ZEOTECH LIMITED — AGM Information 2019

Aug 29, 2019

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ABN 29 137 984 297

Notice of Annual General Meeting

Explanatory Statement

and

Proxy Form

Date of Meeting Friday, 4 October 2019

Time of Meeting 11.00 am (WST)

Place of Meeting Ground Floor, London House 216 St Georges Terrace Perth WA 6000

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Annual General Meeting of Shareholders of Metalsearch Limited ( Metalsearch or the Company ) will be held on Friday, 4 October 2019, commencing at 11.00am (WST) at Ground Floor, London House, 216 St Georges Terrace, Perth, Western Australia.

The enclosed Explanatory Statement accompanies and forms part of this Notice of Meeting.

AGENDA

ORDINARY BUSINESS

Accounts and Reports

To receive and consider the annual financial report for the financial year ended 30 June 2019, together with the reports by directors and auditors thereon.

To consider and, if thought fit, pass the following resolutions as ordinary resolutions:

Resolution 1: Adoption of Remuneration Report

That for the purpose of section 250R(2) of the Corporations Act and for all other purposes, the Remuneration Report set out in the Company’s 2019 Annual Report for the financial year ended 30 June 2019 be adopted.

Note: The vote on this resolution is advisory only and does not bind the directors of the Company.

Voting Exclusion Statement:

Pursuant to section 250R(4) of the Corporations Act, the Company is required to disregard any votes cast on Resolution 1 (in any capacity) by or on behalf of any of the following persons:

• (a) a member of the Key Management Personnel, details of whose remuneration are included in the Remuneration Report; or

• (b) a Closely Related Party of such a member (together “prohibited persons”).

However, the Company will not disregard a vote if:

• (c) the prohibited person does so as a proxy appointed by writing that specifies how the proxy is to vote on the proposed resolution; and

• (d) the vote is not cast on behalf of a prohibited person.

Resolution 2: Re-election of Director (Mr N Bassett)

That Mr Neville Bassett, being a Director of the Company who retires by rotation in accordance with Clause 6.3 of the Company’s Constitution and, being eligible, offers himself for re-election, be re-elected as a director of the Company.

Metalsearch Limited

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SPECIAL BUSINESS

Resolution 3: Approval of 10% Placement Capacity

To consider and, if thought fit, to pass the following resolution as a special resolution :

That, for the purpose of Listing Rule 7.1A and for all other purposes, approval is given for the issue of Equity Securities totalling up to 10% of the Shares on issue, calculated in accordance with the formula prescribed in Listing Rule 7.1A.2 and on the terms and conditions set out in the Explanatory Statement.

Voting Exclusion : The Company will disregard any votes cast in favour of this Resolution by or on behalf of any person who is expected to participate in, or who will obtain a material benefit as a result of, the proposed issue (except a benefit solely by reason of being a holder of ordinary securities) if the Resolution is passed or any associates of those persons. However, the Company will 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.

Resolution 4: Approval of Acquisition of Abercorn

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

That, subject to each of the other Acquisition Resolutions being passed, for the purposes of Listing Rule 7.1 and all other purposes, Shareholders approve the issue of:

• (a) 235,000,000 Shares (Consideration Shares);

• (b) 75,000,000 Class A Performance Rights (and 75,000,000 Shares on conversion of the Class A Performance Rights); and

• (c) 75,000,000 Class B Performance Rights (and 75,000,000 Shares on conversion of the Class B Performance Rights),

(together, the Consideration Securities), to the Vendors as consideration for the Acquisition on the terms and conditions set out in the Explanatory Statement.

Voting Exclusion : The Company will disregard any votes cast in favour of this resolution by the Vendors and any person who will participate in the proposed issue of Shares or who will obtain a material benefit as a result of the proposed issue of Shares, except a benefit solely in the capacity of a holder of ordinary securities, if the resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Resolution 5: Issue of Shares to Corporate Adviser

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

That, subject to the approval of Resolutions 4 and 6 and Completion occurring, for the purposes of Listing Rule 7.1 and for all other purposes, Shareholders approve the issue to Westar Capital Limited ( Westar ) of 35,000,000 Shares in consideration for Westar’s services to the Company as adviser to the Acquisition and the Capital Raising on the terms and conditions set out in the Explanatory Statement

Voting Exclusion : The Company will disregard any votes cast in favour of this resolution by Westar Capital Limited and any person who will participate in the proposed issue of Shares or who will obtain a material benefit as a result of the proposed issue of Shares, except a benefit solely in the capacity of a holder of ordinary securities, if the resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

Metalsearch Limited

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Resolution 6. Approval for Future Issue of Shares

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

That, for the purpose of Listing Rule 7.1 and for all other purposes, approval is given for the Directors to issue up to 333,333,333 Shares on the terms and conditions set out in the Explanatory Statement forming part of this Notice.

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

Resolution 7: Appointment of Mr John Goody as a Director

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

That, in accordance with the provisions of the Constitution, and with effect from Completion of the Acquisition, Mr John Goody be appointed as a Director.

Voting at General Meeting

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the General Meeting are those who are registered Shareholders of the Company at 5.00pm (WST) on 2 October 2019. Accordingly, transactions registered after that time will be disregarded in determining entitlements to attend and vote at the general meeting.

Proxy and Voting Entitlement Instructions are included on the Proxy Form accompanying this Notice of Meeting.

BY ORDER OF THE BOARD

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N J Bassett Company Secretary 14 August 2019

Metalsearch Limited

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EXPLANATORY STATEMENT

1. INTRODUCTION

This Explanatory Statement has been prepared for the information of Shareholders of Metalsearch Limited (“the Company”) in connection with the business to be conducted at the annual general meeting of Shareholders to be held at Ground Floor, London House, 216 St Georges Terrace, Perth, Western Australia on Friday, 4 October 2019 at 11.00am (WST).

This Explanatory Statement forms part of and should be read in conjunction with the accompanying Notice of Meeting.

2. 2019 ANNUAL REPORT

In accordance with the requirements of the Company’s Constitution and the Corporations Act, the 2019 Annual Report will be tabled at the annual general meeting. Shareholders will have the opportunity of discussing the Annual Report and making comments and raising queries in relation to the Report. There is no requirement for a formal resolution on this item.

Representatives from the Company’s auditors, Rothsay, will be present to take shareholders’ questions and comments about the conduct of the audit and the preparation and content of the audit report.

Annual Report Online

Shareholders who have not elected to receive a hard copy of the Annual Report can access the report on the company’s website at www.metalsearch.com.au.

3. ADOPTION OF REMUNERATION REPORT – Resolution 1

3.1 General

Pursuant to section 250R(2) of the Corporations Act, the Company is required to put the Remuneration Report to the vote of Shareholders. The Directors’ Report for the year ended 30 June 2019 contains the Remuneration Report which sets out the remuneration policy for the Company and reports on the remuneration arrangements in place for the Directors and Key Management Personnel.

Resolution 1 is advisory only and does not bind the Directors of the Company. Of itself, a failure of Shareholders to pass Resolution 1 will not require the Directors to alter any of the arrangements in the Remuneration Report.

A reasonable opportunity will be provided for discussion of the remuneration report at the Annual General Meeting.

3.2 Voting consequences

If at least 25% of the votes cast on a remuneration report resolution are voted against adoption of the remuneration report in two consecutive annual general meetings, the Company will be required to put to Shareholders a resolution proposing the calling of an extraordinary general meeting to consider the appointment of directors of the Company ( Spill Resolution ) at the second annual general meeting.

If more than 50% of shareholders vote in favour of the Spill Resolution, the company must convene the extraordinary general meeting ( Spill Meeting ) within 90 days of the second annual general meeting.

At the Company’s previous annual general meeting the votes cast against the remuneration report considered at that annual general meeting were less than 25%. Accordingly, the Spill Resolution is not relevant for this Annual General Meeting.

Metalsearch Limited

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4. RE-ELECTION OF DIRECTOR – Resolution 2

Resolution 2 relates to the re-election of Mr Neville Bassett as a Director.

In accordance with the requirements of clause 6.3 of the Company’s Constitution and the Corporations Act, one-third of the directors of the Company retire from office at this annual general meeting of the Company. Mr Neville Bassett retires by rotation and, being eligible, offers himself for re-election.

A summary of the qualifications and experience of Mr Bassett is provided in the Annual Report.

All the Directors, except for Mr Bassett, recommend that Shareholders vote in favour of Resolution 2.

5. APPROVAL OF 10% PLACEMENT CAPACITY – Resolution 3

5.1 General

ASX Listing Rule 7.1A provides that an Eligible Entity may seek Shareholder approval at its annual general meeting to allow it to issue Equity Securities up to 10% of its issued capital over a period up to 12 months after the annual general meeting ( 10% Placement Capacity ).

The Company is an Eligible Entity.

If Shareholders approve Resolution 3, the number of Equity Securities the Eligible Entity may issue under the 10% Placement Capacity will be determined in accordance with the formula prescribed in ASX Listing Rule 7.1A.2 (as set out in Section 5.2 below).

The effect of Resolution 3 will be to allow the Directors to issue Equity Securities up to 10% of the Company’s fully paid ordinary securities on issue under the 10% Placement Capacity during the period up to 12 months after the Meeting, without subsequent Shareholder approval and without using the Company’s 15% annual placement capacity granted under Listing Rule 7.1.

Resolution 3 is a special resolution. Accordingly, at least 75% of votes cast by Shareholders present and eligible to vote at the Meeting must be in favour of Resolution 3 for it to be passed.

5.2 ASX Listing Rule 7.1A

ASX Listing Rule 7.1A enables an Eligible Entity to seek shareholder approval at its annual general meeting to issue Equity Securities in addition to those under the Eligible Entity’s 15% annual placement capacity.

An Eligible Entity is one that, as at the date of the relevant annual general meeting:

• (a) is not included in the S&P/ASX 300 Index; and

• (b) has a maximum market capitalisation (excluding restricted securities and securities quoted on a deferred settlement basis) of $300,000,000.

The Company is an Eligible Entity as it is not included in the S&P/ASX 300 Index and has a current market capitalisation (at the date of this Explanatory Statement) of $5,770,921.

Any Equity Securities issued must be in the same class as an existing class of quoted Equity Securities. The Company currently has one class of quoted Equity Securities on issue, being the Shares (ASX Code: MSE).

The exact number of Equity Securities that the Company may issue under an approval under Listing Rule 7.1A will be calculated according to the following formula:

(A x D) – E

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Where:

• A is the number of Shares on issue 12 months before the date of issue or agreement:

• (i) plus the number of Shares issued in the previous 12 months under an exception in ASX Listing Rule 7.2;

• (ii) plus the number of partly paid shares that became fully paid in the previous 12 months;

• (iii) plus the number of Shares issued in the previous 12 months with approval of holders of Shares under ASX Listing Rules 7.1 or 7.4; and

• (iv) less the number of Shares cancelled in the previous 12 months.

• D is 10%.

E is the number of Equity Securities issued or agreed to be issued under ASX Listing Rule 7.1A.2 in the 12 months before the date of issue or agreement to issue that are not issued with the approval of holders of Ordinary Securities under ASX Listing Rule 7.1 or 7.4.

5.3 Technical information required by ASX Listing Rule 7.1A

Pursuant to and in accordance with ASX Listing Rule 7.3A, the information below is provided in relation to this Resolution 3:

(a) Minimum Price

The minimum price at which the Equity Securities may be issued is 75% of the volume weighted average price of Equity Securities in that class, calculated over the 15 ASX trading days on which trades in that class were recorded immediately before:

• (i) the date on which the price at which the Equity Securities are to be issued is agreed; or

• (ii) if the Equity Securities are not issued within 5 ASX trading days of the date in Section 5.3(a)(i), the date on which the Equity Securities are issued.

(b) Date of Issue

The Equity Securities may be issued under the 10% Placement Capacity commencing on the date of the Meeting and expiring on the first to occur of the following:

• (i) 12 months after the date of this Meeting; and

• (ii) the date of approval by Shareholders of any transaction under ASX Listing Rules 11.1.2 (a significant change to the nature or scale of the Company’s activities) or 11.2 (disposal of the Company’s main undertaking) (after which date, an approval under ASX Listing Rule 7.1A ceases to be valid).

(c)

Risk of voting dilution

Any issue of Equity Securities under the 10% Placement Capacity will dilute the interests of Shareholders who do not receive any Shares under the issue.

If Resolution 3 is approved by Shareholders and the Company issues the maximum number of Equity Securities available under the 10% Placement Capacity, the economic and voting dilution of existing Shares would be as shown in the table below.

The table below shows the dilution of existing Shareholders calculated in accordance with the formula outlined in ASX Listing Rule 7.1A(2), on the basis of the current market price of Shares and the number of Equity Securities currently on issue.

Metalsearch Limited

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The table also shows the voting dilution impact where the number of Shares on issue (variable A in the formula) changes and the economic dilution where there are changes in the issue price of Shares issued under the 10% Placement Capacity.

Number of Shares on Issue		Dilution	Dilution
	Number of Shares issued under 10% Placement Capacity	Funds raised based on issue price of $0.006 (50% decrease in issue price)	Funds raised based on issue price of $0.012 (issue price)	Funds raised based on issue price of $0.024 (100% increase in issue price)
480,910,159 (Current)	48,091,015	$288,546	$577,092	$1,154,184
721,365,238 (50% increase)	72,136,523	$432,819	$865,638	$1,731,276
961,820,318 (100% increase)	96,182,031	$577,092	$1,154,184	$2,308,368

* The number of Shares on issue (variable A in the formula) could increase as a result of the issue of Shares that do not require Shareholder approval (such as under a pro-rata rights issue or scrip issued under a takeover offer) or that are issued with Shareholder approval under Listing Rule 7.1.

The table above uses the following assumptions:

1. The current shares on issue are the Shares on issue as at 14 August 2019.

2. The issue price set out above is the last closing price of the Shares on the ASX prior to the date of this Notice.

3. The Company issues the maximum possible number of Equity Securities under the 10% Placement Capacity.

4. The Company has not issued any Equity Securities in the 12 months prior to the Meeting that were not issued under an exception in ASX Listing Rule 7.2 or with approval under ASX Listing Rule 7.1.

5. The calculations above do not show the dilution that any one particular Shareholder will be subject to. All Shareholders should consider the dilution caused to their own shareholding depending on their specific circumstances.

6. This table does not set out any dilution pursuant to approvals under ASX Listing Rule 7.1.

Shareholders should note that there is a risk that:

• (i) the market price for the Company’s Shares may be significantly lower on the issue date than on the date of the Meeting; and

• (ii) the Shares may be issued at a price that is at a discount to the market price for those Shares on the date of issue.

(d) Purpose of Issue under 10% Placement Capacity

The Company may issue Equity Securities under the 10% Placement Capacity for the following purposes:

• (i) as cash consideration in which case the Company intends to use funds raised for exploration and evaluation of the company’s Kraaipan Project, subject to shareholder approval at this Meeting the Abercorn HPA Project, and for general working capital; or

• (ii) as non-cash consideration for the acquisition of new assets and investments, in such circumstances the Company will provide a valuation of the non-cash consideration as required by listing Rule 7.1A.3.

Metalsearch Limited

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(e) Allocation under the 10% Placement Capacity

The Company’s allocation policy is dependent on the prevailing market conditions at the time of any proposed issue pursuant to the 10% Placement Capacity. The identity of the allottees of Equity Securities will be determined on a case-by-case basis having regard to a number of factors, including:

• (i) the purpose of the issue;

• (ii) alternative methods for raising funds available to the Company at that time, including, but not limited to, an entitlement issue or other offer where existing Shareholders may participate;

• (iii) the effect of the issue of the Equity Securities on the control of the Company;

• (iv) the circumstances of the Company, including, but not limited to, the financial position and solvency of the Company; and

• (v) advice from corporate, financial and broking advisers (if applicable).

The allottees under the 10% Placement Capacity have not been determined as at the date of this Notice but may include existing Shareholders and/or new investors who are not related parties or associates of a related party of the Company.

Further, if the Company is successful in acquiring new assets or investments, it is possible that the allottees under the 10% Placement Capacity will be the vendors of the new assets or investments.

(f) Previous Approval under ASX Listing Rule 7.1A

The Company previously obtained approval under ASX Listing Rule 7.1A at its annual general meeting held on 29 November 2018.

There have been no new issue of equity securities issued in the 12 months preceding the date of the Meeting.

5.4 Voting Exclusion

A voting exclusion statement is included in this Notice. As at the date of this Notice, the Company has not invited any existing Shareholder to participate in an issue of Equity Securities under ASX Listing Rule 7.1A. Therefore, no existing Shareholders will be excluded from voting on Resolution 3.

6. APPROVAL OF ACQUISITION OF ABERCORN – Resolution 4

6.1 General

On 13 August 2019, the Company announced that it had entered into a binding agreement for the acquisition of 100% of the share capital in Abercorn Kaolin Pty Ltd, which owns the Abercorn High Purity Alumina ( HPA ) Project located in Queensland, Australia ( Acquisition ).

The Acquisition is subject to the conditions set out in Section 6.3 below, including the requirement to obtain Shareholder approval. A detailed description of the Abercorn HPA Project and the proposed Acquisition is outlined in Sections 6.2 and 6.3 below.

Resolution 4 seeks approval from Shareholders for the Acquisition.

Metalsearch Limited

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6.2 About Abercorn and the Abercorn HPA Project

Abercorn is the 100% owner of the Cynthia Kaolinite deposit, which comprises 3 contiguous Exploration Permits for Minerals (“EPM”) for a total of 38 sub-blocks, an area of 128km[2] , these are EPM 26837 comprising 33 sub-blocks, EPM 26903 comprising 4 sub-blocks and EPM 19081 comprising one subblock (Figure 1).

Figure 1 – Project Location

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The Project is situated approximately 135km south of the deep-water port of Gladstone and 125km west of the deep-water port of Bundaberg in Central Queensland. Both of these major ports are connected to the project by sealed roads. The Burnett highway bisects the property (Figure 2).

Metalsearch Limited

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Figure 2 – Project Location and Infrastructure
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The Cynthia Kaolinite Deposit

The scale of the Cynthia deposit is not quantified at this point in time and no JORC resource has been quantified in accordance with the JORC Code. However, twenty-four Reverse Circulation ( RC ) drill holes have been drilled within the tenure, over an area of approximately 5.5km N-S and 3.5km E-W (19.25km²).

All twenty-four holes intersected kaolinite and the kaolin mineralisation remains open in all directions.

Advantages of the Cynthia Kaolinite Prospect for an HPA Operation

• Low cost operation - straight forward open cut mining

• Little to no overburden

• Low impurities

• No drill and blast required / low environmental impact

• Pit depth can be kept to a maximum of 10 metres

• Main sealed highway adjacent to the deposit

• Mains power on site / major power transmission line within 5km of site

• Large water supply nearby and within EPM

• Within close proximity of two towns offering a readily accessible and flexible workforce

• Close to two deep water ports

Metalsearch Limited

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High Purity Alumina (HPA) Market

The HPA market is experiencing significant growth. Demand is primarily being driven by sapphire glass and lithium-ion batteries. HPA is a very pure form of aluminium oxide (Al2O3) and a pre-cursor material required for the manufacturing of sapphire glass and ceramic coated lithium-ion battery separators.

Synthetic Sapphire

HPA is a critical input in the production of synthetic sapphire - one which has no substitute.

Applications:

• Substrates for LED lights, lenses and semiconductors

• Scratch-resistant sapphire glass used for optical lenses, watch faces, televisions, tablet and smartphone components

• Bio-medical devices and phosphors

The LED market is forecast to grow from US$26Bn (2016) to US$54Bn by 2022 and progressively take the major share of the global lighting market of US$110Bn (Source: Zion market research).

The higher brightness, energy efficiency, and longer life span of LED lights are some of the major factors that offer tremendous opportunities for LED lighting market in years to come.

Lithium-ion Batteries

HPA’s fastest growing market is in lithium-ion batteries. HPA is now being used as a coating on the separators in lithium-ion batteries in the EV industry.

The separator is vital to the safety, integrity and performance of the lithium-ion batteries used in electric vehicles in particular. HPA is coated onto the separator between the anode and the cathode in the lithium-ion battery.

Previously, most lithium-ion battery separators were based on polyethylene or polypropylene which were adequate for cathodes such as lithium iron phosphate, lithium manganese oxide and lithium cobalt oxides. However, the demand for higher energy density in a smaller more compact battery has meant higher operating temperatures in the batteries and the need for better quality separators such as HPA.

HPA coated separators are extremely important in reducing flammability as the separators can tolerate much higher temperatures than traditional separators (>200[o] C), resulting in thermal stability.

The SEI layer is a component of lithium-ion batteries, formed from the decomposition materials associated with the electrolyte of the battery. HPA coated separators can tolerate temperatures >200[o] C.

HPA coated separators have also been shown to significantly lengthen battery life due to lower selfdischarge and increased battery discharge rate.

Premier resource forecasting agency, CRU, forecast demand for 4N HPA in lithium-ion batteries is set to increase at an extraordinary Compound Annual Growth Rate ( CAGR) of 57.5% between 2017 and 2025. This, combined with a healthy growth outlook for LED demand, leads CRU to forecast that overall HPA demand is set to treble over the next 7 years (Source: CRU Group).

Geology

The Bundamba group, of upper Triassic – Lower Jurassic Age crops out throughout the Abercorn Project area, striking approximately NNW and with a gentle dip to the East. The Bundama Group, within the project area, consists of three recognised formations:

The Box Vale Sandstone – A light-coloured clayey sandstone at the top of the group;

The Evergreen Shale – A light-coloured clay shale which includes the ironstone; and

The Precipice Sandstone – Which forms the Basel sediments of the Bundamba Group in this area.

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Sedimentation is lenticular and individual shale and sandstone horizons are not laterally persistent.

To the east in the valley of the Burnett River, the Bundamba Group is overlain by the Jurassic Mulgildie Coal Measures.

Exploration Work Completed

In January 2007, a reconnaissance air core drilling programme was carried out to investigate the potential for kaolin resources suitable for paper coating and other applications between Abercorn and Cynthia, which lies approximately 30km south of Monto.

Twenty-four drill holes (814m) were drilled to test the extent and characteristics of the clay deposits in the area.

All twenty-four holes intersected kaolinite, with the average intersection of kaolinite being approximately 30m. Hole 20 intersected Kaolinite from surface to a depth of 54m, ending in mineralisation.

White claystone and clay sandstone are exposed in a railway cutting approximately 2.5km north of Cynthia. Topographically higher locations in the area are capped with silcrete. The sequence of silcrete and clay deposits is interpreted as a partially eroded lateritic weathering profile.

The overburden was between 0m and 10m thick and averaged approximately 1.5m.

Refer ASX market announcement dated 13 August 2019 titled “Metalsearch to Acquire High Purity Alumina Project”. The Company is not aware of any new information or data that materially affects the information included in the market announcement.

Exploration Potential

The size of the kaolin at the Cynthia prospect is not quantified at this point in time. The current size of the Cynthia kaolin mineralisation puts Abercorn in the enviable position of being able to produce several size fractions that contain very high grades of AL2O3.

Of the twenty-four RC drill holes completed, every hole intersected kaolinite and the mineralisation remains open in all directions.

The kaolinite is whitish in colour and very fine in particle size.

Metalsearch plans to conduct an extensional drilling campaign, as soon as possible, to further define the size and scale of the mineralisation and to produce a JORC (2012) compliant Mineral Resource.

6.3 Transaction Details

Metalsearch has signed a binding term sheet with the owners of Abercorn (the Vendors ) to purchase 100% of the shares in Abercorn.

Key Commercial Terms of Acquisition

The Acquisition is a combination of cash and Metalsearch Shares including deferred payments to the Vendors once key performance related milestones are achieved.

The consideration for the Acquisition is summarised as follows:

• the payment by Metalsearch of $50,000 as a non-refundable deposit;

• at completion, the payment by Metalsearch of $300,000 as reimbursement for past expenditures;

• at completion, the issue by Metalsearch to the Vendors of 235,000,000 Shares in Metalsearch at a deemed issue price of $0.006 having a total value equivalent to $1,410,000;

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• issue of the deferred consideration set out below on satisfaction of each milestone;

• upon certification by an independent Competent Person on or before the first anniversary of the date of the term sheet of an inferred JORC compliant resource of 10,000,000 tonnes of raw ore containing 29% Al2O3 at -20micron sizing, the issue by Metalsearch to the Vendors of 75,000,000 Shares: and

• upon completion by the Company of a Scoping Study (as defined in the JORC Code) before the 3rd anniversary of the date of the term sheet, the issue by Metalsearch to the Vendors of 75,000,000 Shares.

No person will acquire a relevant interest of greater than 20% in the Company and as a result of the Metalsearch Shares issued at completion of the Acquisition and any subsequent issue of Metalsearch Shares under the consideration for the Acquisition will be deferred to the extent that, as a result of any such issue, the resulting voting power of any shareholder will increase to more than 20% in contravention of section 606(1) of the Corporations Act 2001 (Cth).

Completion of the Acquisition is subject to and conditional upon the satisfaction of various conditions precedent including (but not limited to):

• (a) Metalsearch obtaining all shareholder approvals required under Listing Rule 11.1.2, if required, or any other approvals required by the ASX in relation to the transaction;

• (b) Metalsearch completing a capital raising of $2,000,000;

• (c) Metalsearch completing due diligence to its satisfaction of all legal, financial and technical aspects of Abercorn and the tenements; and

• (d) Metalsearch distributing to their shareholders a Notice of Meeting calling a general meeting of shareholders, to be held, to approve the Acquisition.

Capital Raising

In conjunction with, and as a condition to completion of, the Acquisition and subject to Shareholder approval of the Acquisition, Metalsearch proposes to conduct a capital raising by way of a placement to sophisticated investors to raise $2 million at an issue price of $0.006 per share (“Capital Raising”). The issue of the Shares the subject of the Capital Raising are the subject of Resolution 6.

Funds raised pursuant to the Capital Raising will be used for the following:

• Infill drilling to define JORC compliant resource

• Extensional RC drilling to further determine the scale of the resource

• Further regional exploration work

• Commencement of work on a Scoping Study

• Working capital

Effect on Capital Structure

If the Acquisition and the Capital Raising are completed in full as described above, the issued share capital structure of Metalsearch will be as follows:

capital structure of Metalsearch will be as follows:
Shares
Current Shares on issue	480,910,159
Capital Raising @ $0.006 per Share to raise $2,000,000 (Resolution 6)	333,333,333
Proposed issue of Shares to Vendors at Completion (Resolution 4)	235,000,000
Proposed issue of Shares to corporate adviser (Resolution 5)	35,000,000

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Proposed maximum total Shares on issue at Completion	1,084,243,492
Proposed issue of Shares to Vendors upon satisfaction of First Milestone (Resolution 4)	75,000,000
Proposed issue of Shares to Vendors upon satisfaction of Second Milestone (Resolution 4)	75,000,000
Proposed maximum total Shares on issue if Milestones are met	1,234,243,492

Board Appointment

On completion, the Vendors will have the right to appoint one nominee to the board of Metalsearch.

The Vendors have nominated John Goody to join the Metalsearch board as a non-executive director (Refer Section 9 of this Explanatory Statement). Metalsearch will leverage his deep understanding of the project and product(s) to help deliver on the potential Abercorn presents.

6.4 ASX Requirements

As outlined in this Section 6, the Company is proposing to acquire all of the shares in the Abercorn from the Vendors.

The Acquisition is subject to the conditions set out in Section 6.2 above, including the requirement to obtain Shareholder approval.

A detailed description of the Abercorn HPA Project and the proposed Acquisition is outlined in Sections 6.2 and 6.3 above.

Listing Rule 7.1 provides that a company must not (subject to specified exceptions), without the approval of shareholders, issue or agree to issue during any 12 month period any equity securities, or other securities with rights to conversion to equity (such as an option or right), if the number of those securities exceeds 15% of the number of ordinary securities on issue at the commencement of that 12 month period.

Given the Consideration Securities to be issued under Resolution 4 will exceed the 15% threshold set out in Listing Rule 7.1 and none of the exceptions contained in Listing Rule 7.2 apply, Shareholder approval is required under Listing Rule 7.1.

Resolution 4 seeks Shareholder approval pursuant to Listing Rule 7.1 to issue the Consideration Securities to the Vendors as consideration for the Acquisition.

Resolution 4 is an ordinary resolution. Resolution 4 is subject to the approval of each of the other Acquisition Resolutions.

The following information is provided for the purposes of Listing Rule 7.3:

• (a) The maximum number of shares the Company will issue under Resolution 4 is 235,000,000 Shares and 150,000,000 Performance Rights (comprising of 75,000,000 Class A Performance Rights and 75,000,000 Class B Performance Rights) and 150,000,000 Shares on conversion of the Performance Rights.

• (b) The Consideration Securities will be issued to the Vendors being:

• (i) Goody Investments Pty Ltd;

• (ii) Anthony Paul Sheridan;

• (iii) Gold Coast Tweed Pet Motels Pty Ltd;

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• (iv) Peter Zardo <Zardo Family A/c);

• (v) Pointciano Pty Ltd ; and

• (vi) Monica Holdings Pty Ltd .

• (c) The Consideration Securities (other than the Shares to be issued on conversion of the Performance Rights) will be issued no later than three months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the Listing Rules) and it is intended that the Consideration Shares and Performance Rights will be issued on the same date, being the date of completion of the Acquisition. The Shares to be issued on conversion of the Performance Rights will be issued on achievement of the relevant Milestone by the relevant expiry date, being 5.00pm (WST) on 8 August 2020 for the Class A Performance Rights and 5.00pm (WST) on 8 August 2022 for the Class B Performance Rights.

• (d) The Consideration Securities will be issued for nil cash consideration as they are being issued as the consideration for the Acquisition. Accordingly, no funds will be raised from the issue of the Consideration Securities.

• (e) The Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares, and the Performance Rights will be issued on the terms set out in Schedules 1 and 2.

• (f) A voting exclusion statement is included in the Notice.

6.5 Directors’ recommendation

The Directors unanimously recommend Shareholders vote in favour of Resolution 4.

7. ISSUE OF SHARES TO CORPORATE ADVISER – Resolution 5

7.1 Background

Pursuant to the binding agreement for the Acquisition, the Company has undertaken to issue 35,000,000 Shares to the Company’s adviser in relation to the Acquisition and the Capital Raising upon Completion ( Adviser Shares ).

7.2 Listing Rules information requirements

Listing Rule 7.1 provides, in summary, that a listed company may not issue equity securities in any 12 month period which exceeds 15% of the number of issued securities of the company held at the beginning of the 12 month period, except with the prior approval of shareholders of the company in general meeting of the precise terms and conditions of the proposed issue.

The effect of Resolution 5, if passed, will be that the issue of Shares will be exempt from the 15% limit under Listing Rule 7.1.

Approval of Resolution 5 will allow the Company to issue the Adviser Shares and provide the Company with flexibility during the next 12 month period to issue further equity securities in order to raise further capital if required.

In accordance with Listing Rule 7.3, the following details are provided in relation to Resolution 5:

• (a) The maximum number of Shares to be issued pursuant to Resolution 5 is 35,000,000 Shares.

• (b) The Adviser Shares will all be issued at the same time on Completion but in any event within 3 months of the date of the Meeting or within such other time as may be permitted by the Listing Rules or any waiver of the Listing Rules granted by ASX.

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• (c) The Adviser Shares will be issued in consideration for the services provided by the Company’s adviser in relation to the Acquisition and the Capital Raising and accordingly the Adviser Shares will be issued for nil cash consideration and no funds will be raised through the issue of the Shares.

• (d) The Adviser Shares will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the existing Shares on issue; the Company will apply for quotation of the Shares on ASX.

• (e) An appropriate voting exclusion statement is included in the Notice.

7.3 Directors’ recommendation

The Directors unanimously recommend Shareholders vote in favour of Resolution 5.

8. APPROVAL FOR FUTURE ISSUE OF SHARES – Resolution 6

8.1 Background

Resolution 6 seeks Shareholder approval for the issue of up to 333,333,333 Shares at an issue price of $0.006 per Share. The capital raising will be undertaken via the issue of Shares to sophisticated and professional investors pursuant to section 708 of the Corporations Act.

As outlined in Section 6.3, the Capital Raising is a condition precedent to completion of the Acquisition. The Company intends to use the funds from the capital raising for the purposes described in Section 6.3 under the heading “Capital Raising”.

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

The effect of Resolution 6 will be to allow the Directors to issue the Shares comprising the capital raising during the period of 3 months after the Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

8.2 Listing Rules information requirements

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

• (a) the maximum number of Shares to be issued is 333,333,333;

• (b) the Shares will be issued no later than 3 months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur on one date;

• (c) the Shares will be issued at a price of $0.006 per share;

• (d) the placement will be made at the discretion of the Directors. It is intended that the allottees will be sophisticated and professional investors pursuant to section 708 of the Corporations Act. No related party of the Company will be permitted to participate in the capital raising;

• (e) the Shares issued will be fully paid ordinary shares in the capital of the Company to be issued on the same terms and conditions as the Company’s existing Shares – the Company will apply for quotation of the Shares on ASX;

• (f) the Company intends to use the funds for the purposes as set out in Section 6.3 under the heading “Capital Raising”; and

• (g) An appropriate voting exclusion statement is included in the Notice.

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8.3 Directors’ recommendation

The Directors unanimously recommend Shareholders vote in favour of Resolution 6.

9. APPOINTMENT OF MR JOHN GOODY AS A DIRECTOR – Resolution 7

9.1 General

The Vendors have nominated Mr John Goody as their nominees to be appointed as a Director of the Company.

Article 13.3 of the Constitution provides that the Company in general meeting may by ordinary resolution appoint any person as a Director.

Mr John Goody, having consented to act, seeks approval to be appointed as a Director with effect from Completion of the Acquisition.

9.2 Candidate Director’s Profile – Mr John Goody

John Goody is Member of the Australian Geological Society with over 45 years’ experience in minerals exploration in Australia and overseas. He was a founding director of Aeon Metals Ltd (ASX: AML) which now has circa $150m market capitalisation and is currently a director of minerals exploration company Cobalt Queensland Pty Ltd.

9.3 Directors’ recommendation

The Directors unanimously recommend Shareholders vote in favour of Resolution 7.

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10. DEFINITIONS

Abercorn means Abercorn Kaoilin Pty Ltd ACN 624 853 210.

Acquisition has the meaning in Section 6.1.

Acquisition Agreement means the binding term sheet between the Company and Vendors and includes any variation thereof.

Acquisition Resolutions means Resolutions 4 and 6.

ASX means ASX Limited ABN 98 008 624 691.

Class A Performance Right means a right issued on the terms and conditions set out in Schedule 1, as those terms relate to “Class A Performance Rights”.

Class B Performance Right means a right issued on the terms and conditions set out in Schedule 2, as those terms relate to “Class B Performance Rights”

Closely Related Party of a member of the Key Management Personnel means:

• (a) a spouse or child of the member;

• (b) a child of the member’s spouse;

• (c) a dependent of the member or the member’s spouse;

• (d) anyone else who is one of the member’s family and may be expected to influence the member, or be influenced by the member, in the member’s dealing with the entity;

• (e) a company the member controls; or

• (f) a person prescribed by the Corporations Regulations 2001 (Cth).

Completion means completion of the Acquisition pursuant to the Acquisition Agreement.

Consideration Securities has the meaning in Resolution 4.

Consideration Shares has the meaning in Resolution 4.

Constitution means the Company’s constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Directors means the current directors of the Company.

Equity Securities includes a Share, a right to a Share or Option, an Option, a convertible security and any security that ASX decides to classify as an Equity Security.

Explanatory Statement means this Explanatory Statement.

Key Management Personnel means has the same meaning as in the accounting standards and broadly includes those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, including any director (whether executive or otherwise) of the Company.

Listing Rules means the official listing rules of ASX.

Meeting means the meeting convened by the Notice of Meeting.

Metalsearch or the Company means Metalsearch Limited ABN 29 137 984 297.

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Notice or Notice of Meeting means the notice of annual general meeting which forms part of this Explanatory Statement.

Ordinary Securities has the meaning set out in the ASX Listing Rules.

Performance Rights means a right issued on the terms and conditions set out in Schedule 1 and 2, comprising the Class A Performance Rights and Class B Performance Rights,

Remuneration Report means the remuneration report set out in the Director’s report section of the Company’s annual financial report for the year ended 30 June 2019.

Resolution means a resolution contained in this Notice.

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

Shareholder means a holder of a Share.

10% Placement Capacity has the meaning given in Section 8.1 of this Notice.

Vendors means the shareholders of Abercorn being:

• (i) Goody Investments Pty Ltd ACN 066 933 597.

• (ii) Anthony Paul Sheridan.

• (iii) Gold Coast Tweed Pet Motels Pty Ltd ACN 613 383 592.

• (iv) Peter Zardo <Zardo Family A/c).

• (v) Pointciano Pty Ltd ACN 614 258 78

• (vi) Monica Holdings Pty Ltd ACN 634 230 890 .

WST means Western Standard Time, being the time in Perth, Western Australia.

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Schedule 1 Terms and Conditions on Class A Performance Rights

• (i) Conversion on achievement of milestone : Each Class A Performance Right will automatically convert into one new ordinary fully paid share in Metalsearch Limited on satisfactory achievement of the following condition ( Vesting Condition ):

Upon certification by an independent Competent Person of an inferred JORC compliant resource of 10,000,000 tonnes of raw ore containing 29% Al2O3 at -20micron sizing.

• (ii) Lapse: A Performance Right will lapse on the earliest to occur of:

• (a) subject to any automatic vesting in accordance with other terms, if applicable Vesting Condition has not been met; or

• (b) the expiry date which will be 5:00PM WST on 8 August 2020.

• (iii) Transfer: The Performance Rights are not transferable.

• (iv) No voting rights: The Performance Rights do not entitle the Holder to vote on any resolutions proposed at a general meeting of Shareholders of the Company, subject to any voting rights under the Corporations Act or the ASX Listing Rules where such rights cannot be excluded by these terms.

• (v) No dividend rights: The Performance Rights do not entitle the holder to any dividends.

• (vi) No rights to return of capital: The Performance Rights do not entitle the holder to a return of capital, whether in a winding up, upon a reduction of capital or otherwise.

• (vii) Rights on winding up: Upon the winding up of the Company, the Performance Rights may not participate in the surplus profits or assets of the Company.

• (viii) Change of Control: All unvested Performance Rights automatically vest and are automatically exercised on the occurrence of a change of control, subject to the total number of ordinary shares that the Performance Rights A and Performance Rights B, in aggregate, convert into not being more than 10% of the issued ordinary capital of Metalsearch Limited as at the date of conversion.

• (ix) Reorganisation: In the event of any reorganisation (including consolidation, subdivision, reduction or return) of the issued shares, the number of Performance Rights to which each Performance Rights holder is entitled will be adjusted in the manner provided for in the ASX listing rules applicable at the time the reorganisation comes into effect.

• (x) No quotation: The Performance Rights will not be quoted on ASX. However if the Company is listed on the ASX, at the time of conversion of the Performance Rights into Shares in accordance with these terms, the Company will within seven (7) days after the later of conversion and any escrow period ending, apply for the official quotation of the Shares arising from the conversion on ASX.

• (xi) Participation in entitlements and bonus issues: Holders of Performance Rights will not be entitled (in their capacity as a Holder of a Performance Right) to participate in new issues of capital offered to holders of the Shares such as bonus issues and entitlement issues.

• (xii) No other rights: The Performance Rights 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.

Change of Control means:

• (a) a Takeover Bid is made to acquire all Shares of Metalsearch Limited, a person obtains a Voting Power in Metalsearch Limited of more than 50%, and the Takeover Bid is or has become unconditional;

• (b) a Court has sanctioned a compromise or arrangement (other than for the purpose of, or in connection with, a scheme for the reconstruction of Metalsearch Limited or its amalgamation with any other entity or entities);

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Schedule 2 Terms and Conditions on Class B Performance Rights

• (i) Conversion on achievement of milestone : Each Class B Performance Right will automatically convert into one new ordinary fully paid share in Metalsearch Limited on satisfactory achievement of the following condition ( Vesting Condition ):

Upon completion by the Company of a Scoping Study (as defined in the JORC Code).

• (ii) Lapse: A Performance Right will lapse on the earliest to occur of:

• (a) subject to any automatic vesting in accordance with other terms, if applicable Vesting Condition has not been met; or

• (b) the expiry date which will be 5:00PM WST on 8 August 2022.

• (iii) Transfer: The Performance Rights are not transferable.

• (iv) No voting rights: The Performance Rights do not entitle the Holder to vote on any resolutions proposed at a general meeting of Shareholders of the Company, subject to any voting rights under the Corporations Act or the ASX Listing Rules where such rights cannot be excluded by these terms.

• (v) No dividend rights: The Performance Rights do not entitle the holder to any dividends.

• (vi) No rights to return of capital: The Performance Rights do not entitle the holder to a return of capital, whether in a winding up, upon a reduction of capital or otherwise.

• (vii) Rights on winding up: Upon the winding up of the Company, the Performance Rights may not participate in the surplus profits or assets of the Company.

• (viii) Change of Control: All unvested Performance Rights automatically vest and are automatically exercised on the occurrence of a change of control, subject to the total number of ordinary shares that the Performance Rights A and Performance Rights B, in aggregate, convert into not being more than 10% of the issued ordinary capital of Metalsearch Limited as at the date of conversion.

• (ix) Reorganisation: In the event of any reorganisation (including consolidation, subdivision, reduction or return) of the issued shares, the number of Performance Rights to which each Performance Rights holder is entitled will be adjusted in the manner provided for in the ASX listing rules applicable at the time the reorganisation comes into effect.

• (x) No quotation: The Performance Rights will not be quoted on ASX. However if the Company is listed on the ASX, at the time of conversion of the Performance Rights into Shares in accordance with these terms, the Company will within seven (7) days after the later of conversion and any escrow period ending, apply for the official quotation of the Shares arising from the conversion on ASX.

• (xi) Participation in entitlements and bonus issues: Holders of Performance Rights will not be entitled (in their capacity as a Holder of a Performance Right) to participate in new issues of capital offered to holders of the Shares such as bonus issues and entitlement issues.

• (xii) No other rights: The Performance Rights 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.

Change of Control means:

• (a) a Takeover Bid is made to acquire all Shares of Metalsearch Limited, a person obtains a Voting Power in Metalsearch Limited of more than 50%, and the Takeover Bid is or has become unconditional;

• (b) a Court has sanctioned a compromise or arrangement (other than for the purpose of, or in connection with, a scheme for the reconstruction of Metalsearch Limited or its amalgamation with any other entity or entities);

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PROXY FORM

The Secretary Metalsearch Limited PO Box 7315 Perth WA 6850

I/We (full name)

_____________ of_____________ being a member(s) of Metalsearch Limited, hereby appoint as my/our proxy

---

of_______________

or, failing him/her the Chairperson of the Meeting to attend and vote for me/us at the general meeting of the Company to be held at 11.00am on Friday, 4 October 2019 and at an adjournment thereof in respect of ____% of my/our shares or, failing any number being specified, ALL of my/our shares in the Company.

RESOLUTIONS

		FOR	AGAINST	ABSTAIN
1	Adoption of Remuneration Report			
2	Re-election of Director – N Bassett			
3	10% Placement Capacity			
4	Approval of Acquisition of Abercorn			
5	Issue of Shares to Corporate Adviser			
6	Approval for Future Issue of Shares			
7	Appointment of John Goody as a Director			

Where permitted, the Chairman intends to vote all undirected proxies in favour of all resolutions.

If the member is an individual or joint holder:

_____ ________ Usual Signature Usual Signature Dated this day of 2019.

If the member is a Company: Signed in accordance with the Constitution of the company in the presence of:

Director/Sole Director Director/Secretary Sole Director and Sole Secretary

Dated this day of 2019.

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INSTRUCTIONS FOR COMPLETING PROXY FORM

1. A member entitled to attend and vote is entitled to appoint not more than two proxies.

2. Where more than one proxy is appointed and that appointment does not specify the proportion or number of the member’s votes, each proxy may exercise half of the votes.

3. A proxy need not be a member of the Company.

4. A proxy is not entitled to vote unless the instrument appointing a proxy and the power of attorney or other authority (if any) under which it is signed is either deposited at the registered office of the Company (refer below) or sent by facsimile to that office (fax: 08 6268 2699 ) to be received not less than 48 hours prior to the time of the Meeting.

5. Signing Instructions

Individual : where the holding is one name, the Shareholder must sign. Joint Holding : where the holding is in more than one name, all of the Shareholders must sign. Companies : where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the Company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director may sign alone. Otherwise this form must be signed by a Director jointly with either another Director or Company Secretary. Please indicate the office held in the appropriate place.

If a representative of the corporation is to attend the meeting the appropriate “Certificate of Appointment of Corporate Representative” should be lodged with the Company before the meeting or at the registration desk on the day of the meeting.

6. Important for Resolution 1:

If the Chair of the Meeting or any member of the Key Management Personnel of the Company or a Closely Related Party of a member of the Key Management Personnel of the Company is your proxy and you have not directed the proxy how to vote on Resolution 1, the proxy will be prevented from casting your votes on Resolution 1. If the Chair, another member of the Key Management Personnel of the Company or Closely Related Party of a member of the Key Management Personnel is your proxy, in order for your votes to be counted on Resolution 1, you must direct your proxy how to vote on Resolution 1.

LODGING YOUR PROXY FORM

To be valid, your proxy form (and any power of attorney under which it is signed) must be received at the address given below no later than 11.00am (WST) on 2 October 2019. Any proxy form received after that time will not be valid for the scheduled meeting.

In person: Metalsearch Limited Level 4 216 St Georges Terrace Perth WA 6000 By mail: Metalsearch Limited PO Box 7315 Perth WA 6850 By email: info@westarcapital.com.au (Subject: Metalsearch) By fax: (08) 6268 2699

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