crust than gold, silver or platinum metals. However, because of their geochemical properties, REE are typically dispersed and not often found in concentrated and economically viable quantities. Due to the very similar chemical characteristics of REE, the preparation of pure oxide or metal products of the individual REE from rare earth mineral concentrate is complex and expensive.

The table below represents a listing of the 17 REE, their atomic number, symbol and their main usages in the market.

	Symbol	Name	Type of REE	Selected Usages
57	La	Lanthanum	LREE	High refractive index glass, flint, hydrogen storage, battery-electrodes,
				camera lenses, fluid catalytic cracking catalyst for oil refineries
58	Ce	Cerium	LREE	Chemical oxidizing agent, polishing powder, yellow colours in glass and
				ceramics, catalyst for self-cleaning ovens, fluid catalytic cracking
				catalyst for oil refineries
59	Pr	Praseodymium	LREE	Rare-earth magnets, lasers, core material for carbon arc lighting,
				colorant in glasses and enamels, additive in Didymium glass used in
				welding goggles, ferrocerium fire steel (flint) products.
60	Nd	Neodymium	LREE	Rare-earth magnets, lasers, violet colours in glass and ceramics,
				ceramic capacitors
61	Pm	Promethium	LREE	Nuclear batteries
62	Sm	Samarium	LREE	Rare-earth magnets, lasers, neutron capture, masers
63	Eu	Europium	HREE	Red and blue phosphors, lasers, mercury-vapour lamps
64	Gd	Gadolinium	HREE	Rare-earth magnets, high refractive index glass or garnets, lasers, x-ray
				tubes, computer memories, neutron capture
65	Tb	Terbium	HREE	Green phosphors, lasers, fluorescent lamps
66	Dy	Dysprosium	HREE	Rare-earth magnets, lasers
67	Ho	Holmium	HREE	Lasers
68	Er	Erbium	HREE	Lasers, vanadium steel
69	Tm	Thulium	HREE	Portable X-ray machines
70	Yb	Ytterbium	HREE	Infrared lasers, chemical reducing agent
71	Lu	Lutetium	HREE	PET Scan detectors, high refractive index glass
21	Sc	Scandium	HREE	Light Aluminium-scandium alloy for aerospace components, additive in
				Mercury-vapour lamps.
39	Y	Yttrium	HREE	Yttrium-aluminium garnet (YAG) laser, YBCO high-temperature
				superconductors, yttrium iron garnet (YIG) microwave filters.

Supply and demand

REE demand is growing rapidly due to the adoption of environmentally-friendly energy technologies; in particular wind energy generation and low-emission “hybrid” motor vehicles. Consumption of REE in 2008 was 124,000 tonnes and projected to exceed 180,000 tonnes by 2014.

Over the last few decades, production of REE outside China has declined significantly with China now supplying more than 95% of the world’s demand for REE.

Source: US Geological Survey

In 2009, China limited its supply of raw REE, partly as an initiative to protect its own REE product industry and to protect China’s REE reserves from over-exploitation. The total export quota for 2010 of 30,259 tonnes was 40% less than the total export quota for 2009 of 50,145 tonnes. The Chinese government has implemented various policies to limit pollution and carbon emissions through the adoption of wind energy electricity generation and hybrid motor vehicles.

The US government have recently raised concerns over China’s action to limit export quotas. REE is a vital mineral necessary for the production of various high technology products and defence equipment. In Europe, several large European companies and governments are joining forces to appeal to the European Commission and World Trade Organisation to address the export quota reduction imposed by the Chinese government.

Prices

The prices for REE are not fixed by central trading exchanges but are fixed on a trade-by-trade basis. The price of individual rare earths varies widely. As a consequence, REE deposits are compared on the basis of its relative concentrations of individual REE in the ore. Historically, most HREE trade at a higher price than LREE.

With an increase in investment focus on clean energy technologies such as hybrid vehicles and wind turbines, the demand and price for light rare earths such as neodymium and praseodymium for the manufacture of permanent magnets and lanthanum and cerium in rechargeable batteries will increase at a faster rate than HREE.

Prices of REE appreciated significantly in the years leading up to 2011 due to lower supply levels and growing demand for REE. Inflated prices have since driven historical consumers of REE to move towards

viable substitutes. This significantly reduced demand among key REE and prices tumbled. This sentiment is illustrated in the graph below which shows the market capital capitalisation weighted index of companies operating within the Rare Earth sector over the past three years.

Rare Earth Mineral Resource Index

==> picture [444 x 161] intentionally omitted <==

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

400
350
300
250
200
150
100
50
0
2009 2010 2011 2012
Bloomberg Rare Earth Index
USD
----- End of picture text -----

Source : Bloomberg

Prices and future outlook

REE prices are expected to increase slightly in the short term as market participants become aware of undervalued commodities. Long term trends indicate a relatively flat price structure for most REE as supply is matched by exploration companies moving into production.

Several countries such as USA, Europe and Japan have raised their concerns on China’s stance of reducing REE export quota. Large companies that drive demand have also continued to look at alternative metals. Toyota has begun developing electric motors based on ferrous magnets and the US Department of Energy has partially subsidised a General Electric project which plans to reduce rare earth usage in wind turbines by 80%.

8. Valuation approach adopted

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

Capitalisation of future maintainable earnings (“ FME ”)
Discounted cash flow (“ DCF ”)
Quoted market price basis (“ QMP ”)
Net asset value (“ NAV ”)
Market based assessment

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 Southern Crown shares we have chosen to employ the following methodologies:

NAV on a going concern as our primary valuation; and
QMP as our primary valuation methodologies.

We have chosen these methodologies for the following reasons:

Being an exploration company, the core value of Southern Crown is in the exploration assets it holds. We have instructed Agricola Mining Consultants Pty Ltd (“ Agricola ”) to act as an independent specialist to value the assets held by Southern Crown in Australia, and the assets held by REI in Southern Africa.
The QMP basis is a relevant methodology to consider because the Company is listed on the ASX. This means that there is a regulated and observable market where Southern Crown shares can be traded. However, in order for QMP to be considered appropriate, the company’s shares should be liquid and the market should be fully informed as to Southern Crown’s activities. We have considered these factors in section 9.2.
FME is not appropriate for exploration assets and insufficient information is available for a DCF valuation approach to be undertaken.

Our assessment of the value of a Southern Crown share if the Proposed Transaction is approved compared to the value of a Southern Crown share if the Proposed Transaction is not approved under a variety of scenarios has been undertaken in sections 9 and 10.

8.1 Agricola Valuation

Agricola has provided the following market valuations:

Southern Crown Mineral Asset Valuation	Low Value	Preferred Value	High Value
	$	$	$
Nkombwa project	3,940,000	4,530,000	5,110,000
Xiluvo project	4,570,000	4,950,000	5,330,000
Dish	1,030,000	1,230,000	1,430,000
Percyvale	2,780,000	3,290,000	3,800,000
Ropewalk	1,250,000	1,500,000	1,750,000
	13,570,000	15,500,000	17,420,000

Agricola has estimated a market value for the mineral assets held by Southern Crown of $13.57 million to $17.42 million with a preferred value of $15.50 million.

We note that Agricola completed a valuation of the Nkombwa and Xiluvo Projects (“ the African Assets ”) in March 2011 and the values have changed since then. The table below shows the preferred valuations ascribed by Agricola to the Nkombwa and Xiluvo Projects in March 2011 and April 2012:

Southern Crown African Mineral Asset Valuation	Agricola March 2011	Agricola April 2012
Nkombwa project	5,075,000	4,530,000
Xiluvo project	1,990,000	4,950,000

We understand that this change in value is as a result of the following factors:

Advantageous conditions in Rare Earth markets;
The Xiluvo Project gaining an indicated JORC resource (and a Comparative Transaction methodology being applied in the current valuation); and
Ownership issues surrounding the Nkombwa Project.

9. Valuation of Southern Crown if the Proposed Transaction is approved

9.1 Net Tangible Asset Valuation of Southern Crown

The net asset value of Southern Crown on a going concern basis if the Proposed Transaction is approved is reflected below:

Southern Crown Resources Limited	Low Preferred High

Statement of Financial Position Note	31-Mar-12 Valuation Valuation Valuation

	$ $ $ $

Current Assets

Cash and equivalents	2,580,722 2,580,722 2,580,722 2,580,722

Trade and other receivables	27,137 27,137 27,137 27,137

Other current assets	33,262 33,262 33,262 33,262

	2,641,121 2,641,121 2,641,121 2,641,121

Non-current assets

Property, plant and equipment	3,833 3,833 3,833 3,833

Other non-current assets	5,005 5,005 5,005 5,005

Tenement acquisition and exploration costs

African assets (a)	1,768,417 - - -

Australian assets (b)	583,638 5,060,000 6,020,000 6,980,000

	2,360,893 5,068,838 6,028,838 6,988,838

Total assets	5,002,014 7,709,959 8,669,959 9,629,959



Current Liabilities

Trade and other payables	49,006 49,006 49,006 49,006

Provisions	3,860 3,860 3,860 3,860

	52,866 52,866 52,866 52,866

Total Liabilities	52,866 52,866 52,866 52,866



Net Assets	4,949,148 7,657,093 8,617,093 9,577,093

Shares on issue (c)	35,001,482 30,001,482 30,001,482 30,001,482

Net assets per share	$0.141 $0.255 $0.287 $0.319

We have been advised that there has not been a significant change in the net assets of Southern Crown since 31 March 2012. The table above indicates the net asset value of a Southern Crown share will be between $0.255 and $0.319 with a preferred value of $0.287.

The following adjustments were made to the net assets of Southern Crown as at 31 March 2012 in arriving at our valuation.

a) Valuation of Southern Crown’s mineral assets

If the Proposed Transaction is approved, Southern Crown will no longer hold any interest in African assets. As such we have removed the book value of the African assets from the balance sheet to determine the net asset value of Southern Crown if the Proposed Transaction is approved.

b) Valuation of Southern Crown’s mineral assets

We instructed Agricola to provide an independent market valuation of the Australian exploration assets held by Southern Crown (“ Australian Assets ”). For this scenario, we have adjusted the Australian Assets amount by the value determined by Agricola. A copy of Agricola’s Report is attached in Appendix 3.

The range of values for each of Southern Crown’s Australian Assets as calculated by Agricola is set out below:

Australian	Low Value	Preferred Value	High Value
	$	$	$
Dish	1,030,000	1,230,000	1,430,000
Percyvale	2,780,000	3,290,000	3,800,000
Ropewalk	1,250,000	1,500,000	1,750,000
Total	5,060,000	6,020,000	6,980,000

The table above indicates a range of values between $5.06 million and $6.98 million, with a preferred value of $6.02 million.

c) Shares on issue

Under the Proposed Transaction, the current shares issued to the Purchasers will be cancelled. We have therefore adjusted the shares on issue to reflect a reduction in the 5 million shares previously granted if the Proposed Transaction is approved.

9.2 Assessment of Southern Crown Value if Proposed Transaction is approved

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

		Low	Preferred	High
		$	$	$
Net assets value (Section	9.1)	0.255	0.287	0.319

Based on the results above, we have assessed the value of a Southern Crown share based on the NAV methodology to be between $0.255 and $0.319, with a preferred value of $0.287 if the Proposed Transaction is approved.

10. Valuation of Southern Crown if the Proposed Transaction is not approved

We have assessed the value of a Southern Crown per share if the Proposed Transaction is not approved with reference to a Base Case, and six alternative scenarios.

For the Base Case and all the scenarios we have increased the number of shares on issue by 3,000,000 as we have been informed by the Company Secretary that the condition for the Purchasers to receive the additional shares in the Purchase Agreement has been fulfilled before the deadline of 3 June 2012 and the shares can be issued at any time.

The value of a Southern Crown share under each of these alternatives is shown below.

10.1 Base Case - No Performance shares convert

10.1.1 Net Asset Value for a Southern Crown share

Market value of African assets reduced to nil, representing no additional expenditure.

Southern Crown Resources Limited			Low	Preferred	High
Statement of Financial Position	Note	31-Mar-12	Valuation	Valuation	Valuation
		$	$	$	$
Current Assets
Cash and equivalents		2,580,722	2,580,722	2,580,722	2,580,722
Trade and other receivables		27,137	27,137	27,137	27,137
Other current assets		33,262	33,262	33,262	33,262
		2,641,121	2,641,121	2,641,121	2,641,121
Non-current assets
Property, plant and equipment		3,833	3,833	3,833	3,833
Other non-current assets		5,005	5,005	5,005	5,005
Tenement acquisition and exploration costs
African assets	(a)	1,768,417	-	-	-
Australian assets		583,638	5,060,000	6,020,000	6,980,000
		2,360,893	5,068,838	6,028,838	6,988,838
Total assets		5,002,014	7,709,959	8,669,959	9,629,959
Current Liabilities

Trade and other payables	49,006 49,006 49,006 49,006

Provisions	3,860 3,860 3,860 3,860

	52,866 52,866 52,866 52,866

Total Liabilities	52,866 52,866 52,866 52,866



Net Assets	4,949,148 7,657,093 8,617,093 9,577,093

Shares on issue	35,001,482 38,001,482 38,001,482 38,001,482

Net assets per share	$0.141 $0.201 $0.227 $0.252

The table above indicates the net asset value of a Southern Crown share is between $0.201 and $0.252 with a preferred value of $0.227 under this scenario.

The following adjustments were made to the net assets of Southern Crown as at 31 March 2012 in arriving at our valuation.

a) African Assets

The Directors of Southern Crown have indicated that it is unlikely that Southern Crown will be making any additional expenditure towards the Nkombwa Project at this time.

The Nkombwa Project still has issues surrounding the legal ownership of the tenements. As such, if Southern Crown satisfies its expenditure requirements to gain an interest in the project, it is possible that they will not have any tenure. Given this information, we consider that it would be unlikely for Southern Crown to make any further capital commitments towards the Nkombwa Project.

For the Xiluvo Project, there are currently issues surrounding if and when the timeframe for the expenditure requirements commenced. Given this uncertainty, it is possible that Southern Crown will not make the expenditure requirements needed to achieve its initial 50% interest.

For these reasons, we do not consider that there will be any value attributed to the African assets if the Proposed Transaction is not approved. We have therefore adjusted the balance sheet to reflect a nil value for the African assets.

The Directors have taken steps to ascertain the likelihood of disposing of the Xiluvo Project and have not determined any realistic opportunities.

10.1.2 Quoted Market Prices for Southern Crown Securities

To provide a comparison to the valuation of Southern Crown in Section 9.2, we have also assessed the quoted market price for a Southern Crown 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.

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

Minority interest value

Our analysis of the quoted market price of a Southern Crown share is based on the pricing prior to the announcement of the Transaction. This is because the value of a Southern Crown share after the announcement may include the effects of any change in value as a result of the Transaction. However, we have considered the value of a Southern Crown share following the announcement when we have considered reasonableness in Section 12.

Information on the Transaction was announced to the market on 20 April 2012. Therefore, the following chart provides a summary of the share price movement over the 12 months to 19 April 2012 which was the last trading day prior to the announcement.

==> picture [469 x 188] intentionally omitted <==

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

0.450
0.400 1.0
0.350
0.8
0.300
0.250 0.6
0.200
0.150 0.4
$ 0.100
0.2
0.050
0.000 -
Volume Closing share price
Millions
----- End of picture text -----

Source: Bloomberg

The daily price of Southern Crown shares from 19 April 2011 to 19 April 2012 has ranged from a low of $0.09 on 1 March 2012 to a high of $0.415 on 16 May 2011.

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

		Closing	Share Price	Closing	Share Price
		Following		Three Days After
Date	Announcement	Announcement		Announcement
		$ (movement)		$ (movement)
24-Feb-12	Nkombwa Project Update	0.110	( 8%)	0.110	( 0%)
27-Jan-12	December 2011 Quarterly Activities and Cashflow Report	0.100	( 0%)	0.100	( 0%)
18-Nov-11	Nkombwa Project Update	0.140	( 0%)	0.140	( 0%)
10-Nov-11	Resource Estimate on Xiluvo Soils	0.120	( 0%)	0.140	( 17%)
26-Oct-11	Quarterly Activities and Cashflow Report	0.120	( 0%)	0.120	( 0%)
04-Oct-11	Nkombwa Project Update	0.140	( 0%)	0.160	( 14%)
18-Aug-11	Nkombwa Exploration Results	0.220	( 0%)	0.220	( 0%)

29-Jul-11	Quarterly Activities and Cashflow Report	0.270	( 4%)	0.250	( 7%)
20-Jul-11	Commencement of Drilling at Xiluvo	0.230	( 0%)	0.220	( 4%)
05-Jul-11	Nkombwa Exploration Update	0.250	( 0%)	0.250	( 0%)
	REI Transaction Completed and Exploration Program
09-Jun-11	Commenced	0.300	( 0%)	0.300	( 0%)
16-May-11	Nkombwa Exploration Results	0.370	( 3%)	0.330	( 11%)
29-Apr-11	Quarterly Activities and Cash Flow Reports	0.320	( 9%)	0.330	( 3%)
23-Mar-11	REI Acquisition Update	0.370	( 0%)	0.395	( 7%)

Source : ASX company announcements

To provide further analysis of the market prices for a Southern Crown share, we have also considered the weighted average market price for 10, 30, 60 and 90 day periods to 19 April 2012.

	17 April 2012	10 Days	30 Days	60 Days	90 Days
Closing Price	$0.100
Weighted Average		$0.097	$0.102	$0.103	$0.102

Source : BDO Analysis

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

An analysis of the volume of trading in Southern Crown shares for the twelve months to 19 April 2012 is set out below:

	Share price low	Share price high	Cumulative Volume traded	As a % of Issued capital
1 day	$0.10	$0.10	-	0.00%
10 days	$0.10	$0.10	33,000	0.09%
30 days	$0.10	$0.11	419,400	1.20%
60 days	$0.09	$0.12	834,400	2.38%
90 days	$0.09	$0.12	1,030,212	2.94%
180 days	$0.09	$0.26	2,020,996	5.77%
1 year	$0.09	$0.42	4,541,634	12.98%

Source : BDO Analysis

This table indicates that Southern Crown’s shares display a low level of liquidity, with 12.98% of the Company’s current issued capital being traded in a 12 month period and only 2.94% over the last 90 days. For the quoted market price methodology to be reliable there needs to be a ‘deep’ market in the shares. RG 111.69 indicates that a ‘deep’ market should reflect a liquid and active market. We consider the following characteristics to be representative of a deep market:

Regular trading in a company’s securities;
Approximately 1% of a company’s securities are traded on a weekly basis;
The spread of a company’s shares must not be so great that a single minority trade can significantly affect the market capitalisation of a company; and
There are no significant but unexplained movements in share price.
A company’s shares should meet all of the above criteria to be considered ‘deep’, however, failure of a company’s securities to exhibit all of the above characteristics does not necessarily mean that the value of its shares cannot be considered relevant.

In the case of Southern Crown, we consider there to be a low level of liquidity present with only 12.98% of shares being traded over a 12 month period, and because 47.67% of the shares issued are controlled by 20 shareholders.

Our assessment is that a range of values for Southern Crown shares based on market pricing, after disregarding post announcement pricing, is between $0.09 and $0.11.

Control Premium

We have reviewed the control premiums paid by acquirers of companies listed on the ASX. We have summarised our findings below:

Year	Number of Transactions	Average Deal Value (AU$m)	Average Control Premium
2012	16	40.92	11.25
2011	117	375.99	48.54
2010	143	502.28	35.71
2009	154	248.78	45.34
2008	158	434.68	31.39
2007	149	884.72	20.85
2006	164	702.46	21.09
	Median	434.68	31.39
	Mean	455.69	30.60

Source : BDO Analysis and Bloomberg

We have also reviewed the control premiums paid by acquirers of mining companies listed on the ASX. We have summarised our findings below:

Year		Average Deal Value (AU$m)
2012	5	7.46	-
2011	37	336.76	31.25
2010	57	389.87	40.80
2009	70	121.64	34.36

2008	45	512.21	38.87
2007	46	473.93	25.26
2006	43	151.25	22.26
	Median	336.76	32.81
	Mean	284.73	32.13

Source : BDO Analysis and Bloomberg

In arriving at an appropriate control premium to apply we note that observed control premiums can vary due to the:

Nature and magnitude of non-operating assets;
Nature and magnitude of discretionary expenses;
Perceived quality of existing management;
Nature and magnitude of business opportunities not currently being exploited;
Ability to integrate the acquiree into the acquirer’s business;
Level of pre-announcement speculation of the transaction;
Level of liquidity in the trade of the acquiree’s securities.

The average annual control premium paid for effective control transactions of mining companies over 2006 to 2012 range from 22.26% to 40.80% with an average of 32.13%. Taking these factors into consideration in applying a control premium to Southern Crown’s quoted market share price, we believe an appropriate range to be 30% to 35%.

Quoted market price including control premium

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

	Low	Midpoint	High
	$	$	$
Quoted market price value	0.09	0.10	0.11
Control premium	30%		35%
Quoted market price valuation including a premium for	0.117	0.133	0.149
control

Therefore, our valuation of a Southern Crown share based on the quoted market price method and including a premium for control is between $0.117 and $0.149, with a midpoint value of $0.133.

We have not relied on the QMP valuation methodology of Southern Crown because there is a low level of liquidity in Southern Crown Shares which means that the QMP does not necessarily provide a true reflection of the value of a Southern Crown share to Shareholders. This applies for the Base Case and all of the scenarios.

10.1.3 Base Case Scenario - Fairness

The value of a Southern Crown share under the Base Case and our assessed value per share if the Proposed Transaction is approved is compared below:

	Ref	Low	Preferred	High
Value of a share in Southern Crown after the Proposed	9.2	$0.255	$0.287	$0.319
Transaction
Value of a share in Southern Crown if the Proposed Transaction	10.1.1	$0.201	$0.227	$0.252
is not approved on a Net Asset Value basis

The preferred value of a Southern Crown share if Proposed Transaction is approved is higher than the value of a Southern Crown share if the Proposed Transaction is not approved. As such the Proposed Transaction is fair under the Base Case.

10.2 Scenario 1 - Class B Performance shares convert

Cash is decreased by the Nkombwa Additional Expenditure;
African assets increased by market value of Nkombwa; and
7,500,000 shares are issued upon conversion of Class B Performance Shares.

Southern Crown Resources Limited	Low Preferred High

Statement of Financial Position Note	31-Mar-12 Valuation Valuation Valuation

	$ $ $ $

Current Assets

Cash and equivalents (a)	2,580,722 1,627,691 1,627,691 1,627,691

Trade and other receivables	27,137 27,137 27,137 27,137

Other current assets	33,262 33,262 33,262 33,262

	2,641,121 1,688,090 1,688,090 1,688,090

Non-current assets

Property, plant and equipment	3,833 3,833 3,833 3,833

Other non-current assets	5,005 5,005 5,005 5,005

Tenement acquisition and exploration costs

African assets (b)	1,768,417 3,940,000 4,530,000 5,110,000

Australian assets	583,638 5,060,000 6,020,000 6,980,000

	2,360,893 9,008,838 10,558,838 12,098,838

Total assets	5,002,014 10,696,928 12,246,928 13,786,928



Current Liabilities

Trade and other payables	49,006 49,006 49,006 49,006

Provisions	3,860 3,860 3,860 3,860

	52,866 52,866 52,866 52,866

Total Liabilities	52,866 52,866 52,866 52,866



Net Assets	4,949,148 10,644,062 12,194,062 13,734,062

Shares on issue (c)	35,001,482 45,501,482 45,501,482 45,501,482

Net assets per share	$0.141 $0.234 $0.268 $0.302

The table above indicates the net asset value of a Southern Crown share is between $0.234 and $0.302 with a preferred value of $0.268 under this scenario.

The following adjustments were made to the net assets of Southern Crown as at 31 March 2012 in arriving at our valuation.

a) Cash and equivalents

The conversion of the Class B Performance shares is dependent on Southern Crown spending US$1.35 million within two years from the date of issue of the Performance Shares to earn a 50% interest in the Nkombwa Project (“ Nkombwa Required Expenditure ”).

As at 31 March 2012, the Company had spent a portion of this sum on the Nkombwa Projects. If the Proposed Transaction is not approved, then the balance of these amounts will need to be spent before the Class D Performance Shares convert. Our calculations of these figures are shown below:

Nkombwa Project

Costs incurred as at 31 March 2012	Nkombwa Project
Acquisition costs	$1,000,000
Total direct costs	$269,418
Directors fees	$80,766
Total Expenditure required	$1,350,184

Given that the expenditure amount is denominated in US dollars, we have calculated the equivalent amount in Australian dollars:

Expenditure required	Nkombwa Project
USD	$1,350,000
AUD/USD as at 18 April 2012	1.0359
AUD	$1,303,215
Less direct costs and directors fees	(350,184)
Total Expenditure required	$953,031

The additional expenditure required for the Class B Performance shares to convert is $953,031 (“ Nkombwa Additional Expenditure) .

For the Class B Performance Shares to convert, the Company must meet the Nkombwa Expenditure by spending the Nkombwa Additional Expenditure amount calculated in section 10 of this report. To show the effect of this to the net asset value per share, we have reduced cash by the Nkombwa Additional Expenditure amount.

b) African Assets

We instructed Agricola to provide an independent market valuation of the African Assets held by REI. For this scenario, we have increased the African Assets amount by the value determined by Agricola for the Nkombwa Project. A copy of Agricola’s Report is attached in Appendix 3.

Agricola has provided an assessment of the market value of the Nkombwa Project with respect to an enhancement factor. This enhancement factor is derived from the assumption that the Nkowmba Required Expenditure will enhance the prospectivity of the project and that this increase in exploration will increase the value of the Project.

The range of values for the Nkombwa Project as calculated by Agricola is set out below, note that this assumes that the tenure over the project is secure and that this is currently not the case:

Nkombwa Asset Valuation	Low Value	Preferred Value	High Value
	$m	$m	$m
Market value	5,740,000	6,910,000	8,090,000
Earning expenditure	950,000	950,000	950,000
Enhancement factor	2.25	2.25	2.25
Enhanced expenditure	2,140,000	2,140,000	2,140,000
Total value including enhancement expenditure	7,890,000	9,060,000	10,230,000
Company's % interest	50%	50%	50%
Total value incl enhancement expenditure	3,940,000	4,530,000	5,110,000

The table above indicates a range of value between $3.94 million and $5.11 million, with a preferred value of $4.53 million.

Note: Under this scenario, we have assumed that the Xiluvo Project will have no value as the Additional Xiluvo Expenditure will not be made and consequently Southern Crown will not gain any interest.

c) Shares on issue

If the Class B Performance Shares meet the conversion requirements, then 7.5 million shares will be issued. As such we have increased the number of shares on issue by 7.5 million in addition to the 3 million shares (refer section 10 above).

10.2.1 Scenario 1 - Fairness

The value of a Southern Crown share under Scenario 1 and our assessed value per share if the Proposed Transaction is approved is compared below:

	Ref	Low	Preferred	High
Value of a share in Southern Crown after the Proposed	9.2	$0.255	$0.287	$0.319
Transaction
Value of a share in Southern Crown if the Proposed Transaction	10.2	$0.234	$0.268	$0.302
is not approved

The preferred value of a Southern Crown share if the Proposed Transaction is approved is higher than the value of a Southern Crown share if the Proposed Transaction is not approved. As such the Proposed Transaction is fair under scenario 1.

10.3 Scenario 2 Class C Performance shares convert

Cash is decreased by the Xiluvo Additional Expenditure; and
7,500,000 shares are issued upon conversion of Class C Performance Shares.

Southern Crown Resources Limited	Low Preferred High

Statement of Financial Position Note	31-Mar-12 Valuation Valuation Valuation

	$ $ $ $

Current Assets

Cash and equivalents (a)	2,580,722 1,783,611 1,783,611 1,783,611

Trade and other receivables	27,137 27,137 27,137 27,137

Other current assets	33,262 33,262 33,262 33,262

	2,641,121 1,844,010 1,844,010 1,844,010

Non-current assets

Property, plant and equipment	3,833 3,833 3,833 3,833

Other non-current assets	5,005 5,005 5,005 5,005

Tenement acquisition and exploration costs

African assets (b)	1,768,417 4,570,000 4,950,000 5,330,000

Australian assets	583,638 5,060,000 6,020,000 6,980,000

	2,360,893 9,638,838 10,978,838 12,318,838

Total assets	5,002,014 11,482,848 12,822,848 14,162,848



Current Liabilities

Trade and other payables	49,006 49,006 49,006 49,006

Provisions	3,860 3,860 3,860 3,860

	52,866 52,866 52,866 52,866

Total Liabilities	52,866 52,866 52,866 52,866



Net Assets	4,949,148 11,429,982 12,769,982 14,109,982

Shares on issue (c)	35,001,482 45,501,482 45,501,482 45,501,482

Net assets per share	$0.141 $0.251 $0.281 $0.310

The table above indicates the net asset value of a Southern Crown share is between $0.251 and $0.310 with a preferred value of $0.281 under this scenario.

The following adjustments were made to the net assets of Southern Crown as at 31 March 2012 in arriving at our valuation.

a) Cash and equivalents

The conversion of the Class C Performance Shares is dependent on Southern Crown spending US$1 million within two years from the date of issue of the Performance Shares to earn an 85% interest in the Xiluvo Project (“ Xiluvo Required Expenditure ”).

As at 31 March 2012, the Company had spent a portion of this sum on the Xiluvo Projects. If the Proposed Transaction is not approved, then the balance of these amounts will need to be spent before the Class D Performance Shares convert. Our calculations of these figures are shown below:

Xiluvo Project

Costs incurred as at 31 March 2012	Xiluvo Project
Acquisition costs	$250,000
Total direct costs	$87,495
Directors fees	$80,738
Total Expenditure required	$418,233

Given that the expenditure amount is denominated in US dollars, we have calculated the equivalent amount in Australian dollars:

Expenditure required	Xiluvo Project
USD	$1,000,000
AUD/USD as at 18 April 2012	1.0359
AUD	$965,344
Less direct costs and directors fees	(168,233)
Total Expenditure required	$797,111

The additional expenditure required for the Class C Performance shares to convert is $797,111 (“ Xiluvo Additional Expenditure ”).

For the Class C Performance Shares to convert, the Company must meet the Xiluvo Expenditure by spending the Xiluvo Additional Expenditure amount calculated in section 10 of this report. To show the effect of this to the net asset value per share, we have reduced cash by the Xiluvo Additional Expenditure amount.

b) African Assets

For this scenario, we have increase the African Assets amount by the value determined by Agricola for the Xiluvo Project. A copy of Agricola’s Report is attached in Appendix 3.

Agricola has provided an assessment of the market value of the Xiluvo Project with respect to an enhancement factor. This enhancement factor is derived from the assumption that the Xiluvo Required

Expenditure will enhance the prospectivity of the project and that this increase in exploration will increase the value of the Project.

The range of values for the Xiluvo Project as calculated by Agricola is set out below:

Xiluvo Asset Valuation	Low Value $m	Preferred Value $m	High Value $m
Market value	2,590,000	3,030,000	3,480,000
Earning expenditure	800,000	800,000	800,000
Enhancement factor	3.50	3.50	3.50
Enhanced expenditure	2,790,000	2,790,000	2,790,000
Total value including enhancement expenditure	5,380,000	5,820,000	6,270,000
Company's % interest	85%	85%	85%
Total value incl enhancement expenditure	4,570,000	4,950,000	5,330,000

The table above indicates a range of value between $4.57 million and $5.33 million, with a preferred value of $4.95 million.

c) Shares on issue

If the Class C Performance Shares meet the conversion requirements, then 7.5 million shares will be issued. As such we have increased the number of shares on issue by 7.5 million in addition to the 3 million shares (refer section 10 above).

10.3.1 Scenario 2 - Fairness

The value of a Southern Crown share under Scenario 2 and our assessed value per share if the Proposed Transaction is approved is compared below:

	Ref	Low	Preferred	High
Value of a share in Southern Crown after the Proposed	9.2	$0.255	$0.287	$0.319
Transaction
Value of a share in Southern Crown if the Proposed Transaction	10.3	$0.251	$0.281	$0.310
is not approved

10.4 Scenario 3 Class B & C Performance shares convert

Cash is decreased by the Nkombwa Additional Expenditure and Xiluvo Additional Expenditure; and
15,000,000 shares are issued upon conversion of Class C Performance Shares.

Southern Crown Resources Limited	Low Preferred High

Statement of Financial Position Note	31-Mar-12 Valuation Valuation Valuation

	$ $ $ $

Current Assets

Cash and equivalents (a)	2,580,722 830,580 830,580 830,580

Trade and other receivables	27,137 27,137 27,137 27,137

Other current assets	33,262 33,262 33,262 33,262

	2,641,121 890,979 890,979 890,979

Non-current assets

Property, plant and equipment	3,833 3,833 3,833 3,833

Other non-current assets	5,005 5,005 5,005 5,005

Tenement acquisition and exploration costs

African assets (b)	1,768,417 8,510,000 9,480,000 10,440,000

Australian assets	583,638 5,060,000 6,020,000 6,980,000

	2,360,893 13,578,838 15,508,838 17,428,838

Total assets	5,002,014 14,469,817 16,399,817 18,319,817



Current Liabilities

Trade and other payables	49,006 49,006 49,006 49,006

Provisions	3,860 3,860 3,860 3,860

	52,866 52,866 52,866 52,866

Total Liabilities	52,866 52,866 52,866 52,866



Net Assets	4,949,148 14,416,951 16,346,951 18,266,951

Shares on issue (c)	35,001,482 53,001,482 53,001,482 53,001,482

Net assets per share	$0.141 $0.272 $0.308 $0.345

The table above indicates the net asset value of a Southern Crown share is between $0.272 and $0.345 with a preferred value of $0.308 under this scenario.

The following adjustments were made to the net assets of Southern Crown as at 31 March 2012 in arriving at our valuation.

a) Cash and equivalents

For the Class B and Class C Performance Shares to convert, the Company must meet the Nkombwa Expenditure and the Xiluvo Expenditure by spending the Nkombwa Additional Expenditure and the Xiluvo Additional Expenditure amounts calculated in section 10 of this report. To show the effect of this to the net asset value per share, we have reduced cash by the Nkombwa Additional Expenditure and by the Xiluvo Additional Expenditure amount.

b) African Assets

For this scenario, we have increased the African Assets amount by the value determined by Agricola for the Nkombwa Project and the Xiluvo Project. A copy of Agricola’s Report is attached in Appendix 3.

The range of values for each of Southern Crown’s exploration assets as calculated by Agricola is set out below, note that this assumes that the tenure over the Nkombwa Project is secure and this is currently not the case:

African Asset Valuation	Low Value	Preferred Value	High Value
	$m	$m	$m
Nkombwa	3,940,000	4,530,000	5,110,000
Xiluvo	4,570,000	4,950,000	5,330,000
Total	8,510,000	9,480,000	10,440,000

The table above indicates a range of value between $8.51 million and $10.44 million, with a preferred value of $9.48 million.

c) Shares on issue

If the Class B and Class C Performance Shares meet the conversion requirements, then 15 million shares will be issued. As such we have increased the number of shares on issue by 15 million in addition to the 3 million shares (refer section 10 above).

10.4.1 Scenario 3 - Fairness

The value of a Southern Crown share under Scenario 3 and our assessed value per share if the Proposed Transaction is approved is compared below:

	Ref	Low	Preferred	High
Value of a share in Southern Crown after the Proposed	9.2	$0.255	$0.287	$0.319
Transaction
Value of a share in Southern Crown if the Proposed Transaction	10.4	$0.272	$0.308	$0.345
is not approved

The preferred value of a Southern Crown share if The Proposed Transaction is approved is lower than the value of a Southern Crown share if the Proposed Transaction is not approved. As such the Proposed Transaction is not fair under Scenario 3.

10.5 Scenario 4 Class B & D Performance shares convert

Cash is decreased by the Nkombwa Additional Expenditure;
7,500,000 shares are issued upon conversion of Class B Performance Shares; and
15,000,000 shares issued upon conversion of Class D Performance Shares.

Southern Crown Resources Limited	Low Preferred High

Statement of Financial Position Note	31-Mar-12 Valuation Valuation Valuation

	$ $ $ $

Current Assets

Cash and equivalents (a)	2,580,722 1,627,691 1,627,691 1,627,691

Trade and other receivables	27,137 27,137 27,137 27,137

Other current assets	33,262 33,262 33,262 33,262

	2,641,121 1,688,090 1,688,090 1,688,090

Non-current assets

Property, plant and equipment	3,833 3,833 3,833 3,833

Other non-current assets	5,005 5,005 5,005 5,005

Tenement acquisition and exploration costs

African assets (b)	1,768,417 3,940,000 4,530,000 5,110,000

Australian assets	583,638 5,060,000 6,020,000 6,980,000

	2,360,893 9,008,838 10,558,838 12,098,838

Total assets	5,002,014 10,696,928 12,246,928 13,786,928



Current Liabilities

Trade and other payables	49,006 49,006 49,006 49,006

Provisions	3,860 3,860 3,860 3,860

	52,866 52,866 52,866 52,866

Total Liabilities	52,866 52,866 52,866 52,866



Net Assets	4,949,148 10,644,062 12,194,062 13,734,062

Shares on issue (c)	35,001,482 60,501,482 60,501,482 60,501,482

Net assets per share	$0.141 $0.176 $0.202 $0.227

The table above indicates the net asset value of a Southern Crown share is between $0.176 and $0.227 with a preferred value of $0.202 under this scenario.

The following adjustments were made to the net assets of Southern Crown as at 31 March 2012 in arriving at our valuation.

a) Cash and equivalents

We have assumed in this scenario that no additional expenditure will be required for the Class D Performance Shares to convert.

b) African Assets

For this scenario, we have increased the African Assets amount by the value determined by Agricola for the Nkombwa Project. A copy of Agricola’s Report is attached in Appendix 3.

The range of values for the Nkombwa Project as calculated by Agricola is set out below, note that this assumes that the tenure over the Nkombwa Project is secure and this is currently not the case:

Nkombwa	Asset	Valuation	Low Value	Preferred Value	High Value
			$m	$m	$m
Nkombwa			3,940,000	4,530,000	5,110,000

The table above indicates a range of value between $3.94 million and $5.11 million, with a preferred value of $4.53 million.

Note: Under this scenario, we have assumed that the Xiluvo Project will have no value as the Additional Xiluvo Expenditure will not be made and consequently Southern Crown will not gain any interest. We have also made the assumption that there will not be any additional expenditure required (other than that already made in this scenario) to trigger the Class D Performance Shares.

c) Shares on issue

If the Class B Performance Shares meet the conversion requirements, then 7.5 million shares will be issued. If the Class D Performance Shares meet the conversion requirements, then 15 million shares will be issued. As such we have increased the number of shares on issue by 22.5 million in addition to the 3 million shares (refer section 10 above).

10.5.1 Scenario 4 - Fairness

The value of a Southern Crown share under Scenario 4 and our assessed value per share if the Proposed Transaction is approved is compared below:

	Ref	Low	Preferred	High
Value of a share in Southern Crown after the Proposed	9.2	$0.255	$0.287	$0.319
Transaction
Value of a share in Southern Crown if the Proposed Transaction	10.5	$0.176	$0.202	$0.227
is not approved

10.6 Scenario 5 Class C & D Performance shares convert

Cash is decreased by the Xiluvo Additional Expenditure;
7,500,000 shares are issued upon conversion of Class C Performance Shares; and
15,000,000 shares issued upon conversion of Class D Performance Shares.

Southern Crown Resources Limited	Low Preferred High

Statement of Financial Position Note	31-Mar-12 Valuation Valuation Valuation

	$ $ $ $

Current Assets

Cash and equivalents (a)	2,580,722 1,783,611 1,783,611 1,783,611

Trade and other receivables	27,137 27,137 27,137 27,137

Other current assets	33,262 33,262 33,262 33,262

	2,641,121 1,844,010 1,844,010 1,844,010

Non-current assets

Property, plant and equipment	3,833 3,833 3,833 3,833

Other non-current assets	5,005 5,005 5,005 5,005

Tenement acquisition and exploration costs

African assets (b)	1,768,417 4,570,000 4,950,000 5,330,000

Australian assets	583,638 5,060,000 6,020,000 6,980,000

	2,360,893 9,638,838 10,978,838 12,318,838

Total assets	5,002,014 11,482,848 12,822,848 14,162,848



Current Liabilities

Trade and other payables	49,006 49,006 49,006 49,006

Provisions	3,860 3,860 3,860 3,860

	52,866 52,866 52,866 52,866

Total Liabilities	52,866 52,866 52,866 52,866



Net Assets	4,949,148 11,429,982 12,769,982 14,109,982

Shares on issue (c)	35,001,482 60,501,482 60,501,482 60,501,482

Net assets per share	$0.141 $0.189 $0.211 $0.233

The table above indicates the net asset value of a Southern Crown share is between $0.189 and $0.233 with a preferred value of $0.211 under this scenario.

The following adjustments were made to the net assets of Southern Crown as at 31 March 2012 in arriving at our valuation.

a) Cash and equivalents

We have assumed in this scenario that no additional expenditure will be required for the Class D Performance Shares to convert.

b) African Assets

For this scenario, we have increased the African Assets amount by the value determined by Agricola for the Xiluvo Project. A copy of Agricola’s Report is attached in Appendix 3.

The range of values for the Xiluvo Project as calculated by Agricola is set out below:

Xiluvo	Asset	Valuation	Low Value	Preferred Value	High Value
			$m	$m	$m
Xiluvo			4,570,000	4,950,000	5,330,000

The table above indicates a range of value between $4.57 million and $5.33 million, with a preferred value of $4.95 million.

Note: Under this scenario, we have assumed that the Nkombwa Project will have no value as the Additional Nkombwa Expenditure will not be made and consequently Southern Crown will not gain any interest. We have also made the assumption that there will not be any additional expenditure required (other than that already made in this scenario) to trigger the Class D Performance Shares.

c) Shares on issue

10.6.1 Scenario 5 - Fairness

The value of a Southern Crown share under Scenario 5 and our assessed value per share if the Proposed Transaction is approved is compared below:

	Ref	Low	Preferred	High
Value of a share in Southern Crown after the Proposed	9.2	$0.255	$0.287	$0.319
Transaction
Value of a share in Southern Crown if the Proposed Transaction	10.6	$0.189	$0.211	$0.233
is not approved

10.7 Scenario 6 Class B, C & D Performance shares convert

Cash is decreased by the Nkombwa Additional Expenditure and Xiluvo Additional Expenditure;
15,000,000 shares are issued upon conversion of Class B and Class C Performance Shares; and
15,000,000 shares are issued upon conversion of Class D Performance Shares.

Southern Crown Resources Limited	Low Preferred High

Statement of Financial Position Note	31-Mar-12 Valuation Valuation Valuation

	$ $ $ $

Current Assets

Cash and equivalents (a)	2,580,722 830,580 830,580 830,580

Trade and other receivables	27,137 27,137 27,137 27,137

Other current assets	33,262 33,262 33,262 33,262

	2,641,121 890,979 890,979 890,979

Non-current assets

Property, plant and equipment	3,833 3,833 3,833 3,833

Other non-current assets	5,005 5,005 5,005 5,005

Tenement acquisition and exploration costs

African assets (b)	1,768,417 8,510,000 9,480,000 10,440,000

Australian assets	583,638 5,060,000 6,020,000 6,980,000

	2,360,893 13,578,838 15,508,838 17,428,838

Total assets	5,002,014 14,469,817 16,399,817 18,319,817



Current Liabilities

Trade and other payables	49,006 49,006 49,006 49,006

Provisions	3,860 3,860 3,860 3,860

	52,866 52,866 52,866 52,866

Total Liabilities	52,866 52,866 52,866 52,866



Net Assets	4,949,148 14,416,951 16,346,951 18,266,951

Shares on issue (c)	35,001,482 68,001,482 68,001,482 68,001,482

Net assets per share	$0.141 $0.212 $0.240 $0.269

The table above indicates the net asset value of a Southern Crown share is between $0.212 and $0.269 with a preferred value of $0.240 under this scenario.

The following adjustments were made to the net assets of Southern Crown as at 31 March 2012 in arriving at our valuation.

a) Cash and equivalents

For the Class B and Class C Performance Shares to convert, the Company must meet the Nkombwa Expenditure and the Xiluvo Expenditure by spending the Nkombwa Additional Expenditure and Xiluvo Additional Expenditure amounts calculated in section 10 of this report. To show the effect of this to the net asset value per share, we have reduced cash by the Nkombwa Additional Expenditure and by the Xiluvo Additional Expenditure amount.

We have assumed in this scenario that no additional expenditure will be required for the Class D Performance Shares to Convert.

b) African Assets

African Asset Valuation	Low Value	Preferred Value	High Value
	$m	$m	$m
Nkombwa	3,940,000	4,530,000	5,110,000
Xiluvo	4,570,000	4,950,000	5,330,000
Total	8,510,000	9,480,000	10,440,000

The table above indicates a range of value between $8.51 million and $10.44 million, with a preferred value of $9.48 million.

Note: Under this scenario, we have assumed that there will not be any additional expenditure required to trigger the Class D Performance Shares.

c) Shares on issue

If the Class B and Class C Performance Shares meet the conversion requirements, then 15 million shares will be issued. If the Class D Performance Shares meet the conversion requirements, then 15 million shares be will issued. As such we have increased the number of shares on issue by 30 million in addition to the 3 million shares (refer section 10 above).

10.7.1 Scenario 6 - Fairness

The value of a Southern Crown share under Scenario 6 and our assessed value per share if the Proposed Transaction is approved is compared below:

	Ref	Low	Preferred	High
Value of a share in Southern Crown after the Proposed	9.2	$0.255	$0.287	$0.319
Transaction
Value of a share in Southern Crown if the Proposed Transaction	10.7	$0.212	$0.240	$0.269
is not approved

11. Is the Proposed Transaction fair?

We have shown the value of a Southern Crown share if the Proposed Transaction is approved and the value of a Southern Crown share if the Proposed Transaction is not approved with reference to the Base Case and the 6 scenarios below:

Scenario	Ref	Low $	Preferred $	High $	Analysis
Approved	9.2	0.255	0.287	0.319	-
Base Case	10.1	0.201	0.227	0.252	Fair
Scenario 1	10.2	0.234	0.268	0.302	Fair
Scenario 2	10.3	0.251	0.281	0.310	Fair
Scenario 3	10.4	0.272	0.308	0.345	Not fair
Scenario 4	10.5	0.176	0.202	0.227	Fair
Scenario 5	10.6	0.189	0.211	0.233	Fair
Scenario 6	10.7	0.212	0.240	0.269	Fair

The table above indicates that the Proposed Transaction would be fair under six of the seven scenarios analysed.

However, we consider that the Base Case, Scenario 2 and Scenario 3 are the most likely scenarios if the Proposed Transaction is not approved. This is due to the following circumstances:

Under scenarios 1, 3, 4 and 6 the Class C Performance Shares will be issued once Southern Crown completes the Nkombwa Additional Expenditure. We consider that this is unlikely given the following circumstances:

The Directors of Southern Crown have indicated that it is unlikely that they will be making any additional expenditure on the Nkombwa Project at this stage;
It is unlikely that the Company will fulfil the expenditure required to achieve its interest in the Nkombwa Project within the timeframe of the existing agreements; and
Even if Southern Crown expends further cash funds on the Nkombwa Project, there remain concerns surrounding the legal ownership of the mineralised area of the tenement.

For these reasons we do not consider that any of the scenarios involving additional expenditure on the Nkombwa Project is likely. We therefore consider that the most likely scenarios involve Southern Crown

making either no expenditure on either of the Projects (Base Case) or the Xiluvo Additional Expenditure (scenario 2 and scenario 5). This is due to the following circumstances:

To meet the additional expenditure requirements to achieve its interest in the Xiluvo Project, the Company will have to invest a large portion of its cash assets so that that further cash will have to be raised by the Company to further develop its projects which may be dilutive to Shareholders;
The Xiluvo Project has a JORC indicated resource with the next stage in developing the project being the process of metallurgical analysis. It is possible that the Company will satisfy the Xiluvo Additional Expenditure within the required timeframe, particularly given that there is some doubt over when/if the required period commenced;
The ability to market the Xiluvo Project to other parties is limited by the existence of the associated Performance Shares; and
The cancellation of the Shares and Performance Shares will enhance the ability of the Company to attract and acquire additional projects for the Company.

We have conducted further analysis on the Base Case Scenario and determined that only if the African tenements were valued at more than $2,289,332 would the decision become not fair on a value per share basis.

We consider that the African assets will only have value to Southern Crown if Southern Crown expends the funds necessary to trigger its percentage interest in the project. As Southern Crown directors have indicated that they will not undertake this expenditure we have considered that the African assets are likely to have a value less than $2,289,332.

12. Is the Proposed Transaction reasonable?

12.1 Alternative Proposal

We are unaware of any alternative proposal that might offer the Shareholders of Southern Crown a premium over the value ascribed to that resulting from the Proposed Transaction.

12.2 Potential decline in share price

There has not been sufficient time elapse between the announcement of the Proposed Transaction on 20 April 2012 and the date of this report and therefore insufficient evidence on which to make a judgement on whether the market views the Proposed Transaction favourably. However it is possible that if the Proposed Transaction is not approved then Southern Crown’s share price may decline.

12.3 Advantages of Approving the Proposed Transaction

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

Advantage	Description
The Proposed Transaction is fair when	As set out in Section 11 the Proposed Transaction is fair under the
compared with the most likely outcomes being	most likely scenario. RG 111 states that an offer is reasonable if it
the Base case, Scenario 2 and Scenario 5	is fair.
The Proposed Transaction is also fair under	As set out in Section 11 the Proposed Transaction is also fair under
certain other scenarios	five of the scenarios.
Concentration of existing shareholders’ interest	If the Proposed Transaction is approved, the current 5,000,000
	shares issued to the Purchasers will be cancelled which will
	concentrate existing shareholder interests.
No possibility of future dilution of existing	If the Proposed Transaction is approved, there will be no possibility
shareholders’ interests	of the Performance Shares converting to ordinary shares in the
	future.
Avoids further expenditure on project where	The tenure for the Nkombwa Project is in doubt and although the
the tenure is in doubt	directors of Southern Crown have indicated their reluctance to
	expend on this project until the current uncertainty is resolved,
	disposing of Southern Crown’s potential interest entirely eliminates
	the possibility of further expenditure on this project.
Opportunity to exit the rare earth market	The Proposed Transaction gives Southern Crown the opportunity to
	exit the rare earth market at a time when market prices are low.
Ability to pursue new opportunities	By disposing of the Nkombwa and Xiluvo projects Southern Crown
	will have cash available to invest further in its existing Australian
	projects or to pursue new opportunities as they arise.
Avoids the necessity to re-negotiate the	Both the Nkombwa and Xiluvo projects are moving towards the
existing agreements for the Nkombwa and	latter stages of the existing agreements in relation to the time
Xiluvo projects	frames for undertaking the qualifying expenditure. This means that
	it is likely that rather than progressing under the existing terms
	Southern Crown will have to re-negotiate the project terms in the
	near future.

12.4 Disadvantages of Approving the Proposed Transaction

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

Disadvantage	Description
The Proposed Transaction is not fair under one	As shown in section 11, the Proposed Transaction is not fair under
of the scenarios	one of the scenarios.

Disposal of the Xiluvo Project represents the	Although a JORC indicated resource is only a step on the way it
disposal of a project with a JORC indicated	nevertheless is significant progress towards one of Southern Crown’s
resource	stated corporate objectives of developing economic mining
	projects, with none of Southern Crown’s other projects being so far
	advanced.
Full benefit from Southern Crown’s past	Southern Crown has spent funds that have contributed to increases
expenditure on the projects not realised	in the value of the African projects but will not gain maximum
	benefit from that past expenditure if the Proposed Transaction is
	approved.

13. Conclusion

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

14. Sources of information

This report has been based on the following information:

Draft Notice of General Meeting and Explanatory Statement on or about the date of this report;
Audited financial statements of Southern Crown for the year ended 30 June 2011;
Reviewed accounts of Southern Crown for the period ended 31 December 2011;
Unaudited management accounts of Southern Crown Resources Limited for the period ended 31 March 2012;
Independent Valuation Report of Southern Crown’s mineral assets dated 23 April 2012 performed by Agricola;
Share registry information;
Information in the public domain; and
Discussions with Directors and Management of Southern Crown Resources Limited.

15. Independence

BDO Corporate Finance (WA) Pty Ltd is entitled to receive a fee of $22,000 (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 Southern Crown in respect of any claim arising from BDO Corporate Finance (WA) Pty Ltd's reliance on information provided by the Southern Crown, 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 Southern Crown and any of their respective associates with reference to ASIC Regulatory

Guide 112 “Independence of Experts”. In BDO Corporate Finance (WA) Pty Ltd’s opinion it is independent of Southern Crown 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 Southern Crown, 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 Southern Crown.

A draft of this report was provided to Southern Crown 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).

16. Qualifications

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

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

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

Sherif Andrawes is a Fellow of the Institute of Chartered Accountants in England & Wales and a Member of the Institute of Chartered Accountants in Australia. He has over twenty years experience working in the audit and corporate finance fields with BDO and its predecessor firms in London and Perth. He has been responsible for over 150 public company independent expert’s reports under the Corporations Act or ASX Listing Rules. These experts’ reports cover a wide range of industries in Australia. Sherif Andrawes is the Chairman of BDO in Western Australia.

Adam Myers is a member of the Australian Institute of Chartered Accountants. Adam’s career spans 14 years in the Audit and Assurance and Corporate Finance areas. Adam has considerable experience in the preparation of independent expert reports and valuations in general for companies in a wide number of industry sectors.

17. Disclaimers and consents

This report has been prepared at the request of Southern Crown Shareholders for inclusion in the Notice of Meeting which will be sent to all Southern Crown Shareholders. Southern Crown engaged BDO Corporate Finance (WA) Pty Ltd to prepare an independent expert's report to consider the sale of 100% of the shares in REI in consider for cancelling all of the shares and performance shares granted to the shareholders of REI in a previous transaction.

BDO Corporate Finance (WA) Pty Ltd hereby consents to this report accompanying the above Notice of Meeting. 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 Notice of Meeting 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 Southern Crown or REI 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 REI. BDO Corporate Finance (WA) Pty Ltd provides no warranty as to the adequacy, effectiveness or completeness of the due diligence process.

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

With respect to taxation implications it is recommended that individual Shareholders obtain their own taxation advice, in respect of the Transaction, tailored to their own particular circumstances. Furthermore, the advice provided in this report does not constitute legal or taxation advice to the Shareholders of Southern Crown, or any other party.

BDO Corporate Finance (WA) Pty Ltd has also considered and relied upon independent valuations for mineral assets held by Southern Crown.

The valuer engaged for the mineral asset valuation, Agricola Mining Consultants Pty Ltd, possess the appropriate qualifications and experience in the industry to make such assessments. The approaches adopted and assumptions made in arriving at their valuation is appropriate for this report. We have received consent from the valuer for the use of their valuation report in the preparation of this report and to append a copy of their report to this report.

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

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

Sherif Andrawes Director

Adam Myers Director

A endix 1 – Glossar of Terms pp y

Reference	Definition
ACR Agreement	Related to the conversion of the Class B- Performance shares, it is the agreement
	between REI and ACR entered into on 31 May 2010
ACR	African Consolidated Resources Plc
The Act	The Corporations Act
Acquisition	The acquisition of 100% of the shares in REI by Southern Crown, in consideration
	for the issue of up to 8 million shares and 37 million performance shares to the
	Purchasers, dated 3 June 2011
African Assets	The African Exploration Assets held by REI
Agricola	Agricola Mining Consultants Pty Ltd
ASIC	Australian Securities and Investments Commission
ASX	Australian Securities Exchange
Australian Assets	Australian exploration assets held by Southern Crown
BDO	BDO Corporate Finance (WA) Pty Ltd
BFS	Bankable Feasibility Study
Centaurus	Centaurus Resources Limited
The Company	Southern Crown Resources Limited
Class A – Performance Shares	The conversion of 7 million Performance Shares when Southern Crown has the
	right to commence the exploration of any application submitted by REI related to
	the Gakara and Rodeo de los Molles projects
Class B – Performance Shares	The conversion of 7.5 million Performance Shares when Southern Crown earns its
	50% interest in the Nkombwa Project
Class C – Performance Shares	The conversion of 7.5 million Performance Shares when Southern Crown earns its
	85% interest in the Xiluvo Project
Class D – Performance Shares	The conversion of 15 million Performance Shares upon completion of a pre-
	feasibility study by Southern Crown and a resolution of the Independent Directors
	of Southern Crown to undertake a full Bankable Feasibility Study on any of REI’s

	mining assets
DCF	Discounted Future Cash Flows
Director of Mines Letter	The letter received by ACR on 20 February 2012 from the Acting Director of Mines
	at the Ministry of Mines and Natural Resources
EBIT	Earnings before interest and tax
EBITDA	Earnings before interest, tax, depreciation and amortisation
EPM	Exploration Permit Minerals
FME	Future Maintainable Earnings
FOS	Financial Ombudsman Service
FSG	Financial Services Guide
Heads of Agreement	The agreement entered into by Southern Crown on 20 April 2012 with the
	Purchasers to sell 100% of the shares in REI to the Purchases
HREE	Heavy rare earth elements
IPO	Initial Public Offering
JORC	Joint Ore Reserves Committee
LREE	Light rare earth elements
Non-associated shareholders	Shareholders whose votes are not to be disregarded in respect of the Proposed
	Transaction
NAV	Net Asset Value
Nkombwa Additional Expenditure	The additional expenditure required for the Class B Performance shares to convert
	by satisfying the Nkombwa Required Expenditure
Nkombwa Required Expenditure	The expenditure required by Southern Crown to earn 50% interest in the Nkombwa
	Project
REE	Rare earth elements
REI	Rare Earth International Limited
Our Report	This Independent Expert’s Report prepared by BDO
RG111	Content of expert reports (March 2011)

RG112	Independence of experts (March 2011)
Promac Agreement	The agreement relating to a licence held by Promac in Mozambique, which was to
	be extended to include rare earth elements within two years of the date of issue
	of the Class C - Performance Shares
Promac	Promac is a company incorporated in Mozambique
The Proposed Transaction	The proposal to sell 100% of the shares in REI in consideration for cancelling all of
	the shares and performance shares granted via the Acquisition
The Purchases	Southern Minerals, Swan Bridge and Umbono
QMP	Quoted Market Price
The Sale	The sale by Southern Crown of 100% of the shares in REI to the purchasers, dated
	20 April 2012 as
SC Resources	SC Resources Pty Ltd
Shareholders	Shareholders of Southern Crown not associated with REI
Southern Crown	Southern Crown Resources Limited
Southern Minerals	Southern Minerals Limited
Swan Bridge	Swan Bridge Resources
TREO	Total Rare Earth Oxides
VWAP	Volume Weighted Average Price
Umbono	Umbono Capital Partners LLC
Xiluvo Additional Expenditure	The additional expenditure required for the Class C Performance shares to
	convert by satisfying the Xiluvo Required Expenditure
Xiluvo Required Expenditure	The expenditure required by Southern Crown to earn 85% interest in the Nkombwa
	Project

A endix 2 – Valuation Methodolo ies pp g

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

1 Net asset value (“NAV”) Asset based methods estimate the market value of an entity’s securities based on the realisable value of its identifiable net assets. Asset based methods include:

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

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

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

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

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

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

2 Quoted Market Price Basis (“QMP”)

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

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

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

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

4 Discounted future cash flows (“DCF”)

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

Considerable judgement is required to estimate the future cash flows which must be able to be reliably estimated for a sufficiently long period to make this valuation methodology appropriate.

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

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

5 Market Based Assessment

The market based approach seeks to arrive at a value for a business by reference to comparable transactions involving the sale of similar businesses. This is based on the premise that companies with similar characteristics, such as operating in similar industries, command similar values. In performing this analysis it is important to acknowledge the differences between the comparable companies being analysed and the company that is being valued and then to reflect these differences in the valuation.

Appendix 3 – Independent Valuation Re ort Pre ared b A ricola p p y g

Malcolm Castle Agricola Mining Consultants Pty Ltd P.O. Box 473, South Perth, WA 6951 Phone: 61 (8) 9474 9351 Mobile: 61 (4) 1234 7511 Email: [email protected] ABN: 84 274 218 871

27 April 2012

The Directors BDO Corporate Finance (WA) Pty Ltd PO Box 700 West Perth, WA, 6872

Dear Sirs,

Re: INDEPENDENT VALUATION OF THE MINERAL ASSETS OF SOUTHERN CROWN LTD IN EAST AFRICA AND AUSTRALIA

I have been commissioned by BDO Corporate Finance (WA) Pty Ltd (“BDO”) to provide a Mineral Asset Valuation Report (“Report”) of the Mineral Assets of Southern Crown Ltd (“the Company” in Zambia, Mozambique and Queensland, Australia. The mineral assets of the Company include:

The Nkombwa Project in Zambia
The Xiluvo Project in Mozambique
The Dish Project in New South Wales
The Percyvale Project in Queensland
The Ropewalk Project in Queensland

The independent technical valuation report is to be used in connection with a report being prepared by BDO. The present status of the tenements/licenses listed in this report is based on information provided by the Company. 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.

The present status of the tenements listed in this report is based on information provided by the Company and is set out in the Tenement Schedule. The Report has been prepared on the assumption that the tenements are lawfully accessible for evaluation. Details in respect to the legal status and tenure of the tenements in Western Australia comprising the Project were reviewed from the Department of Mines and Petroleum database.

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 the Company, along with a written request to identify any material errors or omissions prior to lodgement.

In compiling this report, I did not carry out a site visit to any of the Company’s Project areas. Based on my professional knowledge and experience and the availability of extensive databases and technical reports made available by various Government Agencies, I consider that sufficient current information was available to allow an informed appraisal to be made without such a visit.

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The independent valuation 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 uranium, 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. He has completed numerous Independent Geologist’s Reports and mineral asset valuations over the last decade as part of his consulting business.

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.

Competent Persons Statement

The information in this report that relates to Exploration Results and Mineral Resources of the Company has been reviewed by Malcolm Castle, who is a member of the Australasian Institute of Mining and Metallurgy. Mr Castle has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as an Expert and Competent Person as defined under the VALMIN Code and in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Castle consents to the inclusion in this report of the matters based on the information in the form and context in which they appear.

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.

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Yours faithfully

Malcolm Castle

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

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TENEMENT SCHEDULE

Tenement No.	Registered Holders	Area, km2	Status	Commenced
Nkombwa 12198-HQ-LPL	Fisherman Mining Ltd	716	Granted	06-Jan-2010
Xiluvo 720C	Promac Lda	1.7	Granted	02-Nov-2010
The Dish EL6910	Southern Crown Resources	78	Granted	16-Oct-2007
Percyvale EPM16117	Southern Crown Resources	157.5	Granted	22-Apr-2008
Ropewalk EPM17643	Centaurus Resources Limited	315	Pending

The Status of the tenements is based on information provided by the current owners and has not been based on a recent independent enquiry and are believed to be in good standing. The Nkombwa Large Scale Prospecting Licence was granted to Fisherman Mining Ltd in 2010 but the Zambian government also granted a Small Scale Prospecting Licence over the same area at a later date. The grant of the SPL was challenged legally and the Zambian government have now confirmed that the SPL is invalid and the original tenement will be re-instated.

PROJECT REVIEW

NKOMBWA PROJECT - ZAMBIA

Situated in the extreme north-east of Zambia, the Nkombwa Project includes the Nkombwa Hill carbonatite intrusion along with several kimberlite dykes that form part of the Isoka kimberlite swarm. The project lies 22km from the major paved T2 national road between Lusaka and the Tanzanian border. Since its discovery in 1931, Nkombwa has been explored for phosphate and niobium resources; less attention has been focused on its REE potential.

Nkombwa is composed predominantly of dolomitic and ankeritic carbonatite phases. A phlogopiterich carbonatite occurs as discontinuous brecciated bands along the outer margin of the plug and may represent a hybrid phase incorporating fenitised (alkali-altered) country rock gneisses. Carbonatites in the central parts of the plug (forming the cap to Nkombwa hill) have been silicified, the main components of this rock being iron oxides, quartz, subordinate carbonates with apatite, isokite, pyrochlore and, rarely, monazite.

Early exploration reported elevated levels of the REE in some of the carbonatites with enrichments in the light REE La, Ce and Nd relative to the heavy REE, with Ce oxide values typically 3-7%. Assays of the residual and transported soils flanking Nkombwa Hill returned P2O5 concentrations of 10-18% accompanied by 1-2% REE.

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A focused petrological study identified the REE as occurring predominantly in carbonatite xenoliths hosted in late stage hematite-calcite carbonatite (“ferrocarbonatite”) sills and dykes cutting the dolomite and ankerite carbonatites. The xenoliths are typically angular, 10cm or more in size, green to yellow in colour and make up 20-25% by volume of the intrusive sheets; they are thought to represent fragments of a carbonatite phase not exposed at Nkombwa. Bastnaesite was identified as the principle REE-bearing phase along with lesser amounts of monazite. REE concentrations in the xenoliths are very high – the four samples studied averaged 28% (expressed as oxides; only La-Gd analysed).

Two deep (533m and 457m) boreholes drilled during exploration by Roan Selection Trust (RST) in 1968-69 intersected several 3-6m wide zones of REE mineralization: including 3% (La+Ce)2O3 over 12m; 5.8% over 2m; and 3.6% over 4m (only summary information for the zones is available; no raw assay data is available). These values would equate to concentrations of at least 4-8% TREO. The holes were collared near the centre of the northern edge of the complex and drilled southwards at inclinations of 45° (NB-1) and 60° (NB-2) and did not penetrate the central areas where the best REE mineralization has been identified by surface sampling and a ground radiometric survey. Phosphate is specifically excluded from the JV agreement.

Exploration Progress by Southern Crown

Evaluation of the complete set of geochemical data accumulated from Nkombwa (i.e. core and outcrop) delineated revealed two distinct styles of REE mineralisation: a “primary” type of REE mineralisation hosted in coarse, varitextured iron-rich carbonatite (all the mineralised intersections in the historical drill cores are of this type); and a “secondary” type where elevated REE are found in the high-silica rocks described as “silicified carbonatite” by previous workers. The majority of the >7% TREO outcrop samples, and all of the >10% TREO samples, recovered are of the silica-rich type. Preliminary mineralogical studies on silica-rich REE mineralised samples suggest that the predominant REE mineral is a low-thorium monazite, accompanied by minor amounts of bastnaesite or cerianite in some samples.

Completion of a high resolution airborne magnetic and radiometric survey over the Nkombwa Hill area with flight line spacing of 50m with 500m spaced tie-lines for a total of 437 line kilometres was completed. An average terrain clearance of 20.6m was achieved through the survey. The processed data have improved understanding of the internal structure and extent of the different components of the complex and the distribution of the REE mineralisation. In particular, the survey has assisted in defining the extent of the “silicified carbonatite” unit that hosts pervasive REE mineralisation of the “silica-rich style” discussed above. These data allowed three broad mineralised target areas to be identified and prioritised for exploration drilling in order of decreasing priority:

North-West: encloses a large number of >5% TREO samples and includes the most enriched samples from each sampling exercise (22.09% and 15.37% TREO). Mineralisation is predominantly of the silica hosted type in the sampled outcrops but intersections in historical drill hole cores indicate the presence of “primary”, carbonatite-hosted REE mineralisation at depth.

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Central: a large zone containing extensive (ca 100m) patches of high REE, silica-hosted samples

South-East: A zone less well-defined (by the current sample coverage) and of lower grade. Mineralised samples are mostly of the “carbonate-hosted” type in sub-vertical arcuate “ringdykes” of primary mineralised carbonatite akin to the zones intersected in the historical drill holes in the north of the complex.

XILUVO PROJECT - MOZAMBIQUE

The company has a Joint Venture Agreement with Promac Lda, a Mozambican quarrying and construction company that holds a mining license over the area and operates a quarrying operation exploiting the calcitic carbonatite for use as construction aggregate. According to the Agreement Southern Crown can earn up to 85% ownership of the REE assets by spending US$1,000,000 developing the project.

The Xiluvo Project covers a significant part of the carbonatite component of the Monte Xiluvo complex located in the Sofala Province of Mozambique, 110 km inland of the port of Beira. Access to Xiluvo is excellent – the complex is bound on the eastern side by the paved national road and on the west by the national rail routes linking Zimbabwe (via Mutare) and Beira. Promac, REI’s partner in the project, runs active quarrying operations in the southern part of the complex where it has a railway siding for the shipping of milled aggregate.

Monte Xiluvo is a conspicuous set of quasi-circular hills that rise 700m above the surrounding plains. The outer parts of the complex are composed of an agglomerate apron of coarse, clast-supported breccias made up of angular clasts – predominantly of country rock gneisses and schists – set in a matrix of finely pulverized silicate material. Carbonate is absent from the outer portions of the agglomerate apron but becomes more common towards the centre; rare clasts of carbonatite are found in the innermost parts close to the carbonatite bodies.

The agglomerate apron is intruded by a composite plug of carbonatite. Coarse- to medium-grained calcite carbonatite (“søvite”) is the earliest carbonatite phase and occupies an incomplete ring along the outer margin of the carbonatite plug. These early carbonatites are generally extremely coarse containing platy calcite crystals over 2cm in length and commonly contain streaks and patches of aegirine and scattered pyrochlore. They are intruded by a second phase of calcitic carbonatite that is more uniformly fine-grained and darker in colour (“alvikite”); narrow sheets of this second carbonatite phase are found intruding the agglomerate. The last recognised phase of intrusion in the complex was the emplacement of a series of plugs, sheets and veinlets of iron-rich tuffisite material. In the larger plugs the tuffisite is a matrix-supported breccia where angular and sub-rounded clasts of earlier carbonatites and country rocks are enclosed in an orange to brown hematite-rich carbonate matrix.

Mineralisation

Earlier sampling of the Xiluvo Complex during a petrological investigation showed that elevated LREE concentrations, potentially of ore grade, occurred in samples of the tuffisite and adjacent calcite

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carbonatites. The central topographic bowl of the Monte Xiluvo structure has a substantial volume of residual and transported soils derived from the core carbonatites of the complex. Elevated REE concentrations (over 2% TRO) were identified in the investigation referred to above and suggest that the soils could represent an easily exploitable REE resource.

A limited reconnaissance sampling program was undertaken and 6 of these samples had TREO values above 1%; 4 of these being alvikite, the highest having 1.75% TREO. Evaluation of these preliminary results suggests that elevated REE with enhanced HREE could be found in the contact zone between the tuffisite and alvikite unit. A preliminary survey of the soils was included in the reconnaissance program and involving digging twenty pits on a 100m by 100m grid in the central part of the soil zone that were sampled at a depth 1m (samples weights were ca 1kg each). These samples returned an average TREO value of 2.20% with a maximum of 3.19%.

The soils have accumulated in an internal basin within the central topographic bowl of the eroded Monte Xiluvo volcano structure and are derived from material shed predominantly from carbonatite plugs in the centre of the structure (Figure 4).

The soil deposit was systematically drilled at 50mx50m spacing in July 2011. The drilling was undertaken by specialists in the sampling of unconsolidated deposits and a powered sheathed auger technique was used to drill and sample more than 220 holes. Samples were assayed by Intertek Genalysis, Perth and an Indicated Resource estimate in accordance with the JORC code was undertaken by Widenbar and associates. Grade and tonnage estimates were made for grade cut-offs of 0%, 1%, 2% and 3% total rare earth oxides (TREO).

THE DISH PROJECT

The tenement is located approximately 15kms SE of Peak Hill, NSW. EL6910 is located within the eastern portion of the Lachlan Fold Belt, which formed part of the Ordovician Macquarie Arc. The area of interest is in the Parkes Zone and Mount Foster – Tumut Zone of the Junee-Narromine Volcanic Belt.

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Great Britain Mine

The Great Britain Mine was worked during 1895 and has produced a small but unknown amount of gold from quartz veins in metasediments. The veins were thought to strike at 345 degree magnetic and dip west at 60 degree. The Narromine Mine Data Sheets suggests that the shaft went to a depth of 76 metres. It has been the subject of close spaced (25m x 50m) aircore drilling by previous explorers who also, incorrectly targeted one RC hole.

Significant end of hole gold and arsenic anomalism was uncovered by previous explorers, Geopeko, in aircore holes GBM-7, GBM-8 and GBM-9 and in later tight spaced aircore holes drilled by Golden Cross Resources. This anomalism was tested by Straits Resources with RC Hole PH105 drilled to 78m which failed to intersect any significant anomalism, and no further work was undertaken. An error with AMG and Magnetic north projections by Straits Resources suggest that PH105 was incorrectly targeted. Golden Cross drilling was set depth (50m) aircore.

Review of the prospect by Centaurus identified the arsenic anomalism as being significant in terms of a Wyoming Model, and follow-up aircore drilling on a very tight 40m x 40m pattern and various orientations was initiated. This drilling intersected significant Au and As anomalism in holes DAC020, DAC029 and DAC030.

Highlights of the drilling were DAC030 with 6m @ 1.33ppm Au and 1080ppm As from 26m including 1m @ 5.77ppm Au and 1120ppm As which illustrates the high grade potential of the prospect. The best drill hole ended in mineralisation, the tenor of which is increasing towards the bottom of the hole, i.e. DAC020 12m @ 0.18ppm Au and 1018ppm As from 48m to EOH including 1m @ 0.28ppm Au and 1860ppm As at EOH.

Where assay values for rock chip samples and drill intercepts are quoted they represent the best results from a series of lower grade values. They should not be taken to represent the average grade of the samples unless otherwise stated.

Centaurus’ drilling revealed a coherent Au and As anomaly in aircore samples which is approximately 110m long by 80m wide with results greater than 200ppm As and 0.25ppm Au. The anomaly is open to the north. Drill section interpretation of the results indicate a potential dextral offset to the mineralisation akin to the Wyoming / Caloma displacement along a similarly orientated NW trending structure. The anomalism appears to show a northerly dip.

PERCYVALE PROJECT - NORTH EAST QUEENSLAND

Bernadette Prospect Geology

The Bernadette Prospect is located approximately 500 metres northeast of high grade uranium mineralisation recorded at Lim Kin’s (up to 2% U3O8) and consists of multiple auriferous quartz veins hosted by Silurian-Devonian Robinhood Granodiorite adjacent to a contact with Einasleigh Metamorphics. Numerous, plus 1 g/t gold values have been returned from rock chip sampling (Glengarry Resources peak assay 61.9g/t Au) and adjacent wall rock alteration (up to 10m away from the reefs) suggests that there is potential for bulk tonnage mineralisation. The reef is also sub

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parallel the regionally significant Gilberton Fault which may have provided the conduit or structural porosity allowing fluids to migrate and enable mineralization.

The quartz reefs are observed to truncate mapped Permo-Carboniferous rhyolite dykes, suggesting they are Permian in age, even though no definitive epithermal vein textures are observed.

Previous Exploration

No systematic exploration was completed over the Bernadette Prospect prior to Glengarry’s involvement. Previous explorers including KGM undertook selective rock chip sampling of the exposed auriferous reefs but did not drill any holes. No historical drill holes could be located during site visits.

Further to the northeast of Bernadette (Bernadette Extension) a re-examination of previous exploration by Houston Oil (circa 1981) revealed a coherent anomalous pan concentrate anomaly (>1ppm Au) extending over a 15.6km2 catchment. This anomaly had been downgraded by subsequent explorers including KGM arguing it only reflected subtle gold anomalism at the base of the post Palaeozoic cover sequences. Reconnaissance, by Glengarry, failed to locate a bedrock source of anomalous gold.

Glengarry Resources completed 14 angled RC drill holes into the Bernadette Prospect in November 2008 following the completion of 100 x 50m infill surface soil sampling over the trend. The soil sampling successfully delineated a coherent plus 50ppb gold in soil anomaly extending over 1.2km northeasterly strike, along with significant plus 100ppm copper in soil responses aligned to the northwesterly trending grain of the Proterozoic Einasleigh Metamorphics. This includes the Azurite and Natasha grid targets.

Better Glengarry Resources drill results include:

8m @ 0.29g/t Au, 19.3g/t Ag, 1.76% Cu and 0.48% Zn from 63m in 08AZRC002 at Azurite 6m @ 0.24g/t Au, 10.4g/t Ag, 0.68% Cu from 45m in 08AZRC003

3m @ 6.67g/t Au from 68m in 08BNRC002 60m @ 0.17g/t Au from surface in 08BNRC003, and 60m @ 0.18g/t Au from surface in 08BNRC004

ROPEWALK PROSPECT GEOLOGY

Three Proterozoic granitoids/granite gneisses are interpreted from regional Queensland Geological Survey mapping within the Ropewalk EPMA 17643, located immediately south of Forsayth. These include the Forsayth Granite, the Ropewalk Granite and the Goldsmiths Granite. The Queensland Geological Survey has also mapped a series of isoclinally folded dolerite sills intruding the Proterozoic sedimentary gneisses (Einasleigh Metamorphics) and dominating the southwestern quadrant of the EPMA.

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The intense phase of acid subvolcanic activity during the Permo-Carboniferous extended throughout the Ropewalk EPMA as elsewhere throughout the Forsayth Sub-Province of the Georgetown Inlier. Locally the rhyolitic intrusions/extrusions manifest as a series of west-northwest trending dykes, reflective of the broader top block northeast subduction environment.

Previous exploration over the Ropewalk EPMA was dominated by BHP (circa 1993-1996) and KGM (circa 1990-2000). The two companies focused their exploration efforts on Broken Hill Type sedimentary Ag-Pb-Zn deposits and breccia pipe intrusive related gold deposits respectively.

Aeromagnetics and selected GeoTEM surveys were flown by BHP while KGM undertook regional stream sediment sampling, float sampling and rock chipping plus selective soil sampling, IP and drilling. The majority of KGM’s exploration focused upon the Glenrowan and Breccia Hill breccia pipes located immediately northwest of Ropewalk EPMA but selected work programmes were also reported over the Carlisle East prospect area.

Soil sampling by KGM over Carlisle East returned a coherent plus 20ppb gold in soil anomaly extending over 900 x 400m. The gold in soil anomaly appears associated with flow banded and locally brecciated Permo-Carboniferous rhyolite dykes and quartz feldspar porphyries intruding Proterozoic metasediments. The soil anomaly remains open to the east but KGM argued the anomaly was simply related to Mesozoic fluvial basal gravels and conglomerates despite recording extensive silica-sericite alteration from their limited drilling. KGM’s conclusions also fails to address the spatial extent (>10km strike) of excised contiguous alluvial gold ML’s feeding off the gold in soil anomaly.

KGM drilled three RC holes targeting peak plus 1g/t Au responses into the western and southern parts of the soil anomaly ahead of completing their IP survey. Consequently their drilling was not targeting the peak resistive and chargeable responses returned from their IP survey. Best drill hole assay result was 2m @ 0.54g/t Au from 48m in CRC-2.

The Mosquito Creek Corridor occupies the south-western quadrant of the Ropewalk EPMA. It’s defined as a 25km west-northwest striking domain bounding corridor within the EPMA containing 7 untested BHP GeoTEM targets spatially associated with intrusive dolerites and gossanous ironstones. Better BHP rock chip results from within the EPMA include 4.86% zinc, 12.5% lead, 0.63% copper and 0.32g/t gold.

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VALUATION ASSESSMENT

A mineral Resource has been estimated in accordance with the JORC code for the Xiluvo Project in Mozambique. The Nkombwa, The Dish, Percyvale and Ropework Projects have had some drilling completed but are not yet at the stage where resources can be estimated.

When a resource or defined body of mineralisation has been outlined and its economic viability has still to be established (i.e. there is no ore reserve) then a Comparable Transactions approach is usually applied, often stated as a percentage of metal value. This can be applied to Mineral Resource estimates and Exploration Targets in accordance with the JORC code with appropriate discounts for risk in the different categories.

With gold projects the method requires allocating a dollar value to resource ounces of gold in the ground. This may also apply to well established zones of mineralisation which have not formally been categorised under the JORC code. An additional risk weighting may be appropriate in these circumstances.

A similar approach can be taken with other metals including copper or base metals sold on the spot market and benchmarks are similar to gold properties. Value is estimated as a percentage of contained value once appropriate discounts for uncertainty relating to resource categorisation are taken into account. This approach has been applied to the Xiluvo Project .

The Nkombwa, The Dish, Percyvale and Ropework Projects are advanced exploration projects. Several methods of valuation are available for such projects where a Mineral Resource has not yet been estimated in accordance with the JORC code. These include the use of valuations based on past exploration expenditure and valuations based on perceived prospectivity.

Exploration projects can be extremely variable and the use of comparable transactions is unlikely to produce a statistical spread of values for “similar” projects. This method can be used where a Mineral Resource has been estimated. The Prospectivity Exploration Multiplier (PEM) is based on past expenditure while the Kilburn Geoscience Rating is based on opinions of the prospectivity hence tenements can have marked variation in value between the methods.

The ‘Geoscientific Rating’ method of valuation for exploration tenements is the preferred valuation method for the Company’s current tenements as it focusses on the prospectivity of the area.

The Geoscientific Rating method systematically assesses and grades of 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 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 is usually expressed as average expenditure per square kilometre. Equity and grant status are also taken into account. Each factor then multiplied serially to the BAC. The ‘Base Value is multiplied by the prospectivity rating (the assessment of prospectivity factors multiplied together) to establish the overall technical value of each mineral property.

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Where exploration has produced documented results a PEM can be derived which takes into account the valuer’s judgment of the success of the previous exploration techniques and results.

Paragraph 65 of RG 111 discusses a preference for the use of more than one valuation methodology. In the absence of a resource estimate in accordance with the JORC code an alternative method to the Geoscientific Rating method might consider past expenditure on the tenements and the uplift of value provided by encouraging result.

Past expenditures for the Company’s current tenements are not available from the previous explorers over the duration of modern exploration and reliance is mainly placed on the Geoscientific method.

XILUVO PROJECT – COMPARABLE TRANSACTIONS

MINERAL RESOURCE ESTIMATES

A resource estimate in accordance with the JORC code was undertaken by Widenbar and associates. Grade and tonnage estimates were made for grade cut-offs of 0%, 1%, 2% and 3% total rare earth oxides (TREO). The Indicated Resource at a lower cut off of 1% TREO has been selected for this valuation,

At a cut-off grade of 1.0% TREO, the Indicated Mineral Resource Estimation is 1.11 million tonnes @ 2.05% TREO.

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VALUATION METHODOLOGY

Contained metal is calculated from the deposit tonnes and grade in the three categories of the JORC code.

XILUVO RESOURCE VALUATION

Resource Indicated Tonnes, Mt 1,111,000 Grade, REO% 2.05 Metal Content Indicated Contained tonnes REO 22,776

The estimated contained value for the Indicated Resource is estimates at approximately $1,758 per tonne of material.

Oxide
Head assay
Kg/t
Price/kg Ox
Contained
value/t
La2O3
0.44%
4.40
25.50
$112.20
CeO2
0.94%
9.40
25.50
$239.70
Pr6O11
0.10%
1.00
117.50
$117.50
Nd2O3
0.35%
3.50
144.00
$504.00
Sm2O3
0.05%
0.50
78.45
$39.23
Eu2O3
0.01%
0.10
2,975.00
$297.50
Gd2O3
0.03%
0.30
189.50
$56.85
Tb4O7
0.00%
-
$-
Dy2O3
0.02%
0.20
1,225.00
$245.00
Ho203
0.00%
-
$-
Er203
0.01%
0.10
180.00
$18.00
Tm203
0.00%
-
$-
Yb203
0.00%
-
$-
Lu203
0.00%
-
$-
Y2O3
0.08%
0.80
160.00
$128.00

Pricing Reference
Asianmetal.com 26 Apr 12
Asianmetal.com 26 Apr 13
Asianmetal.com 26 Apr 14
Asianmetal.com 26 Apr 15
Asianmetal.com 26 Apr 16
Asianmetal.com 26 Apr 17
Asianmetal.com 26 Apr 18
Asianmetal.com 26 Apr 20
Asianmetal.com 26 Apr 22
Asianmetal.com 26 Apr 26

Total
2.03%
20.30
$86.60
$1,757.98

Source: http://www.asianmetal.com/partner/peleMountain.html

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Contained Value = [Resource Tonnes]*[Value of TREO per tonne]

Contained Value $M Measured - Indicated 1,953 Inferred - Exploration Target - Subtotal 1,953

A discount factor is applied to the contained value to recognise the JORC category and allow for resource risk.

Resource Category Discounts
Measured Resource	80%
Indicated Resource	70%
Inferred Resource	60%
Exploration Target	50%

Rare Earth Production faces significant challenges in extraction and timing of marketing and significant volatility in price. An estimate of operational factors is included in the valuation to reflect these challenges and to provide a comparison with other types of deposits such as gold which are more straight forward. An operation discount of 92.4% has been used

Operations Factors
Recovery	60%
Mining	100%
Processing	50%
Rail	75%
Port	90%
Capex	50%
Marketing	75%
Total Operating Discount	7.6%

The base value for the project is estimated by multiplying the contained value by the discount factors.

Base Value = [Contained Value][Resource Discount][Operational Discount]

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Base Value A$M REO
Measured -
Indicated
103.82
Inferred -
-
Exploration Target
Total 103.82
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A range of average acquisition cost (AAC) percentages is estimated based on comparative transactions in the gold industry over the last 20 years.

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5.00% Average Acquisition Cost
4.50%
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
1990 1995 2000 2005 2010
----- End of picture text -----

The Average Acquisition Cost (AAC) for gold projects lies in the range of 2% to 4.5%. The data set does not differentiate between resource categories and it is implicit that this has been taken into account with risk related discounts. Information on sales internationally has shown a pattern for the AAC as shown in the following table.

		AAC Percentiles
Percentile	10%	25%	50%	75%	90%
AAC	2.20%	2.63%	3.00%	3.35%	3.89%

For the purpose of this valuation the Average Acquisition Cost for the lower, preferred and higher value is selected at the 25[th] , 50[th] and 75[th] percentiles

The Base Value is multiplied by AAC Percentiles to arrive at the estimated project value.

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Total Project Technical Value, A$M
Low 2.73
High 3.48
Preferred 3.11
% of contained value 0.16%
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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 small to medium market premium to the technical value of the exploration potential of the tenements.

An assessment of country risk and an assessment of the Business Climate has been provided by a specialist firm, Coface (www.coface.com).The rating for Mozambique is ‘C’ for both aspects which is considered to be high risk. This rating will affect the market factor in assessing market value and a base market factor of -5% to 0% has been applied to the basic technical value.

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Total Project Market Value, A$M
Low 2.59
High 3.48
Preferred 3.03
% of contained value 0.16%
$/t Resource $2.73
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Based on an assessment of the factors involved I estimate the value for the Current project areas is in the range A$2.6 million to A$3.5 million with a preferred value of A$3.0 million.

NKOMBWA, THE DISH, PERCYVALE AND ROPEWORK PROJECTS

GEOSCIENTIFIC RATING METHOD

BASE VALUE

This represents the exploration cost for the current period of the tenements. The current Base Acquisition Cost (BAC) for exploration projects is considered to be the average expenditure for Exploration Licences in Western Australia. Exploration Licences in the first year attract a minimum annual expenditure of $1000 and annual rent of $113.5 per block. A 15% administration fee is taken into account to imply a BAC of $410 to $450 per square kilometre. More mature tenements are escalated in proportion to the increase in rent for years 4 to 5 and year 6 and over.

Western	Australia Expenditure	Commitments
Exploration Licence	Year 1	410	450
Exploration Licence	Year 2	480	530
Exploration Licence	Year 3	550	610
Exploration Licence	Years 4 to 5	620	680
Exploration Licence	Year 6 on	1,200	1,320
Prospecting Licences	All years	4,900	5,400
Mining Lease	All Years	13,200	14,500

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The Nkombwa Large Scale Prospecting Licence is a very large one with an area of 716 square kilometres and only a small part of it is of interest for rare earth oxide. An additional factor of 10% has been applied to the area to reflect this situation and a BAC of $4,900 to $5,400 per square kilometres has been applied.

The Percyvale and The Dish tenements are in their 4[th] and 5[th] year with a BAC of $620 to $680 per square kilometres. The Ropework tenement is in the application stage and a BAC of $410 to $450 has been used and a discount of 40% (Grant factor of 60%) is applied to the tenements to recognise the uncertainty of the application process.

For the initial valuation it is assumed the Company has 100% equity in the tenements. A discussion of the earn-in provision and adjustments to the equity position for Nkombwa and Xiluvo is included later in the report.

Base Value = [Area][Grant Factor][Equity]*[Base Acquisition Cost]


Southern Crown Resources Ltd Tenement Factors Tenement Country Project			Equity	Km2	Use	Status	Grant	BAC
							Factor	Low	High
12198-HQ- LPL	Zambia	Nkombwa	100%	716.00	10%	Granted, Yr 3	100%	4,900	5,400
EL 6910	NSW	The Dish	100%	78.00	100%	Granted, Yr 5	100%	620	680
EPM16117	Queensland	Percyvale	100%	157.50	100%	Granted, Yr 4	100%	620	680
EPM17643	Queensland	Ropewalk	100%	315.00	100%	Pending, Yr 1	60%	410	450
Total Area				1,266.50

PROSPECTIVITY ASSESSMENT FACTORS

A detailed assessment of the prospectivity of tenements was carried out. The geoscientific rating chosen for each element are included in the following table.

This includes a consideration of

Regional mineralization, old and current workings and the validity of conceptual models.
Local mineralization within the tenements and the application of conceptual models within the tenements.
Identified anomalies warranting follow up within the tenements.
The proportion of structural and lithological settings within the tenements and difficulty encountered by cover rocks and other factors.

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KILBURN RATING CRITERIA - SIMPLIFIED

KILBURN RATING CRITERIA -SIMPLIFIED	KILBURN RATING CRITERIA -SIMPLIFIED	KILBURN RATING CRITERIA -SIMPLIFIED	KILBURN RATING CRITERIA -SIMPLIFIED	KILBURN RATING CRITERIA -SIMPLIFIED
Rating	OffSite Factor	OnSite Factor	AnomalyFactor	Geological Factor
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 mineralization	Grade intercepts on adjacent sections - Exploration Targets Estimated from sound evidence	Significant grade intercepts not yet linked on cross and longsections	Significant mineralised zones exposed in prospective host rocks
4		Inferred Resource identified not yet estimated	Grade intercepts on adjacent sections

Assessments in each category are based on a set scale (see above and appendix) and are multiplied together to arrive at a “prospectivity index”.

Prospectivity Index = [Off Site Factor][On Site Factor][Anomaly Factor]*[Geology Factor]

Southern Crown Resources
Ltd
Prospectivity Factors
Tenement
Country
Project
Off Site
On Site
Anomaly
Geology
Low
High
Low
High
Low
High
Low
High
12198-HQ-LPL
Zambia
Nkombwa
1.75
1.85
2.50
2.60
2.25
2.35
1.75
1.85
EL 6910
NSW
The Dish
1.50
1.60
2.25
2.35
2.75
2.85
2.00
2.10
EPM16117
Queensland
Percyvale
2.00
2.10
2.25
2.35
2.75
2.85
2.00
2.10
EPM17643
Queensland
Ropewalk
2.00
2.10
2.00
2.10
2.00
2.10
1.75
1.85

TECHNICAL VALUE

An estimate of technical value has been compiled for the tenements based on the base acquisition cost, area, grant status, equity and ratings for prospectivity.

Technical Value = [Base Value]*[Prospectivity Index]

Southern Crown	Resources Ltd
Technical Value
Tenement	Country	Project		Technical Value
			Low	High	Preferred
12198-HQ-LPL	Zambia	Nkombwa	6.04	8.09	7.03
EL 6910	NSW	The Dish	0.90	1.19	1.04
EPM16117	Queensland	Percyvale	2.42	3.16	2.78
EPM17643	Queensland	Ropewalk	1.09	1.46	1.27
Total			10.44	13.90	12.12

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MARKET VALUE

In arriving at a fair market value for a particular exploration tenement, I have considered the Country risk and current market for exploration properties in Australia and overseas. It is considered appropriate to apply a small to medium market premium to the technical value of the exploration potential of the tenements.

An assessment of country risk and an assessment of the Business Climate has been provided by a specialist firm, Coface (www.coface.com).The rating for Zambia is ‘C’ for both aspects which is considered to be high risk. The rating for Australia is ‘A1’ for both aspects which is considered to be low risk This rating will affect the market factor in assessing market value and a base market factor of -5% to 0% has been applied to Zambia and 15% to 20% for Australia to the basic technical value.

Market Value = [Technical Value]*[Adjusted Market Factor]

Southern Crown	Resources Ltd
Market Value
Tenement	Country	Project		Market Value
			Market	Factor	Low	High	Preferred
12198-HQ-LPL	Zambia	Nkombwa	95.0%	100.0%	5.74	8.09	6.91
EL 6910	NSW	The Dish	115.0%	120.0%	1.03	1.43	1.23
EPM16117	Queensland	Percyvale	115.0%	120.0%	2.78	3.80	3.29
EPM17643	Queensland	Ropewalk	115.0%	120.0%	1.25	1.75	1.50
Total					10.80	15.06	12.93

VALUATION OPINION

Exploration Tenements:

There is a preference for the use of more than one valuation methodology for the same tenements expressed in Paragraph 65 of Regulatory Guide 111. In the absence of a resource estimate in accordance with the JORC code at Nkombwa, The Dish, Percyvale and Ropework Projects an alternative method to the Geoscientific Rating method might consider past expenditure on the tenements and the uplift of value provided by encouraging result.

PEM Range Criteria

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 mineralization 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

Page | 20

Complete records of past expenditure for the Projects are not available from the previous explorers. The project has been extensively explored in the past with mapping, satellite imagery, geophysics, surface geochemistry and historical drilling form part of the data base.

It is considered reasonable to suggest that the current value of these work elements would be in the range of $5.5 to $7.25 million if carried out in the current market. This is considered speculative (but plausible) and the successful results of the work indicate that detailed drilling has defined targets with potential economic interest with the potential to contain medium sized deposits and small Inferred Resources may be estimated. This would attract Prospectivity Enhancement Multipliers as set out below and suggest a market value in the range $10.3 million to $15.0 million with a preferred value of $12.6 million.

	Southern Crown Resources Ltd Technical Value - Prospectivity Enhancement Method Expenditure, A$M PEM Technical Value, A$M Low High Low High Low High Preferred Nkombwa, 3.50 4.00 2.00 2.25 7.00 9.00 8.00 The Dish 0.50 0.75 1.75 2.00 0.88 1.50 1.19 Percyvale 1.00 1.50 1.75 2.00 1.75 3.00 2.38 Ropewalk 0.50 1.00 1.25 1.50 0.63 1.50 1.06 Total 5.50 7.25 10.25 15.00 12.63

EQUITY POSITION

The Company has the potential to earn a 50% interest in the Nkombwa Project (and 75% for fully funding a bankable feasibility study) and an 85% interest in Xiluvo Project by undertaking expenditure.

			Interest
Project	Performance hurdle	Relevant date	earned
Nkombwa	$1,350,000 expenditure	2 yrs from issue of performance shares	50%
Xiluvo	$1,000,000 expenditure	3 yrs from issue of performance shares	85%

VALUATION

The valuation of the exploration potential has been arrived at from a consideration of prospectivity and warranted expenditure adjusted for equity and grant status. The market value has been estimated by multiplying the preferred technical value by the range of market factors. I have systematically established the value of the mineral assets as at 23rd April 2012.

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The current value of the projects has been assessed in the report but at this stage the Company holds partial equity in the Nkombwa and Xiluvo Projects and has the right to earn further equity according to the agreement..

The Company may earn equity interest in the Nkomwa and Xiluvo Projects by expenditure of $1.35 million and $1.00 million respectively within several years. Assuming the expenditure enhances the prospectivity of the projects it is highly likely that this exploration will increase the value of the projects by a Prospectivity Enhancement Factor of the expenditure but this cannot be known with any certainty at this stage. The prospectivity enhancement factor has been estimated with an allowance for this uncertainty at 3.0 to 4.0 for Xiluvo (average 3.50)and 2.0 to 2.5 for Nkombwa (average 2.25).

Xiluvo	Low	High	Preferred
	$M	$M	$M
Market value	2.59	3.48	3.03
Earning expenditure	0.80	0.80	0.80
Enhancement factor	3.50	3.50	3.50
Enhanced expenditure	2.79	2.79	2.79
Total value including enhancement expenditure	5.38	6.27	5.82
Company's % interest	85%	85%	85%
Total value includingenhancement expenditure	4.57	5.33	4.95

Nkombwa	Low	High	Preferred
	$M	$M	$M
Market value	5.74	8.09	6.91
Earning expenditure	0.95	0.95	0.95
Enhancement factor	2.25	2.25	2.25
Enhanced expenditure	2.14	2.14	2.14
Total value including enhancement expenditure	7.89	10.23	9.06
Company's % interest	50%	50%	50%
Total value includingenhancement expenditure	3.94	5.11	4.53

The value assuming that the Company fulfils the requirements necessary to earn its ‘performance target’ interest is assessed as follows.

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Prospect Name			A$ Millions
	Equity	Low	High	Preferred
Nkombwa	50%	4.29	5.64	4.97
Xiluvo	85%	3.94	5.11	4.53

This value is speculative and assumes reasonable exploration success at Nkombwe and Xiluvo.

EARLIER VALUATIONS

The valuation of the exploration potential was undertaken for the African Rare Earh projects in early 2011 by Malcolm Castle. The Nkombwa and Xiluvo Projects were systematically established the value of the mineral assets as at 27 January 2011.

Prospect Name	Technical Value, February 2011
	Low High Preferred
Nkombwa	5.06 6.82 5.91
Xiluvo	0.65 0.86 0.75

In early 2011 world metal markets were 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. Rare Earth Elements prices were experiencing a sharp increase currently largely brought about by restriction of supply from China and a desire for western economies to establish alternative supplies. The predicted demand into the future is reasonably strong and should experience a steady overall increase. The market value of Rare earth Elements projects at that time was likely to be at a premium in the order of 25% to 50% above the basic technical value.

Prospect Name	Market Value, February 2011
	Low High Preferred
Nkombwa	7.39 8.87 8.13
Xiluvo	0.94 1.13 1.04

Since that time further progress has been made on the Nkombwa project with the effect that the geoscientific factors have been increased for the current technical valuation. A mineral Resource in accordance with the JORC code has been estimated for the Xiluvo Project and a Comparative Transactions method has been applied in the current valuation.

Page | 23

There has been a significant decline in the market factor since January 2011. The introduction of various taxes in Australia with impact on the mining industry combined with the anti-mining sentiment of some political parties has meant that there is a lower appetite for investment in mining ventures. Australia is now considered a high cost destination for mining with labour costs well above world averages. Unrest on the African continent has caused some unease in mining investment. Even though Zambia and Mozambique are considered to be relatively stable environments but the flow-on effect from Mali, the DRC and Zimbabwe is reflected in the lower market factor. Sovereignty of tenure is considered paramount in long term mineral ventures and the regulatory environment in Zambia is called into question over the resolution of the over pegging at Nkombwa.

The overall effect is to reduce the Market Factor from 25%-50% in early 2011 to 15%-20% at the current time with an additional discount for Zambia.

FINAL VALUE CONSIDERING EQUITY POSITION IN XILUVO AND NKOMBWA

In this report, I have systematically established the value of the mineral assets as at 23rd April 2012.

	Low, $m	High, $m	Preferred, $m	Method
Xiluvo, 50% Equity	4.57	5.33	4.95	Comparative Transactions
Nkombwa, 85% Equity	3.94	5.11	4.53	Geoscientific Rating
The Dish	1.03	1.43	1.23	Geoscientific Rating
Percyvale	2.78	3.80	3.29	Geoscientific Rating
Ropewalk	1.25	1.75	1.50	Geoscientific Rating
Total	13.58	17.42	15.50

Based on an assessment of the factors involved I estimate the value for the Current project areas is in the range A$13.6 million to A$17.4 million with a preferred value of A$15.5 million.

Page | 24

Forward-Looking Statements

This document may include forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning BMG’s planned exploration program and other statements that are not historical facts. Although BMG believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements.

Competent Persons Statement

Page | 25

APPENDIX

MINERAL ASSETS VALUATION METHODOLOGY FOR EXPLORATION TENEMENTS

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	Mineralization 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.

Page | 26

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.

Page | 27

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.

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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 mineralization
level of knowledge of the geometry of mineralization in the district
mining history, including mining methods
location and accessibility of infrastructure
milling and metallurgical characteristics of the mineralization
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 mineralization 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

Page | 29

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.

PEM Factors Used in this valuation method

PEM Range	Criteria
0.2 – 0.5	Exploration (past and present) has downgraded the tenement prospectivity, no mineralization 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 mineralization
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.

Page | 30

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 Factors are defined in the table.

GEOSCIENTIFIC 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 mineralization, geochemical, geological or geophysical anomaly within the property and the tenor of any mineralization 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 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.

Exploration Licences attract a minimum annual expenditure for the first year of $1000 and annual rent of $113.5 per block. A 15% administration fee is taken into account to imply a BAC of $410 to $450 per square kilometre. More mature tenements are escalated in proportion to the increase in rent for years 4 to 5 and year 6 and over.

Western	Australia Expenditure	Commitments
Exploration Licence	Year 1	410	450
Exploration Licence	Year 2	480	530
Exploration Licence	Year 3	550	610
Exploration Licence	Years 4 to 5	620	680
Exploration Licence	Year 6 on	1,200	1,320
Prospecting Licences	All years	4,900	5,400
Mining Lease	All Years	13,200	14,500

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

		KILBURN GEOSCIENTIFIC RATING CRITERIA - MODIFIED	KILBURN GEOSCIENTIFIC RATING CRITERIA - MODIFIED	KILBURN GEOSCIENTIFIC RATING CRITERIA - MODIFIED
			Mineralization - On
	Rating	Address - Off Property	Property	Anomalies	Geology
Low	0.5	Very little chance of mineralization, Concept unsuitable to environment	Very little chance of mineralization, Concept unsuitable to environment	Extensive previous exploration with poor results - no encouragement	Generally Unfavourable lithology
Average	1	Indications of Prospectivity, Concept validated	Indications of Prospectivity, Concept validated	Extensive previous exploration with encouraging results - regional targets	Deep alluvium Covered Generally favourable geology
	1.5	RAB Drilling with some scattered results	Exploratory sampling with encouragement, Concept validated	Several early stage targets outlined from geochemistry and geophysics	Shallow alluvium Covered Generally favourable geology (50-60%)
	2	Significant RC drilling leading to advance project status	RAB &/or RC Drilling with encouraging intercepts reported	Several well defined surface targets with some RAB drilling	Exposed favourable lithology (60-70%)
	2.5	Grid drilling with encouraging results on adjacent sections	Diamond Driing after RC with encouragement	Several well defined surface targets with encouraging drilling results	Strongly favourable lithology (70-80%)
High	3	Resource areas identified	Advanced Resource definition drilling - early stage	Several significant subeconomic targets - no indication of volume	Highly prospective geology (90 - 100%)
	3.5	Along strike or adjacent to known mineralization at Pre-Feasibility Stage	Resource areas identified	Subeconomic targets of possible significant volume - early stage drilling
	4	Along strike or adjacent to Resources at Definitive Feasibility Stage	Along strike or adjacent to known mineralization at Pre-Feasibility Stage	Marginal economic targets of significant volume - advanced drilling
	4.5	Along strike or adjacent to Development Stage Project	Along strike or adjacent to Resources at Definitive Feasibility Stage	Marginal economic targets of significant volume - well drilled at Inferred Resource srage
Very High	5	Along strike or adjacent to Operating Mine	Along strike or adjacent to Development Stage Project	Several significant ore grade correlatable intersections with estimated resources

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Estimate of project value is carried out on a tenement by tenement basis and uses four calculations as shown mellow.

Base Value = [Area][Grant Factor][Equity]*[Base Acquisition Cost]

Prospectivity Index = [Off Site Factor]On Site Factor][Anomaly Factor]*[Geology Factor]

Technical Value = [Base Value]*[Prospectivity Index]

Market Value = [Technical Value]*[Adjusted Market Factor]

VALUATION OF RESOURCES BY COMPARABLE TRANSACTIONS

If a property in the recent past was the subject of an arms-length transaction, for either cash or shares (i.e. from a company whose principal asset was the mineral property) then this forms the most realistic starting point, provided that the deal is still relevant in today’s market. Complicating matters is the knowledge that properties rarely change hands for cash, except for liquidation purposes, estate sales, or as raw exploration property when sold by an individual prospector, or entrepreneur.

Any underlying royalty or net profits interests or rights held by the original vendor of the claims should be deducted from the resultant property value before determination of the company’s interest. Also, reductions in value should be made where environmental, legal or political sensitivities could seriously retard the development of exploration properties.

It should be noted again that exploration is cyclical, and in periods of low metal prices there is often no market, or a market at very low prices, for ordinary exploration acreage (inventory property) unless it is combined with a significant mineral deposit, or with other incentives.

Truly Comparable Transactions are rare for early stage properties without defined drill targets. This is natural in a recession, as companies focus on brownfields exploration. Inflated prices paid for property in fashionable areas should not be discounted because they reflect the true market value of a property at the transaction date. If however, the market sentiment is not so buoyant then adjustments must be made.

When only a resource or defined body of mineralisation has been outlined and its economic viability has still to be established (i.e. there is no ore reserve) then a Comparable Transactions approach is usually applied, often stated as a percentage of metal value. This can be applied to Mineral Resource estimates and Exploration Targets in accordance with the JORC code with appropriate discounts for risk in the different categories.

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Resource Category Discounts Measured Resource 80% Indicated Resource 70% Inferred Resource 60% Exploration Target 50%

The dollar value must take into account a number of aspects of the resources including:

The confidence in the resource estimation (the JORC Category).
The quality of the resource (grade and recovery characteristics)
Possible extensions of the resource in adjacent areas
Exploration potential for other mineralisation within the tenements
Presence and condition of a treatment plant within the project
Proximity of toll treatment facilities, infrastructure, development and capital expenditure aspects

A similar approach can be taken with other metals including uranium or base metals sold on the spot market and benchmarks are similar to gold properties. Value is estimated as a percentage of contained value once appropriate discounts for uncertainty relating to resource categorisation are taken into account.

Iron Ore Mining and Processing Discounts – An example
Recovery	88.0%
Mining	90.0%
Processing	80.0%
Rail	80.0%
Port	70.0%
Capex	70.0%
Marketing	85.0%
Total OperatingDiscount	21.1%

Comparative transactions in the gold industry over the last 20 years

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

5.00% Average Acquisition Cost
4.50%
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
1990 1995 2000 2005 2010
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The AAC for gold projects lies in the range of 2% to 5%. The data set does not differentiate between resource categories and it is implicit that this has been taken into account with risk related discounts. Information on sales internationally has shown a pattern for ‘Apparent Acquisition Cost’ (AAC) over the last twenty years as shown in the following table.

Dollar per Ounce for International Gold Sales (AUD)

		AAC Percentiles
Percentile	10%	25%	50%	75%	90%
AAC	2.20%	2.63%	3.00%	3.35%	3.89%

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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

CIM, (2003) – “Standards and Guidelines for Valuation of Mineral Properties. Final Version, February 2003” Special Committee of the Canadian Institute of Mining, Metallurgy and Petroleum on Valuation of Mineral Properties (CIMVAL)

Goulevitch J and Eupene G S; 1994; Geoscience rating for valuation of exploration properties – applicability of the Kilburn Method in Australia and examples of its use; Proceedings of VALMIN 94; pages 175 to 189; The Australasian Institute of Mining and Metallurgy, Carlton, Australia.

Kilburn, LC, 1990, “Valuation of Mineral Properties which do not contain Exploitable Reserves” CIM Bulletin, August 1990.

Lawrence, M.J, 2007. Valuation methodology for Iron Ore Mineral Properties – thoughts of an Old Valuer: Iron ore Conference, Perth WA, 20 – 22 August 2007

Rudenno, (1998), “The Mining Valuation Handbook”

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Southern Crown Resources Limited ABN 52 143 416 531

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916CR_0_Sample_Proxy/000001/000001/i

MR SAM SAMPLE FLAT 123 123 SAMPLE STREET THE SAMPLE HILL SAMPLE ESTATE SAMPLEVILLE VIC 3030

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Change of address. If incorrect, mark this box and make the correction in the space to the left. Securityholders sponsored by a broker (reference number commences with ’ X ’) should advise your broker of any changes.

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the Chairman of the meeting

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or failing the individual or body corporate named, or if no individual or body corporate is named, the Chairman of the Meeting, as my/our proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the General Meeting of Southern Crown Resources Limited to be held at the Celtic Club, 48 Ord Street, West Perth, Western Australia on Monday, 11 June 2012 at 12.00pm (WST) and at any adjournment of that meeting.

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The Chairman of the Meeting intends to vote undirected proxies in favour of each item of business.

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YOJEE LIMITED — Proxy Solicitation & Information Statement 2012

66110_rns_2012-05-09_b30dd6f3-6be8-4df8-b5b9-51f6dca61e0b.pdf

SOUTHERN CROWN RESOURCES LIMITED ABN 52 143 416 531

NOTICE OF MEETINGS

General Meeting of Shareholders

Special Meeting of REI Purchaser Shareholders

CONTENTS PAGE

IMPORTANT INFORMATION

TIME AND PLACE OF MEETING

YOUR VOTE IS IMPORTANT

VOTING ELIGIBILITY

VOTING IN PERSON

VOTING BY PROXY

Proxy vote if appointment specifies way to vote

Transfer of non-chair proxy to chair in certain circumstances

AGENDA

SPECIAL BUSINESS

1. RESOLUTION 1 – APPROVAL FOR A SELECTIVE REDUCTION OF CAPITAL

2. RESOLUTION 2 – LISTING RULE 10.1 APPROVAL

DATED: 8 MAY 2012

BY ORDER OF THE BOARD

ADRIAN HILL COMPANY SECRETARY

AGENDA

SPECIAL BUSINESS

1. RESOLUTION 1 – APPROVAL FOR CANCELLATION OF SHARES AND PERFORMANCE SHARES

DATED: 8 MAY 2012

BY ORDER OF THE BOARD

ADRIAN HILL COMPANY SECRETARY

EXPLANATORY STATEMENT

1. BACKGROUND

1.1 History

1.2 ASX Waivers

2. RESOLUTION 1 – APPROVAL FOR SELECTIVE REDUCTION OF CAPITAL

2.1 General

2.2 Corporations Act

2.3 Summary of and Effect of Proposed Selective Capital Reduction

2.4 Company Focus following Disposal of REI

2.5

Directors’ Recommendation

2.6

Other Material Information

3. RESOLUTION 2 – LISTING RULE 10.1 APPROVAL

3.1 Background

3.2 Listing Rules

3.3 Independent Expert’s Report

4. SPECIAL GENERAL MEETING RESOLUTION 1 – APPROVAL FOR CANCELLATION OF SHARES AND PERFORMANCE SHARES

4.1 Background

GLOSSARY

SCHEDULE 1 – TERMS AND CONDITIONS OF PERFORMANCE SHARES

1. CLASS A PERFORMANCE SHARES

1.1 Rights attaching to the Class A Performance Shares

1.2 Conversion of the Class A Performance Shares

2. CLASS B PERFORMANCE SHARES

2.1 Rights attaching to the Class B Performance Shares

2.2 Conversion of the Class B Performance Shares

3. CLASS C PERFORMANCE SHARES

3.1 Rights attaching to the Class C Performance Shares

3.2 Conversion of the Class C Performance Shares

4. CLASS D PERFORMANCE SHARES

4.1 Rights attaching to the Class D Performance Shares

4.2 Conversion of the Class D Performance Shares

Financial Services Guide

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

Other Assignments

Remuneration or other benefits received by our employees

Referrals

Complaints resolution

Referral to External Dispute Resolution Scheme

Contact details

TABLE OF CONTENTS

INDEPENDENT EXPERT’S REPORT

1. Introduction

2. Summary and Opinion

2.1 Purpose of the report

2.2 Approach

YOJEE LIMITED Proxy Solicitation & Information Statement 2012