Notice of AGM

Mark Caruso

Executive Chairman

T:+61 8 93533638

Roland Cornish

Beaumont Cornish Limited 

T: +44 (0) 20 7628 3396

TIME:

10.00 am (WST)

DATE:

11 November 2009

PLACE:

Hyatt Regency Hotel

99 Adelaide Terrace

PERTH WA 6000

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

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on (+61 8) 9276 4604.

Notice of Annual General Meeting (setting out the proposed resolutions)

3

Explanatory Statement (explaining the proposed resolutions)

6

Glossary

13

Schedule 1 - Terms and Conditions of Director Options

14

Schedule 2 - Valuation of Director Options

17

(a)

post to Computershare Investor Services Pty Limited, GPO Box 242, Melbourne VIC 3000; 

(b)

hand to Computershare Investor Services Pty Limited, Level 2, 45 St Georges Terrace, Perth WA 6000; or

(c)

facsimile to Computershare Investor Services Pty Limited on facsimile number 1800 783 447 (within Australia) or (+61 3) 9473 2555 (outside Australia),

1.

Resolution 1 - Adoption of remuneration report

2.

Resolution 2 - Re-election of director - Gregory steemson

3.

Resolution 3 - Re-election of director - Montague House

4.

Resolution 4 - Re-election of director - frank terranova

5.

Resolution 5 - ratification of prior issue

6.

Resolution 6 - issue of Director options - montague house

7.

Resolution 7 - issue of Director options - mark caruso

8.

Resolution 8 - issue of Director options - frank terranova

1.

financial statements and reports

2.

Resolution 1 - adoption of remuneration report

3.

Resolutions 2 to 4 - re-election of directors

3.1

Rotation

3.2

Additional Directors

4.

Resolution 5 - ratification of prior issue

4.1

General

4.2

Technical information required by ASX Listing Rule 7.4

(a)

61,649,000 Shares were allotted;

(b)

the issue price was $0.50 per Share;

(c)

the Shares issued were all fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company's existing Shares;

(d)

the Shares were allotted and issued to sophisticated investor clients of Mirabaud Securities in the UK and Evans and Partners in Australia; and

(e)

the funds raised from this issue are being used to:

●

retire the original Simberi Oxide project debt finance facility;

●

accelerate the feasibility study for the Simberi Island sulphide expansion initiative being considered by the Company;

●

continue to accelerate the drilling program relating to the Simberi Island sulphide expansion feasibility;

●

purchase additional drilling rig equipment to accelerate other existing exploration programs; and

●

commence capital initiatives to optimise the gold production process and throughput and reduce operating costs.

5.

Resolutions 6 to 8 - issue of director options

5.1

General

(a)

obtain the approval of the public company's members in the manner set out in Sections 217 to 227 of the Corporations Act; and

(b)

give the benefit within 15 months following such approval,

5.2

Shareholder Approval (Chapter 2E of the Corporations Act and Listing Rule 10.11)

(a)

the related parties are Messrs House, Caruso and Terranova and they are related parties by virtue of being Directors;

(b)

the maximum number of Director Options (being the nature of the financial benefit being provided) to be granted to the Related Parties is:

 (i)

1,500,000 Director Options to Montague House;

 (ii)

25,000,000 Director Options to Mark Caruso; and

 (iii)

12,500,000 Director Options to Frank Terranova;

(c)

the Director Options will be granted to the Related Parties no later than 

1 month after the date of the Annual General Meeting (or such later date as permitted by any ASX waiver or modification of the ASX Listing Rules) and it is anticipated the Director Options will be issued on one date

(d)

the Director Options will be granted for nil cash consideration, accordingly no funds will be raised;

(e)

the terms and conditions of the Director Options are set out in Schedule 1;

(f)

the value of the Director Options and the pricing methodology is set out in Schedule 2;

(g)

the relevant interests of the Related Parties in securities of the Company are set out below;

1 3,400,000 Options exerciseable at $0.45 each on or before 31 December 2009, 4,750,000 Options exerciseable at $0.35 each on or before 31 October 2011, 2,250,000 Options exerciseable at $0.35 each on or before 31 October 2011 (vesting upon the 100,000th ounce of gold produced between 1 October 2008 and 31 December 2009) and 3,000,000 Options exerciseable at $0.35 each on or before 31 October 2011 (vesting upon the Company's Share price trading at greater than $0.70 for 5 consecutive trading days).

2 3,500,000 Options exerciseable at $0.35 each on or before 31 October 2011, 1,500,000 Options exerciseable at $0.35 each on or before 31 October 2011 (vesting upon the 100,000th ounce of gold produced between 1 October 2008 and 31 December 2009) and 1,250,000 Options exerciseable at $0.35 each on or before 31 October 2011 (vesting upon the Company's Share price trading at greater than $0.70 for 5 consecutive trading days).

(h)

the remuneration and emoluments from the Company to the Related Parties for both the current financial year and previous financial year are set out below:

(i)

if the Director Options granted to the Related Parties are exercised, a total of 39,000,000 Shares would be allotted and issued. This will increase the number of Shares on issue from 472,643,276 to 511,643,276 (assuming that no other Options are exercised and no other Shares issued) with the effect that the shareholding of existing Shareholders would be diluted by an aggregate of 7.62% comprising 0.29% by Montague House, 4.89% by Mark Caruso and 2.44% by Frank Terranova.

It should be noted that on 17 September 2009 the Company announced to ASX its intentions to make an off-market takeover bid for all of the issued shares of Australian Solomons Gold Limited (ASG). If the Company is successful in acquiring 100% of the issued shares of ASG, a further 110,316,953 Shares will be issued as consideration under the takeover bid. In addition, in order for the Company to undertake the development of some of the existing expansion initiatives currently in progress, including the development of the Gold Ridge project owned by ASG, further equity issues would be required which would significantly reduce the dilution effect noted in the paragraph above.

The market price for Shares during the term of the Director Options would normally determine whether or not the Director Options are exercised. If, at any time any of the Director Options are exercised and the Shares are trading on ASX at a price that is higher than the exercise price of the Director Options, there may be a perceived cost to the Company.

As at the date of this Notice of Annual General Meeting the Share price is trading on ASX above the exercise price of the Director Options. The Board resolved to issue the Director Options to Montague House, subject to Shareholder approval, on the same terms and conditions as to previous non-executive Directors to bring his emoluments in line with the other non-executive Directors. The exercise price of the Director Options being issued to Mark Caruso and Frank Terranova was determined by applying a premium to the 90-day volume weighted average price of Shares prior to the date the Company's Remuneration and Nomination Committee resolved to recommend their issue. In addition, it is noted there are various vesting conditions applying to the majority of the Director Options;

(j)

the trading history of the Shares on ASX in the 12 months before the date of this Notice of Annual General Meeting is set out below:

(k)

the primary purpose of the grant of Director Options to the Related Parties is to provide cost effective consideration to the Related Parties for their ongoing commitment and contribution to the Company in their respective roles as Directors.

In particular, in respect of the grant of Director Options to Mark Caruso the Board considers his efforts and commitment are paramount in ensuring the ongoing success of the Company, particularly given the unique environment in which the Company currently operates and is intending to expand within. The Board has determined that Mr Caruso is best placed to manage the Company through its intended expansion initiatives and possesses the necessary skill set and attributes that are essential in operating in the existing regions.

Further, in respect of the grant of Director Options to Frank Terranova the Board considered he has been instrumental in developing appropriate systems as the Company is emerging from a junior explorer to a significant gold producer and holds a pivotal role in ensuring the corporate activities of the Company are appropriately managed, allowing other executives to have primary focus on key operational aspects of the corporate group.

The Board has implemented a solid executive team, which has demonstrated the ability to work in unison in delivering required results. The Board considers that the pairing of Messrs Caruso and Terranova in the executive functions of the Company is critical to the ongoing success of the Company and its operations.

As a result the primary purpose of the issue of Director Options to Mark Caruso and Frank Terranova is aimed at ensuring he is appropriately incentivised to remain with the Company and deliver returns to Shareholders.

The Board does not consider that there are any significant opportunity costs to the Company or benefits foregone by the Company in issuing the Director Options upon the terms proposed;

(l)

the Board acknowledges the grant of Director Options to Montague House is contrary to Recommendation 8.2 of the ASX Corporate Governance Principles and Recommendations. However, the Board considers the grant of Director Options to Montague House reasonable in the circumstances, given the necessity to attract the highest calibre of professionals to the Company, whilst maintaining the Company's cash reserves. In addition, it brings Mr House's emoluments in line with the other non-executive Directors;

(m)

Montague House declines to make a recommendation to Shareholders in relation to Resolution 6 due to his material personal interest in the outcome of the Resolution. The other Directors, who do not have a material interest in the outcome of Resolution 6, recommend that Shareholders vote in favour of Resolution 6. The Board (other than Montague House) is not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass the Resolution;

(n)

Mark Caruso declines to make a recommendation to Shareholders in relation to Resolution 7 due to his material personal interest in the outcome of the Resolution. The other Directors, who do not have a material interest in the outcome of Resolution 7, recommend that Shareholders vote in favour of Resolution 7. The Board (other than Mark Caruso) is not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass the Resolution; and

(o)

Frank Terranova declines to make a recommendation to Shareholders in relation to Resolution 8 due to his material personal interest in the outcome of the Resolution. The other Directors, who do not have a material interest in the outcome of Resolution 8, recommend that Shareholders vote in favour of Resolution 8. The Board (other than Frank Terranova) is not aware of any other information that would be reasonably required by Shareholders to allow them to make a decision whether it is in the best interests of the Company to pass the Resolution.

Approval pursuant to ASX Listing Rule 7.1 is not required in order to issue the Director Options to the Related Parties as approval is being obtained under ASX Listing Rule 10.11. Accordingly, the issue of Director Options to the Related Parties will not be included in the 15% calculation of the Company's annual placement capacity pursuant to ASX Listing Rule 7.1.

6.

ENQUIRIES

(a)

Each Director Option gives the Optionholder the right to subscribe for one Share.

(b)

Subject to paragraph , the Director Options will vest in the following proportions at the following times:

 (i)

for those Director Options issued to Montague House pursuant to Resolution 6:

i.

1,000,000 immediately upon issue; and

ii.

500,000 following the Share price trading above 70 cents for 5 consecutive trading days,

 (ii)

for those Director Options issued to Mark Caruso pursuant to Resolution 7:

i.

10,000,000 on that date which is 12 months following the date of Shareholder approval;

ii.

10,000,000 upon the Share price trading at 70 cents or more;

Iii

5,000,000 upon 100,000 ounces of gold being produced from the Simberi Oxide Gold Project between 1 October 2009 and 31 December 2010;

 (iii)

for those Director Options issued to Frank Terranova pursuant to Resolution 8:

i.

5,000,000 on that date which is 12 months following the date of Shareholder approval;

ii.

5,000,000 upon the Share price trading at 70 cents or more; and

iii.

2,500,000 upon 100,000 ounces of gold being produced from the Simberi Oxide Gold Project between 1 October 2009 and 31 December 2010;

(c)

All Director Options that have not already vested will automatically vest on the occurrence of any of the following change of control events:

(i)

The Board passing a resolution recommending that Shareholders accept an offer under a takeover bid for the Company;

(ii)

A bidder under a takeover bid acquiring a relevant interest in more than 50% of the issued Shares; 

(iII)

The dispatch of a notice of meeting to consider a scheme of arrangement between the Company and its creditors or members or any class thereof pursuant to Section 411 of the Corporations Act; or

(iv)

A person, or a group of associated persons, becomes entitled to sufficient Shares to give it, or them, the ability in general meeting to replace all or a majority of the Board in circumstances where such ability was not already held by a person associated with that person or group of associated persons.

(d)

The Director Options will expire at 5:00 pm (WST) on:

(i)

31 December 2011 for those Director Options issued to Montague House pursuant to Resolution 6; and

 (ii)

31 December 2013 for those Director Options issued to Mark Caruso and Frank Terranova pursuant to Resolutions 7 and 8 respectively,

Expiry Date). Any Director Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.

(e)

The amount payable upon exercise of each Director Option will be:

 (i)

$0.35 for those Director Options issued to Montague House pursuant to Resolution 6; and

(ii)

$0.50 for those Director Options issued to Mark Caruso and Frank Terranova pursuant to Resolutions 7 and 8 respectively,

(Exercise Price).

(f)

The Director Options held by each Optionholder may be exercised in whole or in part, and if exercised in part, multiples of 1,000 must be exercised on each occasion.

(g)

An Optionholder may exercise their Director Options by lodging with the Company, before the Expiry Date:

(i)

a written notice of exercise of Director Options specifying the number of Director Options being exercised; and

 (ii)

a cheque or electronic funds transfer for the Exercise Price for the number of Director Options being exercised; 

(Exercise Notice).

(h)

An Exercise Notice is only effective when the Company has received the full amount of the Exercise Price in cleared funds.

(i)

Within 10 Business Days of receipt of the Exercise Notice accompanied by the Exercise Price, the Company will allot the number of Shares required under these terms and conditions in respect of the number of Director Options specified in the Exercise Notice.

(j)

The Director Options are not transferable.

(k)

All Shares allotted upon the exercise of Director Options will upon allotment rank pari passu in all respects with other Shares.

(l)

The Company will not apply for quotation of the Director Options on ASX. However, The Company will apply for quotation of all Shares allotted pursuant to the exercise of Director Options on ASX within 10 Business Days after the date of allotment of those Shares.

(m)

If at any time the issued capital of the Company is reconstructed, all rights of an Optionholder are to be changed in a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

(n)

There are no participating rights or entitlements inherent in the Director Options and Optionholders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Director Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 6 Business Days after the issue is announced. This will give Optionholders the opportunity to exercise their Director Options prior to the date for determining entitlements to participate in any such issue.

(o)

A Director Option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the Director Option can be exercised.

Assumptions:

Valuation date

14 September 2009

Market price of Shares

53.5 cents

Exercise price

35 cents

Expiry date

31 December 2011

Risk free interest rate

4.195%

Volatility

100%

Vesting Conditions

None

Date

Indicative value per Director Option

34.90 cents

24.43 cents

Total Value of Director Options

- Montague House

$349,000

$122,150

Assumptions:

Valuation date

14 September 2009

Market price of Shares

53.5 cents

Exercise price

50 cents

Expiry date

31 December 2013

Risk free interest rate

4.965%

Volatility

100%

Vesting Conditions

Date

Share 

Price

Gold Production

Indicative value per Director Option

39.23 cents

27.46 cents

23.96 cents

Total Value of Director Options

- Mark Caruso

$3,923,000

$2,746,000

$1,198,000

- Frank Terranova

$1,961,500

$1,373,000

$599,000