PHARMAUST LIMITED ACN 094 006 023

NOTICE OF ANNUAL GENERAL MEETING AND

EXPLANATORY STATEMENT

For the Annual General Meeting to be held on Wednesday, 7 November 2012 at 12:00 pm (Western Standard Time) at

Steve's Wine Cellar

30 The Avenue Nedlands, Western Australia

This is an important document. Please read it carefully.

The Explanatory Statement contains information about the Resolutions to be considered at the Meeting. Shareholders should read the Explanatory Statement and the Prospectus, which accompanies this Notice. The Prospectus contains information in relation to Resolution 3

(proposed in specie distribution of fully paid ordinary shares in Diashi Mining Limited).

If you are unable to attend the Meeting, please complete the form of proxy enclosed and return it in accordance with the instructions set out on that form.

You should speak to your professional adviser if you have any questions about this document, the Prospectus or what to do in relation to the Meeting.

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TIME AND PLACE OF GENERAL MEETING AND HOW TO VOTE

Venue The Annual General Meeting of the Company will be held at: Steve's Wine Cellar Commencing 30 The Avenue 12:00 pm (WST) Nedlands, Western Australia Wednesday, 7 November 2012 How to Vote You may vote by attending the Meeting in person, by proxy or authorised representative. Voting in Person To vote in person, attend the Meeting on the date and at the place set out above. The Meeting will commence at 12:00 pm (WST) on Wednesday, 7 November 2012. Voting by Proxy To vote by proxy, please complete and sign the enclosed proxy form and return by: • hand to the Company's office at Suite 7, 29 The Avenue, Nedlands, WA, 6009; • post to PO Box 661, Nedlands, WA, 6009; • email to sam@straightlines.net.au or • facsimile to facsimile number +61 9389 1464, so that it is received not later than 12:00 pm (WST) on Monday, 5 November 2012.

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PHARMAUST LIMITED ACN 094 006 023

NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given that the Annual General Meeting of the Shareholders of PharmAust Limited will held at Steve's Wine Cellar, 30 The Avenue, Nedlands, Western Australia, at 12:00 pm on Wednesday, 7 November 2012 (Western Standard Time) for the purpose of transacting the following business.

The attached Explanatory Statement is provided to supply Shareholders with information to enable Shareholders to make an informed decision regarding the Resolutions set out in this Notice. The Explanatory Statement is to be read in conjunction with this Notice.

AGENDA

ORDINARY BUSINESS Financial Statements and Reports To receive and consider the annual financial report of the Company for the financial year ended 30 June 2012 together with the declaration of the directors, the directors’ report, the remuneration report and the auditor’s report. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

To consider and, if thought fit, to pass, with or without amendment, the following resolution as a non-binding resolution:

"That, for the purpose of Section 250R(2) of the Corporations Act and for all other purposes, approval is given for the adoption of the remuneration report as contained in the Company’s annual financial report for the financial year ended 30 June 2012."

Short Explanation: The Company is required to put a resolution to adopt the remuneration report of the Company at each annual general meeting. This is an advisory resolution only and does not bind the Directors or the Company.

A vote in respect of Resolution 1 must not be cast (in any capacity) by or on behalf of any of the following persons (the "voter"): (a) a member of the key management personnel, details of whose remuneration are included in

the remuneration report; or (b) a closely related party of such a member. However, the voter may cast a vote on Resolution 1 as a proxy if the vote is not cast on behalf of a person described in paragraphs (a) or (b) and either: (c) the voter is appointed as a proxy by writing that specifies the way the proxy is to vote on

Resolution 1; or (d) the voter is the chair of the meeting and the appointment of the chair as proxy:

(i) does not specify the way the proxy is to vote on the resolution; and (ii) expressly authorises the chair to exercise the proxy even if the resolution is

connected directly or indirectly with the remuneration of a member of the key management personnel for the entity.

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RESOLUTION 2 – RE-ELECTION OF DIRECTOR – SAM WRIGHT

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

"That, for the purpose of rule 7.3(a) of the Constitution and for all other purposes, Sam Wright, a Director who retires by rotation, and being eligible, is re-elected as a Director."

Short Explanation: Mr Sam Wright is currently a Director and is presented for re-election in accordance with the rotation requirements of the Company's Constitution. SPECIAL BUSINESS RESOLUTION 3 – REDUCTION OF CAPITAL To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

"That, subject to settlement of the Share Sale Agreement, for the purposes of section 256C of the Corporations Act and for all other purposes, the issued share capital of the Company be reduced by the Company making a pro rata in specie distribution of 16,500,003 fully paid ordinary shares held in Diashi Mining Limited (ACN 151 981 387) to holders of fully paid ordinary shares in the Company on the terms set out in the Explanatory Statement accompanying this Notice."

Short Explanation: The Company wishes to transfer to Shareholders on a pro rata basis all of the shares that it will receive from Diashi Mining Limited following the sale of the Luke River Tenements. This in-specie distribution constitutes an equal reduction of capital which requires shareholder approval under the Corporations Act.

RESOLUTION 4 - ISSUE OF SHARES UNDER PLACEMENT To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

"That, for the purposes of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Company to issue up to 100,000,000 fully paid ordinary shares in the Company at an issue price of $0.01 each to unrelated parties on the terms set out in the Explanatory Statement accompanying this Notice."

Short Explanation: The Company wishes to raise up to $1,000,000 by the issue of Shares to unrelated parties. Shareholder approval is required because the number of Shares to be issued exceeds the Company's 15% placement capacity under ASX Listing Rule 7.1.

The Company will disregard any votes cast on this Resolution by a person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of Shares, if the Resolution is passed and any associates of such a person. However, the Company need not disregard a vote cast on this Resolution if:

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

(b) it is cast by the person chairing the meeting as a proxy for a person who is entitled to vote in accordance with the directions on the proxy form to vote as the proxy decides.

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RESOLUTION 5 – ISSUE OF SHARES IN LIEU OF TERMINATION PAYOUT To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution:

"That, for the purposes of ASX Listing Rules 10.11 and 10.19 and for all other purposes, approval is given for the Company to issue fully paid ordinary shares in the Company up to the value of $135,000 to Bryant Mclarty or his nominee on the terms set out in the Explanatory Statement accompanying this Notice."

Short Explanation: ASX Listing Rule 10.11 requires the Company to seek shareholder approval prior to the issue of securities to a related party. Mr Mclarty as a Director is a related party of the Company. ASX Listing Rule 10.19 requires shareholder approval to a termination benefit in particular circumstances.

Voting exclusion: The Company will disregard any votes cast on this Resolution by Mr Mclarty and any associates. However, the Company need not disregard a vote cast on this Resolution if:

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

(b) it is cast by the person chairing the meeting as a proxy for a person who is entitled to vote in accordance with the directions on the proxy form to vote as the proxy decides.

Restriction on proxy voting by key management personnel or closely related parties: A person appointed as a proxy must not vote, on the basis of that appointment, on this Resolution if: (a) the proxy is either:

(i) a member of the key management personnel for the Company; or

(ii) a closely related party of such a member; and

(b) the appointment does not specify the way the proxy is to vote on this Resolution.

However, the above prohibition does not apply if:

(c) the proxy is the chair of the meeting; and

(d) the appointment expressly authorises the chair to exercise the proxy even if the Resolution is connected directly or indirectly with the remuneration of a member of the key management personnel for the entity.

RESOLUTION 6 – APPROVAL OF ADDITIONAL PLACEMENT CAPACITY

To consider, if thought fit, to pass, with or without amendment, the following resolution as a special resolution:

"That, for the purposes of ASX Listing Rule 7.1A and for all other purposes, approval is given for the Company to issue Equity Securities up to 10% of the issued capital of the Company (at the time of issue) calculated in accordance with the formula prescribed in ASX Listing Rule 7.1A.2, to be issued on the terms and conditions set out in the Explanatory Statement accompanying this Notice."

Short Explanation: ASX Listing Rule 7.1A permits eligible entities to obtain shareholder approval to issue an additional 10% of the entities' issued ordinary securities during a 12 month period. Shareholder approval must be given by a special resolution (at least 75% approval) at an annual general meeting.

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The Company will disregard any votes cast on this Resolution by a person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a Shareholder, if the Resolution is passed and any associates of those persons. However, the Company need not disregard a vote cast on this Resolution if:

(a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or

(b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

VOTING AND PROXIES 1. A Shareholder of the Company entitled to attend and vote is entitled to appoint not more

than two proxies. Where more than one proxy is appointed, each proxy must be appointed to represent a specified proportion of the Shareholder's voting rights. If the Shareholder appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half of the votes. A proxy need not be a Shareholder of the Company.

2. Where a voting exclusion applies, the Company need not disregard a vote if it is cast by the person who is entitled to vote in accordance with the directions on the proxy form or it is cast by the person chairing the Meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

3. The chair of the Meeting will vote undirected proxies on, and in favour of, all of the proposed Resolutions (including Resolution 1 (Adoption of Remuneration Report) and Resolution 5 (Issue of Shares in lieu of termination payout)). In relation to Resolutions 1 and 5, the proxy form expressly authorises the chair to exercise the proxy even though the resolutions are connected directly or indirectly with the remuneration of a member of the key management personnel. Any undirected proxies held by a Director, any member of the key management personnel or any of their closely related parties (who are not the chair of the meeting) will not be voted on Resolutions 1 (Adoption of Remuneration Report) or 5 (Issue of Shares in lieu of termination payout). Key management personnel of the Company are the Directors and those other persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. The Remuneration Report identifies the Company’s key management personnel for the financial year 30 June 2012. Their closely related parties are defined in the Corporations Act, and include certain of their family members, dependants and companies they control.

4. In accordance with Regulation 7.11.37 of the Corporations Act, the Directors have set a date to determine the identity of those entitled to attend and vote at the Meeting. The date is Monday, 5 November 2012 at 4.00pm (WST).

5. A proxy form is attached. If required it should be completed, signed and returned to the Company's registered office in accordance with the instructions on that form.

By order of the Board

Mr Sam Wright Non-Executive Director and Company Secretary

Dated: 4 October 2012

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PHARMAUST LIMITED ACN 094 006 023

EXPLANATORY STATEMENT

This Explanatory Statement is intended to provide Shareholders with sufficient information to assess the merits of the Resolutions contained in this Notice.

The Directors recommend that Shareholders read this Explanatory Statement in full before making any decision in relation to the Resolutions. 1. FINANCIAL STATEMENTS AND REPORTS

In accordance with the Constitution, the business of the Annual General Meeting will include receipt and consideration of the annual financial report of the Company for the financial year ended 30 June 2012 together with the declaration of the directors, the directors’ report, the remuneration report and the auditor’s report.

In accordance with amendments to the Corporations Act the Company is no longer required to provide a hard copy of the Company’s annual financial report to Shareholders unless a Shareholder has specifically elected to receive a printed copy. These amendments may result in reducing the Company’s printing costs.

Whilst the Company will not provide a hard copy of the Company’s annual financial report unless specifically requested to do so, Shareholders may view the Company annual financial report on its website at http://www.pharmaust.com

2. INFORMATION RELATING TO RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

The Corporations Act requires that at a listed company’s annual general meeting, a resolution that the Remuneration Report be adopted must be put to the shareholders. However, such a resolution is advisory only and does not bind the Directors or the Company. The Remuneration Report sets out the Company’s remuneration arrangements for the Directors and senior management of the Company. The Remuneration Report is part of the Directors’ report contained in the annual financial report of the Company for the financial year ending 30 June 2012. A reasonable opportunity will be provided for discussion of the Remuneration Report at the Annual General Meeting. Under the Corporations Act 2001, if 25% or more of votes that are cast are voted against the adoption of the Remuneration Report at two consecutive annual general meetings, Shareholders will be required to vote at the second of those annual general meetings on a resolution (a "Spill Resolution") that another general meeting be held within 90 days at which all of the Directors (other than the Managing Director) must go up for re-election. The Company encourages all Shareholders to cast their votes on Resolution 1 (Remuneration Report). Key Management Personnel of the Company are the Directors and those other persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. The Remuneration Report identifies the Company’s

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Key Management Personnel for the financial year to 30 June 2012. Their Closely Related Parties are defined in the Corporations Act, and include certain of their family members, dependants and companies they control. If you choose to appoint a proxy, you are encouraged to direct your proxy how to vote on Resolution 1 (Remuneration Report) by marking either "For", "Against" or "Abstain" on the Proxy Form for Resolution 1. If you appoint a member of the key management personnel whose remuneration details are included in the Remuneration Report or a closely related party of that member as your proxy, and you do not direct that person on how to vote on this Resolution 1, the proxy cannot exercise your vote and your vote will not be counted in relation to this Resolution 1. The Chairman intends to vote all undirected proxies in favour of Resolution 1. If the Chairman of the Meeting is appointed as your proxy and you have not specified the way the Chairman is to vote on Resolution 1, by signing and returning the proxy form you are giving express authorisation for the Chairman to vote the proxy in accordance with the Chairman's intention.

3. INFORMATION RELATING TO RESOLUTION 2 – RE-ELECTION OF DIRECTOR – SAM WRIGHT

Rule 7.3(a) of the Constitution requires that if the Company has three or more Directors, one third (rounded down to the nearest whole number) of those Directors (except a Managing Director) must retire at each annual general meeting. No Director (except a Managing Director) shall hold office for a period in excess of 3 years, or until the third annual general meeting following his or her appointment, whichever is the longer, without submitting himself or herself for re-election.

Mr Sam Wright was last re-elected on 26 November 2010 and retires in accordance with these provisions and, being eligible, offers himself for re-election as a Director.

The Board recommends the re-election of Mr Wright as a Director.

4. INFORMATION RELATING TO RESOLUTION 3 – CAPITAL REDUCTION

4.1 KEY DATES AND TIMETABLE

Event Date

Shareholder meeting 7 November 2012

Company informs ASX that reduction of capital approved 7 November 2012

Last day for trading in pre-organised securities 8 November 2012

Trading in the Shares on an "ex return of capital"/deferred settlement basis

9 November 2012

Record Date 15 November 2012

Despatch date (Diashi Shares issued to Shareholders) 22 November 2012

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Please note that these dates and times are indicative only and may change without prior notice to Shareholders.

4.2 BACKGROUND INFORMATION TO CAPITAL REDUCTION The Company has previously announced its intention to dispose of its interest in the Luke River Tenements and for the Epichem business of the Company to be retained going forward. The Company currently holds an 80% downstream interest in the Luke River Tenements via its wholly owned subsidiary, Pela.

Pela holds an 80% interest in RI Energetika Pela, a company incorporated in Macedonia. RI Energetika Pela holds the Luke River Tenements.

On 10 September 2012, the Company entered into a share sale agreement with Diashi Mining to sell all of the shares in Pela to Diashi Mining. On completion of the Share Sale Agreement, Diashi Mining will be a subsidiary of the Company because:

• Diashi Mining will hold 100% of the share capital in Pela; and

• the Company will hold 94.3% of the share capital of Diashi Mining (16,500,003 Diashi Shares of 17,500,003 Diashi Shares).

The corporate structure of the Company following the sale of Pela to Diashi Mining (pre-Distribution) is set out in Annexure 1.

Subject to receiving Shareholder approval the Company proposes to distribute all of the 16,500,003 Diashi Shares held by it to Shareholders on the Record Date on a pro rata basis ("Distribution"). On completion of the Distribution, the Company will have disposed of its interest in the Luke River Tenements.

The corporate structure of the Company following the Distribution of Diashi Shares to Shareholders is set out in Annexure 2.

Resolution 3 seeks Shareholder approval for the Distribution of the Diashi Shares to Shareholders following the sale of Pela to Diashi Mining under the Share Sale Agreement.

4.3 LEGAL REQUIREMENTS

4.3.1 Section 256B of the Corporations Act

The proposed Distribution to Shareholders is an equal reduction of capital which must be approved by Shareholders.

Section 256B(1) of the Corporations Act provides that a company may reduce its capital if the reduction:

(a) is fair and reasonable to shareholders as a whole;

(b) does not materially prejudice the company's ability to pay its creditors; and (c) is approved by shareholders in accordance with section 256C of the Corporations

Act.

The Directors are of the opinion that the proposed Distribution:

• is fair and reasonable to Shareholders as a whole, as the Distribution will be undertaken on a pro rata basis and for the reasons set out in this Explanatory Statement; and

• does not materially prejudice the Company's ability to pay its creditors.

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4.3.2 Prospectus

The Corporations Act restricts the Company from disposing of the Diashi Shares to Shareholders within 12 months of their issue, by way of the proposed Distribution, without the Company issuing a Prospectus. The Corporations Act also restricts Shareholders from on-selling the Diashi Shares acquired by them within 12 months of their issue.

In addition, under applicable ASIC guidelines, the invitation to Shareholders to vote on Resolution 3 of this Meeting constitutes an offer to transfer the Diashi Shares to Shareholders under the Distribution. Therefore, under applicable ASIC guidelines, the Company has prepared the Prospectus, which accompanies this Notice of Meeting. The Company recommends that all Shareholders' read the Prospectus carefully and in conjunction with this Notice and the Explanatory Statement.

There is no information known the Company that is material to the decision by Shareholders on how to vote on Resolution 3 other than as disclosed in the Notice and Explanatory Statement, the accompanying Prospectus and information that the Company has previously disclosed to Shareholders.

4.4 DETAILS OF THE DISTRIBUTION

4.4.1 Pro rata distribution

On completion of the Share Sale Agreement, the Company will hold 16,500,003 Diashi Shares representing 94.3% of the total share capital of Diashi Mining, which is currently 17,500,003 Diashi Shares.

The return of capital will be effected by a pro rata distribution of all of the 16,500,003 Diashi Shares held by the Company to the Shareholders as at the Record Date.

The number of Diashi Shares to be distributed to each Shareholder will be determined by the following formula:

Distribution ratio = Number of Shares on issue on Record Date Number of Diashi Shares held by the Company

As at the date of this Notice, the Company has 482,506,606 Shares on issue and the Distribution ratio would be:

Distribution ratio = 482,506,606 16,500,003

= 29.24

This means that, as at the date of this Notice, Shareholders would receive 1 Diashi Share for every 29.24 Shares held in the Company rounded down to the nearest whole number.

Note that the issue of Shares under Resolutions 4 (Issue of Shares under Placement) and 5 (Issue of Shares in lieu of termination payout), if they are passed, will be made after the Record Date for the Distribution and so, will not affect the Distribution ratio.

4.4.2 Record date

The Record Date is 15 November 2012, which is 6 Business Days after this Meeting. Shareholders who will be entitled to receive the Diashi Shares under the Distribution are those Shareholders who are:

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(b) registered as a shareholder as at 5.00pm (WST) on the Record Date (15 November 2012); or

(c) entitled to be registered as a shareholder by virtue of a transfer of Shares executed before 5.00pm (WST) on the Record Date and lodged with the Company at that time.

4.4.3 Overseas Shareholders

The distribution of the Diashi Shares to the Company's overseas registered Shareholders under the reduction of capital will be subject to the legal and regulatory requirements in their relevant jurisdictions. If, in the opinion of the Directors, the requirements of any jurisdiction where a Shareholder is resident restricts or prohibits the distribution of Diashi Shares or otherwise imposes on the Company an unreasonable burden, the Diashi Shares to which the relevant Shareholders are entitled will be sold by the Company on behalf of those Shareholders as soon as practicable after the transfer of Diashi Shares. The Company will then account to the relevant Shareholders for the net proceeds of sale after deducting the costs and expenses of the sale. As there may be no liquid market for the Diashi Shares at the time of issue of the Diashi Shares, the net proceeds of sale to such Shareholders may be less than the notional dollar value of the return of capital as set out in this Explanatory Statement.

4.4.4 Rights and liabilities attaching to the Diashi Shares

Full details of the rights and liabilities attaching to the Diashi Shares are detailed in the constitution of Diashi Mining and in certain circumstances, are regulated by the Corporations Act. A summary of the rights and liabilities attaching to the Diashi Shares is set out in paragraph 4.9.6 below.

4.4.5 Taxation issues

There are taxation consequences following the Distribution to Shareholders. Details of the general taxation issues are set out in paragraph 4.10 below.

4.5 EFFECT OF THE DISTRIBUTION ON THE COMPANY

4.5.1 Capital structure

The capital structure of the Company as at the date of this Notice is:

Shares 482,506,606

The Company has no options or other securities on issue.

The Distribution of the Diashi Shares under Resolution 3 will not affect the capital structure of the Company. The number of Shares on issue will increase however if Resolutions 4 and 5 are passed. The rights attaching to the Shares in the Company will not be altered by the Distribution.

4.5.2 Reduction in the share capital of the Company

The Distribution will have the effect of reducing the issued share capital of the Company by the dollar amount of the book value of the Diashi Shares, being $1,500,000.

The pro forma consolidated balance sheet of the Company following the sale of Pela to Diashi Mining and completion of the Distribution (Resolution 3) and further the issue of Shares the subject of the Placement to raise $1,000,000 (Resolution 4) is set out in Annexure 3.

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4.6 THE COMPANY'S OPERATIONS AFTER THE DISTRIBUTION

After the Distribution, the focus of the Company will be on the continued development of the Epichem business.

4.7 DIRECTORS' RECOMMENDATIONS

The Directors unanimously recommend the approval of Resolution 3. In forming their unanimous recommendation the Directors have considered the following matters:

4.7.1 Potential advantages to Shareholders as a whole

(a) Shareholders will continue to retain a substantial interest in the development and exploitation of the Luke River Tenements through their individual shareholding in Diashi Mining following the spin-off. Information about Diashi Mining is set out in Section 4.9.

(b) Shareholders will continue to retain their shareholding in the Company in the same proportion in which it is held prior to the Distribution, subject to the issue of additional Shares under Resolutions 4 and 5.

(c) The spin-off of the Luke River Tenements through Diashi Mining should allow for a better focus on the development of the Luke River Tenements while the Company continues to develop the separate and distinct Epichem business. The spin-off of Diashi Mining from the Company will mean that both the Company and Diashi Mining will have a primary focus that will not be affected by events or occurrences relating to the other projects. The Company's primary focus will be on the Epichem business and Diashi Mining's focus will be on the Luke River Tenements.

(d) Shareholders will hold both the Company Shares and Diashi Shares following the Distribution and, therefore, will be able to decide, on an individual project-by-project basis once Diashi Mining is spun off, if they wish to hold or sell their interest in the Luke River Tenements and/or the Epichem business.

4.7.2 Potential disadvantages to Shareholders as a whole

(a) There is no guarantee that the Company's Shares or Diashi Shares will increase in value following the spin-off of the Luke River Tenements. It is possible that the collective value of Shareholder' interests in the Company's Shares and the Diashi Shares will decrease.

(b) Shareholders will hold Diashi Shares, which are not listed on any recognised financial market and will have an illiquid investment in a significant asset. It may be difficult for Shareholders to transfer or otherwise deal in that investment or realise the full value for that investment.

(c) Shareholders may incur additional transaction costs if they wish to dispose of their interest in Diashi Mining.

(d) There may be taxation consequences for Shareholders following the Distribution. Details of the general taxation issues are set out in section 4.10.

Having regard to each of these matters, the Directors consider that, on balance, the transfer of the Luke River Tenements to Diashi Mining in consideration for the Diashi Shares and the Distribution to Shareholders is in the best interests of Shareholders as a whole as the Directors believe that the Company will be able to provide greater value to the Shareholders through the spin-off.

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4.8 DIRECTORS' INTERESTS

As at the date of this Notice, the Directors (and their respective associates) have relevant interests in the Shares of the Company at set out in the table below. Interests include those held directly and indirectly. The table also shows the number of Diashi Shares that Directors may have an interest in if the Distribution is approved.

Director Shares in Company Diashi Shares to be received under Distribution2

Bryant Mclarty 11,536,4521 394,544

Gregory Cunnold 38,833,333 1,328,089

Henry Gulev Nil Nil

Sam Wright 3,420,000 116,963

Notes:

1. If Resolution 5 is passed (Issue of Shares in lieu of termination payout) then the number of Shares in which Mr Mclarty has a relevant interest will increase. These Shares will be issued after the Record Date and so, there will not be any change to the number of Diashi Shares that he will be entitled to if the Distribution is approved.

2 Assumes a Distribution ratio of 1 Diashi Share for every 29.24 Shares held at the Record Date.

No Director will receive any payment or benefit of any kind as a result of the Distribution other than as Shareholders of the Company. To the extent that the Directors hold Shares, they will be treated on the same basis as other Shareholders in respect of the Distribution.

4.9 INFORMATION ABOUT DIASHI MINING

4.9.1 Project overview

Assuming Resolution 3 is passed and the Distribution is completed, Diashi Mining will acquire the Company's 80% interest in the Luke River Tenements and have responsibility for the exploration and development of those tenements.

Diashi Mining currently has no operations and its only asset will be the Luke River Tenements following settlement of the Share Sale Agreement.

The Luke River concession area lies within the Dinaride-Carpathian belt of eastern Europe, an ancient volcanic region displaying very similar geology to the western part of the USA. Both regions are polymetallic and host porphyry copper/gold deposits as well as numerous epithermal gold/silver deposits. Another mineralogical similarity is between the Carlin gold deposits of Nevada and recently-discovered, very extensive, sub-microscopic gold deposits in sandstone beds southwest of Bor in Serbia. These newly-discovered Carlin-type deposits lie 200km north of Luke River. Geological evaluation of Yugoslav-era geological reports written on the Luke River concession area suggests that it contains major gold/silver prospectivity and the best prospects are as follows:

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1. Krstov Dol (gold-antimony): a zone approximately 2,000 metres long by up to 500 metres wide, with numerous drillhole intersections of greater than 0.2% antimony in highly altered silicified and pyritic zones; never analysed for gold.

2. Krstov Dol East (Carlin-type gold), an unconformity conglomerate and sandstone

bed, approximately 4,000 metres long, that probably provided a major fluid conduit system during the deposition of the Krstov Dol antimony deposits; never analysed for gold.

3. Samar (gold-silver-lead-zinc), a vein system 1,000 metres long carrying grades of up

to 800 g/t silver with a minimum exploration target size of approximately 0.2 million tonnes of 750-900 g/t silver equivalent.

4. Samar East (gold): An intensely silicified and kaolinised quartz latite lopolith, more

than 1,000 metres long, intruded into a graben-hosted conglomerate sequence that is inferred to hold very strong Carlin-type gold prospecivity; never analysed for gold.

5. Plavilo: (gold-silver-lead-zinc): a large dacite stock system, never analysed for gold

or silver, but with wide (up to 50 metre) zones of more than 1% lead, more than 1% zinc, locally with up to 26% lead, with extensive pyritisation, silicfication and bleaching; total strike length of about 1,000 metres.

A preliminary geochemical exploration program has been designed to test these prospect concepts and is planned to be executed prior to early 2013. Results from this program will be followed up by more detailed sampling and trenching prior to drilling.

Additionally, the Samar, Plavilo and Toshino Polje prospects contain excellent potential for small-scale mining of secondary-enriched, surface to near-surface gold-silver (lead-zinc) ore, of direct shipping type, capable of being brought into production. A preliminary trenching program has been designed to look for such mineralisation. The information contained above that relates to Exploration Results is based on information compiled by Mr John Karajas, who is a member of the Australian Institute of Geoscientists. Mr Karajas is a consultant to the Company and a proposed director of Diashi Mining. Mr Karajas has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Karajas consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

4.9.2 Risk factors

On successful completion of the Distribution, Shareholders of the Company will become shareholders in Diashi Mining and should be aware of the general and specific risk factors, which may affect Diashi Mining and the value of its securities.

The following is a non-exhaustive list of the risks that may have a material effect on the financial position and performance of Diashi Mining and the value of its securities, as well as its exploration and any development and mining activities and an ability to fund those activities.

Specific risks

(a) Liquidity of shares

At the time of the Distribution, Diashi Mining will be an unlisted public company.

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Immediately following the Distribution, Shareholders will hold shares which are not listed on any securities exchange. This means Shareholders will have an illiquid investment in a significant asset (unlisted Diashi Shares) and it may be difficult for Shareholders to transfer or otherwise deal in that investment or realise full value for that investment whilst the Diashi Shares remain unlisted. There can be no assurance that an active market for Diashi Shares will be achieved or sustained. Holders of Diashi Shares may be unable to sell their investment on satisfactory terms or at all.

(b) Future capital needs and funding

Diashi Mining has limited working capital and will be required to raise additional equity and/or debt capital to finance its future activities. Diashi Mining has committed approximately $200,000 to the next stage of exploration of the Luke River Tenements and subject to satisfactory exploration results being received, Diashi Mining will attempt to raise further funds to continue with the exploration of the project. Diashi Mining's ability to raise further capital within an acceptable time, of a sufficient amount and on terms acceptable to it will vary according to a number of factors, including prospectivity of projects (existing and future), the results of exploration, subsequent feasibility studies, development and mining, stock market and industry conditions and the price of relevant commodities and exchange rates. No assurance can be given that future funding will be available to Diashi Mining on favourable terms (or at all). If adequate funds are not available on acceptable terms Diashi Mining may not be able to develop the Luke River Tenements.

(c) Sovereign Risk

The Luke River Tenements are located in Macedonia. Macedonia is a parliamentary democracy with an executive government and an independent judicial branch.

As a parliamentary democracy changes in government policy may occur which may have an adverse economic effect. Risks include without limitation, changes in the terms of mining tenements, changes to royalty arrangements, changes to taxation rates and concessions and changes in the ability to enforce legal rights. Any of these factors may, in the future, adversely affect the financial performance of Diashi Mining and the market price of its shares. No assurance can be given regarding future stability in Macedonia or any other country in which Diashi Mining may have an interest.

(d) Exploration

Minerals exploration and development is by its nature a high risk undertaking. The proposed exploration expenditure on the Luke River Tenements is based upon certain assumptions with respect to the method and timing of exploration and feasibility work. By their nature, these estimates and assumptions are subject to significant uncertainties. Actual costs may materially differ from these estimates and assumptions.

There can be no assurance that these cost estimates and underlying assumptions will be realised in practice. Further, there can be no assurance that exploration will result in the discovery of a significant mineral resource. Even if a significant mineral resource is identified, there can be no guarantee that it can be economically exploited.

Furthermore, feasibility studies on the potential development of operations to exploit any mineral resources that are delineated may not prove positive. Exploration and feasibility activities may be delayed or disrupted by the availability of drilling rigs or

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other technical contractors, adverse weather conditions, difficulties in gaining access to the desired exploration site, delays in approvals from authorities or technology providers or technical issues such as unexpected geological formations or process test work results.

(e) Mineralisation estimates

Mineralisation estimates are expressions of judgment based on knowledge, experience and resource modelling. As such, mineralisation estimates are inherently imprecise and rely to some extent on interpretations made. Additionally, mineralisation estimates may change over time as new information becomes available. If Diashi Mining encounters mineralisation or geological formations different from those predicted by past drilling, sampling and interpretations, any mineralisation estimates may need to be altered in a way that could adversely affect its operations.

(f) Commodity price volatility

Commodities prices, including current and expected future prices of gold and base metals, fluctuate and are affected by numerous factors beyond the control of Diashi Mining. These factors include worldwide and regional supply and demand for commodities, general world economic conditions and the outlook for interest rates, inflation and other economic factors on both a regional and global basis. These factors may have a positive or negative affect on Diashi Mining's exploration, project development and production plans and activities, together with the ability to fund those plans and activities.

(g) Title risk

The Luke River Tenements or other tenements in which Diashi Mining may acquire in the future are subject to the applicable local laws and regulations. There is no guarantee that any tenement, applications or conversions in which the Company has a current or potential interest will be granted.

The Luke River Tenements are subject to the relevant conditions applying in Macedonia. Failure to comply with these conditions may render the licenses liable to forfeiture. The Luke River Tenements will be subject to application for tenement renewal from time to time. Renewal of the term of each tenement is subject to applicable legislation. If the tenement is not renewed for any reason, the Diashi Mining may suffer significant damage through loss of the opportunity to develop and discover any mineral resources on that tenement.

(h) Environmental

The Luke River Tenements are subject to relevant environmental legislation regarding environmental matters, including disturbance, rehabilitation and the discharge of hazardous waste and materials. These will be dealt with in the normal course of operations. The operations of Diashi Mining may be subject to accidents or other unforeseen events which may compromise its environmental performance and which may have adverse financial implications.

(i) Development and mining

Possible future development of a mining operation at any of the Luke River Tenements is dependent on a number of factors including, but not limited to, failure to acquire and/or delineate economically recoverable ore bodies, unfavourable geological conditions, failing to receive the necessary approvals from all relevant

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authorities and parties, unseasonal weather patterns, unanticipated technical and operational difficulties encountered in extraction and production activities, mechanical failure of operating plant and equipment, unexpected shortages or increases in the price of consumables, spare parts and plant and equipment, cost overruns, risk of access to the required level of funding and contracting risk from any third parties providing essential services. In the event that Diashi Mining commences commercial production, its operations may be disrupted by a variety of risks and hazards which are beyond its control, including environmental hazards, industrial accidents, technical failures, labour disputes, lack of skilled labour, unusual or unexpected rock formations, flooding and extended interruptions due to inclement or hazardous weather conditions and fires, explosions and other accidents.

(j) Reliance on key personnel

The success of Diashi Mining will depend, in part, on the ability of the directors, management team and other executive personnel to develop the Luke River Tenements and any other projects and enhance project value. Should one or more of the key personnel cease to be involved, for whatever reason, then the capacity of Diashi Mining may be expected to be impaired pending a suitable replacement being identified and retained.

(k) Insurance

Diashi Mining may have insurance in place in accordance with industry practice. However the occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the business, financial condition and results of Diashi Mining. Insurance of all risks associated with mineral exploration and production is not always available and where available the costs can be prohibitive.

(l) Limited operational history

Diashi Mining has limited historical, financial or operating information. Diashi Mining's ability to achieve its objectives depends on the ability of its directors and management to implement current plans and to respond to any unforeseen circumstances that require changes to those plans.

(m) Foreign exchange risk

Diashi Mining operates internationally and is therefore exposed to the effects of changes in currency exchange rates. In particular, commodity prices (and therefore the potential future revenue of Diashi Mining) are typically denominated in United States’ dollars, whereas a portion of Diashi Mining's costs (capital and revenues) are incurred in other currencies. Diashi Mining does not currently hedge those currency risks.

(n) Potential acquisitions

As part of its business strategy, Diashi Mining may make acquisitions of or significant investments in other resource projects. Any such transactions would be accompanied by risks commonly encountered in making such acquisitions.

General investment risks

(o) Economic risk

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Changes in both Australia, Macedonia and world economic conditions may adversely affect the financial performance of Diashi Mining. Factors such as inflation, currency fluctuations, interest rates, industrial disruption and economic growth may impact on future operations and earnings.

(p) Legislative

Changes in relevant taxes, legal and administration regimes, accounting practice and government policies in Australia or Macedonia may adversely affect the financial performance of Diashi Mining.

4.9.3 Board of directors of Diashi Mining

Nik Jovanovski (Proposed Director)

Mr Nik Jovanovski has over 15 years of experience within multiple engineering sectors, including heavy industrial manufacturing, research and development within the mining, automotive and infrastructure industries, plant process engineering across multiple industries ranging from mining, infrastructure, automotive, solar energy and welding manufacturing. Mr Jovanovski has also been involved in the strategic business development of numerous companies across various parts of the world and covering a wide range of industry sectors. These roles involved the strategic development of businesses moving forward into growth phases, development of business plans, market strategies and implementation strategies to achieve the desired targeted results. Mr Jovanovski will be appointed to the board of Diashi Mining upon completion of the transaction to acquire the interest in the Luke River Tenements.

John Karajas (Proposed Director)

Mr John Karajas is an exploration geologist with over 30 years of experience in both the mining and oil industries. After graduating from the University of Western Australia with a Bsc (Hons) in 1970, he gained his grounding in the mining industry by working for mining companies, Falconbridge, Anaconda and Hanna Mining. This period extended through to 1982 and was predominantly spent in Western Australia but included three years in Mt Isa. Commodities explored for include nickel, copper/lead/zinc, gold, phosphate, taconitic iron ore, tin/tantalite and lignite/oil shale. Between 1982 and 1985 he gained his initial experience in oil exploration by working for Eagle Corporation and IEDC (Australia). This period was spent in working on sedimentary basins in Western Australia and included basin studies, wellsite geology, and other duties related to oil and gas exploration.

From 1986 onwards, he has worked predominantly as a consultant/contract geologist for a wide range of mining and oil industry clients, both within Australia and abroad. Periods of a more managerial nature have included 1989 to 1991 as Technical Director of King Mining Ltd, 1992 to 1995 as Technical Director of Omega Oil NL and 1996 to 1997 as Exploration Vice President of Icelandic Gold Corporation

Mr Karajas is currently a member of the Australian Institute of Geoscientists. Mr Karajas will be appointed to the board of Diashi Mining upon completion of the transaction to acquire the interest in the Luke River Tenements.

Emmanuel Correia

Emmanuel is a Chartered Accountant (CA) with over 20 years’ experience in the provision of corporate finance advice to a diverse client base both in Australia and in

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overseas markets. Emmanuel specialises in the provision of corporate advice in relation to capital raisings, mergers and acquisitions, corporate strategy and structuring, initial public offerings, project and company valuations.

Emmanuel was the co-founder of Cardrona Capital Pty Ltd, a boutique corporate finance and advisory firm which was sold to an Australian based investment organization. Cardrona was involved in equity capital raising’s, initial public offerings and mergers and acquisitions as either Underwriter, Sub Underwriter, Corporate Adviser and/or Investor.

Emmanuel has also spent a number of years working in the corporate finance industry in London for J.P. Morgan & Co. and Price Waterhouse Coopers and for Deloitte Corporate Finance and the Transocean Group in Australia.

Emmanuel is currently a director of ASX public companies Forge Resources Limited, Exalt Resources Limited and Ambassador Oil and Gas Limited.

Mr Emmanuel Correia has agreed to remain on the board of Diashi Mining for the purposes of completing the transaction to acquire the interests in the Luke River Tenements. It is his intention to resign as a director of Diashi after the proposed transaction has been completed. An additional director will need to be appointed to fill his vacancy. No such director has currently been identified.

Mark Blanchard and William Witham are currently directors of Diashi Mining but will resign upon completion of the transaction to acquire the interests in the Luke River Tenements.

4.9.4 Financial information

The pro forma balance sheet for Diashi Mining following the acquisition of the Luke River Tenements is set out in Annexure 4.

4.9.5 Shareholder structure of Diashi Mining

Following the Distribution, Shareholders will hold 94.3% of Diashi Mining in the same proportions as each Shareholder's interest in the Company at the Record Date.

Diashi Mining proposes to raise capital to fund the exploration and development of the Luke River Tenements, which will dilute the interests of Shareholders. The dilutionary effect of this and any other capital raising will depend on the amount raised and the nature of securities offered.

4.9.6 Rights and liabilities attaching to Diashi Shares

The Diashi Shares to be transferred to Shareholders under the Distribution will be fully paid and rank equally with each other. A summary of the rights attaching to the Diashi Shares is set out below. This summary is not exhaustive and does not constitute a definitive statement of the rights and liabilities of the Diashi shareholders. Full details of the rights attaching to the Diashi Shares are set out in Diashi Mining's constitution, a copy of which is available on request.

Voting Rights

Subject to any rights or restrictions from the time being attached to a class or classes of shares, at a general meeting of members every member has one vote on a show of hands and one vote per share on a poll. For each partly paid share on a poll, that member may exercise a fraction of a vote relating to the amount paid on the share excluding the amounts credited or paid in advance. Voting may be in person or by proxy, attorney or representative.

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Dividends

The profits of the company which the board may from time to time determine to distribute by way of dividend are divisible to each share of a class on which the board resolves to pay a dividend in proportion to the amount for the time being paid on a share bears to the total issue price of the share. All shares currently on issue are fully paid shares and at present there are no special rights attached to any share issues.

Future issues of securities

Subject to the Corporations Act and any other regulatory requirements, the directors may issue or otherwise dispose of unissued shares in the company at the times and on the terms that the directors think proper and a share may be issued with preferential or special rights.

Meetings and notices

Each shareholder is entitled to receive notice of, and to attend, general meetings for the company and to receive all notices, accounts and other documents required to be sent to shareholders under the constitution or the Corporations Act. Shareholders may requisition meetings in accordance with the Corporations Act.

Election of directors

There must be a minimum of 3 directors. At every annual general meeting one third of the Directors (or the number nearest one third) must retire from office. Any other Director who has been in office for 3 years or more since that Director's election or last re-election must retire at the annual general meeting. The managing director is excluded from the re-election requirements.

Indemnities

To the extent permitted by law, each officer of the company is entitled to be fully indemnified against any actions, expenses and liability incurred by that person as an officer of the company and any legal costs and expenses incurred in defending an action.

4.10 TAXATION 4.10.1 For Shareholders

The following is a general summary of the potential tax consequences of the capital reduction to Shareholders as at the date of this Explanatory Statement and applies only to Shareholders who are residents of Australia for tax purposes. The Company recommends that all Shareholders obtain their own independent taxation advice in relation to the impact of Resolution 3 on their individual circumstances.

The summary shows the likely tax outcomes for Shareholders who hold their Shares on capital account. The taxation position for share traders, dealers or other Shareholders holding their Shares on revenue account is not dealt with in this section and those Shareholders should obtain their own independent taxation advice to consider the impact of Resolution 3.

This general guide does not extend to Shareholders who do not elect to apply the de-merger relief referred to below. Such Shareholders should obtain their own independent taxation advice to consider the tax implications of the transactions envisaged under Resolution 3.

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Shareholders may be entitled to both capital gains tax ("CGT") relief under Division 125 of Part 3-3 of the Income Tax Assessment Act 1997 and dividend relief under sub-section 44(4) of the Income Tax Assessment Act 1936.

CGT Relief

CGT relief is available to Shareholders who individually make a choice that the CGT relief provisions apply in a de-merger restructuring involving a distribution in specie of shares held by a head entity (the Company) in a de-merger subsidiary (Diashi Mining).

The form of the CGT relief is to entitle Shareholders to disregard any capital gain or capital loss that may otherwise arise under the de-merger restructuring.

Shareholders, irrespective of whether they have elected to claim the CGT relief or not, will be required to make adjustments so as to spread their CGT cost base (and reduced cost base, where applicable) of Company Shares over both the Company and Diashi Mining shares held after the de-merger.

Dividend relief

Dividend relief applies to a de-merger dividend that would otherwise have been an assessable dividend under section 44(1) of the Income Tax Assessment Act 1936.

The form of this dividend relief is to ensure the de-merger dividend is neither assessable income nor exempt income. It follows that should any part of the distribution in specie be considered an ordinary dividend, then that amount will not be assessable income in the hands of the Shareholder.

Integrity rules

In circumstances where Shareholders are in receipt of a de-merger benefit under a scheme, the purpose of which (dominant or otherwise, but excluding incidental purposes) is to provide a tax benefit, then an otherwise non-assessable de-merger dividend will become an assessable dividend.

This is an integrity measure which the Company does not believe should have application to the transaction the subject of the Resolution. Whilst the Company could obtain a Class Ruling from the Commissioner of Taxation confirming that he will not make an adverse determination under the integrity rules, the Company is not currently proposing to do so.

4.10.2 For the Company

On the basis that the de-merger relief provisions apply, the Company is entitled to disregard any capital gain it would otherwise have made from the disposal of the Diashi Mining shares pursuant to the distribution to Shareholders.

4.11 LODGEMENT OF DOCUMENTS

In accordance with section 256C(5), the Company has lodged with ASIC a copy of this Notice, the Explanatory Statement and the Prospectus which accompanies the Notice.

4.12 OTHER MATERIAL INFORMATION

There is no information material to the making of a decision by a Shareholder in the Company whether or not to approve Resolution 3 (being information that is known to any of the Directors and which has not been previously disclosed to Shareholders in the Company) other than as disclosed in this Explanatory Statement and all relevant Annexures.

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5. INFORMATION RELATING TO RESOLUTION 4 – ISSUE OF SHARES UNDER PLACEMENT

5.1 BACKGROUND

As announced to ASX on 31 July 2012, the Company proposes to undertake a placement of up to 100,000,000 Shares at an issue price of $0.01 per Share to raise up to $1,000,000 ("Placement"). The Company has engaged the services of Peloton Capital Pty Ltd (ACN 149 540 018), a licensed securities dealer (AFSL 406040) to act as sole lead manager to the Placement.

Resolution 4 seeks Shareholder approval pursuant to ASX Listing Rule 7.1 for the allotment and issue of 100,000,000 Shares under the Placement. None of the subscribers under the Placement are, or will be, related parties of the Company.

The Shares will be issued after the Record Date for the Distribution such that those persons subscribing under the Placement will not be entitled to receive any Diashi Shares.

ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to issue more equity securities during any 12 month period than that amount which represents 15% of the number of fully paid ordinary securities on issue at the commencement of that 12 month period. The number of Shares to be issued under the Placement exceeds the Company’s 15% placement capacity and so, the Company seeks Shareholder approval to issue the Shares.

5.2 INFORMATION REQUIRED UNDER THE LISTING RULES

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

(a) the maximum number of Shares to be issued is 100,000,000;

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

(c) the issue price is $0.01 (1 cent) per Share;

(d) the Shares will be allotted and issued to sophisticated and professional investors as determined by the Board, none of whom will be related parties of the Company;

(e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares; and

(f) the funds raised from the Placement will be used for working capital and to pursue complementary opportunities that the Board considers has the potential to add value for Shareholders following disposal of the Luke River Tenements.

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6. INFORMATION RELATING TO RESOLUTION 5 – ISSUE OF SHARES IN LIEU OF TERMINATION PAYOUT

6.1 BACKGROUND

The Board and Mr Mclarty have mutually agreed that Mr Mclarty’s contract will be terminated within one month after the date of the Meeting. The Company has agreed, subject to obtaining Shareholder approval, to allot and issue fully paid ordinary shares in the Company up to the value of $135,000 ("Director Remuneration Shares") to Mr Bryant Mclarty on the terms and conditions set out below.

The primary purpose of issuing the Director Remuneration Shares to Mr Mclarty is to provide remuneration in lieu of his termination payout under his executive services agreement. 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 Remuneration Shares upon the terms proposed.

By issuing Director Remuneration Shares in lieu of paying cash, the Company is able to preserve its cash reserves. The independent Directors resolved, subject to Shareholder approval, to issue the Director Remuneration Shares at the volume weighted average price of the last 5 trading days prior to the date of this Meeting equating to $135,000 cash (being 9 month’s salary payable to Mr Mclarty on termination as per the terms of the Executive Services Agreement). The independent Directors (Messrs Cunnold, Gulev and Wright) support the Resolution.

6.2 ASX LISTING RULE 10.11 ASX Listing Rule 10.11 requires shareholder approval to be obtained where an entity issues, or agrees to issue, securities to a related party, or a person whose relationship with the entity or a related party is, in ASX’s opinion, such that approval should be obtained unless an exception in ASX Listing Rule 10.12 applies.

Accordingly, approval is sought in accordance with ASX Listing Rule 10.11 from Shareholders for the issue of the Director Remuneration Shares.

Information required by ASX Listing Rule 10.11 Pursuant to and in accordance with the requirements of ASX Listing Rule 10.13, the following information is provided in relation to the proposed issue of Director Remuneration Shares:

(a) the Director Remuneration Shares are proposed to be issued to Mr Bryant Mclarty or his nominee;

(b) the maximum number of Director Remuneration Shares is not known as at the date of this Notice. The number of Shares will be calculated using the volume weighted average price of the Company’s Shares for the last 5 trading days prior to the date of this Meeting to a value of $135,000. Assuming the relevant volume weighted average price is 1 cent, then the number of Shares to be issued would be 13,500,000 Shares;

(c) the Company proposes to issue the Director Remuneration Shares to Mr Mclarty after the Record Date and no later than 1 month after the date of the Annual General Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules);

(d) Mr Bryant Mclarty is a Director of the Company;

(e) the Director Remuneration Shares will be issued at a deemed issue price equal to the volume weighted average price of the Company’s Shares for the last five trading days prior to the date of this Meeting;

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(f) the Director Remuneration Shares will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company’s existing Shares;

(g) no funds will be raised by the issue of these Shares as they are being issued in consideration for a termination payment otherwise payable by the Company to Mr Mclarty.

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

6.2 ASX LISTING RULE 10.19 ASX Listing Rule 10.19 requires shareholder approval to a termination benefit that is payable to an officer of the company where the value of the benefit exceeds 5% of the equity interests of the company as set out in the latest accounts given to ASX under the Listing Rules.

The termination benefit payable to Mr Mclarty ($135,000) exceeds 5% of the equity interests of the Company in the latest accounts lodged with ASX (5% of $1,212,760 is $60,638). The Company therefore seeks Shareholder approval under ASX Listing Rule 10.19.

The Company is not seeking Shareholder approval under the related party provisions of the Corporations Act to issue Mr Mclarty with the Director Remuneration Shares rather than cash in payment of the termination benefit he is entitled to under his executive services agreement. The decision by the independent Directors was made on reasonable arms length terms (the reasons for issuing the Director Remuneration Shares in lieu of cash are set out in the "Background" section above).

6.3 PROXY RESTRICTIONS If you choose to appoint a proxy you are encouraged to direct your proxy how to vote on Resolution 5 by marking either "For", "Against" or "Abstain" on the proxy form for this item of business.

If you appoint a member of the key management personnel or a closely related party of that member as your proxy, and you do not direct that person on how to vote on Resolution 5, the proxy cannot exercise your vote and your vote will not be counted in relation to the Resolution.

If you appoint the Chairman of the Meeting as your proxy, and you do not direct the Chairman on how to vote on this Resolution 5, then by signing and returning the proxy form you are giving express authorisation for the Chairman to vote in accordance with his or her intentions. The Chairman intends to vote all undirected proxies FOR Resolution 5 even though the Resolution is connected directly or indirectly with the remuneration of a member of the key management personnel. 7. INFORMATION RELATING TO RESOLUTION 6 – APPROVAL FOR ADDITIONAL

PLACEMENT CAPACITY

7.1 General

ASX Listing Rule 7.1 permits entities to issue 15% of its issued capital without shareholder approval in a 12 month period, subject to a number of exceptions.

The ASX has recently amended the ASX Listing Rules to allow small to mid-cap companies to seek shareholder approval for additional placement capacity. ASX Listing Rule 7.1A permits eligible entities, which have obtained shareholder approval by special resolution, to issue Equity Securities up to an additional 10% of its issued capital by placements over a 12 month period after the annual general meeting ("Additional Placement Capacity").

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The Company seeks Shareholder approval under Resolution 6 to be able to issue Equity Securities under the Additional Placement Capacity. The exact number of Equity Securities to be issued is not fixed and will be determined in accordance the formula prescribed in ASX Listing Rule 7.1A.2 (set out below).

7.2 Requirements of ASX Listing Rule 7.1A

(a) Eligible entities

An eligible entity for the purposes of ASX Listing Rule 7.1A is an entity that is not included in the S&P/ASX 300 Index and has a market capitalisation of $300 million or less. The Company is an eligible entity.

(b) Shareholder approval

Shareholders must approve the Additional Placement Capacity by special resolution at the annual general meeting. A resolution under ASX Listing Rule 7.1A cannot be put at any other shareholder meeting.

(c) Equity Securities

Equity Securities issued under the Additional Placement Capacity must be in the same class as an existing class of Equity Securities of the Company that are quoted on ASX.

As at the date of this Notice, the Company has only one class of Equity Securities quoted on ASX being fully paid ordinary Shares.

(d) Formula for calculating number of Equity Securities that may be issued under the Additional Placement Capacity

If Resolution 6 is passed, the Company may issue or agree to issue, during the 12 month period after this Meeting, the number of Equity Securities calculated in accordance with the following formula:

(AxD)-E

A The number of shares on issue 12 months before the date of issue or agreement:

• plus the number of fully paid shares issued in the 12 months under an exception in ASX Listing Rule 7.2;

• plus the number of partly paid shares that became fully paid in the 12 months;

• plus the number of fully paid shares issued in the 12 months with the approval of shareholders under ASX Listing Rules 7.1 or 7.4;

• less the number of fully paid shares cancelled in the 12 months.

D 10%

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

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(e) Interaction between ASX Listing Rules 7.1 and 7.1A

The Additional Placement Capacity under ASX Listing Rule 7.1A is in addition to the Company's 15% placement capacity under ASX Listing Rule 7.1.

The Company has 482,506,606 Shares on issue as at the date of this Notice. If Resolution 6 is passed, the Company will be permitted to issue (as at the date of this Notice:

• 72,375,990 Equity Securities under ASX Listing Rule 7.1; and

• 48,250,660 Equity Securities under ASX Listing Rule 7.1A.

The actual number of Equity Securities that the Company will be permitted to issue under ASX Listing Rule 7.1A will be calculated at the date of issue or agreement to issue the Equity Securities in accordance with the formula prescribed in ASX Listing Rule 7.1A.2 (as set out above).

The effect of Resolution 6 will be to allow the Company to issue securities under ASX Listing Rule 7.1A without using the Company's placement capacity under ASX Listing Rule 7.1.

7.3 Information for Shareholders as required by ASX Listing Rule 7.3A

(a) Minimum price

The issue price of the new Equity Securities will be no lower than 75% of the volume weighted average price (VWAP) for securities in the relevant quoted class calculated over the 15 trading days on which trades in that class were recorded immediately before:

• the date on which the price of the Equity Securities are to be issued is

agreed; or

• if the Equity Securities are not issued within 5 trading days of the date above, the date on which the Equity Securities are issued.

(b) Risk of economic and voting dilution

If Resolution 6 is passed and the Company issues securities under the Additional Placement Facility, existing Shareholders' voting power in the Company will be diluted.

There is the risk that:

• the market price for the Company's existing Equity Securities may be significantly lower on the date of issue of the new Equity Securities than on the date of the Meeting; and

• the new Equity Securities may be issued at a price that is at a discount to the market price of the Company's existing Equity Securities on the issue date or the new Equity Securities may be issued as part of the consideration for the acquisition of a new asset,

which may have an effect on the amount of funds raised by the issue of the new Equity Securities.

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The table below shows the dilution of existing Shareholders on the basis of the current market price of Shares and the current number of ordinary securities for variable "A" calculated in accordance with the formula in ASX Listing Rule 7.1A.2 as at the date of this Notice.

The table also shows:

• two examples where variable "A" has increased by 50% and 100%. Variable "A" is based on the number of ordinary securities the Company has on issue. The number of ordinary securities may increase as a result of issues of ordinary securities that do not require Shareholder approval (for example a pro rata entitlement issue) or future placements under ASX Listing Rule 7.1 that are approved by Shareholders in the future;

• two examples of where the issue price of ordinary securities has decreased by 50% and increased by 50% as against the current market price.

Variable 'A' in ASX Listing Rule 7.1A.2

Dilution 0.5 cents 50% decrease in Issue Price

1.0 cents Issue Price

2.0 cents 100% increase in Issue Price

Current Variable A 482,506,606 Shares

10% Voting Dilution

48,250,660 Shares

48,250,660 Shares

48,250,660 Shares

Funds raised

$241,253

$482,507

$965,013

50% increase in current Variable A 723,759,909 Shares

10% Voting Dilution

72,375,990 Shares

72,375,990 Shares

72,375,990 Shares

Funds raised

$361,880

$723,760

$1,447,520

100% increase in current Variable A 965,013,212 Shares

10% Voting Dilution

96,501,321 Shares

96,501,321 Shares

96,501,321 Shares

Funds raised

$482,507

$965,013

$1,930,026

This table has been prepared on the following assumptions:

(i) The Company issues the maximum number of Equity Securities available under the Additional Placement Capacity.

(ii) The 10% voting dilution reflects the aggregate percentage dilution against the issued share capital at the time of issue. This is why the voting dilution is shown in each example as 10%.

(iii) The table does not show an example of dilution that may be caused to a particular Shareholder by reason of placements under the Additional Placement Capacity, based on that Shareholder's holding at the date of the Meeting.

(iv) The table shows only the effect of issues of Equity Securities under ASX Listing Rule 7.1A, not under the 15% placement capacity under ASX Listing Rule 7.1.

(v) The issue of Equity Securities under the Additional Placement Capacity consists only of Shares. If the issue of Equity Securities includes quoted

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Options, it is assumed that those Options are exercised into Shares for the purpose of calculating the voting dilution effect on existing Shareholders.

(vi) The issue price is 1.0 cent, being the closing price of the Shares on ASX on 28 September 2012.

The Company's ability to issue securities under ASX Listing Rule 7.1A is in addition to its ability to issue securities under ASX Listing Rule 7.1.

(c) Placement Period

Shareholder approval of the Additional Placement Capacity under ASX Listing Rule 7.1A is valid from 7 November 2012 (the date of this Meeting) and expires on the earlier of:

• 7 November 2013, which is 12 months after this Meeting; or

• the date that Shareholders approve a transaction under ASX Listing Rule

11.1.2 (significant change to nature or scale of activities) or ASX Listing Rule 11.2 (disposal of the main undertaking),

or such longer period as allowed by ASX (the "Placement Period").

The Company will only issue and allot new securities during the Placement Period. The approval will cease to be valid in the event that shareholders' approve a transaction under ASX Listing Rules 11.1.2 or 11.2.

(d) Purposes for which the new Equity Securities may be issued

The Company may seek to issue new Equity Securities for the following purposes:

• cash consideration to raise funds for the acquisition of new assets or investments (including the expenses associated such acquisition), continued expenditure on the Company's current assets and for general working capital; or

• non-cash consideration for acquisition of new assets and investments. In

such circumstances the Company will provide a valuation of the non-cash consideration as required by ASX Listing Rule 7.1A.3.

(e) Allocation policy

The Company's allocation policy for the issue of new Equity Securities under the Additional Placement Capacity will depend on the market conditions existing at the time of the proposed issue. The allottees will be determined at the relevant time having regard to factors such as:

• the methods of raising funds that are available to the Company, including but

not limited to, rights issues or other issues in which existing security holders can participate;

• the effect of the issue of new securities on the control of the Company;

• the financial situation and solvency of the Company;

• advice from corporate, financial and broking advisers (as relevant).

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As at the date of this Notice the allottees are not known but may include existing substantial Shareholders and/or new Shareholders. No allottee under the Additional Placement Capacity will be a related party or associate of a related party. Existing Shareholders may or may not be entitled to subscribe for any Equity Securities issued under the Additional Placement Capacity and it is possible that their shareholding will be diluted.

If the Additional Placement Capacity is used to acquire new assets or investments then it is likely that the allottees will be the vendors of the new assets.

The Company will comply with the disclosure obligations under ASX Listing Rules 7.1A(4) and 3.10.5A on the issue of any new securities.

(f) Details of Equity Securities issued under earlier placement capacity approval

The Company has not previously obtained approval under ASX Listing Rule 7.1A.

(g) Voting exclusion

At the date of this Notice, the Company has not approached any particular existing Shareholder or security holder or an identifiable class of existing security holder to participate in a proposed issue of Equity Securities under the proposed Additional Placement Capacity. No existing Shareholder's votes will therefore be excluded under the voting exclusion in the Notice.

ENQUIRIES

Shareholders may contact Sam Wright on (+ 61 8) 9386 8767 if they have any queries in respect of the matters set out in these documents.

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PHARMAUST LIMITED ACN 094 006 023

GLOSSARY

In the Notice and this Explanatory Statement the following expressions have the following meanings:

Annual General Meeting and Meeting

the meeting convened by this Notice.

ASIC the Australian Securities and Investments Commission.

ASX ASX Limited (ACN 008 624 691).

ASX Listing Rules or Listing Rules

the listing rules of the ASX.

Board the Board of Directors of the Company.

Chairman the chairman of the Company.

Company PharmAust Limited (ACN 094 006 023).

Constitution the constitution of the Company.

Corporations Act Corporations Act 2001 (Cth).

Diashi Mining Diashi Mining Limited (ACN 151 981 387)

Diashi Share a fully paid ordinary share in the capital of Diashi Mining.

Directors Directors of the Company from time to time.

Distribution the in specie distribution by the Company to Shareholders on a pro rata basis of 16,500,003 Diashi Shares held by it following the disposal of the Luke River Tenements to Diashi Mining under section 256C of the Corporations Act.

Equity Securities has the same meaning as in the ASX Listing Rules.

Explanatory Statement

this Explanatory Statement.

Luke River Tenements

the tenements held by RI Energetika Pela located in north-east Macedonia.

Notice notice of meeting that accompanies this Explanatory Statement.

Pela Pela Resources Pty Ltd (ACN 146 734 401)

Placement the proposed placement by the Company of 100,000,000 Shares at $0.01 each to raise up to $1,000,000.

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Prospectus the Prospectus issued by the Company in relation to the Diashi Shares proposed to be distributed in specie to Shareholders and which accompanies this Notice.

Record Date 15 November 2012.

Resolution a resolution referred to in the Notice.

RI Energetika Pela

RI Energetika Pela DOO Skopje, a company incorporated in Macedonia

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

Shareholder a registered holder of Shares in the Company.

Share Sale Agreement

the agreement between the Company and Diashi Mining for the sale and purchase of the issued share capital of Pela.

WST Western Standard Time, Perth, Western Australia.

$ Australian dollars unless otherwise stated.

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ANNEXURE 1

CORPORATE STRUCTURE OF THE COMPANY PRE-DISTRIBUTION

PharmAust Limited shareholders

100%

PharmAust Limited

100% 94.3%

100%

Pela Resources Pty Ltd

80%

R I Energetika Pela DOO Skopje

100%

Luke River Tenements

Epichem Pty Ltd Diashi Mining Limited

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ANNEXURE 2

CORPORATE STRUCTURE OF THE COMPANY POST-DISTRIBUTION

PharmAust Limited

shareholders

100% 94.3%*

100% 100%

Pela Resources Pty Ltd

80%

R I Energetika Pela DOO Skopje

100%

Luke River Tenements

* Diashi Mining Limited proposes to raise capital to fund the exploration and development of the Luke River Tenements which will dilute the interests of PharmAust Limited Shareholders.

PharmAust Limited Diashi Mining Limited

Epichem Pty Ltd

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ANNEXURE 3

PROFORMA CONSOLIDATED BALANCE SHEET OF THE COMPANY Audited proforma

at 30 June 2012 prior to the capital

reduction and Placement

Audited proforma at 30 June 2012

after capital reduction and

Placement $ $

CURRENT ASSETS Cash and cash equivalents 122,905 1,222,905

Trade and other receivables 228,435 228,435 Other current assets - - Financial assets 6,400 6,400

TOTAL CURRENT ASSETS 357,740 1,457,740 NON-CURRENT ASSETS

Trade and other receivables - - Investment in Pela Resources 1,550,000 - Plant and equipment 500,924 500,924

TOTAL NON-CURRENT ASSETS 2,050,924 500,924 TOTAL ASSETS 2,408,664 1,958,664 CURRENT LIABILITIES

Deposit from Diashi 100,000 Trade and other payables 439,580 439,580 Borrowings 595,358 595,358 Provisions 81,918 81,918

TOTAL CURRENT LIABILITIES 1,116,856 1,216,856 NON-CURRENT LIABILITIES Provisions 79,048 79,048 TOTAL NON-CURRENT LIABILITIES 79,048 79,048 TOTAL LIABILITIES 1,195,904 1,295,904 NET ASSETS 1,212,760 662,760

EQUITY

Issued capital 33,328,890 32,778,890 Reserves 622,090 622,090 Accumulated losses -32,738,220 -32,738,220

TOTAL EQUITY 1,212,760 662,760

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The above proforma balance sheet of the Company shows the financial impact of the following transactions:

1. The sale of Pela to Diashi Mining and the in specie distribution of 16,500,003 Diashi Shares to Shareholders being a capital reduction of $1,500,000 (Resolution 3).

2. The receipt of a deposit of $100,000 from Diashi Mining under the transaction to sell Pela.

3. The issue of Shares the subject of the Placement to raise $1,000,000 (Resolution 4).

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ANNEXURE 4

PROFORMA CONSOLIDATED BALANCE SHEET OF DIASHI MINING Unaudited

proforma at 30 June 2012 prior

to acquiring Luke River Tenements

Unaudited proforma at 30 June 2012 after acquiring Luke

River Tenements

$ $ CURRENT ASSETS

Cash and cash equivalents 105,000 5,000 Trade and other receivables - - Deposit paid to PharmAust - 100,000 Financial assets - -

TOTAL CURRENT ASSETS 105,000 105,000 NON-CURRENT ASSETS

Trade and other receivables - - Investment in Pela Resources 1,500,000 Plant and equipment - -

TOTAL NON-CURRENT ASSETS - 1,500,000 TOTAL ASSETS 105,000 1,605,000 CURRENT LIABILITIES

Trade and other payables - - Borrowings - - Provisions - -

TOTAL CURRENT LIABILITIES - - NON-CURRENT LIABILITIES Provisions - - TOTAL NON-CURRENT LIABILITIES - - TOTAL LIABILITIES - - NET ASSETS 105,000 1,605,000

EQUITY

Issued capital 250,003 1,750,003 Reserves - - Accumulated losses -145,003 -145,003

TOTAL EQUITY 105,000 1,605,000

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The above proforma balance sheet of Diashi Mining shows the financial impact of the following transaction: 1. The acquisition of the Luke River Tenements including the payment of a deposit of

$100,000 to the Company under the transaction to acquire Pela.

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PHARMAUST LIMITED ACN 094 006 023

PROXY FORM

APPOINTMENT OF PROXY PHARMAUST LIMITED ACN 094 006 023

I/We

being a Member of PharmAust Limited entitled to attend and vote at the Annual General Meeting, hereby

Appoint

Name of Proxy or failing the person so named or, if no person is named, the Chairman of the Meeting or the Chairman’s nominee, to vote in accordance with the following directions or, if no directions have been given, as the proxy sees fit at the Annual General Meeting to be held at Steve’s Wine Cellar, 30 The Avenue, Nedlands, Western Australia on Wednesday, 7 November 2012 at 12:00 pm (WST) and at any adjournment thereof. Important for Resolutions 1 and 5 If you appoint a member of the Company's key management personnel (other than the Chairman of the Meeting) or a closely related party of a member of the Company's key management personnel as your proxy, and you do not direct your proxy how to vote in respect of Resolutions 1 or 5 your proxy will NOT cast your vote on these Resolutions and your votes will not be counted. If you appoint the Chairman of the Meeting as your proxy (or the Chairman of the Meeting becomes your proxy by default) and you do not direct your proxy how to vote in respect of Resolutions 1 or 5 your vote will be cast FOR each of these Resolutions, and you hereby expressly authorise the Chairman of the Meeting to exercise your proxy even though Resolutions 1 and 5 are connected directly or indirectly with the remuneration of the members of the Company's key management personnel. Voting on Business of the General Meeting FOR AGAINST ABSTAIN

Resolution 1 Adoption of Remuneration Report

Resolution 2 Re-election of Director - Sam Wright

Resolution 3 Reduction of capital

Resolution 4 Issue of Shares under Placement

Resolution 5 Issue of Shares to Bryant Mclarty

Resolution 6 Approval of Additional Placement Capacity

If the chair of the meeting is appointed as your proxy, or may be appointed by default and you do not wish to direct your proxy how to vote as your proxy in respect of a Resolution, please place a mark in the box. By marking this box, you acknowledge that the Chair of the meeting may exercise your proxy even if he has an interest in the outcome of the Resolutions and that the votes cast by the Chair of the meeting for those Resolutions other than as proxy holder will be disregarded because of that interest. The Chair intends to vote any such undirected proxies in favour of all Resolutions. If you do not mark this box, and you have not directed your proxy how to vote, the Chair will not cast your votes on the Resolutions and your votes will not be counted in calculating the required majority if a poll is called on the Resolutions.

If you mark the abstain box for a particular item, you are directing your proxy not to vote on that item on a show of hands or on a poll and that your Shares are not to be counted in computing the required majority on a poll.

If two proxies are being appointed, the proportion of voting rights this proxy represents is %

Please return this Proxy Form to the Company Secretary, PharmAust Limited, Suite 7, 29 The Avenue, Nedlands, WA, 6009 or PO Box 661, Nedlands, WA, 6009 or by fax to 089 389 1464 by 12:00 pm (WST) on Monday, 5 November 2012 .

Signed this day of 2012. By: Individuals and joint holders Companies (affix common seal if appropriate)

Signature

Director

Signature

Director/Secretary

Signature

Sole Director and Sole Secretary

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PHARMAUST LIMITED

ACN 094 006 023

Instructions for Completing Appointment of Proxy Form

1. In accordance with section 249L of the Corporations Act, a Shareholder of the Company who is entitled to attend and cast two or more votes at a general meeting of Shareholders is entitled to appoint two proxies. Where more than one proxy is appointed, such proxy must be allocated a proportion of the member’s voting rights. If the Shareholder appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half the votes.

2. A duly appointed proxy need not be a member of the Company. In the case of joint holders, all must sign.

3. Corporate Shareholders should comply with the execution requirements set out on the Proxy Form or otherwise with the provisions of section 127 of the Corporations Act. Section 127 of the Corporations Act provides that a Company may execute a document without using its common seal if the document is signed by:

• 2 Directors of the Company;

• a Director and a Company Secretary of the Company; or

• for a proprietary Company that has a sole Director who is also the sole Company Secretary – that Director.

For the Company to rely on the assumptions set out in sections 129(5) and (6) of the Corporations Act, a document must appear to have been executed in accordance with sections 127(1) or (2). This effectively means that the status of the persons signing the document or witnessing the affixing of the seal must be set out and conform to the requirements of section 127(1) or (2) as applicable. In particular, a person who witnesses the affixing of a common seal and who is the sole Director and sole Company Secretary of the Company must state that next to his or her signature.

4. Completion of a Proxy Form will not prevent individual Shareholders from attending the Meeting in person if they wish. Where a Shareholder completes and lodges a valid Proxy Form and attends the Meeting in person, then the proxy’s authority to speak and vote for that Shareholder is suspended while the Shareholder is present at the Meeting.

5. Where a Proxy Form or form of appointment of corporate representative is lodged and is executed under power of attorney, the power of attorney must be lodged in like manner as this proxy.

In accordance with section 250BA of the Corporations Act the Company specifies the following for the purposes of receipt of proxy appointments:

Registered Office: Suite 7, 29 The Avenue, Nedlands, WA, 6009 Postal address: PO Box 661, Nedlands, WA, 6009 Email address: sam@straightlines.net.au Fax Number: (08) 9389 1464

by no later than 48 hours prior to the time of commencement of the Meeting.

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