Prospectus - Kingsrose Mining
Prospectus - Kingsrose Mining
Prospectus - Kingsrose Mining
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<strong>Kingsrose</strong> <strong>Mining</strong> Limited<br />
ABN 49 112 389 910<br />
PROSPECTUS<br />
For the Offer of 30,000,000 Shares at an<br />
issue price of 20 cents each to raise $6,000,000
Important Notice<br />
This <strong>Prospectus</strong> is dated 1 November 2007 and was lodged with ASIC<br />
on that date. Neither ASIC, ASX nor any of their respective officers take<br />
any responsibility for the contents of this <strong>Prospectus</strong> or the merits of the<br />
investment to which this <strong>Prospectus</strong> relates.<br />
No securities will be allotted or issued on the basis of this <strong>Prospectus</strong> later than 13 months after the date of<br />
this <strong>Prospectus</strong>.<br />
Application will be made to ASX within 7 days after the date of this <strong>Prospectus</strong> for the quotation of the Shares<br />
the subject of this <strong>Prospectus</strong>.<br />
The distribution of this <strong>Prospectus</strong> in jurisdictions outside Australia may be restricted by law and persons who<br />
come into possession of this <strong>Prospectus</strong> should seek advice on and observe any of these restrictions. Failure<br />
to comply with these restrictions may violate securities laws. Applicants who are resident in countries other<br />
than Australia should consult their professional advisers as to whether any governmental or other consents are<br />
required or whether any other formalities need to be considered and followed.<br />
This <strong>Prospectus</strong> does not constitute an offer in any place in which, or to any person to whom, it should not be<br />
lawful to make such an offer.<br />
It is important that investors read this <strong>Prospectus</strong> in its entirety and seek professional advice where necessary.<br />
An investment in the securities the subject of this <strong>Prospectus</strong> should be considered highly speculative.<br />
WEB SITE – ELECTRONIC PROSPECTUS<br />
A copy of this <strong>Prospectus</strong> is available and can be downloaded from the website of the Company at<br />
kingsrosemining.com.au. Any person accessing the electronic version of this <strong>Prospectus</strong> for the purpose of<br />
making an investment in the Company must be an Australian resident and must only access the <strong>Prospectus</strong><br />
from within Australia.<br />
The Corporations Act prohibits any person passing onto another person an Application Form unless it is<br />
attached to a hard copy of this <strong>Prospectus</strong> or it accompanies the complete and unaltered version of this<br />
<strong>Prospectus</strong>. Any person may obtain a hard copy of this <strong>Prospectus</strong> free of charge by contacting the Company.<br />
EXPOSURE PERIOD<br />
In accordance with Chapter 6D of the Corporations Act, this <strong>Prospectus</strong> is subject to an exposure period of<br />
7 days from the date of lodgment with ASIC. This period may be extended by the ASIC for a further period<br />
of up to 7 days. The purpose of this exposure period is to enable this <strong>Prospectus</strong> to be examined by market<br />
participants prior to the raising of funds. If this <strong>Prospectus</strong> is found to be deficient, any Application Forms<br />
received during the exposure period will be dealt with in accordance with section 724 of the Corporations Act.<br />
Application Forms received prior to the expiration of the exposure period will not be processed until after<br />
the exposure period. No preference will be conferred on Application Forms received in the exposure period<br />
and all Application Forms received during the exposure period will be treated as if they were simultaneously<br />
received on the Opening Date.<br />
Certain terms and abbreviations used in this <strong>Prospectus</strong> have defined meanings which are explained in the<br />
Glossary.<br />
The assets depicted in photographs in this <strong>Prospectus</strong> are not assets of the Company unless otherwise stated.
Table of Contents<br />
Section 1 Key Points 2<br />
Section 2 Chairman’s Letter 3<br />
Section 3 Investment Overview 4<br />
Section 4 Details of the Offer 6<br />
Section 5 Company and Project Overview 9<br />
Section 6 Directors and Corporate Governance 11<br />
Section 7 Risk Factors 14<br />
Section 8 Independent Geologist’s Report 18<br />
Section 9 Investigating Accountant’s Report 38<br />
Section 10 Solicitor’s Report 52<br />
Section 11 Material Contacts 62<br />
Section 12 Additional Information 63<br />
Section 13 Directors’ Responsibility and Consent 69<br />
Section 14 Glossary 70<br />
Application Form 71<br />
Corporate Directory<br />
DIRECTORS<br />
John Morris<br />
(Non-Executive Chairman)<br />
David Hatch<br />
(Managing Director)<br />
Michael (Mike) Andrews<br />
(Non-Executive Director)<br />
J. William (Bill) Phillips<br />
(Non-Executive Director)<br />
COMPANY SECRETARY<br />
Jeannette Smith<br />
REGISTERED AND BUSINESS OFFICE<br />
Suite 3, 16 Kearns Crescent, Applecross<br />
Western Australia, 6153<br />
Website: www.kingsrosemining.com.au<br />
SOLICITORS<br />
Fairweather & Lemonis<br />
Level 9<br />
172 St Georges Terrace<br />
Perth, Western Australia, 6000<br />
INVESTIGATING ACCOUNTANT<br />
Mack & Co<br />
Flr 2/35 Havelock Street<br />
West Perth, Western Australia, 6005<br />
SHARE REGISTRY<br />
Advanced Share Registry Services<br />
110 Stirling Highway<br />
Nedlands, Western Australia, 6009<br />
Tel: +61 8 9389 8033<br />
INDEPENDENT GEOLOGIST<br />
Geological Investigations Pty Ltd<br />
4 Minim Close<br />
Mosman Park, Western Australia, 6012<br />
Page 1
Section 1<br />
Key Points<br />
• The Company’s objective is to become a profitable producer. Initially the Company will be a<br />
single project company developing the underground Sand Queen Gold Mine in joint venture<br />
with Reed Resources Limited. The Joint Venture is currently only over the underground<br />
mining potential of the Joint Venture tenement area (Initial Tenements) and all reference to<br />
the Sand Queen Gold Mine is a reference to the underground gold and silver potentials of<br />
such tenements.<br />
• The Company will issue a total of 26,250,000 Shares, 11,000,000 Convertible Notes<br />
(a total of $2,200,000 face value) and repay moneys under the Asset Sale Agreement and<br />
associated debt conversion agreements in order to acquire the Joint Venture interest and<br />
discharge various debt.<br />
• The Company is aiming for the Sand Queen Gold Mine to be in full scale commercial<br />
production in the first quarter of 2008 based on the resources outlined in the Independent<br />
Geologist’s Report and the development work carried out to date.<br />
• The resource outlined in the Joint Venture area is 190,498 tonnes at 12.1 grams of gold per<br />
tonne (JORC Code category indicated resources) and 169,707 tonnes at 11.4 grams of gold<br />
per tonne (JORC Code category inferred resources), giving an in ground resource of 136,518<br />
ounces of gold. In accordance with JORC Code requirements the Independent Geologist has<br />
rounded these resources to 360,200 tonnes at 12 grams of gold a tonne for a total of 136,500<br />
ounces of gold.<br />
• The Company’s joint venture interest in this resource will be 50%. To earn this 50% the<br />
Company must pay all costs of mining. Under a similar arrangement for the area below<br />
the 243 metre level the Company will earn 60% of the gold. Details of the joint venture<br />
obligations are in Schedule 2 to the Solicitor’s Report in section 10.<br />
• The Company will also seek to pursue complementary opportunities that the Directors<br />
consider have the potential to add value.<br />
• The Company has a Board with mining, exploration, project evaluation and corporate skills<br />
to oversee developments as they arise, however it may seek additional skilled personnel to<br />
ensure maximum benefit for Shareholders.<br />
• An investment in the Shares the subject of this <strong>Prospectus</strong> is highly speculative as a result of<br />
the nature of the Company’s business as an early stage production company. No investment<br />
should be made if the loss of that investment would have a temporary or permanent material<br />
effect on the personal financial circumstances of the investor.<br />
• Specific and general risk factors are outlined in section 7. Significant risks for a producing<br />
company are that there can be no assurance that the resources to be mined will maintain the<br />
forecast grade and tonnage and that treatment will achieve the forecast recovery of gold. By<br />
the Joint Venture Agreement the Company will be at risk to lose its Joint Venture interest<br />
if the gold production milestone of 25,000 ounces of gold is not achieved by 31 May 2009.<br />
The actual price of gold in the future cannot be forecast with any certainty. Development of<br />
further resources, either within the Comet Vale Joint Venture area or in new projects is also<br />
inherently uncertain, as are all input costs and the availability of skilled personnel.<br />
This information is a selective overview only and should be read in conjunction with the more<br />
detailed information appearing elsewhere in this <strong>Prospectus</strong>. Investors should read this <strong>Prospectus</strong><br />
in its entirety and not rely solely on this overview.<br />
Page 2
Section 2<br />
Chairman’s Letter<br />
Dear Investor,<br />
On behalf of the Directors of <strong>Kingsrose</strong> <strong>Mining</strong> Limited, it is my pleasure to invite you to become a<br />
Shareholder in the Company.<br />
The Company’s objective is to become a successful producer of gold. Our first project is to continue the<br />
underground development of the Sand Queen Gold Mine at Comet Vale in Western Australia. The Comet<br />
Vale Joint Venture interest which the Company will acquire is a significant asset; the Joint Venture has already<br />
produced gold from ore mined during development and has a current stockpile of ore ready to be processed.<br />
The Sand Queen Gold Mine is a high grade underground project which has been re-developed as a producing<br />
mine over the last two years.<br />
The Company’s joint venture partner, Reed Resources Ltd, has carried out significant exploration on the<br />
mining leases on which the Sand Queen Gold Mine is situated.<br />
Indicated and Inferred resources identified to date include 360,200 tonnes at an average of 12 g/t. Three<br />
parcels of mainly development ore have been processed at the toll treatment facility and subsequently sold.<br />
Recovered ounces totalled, 643ozs, 1,006ozs and 1,529ozs respectively. Our share was 50% less a 2% royalty<br />
resulting in net revenue to the Company of $611,602. New development on the 3 level continues to open up<br />
stoping blocks thereby enabling the extraction of anticipated higher grade ore tonnage in subsequent milling<br />
parcels.<br />
Under the terms of the Joint Venture interest being acquired, the Company is responsible for all costs of<br />
developing and mining of the ore. Reed Resources Ltd is responsible for all transport and treatment costs as<br />
well as tenement management. If 25,000 ounces of gold is recovered by May 2009 then the Company will have<br />
earned and be registered as 50% owner of the Joint Venture tenements.<br />
The project is described in greater detail in the Company and Project Overview section and the Independent<br />
Geologist’s Report. Risks of exploration, development, mining and treatment are addressed in further detail in<br />
the Risks section.<br />
The Board brings together technical and corporate experience in the fields of mining, exploration and project<br />
evaluation.<br />
The Board has experience in running public companies in a cost effective manner to ensure that maximum<br />
benefit is gained from company funds. Day-to-day mining and development will be carried out by Westralmen<br />
Pty Ltd. The personnel of Westralmen Pty Ltd are currently working at the Sand Queen Gold Mine. Corporate<br />
management activities will be carried out by David Hatch as managing director and, where necessary, the<br />
Board as a whole.<br />
The Company will be actively reviewing and assessing other projects. The Company is seeking to raise<br />
$6,000,000 at Full Subscription.<br />
Details of our interest in the Comet Vale Joint Venture, our proposed activities and the investment risks are<br />
contained in this <strong>Prospectus</strong>. Please study this document carefully and seek professional advice if necessary to<br />
make an informed decision.<br />
On behalf of the Directors, I commend this Offer to you and look forward to welcoming you as a Shareholder<br />
in the Company.<br />
Yours sincerely<br />
John Morris<br />
Chairman<br />
<strong>Kingsrose</strong> <strong>Mining</strong> Limited<br />
Page 3
Section 3<br />
Investment Overview<br />
3.1 Important Notice<br />
This section is not intended to provide full information for investors intending to apply for Shares offered<br />
under this <strong>Prospectus</strong>. This <strong>Prospectus</strong> should be read and considered in its entirety.<br />
3.2 Key Offer Statistics<br />
Offer Price per Share<br />
20 cents<br />
Existing Shares 8,800,020<br />
Shares to be issued to the <strong>Kingsrose</strong> Unit Trust 20,000,000<br />
Shares to be issued to Airedale (Asia) Limited 6,250,000<br />
Shares Offered under this <strong>Prospectus</strong> 30,000,000<br />
Total Issued Shares at listing on ASX 65,050,020<br />
Market Capitalisation upon Shares at Offer Price $13,010,004<br />
There are 5,500,000 unlisted Options on issue and there will also be 11,000,000 unlisted Convertible Notes on<br />
issue with a face value of 20 cents per note. Please refer to sections 12.4 and 12.5 of the <strong>Prospectus</strong>.<br />
3.3 Indicative Timetable<br />
<strong>Prospectus</strong> lodged with ASIC 1 November 2007<br />
Opening Date 9 November 2007<br />
Estimated Closing Date 29 November 2007<br />
Expected despatch of Holding Statements 4 December 2007<br />
Securities issued under Asset Sale Agreement and<br />
associated debt conversion agreements 5 December 2007<br />
Expected date for Quotation of Shares on ASX 14 December 2007<br />
The above dates are indicative only and may change without notice. The Company reserves the right to<br />
extend the Closing Date and the Offer or close the Offer early without notice. Applicants are encouraged to<br />
apply as soon as possible after the Offer opens.<br />
3.4 Objectives<br />
The objectives of the Offer are to:<br />
(a)<br />
(b)<br />
(c)<br />
(d)<br />
(e)<br />
fund a 2 year program to develop and mine the Sand Queen Gold Mine for the Joint Venture;<br />
provide general working capital which may be applied in undertaking a review of any further resource<br />
projects that meets the Company’s strategy as detailed in section 5;<br />
fund corporate administration costs;<br />
pay the costs of the <strong>Prospectus</strong> process; and<br />
repay debt.<br />
3.5 Use of Proceeds and Funds<br />
The Company intends to use cash on hand at 31 August 2007, the proceeds of gold sales, and the funds raised<br />
from the Offer broadly as follows:<br />
Funds Available<br />
Cash at Bank at 31 August 2007 plus seed capital $230,741<br />
Proceeds from sales of existing gold inventory (1) $611,602<br />
Funds from this Offer $6,000,000<br />
Total Funds Available $6,842,343<br />
Page 4
Application of Proceeds at Full Subscription<br />
Two year development budget (2) $2,511,605<br />
Repayment of previous Joint Venture liabilities (3) $631,472<br />
<strong>Mining</strong> contact services payments to Westralmen Pty Ltd (4) $836,000<br />
Two year corporate administration costs $600,000<br />
Director salaries for two years $860,000<br />
Two year convertible note investment payments (5) $264,000<br />
Costs of the Offer (6) $400,000<br />
Repayment to bank of equipment loan $251,212<br />
Stamp duty on Asset Sale Agreement $144,000<br />
General Working Capital $344,054<br />
Total $6,842,343<br />
The actual expenditures may vary from the above estimates and the Board reserves the right to appropriately<br />
vary the expenditures dependent on circumstances and other opportunities.<br />
(1) In relation to its Joint Venture interest the Company has received net sales of $611,602 from the sale<br />
of existing gold inventory from the Sand Queen Gold Mine produced mainly from ore mined during<br />
development after payment of a 2% royality.<br />
(2) The two year development budget is itemised by the Independent Geologist in his report at section 8.<br />
(3) See section 4.4 (f) in the Investigating Accountants Report.<br />
(4) As set out in section 11 the annual services fee payable to Westralmen Pty Ltd for mining services is<br />
$418,000.<br />
(5) Interest of 6% per annum is payable on the face value of the Convertible Notes,which face value totals<br />
$2,200,000.<br />
(6) The costs of the Offer assumes a commission fee of $300,000 being 5% on $6,000,000.<br />
3.6 Working Capital<br />
On successful completion of the Offer with at least Full Subscription, the Company will have enough working<br />
capital to carry out the objectives stated in this <strong>Prospectus</strong>.<br />
3.7 Capital Structure<br />
The capital structure of the Company will be:<br />
Shares<br />
Existing Shareholders 8,800,020<br />
Shares to be issued to the <strong>Kingsrose</strong> Unit Trust (1) 20,000,000<br />
Shares to be issued to Airedale (Asia) Limited (2) 6,250,000<br />
Shares under this <strong>Prospectus</strong> 30,000,000<br />
Total Shares 65,050,020<br />
Convertible Notes (Unlisted)<br />
JW Phillips (3) 6,000,000<br />
Airedale (Asia) Limited (3) 5,000,000<br />
Total Convertible Notes 11,000,000<br />
Options (Unlisted)<br />
Options to Director’s and Company Secretary (4) 5,500,000<br />
Total Options 5,500,000<br />
Page 5
Section 3<br />
Investment Overview<br />
(1) The 20,000,000 Shares to be issued to the <strong>Kingsrose</strong> Unit Trust is in accordance with the Asset Sale<br />
Agreement.<br />
(2) The issue of 6,500,000 Shares to Airedale (Asia) Limited at 20 cents per Share will be in satisfaction and<br />
discharge of a debt of $1,250,000 owing by the Company.<br />
(3) The issue of the Convertible Notes at a face value of 20 cents each will be in satisfaction and discharge<br />
of a debt owing by the Company to JW Phillips ($1,200,000) and Airedale (Asia) Limited ($1,000,000).<br />
The full terms of the Convertible Notes are set out in section 12.5.<br />
(4) The Options to be issued to the Directors and Company Secretary have an exercise price of 25 cents and<br />
an expiry date of 31 December 2012. The full terms of the Options are set out in section 12.4.<br />
3.8 Future Entitlements Option Issue<br />
The Company intends to undertake a non-renounceable entitlements issue of Options to registered<br />
Shareholders at a time within 6 months of quotation of the Shares of the Company on the ASX.<br />
The Options are intended to be offered for subscription at a price of 0.5 cents (1/2 cent) each and on the<br />
basis of one (1) Option for every two (2) Shares held. The Options will be exercisable at 20 cents per Share<br />
and will expire on 31 December 2012. Full details of the terms of the Options are set out in section 12.4 of<br />
this <strong>Prospectus</strong>.<br />
At the same time as undertaking the entitlements issue, the Company intends to issue Options on the same<br />
terms and at the same subscription price to the holders of Convertible Notes on the basis of one (1) Option for<br />
every two (2) Convertible Notes held. This will result in the further issue of 5,500,000 Options.<br />
Section 4<br />
Details of the Offer<br />
4.1 The Offer<br />
By this <strong>Prospectus</strong> the Company offers 30,000,000 Shares at 20 cents each to raise $6,000,000 at Full<br />
Subscription.<br />
The Company does not reserve the right to accept oversubscriptions.<br />
The details of how to apply for Shares are set out below.<br />
4.2 Minimum Subscription<br />
The minimum subscription under the Offer is $6,000,000. The Company will not issue any Shares pursuant<br />
to this <strong>Prospectus</strong> until the minimum subscription is satisfied. The Offer is not underwritten.<br />
Should the minimum subscription not be reached within 4 months from the date of this <strong>Prospectus</strong>, the<br />
Company will either repay the Application Moneys to the Applicants or issue a supplementary prospectus or<br />
replacement prospectus and allow Applicants one month to withdraw their Applications and be repaid their<br />
Application Moneys. No interest will be paid on these moneys.<br />
Page 6<br />
4.3 Arrangements with Brokers<br />
There is no underwriter or sponsoring broker. The Company reserves the right to pay a 5% commission or<br />
placement fee (exclusive of goods and services tax) on all moneys received from valid Applications lodged<br />
and accepted by the Company and bearing the stamp of any licensed securities dealer or Australian financial<br />
services licensee.<br />
The costs of the Offer for the purposes of section 3.5 assumes a total broker commission or placement fee of<br />
$300,000 being 5% on all $6,000,000 received at Full Subscription under this <strong>Prospectus</strong>.
4.4 Application for Shares<br />
Applications for Shares by investors must be made using an Application Form.<br />
Payment for the Shares must be made in full at the issue price of 20 cents per Share. Applications for Shares<br />
must be for a minimum of 10,000 Shares and thereafter in multiples of 5,000 Shares. Completed Application<br />
Forms and accompanying cheques must be mailed or delivered as follows:<br />
By Post:<br />
Advanced Share Registry Services<br />
PO Box 1156<br />
Nedlands, Western Australia, 6909<br />
By Delivery:<br />
Advanced Share Registry Services<br />
110 Stirling Highway<br />
Nedlands, Western Australia, 6009<br />
Cheques should be made payable to “<strong>Kingsrose</strong> <strong>Mining</strong> Limited – Offer Account” and crossed “Not<br />
Negotiable”. Completed Application Forms must reach the Share Registry by no later than the Closing Date.<br />
4.5 Allocation and Allotment of Shares<br />
The Company reserves the right to allocate Shares in full for any Application, or to allocate any lesser number,<br />
or to decline any Application. Allotment of Shares will be made as soon as possible after the Closing Date.<br />
Where no allotment is made to an Applicant, the Application Money will be returned in full by cheque with<br />
the relevant Application Form within 14 days of the Closing Date. Where the number of Shares allotted is<br />
less than the number of Shares applied for, the surplus Application Moneys will be returned by cheque to the<br />
Applicant within 14 days of the Closing Date. Interest will not be paid on refunded Application Money.<br />
Pending the issue and allotment of Shares or payment of refunds pursuant to this <strong>Prospectus</strong>, all Application<br />
Money will be held by the Company in trust for the Applicants in a separate bank account as required by the<br />
Corporations Act. The Company, however, will be entitled to retain all interest that accrues on such bank<br />
account and each Applicant waives the right to claim any such interest.<br />
It is the responsibility of Applicants to determine their allotment prior to trading in Shares. Applicants who<br />
sell Shares before they receive their holding statements will do so at their own risk.<br />
4.6 ASX Listing<br />
The Company will apply to ASX within 7 days after the date of this <strong>Prospectus</strong> for quotation of the Shares<br />
offered by this <strong>Prospectus</strong> on ASX. If ASX does not grant permission for the quotation of the Shares offered<br />
under this <strong>Prospectus</strong> within 3 months after the date of this <strong>Prospectus</strong>, or such longer period as is permitted<br />
by the Corporations Act, none of the Shares offered by this <strong>Prospectus</strong> will be allotted or issued. In these<br />
circumstances, all Applications will be dealt with in accordance with the Corporations Act including the<br />
return of all Application Moneys without interest.<br />
A decision by ASX to grant official quotation of the Shares is not to be taken in any way as an indication of<br />
ASX’s view as to the merits of the Company or of the Shares. ASX and its officers take no responsibility as to<br />
the contents of this <strong>Prospectus</strong>. Quotation, if granted, of the Shares offered by this <strong>Prospectus</strong> will commence<br />
as soon as practicable after statements of holdings of the Shares are dispatched.<br />
The Company will not apply for quotation of the Convertible Notes.<br />
4.7 Restricted Securities<br />
The ASX may classify certain securities as being subject to the restricted securities provisions of the Listing<br />
Rules.<br />
The holder of restricted securities is prohibited for the relevant restriction period from disposing or agreeing<br />
to dispose of the restricted securities, granting or agreeing to grant a security interest over the restricted<br />
securities or doing or omitting to do an act which would have the effect of transferring effective ownership or<br />
control of the restricted securities.<br />
None of the Shares offered under this <strong>Prospectus</strong> will be treated as restricted securities and will be freely<br />
transferable from the date of their allotment.<br />
Page 7
Section 4<br />
Details of the Offer<br />
As at the date of this <strong>Prospectus</strong>, the ASX has not determined which Shares already on issue will be restricted<br />
securities and subject to ASX escrow restrictions. Based on their experience, the Directors expect that a<br />
significant proportion of such Shares will be restricted securities and subject to ASX escrow restrictions.<br />
Directors, promoters and related parties that have subscribed for Shares as promoter or seed investors will<br />
likely have the Shares subject to escrow for a 24 month period commencing from the date on which the<br />
securities of the Company are first quoted on the ASX. Seed investors that are not Directors, related parties or<br />
promoters will have their Shares subject to escrow in accordance with the Listing Rules.<br />
4.8 Applicants outside Australia<br />
This <strong>Prospectus</strong> does not, and is not intended to, constitute an offer in any place or jurisdiction, or to any<br />
person to whom, it would not be lawful to make such an offer to issue this <strong>Prospectus</strong>. The distribution<br />
of this <strong>Prospectus</strong> in jurisdictions outside Australia may be restricted by law and persons who come into<br />
possession of this <strong>Prospectus</strong> should seek advice on and observe any such restrictions. Any failure to comply<br />
with such restrictions may constitute a violation of applicable securities law. No action has been taken to<br />
register or qualify the Shares or otherwise permit a public offering of the Shares the subject of this <strong>Prospectus</strong><br />
in any jurisdiction outside Australia.<br />
It is the responsibility of Applicants outside Australia to obtain all necessary approvals for the allotment<br />
and issue of Shares under this <strong>Prospectus</strong>. The return of a completed Application Form will be taken by the<br />
Company to constitute a representation and warranty by the Applicant that all relevant approvals have been<br />
obtained.<br />
4.9 CHESS<br />
The Company will apply to participate in the Clearing House Electronic Subregister System (CHESS). CHESS<br />
is operated by ASX Settlement and Transfer Corporation Pty Ltd (ASTC), a wholly owned subsidiary of ASX.<br />
Under CHESS, the Company will not issue certificates to investors. Instead, security holders will receive a<br />
statement of their holdings in the Company. If an investor is broker sponsored, ASTC will send a CHESS<br />
statement.<br />
4.10 Privacy Act<br />
If you complete an Application Form, you will be providing personal information to the Company<br />
(directly or by the Share Registry). The Company will collect, hold and use that information to assess your<br />
Application, service your needs as a Shareholder, facilitate distribution payments (if made) and send corporate<br />
communications to you as a Shareholder and carry out administration.<br />
The information may also be used from time to time and disclosed to persons inspecting the register, bidders<br />
for your securities in the context of takeovers, regulatory bodies, including the Australian Taxation Office,<br />
authorised securities brokers, print service providers, mail houses and the Share Registry.<br />
You can access, correct and update the personal information that we hold about you. Please contact the<br />
Company or the Share Registry if you wish to do so at the relevant contact numbers set out in this <strong>Prospectus</strong>.<br />
Collection, maintenance and disclosure of certain personal information is governed by legislation including<br />
the Privacy Act 1988 (as amended), the Corporations Act and certain rules such as the ASTC Settlement Rules.<br />
You should note that if you do not provide the information required on the Application Form, the Company<br />
may not be able to accept or process your Application and, accordingly, you may not be allotted any Shares.<br />
4.11 No Prospective Financial Forecasts<br />
The Directors have considered the matters outlined in ASIC Policy Statement 170. Given that the Company<br />
is an early stage gold production company and the highly speculative nature of development and production,<br />
the Company considers that it is unable to provide potential investors with any reliable revenue, profit or cash<br />
flow projections or forecasts.<br />
Page 8
Section 5<br />
Company and Project Overview<br />
Strategy<br />
The Company aims to become a successful miner and exploiter of gold resources in Australia and overseas.<br />
The key strategies of the Company are :<br />
• To become a successful gold miner, exploiting narrow vein, high grade projects.<br />
• To seek to generate cash flows so that the Company may continue to acquire and develop projects that<br />
most suit the Company portfolio.<br />
The project the Company will use to initiate these strategies will be the underground Sand Queen Gold Mine in<br />
Western Australia. The Company is proposing a development spend of approximately $2,500,000 in the next 2<br />
years.<br />
The Directors are confident that the proposed program is realistic and that modern mining techniques will be<br />
applied to seek to obtain maximum benefit from the Company’s funds.<br />
Other complementary resource projects will be considered for acquisition if they have the potential to add value<br />
to the Company. Any such acquisition may or may not bring their own experienced management person(s).<br />
Commencement of the Joint Venture<br />
In May, 2005 the <strong>Kingsrose</strong> Unit Trust entered into a joint venture agreement to develop two mining leases and<br />
one miscellaneous licence collectively called the Comet Vale Joint Venture.<br />
The joint venture agreement required the <strong>Kingsrose</strong> Unit Trust to develop the mine. Reed Resources Ltd is<br />
responsible for exploration, toll treatment and transport of the ore. Since May 2005 a significant amount of<br />
development work has occurred and ore recovered during development has been processed and further ore<br />
is awaiting processing. The development ore processed to date has been sold resulting in net revenue to the<br />
Company of $611,602 (reflecting the Company’s 50% share less a 2% royalty.<br />
Acquisition of the Joint Venture interest<br />
The Company will acquire the joint venture interest of the <strong>Kingsrose</strong> Unit Trust by way of a deed which<br />
will place the Company in the same position as the <strong>Kingsrose</strong> Unit Trust. The Company will maintain<br />
existing personnel and equipment and seamlessly continue the development work previously carried out.<br />
The Company has engaged Westralmen Pty Ltd to conduct day to day mining and development. The senior<br />
personnel of Westralmen are currently employees of the <strong>Kingsrose</strong> Unit Trust. The Company will have access<br />
to required information from both Reed Resources Ltd in accordance with the Joint Venture Agreement and the<br />
information held by the <strong>Kingsrose</strong> Unit Trust.<br />
Joint Venture and Transaction Details<br />
The initial May 2005 joint venture between Reed Resources Ltd and the <strong>Kingsrose</strong> Unit Trust will continue as<br />
a joint venture between Reed Resources Ltd and <strong>Kingsrose</strong> <strong>Mining</strong> Limited by way of the Asset Sale Agreement<br />
between the <strong>Kingsrose</strong> Unit Trust and <strong>Kingsrose</strong> <strong>Mining</strong> Limited and a Deed of Assumption between the<br />
relevant parties.<br />
The Joint Venture Agreement as amended provides that the Company is responsible for all costs of developing<br />
and mining of the ore. Reed Resources Ltd is responsible for all transport and treatment costs as well as<br />
tenement management. Reed Resources Ltd has acknowledged that it is responsible for surface exploration of<br />
the tenements. This means that the Company’s exploration costs are limited to any underground exploration<br />
and mine development costs.<br />
The Company will be entitled to 50% of the gold produced within the project area up to and including a depth<br />
of 243 metres. The Company’s product entitlement in respect of gold ore produced within the project area from<br />
a depth exceeding 243 metres will be 60% whilst Reed Resources Ltd’s product entitlement will be 40%.<br />
By the Joint Venture Agreement as amended a gold production milestone of 25,000 ounces of gold ore is to<br />
be achieved by 31 May 2009. If the Company achieves this milestone, it will be issued with a 50% registered<br />
interest in the Initial Tenements. If the gold production milestone is not met, Reed Resources Ltd may terminate<br />
the agreement, in which case, the Company’s Joint Venture interest will be reduced to zero.<br />
Page 9
Section 5<br />
Company and Project Overview<br />
Reed Resources Ltd will extend to the Company a first right of refusal over all the Comet Vale Tenements to<br />
form a joint venture in similar nature to that formed over the Initial Tenements.<br />
This right is subject to the following:<br />
• The rights are to be over gold and silver.<br />
• The rights exclude any open pitable ore down to a depth of 50 metres from the surface.<br />
• <strong>Kingsrose</strong> <strong>Mining</strong> Ltd must complete at least 500 metres of level development on level 4 or level 5 of<br />
the Sand Queen Gold Mine by 31 May 2009 to earn this right. No development on these levels have<br />
been completed to date.<br />
• <strong>Kingsrose</strong> <strong>Mining</strong> Ltd earns no right to equity in the title of any tenements other than the Initial<br />
Tenements.<br />
Reed Resources Ltd has also agreed that it will not commence open pit operation at any place that would<br />
jeopardise or limit underground mining reasonably expected to occur given the underground resources<br />
identified at the time of commencing any open pit mine.<br />
Details of the material contracts and their terms are set out in Schedule 2 to the Solicitor’s Report in section 10<br />
and section 11.<br />
Development to date<br />
The <strong>Kingsrose</strong> Unit Trust commenced the development program in May 2005. Since then it has rehabilitated<br />
the Sand King and the Sand Queen shaft to level 3, just above the water table and pushed out development<br />
faces along level 2 (about 487 metres) and along level 3 (about 392 metres along strike).<br />
The <strong>Kingsrose</strong> Unit Trust has established a Return Airway/Secondary Means of Exit from surface down to<br />
the 2 level, near the old Sand King workings. The shaft has been rehabilitated down to level 3 with the water<br />
being held 10m below level 3 (i.e a total of 110m below surface). All surface infrastructure is in place.<br />
An operational hoist - (A 25kW Robbins MAN-09) and service hoist is in place. The winder is capable of<br />
moving a large amount of ore under continuous operation, but mining constraints mean the shaft is limited<br />
to a calculated maximum capacity of 192t of material a day or 5,800t per month. The mine development plan<br />
takes into account these restraints, and reflects an anticipated production capacity of 5,500t per month when<br />
level 4 comes on line with a second haulage winder established over the central shaft compartment.<br />
The Company currently employs 6 to 7 miners on site, and expects to stay on 2 shifts once level 3 production<br />
comes on line. <strong>Mining</strong> is conducted using pneumatic airleg drilling tools. The mine is a fully mechanized mine<br />
using battery powered locomotives hauling ore cars on a rail network throughout the Sand Queen Gold Mine.<br />
The current working level has 120m of rail development in ore along with 90m of sublevel development ready<br />
for stoping. This opens the mine to potentially bring online a 10,500 tonne gallery stope. The further 90m<br />
of rail development scheduled for completion in November means two further 10,000 tonne stopes can be<br />
developed to come online. Current sampling of the orebody indicates potential upside to the block modelled<br />
grade.<br />
Investors are referred to the Independent Geologist’s Report for a geological overview of the Comet Vale Joint<br />
Venture.<br />
Royalty<br />
MTAB Pty Ltd holds a 2% gross revenue royalty over the gold production of the Joint Venture area. MTAB Pty<br />
Ltd is a company related to certain directors of Reed Resources Ltd. The board and management of <strong>Kingsrose</strong><br />
<strong>Mining</strong> Limited have no interest in MTAB Pty Ltd. <strong>Kingsrose</strong> <strong>Mining</strong> Limited will be required to pay its<br />
proportion of royalty costs from gold credited to its account by the Joint Venture.<br />
Personnel<br />
The successful exploitation of the mine to full capacity will require sourcing additional skilled miners. The<br />
Company has already sourced a number of overseas miners and they are scheduled to arrive in January 2008.<br />
Page 10
Section 6<br />
Directors and Corporate Governance<br />
6.1 Directors<br />
John Morris (Non-Executive Chairman)<br />
Mr. Morris has over 36 years experience in exploration, mining, project development and management of<br />
public listed resource companies.<br />
He is currently a director of Uruguay Mineral Exploration Plc. He has held prior directorships in a number of<br />
gold and base metals public companies in Australia and overseas including Forsyth NL and Chaco Resources<br />
Plc (formerly Gold Mines of Sardinia Limited).<br />
David Hatch (Managing Director)<br />
Mr. Hatch has an Associateship in <strong>Mining</strong> Engineering from the WA School of Mines and a Diploma in<br />
Geoscience majoring in Mineral Economics from Macquarie University. Also, he has an Institute of Company<br />
Directors Diploma and a WA Quarry Manager’s Certificate.<br />
Mr. Hatch started his mining career at the Windarra Nickel Mine before moving to Savage River in Tasmania<br />
and Bougainville Copper in PNG. After further moves he became the Resident Manager at Darlot for Plutonic<br />
Resources Ltd in 1992 until 1996, during which time he led the transition from open pit to underground<br />
mining. He then moved off shore to the roles of General Manager at the Mt Muro Gold Mine in Kalimantan<br />
with Aurora Gold Ltd; General Manager - Operations with Ranger Minerals Ltd in Ghana; and General<br />
Manager with Ok Tedi in PNG. Consequently, Mr. Hatch has extensive General Manager - Operations<br />
experience in the mining industry, particularly in gold mining.<br />
As Managing Director of Westonia Mines Ltd, from March 2004 to September 2007, Mr Hatch was involved in<br />
operational, feasibility and corporate activities including capital raising.<br />
Michael Andrews (Non Executive Director)<br />
Dr. Andrews is a geologist with over 28 years of research and mining industry experience in gold, copper, coal<br />
and iron exploration. He holds an honours degree in Geology from the University of Reading, and a doctorate<br />
in Exploration Geochemistry from the University of Wales.<br />
Dr. Andrews previously held the positions of Executive Director and Chief Geologist of AuIron Energy Ltd and<br />
of Director Gold Operations for Meekatharra Minerals Ltd. Between 1995 and 1998, Dr. Andrews managed<br />
the Teck Corporation - MM Gold Joint Venture, an exploration portfolio of thirteen gold and copper projects<br />
in Indonesia. He has also previously held senior exploration positions with Ashton <strong>Mining</strong> Ltd, Aurora Gold<br />
Ltd and Muswellbrook Energy and Minerals Ltd. He is currently Director of Canadian exploration company<br />
Southern Arc Minerals Ltd.<br />
J. William Phillips (Non-Executive Director)<br />
Mr. Phillips has over 30 years experience in mining contracting and mine management, much of which has<br />
been gained in Western Australia. He is highly regarded as a leading specialist in underground narrow vein<br />
mining.<br />
He has managed or been instrumental in the successful development of 16 mines either in the role of<br />
contractor or as owner/shareholder. Mr. Phillips currently oversees mining and production at Medusa <strong>Mining</strong><br />
Limited’s Co-O gold mine and processing plant in the southern Philippines which produces approximately<br />
40,000 ounces of gold per annum. He is also overseeing the underground development at both the Sand<br />
Queen Gold Mine and mine development of the PT Natarang <strong>Mining</strong>’s Way Linggo gold/silver mine located in<br />
Sumatra, Indonesia.<br />
Page 11
Section 6<br />
Directors and Corporate Governance<br />
6.2 Corporate Governance<br />
The primary responsibility of the Board is to represent and advance Shareholders’ interests and to protect the<br />
interests of all stakeholders. To fulfill this role the Board is responsible for the overall corporate governance<br />
of the Company including its strategic direction, establishing goals for management and monitoring the<br />
achievement of these goals.<br />
The responsibilities of the Board include:<br />
• Protection and enhancement of Shareholder value;<br />
• Formulation, review and approval of the objectives and strategic direction of the Company;<br />
• Approving all significant business transactions including acquisitions, divestments and capital<br />
expenditure;<br />
• Monitoring the financial performance of the Company by reviewing and approving budgets and<br />
monitoring results;<br />
• Ensuring that adequate internal control systems and procedures exist and that compliance with these<br />
systems and procedures is maintained;<br />
• The identification of significant business risks and ensuring that such risks are adequately managed;<br />
• The review and performance and remuneration of executive directors and key staff;<br />
• The establishment and maintenance of appropriate ethical standards;<br />
• Evaluating and, where appropriate, adopting with or without modification, the ASX Corporate<br />
Governance Council’s Corporate Governance Principles and Recommendations;<br />
The Board recognises the need for the Company to operate with the highest standards of behaviour and<br />
accountability.<br />
Subject to the exceptions outlined below the Company will adopt the ASX Corporate Governance Council’s<br />
Corporate Governance Principles and Recommendations to determine an appropriate system of control and<br />
accountability to best fit its business and operations commensurate with these guidelines.<br />
Page 12<br />
Headframe at dusk. The Company owns the headframe and associated mining equipment.
As the Company’s activities develop in size, nature and scope the implementation of additional corporate<br />
governance structures will be given further consideration.<br />
The Board sets out below its “if not, why not” report in relation to those matters of corporate governance<br />
where the Company’s practices depart from the recommendations.<br />
Recommendation<br />
Reference –<br />
ASX Guidelines<br />
2.1<br />
Notification of Departure<br />
No Majority of<br />
Independent Directors.<br />
Explanation for Departure<br />
The Board considers that the Company is not currently of<br />
a size, nor are its affairs of such complexity to justify the<br />
appointment of a majority of independent non-executive<br />
Directors.<br />
The Board believes that the individuals on the Board can<br />
make, and do make, quality and independent judgements<br />
in the best interests of the Company on all relevant issues.<br />
Directors having a conflict of interest in relation to a<br />
particular item of business must absent themselves from<br />
the Board meeting before commencement of discussion on<br />
the topic.<br />
Mr Hatch as managing director and Mr Phillips as<br />
a substantial shareholder are not considered by the<br />
Board to be independent in terms of the ASX Corporate<br />
Governance Council’s definition of independent director.<br />
2.4<br />
A separate Nomination<br />
Committee has not been<br />
formed.<br />
The Board considers that the Company is not currently of<br />
a size to justify the formation of a nomination committee.<br />
The Board as a whole undertakes the process of reviewing<br />
the skill base and experience of existing Directors to<br />
enable identification or attributes required in new<br />
Directors. Where appropriate, independent consultants<br />
will be engaged to identify possible new candidates for the<br />
Board.<br />
4.1, 4.2, 4.3<br />
A separate Audit<br />
Committee has not been<br />
formed.<br />
The Board considers that the Company is not of a size,<br />
nor are its financial affairs of such complexity to justify<br />
the formation of an audit committee. The Board as a<br />
whole undertakes the selection and proper application of<br />
accounting policies, the integrity of financial reporting,<br />
the identification and management of risk and review of<br />
the operation of the internal control systems.<br />
8.1<br />
There is no separate<br />
Remuneration Committee.<br />
The Board considers that the Company is not currently of<br />
a size, nor are its affairs of such complexity to justify the<br />
formation of a remuneration committee. The Board as a<br />
whole is responsible for the remuneration arrangements<br />
for Directors and executives of the Company and<br />
considers it more appropriate to set aside time at Board<br />
meetings each year to specifically address matters that<br />
would ordinarily fall to a remuneration committee.<br />
Page 13
Section 7<br />
Risk Factors<br />
7.1 Introduction<br />
An investment in the Shares the subject of this <strong>Prospectus</strong> is highly speculative as the Company is a gold<br />
mining company. The Board recommends that investors consider the risks described below and information<br />
contained elsewhere in this <strong>Prospectus</strong>, as well as consulting with their professional advisers before deciding<br />
whether or not to apply for the Shares.<br />
The following is a non-exhaustive list of the risks that may have a material effect on the financial position and<br />
performance of the Company and the value of its securities, as well as the Company’s development and mining<br />
activities and an ability to fund those activities.<br />
The risks below are some of the risks specific to the Company including by reason of its involvement in the<br />
resource industry. The general investment risks below are some of the risks to the Company of a general<br />
economic nature.<br />
7.2 Specific Risks<br />
Development and <strong>Mining</strong><br />
Possible future development of mining operations at any of the Company’s projects is dependent on a<br />
number of factors and avoiding various risks including, but not limited to, failure to acquire and/or delineate<br />
economically recoverable ore bodies, unfavourable geological conditions, failing to receive the necessary<br />
approvals from all relevant authorities and parties, unseasonal weather patterns, excessive seasonal weather<br />
patterns, unanticipated technical and operational difficulties encountered in extraction and production<br />
activities, mechanical failure of operating plant and equipment, unexpected shortages or increases in the price<br />
of consumables, spare parts and plant and equipment, cost overruns, risk of access to the required level of<br />
funding and contracting risk from third parties providing essential services.<br />
In production, operations may be disrupted by a variety of risks and hazards which are beyond the Company’s<br />
control, including environmental hazards, industrial accidents, technical failures, labour disputes, unusual<br />
or unexpected rock formations, flooding and extended interruptions due to inclement or hazardous weather<br />
conditions and fires, explosions and other accidents.<br />
By the Joint Venture Agreement the Company will be at risk to lose its Joint Venture interest if a gold<br />
production milestone of 25,000 ounces of gold is not achieved by 31 May 2009.<br />
Resource Estimations<br />
Resources estimates are expressions of judgment based on knowledge, experience and resource modelling. As<br />
such, resource estimates are inherently imprecise and rely to some extent on interpretations made.<br />
Additionally, resource estimates may change over time as new information becomes available. Should the<br />
Company encounter mineralisation or geological formations different from those predicted by past drilling,<br />
sampling and interpretations, resource estimates may need to be altered in a way that could adversely affect<br />
the Company’s operations. In particular, high grade, quartz vein mines of which the Sand Queen Gold<br />
Mine is an example do not have uniform grade throughout their resources and resource width, indicated by<br />
mineralized drill intersections cannot always be extrapolated between holes.<br />
Exploration<br />
Investors should understand that gold exploration, development and mining is by its nature a high risk<br />
undertaking. There can be no assurance that the Company’s exploration of its existing projects or any other<br />
exploration or mining projects that may be acquired in the future will result in the discovery of a significant<br />
mineral resource. Even if a further significant mineral resource is identified, there can be no guarantee that it<br />
can be economically exploited or that the Sand Queen Gold Mine will be economically viable.<br />
Title<br />
All of the tenements or licences in which the Company has or may earn an interest in will be subject to<br />
applications for renewal or grant (as the case may be). The renewal or grant of the terms of each tenement or<br />
licence is usually at the discretion of the relevant government authority.<br />
Page 14
Additionally, tenements are subject to a number of State specific legislative conditions including payment of<br />
rent and meeting minimum annual expenditure commitments. The inability to meet these conditions could<br />
affect the standing of a tenement or restrict its ability to be renewed.<br />
If a tenement or licence is not renewed or granted, the Company may suffer significant damage through loss of<br />
the opportunity to develop and discover any mineral resources on that tenement.<br />
The Company currently has a contractual joint venture interest in the tenements listed in Schedule 1 to the<br />
Solicitor’s Report in section 10. For further information on these tenements, refer to the Solicitor’s Report in<br />
section 10.<br />
Native Title and Aboriginal Heritage<br />
The Native Title Act 1993 (Cth) recognises and protects the rights and interests in Australia of Aboriginal and<br />
Torres Straight Islander people in land and waters, according to their traditional laws and customs. There<br />
is a significant uncertainty associated with native title in Australia and this may impact upon the Company’s<br />
operations and future plans.<br />
Native title can be extinguished by valid grants of land or waters to people other than the native title holders<br />
or by valid use of land or waters. It can also be extinguished if the indigenous group has lost their connection<br />
with the relevant land or waters. Native title is not necessarily extinguished by the grant of mining licences,<br />
although a valid mining lease prevails over native title to the extent of any inconsistency for the duration of<br />
the title.<br />
All tenements granted prior to 1 January 1994 are valid or validated by the Native Title Act. For tenements to<br />
be validly granted (or renewed) after 1 January 1994 the future act regime established by the Native Title Act<br />
must be followed.<br />
It is important to note that the existence of a native title claim is not an indication that native title in fact exists<br />
to the land covered by the claim, as this is a matter ultimately determined by the Federal Court. If native<br />
title rights do exist, the ability of the Company to gain access to tenements (through obtaining consent of<br />
any relevant landowner) or to progress from the exploration phase to the development and mining phases of<br />
operations may be adversely affected.<br />
The Company must also comply with Aboriginal heritage legislation requirements which require heritage<br />
survey work to be undertaken ahead of the commencement of mining operations.<br />
A discussion of native title and the claims is contained in the Solicitor’s Report in section 10 of this <strong>Prospectus</strong>.<br />
Contractual Risk<br />
The Company is party to the Joint Venture Agreement and the mining contract service agreement which are<br />
summarised respectively in Schedule 2 to the Solicitors Report and in section 11. The Company is reliant upon<br />
the contractual parties complying with their obligations.<br />
Environmental<br />
The Company’s projects are subject to Commonwealth and State laws and regulations regarding environmental<br />
matters and the discharge of hazardous wastes and materials. As with all mineral projects, the Company’s<br />
projects are expected to have a variety of environmental impacts should development proceed. Development<br />
of any of the Company’s projects will be dependent on the Company satisfying environmental guidelines and,<br />
where required, being approved by government authorities.<br />
The Company intends to conduct its activities in an environmentally responsible manner and in accordance<br />
with all applicable laws, but may still be subject to accidents or other unforeseen events which may<br />
compromise its environmental performance and which may have adverse financial implications. The<br />
Company has a joint obligation with Reed Resources Ltd to comply with environmental and rehabilitation<br />
obligations while it is a party to the joint venture.<br />
Page 15
Section 7<br />
Risk Factors<br />
Commodity Price Volatility<br />
It is anticipated that any revenues derived from mining will primarily be derived from the sale of gold or other<br />
precious and base metals. Consequently, any future earnings are likely to be closely related to the price of<br />
those commodities and the terms of any offtake agreements which it enters into.<br />
Gold and metal prices fluctuate and are affected by numerous factors beyond the control of the Company.<br />
These factors include world demand for gold and metals, forward selling by producers and production cost<br />
levels in major mineral-producing regions.<br />
Moreover, gold and metal prices are also affected by macroeconomic factors such as expectations regarding<br />
inflation, interest rates and global and regional demand for, and supply of, gold or the relevant metal (as the<br />
case may be) as well as general global economic conditions. These factors may have an adverse effect on the<br />
Company’s development and production activities, as well as on its ability to fund those activities.<br />
Reliance on Key Personnel<br />
The Company’s success largely depends on the core competencies of its Directors and management and their<br />
familiarisation with, and ability to operate in, the metals and mining industry and the Company’s ability to<br />
retain its key executives. The efficient exploitation of the mine also requires the Company to access additional<br />
skilled miners. The Company has already sourced a number of overseas miners and they are scheduled to<br />
arrive in January 2008.<br />
Future Capital Needs and Additional Funding<br />
The funds raised by the Offer will be used to carry out the Company’s objectives (as detailed in this<br />
<strong>Prospectus</strong>). The Company’s ability to raise further capital (equity or debt) within an acceptable time, of<br />
a sufficient amount and on terms acceptable to the Company will vary according to a number of factors,<br />
including:<br />
• prospectivity of projects (existing and future);<br />
• the results of exploration, subsequent feasibility studies, development and mining;<br />
• stock market and industry conditions; and<br />
• the price of relevant commodities and exchange rates.<br />
No assurance can be given that future funding will be available to the Company on favourable terms (or at<br />
all). If adequate funds are not available on acceptable terms the Company may not be able to further develop<br />
its projects and it may impact on the Company’s ability to continue as a going concern.<br />
Limited Operational History<br />
While the Company’s management has significant experience and has previously carried out or been exposed<br />
to exploration and production activities, (including the Sand Queen Gold Mine) while employed or engaged<br />
by other companies, the Company will only have beneficial interest in the Joint Venture following settlement<br />
of the acquisition of the Joint Venture interest. Accordingly, the Company has limited historical, financial or<br />
operating information. The Company’s ability to achieve its objectives depends on the ability of its Directors<br />
and officers to implement current plans and to respond to any unforeseen circumstances that require changes<br />
to those plans.<br />
Competition<br />
The Company competes with other companies, including major mineral exploration and mining companies.<br />
These companies will likely have greater financial and other resources than the Company and, as a result, may<br />
be in a better position to compete for future business opportunities. Many of the Company’s competitors not<br />
only explore for and produce minerals, but also carry out downstream operations on these and other products<br />
on a worldwide basis. There can be no assurance that the Company can compete effectively with these<br />
companies.<br />
Page 16
Potential Acquisitions<br />
As part of its business strategy, the Company may make acquisitions of or significant investments in other<br />
resource projects. Any such transactions would be accompanied by risks commonly encountered in making<br />
such acquisitions.<br />
7.3 General Risks<br />
Securities Investments and Share Market Conditions<br />
There are risks associated with any securities investment. The prices at which the securities trade may<br />
fluctuate in response to a number of factors.<br />
Furthermore, the stock market, and in particular the market for exploration and mining companies may<br />
experience extreme price and volume fluctuations that may be unrelated or disproportionate to the operating<br />
performance of such companies. These factors may materially adversely affect the market price of the<br />
securities of the Company regardless of the Company’s operational performance. Neither the Company nor<br />
the Directors warrant the future performance of the Company, or any return of an investment in the Company.<br />
Economic Risk<br />
Changes in the general economic climate in which the Company operates may adversely affect the financial<br />
performance of the Company. Factors that may contribute to that general economic climate include the level<br />
of direct and indirect competition against the Company, industrial disruption, the rate of growth of gross<br />
domestic product in Australia, interest rates and the rate of inflation.<br />
Legislative<br />
Changes in relevant taxes, legal and administration regimes, accounting practice and government policies may<br />
adversely affect the financial performance of the Company.<br />
Page 17
Section 8<br />
Independent Geologist’s Report<br />
Geological Investigations Pty Ltd<br />
ABN 69 008 727 820<br />
4 Minim Close<br />
Mosman Park<br />
WESTERN AUSTRALIA 6012<br />
18th October, 2007<br />
The Directors<br />
<strong>Kingsrose</strong> <strong>Mining</strong> Limited<br />
Dear Sirs<br />
INDEPENDENT GEOLOGIST’S REPORT - COMET VALE PROJECT – WESTERN AUSTRALIA<br />
At the request of <strong>Kingsrose</strong> <strong>Mining</strong> Limited (<strong>Kingsrose</strong>), we have prepared an Independent Geologist’s Report<br />
for inclusion in a <strong>Prospectus</strong> to be issued by <strong>Kingsrose</strong> on or about 31 October 2007. The Company seeks to<br />
raise $6,000,000 by the issue of 30,000,000 shares at 20 cents per share.<br />
This report has been prepared in accordance with the Code and Guidelines for the Assessment and Valuation<br />
of Mineral Assets and Mineral Securities for Independent Experts Reports (the Valmin Code) that is binding<br />
upon members of The Australasian Institute of <strong>Mining</strong> and Metallurgy (The Aus.IMM).<br />
The reporting requirements place emphasis on competence, independence, transparency and public material<br />
disclosure so that an informed, impartial reader may be able to make a reasoned judgement as to the merit or<br />
otherwise of the project being reviewed.<br />
Geological Investigations Pty Ltd (GIPL) is an independent geological and exploration consultancy that has<br />
been continuously in operation since 1967, providing services to the mining industry in the fields of geology<br />
and resource evaluation.<br />
GIPL, which operates from offices in Perth, Western Australia has prepared experts reports and mineral asset<br />
valuations on a variety of mineral commodities both in Australia and overseas.<br />
For the purposes of this report the project areas and underground workings were inspected on 8th March<br />
2007, in the company of <strong>Kingsrose</strong> personnel.<br />
GIPL has satisfied itself, and <strong>Kingsrose</strong> has warranted in writing, that all material information in its possession<br />
has been fully disclosed. GIPL has also been given access to relevant data held by the JV partner (Reed<br />
Resources Ltd) and to its geological staff on in both their Perth and Kalgoorlie offices.<br />
A draft of this report was submitted to the Directors of <strong>Kingsrose</strong> for comment in respect of any omissions<br />
and factual accuracy.<br />
The current ownership status and legal standing of the relevant tenements as listed in this <strong>Prospectus</strong>, are<br />
dealt with in a separate Solicitor’s Report in section10.<br />
Page 18
In addition, GIPL made independent enquiries from the Registration Section of the DoIRE that confirmed<br />
ownership details for M29/52, M29/321 and L29/67 as at the 8th June, 2007.<br />
Mr J D Wyatt, who is principal of GIPL and author of this report, is a Fellow of The Aus.IMM, having the<br />
requisite qualifications, competence and experience.<br />
Neither GIPL, nor any of its employees or associates has any material interest, either direct, indirect, or<br />
contingent in <strong>Kingsrose</strong>, nor in any other <strong>Kingsrose</strong> asset, nor has any interest existed in the past.<br />
None of the information contained in this report has been specified as being confidential and to this end<br />
enquiries have been made to the authors of the principal reference seeking permission to quote relevant<br />
information,<br />
Fees for the preparation of this report have been charged at current commercial rates, with expenses<br />
reimbursed at cost. Payment for this work is no way contingent on the conclusions reached in this document.<br />
GIPL is of the opinion that <strong>Kingsrose</strong> has in place a clearly defined exploration and expenditure program that<br />
is reasonable, having regard to the stated objectives of the Company, namely development, economic recovery<br />
and treatment of the underground resources present identified at Comet Vale within M29/52 and M29/321.<br />
It is also believed that sufficient exploration has taken place over the past two years to justify the proposed<br />
exploration and expenditure.<br />
GIPL has given and has not before lodgement of this <strong>Prospectus</strong> with the Australian Securities and<br />
Investments Commission, withdrawn its consent to being named author for this report and its inclusion in the<br />
prospectus for <strong>Kingsrose</strong>.<br />
Yours faithfully,<br />
JD Wyatt<br />
Principal<br />
Geological Investigations Pty Ltd<br />
DISCLAIMER<br />
The opinions expressed in this report have been based on information supplied to GIPL by <strong>Kingsrose</strong> and are provided in<br />
response to a specific request by <strong>Kingsrose</strong> to do so. GIPL has exercised all due care in reviewing the supplied information<br />
and whereas GIPL has compared key data supplied, the accuracy and precision of the results and conclusions from the<br />
review are entirely reliant on the accuracy, precision and completeness of the supplied data. GIPL does not accept any<br />
consequential liability arising from commercial decisions resulting from these opinions of the supplied data.<br />
Page 19
Section 8<br />
Independent Geologist’s Report<br />
Contents<br />
1. Introduction<br />
2. Location and Access<br />
3. Tenement Schedule<br />
4. Regional Geology<br />
5. Project Geology<br />
5.1 Ora Banda Sequence at<br />
Comet Vale<br />
5.2 Granitic Rocks<br />
5.3 Structural Geology<br />
6. Past Exploration up to 1998<br />
7. Exploration by Reed Resources Ltd<br />
1998 -2007<br />
7.1 Exploration 1998 – 2002<br />
7.2 Exploration 2003 – 2007<br />
8. Development budget<br />
9. Conclusions<br />
10. References<br />
11. Glossary<br />
Figures<br />
Figure 1<br />
Figure 2<br />
Figure 3<br />
Figure 4<br />
Locality Plan<br />
Regional Geology<br />
Project Geology and<br />
Tenements<br />
Structural Geology<br />
Figure 5 Sand Queen Mine –<br />
Longitudinal Section<br />
Tables<br />
Table 1<br />
Table 2<br />
Table 3<br />
Table 4<br />
Tenement Schedule<br />
Ora Banda Stratigraphy<br />
Resource estimate for the<br />
Sand George and<br />
Sand Prince lodes<br />
Significant results<br />
Figure 1. Locality Plan<br />
Page 20
Figure 2. Regional Geology<br />
1. Introduction<br />
The <strong>Kingsrose</strong> <strong>Mining</strong> Limited Sand<br />
Queen Project is a joint venture with Reed<br />
Resources Ltd over part of their Comet Vale<br />
project.<br />
The Reed Resources Ltd Comet Vale<br />
Project comprises 20 separate tenements<br />
covering an area of approximately 37 km 2<br />
is located about 100 km north-northwest<br />
of Kalgoorlie within the Norseman-Wiluna<br />
Greenstone Belt, Eastern Goldfields region,<br />
Western Australia Figure 1 (map of WA)<br />
and Figure 2. The main gold exploration<br />
targets currently being developed are<br />
extensions to and strike repetitions of the<br />
gold lode originally marked as the Sand<br />
Queen – Gladsome Mines, along a host<br />
structure referred to as the “Comet Vale<br />
Shear Zone”. The initial discovery, made<br />
in 1893, quickly led to a gold rush in the<br />
area that was followed by the discovery of<br />
a significant number of auriferous reefs, as<br />
well as, alluvial deposits that were worked<br />
by dryblowing. In addition to the Sand<br />
Queen and Gladsome mines a number of<br />
other gold mines were worked with Mines<br />
Department rewards showing that, between<br />
1910 – 1920, some 118,000 tonnes of<br />
ore was treated for a recovery of 101,675<br />
ounces of gold at an average grade of 26<br />
oz/t Au.<br />
The <strong>Kingsrose</strong> <strong>Mining</strong> Limited Farm<br />
in and Joint Venture agreement is over<br />
the underground resources of the three<br />
tenements containing the high grade<br />
portion of the ore which has been identified<br />
(currently 2007) as Indicated and Inferred<br />
Resources from the Sand George/ Sand<br />
Queen underground mine workings totals<br />
360,200 tonnes at a weighted average grade<br />
of about 12g/t Au for a recoverable 136,500<br />
ounces of gold.<br />
The tenements the subject of this joint venture are M29/321, M29/52 and Miscellaneous Licence L29/67, (the<br />
“Initial Tenements”).<br />
The Comet Vale Project comprising three tenements (M29/52,M29/321 and L29/67) covering an area of<br />
approximately 106 ha is located about 100 km north-northwest of Kalgoorlie within the Norseman-Wiluna<br />
Greenstone Belt, Eastern Goldfields region, Western Australia ( Figure 1).<br />
The current (2007) identified Indicated and Inferred Resources from all lodes the Sand George/ Sand Queen<br />
underground mine workings totals some 360,200 tonnes having a weighted average grade of approximately<br />
12g/t Au for 136,500 ounces of gold.<br />
Page 21
Section 8<br />
Independent Geologist’s Report<br />
Drill investigation below the Sand Queen /Gladsome and to the north confirms that this mineralisation is open<br />
both along strike and at depth to at least 400m below ground level. Drilling of the newly identified Princess<br />
Grace resource, located adjacent to the Sand Prince West lode, some 250m southwest of the Sand George<br />
mineralisation is still in progress.<br />
2. Location and Access<br />
The Comet Vale Project is centered about 100km north-northwest of Kalgoorlie in the Menzies District of the<br />
North Coolgardie Mineral Field, Western Australia . The project is located on the old mining centre of Comet<br />
Vale, and is readily accessible by way of the Goldfields Highway, that passes north from Kalgoorlie to Leonora,<br />
through the centre of the project area.<br />
Most of the workings are located west of the main road where access within the various leases is provided by<br />
numerous tracks and cleared areas resulting from previous mining and exploration activity.<br />
Exploration tracks and gridlines provide access to the eastern side of the project area.<br />
3. Tenement Schedule<br />
The Comet Vale Project tenements are shown in Table 1 below.<br />
Table 1<br />
Tenement Tenement Holder Grant Date Comments<br />
M29/35 Reed Resource Ltd – 100% 28 Jan ‘87<br />
M29/52 “ 18 May ‘88<br />
M29/85 “ 12 Jan ‘89<br />
M29/185 “ 25 Jun ‘99<br />
M29/186 “ 24 Nov ‘06<br />
M29/197 “ 25 Oct ‘02<br />
M29/198 “ 25 Oct ‘02<br />
M29/199 “ 25 Oct ‘02<br />
M29/200 “ 25 Oct ‘02<br />
M29/201 “ 25 Oct ‘02<br />
M29/232 “ 25 Oct ‘02<br />
M29/233 “ 24 Sept’02<br />
M29/235 “ 25 Oct ‘02 Repl. E29/163<br />
M29/270 Paddington Gold Pty Ltd Application Repl. 29/1374<br />
M29/321 Reed Resources Ltd – 100% 13 Nov ‘02<br />
P29/1764 Reed Resources Ltd – 100% Application Repl. GML29/6191<br />
L29/67 Reed Resources Ltd – 100% 20 Mar ‘02<br />
E29/614 Reed Resources Ltd – 100% 12 Jul ‘07<br />
E29/670 Reed Resources Ltd – 100% Application<br />
E29/603 Reed Resources Ltd – 100% Application<br />
The tenements the subject of the joint venture are M29/321, M29/52 and Miscellaneous Licence L29/67, (the<br />
“Initial Tenements”) (Figure 3). Under certain conditions as set out in the Summary of Material Contracts<br />
the other tenements may become subject to a joint venture of similar nature. <strong>Kingsrose</strong> <strong>Mining</strong> Limited is<br />
concentrating at the present on the Initial Tenements.<br />
Page 22
Figure 3. Project Geology and Tenements<br />
4. Regional Geology<br />
The Comet Vale Project area is underlain by mafic-ultramafic volcanic rocks of the Ora Banda Domain together<br />
with intrusive granitoids of the Goongarrie Monzogranite to the west and the Comet Vale Monzogranite to the<br />
north (Figure 2).<br />
The Ora Banda Domain is one of six tectono-stratigraphy domains that make up the Kalgoorlie Terrain and<br />
is host to extensive gold mineralisation in gold mining centres that include Ora Banda and Mt Pleasant.<br />
Mafic-ultramafic volcanic and metasedimentary rocks together with mafic igneous sills, within the Ora Banda<br />
Domain are referred to as Ora Banda sequence. (see Table 2 below).<br />
Table 2<br />
Stratigraphy of the Ora Banda Domain after Witt 1990, Swager 1994 and Swager et al 1995 (formations<br />
interpreted as occurring in Comet Vale are detailed in bold)<br />
Black Flag Group<br />
Ora Banda Group<br />
Linger and Die Group<br />
Kurrawang Formation<br />
Spargoville Formation<br />
Orinda Sill<br />
Pipeline Andesite Member<br />
Ora Banda Sill<br />
Victorious Basalt<br />
Bent Tree Basalt<br />
Mt Pleasant Sill<br />
Mt Ellis Sill<br />
Big Dick Basalt<br />
Siberia Komatiite<br />
Walter Williams Formation<br />
Missouri Basalt<br />
Wongi Basalt<br />
Page 23
Section 1<br />
Investment Summary<br />
5. Project Geology (after Collins 2003, Swager 1994)<br />
5.1 Ora Banda Sequence at Comet Vale<br />
Mafic-ultramafic volcanic rocks in the Comet Vale area are a continuation of the lower part of the Ora Banda<br />
Sequence, though generally with reduced thickness.<br />
The mafic-ultramafic volcanics at Comet Vale is divided into three formations that are correlated with the<br />
Missouri Basalt, Walter Williams Formation and Siberia Komatiite.<br />
Only the Missouri Basalt and Walter Williams Formations outcrop in the vicinity of and along strike from the<br />
Sand Queen – Gladsome mine.<br />
The Wongi Basalt at the base of the Ora Banda Sequence is not apparent as outcrop within the project area,<br />
however younger formations may underlie the eastern part of the project area.<br />
The Missouri Basalt is the basal formation in the Comet Vale area consists of massive, fine to medium-grained<br />
metabasalt having a possible thickness in the vicinity of 500-1000m. The Missouri Basalt is conformably<br />
overlain to the east by ultramafic rocks of the Walter Williams Formation (Table 2).<br />
The Missouri Basalt may be divided into two distinct units, the upper and lower basalt. The boundary<br />
between them being about 200m below (and structurally above) the boundary of the Walter Williams<br />
Formation (Holla 2001). The Walter Williams Formation is dominated by serpentenised dunite and minor<br />
peridotite that outcrop east of the Goldfields Highway.<br />
The boundary between the Missouri Basalt and Walter Williams Formation appears to be a zone of shearing in<br />
talc-carbonate-chlorite altered ultramafics.<br />
5.2 Granitic Rocks<br />
There are two granitoids within the Comet Vale area.<br />
1. The Goongarrie Monzogranite forming the western margin of the Menzies Greenstone belt and<br />
underlying the western part of the project area.<br />
2. The Comet Vale Monzogranite, is a late tectonic granitoid that has intruded the greenstone belt<br />
intersecting the eastern margin of the Googarrie Monzogranite. This granitoid is circular in shape and<br />
truncates the mafic-ultramafic volcanic sequence in the northern part of the project area.<br />
The basaltic sequence has been intruded by several narrow porphyry dykes (or sills) that are generally subparallel<br />
to the stratigraphy. Most of these porphyry dykes occur at the top of the Missouri Basalt within some<br />
60m of its boundary with the overlying Walter Williams Formation, however some narrow dykes occur in the<br />
Walter Williams Formation.<br />
5.3 Structural Geology<br />
Comet Vale is on the western limb of the regional-scale north-south trending. Googarrie-Mt Pleasant<br />
anticline. The Googarrie Monzogranite is in the core of this south-plunging anticline, enclosed by rocks of<br />
the Ora Banda Domain. The mafic-ultramafic rocks of the Comet Vale Area are therefore part of the same<br />
sequence that is host to the Grants Patch, Ora Banda and Mt Pleasant gold mining centres on the southern and<br />
western limbs of this anticline (Figure 4).<br />
Close to its southern margin emplacement of the late-tectonic Comet Vale Monzogranite has caused distortion<br />
of the Missouri Basalt and Walter Williams Formation from a NNW-SSE trend to a more NW-SE trend. The<br />
Siberia komatiite appears to have been deflected in the opposite direction resulting in a NE-SW trend.<br />
Emplacement of the monzogranite appears to have been accommodated by faults and shear zones that are subparallel<br />
to the contact between the granitoid and the greenstone belt. These WNW-ESE-trending structures<br />
host some of the smaller gold deposits in the Comet Vale area, namely the Happy Jack, Lake View and Lady<br />
Margaret mines (Witt, 1990).<br />
In contrast, the largest gold deposit at Comet Vale, the Sand Queen-Gladsome mine, occurs in a NNW-SSE<br />
trending, steeply-west dipping structure which is sub-parallel to the boundary between the Missouri Basalt<br />
and Walter Williams Formation. Although the exact nature of this structure is not known it is not thought to<br />
be related to the emplacement of the Comet Vale Monzogranite.<br />
Page 24
6. Past Exploration up to 1998<br />
The initial discovery of gold in the area<br />
was made in 1893 with gold mining<br />
continuing in the Comet Vale area until<br />
the early 1900’s.<br />
Between 1935 and 1936, the West<br />
Australian Department of Mines carried<br />
out surface and underground drilling<br />
in an attempt to locate extensions or<br />
additions to the Comet Vale lode, however<br />
no significant gold intersections were<br />
reported.<br />
In 1965, Western <strong>Mining</strong> Corporation<br />
Ltd (“WMC”) explored the ultramafic<br />
successions to the east of the Comet Vale<br />
Lode for nickel mineralisation, there are<br />
no records of their exploration results.<br />
Between 1970 and 1985, the Comet Vale<br />
project was investigated by Minplex<br />
Resources Ltd on behalf of a consortium<br />
comprising Valiant Consolidated Ltd.,<br />
Queen Margaret Gold Mines NL and<br />
Spargos Exploration NL. During this<br />
period both ground and airborne<br />
magnetic surveys were carried out,<br />
together with the drilling of 251 RAB and<br />
10 RC holes.<br />
Between 1986 and 1988, Aberfoyle carried<br />
out a program of geochemical sampling,<br />
RAB and RC drilling, over projected<br />
extensions of the Comet Vale lode and<br />
Happy Jack Lake View shears.<br />
During the 1980’s, Conex explored a<br />
group of mineral claims surrounding<br />
the Lady Margaret and Lady Mack gold<br />
workings. A total of 21 RAB holes were<br />
Figure 4. Structural Geology<br />
drilled. Also during the 1980’s, Delta<br />
Gold NL and JV partner BP Minerals<br />
Australia Pty Ltd drilled 94 holes over several prospecting licences west of the project area (south of Coonega)<br />
and northeast of the main Comet Vale mine leases. Delta Gold also completed 19 follow-up RAB holes. The<br />
results of this work are not known.<br />
Between 1985 and 1988, Hill Minerals NL evaluated the Coonega mine workings, completing 32 RC drill<br />
holes and one diamond drill hole.<br />
Between 1988 and 1989; and 1991 to 1993, Valiant Consolidated Limited completed six diamond drill holes<br />
and five wedges to evaluate the main Comet Vale lode in the vicinity of the Sand Queen-Gladsome mine.<br />
Between 1989 and 1991, Ashton Gold (WA) Ltd explored the Comet Vale lode at the Sand Queen – Gladsome<br />
mine completing ground magnetics and a geochemical survey. Eight RC and one deep diamond drill hole<br />
were completed.<br />
Between 1993 and 1998, Destra Corporation Ltd completed 115 RAB holes to the north of the project area,<br />
148 RAB holes surrounding the Coonega deposit, 6 RC holes over the Coonega East gold workings, northeast<br />
of the Sand Queen mine, 6 RC holes along projected extensions of the Comet Vale lode, 39 RC holes north<br />
Page 25
Section 8<br />
Independent Geologist’s Report<br />
and south of the Sand Prince mine workings, 13 RC holes over the Sand Queen East gold in soil anomaly, one<br />
diamond drill hole to evaluate the southern plunge of the Comet Vale lode, one RC hole and two diamond<br />
drill holes at Coonega.<br />
7. Exploration by Reed Resources Ltd ( 1998 – 2007)<br />
In September 1998, Mr David Reed acquired Destra Corporation’s 100% interest in the Comet Vale project.<br />
Since that time exploration has been directed at defining extensions to, or repetitions of, the Sand Queen-<br />
Gladsome gold mineralisation. This exploration program has met with a great deal of success, with the<br />
identification of new zones of gold mineralisation that have significantly added to Reed Resource’s resource<br />
inventory.<br />
7.1 Exploration 1998 – 2002 (after Collins, PLF)<br />
1999: Two deep diamond drill holes (CV11 and CV12) with RC pre-collars (DRC1, 2) were drilled in July-<br />
August 1999 to test for possible depth extensions of the Comet Vale lode to the north of the Gladsome<br />
mine. A third RC drill hole (DRC3) was drilled to test a gold in soil anomaly at the Sand Queen East<br />
prospect.<br />
2000: Exploration focused on prospective ground to the south of the Sand Queen-Gladsome mine, with<br />
5,983m of drilling in 66 RC percussion drill holes (DRC4-DRC69). This work resulted in the discovery<br />
of two, closely-spaced, sub-parallel, high-grade gold lodes, referred to as the ‘Sand George prospect, and<br />
centred about 300m south of the Sand Queen shaft. Preliminary tonnage and grade estimates indicated<br />
a resource of the order of 115,000 tonnes grading 12g/t Au.<br />
2001: Exploration included an evaluation of the results of the 1999-2000 drilling programs along the<br />
Gladsome-Sand Queen-Sand George-Sand Prince ‘line’ of lodes, 3-D geological modelling of the Sand<br />
George lode, and an estimation of a mineral resource. Resource modelling indicated 85,549 tonnes<br />
grading 14.2g/t Au in the main Sand George lode. Environmental and hydro-geological studies were<br />
completed in preparation for dewatering of the Sand Queen main shaft.<br />
2002: Surface exploration focused on the Sand George deposit and the potential for repetition of highgrade<br />
lodes elsewhere along the Comet Vale lode structure. In addition a comprehensive data base<br />
was established for all current and previous exploration. Work commenced on dewatering and<br />
rehabilitation of the Sand Queen main shaft to gain underground access to source any remnant ore, for<br />
geological mapping, and to assess use of the shaft as a means of underground access to the Sand George<br />
deposit.<br />
7.2 Exploration 2003 – 2007 (after Potter, D)<br />
2003: Dewatering and rehabilitation of the Sand Queen main shaft to below No. 4 Level was completed and<br />
geological mapping/sampling of the 4 Level south drive revealed a change in structural position of the<br />
lode below 4 Level. Infill RC drilling at the southern end of the Sand Queen identified an Indicated<br />
Mineral Resource of 6,500 tonnes at 19.7g/t Au (4,100 ounces of contained gold). Exploration of the<br />
Comet Vale lode structure at the Sand George prospect included diamond drilling to test the deeper<br />
lode positions, re-assessment of the geological model, and recalculation of the Mineral Resource<br />
(155,000 tonnes at 11.6g/t Au, 58,052 ounces gold). Drilling also identified a shallow, flat-lying<br />
structure referred to as the Sand Prince West lode with a resource (undefined) of 77,000 tonnes grading<br />
3.9g/t Au.<br />
2004: Exploration at the Comet Vale project during 2004 continued to target the area’s gold potential with<br />
most of the work being confined to M29/52 and M29/321. Most exploration has focussed on definition<br />
of a mineable resource at the Sand George deposit together with an evaluation of various mining<br />
options for feasibility studies for development of a mine. A new resource of 205,160 tonnes grading<br />
10.6g/t for 70,000 ounces was calculated using a 2g/t cut-off grade.<br />
2005: Development focussed on Sand Prince West where a total of 93 RC holes were drilled and a resource of<br />
34,881t grading 2.94g/t for 3,300 ounces was defined.<br />
2006: Exploration at the Comet Vale project during 2006 involved:<br />
Page 26
1. Proving up gold resources to the south and west of the Sand George lodes (M29/52 and M29/233)<br />
2. First pass drilling at Sand Duke (M29/198).<br />
3. Defining further gold targets through mapping (M29/197).<br />
4. Surveying of old workings and installing survey control at Lady Margaret (M29/197 and<br />
Lake View (M29/85).<br />
5. Further evaluating the nickel/copper sulphide potential to the east. (M29/85, 186, & 235).<br />
6. Undertaking of detailed aeromagnetic and gravity surveys over the tenure.<br />
7. Continued collation of historical data.<br />
8. Environmental survey of the western tenure (M29/35, M29/197, M29/198, M29/232 and M29/233).<br />
Comet Vale exploration data base<br />
During 2006/2007, significant work has taken place to locate, evaluate and validate previous exploration data.<br />
This data is in the process of being compiled into a single data base now managed by Reed Resources.<br />
All data files have been updated with the results from the 2006 work campaigns.<br />
Sand Prince Prospect<br />
Assays of the quartz lode intersections returned some high-grade gold intervals with assays in excess of 10g/t<br />
Au, including:<br />
• 1m @ 15.24g/t Au from 93m in JVC001, within 3m @ 6.32g/t (92-95m)<br />
• 1m @ 17.30g/t Au from 20m in JVD001<br />
• 0.98m @ 14.02g/t Au in JVD003 (155.29-156.28)<br />
The mineralisation remains open at depth (400m) and along strike to the south where previous shallow<br />
drilling intercepted 1m @ 4.2g/t Au a further 400 metres south and 1m @ 7.3g/t Au and 1m @ 6.3g/t Au in the<br />
same hole 800 metres further south of the <strong>Kingsrose</strong> JV boundary. A further 1.5 km of the Comet Vale shear<br />
that hosts the Sand Queen/Sand George gold mineralisation remains untested.<br />
A diamond drill hole targeted to infill between previously drilled intersections of the Sand George lodes<br />
intersected the SG1 and SG2 lodes below the current mine (JVD006). Further drilling to test the depth<br />
potential of both the Sand Queen and Sand George lodes will be undertaken from planned underground<br />
development.<br />
A new resource estimate was reported by Reed Resources for the Sand George and Sand Queen lodes as<br />
follows. After review I have adopted these resource figures.<br />
Tonnes Grade Ounces<br />
Previous Indicated 146,000 12.1 57,300<br />
Previous Inferred 149,600 11.9 57,360<br />
Previous Total Resource 295,600 12.0 114,660<br />
Increase in Indicated 44,498 12.0 17,104<br />
Increase in Inferred 20,107 7.4 4,754<br />
Total Increase 64,605 10.5 21,858<br />
New Indicated 190,498 12.1 74,404<br />
New Inferred 169,707 11.4 62,114<br />
New Total Resource 360,205 11.8 136,518<br />
NB: To comply with JORC guidelines this resource has been rounded to :-<br />
360,200 tonnes grading 12g/t Au for 136,500 ounces<br />
Page 27
Section 8<br />
Independent Geologist’s Report<br />
Figure 5. Sand Queen Mine – Longitudinal Section<br />
Page 28
Table 3.<br />
Significant Results<br />
The successful completion of the Comet Vale Resource Extension drilling program has doubled the strike<br />
extent of the Sand George resource.<br />
The Resource Extension drilling has extended the potential reserves for a further 500m, down to a vertical<br />
depth of 250m with significant drill intersections being made at depths up to 400 metres below ground level.<br />
A new lode of 8m @ 3.60g/t Au was intercepted beneath the Sand Prince West orebody in the precollar of<br />
JVD006 which was planned to test depth continuity of the Sand George orebodies.<br />
Mineralised wide lode intersections which contain narrow high-grade intervals with assays in excess of 15g/t<br />
Au include:<br />
• 3m @ 6.32g/t Au (92-95m) including 1m @ 15.24g/t Au (JVC001)<br />
• 1m @ 17.30g/t Au (20-21m) (JVD001)<br />
Hole ID Collar Collar Interval Interval Intersection Grade<br />
Northing Easting From (m) To (m) Width (m) (g/t Au)<br />
JVC001 13100 7770 92 95 3 6.32<br />
including 93 94 1 15.24<br />
JVC002 13075 7810 53 54 1 4.2<br />
JVC004 13025 7800 75 75.3 0.3 4.55 @ BOH<br />
JVD 12950 7800 20 21 1 17.3<br />
JVC005 12850 7825 38 39 1 3.54<br />
JVD006 13000 7600 42 50 8 3.60<br />
8. Development Budget<br />
including 48 49 1 13.64<br />
The table below shows a summary of the budgeted, expenditure items for the next 2 years mine development<br />
at the Sand Queen Gold Mine.<br />
2 Year Summary of level Development<br />
4L<br />
5L<br />
Total Metres<br />
Total Millholes<br />
732 m<br />
522 m<br />
1,394 m<br />
23 units<br />
Infrastructure for 2 Years of Development<br />
Level and Rising Development $ 1,882,210<br />
Shaft Refurishment 3L to 5L $ 75,000<br />
Winder (Purchase, Install and Commission) $ 200,000<br />
Diamond Drilling (New Rig and Diamond Drill Cuddies) $ 95,395<br />
Truck/Bogging (Locomotive and Boggers) $ 41,000<br />
Power/Ventilation/Pumps $ 218,000<br />
Total Expenditure $ 2,511,605<br />
Page 29
Section 8<br />
Independent Geologist’s Report<br />
9 . Conclusions<br />
The Comet Vale project is located in an area that has a history of gold mining dating back to 1893.<br />
Between 1904-1948, the Sand Queen-Gladsome lodes produced some 192,000 ounces of gold from 253,154<br />
tonnes of ore at an average grade of 23.5g/tAu.<br />
The current total Indicated and Inferred Resources are 360,200 tonnes grading 12g/t for 136,500 ounces of<br />
gold.<br />
The Sand Queen/Sand George lodes, are open both to the north and south and to depth of at least 400 metres.<br />
Development faces have advanced into ore zones and at least 10,000 tonnes of ore can now be accessed for<br />
mining from these faces.<br />
Directly below the current mine workings, exploratory drilling has intersected significant gold mineralisation<br />
in overlapping lodes, namely 2.45m grading 28.55g/tAu, 3m grading 14.14g/tAu and 1m grading 9.96g/tAu at<br />
depths of between 350m and 400m below ground level.<br />
Along strike to the north, drill investigation below the Sand Queen-Gladsome lodes returned the following.<br />
From RD9, 1m grading 15.45g/tAu, CV1W2, 0.4m grading 21.5g/tAu, and CV2W1, 0.25m grading 5.26g/tAu.<br />
10. Bibiography<br />
Collins, P.L.F., 1999. Assessment of the potential for lateritic nickel mineralisation at Comet Vale.<br />
Unpublished report David J. Reed.<br />
Collins, P.L.F., 2000a. Comet Vale project annual report for the year ending 31 December 1999. M29/52,<br />
GML29/6196, M29/35, P29/1374 and E29/163. Unpublished report David J. Reed.<br />
Collins, P.L.F., 2000b. Coonega mine status report, M29/35, Comet Vale, Western Australia.<br />
Unpublished report David J. Reed<br />
Collins, P.L.F., 2001a. Comet Vale project annual report for the year ending 31 December 2000.<br />
M29/52,GML29/6196, M29/1374 and E29/163. Unpublished report David J. Reed.<br />
Collins, P.L.F., 2001b. Comet Vale project. Summary of gold exploration 1999 - 2000.<br />
Unpublished report David J. Reed.<br />
Collins, P.L.F., 2002. Comet Vale project annual report for the year ending 31 December 2001.<br />
M29/52,GML29/6196, M29/35, P29/1374 and E29/163. Unpublished report David J. Reed.<br />
Collins, P.L.F., 2003. Comet Vale project annual report for the year ending 31 December 2002. M29/52,<br />
GML29/6196, M29/35, P29/1374 and E29/163. Unpublished report Reed Resources Ltd.<br />
Collins, P.F.F., 2004. Comet Vale project annual report for the year ending 31 December 2003. M29/52,<br />
GML29/6196, M29/35, P29/1374 and E29/163. Unpublished report Reed Resources Ltd.<br />
Collins, P.L.F., 2005. Comet Vale project annual report for the year ending 31 December 2004. M29/52,<br />
GML29/6196, M29/35, P29/1374 and E29/163. Unpublished report Reed Resources Ltd.<br />
Costello, P.G., 2004. Report on Comet Vale (eastern tenements) geological mapping/rock chip sampling,<br />
exploration data review and current proposals. Alverna Resources Pty Ltd.<br />
Unpublished report Reed Resources Ltd.<br />
Davis, G., 2003. Resource report, Comet Vale project, Eastern Goldfields region Western Australia.<br />
Unpublished report Reed Resources Ltd.<br />
Hill, D.B. and Bird P., 1990. Sand King Gold Deposit. Geology of the mineral deposits of Australia and Papua.<br />
The Aus.IMM.<br />
Holden, D.J., Archibald, N.J., Utley, D.C. and Collins, P.L.F., 2000. 3 dimensional geological modelling of the<br />
Sand Queen prospect, Comet Vale, Eastern Goldfields, Western Australia.<br />
Unpublished report Fractal Graphics, Report 00-003/1.<br />
Page 30
Holla, L.A., 2001. Geological setting of gold mineralisation at the Sand Queen - Gladsome mine, Comet Vale,<br />
Western Australia. Curtin University Hons dissertation, unpublished. 176p.<br />
Jeffery, R.G., 2004a. procedural report on infill drilling programme at the Sand George prospect,<br />
November 2003 to December 2003, <strong>Mining</strong> Lease M29/25. Jeffery & Associates.<br />
Unpublished report Reed Resources Ltd.<br />
Jeffery, R.G., 2004b. Procedural report on extension drilling programme at the Sand George prospect,<br />
May 2004 to June 2004, <strong>Mining</strong> Lease M29/25. Jeffery & Associates.<br />
Unpublished report Reed Resources Ltd.<br />
Mein, E.S., 2001. Sand Queen conceptual mining study. Ted Mein & Associates.<br />
Unpublished report David J. Reed.<br />
Mein, E.S., 2003. Annual environmental report Comet Vale operations. Ted Mein & Associates.<br />
Unpublished report Reed Resources Ltd.<br />
Miles, K.R., 1944. Scheelite deposits in the central Goldfields, Western Australia. Report of the Government<br />
Geologist for the year 1943. Department of Mines, Western Australia. P. 25-29.<br />
Paterson, P., 2000. A geological interpretation of the Sand Queen line of mineralisation and an estimation<br />
of available ore grade gold mineralisation in the new discovery (unofficially named the Sand George).<br />
Unpublished report David J. Reed.<br />
Paterson P., 2001. Report on RC drilling program mining lease M29/52. Unpublished report David J. Reed.<br />
Potter, D.S. 2006. Comet Vale project annual report for the year ending 31 December 2004. M29/52,<br />
GML29/6196, M29/35, P29/1374 and E29/163. Unpublished report Reed Resources Ltd.<br />
Swager, C.P., 1994. Geology of the Menzies 1:100,000 sheet. Geol Survey Western Australia 1:100,000 series<br />
Explanatory Notes.<br />
Wesley, G., 2003. Genesis of lode gold mineralisation at the Sand George deposit, Comet Vale,<br />
Western Australia. Curtin University Hons dissertation, unpublished. 172p.<br />
Witt, W.K., 1993. Gold deposits of the Menzies and Broad Arrow areas. Geol Survey Western Australia<br />
Record 1992/13, p:67-76.<br />
11. Glossary<br />
A horizon<br />
AAS<br />
Adelaidean<br />
Aeolian<br />
Aerial Photography<br />
Aeromagnetics<br />
Alluvial<br />
Alluvium<br />
Alteration Zone<br />
Altered<br />
Amphibolite<br />
Amygdaloidal<br />
Andesite<br />
Ankerite<br />
Upper layer in soil section containing organic matter.<br />
Atomic absorption spectrometer; a method of assaying rocks and minerals.<br />
The youngest part of the Proterozoic period, about 1,400 to 600 million years<br />
ago.<br />
Applied to deposits transported by the wind.<br />
The taking of air photos for surveying or other purposes.<br />
Measurement of the earth’s magnetic field from an aircraft for the purpose of<br />
recording magnetic characteristics of rocks<br />
Referring to unconsolidated stream sediments of relatively young geological age.<br />
Gravel and sediment found along rivers and creeks.<br />
Zone within which rock forming minerals have been chemically changed.<br />
Referring to physical or chemical change in a rock or mineral subsequent to this<br />
formation.<br />
A metamorphic rock composed mainly of amphibole.<br />
A general name for volcanic rocks containing gas cavities filled with secondary<br />
minerals.<br />
A volcanic rock containing little or no quartz and composed of feldspar and one<br />
or more mafic minerals.<br />
Iron rich dolomite.<br />
Page 31
Section 8<br />
Independent Geologist’s Report<br />
Anomalous<br />
Anomaly<br />
Anticline<br />
Antiform<br />
Archaean<br />
Arkose<br />
Arsenic<br />
Arsenopyrite<br />
Assay<br />
ASX<br />
Auger<br />
Auriferous<br />
Background Values<br />
Basalt<br />
Base metal<br />
Basement<br />
Base volcanics<br />
Basin<br />
Bedding<br />
Bedrock<br />
Belt<br />
BIF<br />
BLEG<br />
Calcareous rock<br />
Calcite<br />
Calcrete<br />
Carbonate<br />
Carpentarian<br />
Cassiterite<br />
Chalcopyrite<br />
Channel Sample<br />
Chert<br />
Chromite<br />
Clastics<br />
Colluvium<br />
Complex<br />
Composite soil sampling<br />
Having statistically significant higher or lower values.<br />
A portion of an area surveyed which is different in appearance from the area<br />
surveyed in general or containing higher or lower values than considered normal.<br />
An upward fold of the rock formation.<br />
Upward arching fold for which stratigraphic sequence is unknown.<br />
The oldest rocks of the earth’s crust – older than 2,400 million years.<br />
Feldspar rich sandstone.<br />
A mineral, the native element, occurring in grey masses.<br />
Arsenic iron sulphide material.<br />
An examination of a mineral, ore or alloy to determine certain of its ingredients.<br />
Australian Stock Exchange.<br />
A screw-like drill designed to provide shallow soil or soft rock samples.<br />
Containing gold.<br />
Average abundance of an element in an area where the concentration is not<br />
anomalous.<br />
A fine grained dark igneous rock, generally extrusive, composed of half feldspar<br />
and half mafic minerals.<br />
Non precious metal. Commonly used to refer to copper, lead and zinc.<br />
Crustal layer of rock beneath the sedimentary strata.<br />
Rocks of volcanic origin comparatively low in silica and rich in mafic minerals.<br />
A depression of large size in which sediments have accumulated.<br />
Arrangement of individual beds or layers.<br />
The solid rock underlying soil, alluvium, laterite, etc.<br />
A zone or a band of a particular kind of rock strata exposed on the surface.<br />
Banded Iron Formation. Tabular rock body usually consisting of alternating<br />
bands of quartz and iron rich minerals.<br />
Bulk leach extractable gold; chemical method of estimating the gold content of<br />
soil samples by cyanide extraction.<br />
Sedimentary rock containing substantial amounts of calcium carbonate.<br />
Calcium carbonate.<br />
Superficial gravels cemented by calcium carbonate.<br />
Common mineral type consisting of carbonates of calcium, iron and/or<br />
magnesium.<br />
The middle part of the Proterozoic period.<br />
Naturally occurring oxide of tin.<br />
Copper iron sulphide material.<br />
A continuous channel cut to a specified length in a rock exposure to provide a<br />
sample for assay purposes.<br />
Dense flinty rock composed almost wholly of silica.<br />
Iron-chromium oxide mineral.<br />
Sediments derived from erosion of pre-existing rocks.<br />
Loose and incoherent deposits usually at the foot of a slope and transported there<br />
by gravity.<br />
An assemblage of related rock that have been intricately mixed or otherwise<br />
complicated.<br />
Method of analysing soil samples whereby an aggregate of two or more samples<br />
are assayed together.<br />
Page 32
Conduits<br />
Conglomerate<br />
Country rock<br />
Craton<br />
Cumulate<br />
Deformation<br />
Deposition<br />
Diamond drilling<br />
Diorite<br />
Dip<br />
Displacement<br />
Disseminated<br />
Distal<br />
DoIRE<br />
Dolerite<br />
Down dip<br />
Dragfold<br />
Drainage<br />
Dyke<br />
EL(A)<br />
Electromagnetic survey<br />
(EM)<br />
EM<br />
Epidote<br />
Epigenetic<br />
Epithermal<br />
Extrusive<br />
Facies<br />
Fault<br />
Feldspar<br />
Felsic<br />
Fold<br />
Foliation<br />
Fracturing<br />
g/t<br />
Gabbro<br />
Galena<br />
Channelways.<br />
A sedimentary rock containing large rounded rock fragments.<br />
The enclosing rock around a body of ore.<br />
A relatively immobile part of the earth’s crust, generally of a large size.<br />
Rocks in layered igneous intrusions which appear to have formed by the<br />
accumulation of crystals.<br />
Process by which rocks are folded or faulted.<br />
The precipitation of mineral matter from solution.<br />
Method of obtaining a cylindrical core of rock by drilling with a diamond<br />
impregnated bit.<br />
Coarse-grained intrusive rock of intermediate composition.<br />
The angle at which layered rocks, foliation, a fault, or other planar structures, are<br />
inclined from the horizontal.<br />
Relative movement of the two sides of a fault.<br />
Mineral grains scattered throughout host rock.<br />
Sediments formed far from the source area.<br />
Department of Industry, Resources and Environment<br />
Medium-grained crystalline basalt.<br />
Direction which is most likely downwards on a lithological structure or surface.<br />
Any fold that is a subsidiary part of a large fold.<br />
The process of discharge of water from an area by stream or sheet flow and<br />
removal of excess water from soil by downward flow.<br />
Tabular igneous intrusion cutting across the bedding or other planar structures in<br />
the country rocks.<br />
Exploration licence (application).<br />
Method of measuring the alternate magnetic fields associated with electrical<br />
currents artificially or naturally maintained in the subsurface.<br />
Electromagnetic survey.<br />
Calcium aluminium silicate mineral.<br />
A mineral deposit formed later than the enclosing rock.<br />
Mineral deposit formed in faults and fractures, mainly in volcanic rocks within<br />
about 1km of the Earth’s surface, from low temperature hydrothermal fluids.<br />
Igneous rocks that have flowed out onto the Earth’s surface.<br />
The general appearance or nature of one part of rock body as contrasted with<br />
other parts.<br />
A fracture in rocks along which rocks on one side have been moved relative to<br />
the rocks on the other. The movement may provide a channel for the passage of<br />
mineral bearing solutions.<br />
A very abundant group of rock-forming silicate minerals in which calcium,<br />
sodium and potassium are in combination with aluminium.<br />
Fine grained igneous rocks with a very low content of mafic minerals.<br />
A bend in rock strata.<br />
Laminated structure in rocks resulting from the parallelism of the constituent<br />
minerals or by segregation of different minerals into layers.<br />
Natural or induced breaks in a rock which enhance its reservoir properties.<br />
Grams per tonne – measure of gold content of rock or sample.<br />
Coarse grained dark igneous rock of similar composition to basic volcanics.<br />
Lead sulphide mineral.<br />
Page 33
Section 8<br />
Independent Geologist’s Report<br />
Page 34<br />
Geochemical surveys<br />
Geophysical surveys<br />
Gossan<br />
Grade<br />
Granite<br />
Grassroots<br />
Gravity survey<br />
Greenstone<br />
Greywacke<br />
Heavy Minerals (HM)<br />
Host rock<br />
Hydrothermal alteration<br />
Hydrothermal gold<br />
Igneous<br />
Illite<br />
Illmenite<br />
Indicated Resource<br />
Inferred Resource<br />
Interbedded<br />
Intersection<br />
Intracratonic<br />
Intrusive<br />
IP Induced polarisation<br />
JORC code<br />
Kimberlite<br />
km<br />
km²<br />
Komatiite<br />
Lag<br />
Landsat<br />
Laterite<br />
The application of methods and techniques of geochemistry, such as soil and rock<br />
sampling, in the search for minerals.<br />
The exploration of an area in which physical properties (e.g., resistivity,<br />
conductivity, magnetic properties) unique to the rocks in the area are<br />
quantitatively measured by one or more geophysical methods.<br />
Rust coloured oxidised or weathered capping or staining of a mineral deposit<br />
generally formed by the decomposition of metallic sulphides.<br />
Quantity of gold or other metal per unit weight of host rock or sample.<br />
Coarse grained igneous crystalline rock with a high silica content.<br />
Mineral exploration program in an area not previously tested for the mineral<br />
sought or exploration undertaken before drilling targets have been identified.<br />
Survey in which measurements are made of the earth’s gravity. The differences<br />
between measured and theoretical gravity values are used to plot gravity highs<br />
and lows.<br />
Field term for any fine grained mafic igneous rock.<br />
Sedimentary rock composed of fragments which are poorly sorted with respect to<br />
size and shape.<br />
Minerals with a high specific gravity.<br />
Rock containing mineralisation.<br />
The alteration of rocks caused by circulating fluids.<br />
Gold deposited from hot fluids.<br />
Rocks formed by solidification from the molten state.<br />
A general name for a group of clay minerals intermediate in composition and<br />
structure between muscovite and montmorillonite.<br />
An iron-black, opaque mineral, the principal ore of titanium and the principal<br />
component of heavy mineral sands deposits.<br />
A resource sampled by drill holes, underground openings, or other sampling<br />
procedures at locations too widely spaced to ensure continuity but close enough<br />
to give a reasonable indication of continuity on geological evidence.<br />
An estimate of the extent of mineralisation, inferred from the broad geological<br />
character such as drill holes, underground openings, or other sampling<br />
procedures and before testing and sampling information is sufficient.<br />
Occurring between beds.<br />
Portion of a drill hole which passes through mineralisation or a feature of<br />
exploration interest.<br />
Situated within a stable continental region.<br />
A rock that has intruded previously existing rocks.<br />
Method of ground geophysical surveying which employs the passing of an<br />
electrical current into the ground to test for indications of conductive metallic<br />
sulphides.<br />
The Australian code for reporting of mineral resources and ore reserves.<br />
Brecciated ultrabasic rock of distinctive composition with which diamonds may<br />
be associated.<br />
Kilometre.<br />
Square kilometres.<br />
A high magnesium ultramafic rock of Archaen age with characteristic texture.<br />
Accumulation of hard rock fragments on the surface after the removal of finer<br />
material by wind or water; a loose aggregate.<br />
Satellite which provides multi-spectral imagery of the earth’s surface.<br />
Iron rich residual surface rock capping.
Lava<br />
Limestone<br />
Lineament<br />
Lithological<br />
Lode<br />
m<br />
Ma<br />
Rock formed from molten material ejected by a volcano.<br />
Carbonate rock.<br />
Long major topographic feature commonly resulting from a fault.<br />
Pertaining to the type of rock.<br />
Tabular or vein like deposit of valuable mineral between well defined walls.<br />
Metre(s)<br />
Million years.<br />
Mafic<br />
Referring to igneous rocks composed dominantly of iron and magnesium<br />
minerals.<br />
Magnetite<br />
A mineral; oxide of iron that is magnetic.<br />
Malachite<br />
A hydrated copper carbonate mineral.<br />
Massive<br />
Containing no (or very few) planar structures.<br />
Massive Sulphides A mass of rock consisting of greater than 40% sulphides.<br />
Measured Resource That part of a mineral resource for which Tonnage, grade etc. are estimated with a<br />
high level of confidence.<br />
Metamorphic Facies A group of metamorphic rocks characterized by particular mineral associations<br />
indicating origin under restricted temperature-pressure conditions<br />
Metamorphic Grade The grade of metamorphism depends upon the extent to which the metamorphic<br />
rock differs from the original rock from which it was derived.<br />
Metamorphism<br />
Alteration and recrystallisation of rocks because of heating or application of<br />
pressure or both.<br />
Metasediments<br />
Partly metamorphosed sedimentary rocks.<br />
Metasomatism<br />
A metamorphic change which involves the introduction of material from an<br />
external source. Whether or not there is a corresponding amount of material<br />
expelled depends on the conditions.<br />
Mineralisation<br />
The concentration of metals and their chemical compounds within a body or<br />
rock.<br />
MMI<br />
Mobile Metal Ion technology is based on partial extraction of metals from the soil<br />
and is recognised reconnaissance soil sampling method.<br />
Monzonite (Monzogranite) A granular plutonic rock containing equal amounts of orthoclase and plagioclase<br />
and intermediate between syenite and diorite.<br />
Moz<br />
Million ounces.<br />
Mt<br />
Million tonnes.<br />
Mtpa<br />
Million tonnes per annum.<br />
NA<br />
Not available.<br />
Olivine<br />
An important rock-forming mineral, especially in mafic and ultramafic rocks.<br />
Ore<br />
Mineral bearing rock that can be (or has been) mined and treated.<br />
Orogeny<br />
Process by which structures within foldbelt mountainous areas are formed.<br />
Orthomagmatic<br />
Crystallisation from a typical magma.<br />
Outcrop<br />
An exposure of bedrock at the surface or projecting through the overlying soil<br />
cover.<br />
Oxidised<br />
Near-surface decomposition by exposure to the atmosphere and groundwater.<br />
Oz<br />
Ounce(s).<br />
pa<br />
per annum.<br />
Palaeoproterozoic Ranges in age between Palaeozoic (570-227mya) and Proterozoic (most recent of<br />
two great divisions of Precambrian).<br />
Percussion drilling Method of drilling which utilises a hammering action under rotation to penetrate<br />
rock while the cuttings are forced to the surface by compressed air returning<br />
outside the drill rods.<br />
Page 35
Section 8<br />
Independent Geologist’s Report<br />
Peridotite<br />
Petrography<br />
Petrology<br />
PGE<br />
Polymetallic<br />
Porphyry<br />
ppb<br />
ppm<br />
Precious Metals<br />
Probable Reserve<br />
Proven Resource<br />
Pyrite<br />
Quartz<br />
Quartzite<br />
RAB<br />
Reconnaissance<br />
RC<br />
Regolith<br />
Residual<br />
Resource<br />
Rock-chip sampling<br />
Sandstones<br />
Secondary<br />
Sediment<br />
Shale<br />
Shear<br />
Sill<br />
Siltstone<br />
Soil sampling<br />
Source rocks<br />
SP Survey<br />
Splay<br />
Coarse grained plutonic rock composed mostly of olivine.<br />
The description and systematic classification of rocks by means of microscopic<br />
examination of thin sections.<br />
The branch of geology dealing with the origin, occurrence, structure and history<br />
of rocks.<br />
Platinum group elements.<br />
Mineral deposit containing a number of metals, a term usually applied to complex<br />
sulphide ores.<br />
A term first given to an altered variety of porphyrite because of its purple colour,<br />
now extended to all rocks containing phenocrysts in a fine grained or aphanatic<br />
groundmass.<br />
Parts per billion.<br />
Parts per million,<br />
A group of metals sold in bullion form including gold, silver and PGE’s.<br />
Is economically mineable part of indicated and in some circumstances Measured<br />
Mineral Resource.<br />
Is economically mineable part of Measured Mineral Resource.<br />
An iron sulphide mineral. Iron pyrites are sometimes called fool’s gold.<br />
Very common mineral composed of silica.<br />
A granular metamorphic rock consisting essentially of quartz.<br />
Rotary air blast drilling. Drilling where the cuttings are returned outside the drill<br />
stem and thus are liable to contamination from the walls rocks.<br />
A general examination or survey of a region with reference to its main features.<br />
Reverse circulation drilling. Drilling where the cuttings are returned inside the<br />
drill stem.<br />
Weathered portion of the land surface down to bedrock.<br />
Characteristic of, pertaining to, or consisting of, residuum. Remaining essentially<br />
in place after all but the least soluble constituents have been removed; said of the<br />
material eventually resulting from the decomposition of rock.<br />
Mineralisation to which conceptual tonnage and grade figures are assigned, but<br />
for which exploration data are inadequate to calculate geological reserves and/or<br />
to which mining parameters have not been applied.<br />
Obtaining a sample, generally for assay, by breaking chips off a rock face.<br />
Rocks composed principally of quartz sand grains.<br />
Formed as consequence of alteration of pre-existing minerals.<br />
Rocks formed of particles deposited from suspension in water, wind or ice.<br />
Sedimentary rock formed by the consolidation of mud or slit.<br />
Zone in which rocks have been deformed by lateral movement along innumerable<br />
parallel planes.<br />
Wall-like intrusion igneous rock that is concordant with the structure of older<br />
adjacent rocks.<br />
A very fine-grained consolidated clastic rock composed predominantly of slit<br />
grade.<br />
Collection of soil samples at a series of different locations in order to study the<br />
distribution of soil geochemical values.<br />
The geological formation in which oil, gas and/or other minerals originate.<br />
Spontaneous potential geophysical survey method.<br />
Divergent small faults at the extremities of large normal faults.<br />
Page 36
Stockwork<br />
Stratabound<br />
Stratigraphy<br />
Stream-sediment survey<br />
Strike<br />
Structure<br />
Sulphides<br />
Supergene<br />
Syngenetic<br />
Syncline<br />
Tectonic<br />
Tenement<br />
Tholeiite<br />
Thrust<br />
Titanium<br />
Transported Cover<br />
Tuff<br />
Tuffaceous sandstone<br />
Ultramafic<br />
Unconformity<br />
Upper Devonian<br />
Vanadium<br />
Vein<br />
VMS<br />
Volcanic<br />
Volcaniclastic<br />
Volcanogenic<br />
Weathering<br />
A network of, usually quartz veinlets diffused in the original rock.<br />
Confined within a particular strata.<br />
Study of stratified rocks, especially their age, correlation and character.<br />
Systematic sampling of sediments within drainage channels.<br />
The direction of bearing of a bed or layer of rock in the horizontal plane.<br />
The sum total of the structural features of an area.<br />
Minerals comprising a chemical combination of sulphur and metals.<br />
Mineral deposit or enrichment formed near the surface, commonly by descending<br />
solutions.<br />
Said of mineral deposits formed contemporaneously with and by the same<br />
process.<br />
A fold in rock strata that is concave upwards with a core of younger rocks.<br />
Of, pertaining to, designating the rock structure and external forms resulting from<br />
the deformation of the earths crust.<br />
Area of land defined by a government authority over which an applicant may<br />
conduct exploration of mining activity.<br />
A variety of basalt poor in alkalis and characterised by the presence of<br />
orthopyroxene in addition to calcic plagioclase and clinopyroxene. Tholeiitic<br />
basalt is the commonest lava on the ocean floor and in continental flood bas.<br />
Overriding movement of one crustal unit over another.<br />
Dark grey metallic element.<br />
Shallow soils, rocks and unconsolidated sediments derived from another source<br />
and not in situ.<br />
Compacted pyroclastic rock of cemented volcanic ash.<br />
Indurated sedimentary rock composed of sand grains derived from explosive<br />
volcanic activity.<br />
Referring to an igneous rock composed essentially of dark-coloured iron and<br />
magnesium minerals.<br />
A surface within a sedimentary sequence representing a break in the continuity of<br />
deposition.<br />
Upper part of the Palaeozoic between 400 to 345 mya.<br />
A grey or white, malleable, ductile, polyvalent metallic element.<br />
A narrow dyke-like intrusion of mineral traversing rock mass of different<br />
material.<br />
Volcanic hosted massive sulphide. Mineralisation associated with hyrothermal<br />
systems developed in volcanic and volcano-sedimentary rocks in a submarine<br />
setting.<br />
Class of igneous rocks that have flowed out of have been ejected at or near the<br />
Earth’s surface, as from a volcano.<br />
Descriptive of a clastic sediment containing material of volcanic origin.<br />
Formed by the process directly connected with volcanism.<br />
The group of processes that change the character and composition of rocks by<br />
decay.<br />
Page 37
Section 9<br />
Investigating Accountant’s Report<br />
31 October 2007<br />
The Directors<br />
<strong>Kingsrose</strong> <strong>Mining</strong> Limited<br />
Suite 3<br />
16 Kearns Crescent<br />
APPLECROSS WA 6153<br />
2nd floor, 35 Havelock Street,<br />
West Perth WA 6005<br />
Po Box 609, West Perth WA 6872<br />
Telephone: (08) 9322 2798<br />
Dear Directors<br />
INVESTIGATING ACCOUNTANT’S REPORT ON HISTORICAL AND<br />
PRO FORMA FINANCIAL INFORMATION<br />
1. Introduction<br />
This investigating accountant’s report has been prepared at your request to report on certain historical and<br />
pro forma financial information in respect of <strong>Kingsrose</strong> <strong>Mining</strong> Limited. The report has been prepared<br />
for inclusion in a prospectus ("the prospectus") to be dated on or about 31 October 2007 relating to the<br />
proposed issue by <strong>Kingsrose</strong> <strong>Mining</strong> Limited of 30,000,000 ordinary shares at 20 cents each to raise a total of<br />
$6,000,000.<br />
2. Basis of Preparation<br />
This investigating accountant’s report has been prepared to provide investors with information on historical<br />
results and assets and liabilities of <strong>Kingsrose</strong> <strong>Mining</strong> Limited. The historical and pro forma financial<br />
information is presented in an abbreviated form and does not include all of the disclosures required by the<br />
Australian Accounting Standards applicable to annual financial reports in accordance with the Corporations<br />
Act 2001. The financial information has been prepared in accordance with the Australian Equivalents to<br />
International Financial Reporting Standards (AIFRS). This report does not address the rights attaching to the<br />
securities to be issued in accordance with the prospectus, nor the risks associated with investment. Mack &<br />
Co has not been requested to consider the prospectus for <strong>Kingsrose</strong> <strong>Mining</strong> Limited, the securities on offer<br />
and related invoicing issues, nor the merits and risks associated with becoming a shareholder and accordingly,<br />
has not done so, nor purports to do so. Mack & Co accordingly takes no responsibility for these matters or for<br />
any matter or omission in the prospectus, other than responsibility for this report.<br />
3. Background<br />
The company was incorporated as <strong>Kingsrose</strong> Pty Ltd on 6 January 2005. On 25 October 2005 the company<br />
changed its name to <strong>Kingsrose</strong> <strong>Mining</strong> Pty Ltd. On 12 July 2007 the company converted from a private<br />
company to a public company with the name of <strong>Kingsrose</strong> <strong>Mining</strong> Limited and a new constitution.<br />
From 11 January 2005 to 25 May 2007 the company acted as trustee for the <strong>Kingsrose</strong> Unit Trust. On 25 May<br />
2007 the company was removed as trustee of the trust and was replaced by a new trustee.<br />
On and since incorporation and up to the date of this report the Company has issued the following shares:<br />
• Issue of 1 fully paid subscriber share on incorporation. This was redeemed on 10 January 2005.<br />
• Issue of 20 ordinary fully paid shares on 10 January 2005 for $20.<br />
• Issue of 8,800,000 fully paid ordinary shares on 3 October 2007 for $63,000.<br />
Page 38
Under the terms of an asset sale agreement dated October 2007 the Company will acquire certain assets and<br />
liabilities of the <strong>Kingsrose</strong> Unit Trust based on the financial statements prepared for the trust at 20 April<br />
2007 for a consideration of $10,000 to be satisfied by the issue of 20,000,000 fully paid ordinary shares in<br />
the Company. The agreement is subject to the seller obtaining the prior written consent of parties to a joint<br />
venture agreement to which the seller is a party to have the Company stand in its place and the Company<br />
completing a capital raising under the IPO prospectus and receiving conditional approval for admission to the<br />
official list of the Australian Securities Exchange by 31 December 2007 or such later date as the parties agree<br />
in writing. Details of the assets and liabilities the subject of this agreement are set out in appendix 1.<br />
Under the amended terms of the farm-in and joint venture agreement in order for <strong>Kingsrose</strong> to have a share of<br />
the tenement interests transferred to its name the joint venture must produce not less than 25,000 ounces of<br />
gold by 31 May 2009.<br />
The operations carried on by the Kingrose Unit Trust have continued from 20 April 2007 and have been<br />
accounted for from that date as if they were carried on by <strong>Kingsrose</strong> <strong>Mining</strong> Limited. The data set out in<br />
Appendix 2 under the heading “Unaudited 31 August 2007” is a summary of these operations for the period<br />
20 April 2007 to 31 August 2007 and the balance sheet as at 31 August 2007.<br />
4. Scope<br />
We have conducted an independent review of the following:<br />
4.1 The income statement of <strong>Kingsrose</strong> Unit Trust for the period from 11 January 2005 to 30 June 2005, the<br />
year ended 30 June 2006 and the period 1 July 2006 to 20 April 2007.<br />
4.2 The balance sheet of <strong>Kingsrose</strong> Unit Trust as at 30 June 2005, 30 June 2006 and 20 April 2007.<br />
4.3 The balance sheet of <strong>Kingsrose</strong> <strong>Mining</strong> Limited as at 31 August 2007 and the income statement from<br />
20 April 2007 to 31 August 2007 prepared on the basis that the company conducted the business for<br />
this period and had acquired the assets and assumed the liabilities set out in the asset sale agreement.<br />
4.4 The pro-forma income statement, balance sheet and statement of changes in equity of <strong>Kingsrose</strong> <strong>Mining</strong><br />
Limited at 31 August 2007 which adjusts these statements to include the financial effects of:<br />
(a) the proposed issue pursuant to the prospectus of 30,000,000 fully paid ordinary shares to raise<br />
$6,000,000.<br />
(b) the estimated capital raising costs of the issue of $400,000.<br />
(c) the issue on 3 October 2007 of 8,800,000 fully paid ordinary shares for $63,000 cash.<br />
(d) the proposed issue of $2,200,000 of convertible notes to retire loans owed by the company.<br />
(e) the proposed issue of 6,250,000 fully paid ordinary shares in satisfaction of $1,250,000 of loans owed<br />
by the company.<br />
(f) the proposed payment by cash from the proceeds of the issue of the balance of the loan accounts<br />
totalling $631,472.<br />
(g) the proposed payment by cash from the proceeds of the issue of the bank equipment loans of $251,212.<br />
(h) the proposed payment of the estimated stamp duty on the asset sale agreement of $144,000.<br />
The company data has been presented using the going concern basis. This basis assumes that expenses<br />
incurred and revenues earned in the ordinary course of business will be paid and received on a timely basis.<br />
Accordingly receivables and payables of this nature have not been included in the proforma adjustments listed<br />
above.<br />
All of the financial information referred to above has not been audited. The directors of <strong>Kingsrose</strong> <strong>Mining</strong><br />
Limited are responsible for the preparation and presentation of the historical and Proforma financial<br />
information including the determination of the pro-forma transactions.<br />
Our review has been conducted in accordance with Australian Auditing and Assurance Standard ASRE 2410<br />
and was limited to inquiries and discussions with the directors of <strong>Kingsrose</strong> <strong>Mining</strong> Limited, reading of<br />
directors minutes and relevant contracts, review of publicly available information and review of work papers,<br />
accounting records and other documents for <strong>Kingsrose</strong> <strong>Mining</strong> Limited and the <strong>Kingsrose</strong> Unit Trust.<br />
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Section 9<br />
Investigating Accountant’s Report<br />
Our review also determined whether the pro-forma transactions formed a reasonable basis for the preparation<br />
of the pro-forma balance sheet.<br />
These review procedures do not provide all the evidence that would be required in an audit, thus the level<br />
of assurance provided is less than that given in an audit. We have not performed an audit on the historical<br />
financial information and the pro-forma balance sheet and accordingly we do not express an audit opinion on<br />
the historical financial information and the pro-forma financial information set out in Appendix 2.<br />
5. Review Opinion<br />
Based on the scope of our review, which is not an audit, nothing has come to our attention that causes us<br />
to believe that the historical information, as set out in Appendix 2, does not present fairly, in accordance<br />
with the recognition and measurement requirements, but not all of the disclosure requirements of applicable<br />
accounting standards and other mandatory professional reporting requirements in Australia, the following:<br />
(a)<br />
(b)<br />
The balance sheet of <strong>Kingsrose</strong> <strong>Mining</strong> Limited at 31 August 2007, the statement of changes in equity,<br />
the income statement and the statement of cash flows from 20 April 2007 to 31 August 2007 prepared<br />
on the basis set out in 4.3 above.<br />
The pro-forma balance sheet of <strong>Kingsrose</strong> <strong>Mining</strong> Limited at 31 August 2007, the proforma statement<br />
of changes in equity, the pro-forma income statement and the proforma statement of cash flows from 20<br />
April 2007 to 31 August 2007 had the transactions as set out in section 4.4 of this report taken place as<br />
at 31 August 2007.<br />
6. Subsequent Events<br />
6.1 In September 2007 the company entered into a mining services agreement with Westralmen Pty Ltd,<br />
Darren Phillips and Michael Green by which Westralmen Pty Ltd agreed to perform mining services for<br />
a period of 2 years for a fee of $418,000 per annum inclusive of GST payable in instalments monthly in<br />
arrears.<br />
6.2 In October 2007 the Company entered into an employment agreement with Mr D F Hatch whereby Mr<br />
Hatch will be employed as managing director of the Company. Employment will commence from the<br />
date the Company shares are listed on the Australian Securities Exchange for a period of three years at<br />
a commencing salary of $300,000 per annum plus 9% superannuation and the use of a Company motor<br />
vehicle. Mr Hatch has been issued 3,000,000 free options with an exercise price of 25c per option<br />
expiring on 31 December 2012.<br />
6.3 In October 2007 the Company issued 2,500,000 free options to the following:<br />
- 1,000,000 to Mr JC Morris<br />
- 1,000,000 to Mr MJ Andrews<br />
- 500,000 to Abillo Pty Ltd as trustee for the MR Smith Family Trust.<br />
Each option will entitle the holder to one fully paid share in the Company at an exercise price of 25c at<br />
any time up to 31 December 2012.<br />
7. Disclosure<br />
At the date of this report Mack & Co does not have any pecuniary interest in <strong>Kingsrose</strong> <strong>Mining</strong> Limited that<br />
would reasonably be regarded as being capable of affecting its ability to give an unbiased opinion in this<br />
matter. Mack & Co will receive a professional fee for the preparation of this report.<br />
Mack &Co consents to the inclusion of this report (including Appendix 1 and Appendix 2) in the <strong>Prospectus</strong><br />
in the form and context in which it is included. At the date of this report this consent has not been withdrawn.<br />
Yours faithfully<br />
Page 40<br />
MACK & CO<br />
N A CALDER<br />
PARTNER
APPENDIX 1<br />
ASSETS BEING ACQUIRED AND LIABILITIES TRANSFERRED<br />
$<br />
CURRENT ASSETS<br />
Cash and cash equivalents 424,050<br />
TOTAL CURRENT ASSETS 424,050<br />
NON CURRENT ASSETS<br />
Term deposit 185,194<br />
Plant and equipment 1,148,680<br />
<strong>Mining</strong> development expenditure 1,634,706<br />
TOTAL NON CURRENT ASSETS 2,968,580<br />
TOTAL ASSETS 3,392,630<br />
CURRENT LIABILITIES<br />
Bank borrowings for equipment 265,938<br />
Less unexpired charges (21,577)<br />
Loan – unsecured 187,425<br />
TOTAL CURRENT LIABILITIES 431,786<br />
NON CURRENT LIABILITIES<br />
Bank borrowings for equipment 85,682<br />
Less unexpired charges (3,485)<br />
Loans – unsecured 2,868,647<br />
TOTAL NON CURRENT LIABILITIES 2,950,844<br />
TOTAL LIABILITIES 3,382,630<br />
NET ASSETS 10,000<br />
The net asset acquisition figure of $10,000 is to be satisfied by the issue of 20,000,000 fully paid ordinary<br />
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Section 9<br />
Investigating Accountant’s Report<br />
shares in <strong>Kingsrose</strong> <strong>Mining</strong> Limited.<br />
APPENDIX 2<br />
INCOME STATEMENT<br />
FOR THE PERIOD 20 APRIL 2007 TO 31 AUGUST 2007<br />
Unaudited<br />
Proforma<br />
31 August 2007 Unaudited<br />
$ $<br />
Income<br />
Interest 7,016 7,016<br />
Insurance recovery 17,308 17,308<br />
Closing stock 611,602 611,602<br />
635,926 635,926<br />
Expenses<br />
Materials and consumables used (320,335) (320,335)<br />
Employee benefits expense (544,833) (544,833)<br />
Depreciation (154,672) (154,672)<br />
Contractors and consultants (107,467) (107,467)<br />
Finance costs (17,175) (17,175)<br />
Other expenses (226,967) (226,967)<br />
Profit/(loss) from ordinary activities before income tax expense (735,523) (735,523)<br />
Income tax expense relating to ordinary activities - -<br />
Profit/(loss) from ordinary activities after related income tax expense (735,523) (735,523)<br />
Page 42
To be read in conjunction with the notes to the unaudited financial statements<br />
APPENDIX 2<br />
BALANCE SHEET<br />
AS AT 31 AUGUST 2007<br />
Note Unaudited Proforma<br />
31 August 2007 Unaudited<br />
$ $<br />
CURRENT ASSETS<br />
Cash and cash equivalents 3 167,741 4,804,057<br />
Receivables 4 47,847 47,847<br />
Inventory 5 611,602 611,602<br />
TOTAL CURRENT ASSETS 827,190 5,463,506<br />
NON CURRENT ASSETS<br />
Cash and cash equivalents 3 188,338 188,338<br />
Property, plant and equipment 6 1,280,456 1,280,456<br />
Mine development costs 7 1,634,706 1,778,706<br />
TOTAL NON CURRENT ASSETS 3,103,500 3,247,500<br />
TOTAL ASSETS 3,930,690 8,711,006<br />
CURRENT LIABILITIES<br />
Trade and other payables 8 1,536,334 323,509<br />
Financial liabilities 9 169,016 -<br />
TOTAL CURRENT LIABILITIES 1,705,350 323,509<br />
NON CURRENT LIABILITIES<br />
Other payables 8 2,868,647 -<br />
Financial liabilities 9 82,196 -<br />
Convertible notes - unsecured 10 - 2,200,000<br />
TOTAL NON CURRENT LIABILITIES 2,950,843 2,200,000<br />
TOTAL LIABILITIES 4,656,193 2,523,509<br />
NET ASSETS/(LIABILITIES) (725,503) 6,187,497<br />
EQUITY<br />
Issued capital 11 10,020 6,923,020<br />
Accumulated loss (735,523) (735,523)<br />
TOTAL EQUITY (725,503) 6,187,497<br />
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Section 9<br />
Investigating Accountant’s Report<br />
To be read in conjunction with the notes to the unaudited financial statements<br />
APPENDIX 2<br />
STATEMENT OF CHANGES IN EQUITY<br />
FOR THE PERIOD 20 APRIL 2007 TO 31 AUGUST 2007<br />
Issued Accumulated Total<br />
Capital<br />
Losses<br />
$ $ $<br />
UNAUDITED 31 AUGUST 2007<br />
Opening balance 20 April 2007 10,020 - 10,020<br />
Net loss for period - (735,523) (735,523<br />
Balance at 31 August 2007 10,020 (735,523) (725,503<br />
PRO FORMA<br />
Opening balance 20 April 2007 10,020 - 10,020<br />
Issue of shares 7,313,000 - 7,313,000<br />
Less costs of issue (400,000) - (400,000)<br />
Net loss for period - (735,523) (735,523<br />
Balance at 31 August 2007 6,923,020 (735,523) 6,187,497<br />
To be read in conjunction with the notes to the unaudited financial statements<br />
Page 44
APPENDIX 2<br />
STATEMENT OF CASH FLOWS<br />
FOR THE PERIOD 20 APRIL 2007 TO 31 AUGUST 2007<br />
Note Unaudited Proforma<br />
31 August 2007 Unaudited<br />
$ $<br />
Cash flow from/(used in) operating activities<br />
Payments to suppliers (982,080) (982,080)<br />
Interest paid (17,175) (17,175)<br />
Interest received 7,016 7,016<br />
Other income 17,308 17,308<br />
Cash flow from/(used in) operating activities (974,931) (974,931)<br />
Cash flow from/(used in) investing activities<br />
Payment for property, plant and equipment (228,308) (228,308)<br />
Payment of stamp duty on asset sale agreement - (144,000<br />
Cash used in investing activities (228,308) (372,308)<br />
Cash flow from/(used in) financing activities<br />
Investment in term deposits (3,144) (3,144)<br />
Proceeds from share issues - 6,063,000<br />
Payments for share issue costs - (400,000)<br />
Repayments of unsecured loans - (631,472)<br />
Proceeds from unsecured loans 1,025,400 1,025,400<br />
Payments off bank equipment loans (75,346) (326,558)<br />
Cash flow from financing activities 946,910 5,727,226<br />
Net increase/(decrease) in cash and cash equivalents (256,329) 4,379,987<br />
Cash and cash equivalents acquired under asset sale agreement 424,050 424,050<br />
Cash and cash equivalents at start of period 20 20<br />
Cash and cash equivalents at end of period 167,741 4,804,057<br />
To be read in conjunction with the notes to the unaudited financial statements<br />
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Section 9<br />
Investigating Accountant’s Report<br />
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS<br />
AS AT 31 AUGUST 2007<br />
1. FINANCIAL REPORTING FRAMEWORK<br />
Basis of preparation of Proforma Financial Information<br />
The Proforma Financial Information of <strong>Kingsrose</strong> <strong>Mining</strong> Limited has been prepared in accordance with the<br />
recognition and measurement, but not all of the disclosure requirements of applicable Accounting Standard<br />
and other authoritative pronouncements of the AASB.<br />
Significant Accounting Policies<br />
(a) Exploration, evaluation, development and restoration costs<br />
Exploration and evaluation expenditure<br />
Exploration and evaluation expenditure is stated at cost and is accumulated in respect of each<br />
identifiable area of interest.<br />
Such costs are only carried forward in respect of areas of interest for which the rights of tenure are<br />
current and where:<br />
- such costs are expected to be recouped through successful development and exploitation of<br />
the area of interest or, alternatively, by its sale; or<br />
- activities in the area have not yet reached a stage which permits a reasonable assessment<br />
of the existence or otherwise of economically recoverable reserves and active and significant<br />
operations in, or in relation, to the area are continuing.<br />
A regular review is undertaken of each area of interest to determine the appropriateness of continuing<br />
to carry forward costs in relation to that area of interest. Where carried- forward expenditure does not<br />
satisfy the policy stated above it is written off to the income statement in the period in which it is<br />
incurred.<br />
Accumulated costs in relation to an abandoned area are written off to the income statement in the<br />
period in which the decision to abandon the area is made.<br />
Mine development costs<br />
Costs incurred in bringing the operation to a mining stage have been capitalised as mine development<br />
costs. The company will determine an appropriate amortisation policy in respect of these costs.<br />
Rehabilitation, restoration and environmental costs<br />
Long-term environmental obligations are based on the company's environmental management plans, in<br />
compliance with current environmental and regulatory requirements.<br />
The costs include obligations relating to reclamation, waste site closure, plant closure and other costs<br />
associated with the restoration of the site.<br />
Full provision is made based on the net present value of the estimated cost of restoring the environment<br />
disturbance that has been incurred as at the balance date. Increases due to additional environmental<br />
disturbance (to the extent that it relates to the development of an asset) are capitalised and amortised<br />
over the remaining lives of the mines.<br />
Annual increases in provision relating to the change in the present value of the provision are accounted<br />
for in earnings.<br />
The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes<br />
in legislation, technology or other circumstances. Cost estimates are not reduced by the potential<br />
proceeds from the sale of assets or from plant clean-up at closure.<br />
Page 46
(b)<br />
(c)<br />
(d)<br />
(e)<br />
(f)<br />
(g)<br />
Income tax<br />
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax<br />
bases and of the assets and liabilities and their carrying amounts for financial reporting purposes.<br />
Deferred income tax liabilities are recognised for all taxable temporary differences except where the<br />
deferred income tax arises from the initial recognition of an asset or liability in a transaction that is not<br />
a business combination and, at the time of transaction, affects neither the accounting profit nor taxable<br />
profit or loss.<br />
Deferred income tax assets are recognised for all deductible temporary differences, carryforward of<br />
unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be<br />
available against which the deductible temporary differences, and the carry-forward of unused tax<br />
assets and unused tax losses can be utilised except where the deferred income tax asset relating to the<br />
deductible temporary difference arises from the initial recognition of an asset or liability in a transaction<br />
that is not a business combination and, at the time of the transaction, affects neither the accounting<br />
profit nor taxable profit or loss.<br />
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced<br />
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or<br />
part of the deferred income tax asset to be utilised.<br />
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the<br />
year when the asset is realised or the liability is settled, based on tax rates of (and tax laws) that have<br />
been enacted or substantially enacted at the balance sheet date.<br />
Income taxes relating to items recognised directly in equity are recognised in equity and not in the<br />
income statement.<br />
Cash and cash equivalents<br />
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term<br />
deposits with an original maturity of three months or less.<br />
For the purposes of the cash flow statements, cash and cash equivalents consist of cash and cash<br />
equivalents as defined above, net of outstanding bank overdrafts.<br />
Inventory<br />
Inventories are measured at the lower of cost and net realisable value.<br />
Property, plant and equipment<br />
Plant and equipment is measured on the cost basis less depreciation and impairment losses.<br />
Depreciation is calculated on plant and equipment using the diminishing value basis.<br />
Rates used are:<br />
Class of Fixed Asset<br />
Depreciation Rate<br />
Headframe and property improvements 5% - 7.5%<br />
Plant and equipment 10% - 20%<br />
Motor vehicles 18.75%<br />
Low value pooled items 37.5%<br />
Goods and services tax<br />
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount<br />
of GST incurred is not recoverable from the Australian Tax Office ("ATO"). In these circumstances<br />
the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as<br />
applicable.<br />
Receivables and payables are stated with the amount of GST included.<br />
Impairment<br />
At each reporting date, the company assesses whether there is any indication that an asset may be<br />
impaired. Where an indicator of impairment exists, the company makes a formal estimate of the<br />
recoverable amount.<br />
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Section 9<br />
Investigating Accountant’s Report<br />
Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired<br />
and is written down to its recoverable amount.<br />
Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for<br />
each individual asset, unless the asset's value in use cannot be estimated to be close to its fair value less<br />
costs to sell and it does not generate cash inflows that are largely independent of those from other assets<br />
or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to<br />
which the asset belongs.<br />
(g)<br />
(h)<br />
Impairment<br />
In assessing value in use, the estimated future cash flows are discounted to their present value using a<br />
pre-tax discount rate that reflects current market assessment of the time value or money and the risks<br />
specific to the asset or group of assets being assessed.<br />
Payables<br />
Liabilities are recognised for amounts to be paid in the future for goods and services received, whether<br />
or not billed to the company. Trade accounts are normally settled within 60 days.<br />
Payables to related parties are initially recognised at fair value and subsequently measured at amortised<br />
cost.<br />
(i)<br />
(j)<br />
(k)<br />
Employee benefits<br />
Provision is made for the company’s liability for employee benefits arising from services rendered by<br />
employees to balance date. Employee benefits that are expected to be settled within one year have been<br />
measured at the amounts expected to be paid when the liability is settled plus related on costs.<br />
Revenue recognition<br />
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the<br />
company and revenue can be reliably measured.<br />
Issued capital<br />
Issued and paid up capital is recognised at the fair value of the consideration received by the Company.<br />
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a<br />
reduction of the proceeds received.<br />
2. PROFORMA TRANSACTIONS<br />
Proforma Unaudited represents Unaudited 31 August 2007 figures adjusted to reflect:-<br />
(a)<br />
The effect of the proposed subscription issue of 30,000,000 fully paid ordinary shares at an issue price<br />
of 20c per share to raise $6,000,000.<br />
(b) The estimated capital raising costs of the prospectus of $400,000.<br />
(c)<br />
(d)<br />
(e)<br />
(f)<br />
(g)<br />
The issue in October 2007 of 8,800,000 fully paid ordinary shares for cash to raise seed capital of<br />
$63,000.<br />
The proposed issue of 6,250,000 fully paid ordinary shares at an issue price of 20c per share to repay<br />
$1,250,000 of the loan from Airedale (Asia) Limited.<br />
The proposed issue of 5,000,000 convertible notes at an issue price of 20c each to repay $1,000,000 of<br />
the loan from Airedale (Asia) Limited.<br />
The proposed issue of 6,000,000 convertible notes at an issue price of 20c each to repay $1,200,000 of<br />
the loan from JW Phillips.<br />
The proposed payment of estimated stamp duty of $144,000 on the asset sale agreement.<br />
(h) The proposed payment of the bank equipment loans of $251,212.<br />
(i)<br />
The proposed payment by cash from the proceeds of the issue of the balance of the loan accounts<br />
totalling $631,472.<br />
Page 48
Unaudited<br />
Proforma<br />
31 August 2007 Unaudited<br />
$ $<br />
3. CASH AND CASH EQUIVALENTS<br />
CURRENT<br />
Cash at bank and on hand 167,741 167,741<br />
Proceeds on proposed issues - 6,063,000<br />
Less - estimated expenses of offer - (400,000)<br />
- proposed payment of loans from associates - (631,472)<br />
- proposed payment of bank equipment loans - (251,212)<br />
- proposed payment of stamp duty on asset loan agreement - (144,000)<br />
167,741 4,804,057<br />
NON CURRENT<br />
Term deposit 188,338 188,338<br />
The term deposit has been provided as security for the bank equipment loans set out in Note 9 and cannot be<br />
withdrawn until those loans are repaid in full.<br />
Unaudited<br />
Proforma<br />
31 August 2007 Unaudited<br />
$ $<br />
4. RECEIVABLES<br />
GST receivable 40,220 40,220<br />
Other 7,627 7,627<br />
47,847 47,847<br />
5. INVENTORY<br />
Gold Stock on hand at market value 624,084 624,084<br />
Less royalty payable on sale at 2% (12,482) (12,482)<br />
611,602 611,602<br />
Subsequent to year end the inventory was sold for the market value disclosed above.<br />
6. PROPERTY PLANT AND EQUIPMENT<br />
Cost 1,435,128 1,435,128<br />
Accumulated Depreciation (154,672) (154,672)<br />
1,280,456 1,280,456<br />
7. MINE DEVELOPMENT COSTS<br />
Acquired from <strong>Kingsrose</strong> Unit Trust 1,634,706 1,634,706<br />
Estimated Stamp Duty payable - 144,000<br />
1,634,706 1,778,706<br />
Unaudited<br />
Unaudited<br />
Proforma<br />
Proforma<br />
Page 49
Section 9<br />
Investigating Accountant’s Report<br />
31 August 2007 Unaudited<br />
$ $<br />
8. TRADE AND OTHER PAYABLES<br />
CURRENT<br />
Trade Creditors 201,732 201,732<br />
Unsecured loan – JW Phillips 1,212,825 -<br />
Accruals 114,777 114,777<br />
Provision for employee benefits 7,000 7,000<br />
1,536,334 323,509<br />
NON CURRENT<br />
Unsecured loans 2,868,647 -<br />
The current unsecured loan of $1,212,825 is proposed to be satisfied in the proforma unaudited accounts<br />
through the issue of 6,000,000 convertible notes of 20c each for a total of $1,200,000 and repayment of<br />
$12,825 in cash.<br />
The non current unsecured loans of $2,868,647 are proposed to be satisfied in the proforma unaudited<br />
accounts through:<br />
• the issue of 6,250,000 fully paid ordinary shares to Airedale (Asia) Limited 1,250,000<br />
• the issue of 5,000,000 convertible notes of 20c each to Airedale (Asia) Limited 1,000,000<br />
• cash repayment 618,647<br />
2,868,647<br />
9. FINANCIAL LIABILITIES<br />
CURRENT<br />
Bank equipment loans 181,218 -<br />
Less unexpired changes (12,202) -<br />
169,016 -<br />
NON CURRENT<br />
Bank equipment loans 85,682 -<br />
Less unexpired changes (3,486) -<br />
82,196 -<br />
Unaudited<br />
Proforma<br />
31 August 2007 Unaudited<br />
Page 50
$ $<br />
10. CONVERTIBLE NOTES – UNSECURED<br />
11,000,000 Convertible notes – unsecured of 20c each - 2,200,000<br />
The convertible notes proposed to be issued will be for a term of 30 months from the date of issue and bear<br />
interest at the rate of 6% per annum payable annually in arrears. Each convertible note can be converted into<br />
one fully paid ordinary share in the company at any time on or before the redemption date at the option of the<br />
noteholder. Any convertible notes not converted by the redemption date will at the option of the Company be<br />
redeemed for cash at the rate of 20c per convertible note or converted to shares on the basis of one fully paid<br />
ordinary share in the company for each 20c convertible note on issue.<br />
11. ISSUED CAPITAL<br />
Issue of 20 ordinary fully paid shares on incorporation 6 January 2005 20 20<br />
Proposed issue of 20,000,000 ordinary fully paid shares to be issued to<br />
KRM (WA) Pty Ltd as trustee for the <strong>Kingsrose</strong> Unit Trust as per asset<br />
sale agreement 10,000 10,000<br />
Issue of seed capital of 8,800,000 ordinary fully paid shares on<br />
3 October 2007 for cash - 63,000<br />
Proposed issued of 30,000,000 ordinary fully paid shares for cash - 6,000,000<br />
Proposed issue of 6,250,000 ordinary fully paid shares to<br />
Airedale (Asia) Limited for loan conversion - 1,250,000<br />
10,020 7,323,020<br />
Less estimated costs of issue<br />
Cash - (400,000)<br />
Contributed equity 10,020 6,923,020<br />
Page 51
Section 10<br />
Solicitor’s Report<br />
FAIRWEATHER & LEMONIS<br />
Barristers & Solicitors<br />
30 October 2007<br />
The Directors<br />
<strong>Kingsrose</strong> <strong>Mining</strong> Limited<br />
Suite 3<br />
16 Kearns Crescent<br />
APPLECROSS WA 6153<br />
Dear Sirs<br />
SOLICITOR’S REPORT ON WESTERN AUSTRALIAN TENEMENTS<br />
This Solicitor’s Report (the “Report”) is prepared for inclusion in a <strong>Prospectus</strong> to be dated on or about 31<br />
October 2007 (“<strong>Prospectus</strong>”) for the issue by <strong>Kingsrose</strong> <strong>Mining</strong> Limited (the “Company”) of 30,000,000<br />
Shares at an issue price of 20 cents per Share.<br />
The Report relates to 2 mining leases and 1 miscellaneous licence in Western Australia (the “Tenements”),<br />
details of which are set out in the attached tenement schedule - Schedule 1 (“Tenement Schedule”) and<br />
summaries of the material agreements (“Material Agreements”) relevant to acquiring an interest in the<br />
Tenements as set out in the attached Schedule 2 (“Material Tenement Agreements Schedule”), which forms<br />
part of this Report.<br />
Words and expressions that are defined in this <strong>Prospectus</strong> have the same meanings when used in this Report,<br />
unless the contrary intention is expressed.<br />
1. SEARCHES OF THE TENEMENTS<br />
We have caused to be conducted the following searches at or obtained the following reports from the relevant<br />
Western Australian or Commonwealth government departments:<br />
(a) Tenements searches of the Tenements conducted on 19 September 2007;<br />
(b)<br />
(c)<br />
“Quick Appraisal” reports summarising information available on the Western Australian “TENGRAPH”<br />
system to determine native title claims upon the Tenements were obtained on 19 and 20 September<br />
2007; and<br />
a search of the Register of Native Title Claims maintained by the National Native Title Tribunal in<br />
respect of registered native title claims upon the Tenements which were conducted on 20 September<br />
2007.<br />
On the basis of the searches, materials and information supplied to us by the Company, subject to our<br />
qualifications set out below, we consider that this Report provides an accurate statement of the status of the<br />
Tenements as at the date on which they were searched and the Company’s interest in the Tenements as at the<br />
date of this Report.<br />
2. TENEMENTS GENERALLY<br />
The Tenements comprise of mining leases and a miscellaneous licence granted under the <strong>Mining</strong> Act 1978<br />
(WA). Details are provided in the Tenement Schedule. We provide below a brief summary of certain types of<br />
tenements in Western Australia.<br />
Page 52<br />
The impact of native title on the Tenements is set out in section 3 below, however, assuming each government<br />
department complied with native title legislative requirements, we are of the opinion that each granted<br />
Tenement has been validly granted with respect to native title. The valid grant of any application for a<br />
tenement and which may be affected by native title will require compliance with the application provisions<br />
and processes of the native title legislation set out in section 3.
2.1 Western Australia<br />
Tenements in Western Australia are granted subject to various conditions prescribed by the <strong>Mining</strong> Act<br />
1978 (WA), including payment of rent, expenditure and reporting requirements and each tenement is<br />
granted subject to standard conditions which regulate the holder’s activities or are designed to protect the<br />
environment. These standard conditions are not detailed in this Report.<br />
The holder of a granted prospecting licence, exploration licence or mining lease is required to spend, or cause<br />
to be spent, a set amount per hectare or, in the case of exploration licences, per block in each tenement year<br />
on exploration or mining activities and a “Form 5” expenditure report must be lodged within 60 days after the<br />
anniversary date of the mining tenement. The Tenement Schedule sets out the details of the current minimum<br />
expenditure obligations for each granted Tenement. The Company may apply for exemption from compliance<br />
with the minimum expenditure requirements on certain grounds set out in section 102(2) of the <strong>Mining</strong> Act<br />
1978 (WA) or at the discretion Minister. A failure to comply with the expenditure requirements renders the<br />
mining tenement open to forfeiture.<br />
The holder of a mining tenement wishing to access private land or certain areas within a pastoral lease may<br />
have to agree the terms of compensation for the rights to access and work the land. We express no opinion on<br />
whether such arrangements are required or have been obtained.<br />
2.2 Prospecting Licences<br />
A prospecting licence entitles the holder, to the exclusion of others, to explore for minerals in the area of the<br />
licence but not to conduct commercial mining. A prospecting licence may cover a maximum area of 200<br />
hectares and remains in force for up to 4 years but does not include a right of renewal.<br />
The holder of a prospecting licence has the right to apply for one or more mining leases over any of the land<br />
the subject of the prospecting licence prior to the expiry of the prospecting licence. A prospecting licence,<br />
subject to a conversion application to a mining lease, remains in force pending the determination of the<br />
application for that mining lease.<br />
There is no restriction on the assignment of a prospecting licence.<br />
2.3 Exploration Licences<br />
An exploration licence entitles the holder, to the exclusion of others, to explore for minerals in the area of<br />
the licence but not to conduct commercial mining. The maximum area of an exploration licence in Western<br />
Australia is 70 graticular blocks (between 196 and 231 square kilometres depending on the latitude).<br />
An exploration licence remains in force for up to 5 years and may be extended in certain circumstances by 2<br />
further periods of 1 or 2 years on application. The prescribed circumstances where the Minister is satisfied<br />
that delays or difficulties in carrying out an exploration program or the marking-out of a mining lease could<br />
not be undertaken, completed or was subject to impracticable conditions. In exceptional circumstances, the<br />
Minister may extend the term for an additional further period or periods of 1 year. An exploration licence<br />
remains in force pending a decision to extend its term. If an extension of term is granted then the minimum<br />
annual expenditure is increased as follows:<br />
(a)<br />
(b)<br />
to $50,000 during the 6 th and 7 th years; and<br />
to $100,000 during the 8 th , 9 th and any subsequent years.<br />
An exploration licence is subject to statutory relinquishment of not less than half of the blocks at the<br />
expiration of the third year of the five year term. At the end of the fourth year half of the remaining blocks<br />
must also be relinquished.<br />
The holder of an exploration licence has the right under the <strong>Mining</strong> Act 1978 (WA) to peg and apply for one or<br />
more mining leases over any of the land the subject of the licence prior to the expiry of the licence. That part<br />
of an exploration licence, subject to a conversion application to a mining lease, remains in force pending the<br />
determination of that mining lease.<br />
An exploration licence can only be assigned during the first year of its term with Ministerial approval.<br />
Page 53
Section 10<br />
Solicitor’s Report<br />
2.4 <strong>Mining</strong> Leases<br />
A mining lease entitles the holder, to the exclusion of others, to work, mine and take minerals won from the<br />
mining lease, subject to obtaining certain approvals. A mining lease covers a maximum of 1,000 hectares and<br />
remains in force for 21 years. The holder has the right, subject to complying with the <strong>Mining</strong> Act 1978 (WA),<br />
to an extension of a further 21 years and at the end of the second 21 year term may apply to the Minister for<br />
Mines for an extension of a further 21 years. As with other mining tenements granted under the <strong>Mining</strong> Act<br />
1978 (WA), a mining lease is granted subject to conditions regulating the conduct of activities. In particular,<br />
the holder of a mining lease cannot commence developmental or productive mining unless the approval of the<br />
State <strong>Mining</strong> Engineer is first obtained.<br />
It is a breach of the conditions of a mining lease to assign it without the prior written consent of the Minister<br />
for Mines.<br />
2.5 Miscellaneous Licences<br />
A miscellaneous licence may be granted over any land, including any land the subject of an existing mining<br />
tenement whether held by the applicant or another person or company for purposes directly connected with<br />
mining operations such as a road, a pipeline licence, a water licence or for any prescribed purpose such as a<br />
bore or communications to service a mining facility.<br />
An application fee and rent is payable in respect of all miscellaneous licences. A miscellaneous licence is<br />
subject to prescribed terms and conditions which are specified in the miscellaneous licence. There is no limit<br />
to the number of the miscellaneous licences a person or company may hold.<br />
The term of a miscellaneous licence granted after 6 June 1998 is 21 years and may be renewed for further<br />
terms. A miscellaneous licence can be applied for over, and can co-exist with, other mining titles.<br />
3. OVERVIEW OF NATIVE TITLE<br />
3.1 General Overview<br />
For the purposes of this Report and for the purposes of reviewing native title issues in respect of the<br />
Tenements, we assume that the Tenements have been validly granted (apart from potential invalidity on native<br />
title grounds).<br />
Native title refers to the unique title held by Australian indigenous peoples over Australian land or waters<br />
(“Native Title”), first recognised in Australia in the landmark Mabo v Queensland (“Mabo”) case on 3 June<br />
1992.<br />
To establish Native Title, a claimant group must show that they have historically enjoyed certain customary<br />
rights and privileges and a traditional connection in respect of a particular area of land. Native Title may be<br />
extinguished either by voluntary surrender to the Crown, death of the last survivor of a community entitled<br />
to Native Title, abandonment of the land in question by that community or the granting of an “inconsistent<br />
interest” in the land by the Crown.<br />
The Commonwealth Parliament responded to the Mabo decision by passing the Native Title Act 1993 (Cth) (the<br />
“Native Title Act”) which:<br />
(a)<br />
recognised Native Title rights;<br />
(b) validated ‘past acts’, including the grant of mining tenements and ancillary titles granted before 1<br />
January 1994;<br />
(c) provided for the protection of Native Title in ‘future acts’, including the grant of certain titles after 31<br />
December 1993; and<br />
(d)<br />
provided for the procedures to claim and register Native Title and to claim compensation for the<br />
extinguishment or impairment of Native Title.<br />
The Native Title Amendment Act 1998 (Cth) (the “Amendment Act”) extensively amended the Native Title Act.<br />
The Amendment Act validated titles which may have been invalidly granted over pastoral leases and certain<br />
other leasehold interests during the period 1 January 1994 to 23 December 1996. The Amendment Act also<br />
Page 54
included a revised threshold test for the acceptance of Native Title claims, confirmation of extinguishment<br />
of Native Title by the grant of “exclusive possession” pastoral leases and certain other leasehold interests and<br />
provisions intended to deal with overlapping claims.<br />
Anyone who claims to hold Native Title, either alone or with others, may lodge a claim with the Native Title<br />
Registrar. However, the claimants must establish the claim before Native Title can exist in the area. We also<br />
advise that the absence of Native Title claims in an area does not mean that Native Title does not exist in an<br />
area. If the claimants satisfy the Native Title Registrar that the claim meets the legislative requirements, then<br />
the claim will be registered by the National Native Title Tribunal (“NNTT”) on the Register of Native Title<br />
claims. This registration entitles the claimants to procedural rights. Importantly, it entitles the claimants to<br />
the ‘right to negotiate’.<br />
Native Title claims that are not registered by the NNTT are recorded on the Schedule of Applications Received.<br />
Claims entered on the Schedule of Applications Received can, at a later date, be properly registered if the<br />
claimant provides additional information and the Native Title Registrar is satisfied that the claimants rights<br />
and interests can prima facie be established.<br />
3.2 Standing of Titles as a result of Native Title<br />
The Standing of Titles as a Result of the advent of Native Title is as set out below.<br />
(a) Pre 1994 Tenements<br />
Tenements that were granted or renewed before 1 January 1994 are valid. Where a Native Title claim<br />
is determined to exist over an area subject to such tenements, the tenements will remain valid for the<br />
duration of its term. Native Title holders may be entitled to compensation from the State Government<br />
for the effect of that grant on Native Title rights.<br />
M29/52 was granted during this period.<br />
(b) Tenements Granted After 1994 and Until 23 December 1996<br />
Some States and Territories including the Western Australian Government granted mining tenements<br />
during the period between 1 January 1994 and 23 December 1996 without complying with the<br />
requirements of the Native Title Act. Accordingly, there was a risk that some of the tenements granted<br />
in this period may be invalid as a result of non-compliance with the Native Title Act. This risk has been<br />
removed by the Amendment Act and corresponding West Australian legislation so far as tenements<br />
were granted over land, which is the subject of a pastoral lease, or other prescribed leasehold land.<br />
(c) Tenements Granted after 23 December 1996<br />
(d)<br />
Tenements granted or renewed since 23 December 1996 will be valid provided that the Native Title Act<br />
has been complied with.<br />
M29/321 and L29/67 were granted during this period.<br />
Applications and Renewals<br />
Future tenement grants including the valid grant of any Tenements that may affect Native Title<br />
will require full compliance with the provisions of the Native Title Act, being in effect successful<br />
negotiation with registered Native Title claimant groups. The ‘conversion’ of a prospecting licence or<br />
an exploration licence in Western Australia to one or more mining leases is a future act, giving rise to a<br />
‘right to negotiate’.<br />
Any renewal of a granted Tenement validly created on or before 23 December 1996 will not be subject<br />
to the ‘right to negotiate’ unless the renewal seeks to extend the area of the tenement, is for a longer<br />
term than the previous term or confers greater rights than the previous grant.<br />
3.3 The Right to Negotiate<br />
The right to negotiate under the Native Title Act consists of a statutory period of negotiation between the<br />
Government party, the Native Title party and the grantee party.<br />
The parties must negotiate in good faith and if no agreement is reached, and at least six months have passed<br />
since the notification day, the matter is referred to the arbitral body for determination. The arbitral body then<br />
Page 55
Section 10<br />
Solicitor’s Report<br />
determines whether the act can be done, not done or done subject to conditions. A right then exists for a State<br />
or Territory Minister to overrule the determination of the arbitral body if it considers it to be in the interest of<br />
the State or Territory.<br />
The Native Title Act authorises the entering of Indigenous Land Use Agreements (“ILUAs”), which provide<br />
for Native Title claimants or holders and the grantee party to enter into agreements, which once registered<br />
at the NNTT, can serve to validate tenements that have already been granted and that may be invalid. ILUAs<br />
can also be used to obtain the Native Title claimant’s or holder’s consent to the granting of current tenement<br />
applications and to obtain the Native Title claimants or holders consent for future tenement applications<br />
within a certain area.<br />
Similarly, the grantee party and Native Title claimant groups can negotiate and enter into agreements covering<br />
heritage protocols for exploration and/or mining, which will facilitate the grant of tenement applications.<br />
Such agreements are not registered under the Native Title Act but serve more as a contract between the mining<br />
company and the relevant Aboriginal group.<br />
4. ABORIGINAL HERITAGE AND ABORIGINAL SITES<br />
4.1 Commonwealth<br />
There is Commonwealth heritage legislation, the Aboriginal and Torres Strait Islander Heritage Protection Act<br />
1984 (Cth) (“National Heritage Act”), which applies to the Tenements. The Act is aimed at the preservation<br />
and protection of significant Aboriginal areas and objects through their use in a manner inconsistent with<br />
Aboriginal traditions. There may be sites of Aboriginal heritage or significance that are subject to such<br />
legislation that are located on the land on which the Tenements are situated. This may affect exploration or<br />
mining activities on the Tenements.<br />
In respect of any Aboriginal sites or places of Aboriginal heritage that are on the Tenements or may be<br />
identified on the Tenements, the Company will need to ensure that any interference with Aboriginal sites is in<br />
strict conformity with the provisions of the National Heritage Act.<br />
4.2 Western Australia<br />
The Aboriginal Heritage Act 1972 (WA) also applies to the Tenements (“WA Heritage Act”). This Act makes it<br />
an offence to alter or damage an Aboriginal site or object on or under an Aboriginal site. An ‘Aboriginal site’<br />
is defined to include any sacred, ritual or ceremonial site which is of importance and special significance to<br />
persons of Aboriginal descent.<br />
Although the WA Heritage Act states that the Minister has a duty to keep a record of Aboriginal sites,<br />
there is no requirement for an Aboriginal site to be registered in any public manner or, indeed, in any way<br />
acknowledged as an Aboriginal site for it to qualify as an Aboriginal site for the purposes of the WA<br />
Heritage Act.<br />
We have not undertaken searches to ascertain if any Aboriginal sites have been registered in the vicinity of the<br />
Tenements under either the National Heritage Act or the WA Heritage Act as there is no obligation to register<br />
sites and in any event the exact location of the sites is not ascertainable from such searches.<br />
In respect of any Aboriginal sites or places of Aboriginal heritage that are on the Tenements or may be<br />
identified on the Tenements, the Company may need to ensure that any interference with Aboriginal sites is in<br />
strict conformity with the provisions of the WA Heritage Act and the National Heritage Act.<br />
Page 56<br />
5. QUALIFICATIONS<br />
Our Report is based on, and subject to, the assumptions and qualifications set out below and as otherwise<br />
specified elsewhere in this Report:<br />
• We have relied upon information provided by third parties, including government departments and<br />
have relied upon that information being accurate, complete and up to date as at the date of its receipt.<br />
• References to areas in the Tenement Schedule are taken from the searches and we have not yet verified<br />
the accuracy of such areas. We have not conducted positioning and spacial searches of the Tenements<br />
on the “TENGRAPH” system to determine the exact areas of the Tenements or the locations of any<br />
limitations or excisions upon the Tenements.
• Compensation may have to be agreed and/or paid to the owner and occupier of private land situated<br />
within the Tenements and we express no opinion whether such arrangements are in place or need to be<br />
put into place.<br />
• We cannot comment on any agreements that are not registered as a dealing, encumbrance or otherwise<br />
noted in the searches of the Tenements.<br />
• Native Title or Aboriginal heritage sites or objects may exist in the areas covered by the Tenements. We<br />
have conducted searches to ascertain what Native Title claims, if any, have been registered over these<br />
areas, but we have not conducted any independent investigations regarding the likely existence or nonexistence<br />
of Native Title, Aboriginal heritage sites or objects.<br />
• Where Ministerial consent is required in relation to the Tenements or to the transfer the Tenements, we<br />
express no opinion as to whether such consent will be granted, or the consequences of consent being<br />
refused, although we are not aware of any matter which would cause consent to be refused.<br />
• We have assumed that the other than as may otherwise be noted in our Report the Tenement holders<br />
and the Company (where appropriate) have complied with all applicable provisions of the <strong>Mining</strong><br />
Act 1978 (WA), and all other legislation or regulations relating to the Tenements and we note that the<br />
interest or rights of the Company in relation to the Tenements is subject to the current registered<br />
holders or the Company as the case may be, continuing to comply with all the applicable provisions<br />
of the <strong>Mining</strong> Act 1978 (WA), and other legislation or regulations relating to the Tenements and any<br />
conditions specifically applicable to the Tenements. We express no opinion on any compliance not<br />
disclosed on the face of the searches conducted for the purposes of this Report.<br />
• We have assumed that all instructions or information which we have received from the Company or<br />
any of its officers, agents, or representatives is accurate and complete in all respects.<br />
• This Report relates solely to the laws of Western Australia, to the extent applicable to the Tenements.<br />
We do not express or imply any opinion on, and have made no investigation of the laws of any other<br />
jurisdiction.<br />
6. CONSENT<br />
Fairweather & Lemonis consent to being named in the <strong>Prospectus</strong> as being responsible for the preparation of<br />
this Report. Except for this Report, Fairweather & Lemonis:<br />
(a)<br />
(b)<br />
(c)<br />
(d)<br />
has not authorised or caused the issue of the <strong>Prospectus</strong>;<br />
is not responsible for any matter included in or omitted from this <strong>Prospectus</strong>;<br />
makes no representation or warranty, either express or implied, with respect to the accuracy or<br />
completeness of the information contained in the <strong>Prospectus</strong>; and<br />
disclaims liability to any persons in respect of any statement included in or omitted from the<br />
<strong>Prospectus</strong>.<br />
This Report is made solely for the benefit of the Company and its Directors in connection with the issue of the<br />
<strong>Prospectus</strong> and it is not to be relied on or disclosed to any other person or used for any other purpose without<br />
prior written consent.<br />
Yours faithfully<br />
FAIRWEATHER & LEMONIS<br />
Page 57
Section 10<br />
Solicitor’s Report<br />
TENEMENT SCHEDULE<br />
(Schedule 1 to Solicitor’s Report)<br />
Key: ML = <strong>Mining</strong> Lease L = Miscellaneous Licence<br />
Tenement Current Shares/ Status Grant/ Expiry Area Annual Current Registered Native Title Note<br />
No Registered Ownership Application Date (Hectares) Rent Annual Encumbrances Claims Made<br />
(Western Holder Date Minimum<br />
Australia) Expenditure<br />
M29/52 Reed 100% Granted 18/05/1988 17/05/2009 96.88 Rental for $10,000 Agreements Central East 1, 2, 3,<br />
Resources Hectares year ended (to 1H/889, Goldfields 4, 5<br />
Ltd 17/05/2009: 17/05/2008) 3OH/889 and People and 6<br />
$1,408.44 335H/890<br />
Bonds PE7854<br />
and 216878<br />
M29/321 Reed 100% Granted 13/11/2002 12/11/2023 3.57650 Rental for $5,000 Bond 21687 Central East 1, 6<br />
Resources Hectares year ended (to Goldfields and 7<br />
Ltd 12/11/2008: 12/11/2007) People<br />
$58.08<br />
L29/67 Reed 100% Granted 20/03/2002 19/03/2023 8.2 Rental for NIL Bond PE8705 Central East 1, 6, 8<br />
Resources Hectares year ended Goldfields and 9<br />
Ltd 19/03/2009: People<br />
$115.83<br />
Page 58
Notes:<br />
1. The tenement is subject to the Joint Venture Agreement as amended, the Asset Sale Agreement and the MTAB Royalty Deed which are summarised in Schedule 2 of<br />
this Report. The Company will have an interest in the tenement by the Joint Venture Agreement as amended.<br />
2. The tenement is subject to each of Agreement 1H/889 being a Deed of Undertaking between Valiant Consolidated Ltd (now Consolidated Minerals Limited), Ridek<br />
Corporation Pty Ltd, Goongarrie Gold Pty Ltd and Julia Mines NL (now Dee Yellow Ltd) registered 1 July 1988, Agreement 30H/889 being a Deed of Variation<br />
between Valiant Consolidated Ltd (now Consolidated Minerals Limited) and Ridek Corporation Pty Ltd registered 22 July 1988 and Agreement 335H/890 being a<br />
Joint Venture Agreement between Valiant Consolidated Ltd (now Consolidated Minerals Limited), Platgold Pacific NL (now Konekt Ltd) and Ashton Gold Mines Pty<br />
Ltd (now Aurora Gold Services Pty Ltd) registered 29 March 1990. Reed Resources Ltd has warranted in favour of the Company that each of these agreements do not<br />
in any way limit or adversely affect Reed Resources Ltd or the Company receiving the full benefits of ownership of the tenements.<br />
3. The tenement is subject to an, unconditional performance bond numbered PE 7854 in the amount of $7,000 to secure compliance with the conditions of the<br />
tenement relating to preventing, reducing or making good injury to the land. The surety provider is the National Australia Bank Limited.<br />
4. The tenement is subject to an unconditional performance bond numbered 216878 in the amount of $29,000 to secure compliance with the conditions of the<br />
tenement relating to preventing, reducing or making good injury to the land. The surety provider is the National Australia Bank Limited.<br />
5. There are a number of limitations and excisions imposed on M29/52 including no mining on recreation reserve 13763, rifle range reserve 13737 and Comet Vale<br />
townsite without the consent of the Minister for Mines, a ban on mining on or within a distance of 140 metres of Cemetery Reserve No. 11107, no interference with<br />
geodetic survey stations BM365 and BM383 and no mining on a strip of land around the Kalgoorlie Leonora Railway Line.<br />
6. The land the subject of this tenement is affected by native title claim WC99/30 (Federal Court Number WAD 70/98) made on behalf of the Central East Goldfields<br />
People and registered on 4 October 1999.<br />
7. The tenement is subject to an unconditional performance bond numbered 216876 in the amount of $10,000 to secure compliance with the conditions of the<br />
tenement relating to preventing, reducing or making good injury to the land. The surety provider is National Australia Bank Ltd.<br />
8. The tenement is subject to an unconditional performance bond numbered PE 8705 in the amount of $16,500 to secure compliance with the conditions of the<br />
tenement relating to preventing, reducing or making good injury to the land. The surety provider is the National Australia Bank Limited.<br />
9. The tenement has been granted for the purposes of the registered holder of the tenement constructing and using a pipeline, a road and a water management facility.<br />
Page 59
Section 10<br />
Solicitor’s Report<br />
MATERIAL TENEMENT AGREEMENTS SCHEDULE<br />
(Schedule 2 to Solicitor’s Report)<br />
1. Asset Sale Agreement<br />
In October 2007 the Company entered into the Asset Sale Agreement with the <strong>Kingsrose</strong> Unit Trust under<br />
which the Company agreed to acquire various assets and assume various liabilities from the <strong>Kingsrose</strong> Unit<br />
Trust.<br />
The assets acquired by the Company will be the interest of <strong>Kingsrose</strong> Unit Trust in the Joint Venture<br />
Agreement, various plant and equipment, the benefit of mining expenditure and cash and term deposits. The<br />
<strong>Kingsrose</strong> Unit Trust and the Company have also separately agreed that the Company will receive the benefit<br />
of gold ore present upon the Comet Vale Joint Venture area including the recent sale of development gold ore<br />
resulting in net revenue to the Company of $611,602.<br />
The liabilities to be assumed by the Company total $3,382,630. Of this sum, $2,250,000, will be satisfied<br />
by the issue of 6,250,000 Shares at 20 cents per Share (satisfying $1,250,000 of liability) and the issue of<br />
5,000,000 Convertible Notes at an issue price of 20 cents each (satisfying $1,000,000 of liability). These<br />
Shares and Convertible Notes are to be issued by agreement to Airedale (Asia) Limited, a company associated<br />
with JW Phillips, a director of <strong>Kingsrose</strong> <strong>Mining</strong>. The Company has also separately agreed with JW Phillips<br />
to issue him with 6,000,000 Convertible Notes at an issue price of 20 cents each to satisfy and discharge<br />
$1,200,000 of liability owed by the Company. The terms of the Convertible Notes are detailed in section 12.5.<br />
The Company will issue 20,000,000 Shares in the capital of the Company to the <strong>Kingsrose</strong> Unit Trust as<br />
consideration for acquisition of the sale interests.<br />
Completion of the transaction will occur within 3 business days of the satisfaction of the conditions precedent.<br />
The agreement is conditional upon the Company completing a capital raising constituted by this <strong>Prospectus</strong><br />
and receiving conditional approval to be admitted to the official list of the ASX on conditions acceptable to the<br />
Company and receiving consent from Reed Resources Ltd to the sale of the interests under the Joint Venture<br />
Agreement. The consent of Reed Resources Ltd has been received in terms of the deed of consent, assumption<br />
and variation as summarised below.<br />
KRM provides various warranties as to the sale interests including that the assets are not subject to any<br />
encumbrances and that it has complied with all its obligations under the Joint Venture Agreement.<br />
The agreement is governed by the laws of Western Australia.<br />
2. Joint Venture Agreement and Deed of Consent, Assumption and Variation<br />
In conjunction with the Asset Sale Agreement, the Company entered into a deed of consent, assumption and<br />
variation by which, amongst other things, it will be treated as a party to the Joint Venture Agreement.<br />
By reason of the Joint Venture Agreement and the deed of consent, assumption and variation, the Company<br />
and Reed Resources Ltd are bound by the Joint Venture Agreement.<br />
By the Joint Venture Agreement as amended, Reed Resources Ltd and the Company will be treated as parties<br />
to an unincorporated joint venture to mine for gold and other minerals in respect of the area covering mining<br />
leases M 29/52 and M 29/321 and miscellaneous licence L 29/67 (“Tenement Area”). The Tenement Area<br />
includes the area of the Sand George mine.<br />
Reed Resources Ltd is the registered holder of the joint venture tenements. <strong>Kingsrose</strong>, upon receiving an<br />
assignment of an interest from KRM, will have a 50% participating interest in the joint venture.<br />
The Company will be the operator of the joint venture and will be solely responsible for all mining and<br />
development expenditure in connection with the mining of ore including funding approved work programs.<br />
The Company’s expenditure responsibility includes the employment or engagement of any personnel and<br />
the maintaining of relevant insurances concerning the operations and the joint venture. Reed Resources Ltd<br />
will be solely responsible for all expenditure in connection with the transport and treatment of ore produced<br />
from the Tenement Area together with all surface exploration conducted on the Tenement Area. All other<br />
Page 60
expenditure will be borne by the parties in accordance with their participating 50% interests.<br />
The product entitlement of the joint venture parties is each of the Company and Reed Resources Ltd will be<br />
entitled to 50% of the product from shallow ore being gold ore produced within the Tenement Area up to and<br />
including a depth of 243 metres. The product entitlement in respect of deep ore, being gold ore produced<br />
within the Tenement Area from a depth exceeding 243 metres, is the Company will be 60% entitled to the<br />
product whilst Reed Resources Ltd will be 40% entitled to the product.<br />
The agreement provides for a gold production milestone of at least 25,000 ounces of gold ore by 31 May<br />
2009. If the gold production milestone is not satisfied, Reed Resources Ltd may terminate the agreement by<br />
notice in writing to the Company with the consequence that the participating interest of the Company in the<br />
joint venture will be deemed to be zero. Additionally, if the gold production milestone is not satisfied, the<br />
Company becomes insolvent or withdraws from the joint venture, then Reed Resources Ltd may purchase<br />
various office and mining equipment owned by the Company at the then written down value. If the gold<br />
production milestone is satisfied, Reed Resources Ltd is obliged to transfer 50% of its registered interest in the<br />
joint venture tenements to the Company.<br />
Surface resources amenable to open pit mining are excluded areas from the joint venture and are reserved for<br />
the benefit of Reed Resources Ltd. Reed Resources Ltd cannot commence open pit operation on any part of<br />
the Tenement Area where the Company reasonably expects that open pit operations would detrimentally affect<br />
current or future underground mining activities.<br />
The Company has a first right of refusal to form a joint venture with Reed Resources Ltd in respect of all gold<br />
and silver mineralisation occurring upon the Comet Vale Tenements on terms similar to the joint venture<br />
however the Company will earn no right to a registered holding in the Comet Vale Tenements. The Comet<br />
Vale Tenements constitute mining leases M 29/85, M 29/185, M 29/186, M 29/270, M 29/35, M 29/197, M<br />
29/198, M 29/199, M 29/200, M 29/201, M 29/232, M 29/233, M 29/235, exploration licences E 29/614, E<br />
29/603 and E 29/670 and prospecting licence P 29/1764.<br />
The joint venture will be conducted on a day to day basis by the Company as the operator subject to<br />
instructions of the management committee. Each party at the management committee level is entitled to<br />
votes equalling its participating share in the joint venture. While there are two parties to the joint venture, all<br />
management committee decisions must be unanimous.<br />
No party may assign its rights or obligations under the agreement without the written consent of the other<br />
party.<br />
The agreement otherwise features clauses common in mining joint venture agreements including withdrawal,<br />
default, pre-emptive right, force majeure and dispute resolution clauses. The agreement is governed by the<br />
laws of Western Australia.<br />
3. MTAB Pty Ltd Royalty Deed<br />
By a royalty deed dated 14 May 2002 as amended, Reed Resources Ltd (together with the Company from the<br />
date of acquiring its interest in the joint venture) is liable to pay MTAB Pty Ltd a royalty upon production.<br />
The total royalty payable to MTAB Pty Ltd for gold produced from the joint venture tenements is 2% of the<br />
gross proceeds received from the sale of any gold. The royalty payable from the sale of any minerals other<br />
than gold produced from the joint venture tenements is 2% of the net smelter return received from the sale of<br />
the product at the point of sale less selling costs, the costs of mining, milling, leaching, smelting, refining and<br />
any other processing costs, the cost of assaying and sampling such products and taxes imposed in connection<br />
with producing or selling the product.<br />
Upon completion of the sale transaction under the Asset Sale Agreement, the joint venture parties will be Reed<br />
Resources Ltd and the Company which will each have a 50% participating interest and they will each be liable<br />
to pay the royalties in accordance with their participating interest.<br />
The royalty deed is governed by the laws of Western Australia.<br />
Page 61
Section 11<br />
Material Contracts<br />
Set out below is a summary of the contracts to which the Company is a party which may be material in terms of<br />
this <strong>Prospectus</strong> and which are not otherwise summarised in Schedule 2 to the Solicitor’s Report. That schedule<br />
summarises the Joint Venture Agreement and other agreements which are material agreements relating to the<br />
Company’s interest in the Joint Venture tenements.<br />
To fully understand all rights and obligations of a material contract it would be necessary to review each<br />
contract in full and the summaries below should be read in that light.<br />
<strong>Mining</strong> Contract Services Agreement<br />
In September 2007, the Company entered into a mining services agreement with Westralmen Pty Ltd, Darren<br />
Phillips and Michael Green by which Westralmen Pty Ltd agreed to perform mining services for the Company<br />
and further agreed to procure Darren Phillips and Michael Green to provide these services for a period of 24<br />
months. At the conclusion of the 24 month period, the parties may agree to negotiate in good faith with a view<br />
to extending the term of the agreement on mutually agreeable terms.<br />
In consideration of Westralmen Pty Ltd performing the mining services, the Company will pay Westralmen Pty<br />
Ltd a services fee of $418,000 per annum inclusive of GST in equal instalments monthly in arrears. Westralmen<br />
Pty Ltd is solely responsible for all taxes incurred or payable in respect of the services fee it will receive from<br />
the Company.<br />
The services that Westralmen Pty Ltd will provide to the Company includes managing all aspects of the<br />
conduct of mining operations on the Joint Venture tenements, preparing and submitting expenditure proposals<br />
and work programs, maintaining all mining equipment, reporting to the Company in respect of the progress of<br />
the services and preparing and submitting any reports relating to the mining services as the Company requires.<br />
Under the terms of the agreement, the Company will effect and maintain all insurances required by all<br />
applicable laws in respect of the mining services.<br />
Westralmen Pty Ltd, Darren Phillips and Michael Green jointly and severally indemnify and keep indemnified<br />
the Company and its personnel, from all losses and claims arising from a breach by Westralmen Pty Ltd, Darren<br />
Phillips or Michael Green of their obligations under the agreement or any negligent act or omission or wilful<br />
misconduct arising out of their performance of the agreement.<br />
By the agreement, the Company may issue directions in connection with any aspect of the mining services<br />
to Westralmen Pty Ltd, Darren Phillips and Michael Green and may also issue a default notice if any term of<br />
the Agreement is breached by Westralmen Pty Ltd, Darren Phillips and Michael Green or an insolvency event<br />
occurs in relation to Westralmen Pty Ltd and continues for a period of 21 days.<br />
Westralmen Pty Ltd may not assign or subcontract all or part of its rights, benefits or interests under the<br />
agreement without obtaining prior written consent from the Company.<br />
The agreement is governed by the laws of Western Australia.<br />
Managing Director’s Employment Agreement<br />
The Company has entered into an employment agreement with David Hatch as managing director.<br />
By the agreement Mr Hatch is employed as the managing director to manage the day to day activities of the<br />
Company subject to and in accordance with the control and supervision of the Board.<br />
The engagement of Mr Hatch under the agreement is for a period of 3 years commencing on the date on<br />
which the Shares of the Company are listed for quotation on the ASX. The parties may extend the term of<br />
the agreement by mutual agreement subject to a satisfactory performance review by the Board. During the<br />
employment of Mr Hatch, the Company may terminate the employment upon limit events akin to<br />
misconduct or incapacity provided the Company has given Mr Hatch 3 months notice in writing. Additionally,<br />
either party may terminate the agreement without cause by providing the other party not less than 6 months<br />
written notice.<br />
Mr Hatch’s remuneration will consist of a salary of $300,000 per annum base salary plus statutory<br />
superannuation of 9%. Mr Hatch will be provided with use of a company motor vehicle to the value of $25,000<br />
per annum. Additionally, Mr Hatch has been issued with 3,000,000 Options with an exercise price of 25 cents<br />
and an expiry date of 31 December 2012. Otherwise, the terms of the Options are set out in section 12.4 of this<br />
<strong>Prospectus</strong>. Mr Hatch will not be paid a separate director’s fee for serving on the Board.<br />
The base salary of Mr Hatch will be reviewed every 12 months from the commencement date or as otherwise<br />
agreed between the parties. The base salary will be reviewed to an amount agreed in writing by the parties or if<br />
no agreement is reached as to such an amount, the base salary will be increased by the same percentage as the<br />
percentage increase in the consumer price index Sydney all groups table.<br />
The agreement is governed by the laws of Western Australia.<br />
Page 62
Section 12<br />
Additional Information<br />
12.1 Interests of Directors<br />
Other than as set out below or elsewhere in this <strong>Prospectus</strong>, no Director or proposed Director holds at the date<br />
of this <strong>Prospectus</strong>, or held at any time during the last two years before the date of lodgment of this <strong>Prospectus</strong><br />
with ASIC, any interest in:<br />
(a) the formation or promotion of the Company; or<br />
(b) any property acquired or proposed to be acquired by the Company in connection with its formation or<br />
promotion of the Company or the Offer; or<br />
(c) the Offer;<br />
and no amounts have been paid or agreed to be paid by any person and no benefits have been given or agreed<br />
to be given by any person:<br />
(d) to a Director or proposed Director to induce him or her to become, or to qualify as, a Director; or<br />
(e) for services provided by a Director or proposed Director in connection with the formation or promotion<br />
of the Company or the Offer.<br />
Holdings of Directors<br />
As at the date of this <strong>Prospectus</strong> the Directors have a relevant interest in securities as set out in the table<br />
below:<br />
Director Shares Options Convertible Notes<br />
John Morris 0 1,000,000 0<br />
Michael Andrews 0 1,000,000 0<br />
James William Phillips 26,250,000 0 11,000,000<br />
David Hatch 3,000,000* 3,000,000 0<br />
* Mr Hatch has entered into an agreement with the <strong>Kingsrose</strong> Unit Trust, a trust associated with Mr Phillps,<br />
to have 3,000,000 Shares transferred to him from the <strong>Kingsrose</strong> Unit Trust at the end of any escrow period<br />
imposed by the ASX upon such Shares. The agreement is conditional on Mr Hatch serving as a full time<br />
employee of the Company for 2 years.<br />
The Directors are not required to hold any Shares in the Company under the Constitution.<br />
The Directors reserve the right to subscribe for Shares under this Offer.<br />
Remuneration of Directors<br />
Mr Hatch has entered into a Employment Agreement with the Company. This agreement is summarised at<br />
section 11. Mr Hatch will not be paid a separate Director’s fee.<br />
Mr Morris will be paid a Director’s fee as chairman of $40,000 per annum plus statutory superannuation.<br />
Dr Andrews will be paid a Director’s fees of $20,000 per annum. Mr Phillips will be paid a Director’s fee of<br />
$20,000 per annum.<br />
No Director has received any fees from the Company in the last 2 years prior to the date of this <strong>Prospectus</strong>.<br />
Directors may be paid reasonable expenses incurred by them on business of the Company.<br />
12.2 Interests of Experts and Advisors<br />
Except as disclosed in this <strong>Prospectus</strong>, no expert, promoter or any other person named in this <strong>Prospectus</strong><br />
as performing a function in a professional advisory or other capacity in connection with the preparation<br />
or distribution of the <strong>Prospectus</strong>, nor any firm in which any of those persons is or was a partner nor any<br />
company in which any of those persons is or was associated with, has now, or has had, in the two year period<br />
ending on the date of this <strong>Prospectus</strong>, any interest in:<br />
(a) the formation or promotion of the Company; or<br />
(b) property acquired or proposed to be acquired by the Company in connection with its formation or<br />
promotion or the Offer; or<br />
Page 63
Section 12<br />
Additional Information<br />
(c)<br />
the Offer.<br />
Except as disclosed in this <strong>Prospectus</strong>, no amounts of any kind (whether in cash, securities or otherwise)<br />
have been paid or agreed to be paid to any expert, promoter or any other person named in this <strong>Prospectus</strong><br />
as performing a function in a professional advisory or other capacity in connection with the preparation or<br />
distribution of the <strong>Prospectus</strong>, or to any firm in which any of those persons is or was a partner or to any<br />
company in which any of those persons is or was associated with, for services rendered by that person in<br />
connection with the formation or promotion of the Company or the Offer.<br />
Fairweather & Lemonis has acted as solicitors to the Company in relation to the Offer including the provision<br />
of the Solicitor’s Report. In respect of this work, the Company will pay approximately $20,000 exclusive of<br />
GST and disbursements. Subsequently fees will be paid in accordance with normal hourly rates. Fairweather<br />
& Lemonis has been paid fees of approximately $14,000 for services to the Company in the 2 years prior to<br />
the date of this <strong>Prospectus</strong> for other legal services.<br />
Mack & Co has prepared the Investigating Accountant’s Report in this <strong>Prospectus</strong>. In respect of this work,<br />
the Company will pay approximately $17,000. Mack & Co has not received any other fees for services to the<br />
Company in the 2 years prior to the date of this <strong>Prospectus</strong>.<br />
Geological Investigations Pty Ltd has prepared the Independent Geologist’s Report in this <strong>Prospectus</strong>. In<br />
respect of this work, the Company will pay approximately $18,000. Geological Investigations Pty Ltd has not<br />
received any other fees for services to the Company in the 2 years prior to the date of this <strong>Prospectus</strong>.<br />
Page 64<br />
12.3 Rights and Liabilities Attaching to Shares<br />
Full details of the rights and liabilities attaching to the Shares are:<br />
• detailed in the Constitution, a copy of which can be inspected, free of charge, at the registered office of<br />
the Company during normal business hours; and<br />
• in certain circumstances, regulated by the Corporations Act, the Listing Rules and the general law.<br />
The following is a summary of the more significant rights and liabilities attaching to the Shares. This<br />
summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of<br />
Shareholders. To obtain such a statement, persons should seek independent legal advice.<br />
Voting<br />
At any meeting, each Shareholder present in person or by proxy, attorney or representative has one vote for<br />
each Share held either upon a show of hands or by a poll. Holders of partly paid shares shall have a fraction of<br />
a vote for each partly paid share held with the fractional vote of each share being equivalent to the proportion<br />
which the amount actually paid (not credited) for that share is of the total amounts paid and payable<br />
(excluding amounts credited) for that share. Amounts paid in advance of a call are ignored when calculating<br />
proportions.<br />
The holder of a partly paid share shall not be entitled to vote at a meeting in respect of those shares on which<br />
calls are outstanding.<br />
General Meetings<br />
Each Shareholder in the Company will be entitled to receive notice of and attend and vote at general meetings<br />
of the Company. The Directors may whenever they think fit, convene a general meeting of the members of<br />
the Company and the Directors will convene a general meeting whenever requisitioned by the members in<br />
accordance with the Corporations Act.<br />
Dividends<br />
The profits of the Company, which the Directors may from time to time determine to distribute to the<br />
members by way of dividend, will be divisible amongst the members in proportion to the amounts paid (not<br />
credited) on the shares held by them, subject to the rights attached to any shares issued upon special terms.<br />
An amount paid in advance of a call is not to be included as an amount paid on a share for the purposes of<br />
calculating entitlement to dividends for such a share.<br />
No dividend is currently declared or proposed.
Rights on Winding Up<br />
Subject to the rights of members (if any) entitled to shares with special rights in a winding up, all moneys and<br />
property that are to be distributed amongst members on a winding up, shall be distributed in proportion to the<br />
shares held by them.<br />
Transfer of Shares<br />
Subject to the Constitution of the Company, the Corporations Act, the Listing Rules and any other applicable<br />
law of Australia, Shares are freely transferable.<br />
Variation of Rights<br />
The rights, privileges and restrictions attaching to shares of a class, can be altered, with the approval of a<br />
special resolution passed at a separate general meeting of the holders of shares of that class, (being a three<br />
quarters majority of those holders who, being entitled to do so, vote at that meeting) or with the written<br />
consent of the holders of at least three quarters of that class of share on issue. Any variation is subject to the<br />
provisions of the Corporations Act.<br />
Creation and Issue of Further Shares<br />
The issue and allotment of any additional shares is under the control of the Directors, and, subject to any<br />
restriction on the issue and allotment of shares imposed by the Constitution of the Company, the Corporations<br />
Act, the Listing Rules or as may be directed by the members of the Company at a general meeting, the<br />
Directors may issue and allot such shares on such terms and conditions and with such rights and privileges as<br />
they deem fit.<br />
Predominance of Listing Rules<br />
If the Company is admitted to trading on the official list of the ASX, then despite anything in the Constitution,<br />
if the Listing Rules prohibit an act being done, the act must not be done. Nothing in the Constitution<br />
prevents an act being done that the Listing Rules require to be done. If the Listing Rules require an act to be<br />
done or not to be done, authority is given for that act to be done or not to be done (as the case may be). If<br />
the Listing Rules require the Constitution to contain a provision and it does not contain such a provision, the<br />
Constitution is deemed to contain that provision. If the Listing Rules require the Constitution not to contain<br />
a provision and it contains such a provision, the Constitution is deemed not to contain that provision. If a<br />
provision of the Constitution is inconsistent with the Listing Rules, the Constitution is deemed not to contain<br />
that provision to the extent of the inconsistency.<br />
12.4 Rights Attaching to Management Options and Future Entitlements Options<br />
The Company has issued 5,500,000 Options to management being 3,000,000 to David Hatch as Managing<br />
Director, 1,000,000 to John Morris as a Director, 1,000,000 to Michael Andrews as a Director and 500,000<br />
to Jeannette Smith, or her nominee, as Company Secretary. The key terms of these Options are they have an<br />
exercise price of 25 cents each, an expiry date of 31 December 2012, are freely transferable and will not be<br />
listed.<br />
The Company also intends to undertake an entitelements Option issue in the future in accordance with<br />
section 3.8 of this <strong>Prospectus</strong>. The key terms of these future Options are they have an exercise price of 20<br />
cents each, an expiry date of 31 December 2012, are freely transferable and will be sought to be listed.<br />
Otherwise the material terms of the Options will be in terms of the following:<br />
(a) Each Option entitles the holder to one (1) Share.<br />
(b) The Options are exercisable at any time prior to the expiry date.<br />
(c)<br />
The Company will provide to each Option holder a notice that is to be completed when exercising<br />
the Options (Notice of Exercise). The Options may be exercised wholly or in part by completing<br />
the Notice of Exercise and delivering it together with payment to the secretary of the Company to be<br />
received any time prior to the expiry date. The Company will process all relevant documents received at<br />
the end of every calendar month.<br />
Page 65
Section 12<br />
Additional Information<br />
(d)<br />
(e)<br />
(f)<br />
(g)<br />
(h)<br />
Upon the exercise of an Option and receipt of all relevant documents and payment, the holder in<br />
accordance with paragraph (c) will be allotted and issued a Share ranking pari passu with the then<br />
issued Shares.<br />
There will be no participating rights or entitlements inherent in the Options and the holders will not be<br />
entitled to participate in new issues of capital which may be offered to Shareholders during the currency<br />
of the Options. However, the Company will ensure that for the purposes of determining entitlements<br />
to any such issue, the record date will be at least 7 business days after the issue is announced. This will<br />
give Option holders the opportunity (where available) to exercise their Options prior to the date for<br />
determining entitlements to participate in any such issue.<br />
If there is a bonus issue (Bonus Issue) to Shareholders, the number of Shares over which an Option<br />
is exercisable will be increased by the number of Shares which the holder would have received if the<br />
Option had been exercised before the record date for the Bonus Issue (Bonus Shares). The Bonus<br />
Shares must be paid up by the Company out of profits or reserves (as the case may be) in the same<br />
manner as was applied in the Bonus Issue, and upon issue will rank equally in all respects with the<br />
other Shares on issue as at the date of issue of the Bonus Shares.<br />
In the event of any reconstruction (including consolidation, sub-division, reduction or return) of the<br />
issued capital of the Company prior to the expiry date, all rights of an Option holder are to be changed<br />
in a manner consistent with the Listing Rules.<br />
In the event that the Company makes a pro rata issue of securities, the exercise price of the Options<br />
will be adjusted in accordance with the formula set out in Listing Rule 6.22.2.<br />
12.5 Convertible Note Terms<br />
The Company will issue 5,000,000 Convertible Notes to or at the direction of Airedale (Asia) Limited,<br />
a company associated with JW Phillips, a director of <strong>Kingsrose</strong> <strong>Mining</strong>. The Company will also issue<br />
6,000,000 Convertible Notes to or at the direction of JW Phillips a director of <strong>Kingsrose</strong> <strong>Mining</strong> Limited. The<br />
Convertible Notes will be issued at 20 cents each and will be in discharge of liabilities of $2,200,000 owed by<br />
the Company to Airedale (Asia) Limited and JW Phillips.<br />
The terms of the Convertible Notes are set out below.<br />
Issue Price<br />
The Convertible Notes to be issued at 20 cents ($0.20) each.<br />
Number of Notes<br />
11,000,000 Convertible Notes to all Noteholders with a total repayment of $2,200,000 at the issue price.<br />
Interest<br />
6% per annum payable annually in arrears.<br />
Conversion Rights and Ratio<br />
The Convertible Notes may be converted into Shares upon the moneys payable at any time on or before the<br />
redemption date in minimum parcels of 5,000 Convertible Notes. The moneys payable upon the Convertible<br />
Notes will convert to the number of Shares at 20 cents per Share subject to any capital events referred to<br />
below.<br />
Security<br />
Unsecured.<br />
Redemption Date<br />
30 months from the date of issue of the Convertible Notes. The Convertible Notes will be redeemed on the<br />
redemption date unless converted or redeemed prior to this date.<br />
Page 66
Early Redemption by Noteholder<br />
The noteholder may only redeem the Convertible Notes in minimum parcels of 5,000 prior to the redemption<br />
date where:<br />
(a)<br />
(b)<br />
(c)<br />
there is non-payment of interest and the default is not remedied within 7 days of issue of a default<br />
notice by the noteholder;<br />
the Convertible Notes cannot be converted without breaching the law; or<br />
a liquidator is appointed to the Company.<br />
Rights of Shares Issued on Conversion<br />
Shares issued on conversion are to rank equally with all other Shares in the Company.<br />
Company’s election to convert at Redemption Date<br />
The Company may at its absolute discretion cause the moneys payable to the noteholder to be converted to<br />
Shares at the redemption date rather than being redeemed.<br />
Voting Rights<br />
A Convertible Note does not carry any voting rights until it is converted.<br />
Participation Rights and Capital Events<br />
Prior to conversion the Noteholder is not entitled to participate in any rights issue, any return of capital,<br />
bonus issue or any reconstruction of the issued capital of the Company. However, a proportionate adjustment<br />
will be made for any of these capital events to the number and/or issue price of Shares to which the noteholder<br />
is entitled upon conversion of the Convertible Notes to ensure that the value of the Convertible Notes is, as far<br />
as practicable, the same as it would have been had the capital event not occurred.<br />
12.6 Director Protection Deeds<br />
The Company will enter into Director Protection Deeds (“Deed”) with each Director. Under the Deed, the<br />
Company indemnifies the Director to the maximum extent permitted by law and the Constitution against legal<br />
proceedings, damage, loss, liability, cost, charges, expense, outgoings or payment (including legal expenses<br />
on a solicitor/client basis) suffered, paid or incurred by the officers in connection with the Director being an<br />
officer of the Company, the employment of the Director with the Company or a breach by the Company of its<br />
obligations under the Deed.<br />
Pursuant to the Deed, the Company may insure the Directors against liability and must provide access to all<br />
Board documents both while a person is a Director and after that person ceases to be a Director to the extent<br />
relevant to defending any claim brought against the Directors in their capacity as officers of the Company.<br />
12.7 Company Tax Status and Financial Year<br />
The Company will be taxed in Australia as a public company. The financial year of the Company ends on 30<br />
June annually.<br />
12.8 Dividend Policy<br />
The Company does not intend to pay dividends on securities for the year ending 30 June 2008.<br />
Any future determination as to the payment of dividends by the Company will be at the discretion of the<br />
Directors and will depend upon matters such as the availability of distributable earnings, the operating results<br />
and financial condition of the Company, future capital requirements, general business and other factors<br />
considered relevant by the Directors. No assurances in relation to the payment of dividends, or the franking<br />
credits attached to such dividends, can be given.<br />
Page 67
Section 12<br />
Additional Information<br />
12.9 Expenses of the Offer<br />
The total estimated costs of this <strong>Prospectus</strong> assuming Full Subscription including broker commission fees, fees<br />
to be paid to the solicitors, independent geologist and investigating accountant, listing fees, <strong>Prospectus</strong> design,<br />
printing and other miscellaneous expenses will be payable by the Company and these expenses are estimated<br />
to be approximately $400,000 exclusive of any GST which may be payable on that amount. This sum includes<br />
estimated broker commission placement fees of $300,000 which assumes a payment of 5% on all $6,000,000<br />
received at Full Subscription under this <strong>Prospectus</strong>.<br />
12.10 Consents<br />
The following parties have given their written consent to be named in this <strong>Prospectus</strong> and for the inclusion<br />
of statements made by those parties (as described below in the form and context in which they are included),<br />
and have not withdrawn such consent before lodgment of this <strong>Prospectus</strong> with ASIC.<br />
(a) Fairweather and Lemonis has consented to being named as the Solicitors to the Company and to<br />
inclusion of the Solicitor’s Report in this <strong>Prospectus</strong>.<br />
(b)<br />
(c)<br />
(d)<br />
(e)<br />
(f)<br />
Geological Investigations Pty Ltd has consented to being named as the Independent Geologist to the<br />
Company, the inclusion of the Independent Geologist’s Report in this <strong>Prospectus</strong> and all statements<br />
referring to it in this <strong>Prospectus</strong>.<br />
Mack & Co has consented to being named as the Investigating Accountant to the Company and the<br />
inclusion of the Investigating Accountant’s Report in this <strong>Prospectus</strong>.<br />
Advanced Share Registry Services has consented to being named as the Share Registry to the Offer.<br />
Reed Resources Limited has consented to all statements referring to it in this <strong>Prospectus</strong>.<br />
Westralmen Pty Ltd has consented to all statements referring to it in this <strong>Prospectus</strong>.<br />
Each of the parties referred to above in this section:<br />
• does not make, or purport to make any statement in this <strong>Prospectus</strong>, or on which a statement made in<br />
this <strong>Prospectus</strong> is based other than as specified in this section;<br />
• to the maximum extent permitted by law, expressly disclaims and takes no responsibility for any part of<br />
this <strong>Prospectus</strong> other than a reference to its name and a statement included in the <strong>Prospectus</strong> with the<br />
consent of that party as specified in this section; and<br />
• has not caused or authorised the issue of this <strong>Prospectus</strong>.<br />
12.11 Legal Proceedings<br />
Legal proceedings may arise from time to time in the course of the business of the Company. As at the date of<br />
this <strong>Prospectus</strong>, there are no material legal proceedings affecting the Company and the Directors are not aware<br />
of any legal proceedings pending or threatened against or affecting the Company.<br />
12.12 Electronic <strong>Prospectus</strong><br />
Pursuant to Class Order 00/44 the ASIC has exempted compliance with certain provisions of the Corporations<br />
Act to allow distribution of an electronic prospectus and electronic application form on the basis of a paper<br />
prospectus lodged with ASIC and the publication of notices referring to an electronic prospectus or electronic<br />
application form, subject to compliance with certain conditions.<br />
If you have received this <strong>Prospectus</strong> as an electronic <strong>Prospectus</strong>, please ensure that you have received the<br />
entire <strong>Prospectus</strong> accompanied by the Application Form. If you have not, please contact the Company and<br />
the Company will send you, for free, either a hard copy or a further electronic copy of the <strong>Prospectus</strong> or both.<br />
The Company reserves the right not to accept an Application Form from a person if it has reason to believe<br />
that when that person was given access to the electronic Application Form, it was not provided together<br />
with the electronic <strong>Prospectus</strong> and any relevant supplementary or replacement prospectus or any of those<br />
documents were incomplete or altered.<br />
Page 68
Section 13<br />
Director’s Responsibility and Consent<br />
The Directors state that they have made all reasonable enquiries and on that basis have reasonable grounds<br />
to believe that any statements made by the Directors in this <strong>Prospectus</strong> are not misleading or deceptive and<br />
that in respect to any other statements made in the <strong>Prospectus</strong> by persons other than Directors, the Directors<br />
have made reasonable enquiries and on that basis have reasonable grounds to believe that persons making the<br />
statement or statements were competent to make such statements, those persons have given their consent to<br />
the statements being included in this <strong>Prospectus</strong> in the form and context in which they are included and have<br />
not withdrawn that consent before lodgement of this <strong>Prospectus</strong> with the ASIC, or to the Directors knowledge,<br />
before any issue of the Shares pursuant to this <strong>Prospectus</strong>.<br />
Each Director has consented to the lodgement of this <strong>Prospectus</strong> with the ASIC and has not withdrawn that<br />
consent.<br />
Dated: 1 November 2007<br />
Signed for and on behalf of<br />
<strong>Kingsrose</strong> <strong>Mining</strong> Limited by<br />
John Morris<br />
Chairman<br />
Page 69
Section 14<br />
Glossary<br />
Where the following terms are used in this <strong>Prospectus</strong> they have the following meanings:<br />
Applicant<br />
means a person who submits a valid Application Form pursuant to this<br />
<strong>Prospectus</strong>.<br />
Application<br />
means a valid application made on an Application Form to subscribe for<br />
Shares pursuant to this <strong>Prospectus</strong>.<br />
Application Form<br />
means the application form attached to this <strong>Prospectus</strong>.<br />
Application Money<br />
means money received by the Company with the Application Form.<br />
Asset Sale Agreement means the asset sale agreement between the <strong>Kingsrose</strong> Unit Trust and the<br />
Company as summarised in Schedule 2 to the Solicitor’s Report.<br />
ASIC<br />
means the Australian Securities & Investments Commission.<br />
ASX means the ASX Limited ACN 008 624 691.<br />
Board<br />
means the Board of Directors.<br />
Closing Date<br />
means the closing date for receipt of Application Forms under this<br />
<strong>Prospectus</strong>, estimated to be 5.00pm WST on 29 November 2007 or an<br />
amended time as set by the Board.<br />
Comet Vale Joint Venture means the project comprising mining leases M29/52 and M29/321 and<br />
or Joint Venture<br />
miscellaneous licence L29/67.<br />
Comet Vale Tenements means M29/00085, M29/00185, M29/00186, M29/00270, M29/00035,<br />
M29/00197, M29/00198, M29/00199, M29/00200, M29/00201, M29/00232,<br />
M29/00233, M29/00235, E29/00614, P29/01764, E29/00603, E29/00670.<br />
Company or <strong>Kingsrose</strong> means <strong>Kingsrose</strong> <strong>Mining</strong> Limited ABN 49 112 389 910.<br />
Constitution<br />
means the constitution of the Company.<br />
Convertible Notes<br />
means the convertible notes issued by the Company on the terms set out in<br />
section 12.5.<br />
Corporations Act<br />
means the Corporations Act 2001 (Cth).<br />
Director<br />
means a director of the Company.<br />
Dollar or $<br />
means Australian dollars unless otherwise stated.<br />
Full Subscription means the amount to be raised under this <strong>Prospectus</strong> being $6,000,000.<br />
Independent Geologist means Geological Investigations Pty Ltd.<br />
Initial Tenements<br />
means mining leases M29/52 and M29/321 and miscellaneous licence L29/67.<br />
Joint Venture Agreement means the joint venture agreement as amended to which the Company and<br />
Reed Resources Limited will be bound as summarised in Schedule 2 to the<br />
Solicitor’s Report.<br />
JORC Code<br />
means the Australasian Code for Reporting of Exploration Results, Mineral<br />
Resources and Ore Reserves prepared by the Joint Ore Reserves Committee<br />
of the Australasian Institute of <strong>Mining</strong> and Metallurgy, Australian Institute<br />
of Geoscientists and Minerals Council of Australia.<br />
<strong>Kingsrose</strong> Unit Trust<br />
means KRM (WA) Pty Ltd ACN 125 569 440 as trustee for the <strong>Kingsrose</strong><br />
Unit Trust.<br />
Listing Rules<br />
means the official listing rules of the ASX.<br />
Offer<br />
means an invitation made in this <strong>Prospectus</strong> to subscribe for Shares.<br />
Opening Date means 9 November 2007.<br />
Option<br />
means an option to subscribe for a Share.<br />
<strong>Prospectus</strong><br />
means this <strong>Prospectus</strong> and includes the electronic prospectus.<br />
Sand Queen Gold Mine means the mine located in the Comet Vale Joint Venture.<br />
Share<br />
means a fully paid ordinary share in the Company.<br />
Shareholder<br />
means the registered holder of Shares in the Company.<br />
WST<br />
means Western Standard Time, Perth, Western Australia.<br />
Page 70
Application<br />
This Application Form relates to the issue of Shares in <strong>Kingsrose</strong> <strong>Mining</strong> Limited at 20 cents per Share pursuant to<br />
a <strong>Prospectus</strong> dated 1 November 2007. The expiry date of the <strong>Prospectus</strong> is the date which is 13 months after the<br />
date of the <strong>Prospectus</strong>. The <strong>Prospectus</strong> contains information about investing in the Shares of the Company and it<br />
is advisable to read this document before applying for Shares. A person who gives another person access to this<br />
Application Form must at the same time and by the same means give the other person access to the <strong>Prospectus</strong>,<br />
and any supplementary prospectus (if applicable). While the <strong>Prospectus</strong> is current, the Company will send paper<br />
copies of the <strong>Prospectus</strong>, and any supplementary prospectus (if available) and an Application Form, on request<br />
and without charge.<br />
Number of Shares applied for:<br />
Broker Stamp<br />
Application moneys at 20 cents per Share:<br />
$<br />
Title Given Names/Company Name Surname/ACN<br />
Joint applicants or account designation<br />
_________________________________________________________________________________________<br />
_________________________________________________________________________________________<br />
Postal Address<br />
City/Town State Postcode<br />
Contact Name Daytime Contact No. Email contact<br />
CHESS Details: PID<br />
HIN<br />
Tax File No/Exemption Category<br />
Applicant 1 Applicant 2 Applicant 3<br />
Payment Details<br />
Drawer Bank Branch Amount<br />
_______________________________ ____________________ ________________ $_____________<br />
_______________________________ ____________________ ________________ $_____________<br />
DECLARATION<br />
By lodging this Application Form and a cheque for the Application money the Applicant hereby:<br />
a) applies for the number of Shares specified in the Application Form or such lesser number as may be allocated<br />
by the Directors;<br />
b) agrees to be bound by the Constitution of the Company; and<br />
c) authorises the Directors to complete or amend this Application Form where necessary to correct any errors or<br />
omissions.<br />
Page 71
Application<br />
INSTRUCTIONS<br />
1. Enter the number of Shares you wish to apply for. Applications must be for a minimum of 10,000 Shares and<br />
thereafter in multiples of 5,000 Shares.<br />
2. Enter the total amount of application moneys payable. To calculate this amount, multiply the number of Shares you<br />
are applying for by the issue price for each Share.<br />
3. Enter the full name(s) of all legal entities that are to be recorded as the registered holders.<br />
4. Enter the postal address for all communications from the Company.<br />
5. Enter the name and telephone number of the person who should be contacted if there are any questions with respect<br />
to this application.<br />
6. If you are CHESS sponsored, enter your Participant Identification Number (PID) and Holder Identification Number<br />
(HIN), otherwise leave this box blank and a Shareholder Reference Number (SRN) will be allocated to you on issue.<br />
7. Enter the tax file number(s) of the Applicant(s) - this is not mandatory.<br />
8. Unless otherwise agreed by the Company, payment must be made to “<strong>Kingsrose</strong> <strong>Mining</strong> Limited - Offer Account” by<br />
cheque drawn or payable on a bank within Australia, crossed “Not Negotiable” and be in Australian dollars. Receipt<br />
of payment will not be acknowledged.<br />
9. This Application Form does not need to be signed. Return of this Application Form with the required application<br />
moneys will constitute acceptance of that number of Shares stated on this form.<br />
If you have received an Application Form without a complete and unaltered copy of this <strong>Prospectus</strong>, please contact the<br />
Company who will send you, free of charge, either a printed or electronic version of this <strong>Prospectus</strong> (or both).<br />
CORRECT FORMS OF REGISTRABLE TITLE<br />
Note that only legal entities are allowed to hold securities. Application Forms must be in the name(s) of a natural<br />
person(s), companies or other legal entities acceptable to the Company. At least one full name and the surname is<br />
required for each natural person. Application Forms cannot be completed by persons less than 18 years of age. Examples<br />
of the correct form of registrable title are set out below:<br />
Type of Investor Correct Form of Registrable Title Incorrect Form of<br />
Registrable Title<br />
Trusts Mr John David Brown John Brown Family<br />
Trust<br />
Deceased Estates Mr John David Brown John Brown<br />
<br />
Partnerships Mr John David Brown and Mr Michael James Brown John Brown & Son<br />
Clubs/Unincorporated Bodies Mr John David Brown Brown Investment<br />
Club or ABC Tennis<br />
Association<br />
Super Funds John Brown Pty Ltd John Brown<br />
Superannuation Fund<br />
PAYMENT DETAILS<br />
Please note that if an Application Form is not completed correctly, or if the accompanying payment is for the wrong<br />
amount, it may still be accepted. Any decision of the Directors as to whether to accept an Application Form, and how to<br />
construe, amend or complete it, shall be final. An Application Form will not be treated as having offered to subscribe for<br />
more Shares than is indicated by the amount of the accompanying cheque. Please deliver the completed Application Form<br />
(accompanied by a cheque for the application moneys) at any time prior to Closing Date to :<br />
By Post:<br />
By Delivery:<br />
Advanced Share Registry Services<br />
Advanced Share Registry Services<br />
PO Box 1156<br />
110 Stirling Highway<br />
Nedlands, Western Australia, 6909 Nedlands, Western Australia, 6009<br />
Applications must be received by the Closing Date.<br />
Please telephone the Company on (08) 9316 2711 if you have any questions with respect to this Application Form.<br />
Page 72
Application<br />
This Application Form relates to the issue of Shares in <strong>Kingsrose</strong> <strong>Mining</strong> Limited at 20 cents per Share pursuant to<br />
a <strong>Prospectus</strong> dated 1 November 2007. The expiry date of the <strong>Prospectus</strong> is the date which is 13 months after the<br />
date of the <strong>Prospectus</strong>. The <strong>Prospectus</strong> contains information about investing in the Shares of the Company and it<br />
is advisable to read this document before applying for Shares. A person who gives another person access to this<br />
Application Form must at the same time and by the same means give the other person access to the <strong>Prospectus</strong>,<br />
and any supplementary prospectus (if applicable). While the <strong>Prospectus</strong> is current, the Company will send paper<br />
copies of the <strong>Prospectus</strong>, and any supplementary prospectus (if available) and an Application Form, on request<br />
and without charge.<br />
Number of Shares applied for:<br />
Broker Stamp<br />
Application moneys at 20 cents per Share:<br />
$<br />
Title Given Names/Company Name Surname/ACN<br />
Joint applicants or account designation<br />
_________________________________________________________________________________________<br />
_________________________________________________________________________________________<br />
Postal Address<br />
City/Town State Postcode<br />
Contact Name Daytime Contact No. Email contact<br />
CHESS Details: PID<br />
HIN<br />
Tax File No/Exemption Category<br />
Applicant 1 Applicant 2 Applicant 3<br />
Payment Details<br />
Drawer Bank Branch Amount<br />
_______________________________ ____________________ ________________ $_____________<br />
_______________________________ ____________________ ________________ $_____________<br />
DECLARATION<br />
By lodging this Application Form and a cheque for the Application money the Applicant hereby:<br />
a) applies for the number of Shares specified in the Application Form or such lesser number as may be allocated<br />
by the Directors;<br />
b) agrees to be bound by the Constitution of the Company; and<br />
c) authorises the Directors to complete or amend this Application Form where necessary to correct any errors or<br />
omissions.<br />
Page 73
Application<br />
INSTRUCTIONS<br />
1. Enter the number of Shares you wish to apply for. Applications must be for a minimum of 10,000 Shares and<br />
thereafter in multiples of 5,000 Shares.<br />
2. Enter the total amount of application moneys payable. To calculate this amount, multiply the number of Shares you<br />
are applying for by the issue price for each Share.<br />
3. Enter the full name(s) of all legal entities that are to be recorded as the registered holders.<br />
4. Enter the postal address for all communications from the Company.<br />
5. Enter the name and telephone number of the person who should be contacted if there are any questions with respect<br />
to this application.<br />
6. If you are CHESS sponsored, enter your Participant Identification Number (PID) and Holder Identification Number<br />
(HIN), otherwise leave this box blank and a Shareholder Reference Number (SRN) will be allocated to you on issue.<br />
7. Enter the tax file number(s) of the Applicant(s) - this is not mandatory.<br />
8. Unless otherwise agreed by the Company, payment must be made to “<strong>Kingsrose</strong> <strong>Mining</strong> Limited - Offer Account” by<br />
cheque drawn or payable on a bank within Australia, crossed “Not Negotiable” and be in Australian dollars. Receipt<br />
of payment will not be acknowledged.<br />
9. This Application Form does not need to be signed. Return of this Application Form with the required application<br />
moneys will constitute acceptance of that number of Shares stated on this form.<br />
If you have received an Application Form without a complete and unaltered copy of this <strong>Prospectus</strong>, please contact the<br />
Company who will send you, free of charge, either a printed or electronic version of this <strong>Prospectus</strong> (or both).<br />
CORRECT FORMS OF REGISTRABLE TITLE<br />
Note that only legal entities are allowed to hold securities. Application Forms must be in the name(s) of a natural<br />
person(s), companies or other legal entities acceptable to the Company. At least one full name and the surname is<br />
required for each natural person. Application Forms cannot be completed by persons less than 18 years of age. Examples<br />
of the correct form of registrable title are set out below:<br />
Type of Investor Correct Form of Registrable Title Incorrect Form of<br />
Registrable Title<br />
Trusts Mr John David Brown John Brown Family<br />
Trust<br />
Deceased Estates Mr John David Brown John Brown<br />
<br />
Partnerships Mr John David Brown and Mr Michael James Brown John Brown & Son<br />
Clubs/Unincorporated Bodies Mr John David Brown Brown Investment<br />
Club or ABC Tennis<br />
Association<br />
Super Funds John Brown Pty Ltd John Brown<br />
Superannuation Fund<br />
PAYMENT DETAILS<br />
Please note that if an Application Form is not completed correctly, or if the accompanying payment is for the wrong<br />
amount, it may still be accepted. Any decision of the Directors as to whether to accept an Application Form, and how to<br />
construe, amend or complete it, shall be final. An Application Form will not be treated as having offered to subscribe for<br />
more Shares than is indicated by the amount of the accompanying cheque. Please deliver the completed Application Form<br />
(accompanied by a cheque for the application moneys) at any time prior to Closing Date to :<br />
By Post:<br />
By Delivery:<br />
Advanced Share Registry Services<br />
Advanced Share Registry Services<br />
PO Box 1156<br />
110 Stirling Highway<br />
Nedlands, Western Australia, 6909 Nedlands, Western Australia, 6009<br />
Applications must be received by the Closing Date.<br />
Please telephone the Company on (08) 9316 2711 if you have any questions with respect to this Application Form.<br />
Page 74
Airleg miner boring a level drive face.
<strong>Kingsrose</strong> <strong>Mining</strong> Limited<br />
ABN 49 112 389 910