abn 22 080 933 455 for personal use only - asx resources limited abn 22 080 933 455 notice of...

Arafura Resources Limited

ABN 22 080 933 455

NOTICE OF MEETING

AND

EXPLANATORY MEMORANDUMTO SHAREHOLDERS

A PROXY FORM IS ENCLOSED

Please read the Notice and Explanatory Memorandum carefully.

If you are unable to attend the meeting please complete and return the enclosed proxy form in accordance with the specified instructions.

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Arafura Resources Limited ABN 22 080 933 455

Notice of Meeting Notice is given that a meeting of shareholders of Arafura Resources Limited (Arafura) will be held at Hyatt Perth, 99 Adelaide Terrace, Perth, Western Australia on Tuesday 2 September 2008 at 2pm Perth time.

Agenda

Business

Resolution 1 – Approval of previous share placement

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

“THAT for the purposes of ASX Listing Rule 7.4 and for all other purposes, approval is given for the placement of shares which has occurred in accordance with the terms and conditions set out in the Explanatory Memorandum.”

Resolution 2 – Approval of grant by Arafura of Options to Ian James Laurance, Director of the Company

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

“THAT for the purposes of Chapter 2E of the Corporations Act, Listing Rule 10.11 of the ASX Listing Rules and for all other purposes, approval is given for Arafura to grant to Ian James Laurance 2,000,000 Options on the terms and conditions set out in the Explanatory Memorandum.”

Resolution 3 – Approval of grant by Arafura of Options to Ian John Kowalick, Director of the Company


“THAT for the purposes of Chapter 2E of the Corporations Act, Listing Rule 10.11 of the ASX Listing Rules and for all other purposes, approval is given for Arafura to grant to Ian John Kowalick, 1,500,000 Options on the terms and conditions set out in the Explanatory Memorandum.”

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Resolution 4 – Approval of grant by Arafura of Options to Stephen Ward, Director of the Company


“THAT for the purposes of Chapter 2E of the Corporations Act, Listing Rule 10.11 of the ASX Listing Rules and for all other purposes, approval is given for Arafura to grant to Stephen Ward, 1,500,000 Options on the terms and conditions set out in the Explanatory Memorandum.”

Resolution 5 – Approval of grant by Arafura of Options to Terry Roy Jackson, Director of the Company


“THAT for the purposes of Chapter 2E of the Corporations Act, Listing Rule 10.11 of the ASX Listing Rules and for all other purposes, approval is given for Arafura to grant to Terry Roy Jackson, 1,500,000 Options on the terms and conditions set out in the Explanatory Memorandum.”

Resolution 6 – Approval of grant by Arafura of Options to Alistair James Stephens, Director of the Company


“THAT for the purposes of Chapter 2E of the Corporations Act, Listing Rule 10.11 of the ASX Listing Rules and for all other purposes, approval is given for Arafura to grant to Alistair James Stephens, 2,500,000 Options on the terms and conditions set out in the Explanatory Memorandum.”

Explanatory Memorandum Shareholders are referred to the Explanatory Memorandum accompanying and forming part of this Notice of Meeting.

Capitalised terms in this Notice of Meeting and the Explanatory Memorandum are defined in Annexure A to the Explanatory Memorandum.

Resolutions not inter-dependent None of the resolutions are inter-dependent. This means that one or more of the resolutions can be passed even though one or more of the other resolutions were not passed by shareholders.

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Entitlement to vote Snapshot Date It has been determined that in accordance with regulation 7.11.37 of the Corporations Regulations 2001 (Cth), for the purposes of the meeting, Arafura Shares will be taken to be held by the persons who are the registered holders at 5.00 pm Perth time on Sunday 31 August 2008. Accordingly, share transfers registered after that time will be disregarded in determining entitlements to attend and vote at the meeting.

Voting Exclusions Arafura will disregard:

• any votes cast on Resolution 1 by a shareholder who participated in the issue of shares, being the shareholders set out in Annexure B, and any of their associates,

• any votes cast on Resolution 2 by Mr Laurance and any of his associates,

• any votes cast on Resolution 3 by Mr Kowalick and any of his associates,

• any votes cast on Resolution 4 by Dr Ward and any of his associates,

• any votes cast on Resolution 5 by Mr Jackson and any of his associates,

• any votes cast on Resolution 6 by Mr Stephens and any of his associates,

unless the vote is cast in the following circumstances:

• by a person as proxy for a person who is entitled to vote in accordance with the directions on the proxy form; or

• by the person chairing the meeting as a proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

Proxies

A shareholder entitled to attend and vote has a right to appoint a proxy to attend and vote instead of the shareholder. A proxy need not be a shareholder and can be either an individual or a body corporate. If a shareholder appoints a body corporate as a proxy, that body corporate will need to ensure that it:

• appoints an individual as its corporate representative to exercise its powers at the meeting, in accordance with section 250D of the Corporations Act; and

• provides satisfactory evidence of the appointment of its corporate representative to Arafura.

If such evidence is not received, then the body corporate (through its representative) will not be permitted to act as a proxy.

A shareholder that is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If no proportion or number is specified, each proxy may exercise half of the shareholder’s votes.

A Proxy Form accompanies this Notice and to be effective must be received at the Company’s registered office:

The Company Secretary Arafura Resources Limited Level 4, 16 St Georges Terrace PERTH WA 6000

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OR by facsimile: (08) 9221 7966 (Australia) or + 61 8 9221 7966 (International)

by no later than 2pm Perth time on Sunday 31 August 2008.

By Order of the Board

Dated: 28 July 2008

Gavin Lockyer Company Secretary Arafura Resources Limited

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Arafura Resources Limited ABN 22 080 933 455

Explanatory Memorandum to Arafura Shareholders

1 Introduction

This Explanatory Memorandum has been prepared to assist Arafura Shareholders to understand the business to be put to Arafura Shareholders at the meeting.

This Explanatory Memorandum should be read in conjunction with the accompanying Notice of Meeting. Annexure A of this Explanatory Memorandum contains the definitions of the capitalised terms in the Notice of Meeting and this Explanatory Memorandum.

The Directors recommend that Arafura Shareholders read this Explanatory Memorandum in full before making any decision in relation to the resolutions set out in the Notice of Meeting.

Section 2 contains information about Resolution 1 and Sections 3 to 7 contain information about Resolutions 2 to 6.

If any Arafura Shareholder is in doubt as to how they should vote, they should seek advice from their professional adviser prior to voting.

2 Resolution 1 - Approval of previous share placement

2.1 Introduction

Listing Rule 7.1 provides a restriction on the number of equity securities which the Company may issue in any 12 month rolling period, without having to obtain shareholder approval. The Company must not, without prior shareholder approval, issue, or agree to issue, equity securities greater than 15% of the Company’s share capital in the previous 12 months (ignoring placements made under a Listing Rule exception or with shareholder approval).

Listing Rule 7.4 provides that an existing issue of shares, made without shareholder approval under Rule 7.1, is treated as having been made with approval for the purpose of Listing Rule 7.1 if shareholders approve that existing issue of shares.

2.2 Share Placement

Arafura seeks shareholder approval under Listing Rule 7.4 for the placement of shares which have been issued by the Company to the shareholders set out in Annexure B.

2.3 Information

The Notice of Meeting is required to include the following details of the placement:

• Number of securities:

The total number of shares allotted was 18,691,500.

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• Price:

The price at which the shares were issued was $1.00 per share.

• Terms of the Securities:

The terms of the shares were fully paid, ordinary shares.

• Who the shares were allotted to or on what basis:

The names of the allottees are set out in Annexure B.

• Use (or intended use) of the funds raised:

The use of the funds raised was and will be:

(1) $5 million over 6 months commencing in February 2008 for the operation of a rare earths and phosphoric acid pilot plant, to optimise the treatment process.

(2) Additional costs for engineering studies to refine the cost structure of the Nolans project.

(3) $3 million of the funds will be used in the next 6 months in an intensive drilling campaign for detailed assessment of current resources, to define additional resources and to target higher grade zones of mineralisation at Nolans (in progress).

(4) $3 million will be undertaken in exploratory assessment for rare earths and other commodities on other projects in 2008.

(5) The remainder of the funds will be for working capital and project development studies.

3 Resolutions 2 to 6 – Grant by Arafura of Options to Directors of the Company

3.1 Introduction

Arafura seeks to grant Options to each of the following persons who are Directors of the Company:

• Ian James Laurance – 2,000,000 Options.

• Ian John Kowalick – 1,500,000 Options.

• Stephen Ward – 1,500,000 Options.

• Terry Roy Jackson – 1,500,000 Options.

• Alistair James Stephens – 2,500,000 Options.

3.2 Approvals Required

Approval of Arafura’s Shareholders is sought for the purposes of Chapter 2E of the Corporations Act and Listing Rule 10.11 for Arafura to grant the above Options.

3.3 Chapter 2E of the Corporations Act

Chapter 2E of the Corporations Act regulates the provision by a public company of a “financial benefit” to a “related party”. Section 208 of the Corporations Act prohibits:

(1) a public company giving a financial benefit to a related party; or

(2) a company which is controlled by the public company giving a financial benefit to a related party,

unless one of a number of exceptions applies, or shareholder approval is obtained.

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A “financial benefit” is defined in the Corporations Act in broad terms and includes a company issuing shares and granting options.

A “related party” includes:

(1) a Director; and

(2) an entity over which a Director has control; and

(3) an entity which believes, or has reasonable grounds to believe, that it is likely to become a related party in the future.

For the purposes of Chapter 2E of the Corporations Act, each of the Directors named above are related parties of Arafura.

Arafura is seeking shareholder approval for the purposes of Chapter 2E.

3.4 ASX Listing Rule 10.11

Listing Rule 10.11 provides that Arafura must not issue equity securities to a related party unless one of a number of exceptions applies, or shareholder approval is obtained.

Arafura is seeking shareholder approval for the purposes of Listing Rule 10.11.

4 Resolution 2 – Specific Information Requirements for Grant of Options to Ian James Laurance

4.1 Information Requirements

The following information is provided to Arafura Shareholders in accordance with the requirements of section 219 of the Corporations Act and Listing Rule 10.13:

The related party

The related party is Ian James Laurance.

Proposed financial benefit

The proposed financial benefit to be given is 2,000,000 Options, the terms of which are set out in Annexure D.

The Options will be granted for nil consideration.

The Options are being granted for the following reasons. The purpose of the grant of Options is to provide an incentive to Mr Laurance to provide dedicated commitment and effort to the Company, whilst preserving the cash reserves of the Company. The Company acknowledges that the grant of the Options to a Non-Executive Director is contrary to recommendation 8.2 of the ASX Corporate Governance Principles and Recommendations. However the non-interested Directors (that is, excluding Mr Laurance) believe that the grant of the Options is appropriate and reasonable in the circumstances because:

(1) the Company is in a critical phase of its development and the Company needs to attract high calibre individuals with the necessary experience and qualifications, in a time when the labour market is tight;

(2) the payment of monetary fees alone is not an adequate incentive to enable the Company to attract and keep these high calibre individuals;

(3) the Option exercise price is set at a significant premium to the Company’s current share price, providing incentive to the directors to maximise their efforts to achieve success for the Company and the benefit of shareholders

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generally and incentive to retain their position as director because the Options will lapse if the director ceases to be a director of the Company; and

(4) the grant of the Options (including the amount and value) forms part of a reasonable remuneration package.

Recommendation of each Arafura Director

The non interested Directors, Messrs Muir, Stephens, Jackson and Kowalick and Dr Ward each recommend to shareholders that they vote in favour of Resolution 2, for reasons (1) to (4) set out above.

Mr Laurance has not made a recommendation to shareholders because of his interest in the outcome of the resolution. Interests of Arafura Directors in outcome of resolution

The non interested Directors, Messrs Muir, Stephens, Jackson, Kowalick and Dr Ward do not have an interest in the outcome of the resolution.

As at the date of the Notice of Meeting, each Director holds the interests in Arafura set out in Annexure C.

Mr Laurance has an interest in the outcome of Resolution 2 in that he will receive 2,000,000 Options if Resolution 2 is passed.

4.2 Reasons for Giving the Financial Benefit

The reason the financial benefit is being given is to provide an incentive to Mr Laurance to provide dedicated commitment and effort to the Company, whilst preserving the cash reserves of the Company.

4.3 Terms and conditions of Options

The terms of the Options are set out in Annexure D.

4.4 Valuation of Options

Ernst & Young has provided an indicative valuation of the proposed options, based on the binomial option valuation model, and has arrived at a valuation of between $0.2712 and $0.4828 per option, with a preferred value of $0.3740 per option, based on an assumed valuation date of 21 July 2007. The valuation is based on the following data:

Input Details

Input Basis for Input Value

Underlying Share Price

$0.58 - $0.86 Based on underlying share price as at 21 July 2008 at $0.72 and a range of +/-20%.

Strike/exercise price

$1.19 VWAP of Arafura’s share price for the 15 trading days up to 30 June +30% as determined by Arafura.

Risk free rate 6.37% Implied yield on zero-coupon Australian Government bonds at 21 July 2008 continuously compounded, corresponding to the expected life of the Options.

Expected Grant date

2 September 2008 Expected Date of shareholder approval.

Vesting Date 31 December 2009 Terms and conditions of the Options.

Expiry Date 31 December 2012 Terms and conditions of the Options.

Expected Life 3.58 years Assumption based on terms and conditions of the Options, including vesting date and expiry date.

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of the Options

Expected Volatility

84.91% Weekly historical volatility corresponding to the expected life of the Options.

Dividend Yield

0.00% Continuously compounded rate, based on total dividends paid in previous twelve months divided by closing share price on 21 July 2008.

The valuation provided by Ernst & Young was indicative only, being based on data available as at 21 July 2008.

The value of the 2,000,000 Options based on the preferred indicative value of $0.3740 is $748,000.

4.5 Total Remuneration Package for Mr Laurance

The total Arafura remuneration package for Mr Laurance comprises:

1. a base salary of $50,000;

2. an additional amount of $5,000 for being on the Remuneration & Nomination Committee; and

3. a superannuation contribution of $6,600.

4.6 Dilution Effect if Options Exercised

If the Options are granted and any or all of the Options are exercised, dilution of existing shareholders will occur. The dilution effect will be marginal. As at the date of issue of the Notice of Meeting, the total number of shares on issue is 157,199,500. If all of the Options are exercised the dilution effect will be approximately 1.27 percent (based on the total number of shares on issue as at the date of the Notice of Meeting).

4.7 Date for Granting Options

The Options will be granted by 2 October 2008, being no later than 1 month after the date of the meeting.

4.8 Intended Use of Funds Raised from Grant of Options

No funds will be raised from the grant of the Options because the issue price of the Options is nil.

4.9 General Information

General information relating to Arafura and the grant of Options is set out under Heading 7 below.

5 Resolutions 3 to 5 – Specific Information Requirements for Grant of Options to each of Messrs Kowalick and Jackson and Dr Ward


The following information is provided to Arafura Shareholders in accordance with the requirements of section 219 of the Corporations Act and Listing Rule 10.13:

The related party

The related parties are Messrs Kowalick and Jackson and Dr Ward, each a Director of Arafura.

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The proposed financial benefit to be given is 1,500,000 Options each, the terms of which are set out in Annexure D.


The Options are being granted for the following reasons. The purpose of the grant of Options is to provide an incentive to the directors to provide dedicated commitment and effort to the Company, whilst preserving the cash reserves of the Company. The Company acknowledges that the grant of the Options to a Non-Executive Director is contrary to recommendation 8.2 of the ASX Corporate Governance Principles and Recommendations. However the non-interested Directors believe that the grant of the Options is appropriate and reasonable in the circumstances because:



(3) the Option exercise price is set at a significant premium to the Company’s current share price, providing incentive to the directors to maximise their efforts to achieve success for the Company and the benefit of shareholders generally and incentive to retain their position as director because the Options will lapse if the director ceases to be a director of the Company; and


Recommendation of each Arafura Director

The non interested Directors (that is, excluding Mr Kowalick) each recommend to shareholders that they vote in favour of Resolution 3, for reasons (1) to (4) set out above.

The non interested Directors (that is, excluding Dr Ward) each recommend to shareholders that they vote in favour of Resolution 4, for reasons (1) to (4) set out above.

The non interested Directors (that is, excluding Mr Jackson) each recommend to shareholders that they vote in favour of Resolution 5, for reasons (1) to (4) set out above.

Each of Messrs Kowalick and Jackson and Dr Ward has not made a recommendation to shareholders in relation to his resolution because of his interest in the outcome of that resolution. Interests of Arafura Directors in outcome of resolution

The non interested Directors do not have an interest in the outcome of the resolution.


Each of Messrs Kowalick and Jackson and Dr Ward has an interest in the outcome of his resolution in that each will receive 1,500,000 Options if his Resolution is passed.

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The reason the financial benefit is being given is to provide an incentive to the directors to provide dedicated commitment and effort to the Company, whilst preserving the cash reserves of the Company.





Input Details







Expected Grant date




Expected Life of the Options

3.58 years Assumption based on terms and conditions of the Options, including vesting date and expiry date.

Expected Volatility


Dividend Yield



The value of 1,500,000 Options based on the preferred indicative value of $0.3740 is $561,000.

5.5 Total Remuneration Package for Messrs Kowalick and Jackson and Dr Ward

The total Arafura remuneration package for Mr Kowalick comprises:


2. an additional amount of $10,000 for being chair of the Audit & Risk Committee;

3. an additional amount of $5,000 for being on the Remuneration & Nomination Committee; and

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The total Arafura remuneration package for Mr Jackson comprises:

1. a base salary of $50,000; and

2. an additional amount of $5,000 for being on the Audit & Risk Committee; and


The total Arafura remuneration package for Dr Ward comprises:

1. a base salary of $50,000; and

2. an additional amount of $10,000 for chair of the Remuneration & Nomination Committee; and



If the Options are granted and any or all of the Options are exercised, dilution of existing shareholders will occur. The dilution effect will be marginal. As at the date of issue of the Notice of Meeting, the total number of shares on issue is 157,199,500. If 100% of one Director’s Options were exercised the dilution effect will be approximately 0.9 percent (based on the total number of shares on issue as at the date of the Notice of Meeting). If all three Director’s Options are exercised the dilution effect will be approximately 2.7 percent (based on the total number of shares on issue as at the date of the Notice of Meeting).







6 Resolution 6 – Specific Information Requirements for Grant of Options to Alistair Stephens


The following information is provided to Arafura Shareholders in accordance with the requirements of section 219 of the Corporations Act, and Listing Rule 10.13:

The related party

The related party is Alistair James Stephens, who is the Managing Director of Arafura.


The proposed financial benefit to be given is 2,500,000 Options, the terms of which are set out in Annexure D.

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The purpose of the grant of Options is to provide an incentive to Mr Stephens to provide dedicated commitment and effort to the Company, whilst preserving the cash reserves of the Company. The non-interested Directors (that is, excluding Mr Stephens) believe that the grant of the Options is appropriate and reasonable in the circumstances because:



(3) the Option exercise price is set at a significant premium to the Company’s current share price, providing incentive to the directors to maximise their efforts to achieve success for the Company and the benefit of shareholders generally and incentive to retain their position as director because the Options will lapse if the director ceases to be a director of the Company; and


Recommendations of Arafura Directors

The non interested Directors, Messrs Muir, Jackson, Kowalick and Laurance and Dr Ward each recommend to shareholders that they vote in favour of Resolution 6, for reasons (1) to (4) set out above.

Mr Stephens has not made a recommendation to shareholders because of his interest in the outcome of the resolution. Interests of Arafura Directors

The non interested Directors, Messrs Muir, Jackson, Kowalick and Laurance and Dr Ward do not have an interest in the outcome of the resolution.


Mr Stephens has an interest in the outcome of Resolution 6 in that he will receive 2,500,000 Options if Resolution 6 is passed.


The reason the financial benefit is being given is to provide an incentive to Mr Stephens to provide dedicated commitment and effort to the Company, whilst preserving the cash reserves of the Company.





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Input Details







Expected Grant date




Expected Life of the Options

3.58 years Assumption based on terms and conditions of the Options, including vesting date and expiry date.

Expected Volatility


Dividend Yield



The value of the 2,500,000 Options based on the preferred indicative value of $0.3740 is $935,000.

6.5 Total Remuneration Package for Mr Stephens

The total Arafura remuneration package for Mr Stephens comprises:


2. a superannuation contribution of $37,500; and

3. a motor vehicle allowance of $40,000.


If the Options are granted and any or all of the Options are exercised, dilution of existing shareholders will occur. The dilution effect will be marginal. As at the date of issue of the Notice of Meeting, the total number of shares on issue is 157,199,500. If all of the Options are exercised the dilution effect will be approximately 1.59 percent (based on the total number of shares on issue as at the date of the Notice of Meeting).





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7 Resolutions 2 to 6 – General Information Requirements relating to Grant of Options The following additional information is provided to Arafura Shareholders in relation to the granting of the Options:

7.1 Arafura’s Trading History

The highest and lowest market sale prices of the Company’s Shares on the ASX during the 12 months immediately preceding the date of the Notice of Meeting and the respective dates of those sales were:

Highest: $2.24 on 26 July 2007

Lowest: $0.67 on 22 July 2008

The latest available market sale price of the Company’s Shares on the ASX immediately prior to the date of the Notice of Meeting was $0.715 on 25 July 2008.

7.2 Other Information

There are no taxation consequences for Arafura resulting solely from the grant of the Options.

7.3 Listing Rules 7.1 and 7.2

If shareholder approval is given under Listing Rule 10.11 then shareholder approval will not be required for the purposes of Listing Rule 7.1 as that Listing Rules applies to the grant of the Options.

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Annexure A – Definitions

The meanings of capitalised terms used in the Notice of Meeting and Explanatory Memorandum are set out below:

ASX means the ASX Limited or the exchange operated by it, as the context requires. Arafura means Arafura Resources Limited ABN 22 080 933 455.

Arafura Share means a fully paid, ordinary share issued in the share capital of Arafura.

Arafura Shareholder means the registered holder of an Arafura Share. Company means Arafura Resources Limited ABN 22 080 933 455.

Corporations Act means the Corporations Act 2001 (Cth). Listing Rules means the ASX Listing Rules published by the ASX from time to time. Options means the right to subscribe for Arafura Shares in accordance with the option terms set out in Annexure D. Share Registry means Security Transfer Registrars Pty Ltd ABN 95 008 894 488.

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Annexure B – Share Placement

Shareholder Account Designation Shares Consideration HSBC Custody Nominees (Australia) Limited 11,000,000.00 $11,000,000.00 Cecil Hoffman & Norma Hoffman <Hoffman Super Fund> 75,000.00 $75,000.00

Dixtru Pty Limited 100,000 $100,000.00 Jestar Pty Limited <Vagg Family Super Fund A/C> 100,000 $100,000.00 Leet Investments Pty Ltd <Superannuation Fund A/C> 50,000 $50,000.00

RK & DF Consulting pty Ltd <RK & DF Super Fund A/C> 25,000 $25,000.00

MRK Pty Ltd <MRK No1 TR A/C> 100,000 $100,000.00 Richter Superfund Pty Ltd <Richter Superfund A/C> 100,000 $100,000.00 SJS (Aust) Pty Ltd 50,000 $50,000.00 Nutsville Pty Limited 250,000 $250,000.00 Invia Custodian Pty Limited 385,000 $385,000.00 Invia Custodian Pty Limited 115,000 $115,000.00 Elinora Investments Pty Ltd 100,000 $100,000.00 Chifley Investor Group Pty Ltd 100,000 $100,000.00 Mannwest Group Pty Ltd 100,000 $100,000.00 Mr Daniel Droga Droga Capital Pty Ltd 200,000 $200,000.00 Sekfam Pty Ltd 25,000 $25,000.00 Mr Steven Erwin Kuhr 50,000 $50,000.00 Dr William Bruce Goodfellow 30,000 $30,000.00 Archem Trading NZ Ltd 100,000 $100,000.00 Direct Portfolio Services Ltd <DPSL as Re for Direct Portfolio> 200,000 $200,000.00

Dr Beng Hock Michael Khoo 100,000 $100,000.00 Mr Alexander Naum & Mrs Albina Naum <Coco Investments A/C> 75,000 $75,000.00

Megastone Pty Ltd <Megastone A/C> 50,000 $50,000.00 KMB Australia Pty Ltd 20,000 $20,000.00 Mersounds Pty Ltd 30,000 $30,000.00 Advance Publicity Pty Ltd 40,000 $40,000.00 National Nominees Limited 250,000 $250,000.00 How Trading 150,000 $150,000.00 Rael Holdings Pty Ltd 20,000 $20,000.00 Zyga Nominees Pty Ltd 12,000 $12,000.00 Mr Andrew Vasearelli 30,000 $30,000.00 Montida Nominees Pty Ltd <SGB Margin Account> 30,000 $30,000.00 DBR Corporation Pty Ltd 50,000 $50,000.00 Goncang Pty Ltd <DGA Superannuation A/C> 137,500 $137,500.00 Global Change Investments Limited 75,000 $75,000.00 Fortis Clearing Nominees Pty Ltd <Settlement A/C> 100,000 $100,000.00 Mrs Jirachaya Charnchayasuk 140,000 $140,000.00 Phillip Securities Pte Ltd <"D" A/C> 100,000 $100,000.00 Grofund Limited 50,000 $50,000.00 James Vincent Chester Guest 60,000 $60,000.00 Ontario Pty Ltd 25,000 $25,000.00

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Mr Giovanni Spagnolo 100,000 $100,000.00 Mrs Sriyani Indira Arulsamy 15,000 $15,000.00 Mr Don Atnon Prasana Wickramatunge 5,000 $5,000.00 Mr Melville Shanmugaratnam 15,000 $15,000.00 Mr Weidong Zhang 25,000 $25,000.00 Mr Wayne Stiven 15,000 $15,000.00 Protium Pty Ltd <ATF The Deuterium Fund> 100,000 $100,000.00 Vince Truda <Superfund A/C> 100,000 $100,000.00 Mr Nicholas Van Vliet 5,000 $5,000.00 Najava Pty Ltd<Macintosh Super Fund 50,000 $50,000.00 Mr Timothy Cook 34,000 $34,000.00 Mr John Addison Doughty 20,000 $20,000.00 Mr Frank George Spanyik 10,000 $10,000.00 Mr D & MA Jenkins <Jenkins Super Fund A/C 50,000 $50,000.00 Mr Jeffrey Howard Dods & Mrs Christine Elaine Dods<The Dods Family Super Fund A/C 50,000 $50,000.00

Mr Anthony Williams Dods 10,000 $10,000.00 Robin & Barbara Proudford<Robin Proudford Superannuation Fund 20,000 $20,000.00

Scanasia Pty Limited 25,000 $25,000.00 Mr Charles Cook 34,000 $34,000.00 DSQ Pty Limited 25,000 $25,000.00 POCU Pty Limited, POCU Super Fund 50,000 $50,000.00 QBE Investment Group 400,000 $400,000.00 Miss Vanessa Zdrilic 30,000 $30,000.00 Mr Reginald Keene 50,000 $50,000.00 Thiso Pty Ltd 30,000 $30,000.00 John Cook Super Fund A/C 100,000 $100,000.00 Fixed Interest Pty Ltd 100,000 $100,000.00 Empshore Limited 50,000 $50,000.00 RW & Y Owen Superannuation Fund 20,000 $20,000.00 KAS Developments 100,000 $100,000.00 Gurravembi Investments Pty Ltd 50,000 $50,000.00 Quatro Financial Services Pty Ltd 30,000 $30,000.00 Topete Pty Ltd,Superannuation Fund A/c. 100,000 $100,000.00 John Cook Super Fund A/C 32,000 $32,000.00 Zesty Pty Ltd 12,000 $12,000.00 Miss Kate Davies 5,000 $5,000.00 Idameneo Pty Ltd 2,000,000 $2,000,000.00 Totals 18,691,500 $18,691,500.00

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Annexure C – Directors’ Interests

As at the date of the Notice of Meeting, each Director holds the following interests in Arafura:

Director Shares held

(total direct and indirect interest)

Options held

(total direct and indirect interest)

I G (Mick) Muir 3,018,501 Nil

Alistair Stephens 2,659,827 # Nil

Terry Jackson 4,778,668 # Nil

Ian Kowalick 550,000 # Nil

Dr Steve Ward 25,000 # Nil

Ian Laurance 40,000 # Nil

# The Notice of Meeting sets out the options which are proposed to be granted to Directors if shareholder approval is obtained.

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Annexure D – Option Terms

The key terms of the Options are:

Exercise Price Vesting Date Expiry Date

$1.19 31 December 2009 31 December 2012

The other terms of the Options are:

(1) The options are only capable of being exercised from the date on which they vest up to and including the expiry date.

(2) Should the Director cease to be a director of Arafura, all unexercised options will lapse (whether they have vested or not).

(3) If the Director is an executive director and the Director is dismissed from employment for misconduct from Arafura, then all unexercised options will lapse (whether they have vested or not).

(4) If the Director is an executive director and the Director’s employment is terminated by Arafura for any other reason then all unexercised options will lapse (whether they have vested or not) unless the Board decides otherwise.

(5) The options are exercisable by notifying the Company in writing specifying the number of options being exercised and delivering the notice, together with payment for the number of shares in respect of which the options are exercised, to the registered office of the Company.

(6) Options will not be granted Official Quotation for trading on the ASX.

(7) The options may not be transferred or otherwise disposed of in whole or part at any time prior to expiry.

(8) Within 14 days after the receipt of a properly executed notice of exercise and application monies the company will allot and issue the number of shares specified in the notice.

(9) The Company will apply for Official Quotation by ASX of the shares allotted and issued pursuant to the exercise of the options.

(10) The options do not confer the right to participate in new issues of capital during the exercise period. The Company will give not less than 10 Business Days notice to the Officer to exercise his options prior to the date of determining shareholders entitlements for any new issues of capital that occur during the option exercise period.

(11) In the event of any reorganisation (including consolidation, subdivision, reduction or return of capital) of the share capital of the Company, the options are to be reorganised as required by the Listing Rules.

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(12) If an entity (as that term is defined in the Corporations Act) acquires 90% of the shares on issue in the Company and has the ability to compulsory acquire the remainder of the shares on issue pursuant to Part 6A.1 of the Corporations Act, all options that have not yet vested will immediately vest and the options will be deemed to expire on the date which is the earlier of 3 months from the date of vesting and 31 December 2012.

(13) All options may be exercisable by the optionholder:

(1) during a bid period; or (2) at any time after a change of control event has occurred; or

(3) on application under section 411 of the Corporations Act, if a court orders a meeting to be held concerning a proposed compromise or arrangement for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company.

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