Ann: Half Yearly Report , page-2

All gravy!!

(AUD$1m was received in October 2012 pursuant to the debt facility with Celtic Capital Pty Ltd as announced on 28 September 2012)

The parent entity issued 1,000,000 of convertible notes in October 2012. The notes and corresponding interest
are convertible at the option of the holder at the holder’s elected conversion price, which is either 80% of the
10 day VWAP at the original maturity date of 28 November 2012 or 130% of the 10 day VWAP at the effective
date of 28 September 2012. 5,420,401 shares having a total value of $75,000 and 5,000,000 options
exercisable at $0.02 on or before 28 September 2015 were issued to the convertible note holder as consideration for the provision of the convertible note in lieu of interest.

In November 2012 the maturity date
of the note was extended from 28 November 2012 to 28 February 2013, and further extended to 31 March
2013.

The Group also paid the note holder a $5,000 per month research & brokerage fee for 4 months and has issued a further 23,666,667 shares having a total value of $142,000 and 23,666,667 options exercisable at $0.02 on or before 24 December 2015 to the convertible note holder as consideration for the maturity date extension in lieu of interest.

Recognition of convertible note derivative 336,124

Recognition of option derivative 42,815

Adjustment to convertible note derivative on
extension of convertible note 142,635

Adjustment to option derivative on extension of
convertible note 129,611

Convertible note interest accretion 563,551
Interest expense 87,557
Total $651,108
OUCH!!

New!
As consideration for the lease of the Chowa Small Scale Mining Site, licence number 14869-HQ-SML, the Group has
committed to pay a royalty of USD $6/tonne on all Manganese ore sold from the licence area.

DOUBLE OUCH!!