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Notice of Extraordinary General Meeting and Explanatory Memorandum

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					Notice of Extraordinary General Meeting
and Explanatory Memorandum



To approve the Zhongjin Lingnan transaction (comprising
the issue of 197,672,000 new shares at $0.23 per new share
and the appointment of directors)
The Perilya Limited Directors UNANIMOUSLY RECOMMEND that you VOTE IN FAVOUR
of the Resolutions in the absence of a superior proposal.
The Independent Expert has concluded that the Zhongjin Lingnan Transaction is
not fair but reasonable.


THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in doubt as to its contents, please contact your professional adviser.
If you have any queries in relation to the Resolutions, this Notice or the Explanatory
Memorandum, please contact the Perilya Company Secretary on (08) 6330 1000
(from within Australia) or +61 8 6330 1000 (from outside Australia) between 9.00am
and 5.00pm (Perth time) Monday to Friday.




                                                                                             Perilya Limited
                                                                                         ABN 85 009 193 695


                                                                                                               1
Perilya Limited 2009 Notice of Extraordinary General Meeting




Important information




This is an important document that should be read in its entirety.
If you do not understand it, or any part of it, you should consult with
your professional advisers without delay.
This Notice of Meeting is accompanied with an Explanatory
Memorandum. Also annexed to the Explanatory Memorandum is an
Independent Expert’s Report. The Explanatory Memorandum and its
annexures have been prepared to assist Shareholders in determining
whether or not to vote in favour of the Resolutions set out in this
Notice of Meeting.
The Explanatory Memorandum and its annexures are intended to be
read in conjunction with this Notice of Meeting.
You are encouraged to attend the Meeting, but if you cannot, you are
requested to complete and return the enclosed Proxy Form without
delay to:
Computershare at GPO Box 242, Melbourne, Victoria 3001 or by
facsimile on 1800 783 447 (within Australia) or +61 3 9473 2555
(outside Australia).




Contents

Key Reasons why you Should Support
the Zhongjin Lingnan Transaction                                                 1
Notice of Extraordinary General Meeting                                         2
Explanatory Memorandum                                                          4
Annexure A – Summary of Zhongjin Lingnan
Subscription Agreement                                                         44
Annexure B – Summary of Call Option Deed                                       48
Annexure C – Ernst & Young
Independent Expert’s Report                           (refer to separate document)
                                                                                                 Perilya Limited 2009 Notice of Extraordinary General Meeting




Key reasons why you should support
the Zhongjin Lingnan transaction




1. Perilya will receive a cash injection                                6. Secures a platform for future growth
   of $45.5 million                                                       Zhongjin Lingnan is committed to the long-term development
   Perilya will receive (subject to Shareholder, FIRB and other           of Perilya’s assets and to the future growth of Perilya. Perilya
   approvals) approximately $45.5 million in cash from the share          Shareholders will benefit from the support provided by Zhongjin
   placement to Zhongjin Lingnan. This increased cash backing             Lingnan by retaining ownership of 49.9% of the expanded
   positions Perilya to weather the current depressed commodity           shareholder base.
   price environment.
                                                                        7. Attractive funding source
2. The proposed placement price represents a                              The Perilya Directors believe the placement to Zhongjin Lingnan
   material premium to Perilya’s trading price                            is the best available funding source in the current difficult capital
                                                                          markets environment.
   The proposed placement is at an issue price of $0.23 per share
   representing a 53% premium to the last traded price of Perilya
   prior to the announcement of the Zhongjin Lingnan Transaction        8. Independent expert opinion
   on 9 December 2008 and a 61% premium to the volume weighted            The Independent Expert has concluded that the Zhongjin Lingnan
   average price (VWAP) of Perilya shares for the 30 trading days up      Transaction is not fair but reasonable. See Annexure C for further
   to 9 December 2008.                                                    details.

3. Introduces a well funded strategic partner                           9. The Directors of Perilya unanimously
   Zhongjin Lingnan is a well funded, long term strategic partner          recommend that Shareholders vote in favour
   with significant mining, processing, smelting and marketing             of the placement
   experience. Zhongjin Lingnan is supportive of Perilya’s
   management and current operating plan and has the financial            The Directors of Perilya each voted to approve the proposal
   backing to help secure the future of Perilya and its Broken Hill       to put the Resolutions to Shareholders. They unanimously
   Operation.                                                             recommend that Shareholders vote in favour of the placement to
                                                                          Zhongjin Lingnan, in the absence of a superior alternative offer.
4. Potential for future offtake agreements with
   Zhongjin Lingnan
   The introduction of Zhongjin Lingnan as a future off-take partner,
   secures an additional potential future source of demand for
   Perilya’s concentrates and zinc silicate ore.

5. Perilya and Zhongjin Lingnan will seek
   to identify potential synergies from the
   partnership
   The Zhongjin Lingnan Transaction will allow Perilya to develop
   its relationship with Zhongjin Lingnan to identify and exploit
   potential synergies. These include technical interchange,
   providing access to the Chinese markets and input sources, and
   the possible development of new markets for zinc silicate ore.




                                                                                                                                                                1
    Perilya Limited 2009 Notice of Extraordinary General Meeting




    Notice of Extraordinary General Meeting




    An Extraordinary General Meeting of Perilya Limited (“Perilya” or                     c) “That, subject to Resolution 1 being passed, with effect from
    “Company”) will be held on the date and location and time specified                      Settlement under the Subscription Agreement between the
    below:                                                                                   Company and Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd
                                                                                             dated 5 December 2008, Mr Wen Wang being eligible for election
                                                                                             and whose appointment is recommended by the Board, be
    DATE:                                                    Thursday, 5 February 2009
                                                                                             elected a director of the Company.”
    LOCATION:              Conference Suite, Level 8, Exchange Plaza Building,
                                   2 The Esplanade, Perth, Western Australia              Explanatory memorandum
    TIME:                                                          10.30am (Perth time)   Shareholders are referred to the Explanatory Memorandum
                                                                                          accompanying and forming part of this Notice of Extraordinary
                                                                                          General Meeting.
    Terms used in this Notice and Explanatory Memorandum are defined
    in section 16 of this Explanatory Memorandum. The Explanatory                         Notes:
    Memorandum which accompanies and forms part of this Notice
                                                                                          These notes form part of the Notice of Extraordinary General
    describes the matters to be considered at the Extraordinary General
                                                                                          Meeting.
    Meeting.
                                                                                          CBH Bid
    Resolution 1:                                                                         On 2 October 2008, CBH Resources Limited announced its intention
    Proposed issue of Shares to Zhongjin Lingnan Mining (HK)                              to make an all-scrip bid for all of the shares in Perilya. The CBH Bid is
    Company Limited                                                                       subject to certain conditions. Resolutions 1, 2(a), 2(b) and 2(c) may
                                                                                          breach one or more Bid Conditions under the CBH Bid. Further details
    To consider and, if thought fit, to pass the following resolution, with
                                                                                          are set out in the accompanying Explanatory Memorandum.
    or without amendment, as an ordinary resolution:
         “That, for the purposes of item 7 of section 611 of the                          Voting Exclusion Statement
         Corporations Act 2001 (Cth) and for all other purposes the
                                                                                          No votes may be cast on Resolution 1 by Shenzhen Zhongjin Lingnan
         transactions contemplated by the Subscription Agreement
                                                                                          Nonfemet Co. Ltd, Zhongjin Lingnan Mining (HK) Company Limited
         between the Company and Shenzhen Zhongjin Lingnan
                                                                                          and any of their respective associates.
         Nonfemet Co. Ltd dated 5 December 2008 including the
         allotment and issue to and acquisition by Zhongjin Lingnan                       Entitlement to Vote
         Mining (HK) Company Limited, a wholly owned subsidiary of
                                                                                          The Directors have determined that, for the purpose of voting at the
         Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd, of 197,672,000
                                                                                          Meeting, members eligible to vote at the Meeting are those persons
         fully paid ordinary shares in the capital of the Company (Shares)
                                                                                          who are the registered holders of shares at 5.00 pm (Perth time) on 3
         and the Call Option Deed between the Company, Perilya Freehold
                                                                                          February 2009.
         Mining Pty Ltd and Shenzhen Zhongjin Lingnan Nonfemet Co.
         Ltd dated 18 December 2008 at an issue price of $0.23 per Share,                 How to Vote
         be approved and authorised on the terms and conditions set out
         in the Explanatory Memorandum accompanying this Notice of                        You may vote by attending the Meeting in person, by proxy, or by an
         Meeting.”                                                                        authorised representative.

                                                                                          Voting in Person
    Resolution 2(a-c):
                                                                                          To vote in person, attend the Meeting on the date and at the place
    Election of Directors                                                                 set out above. Members are asked to arrive at the venue 30 minutes
    To consider and, if thought fit, to pass each of the following                        prior to the time designated for the Meeting, if possible, so that the
    resolutions as separate ordinary resolutions:                                         Company may check their shareholding against the Company’s share
                                                                                          register and note attendances.
    a) “That, subject to Resolution 1 being passed, with effect from
       Settlement under the Subscription Agreement between the                            Voting by Proxy
       Company and Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd
       dated 5 December 2008, Mr Shuijian Zhang being eligible for                        A shareholder has the right to appoint a proxy, who need not be a
       election and whose appointment is recommended by the Board,                        shareholder of the Company. A proxy can be an individual or a body
       be elected a director of the Company.”                                             corporate. A body corporate appointed as a shareholder’s proxy
                                                                                          may appoint a representative to exercise any of the powers the body
    b) “That, subject to Resolution 1 being passed, with effect from                      may exercise as a proxy at the Meeting. The representative should
       Settlement under the Subscription Agreement between the                            bring to the Meeting evidence of his or her appointment, including
       Company and Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd                             any authority under which the appointment is signed, unless it has
       dated 5 December 2008, Mr Minzhi Han being eligible for                            previously been given to the Company.
       election and whose appointment is recommended by the Board,
       be elected a director of the Company.”


2
                                                                          Perilya Limited 2009 Notice of Extraordinary General Meeting




If a shareholder is entitled to cast two or more votes they may
appoint two proxies and may specify the percentage of votes each
proxy is appointed to exercise.
To vote by proxy, the Proxy Form (together with the original of any
power of attorney or other authority, if any, or certified copy of that
power of attorney or other authority under which the proxy is signed)
must be received at the Share Registrar of Perilya no later than
10.30am (Perth time) on 3 February 2009 (Proxy Forms received after
that time will be invalid). Proxy Forms must be received before that
time via any of the following methods:
In Person: Perilya’s Office located at 1st Floor, Building E, 661
Newcastle Street, Leederville, WA 6007
By Post: Computershare Investor Services Pty Limited, GPO Box 242
Melbourne, Victoria 3001
By Facsimile: (within Australia) 1800 783 447
By Facsimile: (outside Australia) +61 3 9473 2555

Corporate Representatives
A body corporate may elect to appoint an individual to act as its
representative in accordance with Section 250D of the Corporations
Act, in which case the Company will require a certificate of
appointment of the corporate representative executed in accordance
with the Corporations Act. The certificate of appointment must be
lodged with the Company and/or the Company’s Share Registrar,
Computershare Investor Services, before the Meeting or at
the registration desk on the day of the Meeting. Certificates of
appointment of corporate representatives are available at www.
computershare.com or on request by contacting Computershare
Investor Services on telephone number +61 1300 557 010.

Enquiries
Shareholders are invited to contact the Company Secretary, Paul
Marinko, on (08) 6330 1000 (from within Australia) or +61 8 6330
1000 (from outside Australia) between 9.00am and 5.00pm (Perth
time) Monday to Friday, if they have any queries in respect of the
matters set out in these documents.



By order of the Board




Paul Marinko
Company Secretary
Dated 5 January 2009




                                                                                                                                         3
    Perilya Limited 2009 Notice of Extraordinary General Meeting




    Explanatory memorandum




    The Notice of General Meeting, Explanatory Memorandum,                               Disclaimer
    Independent Expert’s Report and Proxy Form are all important
                                                                                         No person is authorised to give any information or make any
    documents. They should be read carefully in their entirety before you
                                                                                         representation in connection with the Transaction which is not
    make a decision on how to vote at the Meeting.
                                                                                         contained in this Explanatory Memorandum. Any information or
    If you have any questions regarding the matters set out in the                       representation not contained in this Explanatory Memorandum may
    documents, please contact the Company, your stockbroker or other                     not be relied on as having been authorised by Perilya or the Board in
    professional adviser.                                                                connection with the Transaction.

                                                                                         Privacy
    Key dates
                                                                                         To assist Perilya to conduct the General Meeting, Perilya may
    Date of this Explanatory Memorandum                                5 January 2008    collect personal information including names, contact details and
                                                                                         shareholding of Shareholders and the names of persons appointed
    Proxy Form to be received                                    10.30am (Perth time),   by Shareholders to act as proxy at the General Meeting. Personal
    by no later than                                          Tuesday 3 February 2009    information of this nature may be disclosed by Perilya to its share
    Perilya Shareholders Meeting                                 10.30am (Perth time),   registry, print and mail service providers, and Perilya’s agents for
    Conference Suite, Level 8,                               Thursday 5 February 2009    the purposes of implementing the Transaction. Shareholders have
    Exchange Plaza Building,                                                             certain rights to access their personal information that has been
    2 The Esplanade, Perth,                                                              collected and should contact the Company Secretary, Paul Marinko,
    Western Australia                                                                    on +61 8 6330 1000 if they wish to access their personal information.

    Expected date of Proposed Placement                        Monday 9 February 2009    Responsibility for information
    to Zhongjin Lingnan
                                                                                         The information contained in this Explanatory Memorandum (except
                                                                                         for the Independent Expert’s Report and information regarding
                                                                                         Zhongjin Lingnan and its intentions) has been prepared by Perilya
    Important information                                                                and is the responsibility of Perilya. Zhongjin Lingnan does not
                                                                                         assume any responsibility for the accuracy or completeness of that
    Purpose of this Explanatory Memorandum                                               information. Information concerning Zhongjin Lingnan (in section
                                                                                         3) and its intentions (in section 9) has been provided by Zhongjin
    This Explanatory Memorandum has been prepared for the
                                                                                         Lingnan. None of Perilya, its associates or its advisers assumes any
    shareholders of the Company in connection with the Extraordinary
                                                                                         responsibility for the accuracy or completeness of that information.
    General Meeting of the Company to be held on 5 February 2009. The
    purpose of this Explanatory Memorandum is to provide Shareholders                    Ernst & Young Transaction Advisory Services Limited has prepared
    with information that the Board believes to be material to                           the Independent Expert’s Report and has consented to the inclusion
    Shareholders in deciding whether or not to approve the Resolutions                   of the report in this Explanatory Memorandum. Ernst & Young
    detailed in the Notice.                                                              Transaction Advisory Services Limited takes responsibility for that
                                                                                         report but is not responsible for any other information contained
    This Explanatory Memorandum does not take into account the
                                                                                         within this Explanatory Memorandum.
    individual investment objectives, financial situation and needs of
    individual Shareholders or any other person. Accordingly, it should                  Shareholders are urged to read the Independent Expert’s Report
    not be relied on solely in determining how to vote on the Resolutions.               carefully to understand the scope of the report, the methodology
                                                                                         of the assessment, the sources of information and the assumptions
    Forward looking statements                                                           made.
    Certain statements in this Explanatory Memorandum relate to
                                                                                         ASX involvement
    the future. These statements reflect views only as of the date
    of this Explanatory Memorandum. While Perilya believes that                          A copy of the Notice of Meeting and Explanatory Memorandum has
    the expectations reflected in the forward looking statements                         been lodged with ASX pursuant to the Listing Rules. Neither ASX
    are reasonable, neither Perilya nor any other person gives any                       nor any of its officers take any responsibility for the contents of the
    representation, assurance or guarantee that the occurrence of an                     Notice of Meeting and Explanatory Memorandum.
    event expressed or implied in any forward looking statements in this
    Explanatory Memorandum will actually occur.                                          Definitions
                                                                                         Capitalised terms used in this Explanatory Memorandum are defined
    Notice to persons outside Australia                                                  in section 16.
    This Explanatory Memorandum has been prepared in accordance
    with Australian laws, disclosure requirements and accounting
    standards. These laws, disclosure requirements and accounting
    standards may be different to those in other countries.




4
                                                                                                   Perilya Limited 2009 Notice of Extraordinary General Meeting




Table of contents




Chairman’s Letter                                                                             6
Section 1      Overview of the Zhongjin LingnanTransaction                                    7
Section 2      Rationale for the Zhongjin LingnanTransaction                                 10
Section 3      Overview of Zhongjin Lingnan                                                  14
Section 4      Overview of Perilya                                                           16
Section 5      Impact on Perilya’s financial position                                        22
Section 6      Impact on Perilya’s capital structure and level of control                    26
Section 7      Directors and management                                                      27
Section 8      Corporate governance                                                          28
Section 9      Intentions of Zhongjin Lingnan                                                29
Section 10     Key Risks                                                                     30
Section 11     Impact on CBH Bid                                                             32
Section 12     Key implications and risks of the Transaction                                 34
Section 13     Independent Expert’s Report                                                   37
Section 14     Directors Recommendation                                                      38
Section 15     Additional Information relating to the Resolutions                            39
Section 16     Glossary                                                                      42
Annexure A     Summary of Zhongjin Lingnan Subscription Agreement                            44
Annexure B     Summary of Call Option Deed                                                   48
Annexure C     Ernst & Young – Independent Expert’s Report          (refer to separate document)




                                                                                                                                                                  5
    Perilya Limited 2009 Notice of Extraordinary General Meeting




    Chairman’s letter




    Dear Shareholder                                                         In the longer term, it will provide a strong platform for growth with
                                                                             a committed and well funded partner. Zhongjin Lingnan is China’s
                                                                             third largest zinc producer. It has a wealth of mining, processing,
    On behalf of the Perilya Board, I am pleased to formally present to      smelting and marketing experience which can only add value for
    you the recently announced alliance with major Chinese metals and        Perilya shareholders. We have also agreed to enter into good faith
    mining company, Shenzhen Zhongjin Lingnan Nonfemet (“Zhongjin            arm’s length negotiations for a portion of Perilya’s zinc and lead
    Lingnan”).                                                               concentrate which would further support Perilya’s long-term viability.
    The Board believes this is a watershed deal for Perilya and its          Zhongjin Lingnan is committed to the long-term growth of Perilya
    shareholders, and one that positions the Company not only to             and its assets, and is fully supportive of our current management
    weather the current commodity price environment, but to pursue           team and operating plan. This commitment is reinforced by the fact
    further growth opportunities in the longer term.                         that Zhongjin Lingnan has also stated that, on completion of the
    The Agreement requires the support of Perilya shareholders, and          transaction, it does not intend to accept CBH Resources’ offer for
    included in this document is a Notice of Meeting, Explanatory            Perilya shares.
    Memorandum and Independent Expert’s Report which requires your           You will have recently received Perilya’s Target’s Statement in
    attention. The Directors of Perilya unanimously recommend you            relation to the offer from CBH Resources. This included a unanimous
    vote in favour of the Resolutions within the Notice of Meeting, in the   recommendation from the Perilya Directors to REJECT CBH’s bid.
    absence of a superior proposal. The Independent Expert has also
                                                                             The Board is also unanimous in the belief that the placement of
    concluded the proposed issue of shares is not fair but reasonable.
                                                                             shares to Zhongjin Lingnan represents the best alternative currently
    Perilya has signed a Subscription Agreement with Zhongjin Lingnan        available to Perilya shareholders, and will be voting their own shares
    to raise $45.5 million. Pending Shareholder, Foreign Investment          in favour of the share placement.
    Review Board and other approvals, Perilya will issue approximately
                                                                             As set out in this document, Perilya will hold an Extraordinary
    197.672 million full paid ordinary shares to Zhongjin Lingnan,
                                                                             General Meeting on 5 February 2009 to provide shareholders the
    representing 50.1% of the enlarged share capital of the Company.
                                                                             opportunity to vote on the Share Subscription Agreement with
    The share placement will take place at a significant premium             Zhongjin Lingnan. Details of the meeting are included in the Notice of
    to recent share values. Based on an issue price of $0.23, it is          Meeting accompanying this document, and I look forward to seeing
    a 53% premium to the last traded prices of Perilya prior to the          you there.
    announcement of the Transaction on 9 December 2008 and a 61%
    premium to the volume weighted average prices of Perilya shares for
    the 30 trading days up to 9 December 2008.                               Yours sincerely
    In the immediate term, the transaction will clearly strengthen
    Perilya’s cash backing. Access to capital provides a significant
    comparative advantage to other resource companies, and will also
    allow us to advance development projects such as Mount Oxide as
    market conditions allow.                                                 Patrick O’Connor
                                                                             Non-Executive Chairman




6
                                                                                                     Perilya Limited 2009 Notice of Extraordinary General Meeting




1       Overview of the Zhongjin Lingnan
        Transaction




1.1 Zhongjin Lingnan Transaction                                         The key dates in relation to the Zhongjin Lingnan Transaction are set
                                                                         out below:
As announced on 9 December 2008, Perilya entered into a share
placement agreement (“Subscription Agreement”) and strategic             Date of this Explanatory                                         5 January 2009
partnership with major Chinese metal company Shenzhen                    Memorandum
Zhongjin Lingnan Nonfemet Co., Ltd. (“Zhongjin Lingnan”), to raise
$45,464,560 (before Transaction costs). Details on the background        Proxy form to be received                             10.30am (Perth time),
on Zhongjin Lingnan are set out in section 3 below and a summary of      no later than                                      Tuesday 3 February 2009
the Subscription Agreement is set out in Annexure A.
                                                                         Perilya Shareholder meeting                          10.30am (Perth time),
Subject to Shareholder, FIRB and other approvals the transaction         to be held at Conference Suite,                  Thursday 5 February 2009
contemplated with Zhongjin Lingnan involves a share placement to         Level 8, Exchange Plaza Building,
Zhongjin Lingnan (or a Related Body Corporate nominated by it) of        2 The Esplanade, Perth,
197,672,000 Perilya Shares (“New Shares”) at $0.23 per Share.            Western Australia
Importantly, the proposed share placement to Zhongjin Lingnan will       Expected date of Proposed                          Monday 9 February 2009
raise cash of $45,464,560 (before Transaction costs) and represents      Placement of New Shares to
a watershed event for Perilya and provides a significant platform for    Zhongjin Lingnan
growth and a major operational and funding boost for Perilya.
It will also assist to strengthen Perilya’s cash position and help       Zhongjin Lingnan has nominated Zhongjin Lingnan HK, a wholly-
Perilya to withstand the current commodity price environment.            owned subsidiary of Zhongjin Lingnan, to subscribe for the New
                                                                         Shares.
The Perilya Board believes this access to capital provides a
significant comparative advantage to other small cap resource            The proposed issue of the New Shares to Zhongjin Lingnan HK is the
companies, and will also allow Perilya to advance, as appropriate,       subject of Resolution 1. Each of Zhongjin Lingnan, Zhongjin Lingnan
development projects.                                                    HK and Zhongjin Lingnan’s major shareholder, Rising, will have
                                                                         obtained a relevant interest in the New Shares if the Resolution is
The Perilya Board also believes Zhongjin Lingnan is a well funded
                                                                         approved and the New Shares are issued to Zhongjin Lingnan HK.
strategic partner committed to the long-term development of
                                                                         Zhongjin Lingnan HK’s relevant interest arises by virtue of being the
Perilya’s assets. As China’s third largest zinc producer, Zhongjin
                                                                         registered holder of the New Shares. Zhongjin Lingnan’s relevant
Lingnan has a wealth of mining, processing, smelting and marketing
                                                                         interest arises by virtue of its ability to control Zhongjin Lingnan HK.
experience that will add significant value, particularly through these
                                                                         In addition, by virtue of it holding over 20% of the shares of Zhongjin
turbulent times.
                                                                         Lingnan HK's parent company, Zhongjin Lingnan, Rising will obtain a
Under the terms of the Subscription Agreement the Zhongjin Lingnan       relevant interest in the New Shares if the Resolution is approved and
Transaction is subject to a number of approvals and conditions           the New Shares issued to Zhongjin Lingnan HK.
including:
                                                                         Under the Subscription Agreement, Zhongjin Lingnan is entitled
•   shareholder approval as set out in this Notice;                      to nominate a number of directors equal to half of the members
•   approval of the Foreign Investment Review Board (“FIRB”), which      of the Board at Settlement. Zhongjin Lingnan has nominated Mr
    is anticipated prior to the Meeting;                                 Shuijian Zhang, Mr Minzhi Han and Mr Wen Wang to be Directors.
                                                                         Accordingly, Resolutions 2(a) to (c) (inclusive) seek to appoint Mr
•   all regulatory approvals necessary from the relevant Chinese
                                                                         Shuijian Zhang, Mr Minzhi Han and Mr Wen Wang, representatives of
    Regulatory authorities, which have at the date of this Explanatory
                                                                         Zhongjin Lingnan, as Directors, conditional upon and with effect from
    Memorandum been granted and announced by Perilya; and
                                                                         Settlement. Information on each nominee is set out in section 7.2.
•   contractual consents from various service providers, which are in
                                                                         Further details on the Transaction are set out elsewhere in this
    the ordinary course of business.
                                                                         Explanatory Memorandum and as to the reasons Shareholder
Under the terms of the Subscription Agreement, Perilya and Zhongjin      approval is required are set out in section 15.
Lingnan have also agreed to enter into good faith negotiations with
                                                                         In the absence of a superior offer the Directors unanimously
respect to potential arm’s length, commercial concentrate sales
                                                                         recommend that Shareholders vote in favour of each Resolution for
agreements for up to 50% of Perilya’s Broken Hill zinc and lead
                                                                         the reasons outlined in section 2.
concentrate production, which will create competitive demand and
commercial transparency, and will benefit Perilya by supporting its
long-term viability.




                                                                                                                                                                    7
    Perilya Limited 2009 Notice of Extraordinary General Meeting




    1         Overview of the Zhongjin Lingnan
              Transaction (continued)




    1.2 Proposed Share Placement to Zhongjin                                   1.3 Implications if the Placement to Zhongjin
        Lingnan                                                                    Lingnan is not approved
    If the share placement proceeds (following Shareholder, FIRB and           If the share placement to Zhongjin Lingnan is not approved by Perilya
    other approvals), Zhongjin Lingnan HK will subscribe for 197,672,000       shareholders, or the Transaction does not complete, because the
    New Shares at an issue price of $0.23 per Share. Immediately               Subscription Agreement is terminated or approval is not granted
    following Settlement, there will be 394,554,640 Perilya Shares on          by FIRB or the conditions precedent to the Subscription Agreement
    issue and Zhongjin Lingnan HK will own 50.1% of the issued share           (as set out in Annexure A) are not satisfied or waived by 31 March
    capital of Perilya (assuming no Options are exercised).                    2009, then Perilya will be required to repay a deposit of $10 million
                                                                               received from Zhongjin Lingnan within 20 business days.
    The Directors anticipate that Perilya and Zhongjin Lingnan will
    receive FIRB and other approvals prior to the Meeting. Details on          If Perilya is unable to repay this amount then, under the terms of the
    the implications of not receiving Shareholder and/or FIRB and/             Subscription Agreement and a call option Deed, Zhongjin Lingnan
    or other approvals are set out in section 1.3 and in further detail in     may at its election exercise its right to acquire the Company’s Mount
    section 12 below. As at the date of this Explanatory Memorandum all        Oxide Copper Project for a cash payment of $15 million and to off-
    regulatory approvals necessary from the relevant Chinese Regulatory        set the $10 million deposit paid to Perilya. If Zhongjin Lingnan fails
    authorities, have been granted and have been announced by Perilya.         to exercise this right within 30 days, then Zhongjin Lingnan would
                                                                               remain an unsecured creditor.
    As part of the Placement, Zhongjin has provided Perilya with an
    initial cash deposit of A$10 million on 24 December 2008 which             The Board also recognises that, whilst the exercise of the Call Option
    will complement Perilya’s existing cash balance. The deposit is            may assist in providing a level of funding, there are additional risks
    refundable in the event the transaction conditions precedents are not      that this amount may be insufficient to enable the business to
    satisfied or the subscription agreement is terminated.                     continue in the longer-term without additional capital over and above
                                                                               this amount.
    Upon Settlement, the Perilya Board will be restructured to allow
    for a new Board of six Directors comprising three existing Directors       A summary of the Call Option Deed is set out in Annexure B.
    and three Directors nominated by Zhongjin Lingnan. Paul Arndt              If the Resolutions are not passed or the Transaction does not
    will continue as Managing Director and Chief Executive Officer and         complete Perilya will continue to operate as it did prior to the
    Patrick O’Connor will continue as a non-executive Director. At the         Zhongjin Lingnan Transaction, exploring all available alternatives
    date of this Notice no agreement has been reached with Zhongjin            to optimise its assets and remain financially viable. However,
    Lingnan on the final composition of the Perilya Board members              given the current metal prices, difficult global financial markets,
    post Settlement (other than those Board members nominated                  constrained borrowing conditions and uncertainty on global demand
    pursuant to Resolution 2 and including Patrick O’Connor and Paul           for base metals, the Perilya Directors believe the Zhongjin Lingnan
    Arndt). Accordingly, on completion two of the current non-executive        Transaction represents the best option for Shareholders.
    Directors, Peter Harley, Karen Field or Phil Lockyer will retire and an
    announcement made to the market at the appropriate time.                   In particular, if the Zhongjin Lingnan Transaction is not implemented
                                                                               – and in the absence of alternatives, Perilya will need to raise
    Perilya and Zhongjin Lingnan have also agreed that following               comparable funding by 31 March 2009 to ensure that it continues
    Settlement, they will enter into good faith negotiations with              to operate as a going concern. In the current equity capital markets
    respect to sales agreements for up to 50% of Perilya’s zinc and lead       environment any raisings would likely be at a significant discount
    concentrate production and zinc silicate ore, subject to concentrates      to the current market price of Perilya shares and well below the
    and ores becoming available from existing off-take contracts.              proposed issue price of New Shares to Zhongjin Lingnan and a
    Any off-take arrangements entered into between Perilya and Zhongjin        significant dilution to existing Shareholders.
    Lingnan will be conducted on arm’s length commercial terms, be             Further, in the absence of alternative capital raisings, Perilya may
    subject to Shareholder approval (where required by any applicable          need to sell one or more of its assets (other than in the ordinary
    law or the Listing Rules) and will secure an additional potential future   course of business and at distressed values or values different to
    source of demand for Perilya’s concentrates and ores.                      those in its financial statements). Furthermore, the Board may need
    Zhongjin Lingnan has publicly stated on 9 December 2008, that they         to consider further reductions in production to reduce operating
    do not intend to accept CBH’s Bid.                                         costs and consider all alternatives available to it. Further details are
                                                                               set out in sections 5, 10, 11 and 12 and in the Independent Expert’s
    Further details on the risks associated with the Zhongjin Lingnan
                                                                               Report.
    Transaction are set out in sections 10, 11 and 12.
                                                                               Further details on the risks associated with the Zhongjin Lingnan
                                                                               Transaction not proceeding, including financial risks are set out in
                                                                               sections 10, 11 and 12.




8
                                                                                                    Perilya Limited 2009 Notice of Extraordinary General Meeting




1.4 Implication on the Takeover offer by CBH                              Reasonable
    Resources Limited                                                     The Transaction may also be deemed by the Independent Expert
                                                                          to be `reasonable’ if it is `fair’ or `not fair’, where the Independent
On 2 October 2008, CBH announced its intention to make a takeover         Expert believes that there are other significant factors, which
offer to acquire all of the shares in Perilya on the basis on 4.2 CBH     justify the acceptance and approval by Perilya shareholders to the
shares for every 1 Perilya Share (“CBH Bid”). The offer is subject to a   proposed Zhongjin Lingnan Transaction, in the absence of any higher
number of conditions (“Bid Conditions”).                                  alternative proposals.
CBH’s offer is unsolicited and proposes to offer CBH shares for
Perilya shares on terms and conditions outlined in their Bidder’s         Summary of Expert’s Opinion
Statement lodged with ASX and ASIC on 12 November 2008.                   The Independent Expert has assessed the fair market value of a
In response to CBH’s offer, Perilya lodged with ASX and ASIC              Perilya Share to be in the range of $0.33 to $0.38 per Share. As the
its Target’s Statement on 15 December 2008, advising Perilya              cash consideration payable by Zhongjin Lingnan for the placement of
Shareholders to REJECT CBH’s unsolicited offer. Full details of the       Shares is $0.23 per New Share the Independent Expert’s view is the
Board’s response and recommendations are set out in Perilya’s             Transaction is not fair.
Target’s Statement which is available on www.perilya.com.au or            However, based on a number of significant factors, the Independent
www.asx.com.au or by requesting a copy from Perilya’s Company             Expert considers that the proposed share placement to Zhongjin
Secretary.                                                                Lingnan is reasonable.
The entry into the Subscription Agreement and the associated              Accordingly, the Independent Expert has opined that the proposed
Call Option Deed may have breached one or more Bid Conditions             share placement to Zhongjin Lingnan is not fair but reasonable.
associated with the CBH Bid. In addition, the approval of each
Resolutions 1 and 2(a - c) may also breach certain of the Bid             1.6 Director recommendations
Conditions associated with the CBH Bid and Shareholders should
consider the potential effect of approving those Resolutions on CBH’s     In the absence of a superior offer the Directors unanimously
takeover offer, including that approving each of these Resolutions        recommend that Shareholders vote in favour of each Resolution
may entitle CBH to withdraw its offer.                                    (and intend to do so in respect of their own Shares) for the reasons
                                                                          outlined in section 2.
As at the date of this Explanatory Memorandum, CBH has not
advised whether it intends to withdraw the Bid because it regards the
Subscription Agreement and the transactions contemplated by it as
having breached the Bid Conditions.
Further information on the Bid Conditions associated with CBH’s
takeover offer is contained in section 11.

1.5 Independent Expert’s Report
To assist Perilya shareholders assess the proposed Transaction,
Ernst & Young Transaction Advisory Services Limited (the
“Independent Expert”) has been appointed to prepare an
Independent Expert’s Report, the purpose of which is to state
whether or not, in their opinion, the share placement to Zhongjin
Lingnan under the proposed Transaction is ‘fair’ and ‘reasonable’ to
Perilya’s shareholders not associated with the proposed Transaction.
A copy of Ernst & Young’s Independent Experts Report is set out in
Annexure C.

Fair
In the context of the proposed Zhongjin Lingnan Transaction the
share placement to Zhongjin Lingnan will be deemed to be fair if
the placement price is equal to or greater than the assessed value
of Perilya shares. The proposed Transaction is deemed by the
Independent Expert to be ‘fair’ if the issue price of $0.23 per New
Share is equal or greater than the assessed fair value of P
erilya Shares.




                                                                                                                                                                   9
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     2         Rationale for the Zhongjin Lingnan
               Transaction




     2.1 Perilya will receive a cash injection of                              2.4 Potential for future off-take agreements
         $45.5 million                                                             with Zhongjin Lingnan
     As at 31 October 2008, Perilya held cash of $10.8 million and other       The introduction of Zhongjin Lingnan as an off-take partner, secures
     deposits and investments totalling $57.0 million and had (and             an additional potential future source of demand for Perilya’s
     continues to have) no corporate debt (other than borrowings of            concentrates and ore. Zhongjin Lingnan and Perilya have agreed
     $15.2 million related to mobile equipment and insurance premium           that in the future and following Settlement they will enter into good
     financing).                                                               faith negotiations with respect to sales agreements for up to 50% of
                                                                               Perilya’s zinc and lead concentrates and zinc silicate ore.
     If approved, the proposed share placement to Zhongjin Lingnan will
     result in a $45,464,560 cash injection into Perilya (before Transaction   Currently Perilya has 100% of its zinc and lead concentrate
     costs). The increased cash backing provided by the share placement        production committed to one buyer for each concentrate production.
     will strengthen Perilya’s ability to weather the current depressed        This arrangement does not allow Perilya the ability to open a window
     commodity price environment. Perilya will also continue to remain         to other markets to truly benchmark a fair value for its product.
     free of corporate debt.                                                   This is a serious restriction applied under Perilya’s current off-take
                                                                               arrangements and therefore a major impediment to achieving fully
     2.2 The proposed share placement represents a                             transparent and commercial settlements. By only committing up
                                                                               to 50% of its off-take to Zhongjin Lingnan, Perilya will have the
         material premium to Perilya’s trading price
                                                                               opportunity to fully maximise the value it receives for the sale of its
     The proposed share placement is at an issue price of $0.23 per share      various off-take products by allowing Perilya to gain competitive
     representing a 53% premium to the last traded price of Perilya prior      tension in the pricing of its treatment charges in the open market.
     to the announcement of the Transaction on 9 December 2008 and
                                                                               This will potentially lead to:
     a 61% premium to the volume weighted average price (VWAP) of
     Perilya shares for the 30 trading days up to 9 December 2008.             a) more favourable commercial terms by creating “competitive
                                                                                  tension” and greater transparency by becoming a price maker
     Perilya share price since 27 October 2008                                    rather price taker;
                                                                               b) exposure to China, as the world’s largest zinc market and
                                                                                  specifically to a smelter that highly values Perilya’s quality of
                                                                                  concentrate thereby reducing quality penalties;
                                                                               c) opportunity to leverage off this relationship to market niche
                                                                                  products i.e. Perilya’s zinc silicates from its Flinders project; and
                                                                               d) potential to reduce large ocean freight costs by loading larger
                                                                                  ships more frequently as a result of combination cargo’s.

                                                                               2.5 Perilya and Zhongjin Lingnan will seek
                                                                                   to identify potential synergies from the
                                                                                   partnership
                                                                               The Zhongjin Lingnan Transaction will allow Perilya to develop its
                                                                               relationship with Zhongjin Lingnan to identify potential synergies
                                                                               from the production of metal concentrates and the smelting process.
                                                                               These potential synergies include:
                                                                               a) the exchange of technical knowledge, skills and expertise with
     2.3 Introduces a well funded strategic partner                               regards to exploration, mining and upstream processing issues;

     Zhongjin Lingnan is China’s third largest zinc producer with a market     b) providing Perilya with access to Chinese specialised smelters
     capitalisation of approximately $2 billion as at 5 December, 2008 and        for the processing of some of Perilya’s different products. These
     is a well funded, long term strategic partner with significant mining,       include the very high grade zinc silicate ore produced from
     processing, smelting and marketing experience. Zhongjin Lingnan is           Perilya’s Flinders project, but which is difficult to process for
     supportive of Perilya’s management and current operating plan and            most smelters; and
     has the financial backing to help to secure the future of Perilya.        c) allowing Perilya to access local Chinese knowledge of the
                                                                                  quality of supply for many of Perilya’s processing inputs that are
                                                                                  generally sourced from China, but which traditionally can have
                                                                                  variable quality.




10
                                                                                                       Perilya Limited 2009 Notice of Extraordinary General Meeting




2.6 Secures a platform for future growth                                     markets environment. The onset of the global financial crisis has had
                                                                             a material impact on the demand for the shares in small to mid cap
Zhongjin Lingnan has publicly stated that it is committed to the             resource companies. The chart below illustrates that both the volume
long-term development of Perilya’s assets and to the future growth           and value of secondary raisings by ASX listed metals & mining
of Perilya.                                                                  companies has slowed substantially over the last year. Your Directors
                                                                             believe that in order to raise money from traditional equity investors,
2.7 Attractive funding source                                                Perilya shares would have to be issued at a material discount to
                                                                             the prevailing share price, which would likely dilute existing Perilya
The Perilya Directors believe the placement to Zhongjin Lingnan
                                                                             shareholders by a greater amount than through the placement to
is the best available funding source in the current difficult capital
                                                                             Zhongjin Lingnan.


Value and volume of secondary offerings for ASX listed resource companies—2007 to date




2.8 Independent Expert’s Opinion                                             The Independent Expert has considered a number of significant
                                                                             other factors to be relevant in assessing the reasonableness of the
The Independent Expert has concluded that the proposed share                 Transaction. Based on these significant factors, the Independent
placement to Zhongjin Lingnan is not fair but reasonable to Perilya          Expert is of the opinion the share placement to Zhongjin Lingnan is
Shareholders.                                                                reasonable.
Fair                                                                         The factors which the Independent Expert identified included:
In the context of the proposed Zhongjin Lingnan Transaction                  •   the $0.23 per New Share payable by Zhongjin Lingnan is at an
the share placement to Zhongjin Lingnan will be deemed by the                    82.4% premium to the 20 day volume weighted average price
Independent Expert to be `fair’ if the issue price of $0.23 per New              for a Perilya Share on the ASX up to 5 December 2008, the
Share is equal to or greater than the assessed fair value of Perilya             last trading before the announcement of the Zhongjin Lingnan
Shares. The Independent Expert has determined that the assessed                  Transaction on 9 December 2008, and a 53.3% premium to the
fair market value of a Perilya Share to be in the range of $0.33 to              closing price on that date. The payment of a premium is to the
$0.38 per Share. Accordingly, as the proposed share placement to                 benefit of the Perilya Shareholders;
Zhongjin Lingnan is at $0.23 per New Share, the Independent Expert           •   the increase in Perilya’s Share price since the announcement of
is of the opinion the share placement to Zhongjin Lingnan is not fair.           the proposed Zhongjin Lingnan Transaction indicates the market
                                                                                 has reacted favourable to the Transaction with Zhongjin Lingnan;
Reasonable
                                                                             •   Perilya’s short term forecast cash flows indicate that in the
The proposed Transaction may however, be deemed by the
                                                                                 absence of the proposed Zhongjin Lingnan Transaction the
Independent Expert to be `reasonable’ if it is `fair’ or `not fair’, where
                                                                                 Company will need to source new funding early in 2009 to help
the Independent Expert believes that there are other significant
                                                                                 finance continuing operations. With the volatility in capital
factors, which justify the acceptance and approval by Perilya
                                                                                 markets expected to continue through 2009, Perilya’s ability to
shareholders to the proposed Zhongjin Lingnan Transaction, in the
                                                                                 readily source new debt or equity funding at this time is uncertain.
absence of any superior alternative proposals.
                                                                                 The issue of the New Shares to Zhongjin Lingnan will provide
                                                                                 Perilya with the funding required without the need to dispose of
                                                                                 assets or to secure new funding from an alternative source;

                                                                                                                                                                      11
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     2         Rationale for the Zhongjin Lingnan
               Transaction (continued)




     2.8 Independent Expert’s Opinion (continued)                                2.9 The Directors of Perilya unanimously
                                                                                     recommend that Shareholders vote in favour
     Reasonable (continued)
                                                                                     of the placement
     •    with a 50.1% interest and at least 50% representation on
          Perilya’s Board post Settlement, Zhongjin Lingnan will be able to      On 2 October 2008, CBH announced an unsolicited takeover offer for
          control the Company in a general meeting of Shareholders and           all the shares of Perilya in exchange for CBH shares on the basis on
          be able to significantly influence Perilya’s day to day operations;    4.2 CBH shares for every 1 Perilya Share and a copy of CBH’s Bidder’s
                                                                                 Statement was sent to Perilya Shareholders on 2 December 2008.
     •    Zhongjin Lingnan’s dealings with Perilya as its largest
          shareholder and with Board representation will be governed by          In the Target’s Statement released on 15 December 2008,
          the Corporations Act, the Listing Rules, the Company’s Corporate       Perilya Directors recommended that Shareholders reject CBH’s
          Governance policies and common law.                                    unsolicited offer.

     •    based on the trading prices of CBH’s shares and Perilya’s Shares       The Directors of Perilya unanimously recommend that Shareholders
          since the announcement of the proposed Zhongjin Lingnan                vote in favour of the share placement to Zhongjin Lingnan, in the
          Transaction, the issue of the New Shares to Zhongjin Lingnan is        absence of a superior alternative offer and for the reasons set out in
          superior to the value being offered to Perilya Shareholders under      this section 2.
          the CBH Bid;                                                           The share placement to Zhongjin Lingnan will leave Perilya with a
     •    the $45,464,560 cash to be provided to Perilya through the             materially increased cash position and no corporate debt and in the
          share placement to Zhongjin Lingnan will significantly strengthen      opinion of the Directors, the Zhongjin Lingnan Transaction is superior
          Perilya’s financial position at a time when there is substantial       to the value being offered to Perilya Shareholders under the CBH
          economic uncertainty globally and in an environment of                 Bid (based on the current share price for Perilya and CBH as at 24
          continued low metal prices;                                            December 2008).

     •    as Zhongjin Lingnan is one of China’s largest non-ferrous metal
          producers the strategic benefits of having Zhongjin Lingnan as its
                                                                                 2.10 Relativities of the Transaction versus
          major shareholder should provide Perilya with opportunities that            the CBH Bid
          may not otherwise generally be available;                              On 2 October 2008, CBH announced its intention to make a takeover
     •    if Perilya was to undertake a capital raising of a similar amount to   offer to acquire all of the shares in Perilya on the basis on 4.2 CBH
          the funds being provided by Zhongjin Lingnan, given the current        shares for every 1 Perilya Share. The offer is subject to the Bid
          market conditions, it is likely that it would need to be done at a     Conditions.
          deep discount to its market price, which would be substantially        CBH’s offer is unsolicited and proposes to offer CBH shares for
          more dilutionary to Perilya Shareholders than the issue of shares      Perilya Shares on the terms and conditions outlined in CBH’s Bidder’s
          at a premium to market; and                                            Statement lodged with ASX and ASIC on 26 November 2008.
     •    based on recent market prices, Zhongjin Lingnan is paying a            In response to CBH’s offer Perilya lodged with ASX and ASIC
          premium for control, although in comparison to the assessed fair       its Target’s Statement on 15 December 2008, advising Perilya
          value of a Perilya Share, no premium for control is being paid.        Shareholders to REJECT CBH’s unsolicited offer. Full details of the
     A copy of the Ernst & Young Transaction Advisory Services’                  Board’s response and recommendations are set out in the Company’s
     Independent Expert’s Report is set out in Annexure C.                       Target’s Statement which is available on www.perilya.com.au or
                                                                                 www.asx.com.au or by requesting a copy from Perilya’s Company
                                                                                 Secretary.
                                                                                 Perilya will receive a cash injection of $45,464,560 million from
                                                                                 Zhongjin Lingnan and remain free of any corporate debt. In contrast,
                                                                                 acceptance of the CBH Bid would expose Shareholders to CBH’s
                                                                                 substantial corporate debt position, which as at the date of CBH’s
                                                                                 Bidder’s Statement was approximately $160 million requiring interest
                                                                                 payments of approximately $10 million per annum (as at the date of
                                                                                 CBH’s Bidder Statement).
                                                                                 The proposed investment by Zhongjin Lingnan represents a 53%
                                                                                 premium to the closing price of Perilya Shares prior to the date of
                                                                                 announcement of the Zhongjin Lingnan Transaction on 9 December
                                                                                 2008 and a 61% premium to the volume weighted average price
                                                                                 (VWAP) of Shares for the 30 trading days up to 9 December 2008.
                                                                                 It also represents a 48% premium to the CBH Bid prior to the
                                                                                 announcement of the Zhongjin Lingnan Transaction on 9
                                                                                 December 2008.



12
                                                                          Perilya Limited 2009 Notice of Extraordinary General Meeting




Perilya Shareholders will retain ownership of 49.9% of Perilya and be
partnered with a strategic organisation committed to the long-term
development of Perilya’s assets. By comparison, under the terms
of the CBH Bid, Shareholders are being offered ownership of up to
48.5% of the CBH group following its acquisition of all or a majority
of the Shares. While the level of dilution to Shareholders is similar
under the two alternatives, the Directors believe that the cash-
based alternative proposed by Zhongjin Lingnan will further improve
Perilya’s ability to weather a sustained downturn in commodity
prices and to pursue growth options as they arise. By contrast, the
CBH offer exposes Perilya Shareholders to CBH’s net corporate debt
position and to CBH’s operating and development assets which
Perilya Directors have concerns regarding (these concerns are clearly
outlined in Perilya’s Target’s Statement dated 15 December 2008).

2.11 Other funding sources
During recent months, Perilya has sought to shore up its capital base
to enable it to survive an extended period of depressed metal prices
and the global financial credit crisis. The chart shown at section 2.7
above demonstrates the difficulties faced by the resources industry
in accessing capital markets in the current economic climate.
The opportunities that have come out of this process include:
•   an all scrip offer for the Mt Oxide copper project with an
    Australian listed junior explorer, Chalice Gold Mines, for an
    indicative price of $25 million. This transaction subsequently
    terminated at the request of Chalice due to deteriorating world
    metal prices and the drying up of credit and capital markets,
    denying them a source of funding to progress the project;
•   a subsequent conditional cash offer for the Mt Oxide Copper
    project of $15 million from an foreign controlled entity;
•   a conditional all-scrip offer from CBH for 100% of Perilya;
•   a conditional cash offer from a Chinese entity for the injection
    of $30 million in Perilya at $0.20 per share by way of a share
    placement; and
•   a superior cash offer from Zhongjin Lingnan for the injection of
    $45.5 million in Perilya at $.0.23 per share by way of a share
    placement, as proposed in Resolution 1.
The Board of Directors considered these and other third party
proposals available to Perilya during the past few months. The ideal
position was to find a source of new equity funding that injected cash
into the Company sufficient to enable Perilya to weather a sustained
period of economic downturn. In addition, Perilya was seeking a
long term strategic partner that would be prepared to support the
long term development, as appropriate, of its existing asset base,
primarily the Broken Hill Operation, development of its Mount Oxide
copper project and development of its Flinders zinc silicate project in
South Australia.




                                                                                                                                         13
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     3         Overview of Zhongjin Lingnan




     Zhongjin Lingnan is a joint stock limited Chinese company based in       The balance of Zhongjin Lingnan’s shares are held by a combination
     Shenzhen, Guangdong Province, China. Its principal activity is the       of public and institutional investors, with no one entity holding
     mining and processing of lead, zinc and other non-ferrous metals.        greater than 4%.
     It is also engaged in the trading, building materials, transportation,
     real estate and high technology industries. Zhongjin Lingnan is          3.3 Main business operations
     China’s third largest zinc producer and is listed on the Shenzhen        Zhongjin Lingnan’s main activities comprise mining and smelting
     stock exchange (Ticker: 000060) and had a market capitalisation of       activities. Its key operations are the Shaoguan and Danxia Smelters
     CNY8.7 billion ($2.0 billion) as at 5 December 2008.                     and the Fankou Lead/Zinc Mine.

                                                                              a) Shaoguan smelter
     3.1 Financial highlights
                                                                                  The Shaoguan Smelter is located 9km north east of Shaoguan
     For the nine months ended 30 September 2008, Zhongjin Lingnan                City in Guangdong Province. It was the first Chinese Smelter
     reported an unaudited consolidated net profit of CNY759 million              to apply the ISP pyro-metallurgical process and is ISO9002
     (approximately $170 million) with consolidated net sales of CNY5.9           and ISO10012 certified. The capacity of the Shaoguan smelter
     billion (approximately $1.3 billion). Zhongjin Lingnan had total debt        is 240,000 tonnes per annum of lead and zinc and 320,000
     of CNY1.3 billion (approximately $280 million) and total cash and            tonnes per annum of sulfuric acid. The smelter has completed a
     equivalents of CNY1.2 billion (approximately $270 million) as at 30          technological enhancement program, with the annual capacity
     September 2008.                                                              increased to 300,000 tonnes of lead and zinc and 400,000 tonnes
     For the year ended 31 December 2007, Zhongjin Lingnan reported               of sulfuric acid at the end of 2008.
     net sales revenue of CNY8.3 billion (approximately $1.9 billion) and a
                                                                              b) Danxia smelter
     consolidated net profit CNY1.2 billion (approximately $273 million).
     Of these sales revenues, sales from lead/zinc products comprised             The Danxia Smelter is located in Renhua Country, north east
     approximately 90%.                                                           of Shaoguan City, Guangdong Province, near the Fankou Mine.
                                                                                  The annual capacity of the Danxia smelter is 20,000 tonnes of
     3.2 Ownership                                                                lead and zinc and 36,000 tonnes of sulfuric acid and was the
                                                                                  first Chinese smelter to adopt Pressure Leach Technology from
     The main shareholder of Zhongjin Lingnan is Guangdong Rising                 Canada. The smelter is also currently undertaking an expansion
     Assets Management Co. Ltd (“Rising”). Incorporated in 1999, Rising           program, targeting an increase in 2009 capacity to 100,000
     is a wholly State-owned asset management company, representing               tonnes of zinc.
     the Guangdong Provincial Government in operating and managing
     State-owned assets.                                                      c) Fankou Lead/Zinc mine
     Rising holds direct and indirect interests totalling approximately 38%       The primary mining asset of Zhongjin Lingnan is the underground
     of Zhongjin Lingnan. Rising’s indirect interests of 4.51% and 1.98%          Fankou mine, located 48km north east of Shaoguan City in
     are held through its wholly-owned subsidiaries, Shenzhen Rising              Guangdong Province. The mine commenced production in 1968
     Investment Development Co Ltd and Guangdong Rising Non-ferrous               and has a current capacity of 150,000 tonnes per annum of lead
     Metals Group Co Ltd, respectively.                                           and zinc metal in concentrate, with average ore grades of 4.89%
                                                                                  for lead and 9.12% for zinc. The mine is currently undertaking
     Apart from its investment holding in Zhongjin Lingnan, Rising also
                                                                                  an expansion program which is targeting an increase in 2008
     has investment holdings in a variety of industries in the Guangdong
                                                                                  production to 180,000 tonnes of lead and zinc. The directors of
     Province and the rest of China. Its single largest investment is its
                                                                                  Zhongjin Lingnan believe the Fankou mine is one of the lowest
     6.94% interest in China Telecom which is valued at approximately
                                                                                  cost mines in the world.
     US$2.2 billion based on the Hong Kong-listed China Telecom’s share
     price on 10 December 2008. Rising had total assets of CNY34.832          Production from the Fankou Mine supplies approximately 50% of the
     billion (approximately $7.88 billion) and net assets of CNY28.058        feedstock requirements of the Shaoguan and Danxia smelters. The
     billion (approximately $6.35 billion) as at 31 December 2007. Non-       two smelters produced 181,500 tonnes of refined zinc metal, 92,200
     ferrous metals and mining accounted for 68% of Guangdong Rising’s        tonnes of refined lead metal and 185 tonnes of refined silver in 2007.
     sales in 2007.
     Rising is represented by four out of a total of eleven directors,
     including the Chairman, on Zhongjin Lingnan’s board of directors
     which largely reflects its position as the single largest shareholder.
     All directors from Rising on Zhongjin Lingnan’s board are non-
     executive directors. Rising, as a state assets management company,
     is not involved in the day-to-day management and operations of
     Zhongjin Lingnan but is involved in important decision-making of
     Zhongjin Lingnan through its representation on the board of directors
     and its votes at meetings of Zhongjin Lingnan shareholders.



14
                                                                        Perilya Limited 2009 Notice of Extraordinary General Meeting




3.4 Directors and associates
Both Rising and Zhongjin Lingnan have a relevant interest (as defined
in the Corporations Act) in the New Shares to be issued under the
placement. The names and qualifications of Zhongin Lingnan HK
Directors are set out below.
Mr Yong Guo (55) is an executive director of Zhongjin Lingnan.
Mr Guo joined Shaoguan Smelter in 1970 and, since then, has
worked in various departments of Zhongjin (and its predecessors).
Mr Guo was Vice President of Zhongjin Lingnan from 1995 to 2001
and joined the Board of Directors of Zhongjin Lingnan in 2002.
Mrs Ling Peng (44) is secretary to the Board of Directors of Zhongjin
Lingnan and the head of its investor relations department. Mrs
Peng joined Zhongjin in 1996 and has been secretary to the Board
of Directors of Zhongjin Lingnan since it was listed on the Shenzhen
Stock Exchange. Mrs Peng graduated from Central China Mining and
Smelting College with a masters degree.
Mr Jian Yi (52) is the chief engineer of Zhongjin Lingnan and head of
its business development department. Mr Yi joined China Nonferrous
Metals Import and Export Corp’s Shenzhen branch (the predecessor
of Zhongjin Lingnan) in 1989. Mr Yi graduated from Jiangxi Metallurgy
College with a bachelors degree and from Central China Mining and
Smelting College with a masters degree.
Mrs Airong Chen (40)is currently the head of the finance and planning
department of Zhongjin Lingnan. Prior to joining Zhongjin Lingnan
in 2007, she worked as a certified public accountant at a number
of accounting firms based in Shenzhen, China. Mrs Chen graduated
from Shenzhen University with a bachelors degree in accounting.




                                                                                                                                       15
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     4         Overview of Perilya




     4.1 Business overview                                                     4.4 Main business operations
     Perilya Limited is an Australian base metals mining and exploration
                                                                               (a) Broken Hill Project
     company. Perilya owns and operates the Broken Hill zinc, lead and
     silver mine in New South Wales, Australia, the Beltana/Flinders high         Broken Hill Operation
     grade zinc mine in South Australia and is exploring for copper and
                                                                                  Perilya’s Broken Hill Operation in NSW includes the Southern
     cobalt at its Mount Oxide Project in Queensland. As at the date of this
                                                                                  Operations, the North Mine and Potosi Exploration Decline,
     Explanatory Memorandum, Perilya is an S&P/ASX300 company.
                                                                                  with a 2.8 million tonne concentrator located on the Southern
     Prior to recent production cuts at its Broken Hill Operation, Perilya        Operations. Zinc and lead concentrate produced is railed to the
     was rated in the top 20 of global producers for zinc and lead                port of Port Pirie in South Australia where the zinc concentrate is
     production and the world’s thirteenth largest zinc mine and the sixth        shipped to Korea Zinc in South Korea, and the lead concentrates
     largest lead mine. Due to the current economic environment and               are processed at Nystrar’s smelter in Port Pirie.
     in response to the current low metal prices and cost pressures, the
                                                                                  The Broken Hill Operation has a long history of zinc and lead
     Company has resized its Broken Hill Operation to focus on a reduced
                                                                                  mining and resource discovery through exploration. Perilya
     tonnage, lower-cost operation at its Southern Operations, with the
                                                                                  has current tenement holdings over more than 1,200 square
     North Mine and Potosi exploration decline recently placed on care
                                                                                  kilometres. The Broken Hill Operation has historically been one of
     and maintenance.
                                                                                  the top 20 producers of lead and zinc concentrates in the world,
     Despite the current downturn in the resources industry, Perilya is well      producing more than 200 million tonnes of ore throughout its
     positioned, for when metal prices and economic conditions improve,           125-year history. Perilya has been endowed with well-developed
     with a project pipeline, which includes the North Mine and the               infrastructure as a result of the region’s long mining history. This
     exploration decline at the Potosi deposit, the Flying Doctor deposit         infrastructure, situated at the heart of the Company’s Southern
     and other various regional deposits in Broken Hill, the Flinders             Operations, has the capacity and flexibility to operate at lower
     Project in South Australia and the Mount Oxide copper exploration            and higher volumes and with a variety of ore sources.
     project in Queensland.
                                                                                  In June 2008, Perilya achieved the significant milestone of six
                                                                                  years of successful operation of the Broken Hill mine. Since
     4.2 Strategic direction                                                      acquisition, Perilya has mined 11.1 million tonnes of ore and
     With the resizing of the Broken Hill Operation completed in                  shipped 733,000 tonnes of zinc metal, along with 351,000 tonnes
     September 2008, Perilya is focused on sustaining production, albeit          of lead from this operation.
     at a lower rate, for the long-term, while retaining the flexibility to       Under the resized operating plan (which commenced in
     rapidly increase production and extend the life of mine, should metal        September 2008), ore production at Broken Hill reduced from 1.8
     prices improve in the near future.                                           to 0.95 million tonnes per annum, which is expected to produce
     With the support of Zhongjin Lingnan and its cash injection, Perilya         approximately 55,000 tonnes of contained zinc and 50,000
     and its Shareholders will be in a stronger position with sufficient          tonnes of contained lead annually. Future cash costs will reduce
     cash to help withstand the current commodity price environment and           significantly under the new operating plan. Future ore production
     to pursue growth options as they arise.                                      at the Southern Operations will utilise stopes that are currently
                                                                                  available or require minimal development. The operation will
     4.3 History                                                                  bring forward the mining of high-grade pillars, which were
                                                                                  originally planned to be mined in the latter years of the Life of
     Perilya was established in 1986. Perilya has owned and operated a            Mine Plan for the Southern Operations.
     variety of resource assets and over time it has assembled a diverse
                                                                                  Importantly, the new production plan is based on the re-
     portfolio of base metal operations and exploration projects.
                                                                                  sequencing of mining areas rather than a short-term high-grade
     In May 2002, the Company successfully acquired the Broken Hill               approach, which could undermine the long-term value of the
     mine, historically one of the largest and most renowned zinc, lead           resources.
     and silver mines in the world.
                                                                                  The new operating plan will also see an ongoing focus on cost
     In March 2007, mining operations commenced at Beltana zinc                   control and further significant improvements in reducing direct
     oxide mine in South Australia (which is part of the Flinders Project),       cash operating costs. Net cash costs are expected to move
     targeting high grade zinc ore for direct shipment to smelters in Asia.       towards US$0.60 to US$0.65 per pound of payable zinc during
     Perilya directly employs more than 350 people. A significant majority        the quarter March 2009 (assuming a metal prices of US$0.65
     of Perilya’s full-time employees are Shareholders.                           cents per pound of payable zinc, US$0.65 cents per pound of
                                                                                  payable lead, US$2.22/oz silver, and an AUD/USD exchange rate
                                                                                  of 72 cents, which are lower than the current market consensus
                                                                                  metal prices for the next 4 years).
                                                                                  Should metal prices increase in the future, Perilya will be in
                                                                                  a strong position extend the life of the mine and to ramp-up
                                                                                  production at the Broken Hill Operation and to utilise the full


16
                                                                                                   Perilya Limited 2009 Notice of Extraordinary General Meeting




   potential of the Broken Hill concentrator with ore sources from the      Perilya’s existing customers have continued to take ore despite
   Southern Operations, Potosi, the North Mine and Flying Doctor.           the weakening market.

   Broken Hill Exploration                                                  Reliance Deposit (70-85% owned)
   Perilya manages and is actively exploring 1,880 square kilometres        Reliance is a zinc silicate ore body in close proximity to the Beltana
   of prospective terrain, which includes the mining leases covering        mine and is the next major development in the Flinders Project.
   the Southern Operations and Northern Operations, and the                 With the high grade nature of the deposit obviating the need
   historic Little Broken Hill and Pinnacles Region.                        for metallurgical processing, Reliance provides a low cost
   Should metal prices increase in the future the development               development option using the Beltana infrastructure to maintain
   pipeline together with resources at the Southern Operation, will         a blended product feed of direct shipping zinc silicate ore to meet
   position the Company to extend the life of mine at Broken Hill           the demands of overseas zinc smelters.
   beyond the current plan.                                                 Pit optimisation, feasibility studies and the permitting process
                                                                            are in progress for when metal prices improve. This will further
   North Mine
                                                                            position Perilya to respond to a change in market conditions.
   Perilya is continuing the feasibility study of the North Mine,
   including the North Mine Deeps project. Under the right               (c) Mount Oxide Copper and Cobalt Project
   economic circumstances and mining approach this ore body
                                                                            The Mount Oxide deposit is located in the Mt Isa Region of
   remains a significant part of Perilya’s long term future.
                                                                            northern Queensland, some 25 kilometres north of Aditya Birla
   Potosi                                                                   Minerals Limited’s Mount Gordon Mine.

   The Potosi Exploration Decline is located two kilometres north           The current Mount Oxide resource (updated in February 2008)
   of the existing North Mine and within five kilometres of the             includes 15.5 million tonnes at 1.3% copper, 0.05% cobalt and
   Southern Operation in Broken Hill. The mineral resource includes         9g/t silver for 203,000 tonnes of contained copper mineral
   two ore bodies’ the Potosi North and Potosi Extended. Under              resource.
   the right economic circumstances and mining approach the ore             Following completion of a significant 5 month drilling program
   bodies’ remain a significant part of Perilya’s long term future.         which ended in October 2008, and on the basis of the significant
                                                                            exploration results reported during the year at Mount Oxide, all
   Flying Doctor                                                            of which support a high level of confidence in the potential of the
   Perilya is continuing the regulatory approval process for this           Mount Oxide Project. Perilya will provide an update in January
   project to enable early mining when metal prices improve.                2009, to the current 203,000 tonnes of contained copper mineral
                                                                            resource.
   Pinnacles region
   The Pinnacles region, located approximately 10 kilometres             4.5 Resources and Reserves
   southwest of the Broken Hill mill, shows great promise for            Information on the mineral resources and reserves for each of the
   the discovery of a large underground system. During the year,         Company’s projects is set out in the Resources and Reserves Table.
   ongoing drilling defined new resources at the Henry George and
   11:30 deposits and mineral targets at Sam Deeds and Esmeralda.        (a) Overview
   These deposits have potential to be developed as open pit                Resources and Reserves conform to the Australasian Code for
   operations that can be integrated into the current operations.           Reporting of Mineral Resources and Ore Reserves (The Joint Ore
   They also hold potential for large Broken Hill systems as there          Reserves Committee Code – JORC). Total Resources include all
   is minimal deep drilling below 100 metres depth on mineralised           the Measured and Indicated Resources used to calculate the
   lode rocks with one of the strongest alteration systems away             Reserves.
   from the main deposit.
                                                                         (b) Broken Hill mine resources and reserves
(b) Flinders Zinc Project
                                                                            Since Perilya acquired the Broken Hill deposit in 2002, a total of
   Beltana Mine                                                             11.3 million tonnes of ore has been mined containing 1.2 million
                                                                            tonnes of contained zinc and lead. The Ore Reserves have been
   The Flinders Project is a group of zinc silicate deposits located        consistently replenished through classification of areas as
   in the northern Flinders Ranges close to Port Pirie in South             economic during development planning and Resource extension
   Australia. Perilya has mined and stockpiled ore from one of these        drilling. All JORC compliant statements are compiled from ASX
   deposits and has been shipping this ore to regional smelters             released data on 19 February 2008, 30 April 2008, 12 June 2008,
   over the last 12 months. The high grade ore allows it to be sold         13 June 2008 and 7 November 2008.
   directly to smelters without any further processing by Perilya.
                                                                            Current Ore Reserves provide for a mine life of approximately
   At the end of September 2008 a total of 238,000 tonnes of zinc           nine years.
   silicate ore are stockpiled at an approximate average grade of
   31% zinc, for a total of 73,400 tonnes of contained zinc.


                                                                                                                                                                  17
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     4         Overview of Perilya (continued)




     (c) Resources and reserves table

                                                                                             Tonnes          Zinc          Lead         Silver      Copper         Cobalt
      Mineral Resource as at 30 June 2008                                    Notes
                                                                                               ‘000            %             %             g/t          %              %
     BROKEN HILL OPERATIONS

     Southern Operations                                      Measured                        5,874            9.7          7.5          74.5             -             -
                                                              Indicated                       3,144            9.7          6.3          62.4             -
                                                              Inferred                          510            9.6          10.1           83             -             -
                                                              Total           1(a)            9,528            9.7          7.2          70.9             -             -

     North Mine Uppers                                        Measured                             1           5.0          6.8          67.0             -             -
     (Above 26L)                                              Indicated                          80            7.0          7.7         104.0              -            -
                                                              Inferred                          830            7.1          8.5           141              -            -
                                                              Total           1(a)              910            7.0          8.4         137.7              -            -

     North Deeps                                              Measured                        2,100           11.4         13.9         216.0              -            -
     (Below 26L)                                              Indicated                       1,2.00          11.7         13.6         239.0              -            -
                                                              Total           1(a)            3,300           11.5         13.8         224.4              -            -

     Potosi                                                   Inferred                         1,600          14.0          3.4            46              -            -
                                                              Total           1(a)             1,600          14.0          3.4            46              -            -

     Silver Peak                                              Inferred                          390            5.2          9.2            78              -            -
                                                              Total           1(b)              390            5.2          9.2            78              -            -

     Central Blocks                                           Inferred                          680            4.7          3.5            43              -            -
                                                              Total           1(c)              680            4.7          3.5            43              -            -

     Flying Doctor                                            Indicated                         865            3.1          4.2            43              -            -
                                                              Inferred                          590            3.3          3.7            46              -            -
                                                              Total           1(d)             1,455           3.2          4.0            44              -            -

     Henry George                                             Inferred                         1,290           7.7          0.8            14              -            -
                                                              Total           1(e)             1,290           7.7          0.8            14              -            -

     1130                                                     Inferred                          220           12.2          0.6             7              -            -
                                                              Total           1(f )             220           12.2          0.6             7              -            -

     TOTAL BROKEN HILL OPERATIONS                             Measured                        7,975           10.1          9.2          111.8             -            -
                                                              Indicated                       5,287            9.0          7.6          99.9              -            -
                                                              Inferred                         6,100           8.7          4.4            56              -            -
                                                              Total             1            19,362            9.4          7.3          90.8              -            -

     TOTAL FLINDERS                                           Measured                          264           31.0          0.0              -             -            -
                                                              Indicated                         358          28.5            1.4             -             -            -
                                                              Inferred                          172          27.5           0.8              -             -            -
                                                              Total            2                794           29.1          0.8              -

     TOTAL MT OXIDE                                           Measured
                                                              Indicated                       9,800              -             -            11          1.6          0.05
                                                              Inferred                        5,700              -             -            4           0.9          0.05
                                                              Total            3             15,500              -             -          8.4           1.3          0.05


                                                                                             Tonnes           Zinc         Lead         Silver
      Ore Reserve as at 30 June 2008                                         Notes
                                                                                               ‘000             %            %             g/t
     BROKEN HILL OPERATIONS

     Southern Operations                        LHOS**        Proved                          4,572            6.4          4.2          45.9
                                                              Probable                         3,817           5.0           3.1         34.6
                                                              Total                           8,389            5.7          3.7          40.8
                                                Pillar        Proved                          1,262            8.9          9.6          84.6
                                                              Probable                          371            5.5          5.5          50.9
                                                              Total                           1,633            8.1          8.7          76.9
     TOTAL RESERVES                                           Proved                          5,834            6.9          5.4          54.3
                                                              Probable                        4,188            5.1          3.3          36.1
                                                              Total            1             10,022            9.1          4.5          46.7

     Mineral Resource cutoff grade (combined Pb and Zn): North Mine Deeps 8%, Henry George / 1130 / Central Blocks variable 2-5%, Silver Peak 5%, all other resources 7%.
     ** Long-Hole Open Stope Reserve



18
                                                                                                   Perilya Limited 2009 Notice of Extraordinary General Meeting




Notes to resources and reserves table                                       Perilya can limit the level of concentrate off-take to Zhongjin to
                                                                            50% of production.
1(a) Southern Operations, North Mine Upper and Potosi – as per ASX
Announcement 7 November 2008                                                The Board believes that the addition of Zhongjin Lingnan as a
                                                                            potential off-take partner will further support Perilya’s long-
1(b) Silver Peak – as per ASX Announcement 7 November 2008
                                                                            term viability and add additional competition for Perilya’s
1(c) Central Blocks – as per ASX Announcement 7 November 2008               concentrates.
1(d) Flying Doctor – as per ASX Announcement 30 April 2008
                                                                         b) Zinc Concentrate Sales Agreement (Broken Hill,
1(e) Henry George – as per ASX Announcement 13 June 2008                    New South Wales)
1(f ) 1130 Deposit – as per ASX Announcement 13 June 2008                   On 25 May 2002, Perilya Broken Hill Limited (a wholly-owned
2 Flinders – Includes stockpiles of 264,000 tones and resources             subsidiary of Perilya) entered into a zinc concentrate sales
at various deposits including a Mineral Resources at Reliance of            agreement with Korea Zinc Company Limited of Korea. The
308,000 tonnes as per ASX Announcement 12 June 2008                         agreement was mutually terminated and a new agreement with
                                                                            Korea Zinc was entered into in May 2005. The agreement is
3–Mount Oxide – as per ASX Announcement 19 February 2008
                                                                            for 100% of the current and future output of zinc concentrates
The attribution statements by competent persons were detailed in            produced at Perilya’s Broken Hill concentrator on the Southern
each of the above ASX announcements.                                        Operations and includes zinc concentrate produced from ore
The information in this report that relates to Mineral Resources and        recovered from Perilya Broken Hill Limited’s other tenements in
Ore Reserves is based on information held by the Company and                and around Broken Hill.
compiled into the above table by Mr David Price who, at the time of         The agreement has no maximum term, with a minimum term
compilation, was a full-time employee of Perilya and is a member            running through to 31 December 2011 and may be terminated by
of the Australian Institute of Mining and Metallurgy. Mr Price has          either party at the end of the minimum term or anytime following
sufficient experience which is relevant to the style of mineralisation      the minimum term on notice expiring on 31 December of the
and type of deposit under consideration and to the activity which he        following contract year after service of such notice.
is undertaking to qualify as a Competent Person as defined in the
2004 Edition of the ‘Australasian Code for Reporting of Exploration      c) Zinc Concentrate Sales Agreement (Beltana, South Australia)
Results, Mineral Resources and Ore Reserves’. Mr Price consents to          On 24 January 2008, Perilya Freehold Mining Pty Ltd (a wholly-
the inclusion in the report of the matters based on their information       owned subsidiary of Perilya) entered into a zinc silicate ore sales
in the form and context in which it appears.                                agreement with Padaeng Industry Public Company Limited of
                                                                            Thailand. The agreement is for the shipment of approximately
4.6 Material Off-Take Supply Contracts                                      60,000 tonnes of high grade (37%+) zinc ore and approximately
                                                                            50,000 tonnes of a blended medium grade (approximately
a) Potential Future Off-take agreements with Zhongjin Lingnan               34.5%) zinc ore mined from the Beltana mine in South Australia.
    Under the terms of the Subscription Agreement, Perilya and              The agreement runs until the earlier of 31 December 2009 or until
    Zhongjin Lingnan have agreed that, following Settlement, it             the quantity of the product is delivered.
    is their intention to enter into good faith negotiations with
    respect to potential arm’s length, commercial concentrate sales      d) Lead Concentrate Sales Agreement (Broken Hill,
    agreements for up to 50% of Perilya’s zinc and lead concentrate         New South Wales)
    production, from its Broken Hill Project and zinc silicate ore          On 8 March 2002, Perilya Broken Hill Limited entered into a
    from its Flinders Project, subject to concentrates and ores             lead concentrate sales agreement with Zinifex Port Pirie Pty Ltd
    becoming available from existing off-take contracts. Any off-           (now Nyrstar Port Pirie Pty Ltd). The agreement was varied and
    take arrangements entered into between Perilya and Zhongjin             restated in an agreement made between the parties on or about
    Lingnan will be conducted on arm’s length commercial terms              May 2006. The agreement is for 100% of the current and future
    and be subject to Shareholder approval (where required by any           output of lead concentrates produced at Perilya’s Broken Hill
    applicable law or the Listing Rules).                                   concentrator on the Southern Operations.
    As set out below, Perilya has current off-take agreement with           The agreement expires on 31 December 2009.
    Korea Zinc Company Limited of Korea in respect of its 100% of
    zinc concentrates and Nyrstar Port Pirie Pty Ltd in respect of its   e) Silver Sale Agreement with Coeur D’Alene (Broken Hill,
    100% of lead concentrates from its Broken Hill Operation.               New South Wales)
    In the case of zinc concentrates from the Company’s Broken              On 8 September 2005, Perilya Broken Hill Limited (a wholly-
    Hill Operation, the earliest Perilya could enter into off-take          owned subsidiary of Perilya) entered into a silver sale agreement
    agreements with Zhongjin Lingnan would be 1 January 2012                with CDE Australia Pty Ltd (“CDEA”) and its parent, Couer d’Alene
    and in the case of lead concentrates, the earliest Perilya could        Mines Corporation Limited for the sale of the contained silver at
    enter into off-take agreements with Zhongjin Lingnan would be           Perilya’s Broken Hill mines and adjacent tenements. CDEA paid
    1 January 2010. Under the terms of the Subscription Agreement           Perilya Broken Hill Limited consideration of US$36 million.



                                                                                                                                                                  19
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     4         Overview of Perilya (continued)




     4.6 Material Off-Take Supply Contracts                                       Paul brings a range of skills and qualities well suited to the role,
                                                                                  including a steadfast and disciplined approach to addressing
         (continued)                                                              key business drivers. Paul brings a wealth of mining experience
                                                                                  and skills in the areas of strategy, commercialisation, people and
     e) Silver Sale Agreement with Coeur D’Alene (Broken Hill,
                                                                                  project management.
        New South Wales) (continued)
                                                                                  Former roles include senior general management positions with
          Under the terms of the agreement, Perilya Broken Hill Limited
                                                                                  Newcrest Mining Limited at their Telfer operation in Western
          is to deliver approximately 17.2 million ounces of silver with
                                                                                  Australia, Pasminco Limited’s Cockle Creek smelter in Boolaroo
          CDEA paying to Perilya Broken Hill Limited a per ounce operating
                                                                                  (NSW), and MIM Holdings Limited’s Britannia zinc and lead
          cost contribution for each ounce of payable silver calculated in
                                                                                  operation in Avonmouth (UK).
          accordance with the agreement. If Perilya Broken Hill Limited has
          not delivered at least 15 million ounces of silver to CDEA by 13     c) Phillip Lockyer Independent Non-Executive Director
          October 2013, CDEA may terminate the agreement. In the event
          of termination there are no further liabilities payable by Perilya      Phillip Lockyer (64) was appointed Non-Executive Director on
          under the agreement. Perilya has delivered approximately 5.1            19 November 2003 and was the Company’s Chairman until 1
          million ounces of silver under the agreement as at 30 November          February 2006.
          2008.                                                                   Skills, experience and expertise – Phillip is a mining engineer
                                                                                  and metallurgist with more than 40 years experience in the
     4.7 Directors                                                                minerals industry with an emphasis on gold and nickel, in both
                                                                                  underground and open pit mining operations. Phillip has worked
     The Directors of Perilya as at the date of this Explanatory
                                                                                  in senior positions in WMC Resources, Dominion Mining Ltd and
     Memorandum are as follows:
                                                                                  Resolute Ltd. He was formerly WMC Resources General Manager
     a) Patrick O’Connor Non - Executive Chairman                                 Western Australia with responsibility for that company’s nickel
                                                                                  division and gold operations.
          Patrick O’Connor (45) was appointed Non-Executive Chairman on
          1 February 2006 and Executive Chairman on 5 February 2008. He           Phillip has extensive knowledge of Perilya’s Broken Hill mine and
          reverted to Non-Executive Chairman following the appointment            expertise in underground and open pit mining operations.
          of Paul Arndt as Managing Director on 25 November 2008.                 Phillip is a member of the Audit and Risk Management
          Skills, experience and expertise – Patrick is a fellow of the           Committee and Remuneration and Nominations Committee. He is
          Australian Institute of Directors and attended the Stanford             also a director of Focus Minerals Limited, St. Barbara Limited and
          Executive Program at Stanford University, California, United            Swick Mining Services Limited.
          States.
                                                                               d) Peter Harley Independent Non-Executive Director
          Patrick has extensive executive leadership skills and wide
                                                                                  Peter Harley (58) was appointed Non-Executive Director on 19
          experience in communicating with capital markets. He has a
                                                                                  November 2003.
          deep understanding of organisational and strategic development
          drawn from his involvement in management consulting practices           Skills, experience and expertise – Peter is a fellow of the
          specialising in these fields. He is currently an executive of St        Australian Institute of Company Directors and a qualified
          George Capital Pty Ltd, a boutique investment manager and               accountant.
          Chairman of Water Corporation and Xceed Capital Limited.                Peter has more than 30 years of commercial experience and has
                                                                                  held senior roles in a range of diverse industries.
     b) Paul Arndt Managing Director and Chief Executive Officer
                                                                                  Since 1996, Peter has been a senior consultant and a non
          Paul Arndt (50) was appointed as Executive General Manager
                                                                                  executive director to a number of organisations, providing
          of Operations and Development in February 2008, and
                                                                                  strategic advice on areas including business planning, strategic
          subsequently appointed Managing Director and Chief Executive
                                                                                  marketing, acquisitions and investments.
          Officer of Perilya on 25 November 2008 following approval at the
          Company’s annual general meeting held on 25 November 2008.              Peter is currently Chairman of the Audit and Risk Management
                                                                                  Committee and a member of the Remuneration and Nominations
          Skills, experience and expertise – In February 2008, the Board
                                                                                  Committee. He is also a director of Gunson Resources Limited.
          appointed Paul Arndt as Executive General Manager Operations
          to oversee performance improvements at the Broken Hill               e) Karen Field Independent Non-Executive Director
          Operation and subsequently and as a result of the resizing of
                                                                                  Karen Field (60) was appointed Non-Executive Director on 24
          the organisation and in particular the Company’s operations
                                                                                  August 2007.
          at Broken Hill. During Paul’s time with Perilya he has been
          instrumental in delivering a 15% increase in production in the          Skills, experience and expertise – Karen is a professional non-
          second half of 2008 as well as significant reductions in direct         executive director who has more than 30 years of experience in
          operating costs at the Broken Hill Operation.                           the minerals industry with a wealth of mining experience and
                                                                                  expertise in the areas of strategy, commercialisation, people and
                                                                                  project management.


20
                                                                                                     Perilya Limited 2009 Notice of Extraordinary General Meeting




    During her career Karen has held executive roles in a variety         4.8 Perilya’s current capital structure
    of mining industry sectors throughout Australia and in South
    America where she served as president of Minera Alumbrera             Details on Perilya’s current capital structure are set out in section 6.1.
    Limited, which manages the Bajo de la Alumbrera copper gold
    project in north- western Argentina.                                  4.9 Substantial Shareholders
    Karen is the Chairman of the Remuneration and Nominations             As at the date of this Explanatory Memorandum and based on
    Committee and a member of the Audit and Risk Management               substantial shareholder notices filed with Perilya, the following
    Committee. She is also a director of Sipa Resources Limited,          persons have identified themselves as substantial shareholders of
    Electricity Networks Corporation, Water Corporation and               Perilya (within the meaning of the Corporations Act):
    Cooperative Research Centre for Sustainable Processing.


                                                                                                             Number of Perilya                  Voting
Shareholder                                                                                                    Shares held                    power (%)

AXA Asia Pacific Holdings Limited                                                                                 18,729,419                      9.51

UBS Nominees Pty Ltd                                                                                              13,290,799                      6.75


4.10 Top 20 Shareholders
As at 3 December 2008, the top 20 largest shareholders in Perilya are listed below:

                                                                                                            Number of Perilya                    Voting
Shareholder                                                                                                   Shares held                      power (%)

ANZ Nominees Limited <Cash Income A/C>                                                                           27,017,264                       13.72
HSBC Custody Nominees (Australia) Limited                                                                        23,468,303                        11.92
J P Morgan Nominees Australia Limited                                                                             18,381,507                       9.34
Citicorp Nominees Pty Limited                                                                                     17,107,777                       8.69
National Nominees Limited                                                                                          7,233,023                       3.67
CPU Share Plans Pty Limited <Perilya Employee Share Acquisition Plan>                                              3,791,792                       1.93
Mr Andrew Tsang                                                                                                     2,611,901                      1.33
Yandal Investments Pty Ltd                                                                                         1,500,000                       0.76
Mr Eric Arthur Hopgood and Mr Owen William Hopgood                                                                 1,366,000                       0.69
C4 Shares Pty Ltd <C4 Share A/C>                                                                                   1,344,500                       0.68
Mr Timothy Ryan                                                                                                    1,250,000                       0.63
Arora Constructions Pty Ltd                                                                                        1,000,000                       0.51
Mr Leonard Stanley Jubber                                                                                          1,000,000                       0.51
Linpark Holdings Pty Ltd <Alf S/F A/C>                                                                             1,000,000                       0.51
Pegmont Mines Limited                                                                                              1,000,000                       0.51
Krystal Holdings Pty Ltd <Shar Super Fund A/C>                                                                        917,139                      0.47
Mrs Tew Hua Cameron                                                                                                  850,000                       0.43
Mr William Gordon Martin and Mrs Beverley Michelle Martin <Chemco Super Fund A/C>                                    700,000                       0.36
Mr Jae Yong Park and Mrs Myung Sook Park                                                                             636,000                       0.32
Gemrock Holdings Pty Ltd <M T Dunnet Super Fund A/C>                                                                 544,643                       0.28
TOTAL                                                                                                           112,719,849                       57.26



                                                                                                                                                                    21
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     5         Impact on Perilya’s financial position




     5.1 Introduction                                                          annual financial statements for the 2008 financial year for more
                                                                               detailed disclosures in relation to the historical performance and
     The financial information in this Section has been prepared in            position of the Company. The financial statements are set out in the
     accordance with the recognition and measurement principles                Company’s 2008 Annual Report for the 2008 financial year, which is
     of Australian Accounting Standards, which include Australian              available at www.perilya.com.au or www.asx.com.au.
     equivalents to International Financial Reporting Standards (A-IFRS).
                                                                               Shareholders should also refer to the financial information in the
     The financial information in this section is presented in an              Independent Expert’s Report, which is set out in Annexure C to this
     abbreviated form. Shareholders should refer to Perilya’s audited          Explanatory Memorandum.


     5.2 Financial summary

                                                                                      4 Months to
                                                                                      31 Oct 2008
                                                                                      (unaudited)                FY 2008                 FY 2007
     Abbreviated income statement                                                      ($ million)             ($ million)            ($ million)

     Revenue from ordinary activities                                                         77.6                  292.3                   370.4
     Earnings Before Interest and Tax (EBIT)                                                (37.8)                 (161.6)                  119.0
     Net profit / (loss) after tax                                                          (27.5)                 (140.2)                   82.5


     The Company has recorded in its management accounts for the 4             The result for FY2008, includes one-off pre-tax impairment write
     months ending 31 October 2008 a net loss after tax of $27.5 million       downs of $188.2 million. The underlying loss after tax was $22.1
     (unaudited). The loss for the four months includes significant            million which reflected the lower metal price environment seen in
     one-off costs associated with the resizing of the Broken Hill             FY2008 along with higher treatment and refining charges and a
     Operation (as announced on 21 August 2008) including redundancy           stronger Australian dollar.
     costs associated with the restructure. Further information on             The impairment losses of $188.2 million comprised approximately
     the Company’s financial performance is set in section 3.3 of the          $163.2 million with respect to the operating and exploration assets at
     Independent Expert’s Report in Annexure C.                                Broken Hill, $10.1 million on other exploration properties and $14.9
     For the twelve months ending 30 June 2008 (FY2008), the Company           million on other assets, including available-for-sale financial assets.
     recorded a net loss after tax of $140.2 million. The net loss compares
     to a net profit after tax of $82.5 million in the previous FY2007 year.


                                                                                             As at
                                                                                      31 Oct 2008                   As at                   As at
                                                                                      (unaudited)           30 June 2008            30 June 2007
     Abbreviated balance sheet                                                         ($ million)            ($ million)             ($ million)

     Cash & restricted cash                                                                   35.5                   37.0                   173.0
     Available-for-sale financial assets                                                      32.5                   40.9                     5.0
     Derivative financial instruments                                                          3.5                   129.1                   16.4
     Other assets                                                                            105.2                  100.7                   254.6
     Total assets                                                                            176.7                  307.7                  449.0


     Borrowings                                                                               15.2                   26.0                    20.8
     Derivative financial instruments/option premiums                                             -                  38.0                   133.4
     Deferred income                                                                          50.0                       -                       -
     Other liabilities                                                                        61.2                    96.1                  145.6
     Total liabilities                                                                       126.3                   160.1                 299.8
     Net assets                                                                               50.4                  147.6                   149.3


22
                                                                                                 Perilya Limited 2009 Notice of Extraordinary General Meeting




The Company’s cash position reduced significantly during the FY2008        At 31 October 2008, Perilya held cash, deposits, and other
year as a result of:                                                       financial assets represented by:
•   materially weaker Australian dollar metal prices and lower metal       •   free cash of $10.8 million (30 June 2008: $26.5 million);
    production from Broken Hill;                                           •   secured deposits of $24.7 million supporting performance
•   re-classification of investments in commercial paper from cash to          bonds required under various mining leases at Broken Hill;
    available-for-sale financial assets;                                   •   commercial paper of $21.6 million (written down value);
•   continued investment during the year in the development of the         •   derivative instruments of $3.5 million; and
    Company’s two operating assets at Broken Hill and Beltana; and
                                                                           •   other investments of $10.8 million (written down value).
•   investment of approximately $22.3 million in exploration
    activities.                                                            At 31 October, 2008, the Company’s only debt was $15.2 million
                                                                           related to mobile equipment financing and insurance premium
The total assets of the Company fell by approximately $141.3 million,      funding.
largely as a result of the impairment write-offs made at 30 June 2008.
                                                                           On 24 December 2008, Perilya received a $10 million deposit
Deferred Income relates to the gain associated with the close out of       from Zhongjin Lingnan pursuant to the terms of the Subscription
the hedge book in August 2008. In accordance with AIFRS, the gain          Agreement.
on closure of the hedge book has been deferred and will be brought
to account as profits over the period September 2008 to June 2010.         Additionally, since the end of FY2008 metal prices have
                                                                           weakened and remain volatile placing demands on cash
(c) Matters subsequent to the end of FY 2008                               resources and impacting cash flows.
    On 21 August 2008, Perilya completed an extensive review of            Perilya’s cash position changes on a daily basis as revenue is
    its Broken Hill zinc, lead and silver operation and implemented        received and expenses paid. In common with all listed resources
    a plan to resize the operation in light of the current low metal       companies, Perilya reports its cash position to the ASX in respect
    prices. The new plan at Broken Hill focuses on a lower tonnage         of each quarter. The numbers referred to above are taken from
    profile and mining remnant pillars and stopes which have low           Perilya’s October 2008 Management Accounts (unaudited). Since
    development requirements in the Southern Operations. It was            that time, Perilya’s cash position has changed and the amount
    further decided that the North Mine and Potosi exploration             of cash that Perilya has on any particular day is likely to be less
    decline be placed on care and maintenance.                             than those amounts - unless metals prices improve. Perilya will
                                                                           provide up-dated cash information as at 31 December 2008,
    In conjunction with the resizing, Perilya closed-out its hedge
                                                                           when it releases its December 2008 Quarterly Activities Report,
    book realising $60.3 million in cash. The proceeds of the hedge
                                                                           which is expected to be lodged with ASX in January 2009, and
    book closure, which were received in full during August 2008,
                                                                           also in its Half-Yearly interim financial statements, which are
    have been used to fund the resizing of the Broken Hill Operation
                                                                           expected to be lodged with ASX in February 2009.
    (including redundancy costs and working capital reductions),
    repayment of short term corporate debt and to increase the cash
    used to secure performance bonds.                                    5.3 Impact of Zhongjin Lingnan Transaction on
    On 26 September, 2008, the Company repaid $10 million in short           financial position
    term corporate debt, leaving it with no corporate debt at the date     Perilya’s net cash position will be further enhanced by the
    of this Explanatory Memorandum.                                        Zhongjin Lingnan Transaction, the impact of which will be an
    On or about 31 July 2008, bank guarantees backing the existing         increase in cash of $44,514,560 (after estimated Transaction
    rehabilitation performance guarantees in place with relevant           costs of $950,000 of the Transaction are deducted from the gross
    State Governments expired and were required to be replaced             proceeds of $45,464,560 raised by the issue of the New Shares).
    with cash backed facilities. To meet this requirement Perilya          Set out below is a pro forma consolidated balance sheet of
    placed an additional $14.275 million into restricted cash,             Perilya Limited (unaudited) taking into account the Transaction.
    bringing total restricted cash to $24.7 million.                       The pro forma balance sheet illustrates the effect of the
                                                                           Transaction as if the Transaction had occurred on 31 October
                                                                           2008.




                                                                                                                                                                23
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     5         Impact on Perilya’s financial position
               (continued)




     Perilya Limited (unaudited) Proforma Balance Sheet as at 31 October 2008

                                                                                                                   An abbreviated financial summary
                                                                     Actual      Adjustments          ProForma     of Perilya’s income statement and
                                                                     $’000             $’000             $’000
                                                                                                                   balance sheet for 4 months ending
                                                                                                                   31 October 2008 (unaudited)
     CURRENT ASSETS
                                                                                                                   and the year ended 30 June
     Cash & Cash Equivalents                                         10,777            44,515            55,292    2008 (audited) and 30 June 2007
     Trade & Other Receivables                                        4,686                                4,686   (audited) has been disclosed in
                                                                                                                   section 5.2. The unaudited balance
     Inventories                                                     24,470                              24,470
                                                                                                                   sheet as at 31 October 2008 reflects
     Financial Assets                                                34,514                              34,514    the re-sizing of the Broken Hill
     Total Current assets                                            74,447            44,515           118,962    Operation and the funding of this
                                                                                                                   resizing in operations (including
     NON-CURRENT ASSETS                                                                                            redundancy payments and working
     Restricted Cash                                                 24,724                              24,724    capital reductions) from the closing
                                                                                                                   out of Perilya’s hedge book.
     Financial Assets                                                 1,435                                1,435
                                                                                                                   Perilya’s new operating plan, which
     Property, Plant and Equipment                                   35,657                              35,657
                                                                                                                   commenced in September 2008, has
     Exploration, Development and Evaluation                         20,726                              20,726    been designed and implemented to
     Deferred Tax                                                    19,664                              19,664    reposition the Broken Hill Operation
     Other                                                                28                                  28   down the industry total cost curve.
                                                                                                                   The quarter ending 30 September
     Total Non-current assets                                       102,234                             102,234    2008, was a period of transition with
     Total Assets                                                   176,681            44,515           221,196    two months of full production with
                                                                                                                   a high fixed cost component and
     CURRENT LIABILITIES                                                                                           one month under the new re-sized
     Trade & Other Payables                                          19,714                               19,714   plan, together with the one off
                                                                                                                   costs of redundancies and care and
     Provisions                                                       7,790                                7,790
                                                                                                                   maintenance cost for the North Mine
     Deferred Income                                                 19,980                              19,980    and the Potosi exploration decline.
     Other                                                            1,938                                1,938   The future profitability of the
     Borrowings                                                       7,684                                7,684   Broken Hill Operation and of
                                                                                                                   Perilya will depend on the ongoing
     Total Current liabilities                                       57,106                               57,106
                                                                                                                   successful implementation of the
     NON-CURRENT LIABILITIES                                                                                       new operating plan as well as
                                                                                                                   an improvement in metal prices
     Provision                                                       29,121                               29,121   in Australian dollar terms. Risks
     Deferred Income                                                 29,971                              29,971    relating to Perilya’s future prospects
     Borrowings                                                       7,482                                7,482   are disclosed in section 10 below.
     Other                                                            2,648                                2,648   With the current high levels of
                                                                                                                   uncertainty and volatility in both
     Total Non-current liabilities                                   69,222                              69,222
                                                                                                                   capital and metal markets the
     Total Liabilities                                              126,328                             126,328    proposed placement to Zhongjin
                                                                                                                   Lingnan HK will raise proceeds
     Net Assets                                                      50,353            44,515            94,868
                                                                                                                   of approximately $45.5 million in
     SHAREHOLDERS EQUITY                                                                                           cash (excluding the costs of the
                                                                                                                   Transaction) and greatly assist
     Contributed equity                                             113,474            44,515           157,989
                                                                                                                   Perilya through this period of
     Reserves                                                       (15,127)                            (15,127)   depressed economic conditions.
     Retained earnings                                              (47,991)                            (47,991)
     Total Shareholders Equity                                       50,353            44,515            94,868

     Note 1:      Adjustments to the pro forma balance sheet include the receipt of gross proceeds from the
                  issue of New Shares to Zhongjin Lingnan for $45.465 million, less Transaction costs as set out
                  in section 5.6 below of $0.95 million.



24
                                                                                                    Perilya Limited 2009 Notice of Extraordinary General Meeting




5.4 Key risks relating to Perilya’s financial                             •   extending the life of the Broken Hill Operation in a sustainable
                                                                              manner;
    prospects
                                                                          •   maintaining flexibility to rapidly increase production in response
Shareholders should be aware of the key risks that may affect the             to market price and economic conditions;
future operating and financial performance of Perilya and the value
of Shares. These risks include general risks associated with any form     •   continuing with work to strengthen its development pipeline at
of business and specific risks associated with Perilya’s business.            the Southern Operations and its nearby mine deposits at the
Details on these risks including the risks associated with the                North Mine, Potosi and Flying Doctor in Broken Hill;
proposed Zhongjin Lingnan Transaction not proceeding are set out          •   continuing with Pit optimisation, feasibility studies and the
in section 10.                                                                permitting process of the Reliance zinc deposit in the Flinders
Shareholders should also be aware that, if the Resolutions are not            region in South Australia; and
passed Perilya will continue to operate as it did prior to the Zhongjin   •   continuing with the development of the company’s Mount Oxide
Lingnan Transaction, exploring all available alternatives to optimise         Copper and Cobalt Project in the Mt Isa region in Northern
its assets and remain financially viable. However, given the current          Queensland.
metal prices, difficult global financial markets, constrained borrowing
conditions and uncertainty on global demand for base metals, the          5.6 Costs of Share Placement
Perilya Directors believe the Zhongjin Lingnan Transaction represents
the best option for Shareholders.                                         A summary of the costs in respect to the Subscription Agreement,
                                                                          including advisory, legal, Independent Expert, ASX listing fees and
In particular, if the Zhongjin Lingnan Transaction is not implemented
                                                                          printing costs is as follows:
– and in the absence of alternatives, Perilya will need to raise
comparable funding by 31 March, 2009 to ensure that it continues to
                                                                                                                                                           $
operate as a going concern. In the current capital market, this would
likely result in the raising at a significant discount to the current     UBS Investment Bank                                                     700,000
market price to Perilya shares and well below the proposed issue
price of New Shares to Zhongjin Lingnan HK and a significant dilution     Legal fees                                                                50,000
to existing Shareholders.                                                 Independent Expert’s Report                                             130,000
Further, in the absence of alternative capital raisings, Perilya may      Printing / EGM                                                            40,000
need to sell one or more of its assets (other than in the ordinary
course of business and at distressed values or values different to        ASX Fees                                                                  30,000
those in its financial statements). Furthermore, the Board may need       Total Transaction Costs                                                 950,000
to consider further reductions in production to reduce operating
costs and consider all alternatives available to it. Further details      No other fee or commission is payable in connection with the
are set out in sections 5, 10 and 12 and in the Independent               Zhongjin Lingnan Transaction. Fees payable to UBS Investment Bank
Expert’s Report.                                                          in relation to the successful defence of CBH’s takeover offer will
                                                                          collectively total $1.3 million, if the Zhongjin Lingnan Transaction is
5.5 Use of funds raised from the Zhongjin                                 approved and completed. Of this amount, $600,000 was allocated
    Lingnan Transaction                                                   to the defence work associated with the CBH Bid. The remaining
                                                                          $700,000 may be payable if the defence of the CBH Bid is successful
If the Resolutions are approved and FIRB approval is granted and the      and the Zhongjin Lingnan Transaction completes.
Zhongjin Lingnan Transaction proceeds, it would put the Company
in a stronger financial position, with substantial operations and
resources and no corporate debt. This would enable the Company
to better weather a sustained period of commodity price weakness.
The funds raised from the share placement to Zhongjin Lingnan HK
will be applied towards:
•   working capital requirements (see section 5.4);
•   further improving the financial viability of the Southern
    Operations;




                                                                                                                                                                   25
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     6         Impact on Perilya’s capital structure
               and level of control




     6.1 Current capital structure                                                    The capital structure and voting power of Perilya’s substantial
                                                                                      shareholders after completion of the Zhongjin Lingnan Transaction
     As at the date of this Explanatory Memorandum Perilya’s ordinary                 (assuming no Options are exercised) will be as set out below:
     fully paid Shares on issue total 196,882,640. The voting power of
     Perilya’s substantial shareholders (based on substantial shareholder
                                                                                                                              Number of Voting Power
     notices filed with Perilya) are set out below:                                   Shareholder                               Shares           (%)

                                                             Number of       Voting   Zhongjin Lingnan HK (registered       197,672,000           50.1%
     Shareholder                                               Shares     Power (%)   holder), Zhongjin Lingnan
                                                                                      (holding company of Zhongjin
     AXA Asia Pacific Holdings Limited                       18,729,419      9.51%    Lingnan HK) and Rising (holder
                                                                                      of more than 20% of Zhongjin
     UBS Nominees Pty Ltd                                   13,290,799       6.75%
                                                                                      Lingnan)
     Other Shareholders                                    164,862,422     83.74%     Other existing Shareholders           196,882,640          49.9%
     Total                                                196,882,640        100%
                                                                                      Total                                 394,554,640           100%
     As at the date of this Explanatory Memorandum there are also
     8,700,000 unquoted Options on issue under the ESOP and 151,800                   6.3 Impact on Employee Options and
     unquoted Performance Rights under the Long Term Incentive Plan.
                                                                                          Performance Rights
     Further details in relation to these Options and Performance Rights
     (and the associated implications of the Zhongjin Lingnan Transaction             As at the date of this Explanatory Memorandum, there are 8,700,000
     in this regard) are set out in section 12.1(h).                                  unquoted Options on issue under the ESOP.
                                                                                      7,650,000 of the Options were issued following the Company’s
     6.2 Capital structure post completion                                            annual general meeting held on 25 November 2008 at which
                                                                                      Shareholders approval was given for the issue. The Options were
     As at the date of this Explanatory Memorandum, Zhongjin Lingnan,                 issued in three tranches and are exercisable at $0.50, $0.60 and
     Zhongjin Lingnan HK and their respective associates held no Shares               $0.75, vest on 30 September 2009, 30 September 2010 and 30
     and accordingly had no voting power in the Company.                              September 2011 and expire on 30 September 2010, 30 September
     If the Resolutions are approved by Shareholders and the Transaction              2011 and 30 September 2012, respectively.
     proceeds, 197,672,000 New Shares will be issued by the Company to                In addition to the Options issued in November 2008, the Company
     Zhongjin Lingnan HK. This will increase the total issued shares in the           also has on issue 1,050,000 Options with exercise prices between
     Company to 394,554,640, 50.1% of which will be owned by Zhongjin                 $0.88 and $4.32 per Share issued in accordance with the ESOP.
     Lingnan HK (assuming no Options are exercised).
                                                                                      As at the date of this Explanatory Memorandum, there are also
     Each of Zhongjin Lingnan, Zhongjin Lingnan HK and Rising will have               151,800 unquoted Performance Rights on issue under the Long Term
     a relevant interest in the New Shares issued to Zhongjin Lingnan HK.             Incentive Plan.
     Zhongjin Lingnan HK’s relevant interest arises by virtue of being the
     registered holder of the New Shares. Zhongjin Lingnan HK’s relevant              Details in relation to the implications of the Zhongjin Lingnan
     interest arises by virtue of its ability to control Zhongjin Lingnan HK.         Transaction on the above Options and Performance Rights under the
     Rising’s relevant interest arises by virtue of it holding over 20% of the        Transaction are set out in section 12.1(h).
     shares of Zhongjin Lingnan.




26
                                                                                                    Perilya Limited 2009 Notice of Extraordinary General Meeting




7       Directors and management




7.1 Current Directors                                                        Skills, experience and expertise – Mr. Han is a senior commercial
                                                                             executive in the base metal industry with over 21 years of
The Perilya Board is currently comprised of the following Directors:         experience in trading base metals and base metal concentrates,
•   Mr Patrick O’Connor (Non-Executive Chairman);                            especially in zinc and lead. He is also responsible for hedging
•   Mr Paul Arndt (Managing Director and Chief Executive Officer);           and derivative trading at Zhongjin Lingnan.
•   Mr Philip Lockyer (Non Executive Director);                              Mr Han will bring extensive commercial and hedging expertise
•   Mr Peter Harley (Non Executive Director); and                            to the Board.
•   Ms Karen Field (Non Executive Director).
                                                                         c) Mr Wen Wang

7.2 Proposed new Directors                                                   Mr Wen Wang (43) is the Deputy General Manager of the Zhongjin
                                                                             Lingnan’s Fankou Mine.
Under the Subscription Agreement, from Settlement, Zhongjin
                                                                             Skills, experience and expertise – Mr. Wang has 20 years of
Lingnan is entitled to nominate a number of directors equal to half of
                                                                             mining experience at the Fankou Mine which has a throughput of
the members of the Board and the Company is required to procure
                                                                             1.3 million tonnes a year, producing 150,000 tonnes of zinc and
their appointment forthwith.
                                                                             lead in concentrates. Mr Wang was instrumental in the Fankou
Zhongjin Lingnan has nominated Mr Shuijian Zhang, Mr Minzhi Han              Mine’s expansion programme undertaken during 2005-2008
and Mr Wen Wang to be Directors. Resolutions 2(a) to (c) (inclusive)         to bring its mining capacity up to 1.59 million tonnes a year in
seek approval for their appointment, conditional on and with effect          throughput, with capacity to produce180,000 tonnes of zinc and
from Settlement.                                                             lead in concentrate.
Information on each Zhongjin Lingnan nominee is set out below:               Mr Wang was trained as a mining engineer in China and Germany.

a) Mr Shuijian Zhang                                                         Mr Wang will bring extensive mining and project management
                                                                             skills to the Board.
    Mr Shuijian Zhang (53) is President and a Director of Zhongjin
    Lingnan. Mr Zhang joined Zhongjin Lingnan in 2000 as a Vice
    President and was promoted to President in 2002.
                                                                         7.3 Composition of the Perilya Board after
    Skills, experience and expertise – Mr Zhang is a senior mining           completion of the Zhongjin Lingnan
    executive with over 30 years of experience in the resources              Transaction
    industry. At Zhongjin Lingnan, Mr Zhang has led the expansion
    programme of both the mining and smelter operations in               In the event that Shareholders approve the Resolutions and the
    recent years.                                                        Zhongjin Lingnan Transaction completes, the Perilya Board will be
                                                                         restructured, conditional on and with effect from Settlement, to allow
    Prior to joining Zhongjin Lingnan, Mr Zhang worked at Jiangxi        for a new Board of six Directors comprising three existing Directors
    Copper (the largest copper producer in China), where he              and [three] Directors nominated by Zhongjin Lingnan. Details in
    managed the Dexing Copper mine, the second largest copper            relation Zhongjin Lingnan appointed Directors Messrs Zhang, Han
    mine in the world (on the basis of throughput). At Jiangxi Copper,   and Wang are set out in section 7.2.
    Mr Zhang served as Executive Director and Vice President.
                                                                         Paul Arndt will continue as Managing Director and Chief Executive
    Mr Zhang is also the current Vice President of the China Non-        Officer and Patrick O’Connor will continue as a non-executive
    ferrous Metals Association, the trade body for the nonferrous        Director. At the date of this Notice no agreement has been reached
    metals industry in China.                                            with Zhongjin Lingnan HK on the final composition of the Perilya
    Mr Zhang has a wealth of mining experience and skills in the         Board members post Settlement (other than those nominated
    areas of mining, business strategy and general management.           pursuant to Resolution 2 and including Patrick O’Connor and Paul
                                                                         Arndt). Accordingly, on completion two of the current non-executive
b) Mr Minzhi Han                                                         Directors, Peter Harley, Karen Field or Phil Lockyer will retire and an
    Mr Minzhi Han (44) is the General Manager of the commercial          announcement made to the market at the appropriate time.
    department of Zhongjin Lingnan. He joined Zhongjin Lingnan
    in 1996.
    Prior to joining Zhongjin Lingnan, Mr Han worked for the import
    and export division of China National Nonferrous Corp.




                                                                                                                                                                   27
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     8         Corporate governance




     8.1 Director protocols                                                     8.2 Corporate governance and Board
     The Board aspires to the highest standards of corporate governance             independence post completion of the
     and applies rigorous procedures to deal with actual or potential               Zhongjin Lingnan Transaction
     conflict situations.
                                                                                Zhongjin Lingnan, Zhongjin Lingnan HK and the nominee directors
     The Board Code of Conduct summarises the procedures applied to             must comply with all applicable laws and the Listing Rules in relation
     manage conflicts of interest. It states that:                              to any dealings between Perilya and Zhongjin Lingnan including:
     •    Directors will advise the Company Secretary promptly of any           •   seeking Shareholder approval for transactions between Perilya
          changes to relevant interests such as directorships, partnerships         and Zhongjin Lingnan (or its associates) where required by any
          and holdings in securities. The Company Secretary will inform             applicable law or the Listing Rules;
          all Board members and the regulatory authorities, if required.
                                                                                •   complying with applicable laws relating to conflicts of interest
          Board members will normally be advised at the next meeting but
                                                                                    for directors and directors’ exclusion from voting in relation to
          more urgently if appropriate to the circumstances. Interests are
                                                                                    matters considered by the Board; and
          confirmed annually in writing to the Company Secretary prior to
          inclusion in the Directors’ Report.                                   •   in the case of Zhongjin Lingnan’s nominee directors, complying
                                                                                    with their legal obligations to act in good faith, in the best
     •    If a situation of an actual or potential conflict should arise, the
                                                                                    interests of Perilya and for proper purposes, and to have regard
          director concerned will discuss the matter with the Chairman. The
                                                                                    to the interests of the Shareholders and Perilya as a whole.
          director concerned will withdraw if requested while the Board
          discusses the potential conflict.                                     Any transactions in which Zhongjin Lingnan, Zhongjin Lingnan HK
                                                                                or a nominee director (or any associate of Zhongjin Lingnan) has
     •    If it is decided that a conflict does exist, then, depending on its
                                                                                an interest will be on arm's length commercial terms (including
          assessed significance, the director involved will be requested to
                                                                                any potential off-take arrangements for Perilya’s zinc and lead
          take one of the following courses of action (in order of increasing
                                                                                concentrate production and zinc silicate ore referred to in section
          significance):
                                                                                4.6(a)) or will be approved by Shareholders, where required by
          -    refrain from voting on a relevant matter during a Board          legislation or the ASX Listing Rules.
               meeting;
                                                                                The transactions will also be approved by the independent Directors
          -    withdraw from discussion of relevant matter(s) during a          of Perilya not associated with Zhongjin Lingnan in accordance with
               Board meeting;                                                   any applicable laws relating to conflicts of interest and exclusion of
          -    take a leave of absence from the Board for a period; or          directors from voting.
          -    resign from the Board.
     •    In the particular case where the other members of the Board
          may decide that a director or a related party may properly supply
          goods or services on commercially acceptable terms to the
          Company, details will be provided in the annual Directors’ Report
          and Notes to the Financial Statements.




28
                                                                                                   Perilya Limited 2009 Notice of Extraordinary General Meeting




9       Intentions of Zhongjin Lingnan




This section sets out the intentions of Zhongjin Lingnan in relation      9.3 Management
to Perilya after the New Shares are issued to its wholly owned
                                                                          Zhongjin Lingnan is supportive of Perilya, its current management
subsidiary, Zhongjin Lingnan HK, based on information known to
                                                                          team and operating plan. The parties intend that Paul Arndt will
Zhongjin Lingnan as at the date of this document.
                                                                          continue as Managing Director and Chief Executive Officer after
Final decisions regarding these matters will only be made by              completion of the Transaction.
Zhongjin Lingnan at a time after consideration of all of the relevant
material and information at the time of making the decision.              9.4 Rising’s intentions
Accordingly, the statements set out in this section are statements
                                                                          Rising is an assets management company, representing the
of current intention only, which may change as new information            Guangdong Provincial Government and is not involved in the day-to-
becomes available or as circumstances change.                             day management or operations of Zhongjin Lingnan. To the extent
                                                                          Rising as a 38% shareholder in Zhongjin Lingnan and through its
9.1 Entity acquiring the New Shares                                       board representation is able to influence the decisions of Zhongjin
                                                                          Lingnan, its intentions with respect to the Perilya business are
The New Shares will be acquired by Zhongjin Lingnan Lingnan Mining        consistent with the intentions of Zhongjin Lingnan set out in this
(HK) Company Limited, a wholly-owned subsidiary of Zhongjin               section 9. The directors of Zhongjin Lingnan appointed by Rising
Lingnan incorporated in Hong Kong and whose registered office is at       voted in favour of the Transaction and Zhongjin Lingnan’s intentions
18th Floor, Tower Two, Admiralty Centre, Central, Hong Kong.              for the Perilya business.

9.2 Continued operations and strategic direction                          9.5 CBH Offer to be rejected by Zhonjin
Based on information available to Zhongjin Lingnan, Zhongjin              Zhongjin Lingnan has stated that it does not intend to accept the CBH
Lingnan currently intends that Perilya’s operations will continue         Bid in the event that Shareholders approve the Transaction.
substantially in their current form and in a manner consistent with
Perilya’s strategy and operating plan set out in sections 4.2 and 4.4
and otherwise announced by it prior to the date hereof.
On the basis of information currently known to it, Zhongjin Lingnan’s
current intentions are:
•   to be a strategic shareholder in the Company and to use its
    expertise to assist the future development of the Company’s
    business;
•   not to change the business of the Company;
•   to inject further capital into Perilya on a pro rata basis with
    other Shareholders and, in any other circumstance, to give
    consideration to injecting capital into Perilya on terms and
    conditions to be agreed with Perilya;
•   not to change the employment of any present employee of
    Perilya;
•   not to redeploy fixed assets of Perilya or change significantly
    Perilya’s existing policies in relation to financial matters or
    dividends; and
•   not to transfer to or acquire from the Company any property
    other than shares, other than the entry into of sale agreements
    and the acquisition of a portion of Perilya’s zinc and lead
    concentrate production and zinc silicate ore (subject to sufficient
    concentrates and ores becoming available under existing off-take
    contracts). Any such off-take arrangements will be negotiated in
    good faith and on arm’s length commercial terms and be subject
    to Shareholder approval (if required by applicable law and the
    Listing Rules).




                                                                                                                                                                  29
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     10 Key Risks




     10.1 General Risks                                                          A significant portion of Perilya’s revenue and expenditure
                                                                                 are denominated in US currency and movements in currency
     Investors should be aware of the following key risks that may affect        exchange rates may affect cash flows, profitability, costs and
     the future operating and financial performance of Perilya and the           revenue.
     value of Shares. These risks include general risks associated with
     any form of business and specific risks associated with Perilya’s           It is not possible to accurately predict future movements in metal
     business.                                                                   prices and/or exchange rates.

     a) Economic conditions                                                   b) Increased or new competition

          Adverse changes in economic conditions such as interest rates,         Perilya faces competition in its businesses. To the extent that
          exchange rates, inflation, government policy, international            there are new entrants or changes in strategy by existing
          economic conditions and employment rates amongst others                competitors or mine owners Perilya may lose market share
          are outside Perilya’s control and have the potential to have an        with consequent adverse effects upon operating and financial
          adverse impact on Perilya and its operations.                          performance.

     b) Stock market fluctuations                                             c) Environmental risks

          There are risks associated with any investment in a company            Extensive national environmental laws and regulations in
          listed on the ASX. The value of Shares may rise above or below         Australia affect the operations of the Perilya Group. The laws
          the current Share price depending on the financial and operating       and regulations set various standards which regulate certain
          performance of Perilya and external factors over which Perilya         aspects of health and environmental quality, provide penalties
          and the Directors have no control.                                     or other remedies for any violation of standards and, in certain
                                                                                 circumstances, impose obligations to undertake remedial action
          These external factors include:                                        in current locations where operations are conducted.
          •    economic conditions in Australia and overseas which may           There is a risk that significant damages or penalties might be
               have a negative impact on equity capital markets;                 imposed on companies in the Perilya Group, including for certain
          •    changing investor sentiment in the local and international        discharges into the environment, effects on employees, sub-
               stock markets;                                                    contractors or customers, or as clean up costs. The Perilya Group
                                                                                 minimises these risks by having processes in place to manage
          •    changes in domestic or international fiscal, monetary,
                                                                                 compliance with environmental laws and regulations in Australia.
               regulatory and other government policies; and
          •    developments and general conditions in the markets in which    d) Reliance on key personnel
               Perilya proposes to operate and which may impact on the           The responsibility of overseeing day-to-day operations and
               future value and pricing of shares.                               the strategic management of the Perilya Group is concentrated
                                                                                 amongst a small number of key employees. While it is not
     c) Regulatory risks
                                                                                 currently anticipated, one or any number of these key employees
          Perilya is exposed to any changes in the regulatory conditions         may cease employment with the Perilya Group. The loss of any
          under which it operates in Australia.                                  such key employees of Perilya could have the potential to have a
          Such regulatory changes can include, for instance, changes in:         detrimental impact on the Perilya Group until the skills that are
                                                                                 lost are adequately replaced.
          •    taxation laws and policies;
          •    accounting laws, policies, standards and practises;            e) Occupational health and safety

          •    environmental laws and regulations that may impact upon           Perilya manages, with its clients, certain risks associated with the
               the operations and processes of Perilya; and                      occupational health and safety of its employees. Perilya takes
                                                                                 out insurance to cover these risks within certain parameters,
          •    employment laws and regulations, including laws and               however it is possible for injuries and/or incidents to occur
               regulations relating to occupational health and safety.           which may result in expenses in excess of the amount insured or
                                                                                 provided for with a resultant impact on Perilya’s earnings.
     10.2 Perilya specific risks
                                                                              f ) Reliance on key customers
     a) Metal prices and Exchange Rates                                          Perilya’s businesses rely on a number of long term contracts
          Zinc and lead prices significantly impact on the cash flows and        and business relationships. If any of the key customers reduces
          profitability of Perilya. Continued low zinc, lead and other base      production or terminates the relationship, this may have an
          metal prices may have a materially adverse affect on Perilya’s         adverse effect on the financial performance and or financial
          cash flows and profitablity.                                           position of the Group.




30
                                                                                                      Perilya Limited 2009 Notice of Extraordinary General Meeting




g) Industrial disputes                                                      10.3 Risks associated with the Zhongjin Lingnan
     Industrial disputes may arise from claims for higher wages and/             Transaction
     or better working conditions in the industry in which Perilya
     operates. This could disrupt operations and impact on earnings.        There a number of risks associated with the Zhongjin Lingnan
                                                                            Transaction which Shareholders should be aware of if the Transaction
h) Resource and reserve estimates                                           is approved or it fails to receive Shareholder or regulatory or FIRB
                                                                            approvals.
     Perilya has made estimates of its resources and reserves based
     on relevant reporting codes, where required, and judgments             Risks and implications associated with the approval of all Resolutions
     based on knowledge, skills and industry experience. However,           include amongst other things, the impact on the CBH Bid, changes in
     there is no guarantee that estimates will prove to be accurate.        corporate governance and control and regulations under the Foreign
     Actual mining results may materially differ from forecasts and         Acquisitions and takeovers Act 1975 (Cth). Details on these risks and
     estimates due to further findings and results not previously           implications are set out in Section 12.1.
     known or fluctuations in operating costs, exchange rates and           If on the other hand the Zhongjin Lingnan Transaction is not approved
     metal prices.                                                          or does not complete, then there are additional risks over and above
                                                                            those set in sections 10.1 and 10.2, which include amongst other
i)   Customer and off-take risk
                                                                            things the potential sale of the Company’s Mount Oxide assets,
     Perilya generates its revenue from the sale of concentrates            the impact on CBH’s Bid and impacts to Perilya’s financial position.
     to customers under off-take and other agreements. There is             Details on these risks and implications are set out in section 12.2.
     potential that Perilya will not receive payments for the sale of its
                                                                            Any future participation by Zhongjin Lingnan in capital raisings
     concentrates if a customer becomes insolvent or fails to provide
                                                                            undertaken by Perilya is subject to Chinese regulatory approval and
     payment in accordance with its agreement with Perilya.
                                                                            FIRB approval. Such approvals are subject to the discretion of the
j)   Production estimates                                                   applicable government or government officials. No assurance can
                                                                            be given that Zhongjin Lingnan will be successful in obtaining any
     Actual future production may vary materially from targets and          or all of the various approvals, licences and permits or maintaining
     projections of future production for a variety of reasons. There       such authorisations in full force and effect without modification or
     is greater risk that actual production will vary from estimates of     revocation.
     production made for properties under exploration or not yet in
     production or from operations that are to be expanded.

k) Operating risks
     In common with other enterprises in the minerals and mining
     industry, Perilya’s mineral exploration and mining and related
     activities, including the delivery of supplies and consumables
     and the transportation of products are subject to conditions
     beyond Perilya’s control that can reduce production and sales
     and/or increase costs. These conditions include, but are
     not limited to: changes in legislative requirements; market
     conditions; government policies; exchange rates; abnormal
     or severe weather or climatic conditions; natural disasters;
     unexpected maintenance or technical problems; key equipment
     failures; industrial disruption; and variations in geological
     conditions. An inability to secure ongoing supply of such goods
     and services at prices assumed within production targets could
     potentially impact the results of Perilya’s operations, and in a
     worst case scenario, result in the shutdown of an operation.

l) Investments and commercial paper
     The Company holds investments in listed and unlisted companies
     and commercial paper. The value of these investments fluctuates
     depending on changes in economic and financial market
     conditions and the demand for these types of investments.
     The changes in market value of these investments are outside
     Perilya’s control and have the potential to have an adverse
     impact on the carrying value of Perilya investments.




                                                                                                                                                                     31
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     11 Impact on CBH Takeover Offer




     On 2 October 2008, CBH announced its intention to make a takeover            Section in Bidder’s Statement                               Bid Condition
     offer to acquire all of the shares in Perilya. The offer is subject to the
                                                                                  16.6   Between the Announcement Date and the end of the Offer
     Bid Conditions.                                                                     Period, no person other than CBH or a Related Entity of CBH
     CBH’s offer is unsolicited and proposes to offer CBH shares for                     obtains a Relevant Interest in more than 20% of Perilya’s
     Perilya Shares on the terms and conditions outlined in CBH’s                        shares.
     Bidder’s Statement lodged with ASX and ASIC on 26 November 2008.             16.8   Except as disclosed in any public announcement by Perilya
                                                                                         delivered to ASX prior to the Announcement Date or as
     In response to CBH’s offer Perilya lodged with ASX and ASIC
                                                                                         disclosed in the Perilya AGM Notice, no member of the
     its Target’s Statement on 15 December 2008, advising Perilya
                                                                                         Perilya Group has between the Announcement Date and the
     Shareholders to REJECT CBH’s unsolicited offer. Full details of the
                                                                                         end of the Offer Period:
     Board’s response and recommendations are set out in the Company’s
                                                                                         a) acquired, offered to acquire or agreed to acquire, or
     Target’s Statement which is available on www.perilya.com.au or
                                                                                            disposed of, offered to dispose of or agreed to dispose
     www.asx.com.au or by requesting a copy from Perilya’s Company
                                                                                            of, one or more shares, companies or assets (or an
     Secretary.
                                                                                            interest in one or more shares, companies or assets)
                                                                                            for an amount in aggregate that is material or disposed
     11.1 Bid Conditions                                                                    of, offered to dispose of or agreed to dispose of, any
                                                                                            underground mobile mining equipment at Perilya’s
     The entry into the Subscription Agreement and the associated                           Broken Hill Operation that has not reached the limit of its
     Call Option Deed may have breached one or more Bid Conditions                          economic life;
     associated with the CBH Bid. In addition, the approval of each
     Resolutions 1 and 2 (a) to (c) may also breach certain of the Bid                   b) disposed of, offered to dispose of, or agreed to dispose
     Conditions associated with the CBH Bid and Shareholders should                          of, any interest in any mining or exploration tenement
     consider the potential effect of approving those Resolutions on CBH’s                   or surrendered or relinquished the whole or part of any
     takeover offer, including that approving each of these Resolutions                      mining or exploration tenement other than to give effect
     may entitle CBH to withdraw its offer.                                                  to any relinquishment requirement pursuant to the
                                                                                             conditions of a tenement, or closed a mine for a period of
                                                                                             in excess of five Business Days;
                                                                                         ...
                                                                                         e) issued, or agreed to issue, or authorised or proposed the
                                                                                             issue of, any equity, debt or hybrid security (including
                                                                                             any security convertible into shares of any class) or
                                                                                             rights, warrants, performance rights or options (including
                                                                                             under any Employee share scheme) to subscribe for or
                                                                                             acquire any such securities, other than an issue of Perilya
                                                                                             shares on the exercise of Perilya options or Perilya
                                                                                             performance rights;
                                                                                         ...
                                                                                         i)    entered into, renewed or changed the terms of, any
                                                                                               contract of service with any director or senior executive
                                                                                               of Perilya or another material member of the Perilya
                                                                                               Group;
                                                                                         ...
                                                                                         o) entered into any contract, commitment, arrangement
                                                                                            or agreement, passed any resolution or made any offer
                                                                                            (which remains open for acceptance) with respect to, or
                                                                                            publicly announced an intention to, or proposed to do,
                                                                                            anything described in paragraphs (a), (b), (e) or (i) to (m)
                                                                                            above.
                                                                                  16.9   Before the end of the Offer Period, no Prescribed Occurrence
                                                                                         occurs, other than the issue of shares on exercise of Perilya
                                                                                         options or Perilya performance rights or as disclosed in the
                                                                                         Perilya AGM Notice.
                                                                                         (Prescribed Occurrence is defined in the Bidder’s Statement to
                                                                                         include Perilya issuing shares or agreeing to make such an issue.)




32
                                                                                                   Perilya Limited 2009 Notice of Extraordinary General Meeting




11.2 Execution of the Subscription Agreement                            11.4 Mount Oxide Call Option Deed
The execution of the Subscription Agreement itself may have             A term of the Subscription Agreement is that Zhongjin Lingnan would
breached Bid Condition 16.8(o) in so far as it constitutes an           provide Perilya with a cash deposit of $10 million which is refundable
agreement by Perilya to issue the New Shares to Zhongjin Lingnan,       if the Zhongjin Lingnan Transaction does not proceed, because either
notwithstanding that the issue is conditional on Shareholder            the conditions precedent under the Subscription Agreement are not
approval being obtained.                                                satisfied or waived or the Subscription Agreement is terminated. See
                                                                        Annexure A of this Explanatory Memorandum for a summary of the
Given the need for Shareholder approval to be obtained, and in
                                                                        terms of the Subscription Agreement.
light of the clear commercial advantage in Shareholders being
given an opportunity to consider the Zhongjin Lingnan Transaction       The payment of the deposit is conditional on the parties agreeing the
as an alternative to the CBH Bid, the Directors considered it           terms of a call option over the entire issued share capital of Mount
was appropriate for the Company to enter into the Subscription          Oxide Pty Ltd (whose assets comprise the Mount Oxide Project),
Agreement.                                                              exercisable at $15 million only if Perilya fails to refund the deposit in
                                                                        breach of the Subscription Agreement. Zhongjin Lingnan may set off
11.3 The Resolutions                                                    the amount payable under the call option against the deposit.

The issue of New Shares to Zhongjin Lingnan as contemplated by          On 18 December 2008, the Company and Zhongjin Lingnan entered
Resolution 1 may breach the Bid Conditions, including Bid Conditions    into a call option deed (“Call Option Deed”). Under the terms of
16.6, 16.8(e), 16.8(o) and 16.9. The appointment of the new directors   the Subscription Agreement, the deposit of $10 million was paid by
as contemplated by Resolutions 2(a), 2(b) and 2(c) may breach Bid       Zhongjin Lingnan to Perilya on 24 December 2008. See Annexure B
Condition 8(i).                                                         of this Explanatory Memorandum for a summary of the Call Option
                                                                        Deed.
Accordingly, Shareholders should be aware that if they vote in favour
of any of Resolutions 1, 2(a), 2(b) and 2(c), CBH may exercise its      The grant of the call option pursuant to the Call Option Deed may
rights not to complete its takeover offer because a Bid Condition has   have breached Bid Conditions 16.8(a), 16.8(b) and 16.8(o), potentially
been breached.                                                          entitling CBH to withdraw its bid, whether or not the Resolutions are
                                                                        approved.
There is no statutory or other prohibition on the Directors proposing
Resolutions which may breach the Bid Conditions. However, the           Notwithstanding this, the Directors considered there was a clear
Takeovers Panel has indicated that entering into a transaction which    commercial advantage for the Company and Shareholders by the
triggers a breach of a Bid Condition may have the effect of denying     Company entering into the Subscription Agreement and Call Option
Shareholders an opportunity to consider whether or not they wish        Deed, so that Shareholders were given an opportunity to consider
to accept the takeover offer by CBH. This may give CBH the ability      the Zhongjin Lingnan Transaction, as an alternative to the CBH Bid.
to seek a remedy from the Takeovers Panel, which could include
preventing the relevant transactions from being implemented.            11.5 CBH response to announcement of the
The Takeovers Panel has indicated that the seeking of Shareholder            Transaction
approval may avoid the possibility that any action proposed by target   As at the date of this Explanatory Memorandum, CBH has not
company directors could give rise to unacceptable circumstances.        advised whether it intends to withdraw the Bid because it regards the
By seeking Shareholder approval for Resolutions 1, 2(a), 2(b) and       Subscription Agreement and the transactions contemplated thereby
2(c), Shareholders can make a choice between the CBH Bid and            between the Company and Zhongjin Lingnan to date as having
the approval of the Zhongjin Lingnan Transaction (including the         breached the Bid Conditions.
triggering actions proposed to be approved by Resolutions 1, 2(a),
2(b) and 2(c)).




                                                                                                                                                                  33
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     12 Key implications and risks of the
        Zhongjin Lingnan Transaction




     12.1 Key implications and risks if the                                        Zhongjin Lingnan’s intentions with respect to the Company are
                                                                                   set out in section 9 of this Explanatory Statement.
          Resolution 1 is approved
                                                                                c) Impact on the status of Perilya under the Foreign Acquisitions
     a) Impact on CBH Bid                                                          and Takeovers Act 1975 (Cth)
          As noted in section 11 of this Explanatory Memorandum,                   Under the Foreign Acquisitions and Takeovers Act 1975
          Resolutions 1, 2(a), 2(b) and 2(c) are likely to breach several of       (Cth) (“FATA”), the Federal Treasurer has the power to block
          CBH’s Bid Conditions. Shareholders should consider the potential         transactions subject to the FATA which would result in a foreign
          effect of approving those Resolutions on the CBH Bid, including          person acquiring control of an Australian corporation or business
          that approving each or any of the Resolutions may entitle CBH to         or an interest in real estate, where this is determined to be
          withdraw its offer.                                                      contrary to the national interest.
          By seeking Shareholder approval for Resolutions 1, 2(a), 2(b) and        The Federal Treasurer’s powers include prohibiting a person
          2(c), Shareholders can make a choice between the CBH Bid and             proposing to acquire shares or assets of an Australian
          the Zhongjin Lingnan Transaction (including the triggering actions       corporation or business from doing so, if as a result of the
          proposed to be approved by Resolutions 1, 2(a), 2(b) and 2(c)).          acquisition, one or more foreign persons would gain control
          Further, the execution of the Subscription Agreement and the             of the Australian corporation or business and the result would
          Call Option Deed may have breached one or more Bid Conditions            be contrary to the national interest. The prohibition applies to
          potentially entitling CBH to withdraw its offer.                         corporations with total assets of more than $100 million or where
                                                                                   the proposal values the business at more than $100 million. If
          The Directors considered it was appropriate for the Company
                                                                                   the person has already acquired the shares or assets, the Federal
          to enter into these agreements, in light of the clear commercial
                                                                                   Treasurer may order that the shares or assets be disposed of to
          advantage to the Company and Shareholders in giving
                                                                                   an approved person.
          Shareholders an opportunity to consider the Zhongjin Lingnan
          Transaction as an alternative to CBH’s Bid.                              A “foreign person” under the FATA includes a corporation in
                                                                                   which a foreign corporation holds more than a 15% interest.
     b) Impact on control and governance                                           Accordingly, if the Zhongjin Lingnan Transaction proceeds and
          If the Zhongjin Lingnan Transaction proceeds, Perilya will issue         Zhongjin Lingnan acquires a 50.1% interest in Perilya, Perilya
          197,672,000 New Shares. This will increase the total issued              would be considered a “foreign person” for the purposes of the
          Shares in Perilya to 394,554,640 and Zhongjin Lingnan will own           FATA. Perilya would be required to give notice under the FATA as a
          50.1% of those Shares (assuming no Options are exercised). This          pre-condition to it, or any of its subsidiaries acquiring more than
          means the interests of current Shareholders will be diluted by           15% of the shares in an Australian corporation with total assets
          50.1%. In addition, if the Zhongjin Lingnan Transaction proceeds,        of more than $100 million.
          (and subject to Resolutions 2(a), 2(b) and 2(c) being approved),         In addition, by virtue of Rising’s 38% interest in Zhongjin
          3 nominees of Zhongjin Lingnan will be appointed to the Board.           Lingnan, Perilya would be considered a “foreign government
          There is a risk that Zhongjin Lingnan could use its voting power         investor” under the FATA if the Zhongjin Lingnan Transaction
          on the Board to pursue interests which are different to the              proceeds. All direct investments by “foreign government
          interests of current Shareholders.                                       investors” are required to be notified for prior approval,
                                                                                   irrespective of the size of the investment.
          However, Zhongjin Lingnan, Zhongjin Lingnan HK and the
          nominee Directors must comply with all applicable laws and            d) Transaction may not proceed even if Shareholders approve
          the Listing Rules in relation to any dealings between Perilya            the Resolution
          and Zhongjin Lingnan (see sections 8 and 9 of this Explanatory
                                                                                   Even if the Resolutions are approved, the Zhongjin Lingnan
          Memorandum for further information). Accordingly, any
                                                                                   Transaction will only be implemented if the other conditions
          transactions in which Zhongjin Lingnan, Zhongjin Lingnan HK
                                                                                   precedent set out in the Subscription Agreement are satisfied or
          and/or any nominee director (or any associate) has an interest
                                                                                   waived. These conditions precedent are summarised in Annexure
          will be on arm’s length commercial terms (including the potential
                                                                                   A and include obtaining FIRB approval under the FATA and
          off-take arrangements for Perilya’s zinc and lead concentrate
                                                                                   Chinese regulatory approvals.
          production and zinc silicate ore referred to in section 4.6(a)), or
          will be approved by independent Shareholders, where required             The application for FIRB approval was submitted by Zhongjin
          by legislation or the ASX Listing Rules. In addition Zhongjin            Lingnan on 12 December 2008 and it is expected that the Federal
          Lingnan, Zhongjin Lingnan HK and the nominee Directors, who              Treasurer will confirm in writing whether there are objections
          have a material interest in any proposed contract, must not be           under the Australian Government’s Foreign Investment Policy
          present at any Board meeting to consider the matter and abstain          to the acquisition of the New Shares in accordance with the
          from voting on the matter. Accordingly, only the independent             Subscription Agreement by 22 January 2009.
          Directors (under the proposed new Board structure) will be               The Company is not currently aware of any information which
          eligible to vote on future matters which Zhongjin Lingnan,               may cause the conditions precedent to be breached or unfulfilled.
          Zhongjin Lingnan HK and the nominee Directors, may have a                However, there is a risk that these conditions precedent will be
          material interest in, such as potential off-take agreements.             unfulfilled due to circumstances outside its control.

34
                                                                                                    Perilya Limited 2009 Notice of Extraordinary General Meeting




   The Subscription Agreement requires Settlement (and the                    weather a sustained period of commodity price weakness.
   allotment and issue of the New Shares) to take place within 5              Further details on the use of funds are set out in section 5.5.
   business days after the satisfaction (or waiver) of the conditions
   precedent.                                                              h) Impact on Options and Performance Rights

   In the event Shareholders approve the Resolutions but the other            Options issued under the ESOP
   conditions precedent under the Subscription Agreement are not              Under the rules of the ESOP, Options are exercisable for 20
   satisfied or waived or the Subscription Agreement is terminated,           business days after the day on which a person’s voting power
   the Zhongjin Lingnan Transaction will not proceed. In those                in the Company increases from less than 30% to 30% or more,
   circumstances, Shareholders may still have the option to accept            irrespective of whether the Options have vested.
   the CBH takeover offer, provided that CBH has not withdrawn
                                                                              Accordingly, if the Resolutions are approved and the New Shares
   that offer due to either its Bid Conditions being breached (in this
                                                                              are issued, Zhongjin Lingnan HK’s voting power will increase
   regard see sections 11.1 and 12.1(a) above) or due to some other
                                                                              from nil to 50.1% and the Options issued under the ESOP will be
   reason entitling CBH to withdraw its Bid.
                                                                              exercisable for 20 business days after Settlement.
   If the conditions precedent are not satisfied or waived or the
                                                                              There are currently 8,500,000 Options on issue under the
   Subscription Agreement is terminated, Perilya will be required to
                                                                              ESOP. This includes 7,650,000 Options issued with Shareholder
   repay the $10 million deposit paid by Zhongjin Lingnan. If Perilya
                                                                              approval in November 2008.
   fails to repay this deposit, Zhongjin Lingnan may exercise its rights
   under the Call Option Deed. Further information on the deposit             Details of these Options are set out in the table below.
   and the Call Option Deed is contained in sections 11.4 and 12.2(a).
   If the Transaction is not implemented because one or more                  Number of Options             Expiry Date              Exercise Price ($)
   conditions precedent is not satisfied or waived, the Company will          50,000                        20/08/2009                        0.88
   be otherwise affected in the manner set out in section 12.2 of this
   Explanatory Memorandum.                                                    300,000                       07/03/2011                        2.47
                                                                              100,000                       07/03/2012                        2.67
e) Effect on other possible takeover offers
                                                                              100,000                       07/03/2013                        2.97
   If the Zhongjin Lingnan Transaction proceeds, it may influence
   a decision by any other third party to bid for Perilya. Other third        300,000                       17/07/2011                        3.46
   parties may be reluctant to make a takeover offer because they
                                                                              100,000                       17/07/2012                        3.89
   would not be confident that they could acquire a 90%, or at least
   50% interest in the Shares. Zhongjin Lingnan’s 50.1% interest              100,000                       07/07/2013                        4.32
   may be seen as a “blocking stake”.
                                                                              2,550,000                     30/09/2010                        0.50
f ) Negotiate off-take arrangements with Zhongjin Lingnan                     2,550,000                     30/09/2011                        0.60
   Perilya and Zhongjin Lingnan have also agreed that following               2,550,000                     30/09/2012                        0.75
   Settlement, it is their intention at some time in the future to
   enter into good faith negotiations with respect to a potential
                                                                              The exercise of Options following Settlement will result in
   concentrate sales agreements for up to 50% of Perilya’s zinc
                                                                              Shareholders’ interests being further diluted.
   and lead concentrate production and zinc silicate ore, subject to
   concentrates and ores becoming available from existing off-take            The issue of Shares upon exercise of Options under the ESOP is
   contracts. Any off-take arrangements entered into between                  expressly excluded from the operation of Bid Conditions 16.8(e)
   Perilya and Zhongjin Lingnan will be conducted on arm’s length             and 16.9, which are set out in section 11.1
   commercial terms and will further support Perilya’s long-term
   viability.                                                                 Performance Rights issued under the Long Term Incentive Plan

   As stated above, Zhongjin Lingnan , Zhongjin Lingnan HK and                There are currently 115,800 Performance Rights on issue under
   the nominee Directors must comply with all applicable laws and             the Long Term Incentive Plan. Performance Rights issued under
   the Listing Rules in relation to any dealings between Perilya              the Long Term Incentive Plan will not be directly affected by the
   and Zhongjin Lingnan. See sections 8 and 9 of this Explanatory             Zhongjin Lingnan Transaction.
   Memorandum for further information.                                        Under the rules of the Long Term Incentive Plan, vesting of
                                                                              Shares is dependent upon Perilya achieving certain performance
g) Use of funds raised from the Zhongjin Lingnan Transaction                  hurdles measured by reference to capital value growth and
   If the Resolutions are approved and the Zhongjin Lingnan                   dividends, assuming the dividends are reinvested on the date of
   Transaction proceeds, it would put the Company in a stronger               payment. The Zhongjin Lingnan Transaction may impact on the
   financial position, with significant operations and resources and          achievement of these performance hurdles.
   no corporate debt. This would enable the Company to better




                                                                                                                                                                   35
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     12 Key implications and risks of the Zhongjin
        Lingnan Transaction (continued)




     12.2 Key implications and risks if the Resolutions                           The Board believe that the CBH Bid is opportunistic, fails
                                                                                  to deliver any compelling financial or operational synergies
          are not approved                                                        to Shareholders, and would expose Shareholders to CBH’s
                                                                                  substantial corporate debt position, which as at the date of CBH’s
     a) Mount Oxide Call Option Deed
                                                                                  Bidder’s Statement stood at $160 million with interest costs of
          Zhongjin Lingnan have indicated their support for the further           approximately $10 million per annum (based on interest at a rate
          development of Perilya’s Mount Oxide Project and are keen for           of 7.25% on CBH’s Convertible Notes).
          this asset to remain with Perilya. Notwithstanding this the Board
                                                                                  If Shareholders do not approve the Resolutions, the Zhongjin
          had received proposals from inter ested parties to acquire the
                                                                                  Lingnan Transaction will not proceed. In those circumstances,
          Mount Oxide Project and may consider in the future options for
                                                                                  Shareholders may still have the option to accept the CBH Bid,
          its future development, which may include the introduction of
                                                                                  provided that CBH has not withdrawn the Bid due to either
          additional partners.
                                                                                  the Bid Conditions being breached (in this regard see sections
          Prior to entering into the Subscription Agreement with Zhongin,         11.1 and 12.1(a)) or due to some other reason entitling CBH to
          the Company received a conditional offer from a third party to          withdraw its Bid.
          acquire the Company’s Mount Oxide Project for $15 million in
          cash. This offer was declined in favour of the proposed Zhongjin     c) Perilya’s financial position
          Lingnan Transaction.                                                    Shareholders should also be aware that, if the Resolutions
          As part of the Subscription Agreement and associated Call               are not passed Perilya will continue to operate as it did prior
          Option Deed, Zhongjin Lingnan HK advanced Perilya $10 million           to the Zhongjin Lingnan Transaction, exploring all available
          in cash on 24 December 2008. The advance is refundable (within          alternatives to optimise its assets and remain financially viable.
          20 business days) if the Zhongjin Lingnan Transaction does              However, given the current metal prices, difficult global financial
          not proceed because the Resolutions are not approved (or if             markets, constrained borrowing conditions and uncertainty on
          the other conditions precedent including FIRB approval are not          global demand for base metals, the Perilya Directors believe
          satisfied or the Subscription Agreement is terminated).                 the Zhongjin Lingnan Transaction represents the best option for
                                                                                  Shareholders.
          If Perilya is unable to repay this amount then, under the terms of
          the Subscription Agreement and the Call Option Deed, Zhongjin           In particular, if the Zhongjin Lingnan Transaction is not
          Lingnan may at its election exercise its right to acquire the           implemented – and in the absence of alternatives, Perilya
          Company’s Mount Oxide Copper Project for a cash payment of              will need to raise comparable funding by 31 March, 2009 to
          $15 million and may set off the amount payable under the Call           ensure that it continues to operate as a going concern. In the
          Option Deed against the $10 million deposit. If Zhongjin Lingnan        current capital market, this would likely result in the raising
          fails to exercise this right within 30 days, then Zhongjin Lingnan      at a significant discount to the current market price to Perilya
          HK would remain an unsecured creditor.                                  shares and well below the proposed issue price of New Shares
                                                                                  to Zhongjin Lingnan HK and a significant dilution to existing
          The Board also recognises that, whilst the exercise of the call
                                                                                  Shareholders.
          option may assist in providing a level of funding, there are
          additional risks that this amount may be insufficient to enable         Further, in the absence of alternative capital raisings, Perilya
          the business to continue in the longer-term without additional          may need to sell one or more of its assets (other than in the
          capital over and above this amount. See additional information in       ordinary course of business and at distressed values or values
          section 12.2(c) below.                                                  different to those in its financial statements). Furthermore, the
                                                                                  Board may need to consider further reductions in production to
          A summary of the Call Option Deed is set out in Annexure B.
                                                                                  reduce operating costs and consider all alternatives available to
          As stated above, the granting of the call option is likely to have      it. Further details are set out in sections 5, 10 and 11 and in the
          breached one or more of the Bid Conditions, potentially entitling       Independent Expert’s Report.
          CBH to withdraw its bid. However, the Directors considered
          there was a clear commercial advantage for doing so, so that         d) Sale of concentrates
          Shareholders would be given an opportunity to consider the              If the Resolutions are not passed Perilya will continue to operate
          Zhongjin Lingnan Transaction, as an alternative to the CBH Bid.         under the existing off-take agreement terms as set out in section
                                                                                  4.6 above and may do so beyond the minimum terms (if any) set
     b) CBH’s Bid
                                                                                  out in those off-take agreements.
          Unless CBH withdraws its offer on the basis that execution of the
          Subscription Agreement and/or the granting of the call option
          pursuant to the Call Option Deed breached one or more Bid
          Conditions (see sections 11 and 12 above), then the CBH Bid will
          proceed in accordance with the timetable set out in the Bidder’s
          Statement if the Resolutions are not approved. The Directors
          have previously recommended that Shareholders reject the CBH
          Bid for the reasons set out in the Target’s Statement.


36
                                                                                                       Perilya Limited 2009 Notice of Extraordinary General Meeting




13 Independent Expert’s Report




The Independent Expert’s Report assesses whether the Zhongjin                •   The increase in Perilya’s Share price since the announcement
Lingnan Transaction is not fair but reasonable to Shareholders                   of the proposed Zhongjin Lingnan Transaction indicates the
who are not associated with Zhongjin Lingnan. This assessment is                 market has reacted favourable to the proposed Transaction with
designed to assist all Shareholders in reaching a decision to vote on            Zhongjin Lingnan;
the Resolutions.                                                             •   Perilya’s short term forecast cash flows indicate that in the
                                                                                 absence of the proposed Zhongjin Lingnan Transaction the
The Independent Expert’s Report has been provided by Ernst &
                                                                                 Company will need to source new funding early in 2009 to help
Young Transaction Advisory Services Limited. It provides the opinion
                                                                                 finance continuing operations. With the volatility in capital
that the Zhongjin Lingnan Transaction is not fair but reasonable to              markets expected to continue through 2009, Perilya’s ability
Shareholders.                                                                    to readily source new debt or equity funding at this time is
It is recommended that Shareholders read the Independent Expert’s                uncertain. The issue of the New Shares to Zhongjin Lingnan will
Report in full, as set out in Annexure C.                                        provide Perilya with the funding required without the need to
                                                                                 dispose of assets or to secure new funding from an alternative
The Independent Expert has concluded that the proposed share                     source;
placement to Zhongjin Lingnan is not fair but reasonable to Perilya          •   With a 50.1% interest and at least 50% representation of Perilya’s
shareholders.                                                                    Board post Settlement, Zhongjin Lingnan will be able to control
                                                                                 the Company in a general meeting of shareholders and be able to
Fair                                                                             significantly influence its day to day operations;

In the context of the proposed Zhongjin Lingnan Transaction                  •   Zhongjin Lingnan’s dealings with Perilya as the largest
the share placement to Zhongjin Lingnan will be deemed by the                    shareholder and having Board representation will be governed by
                                                                                 the Corporations Act, the Listing Rules, the Company’s Corporate
Independent Expert to be ‘fair’ if the issue price of $0.23 per New
                                                                                 Governance policies and common law.
Share is equal to or greater than the assessed fair value of Perilya
Shares. The Independent Expert has determined that the assessed              •   Based on the trading prices of CBH’s shares and Perilya’s Shares
fair market value of a Perilya Share to be in the range of $0.33 to              since the announcement of the proposed Zhongjin Lingnan
$0.38 per Share. Accordingly, as the proposed share placement to                 Transaction, the issue of the New Shares to Zhongjin Lingnan is
                                                                                 superior to the value being offered to Perilya Shareholders under
Zhongjin Lingnan is at $0.23 per New Share, the Independent Expert
                                                                                 the CBH Bid;
is of the opinion that the share placement to Zhongjin Lingnan is not
fair.                                                                        •   The $45,464,560 cash to be provided to Perilya through the
                                                                                 share placement to Zhongjin Lingnan will significantly strengthen
                                                                                 Perilya’s financial position at a time when there is substantial
Reasonable
                                                                                 economic uncertainty globally and in an environment of
The proposed Transaction may however, be deemed by the                           continued low metal prices;
Independent Expert to be ‘reasonable’ if it is ‘fair’ or ‘not fair’, where
                                                                             •   As Zhongjin Lingnan is one of China’s largest non-ferrous metal
the Independent Expert believes that there are other significant
                                                                                 producers the strategic benefits of having Zhongjin Lingnan as its
factors, which justify the acceptance and approval by Perilya
                                                                                 major shareholder should provide Perilya with opportunities that
shareholders to the proposed Zhongjin Lingnan Transaction, in the
                                                                                 may not generally be available;
absence of any higher alternative proposals.
                                                                             •   If Perilya was to undertake a capital raising of a similar amount to
The Independent Expert has considered a number of significant
                                                                                 the funds being provided by Zhongjin Lingnan, given the current
other factors to be relevant in assessing the reasonableness of
                                                                                 market conditions, it is likely that it would need to be done at a
the proposed Transaction. Based on these significant factors, the
                                                                                 deep discount to its market price, which would be substantially
Independent Expert is of the opinion the share placement to Zhongjin
                                                                                 more dilutionary to Perilya Shareholders than the issue of shares
Lingnan is reasonable.
                                                                                 at a premium to market; and
The factors which the Independent Experts identified included:
                                                                             Based on recent market prices, Zhongjin Lingnan is paying a premium
•      The $0.23 per New Share payable by Zhongjin Lingnan is at an          for control, however in comparison to the assessed fair value of a
       82.4% premium to the 20 day volume weighted average price             Perilya Share, no premium for control is being paid.
       for a Perilya Share on the ASX up to 5 December 2008, the
       last trading before the announcement of the Zhongjin Lingnan
       Transaction on 9 December 2008, and a 53.3% premium to the
       closing price on that date. The payment of a premium is to the
       benefit of the Perilya Shareholders;




                                                                                                                                                                      37
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     14 Directors Recommendation




     14.1 Recommendations
     In the absence of a superior offer the Directors unanimously
     recommend that Shareholders vote in favour of each Resolution.

     14.2 Directors’ Voting Intentions
     The Directors who each hold shares intend to vote their Shares in
     favour of all Resolutions for the reasons outlined in section 2 above.

     14.2 Directors’ Interests in Perilya Shares
     As at 24 December 2008, the Directors had the following interests in
     Shares and Options:

                                                      Number of           Number of
     Director                                           Shares              Options

     Patrick O’Connor                                               Nil         Nil

     Paul Arndt                                            95,806         3,000,000

     Karen Field                                                    Nil         Nil

     Phillip Lockyer                                       20,492               Nil

     Peter Harley                                           15,000              Nil

     The Directors do not have any material personal interest in the
     outcome of the Resolutions other than their interests arising solely in
     their capacity as Shareholders.
     Save as disclosed, there have been no acquisitions or disposals of
     Shares or Options by any Director in the four months ending on 24
     December 2008.
     On 25 November 2008, Mr Arndt was granted 3,000,000 Options
     with Shareholder approval. Mr Arndt also acquired 95,806 Shares
     pursuant to the Perilya Employee Share Acquisition Plan – Tax
     Deferred. These Perilya Shares are held by CPU Share Plans Pty
     Ltd ABN 20 081 600 875 (managed by Computershare Limited) and
     are subject to certain restrictions including a 2 year restriction on
     disposal.
     Any subsequent acquisitions or disposals by Directors will be
     announced to the ASX in accordance with legal requirements.




38
                                                                                                  Perilya Limited 2009 Notice of Extraordinary General Meeting




15 Additional Information relating
   to the Resolutions




15.1 Resolution 1 – Approval of the Zhongjin                               Item 7 of section 611 requires the following information to be
                                                                           provided to Shareholders:
     Lingnan Transaction
                                                                           i)   The identity of the person proposing to make the acquisition
a) Regulatory Requirements                                                      and their associates
   Section 606(1) of the Corporations Act provides that a person                The New Shares will be acquired by Zhongjin Lingnan HK,
   must not acquire a relevant interest in issued voting shares of              a wholly-owned subsidiary of Zhongjin Lingnan. Zhongjin
   a listed company if the person acquiring the interest does so                Lingnan and Rising will have a relevant interest in the New
   through a transaction in relation to the securities entered into by          Shares acquired by Zhongjin Lingnan HK.
   or on behalf of the person and, because of the transaction, that
   person’s or someone else’s voting power in the listed company           ii) The maximum extent of the increase in that person’s voting
   increases:                                                                  power in the company that would result from the acquisition
   •   from 20% or below to more than 20%; or                                   Zhongjin Lingnan HK does not currently hold any shares
   •   from a starting point that is above 20% and below 90%.                   in Perilya (and therefore has no voting power in Perilya).
                                                                                Accordingly, the maximum extent to which Zhongjin Lingnan
   Under section 608(1) of the Corporations Act, a person has
                                                                                HK’s voting power may increase as a result of the acquisition
   a relevant interest in securities if they are the holder of the
                                                                                is 50.1%.
   securities, have power to exercise, or control the exercise of, a
   right to vote attached to the securities or have power to dispose       iii) The voting power that person would have as a result of the
   of, or control the exercise of a power to dispose of, the securities.        acquisition
   It does not matter how remote the relevant interest is, or how
                                                                                If the New Shares are issued to Zhongjin Lingnan HK it will
   it arises. If 2 or more people can jointly exercise one of these
                                                                                have voting power of up to 50.1%.
   powers, each of them is taken to have that power.
   Under section 608(3) of the Corporations Act, a person with             iv) The maximum extent of the increase in the voting power of
   voting power above 20% in a body corporate or control of the                each of that person’s associates that would result from the
   body corporate is deemed to have a relevant interest in any                 acquisition
   securities held by that body corporate.                                      Zhongjin Lingnan will have a relevant interest in the New
   Each of Zhongjin Lingnan, Zhongjin Lingnan HK and Rising will                Shares issued to Zhongjin Lingnan HK by virtue of its ability
   have a relevant interest in the New Shares which the Company                 to control Zhongjin Lingnan HK and accordingly, the issue of
   proposes to issue to Zhongjin Lingnan HK. Zhongjin Lingnan HK’s              New Shares to Zhongjin Lingnan HK will increase Zhongjin
   relevant interest arises by virtue of being the registered holder            Lingnan’s voting power in Perilya from nil up to 50.1%
   of the New Shares. Zhongjin Lingnan’s relevant interest arises               (assuming no Options are exercised).
   by virtue of its ability to control Zhongjin Lingnan HK. Rising’s            By virtue of Rising’s 38% shareholding in Zhongjin Lingnan
   relevant interest arises by virtue of it holding 38% of the shares           and the operation of section 608(3) of the Corporations Act,
   of Zhongjin Lingnan.                                                         Rising will also have a relevant interest in the New Shares
   Accordingly, if the New Shares are issued to Zhongjin Lingnan                issued to Zhongjin Lingnan HK and the issue of New Shares
   HK as contemplated by Resolution 1, each of Zhongjin Lingnan’s,              to Zhongjin Lingnan HK will also increase Rising’s voting
   Zhongjin Lingnan HK’s and Rising’s voting power in Perilya will              power in Perilya from nil up to 50.1% (assuming no Options
   increase from nil to 50.1% (assuming no Options are exercised).              are exercised).

   Section 606(1A) of the Corporations Act provides that a person               Zhongjin Lingnan HK’s associates do not have a relevant
   may acquire a relevant interest under one of the exceptions set              interest in Shares other than from securities to be acquired
   out in section 611 of the Corporations Act without contravening              by Zhongjin Lingnan HK itself under the Transaction .
   section 606(1). Under item 7 of section 611, an acquisition that
                                                                           v) The voting power that each of that person’s associates would
   was approved previously by a resolution passed at a general
                                                                              have as a result of the acquisition.
   meeting of the company in which the acquisition is made is
   exempt from section 606(1).                                                  As stated above, Zhongjin Lingnan and Rising will have
                                                                                a relevant interest in the New Shares issued to Zhongjin
   Accordingly, Resolution 1 seeks Shareholder approval for the
                                                                                Lingnan HK and will upon issue of the New Shares to
   purposes of item 7 of section 611 of the Corporations Act for the
                                                                                Zhongjin Lingnan HK have voting power in Perilya of 50.1%
   New Shares to be allotted and issued to Zhongjin Lingnan HK
                                                                                (assuming no Options are exercised).
   pursuant to the Subscription Agreement between the Company
   and Zhongjin Lingnan, the effect of which is that each of Zhongjin           Zhongjin Lingnan HK’s associates do not have a relevant
   Lingnan, Zhongjin Lingnan HK’s, and Rising’s voting power in                 interest in Shares other than from securities to be acquired
   the Company will be increased from nil to 50.1% (assuming no                 by Zhongjin Lingnan HK itself under the Transaction.
   Options are exercised) by virtue of each of them having a relevant
   interest in the New Shares issued to Zhongjin Lingnan HK.



                                                                                                                                                                 39
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     15 Additional Information relating to
        the Resolutions (continued)




     b) Additional Information for Shareholders                                   (v) particulars of the terms of the proposed allotment or
                                                                                      purchase and any other contract or proposed contract
          ASIC Regulatory Guide 74: Acquisitions agreed to by
                                                                                      between the allottee and the company or vendor or any of
          shareholders requires that the following information be provided
                                                                                      their associates which is conditional upon, or directly or
          to Shareholders to enable Shareholders to make an informed
                                                                                      indirectly dependent on, Shareholders’ agreement to the
          decision on the Resolutions:
                                                                                      allotment or purchase.
          i)   The identity of the allottee or purchaser and any person who           The particulars of the Zhongjin Lingnan Transaction are set
               will have a relevant interest in the shares to be allotted or          out in section 1 of this Explanatory Memorandum. A summary
               purchased.                                                             of the Subscription Agreement is set out in Annexure A to
               The New Shares will be acquired by Zhongjin Lingnan HK,                this Explanatory Memorandum. A summary of the Call Option
               a wholly-owned subsidiary of Zhongjin Lingnan. Zhongjin                Deed is set out in Annexure B.
               Lingnan will have a relevant interest in the New Shares by
                                                                                  (vi) when the allotment is to be made or the purchase is to be
               virtue of its control of Zhongjin Lingnan HK (under section
                                                                                       completed
               608(3) of the Corporations Act).
                                                                                      If Shareholders approve Resolution 1, and assuming all other
               Rising will have a relevant interest in the New Shares by
                                                                                      conditions precedent under the Subscription Agreement are
               virtue of its 38% shareholding in Zhongjin Lingnan (under
                                                                                      satisfied or waived, the issue of the New Shares to Zhongjin
               section 608(3) of the Corporations Act).
                                                                                      Lingnan HK will take place within 5 business days after the
          (ii) full particulars (including the number and the percentage) of          satisfaction or waiver of the conditions precedent, currently
               the shares in the company to which the allottee or purchaser           anticipated to be on or before 12 February 2009.
               is or will be entitled immediately before and after the
                                                                                  (vii) an explanation of the reasons for any proposed allotment
               proposed acquisition.
                                                                                      An explanation of the rationale for the Zhongjin Lingnan
               Each of Zhongjin Lingnan, Zhongjin Lingnan HK and Rising
                                                                                      Transaction is set out in section 2 of this Explanatory
               does not currently hold a relevant interest in any Shares.
                                                                                      Memorandum.
               Immediately after the proposed acquisition, Zhongjin
               Lingnan HK will hold 197,672,000 New Shares in the                 (viii) the interests of the directors in the Resolution
               Company, representing 50.1% of the enlarged issued share
               capital of the Company (assuming no Options are exercised).            The Directors do not have a material personal interest in the
               The New Shares will rank pari passu with the existing Shares.          outcome of the Resolutions other than in their capacity as
               Zhongjin Lingnan will have a relevant interest in the New              Shareholders. The Directors interests in Shares and Options
               Shares by virtue of its control of Zhongjin Lingnan HK. Rising         are set out in section 14.2 of this Explanatory Memorandum.
               will have a relevant interest in the New Shares by virtue of its   (ix) the identity of the directors who approved or voted against
               38% shareholding in Zhongjin Lingnan (under section 608(3)              the proposal to put the Resolution to Shareholders and the
               of the Corporations Act).                                               relevant information memorandum
          (iii) the identity, associations (with the allottee, purchaser or           All of the Directors voted to put this Resolution and the
                vendor and with any of their associates) and qualifications           information contained in the Notice of Meeting and this
                of any person who it is intended will become a director if the        Explanatory Memorandum to Shareholders.
                Shareholders agree to the allotment or purchase.
                                                                                  (x) the recommendation or otherwise of each director as to
               The identity, associations and qualifications of the persons           whether the non-associated Shareholders should agree to
               nominated by Zhongjin Lingnan to be appointed as directors             the acquisition, and the reasons for that recommendation or
               are set out in section 7.2 of this Explanatory Memorandum.             otherwise
          (iv) a statement of the allottee’s or purchaser’s intentions                The Directors’ recommendations are set out in section 14
               regarding the future of the company if Shareholders agree to           of this Explanatory Memorandum.
               the allotment or purchase, and in particular, any intention to
               change the business of the company; any intention to inject        (xi) any intention of the acquirer to change significantly the
               further capital into the company and if so, how, the future             financial or dividend policies of the company
               employment of the present employees of the company; any                The intentions of Zhongjin Lingnan are set out in section 9
               proposal whereby any property will be transferred between              of this Explanatory Memorandum.
               the company and the allottee, vendor or purchaser or any
               person associated with any of them; and any intention to
               otherwise redeploy the fixed assets of the company.
               The intentions of Zhongjin Lingnan are set out in section 9
               of this Explanatory Memorandum.




40
                                                                                                    Perilya Limited 2009 Notice of Extraordinary General Meeting




15.1 Resolution 1 – Approval of the Zhongjin                              e) Voting exclusion statement
     Lingnan Transaction (continued)                                          In accordance with item 7 of section 611 of the Corporations Act,
                                                                              Perilya will disregard any votes cast on Resolution 1 by Zhongjin
b) Additional Information for Shareholders (continued)                        Lingnan, Zhongjin Lingnan HK and any of their associates.

   (xii) an analysis of whether the proposal is fair and reasonable
         when considered in the context of the interests of the
                                                                          15.2 Resolutions 2(a), 2(b) and 2(c) –
         Shareholders other than those involved in the proposed                Appointment of new directors
         allotment or purchase or associated with such persons            Under the Subscription Agreement, Zhongjin Lingnan is entitled to
       In accordance with ASIC Regulatory Guide 74, the Directors         nominate such number of directors as is equal to half of the members
       commissioned Ernst & Young to prepare an Independent               of the Board.
       Expert’s Report which assesses whether the Zhongjin                In accordance with this right, Zhongjin Lingnan has nominated Mr
       Lingnan Transaction is fair and reasonable to Shareholders         Shuijian Zhang, Mr Minzhi Han and Mr Wen Wang as its nominees.
       who are not associated with Zhongjin Lingnan. The report is
       set out in Annexure C. The Independent Expert’s Report has         Perilya is required to seek the approval of Shareholders for the
       concluded that the Zhongjin Lingnan Transaction is not fair        appointment of the nominees, conditional on, and with effect from
       but reasonable to Shareholders who are not associated with         Settlement under the Subscription Agreement. Resolutions 2(a), 2(b)
       Zhongjin Lingnan.                                                  and 2(c) seek this approval.

       Neither the Company nor the Directors are aware of any             Rule 3.5 of the Constitution, provides that the Company may
       additional information not set out in this Explanatory             in general meeting elect a person as a Director if the Board
       Memorandum that would be relevant to Shareholders in               recommends the appointment. Accordingly, the Board recommends
       deciding how to vote on the Resolutions.                           the appointment of each nominee.
                                                                          Further information on these nominees is set out in section 7.2 of
c) Application of Listing Rule 7.1                                        this Explanatory Memorandum.
   Listing Rule 7.1 imposes a limit on the number of equity
   securities (eg shares or options to subscribe for shares) which
   a company can issue without shareholder approval. In general
   terms, a company may not, without prior shareholder approval,
   issue equity securities if the equity securities will in themselves
   or when aggregated with the securities issued by the company
   during the previous 12 months, exceed 15% of the number of
   fully paid ordinary shares on issue at the commencement of that
   12 month period.
   Listing Rule 7.2, exception 16 states that Listing Rule 7.1 does not
   apply to an issue of securities approved by shareholders for the
   purposes of item 7 of section 611 of the Corporations Act.
   Accordingly, Resolution 1 does not seek approval for the issue of
   New Shares to Zhongjin Lingnan HK for the purposes of Listing
   Rule 7.1.

d) Application of Listing Rule 7.9
   Listing Rule 7.9 prohibits a company from issuing (or agreeing
   to issue) equity securities without shareholder approval for
   3 months after it is told in writing that a person is making,
   or proposes to make, a takeover offer for securities in it. An
   exception to this is rule is where the agreement to issue equity
   securities is conditional upon shareholders approving the issue
   before the issue is made. If a company relies on this exception, it
   must not issue the equity securities without approval.
   Accordingly, to the extent required, Resolution 1 seeks approval
   for the issue of New Shares to Zhongjin Lingnan HK for the
   purposes of the exception in Listing Rule 7.9.




                                                                                                                                                                   41
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     16 Glossary




     $                                                   means Australian dollars.

     ASIC                                                means Australian Securities and Investments Commission.

     associate                                           means an “associate” as defined in section 9 of the Corporations Act.

     ASX                                                 means ASX Limited (ABN 98 008 624 691), or as the context requires, the financial market operated by
                                                         it.

     ASX Listing Rules or                                means the Listing Rules of ASX.
     Listing Rules

     Bid or CBH Bid                                      means the unsolicited takeover bid by CBH to acquire all of the Shares in Perilya as announced on 2
                                                         October 2008 on the terms set out in the Bidder’s Statement.

     Bid Condition                                       means a condition to the CBH Bid, as set out in the Bidder’s Statement.

     Bidder’s Statement                                  means the replacement bidder’s statement dated 26 November 2008 prepared by CBH (and its wholly
                                                         owned subsidiary Broken Hill Operations Pty Limited) in relation to its takeover bid for all of the issued
                                                         Shares in Perilya.

     Board                                               means the board of Directors of the Company.

     Call Option Deed                                    means the deed entered into by the Company and Zhongjin Lingnan on 18 December 2008 pursuant
                                                         to which the Company granted Zhongjin Lingnan a call option over the entire issued share capital
                                                         of Mount Oxide Pty Ltd whose assets comprise the Mount Oxide Project. The terms of the deed are
                                                         summarised in Annexure B.

     CBH                                                 means CBH Resources Limited (ABN 27 009 423 858).

     Company or Perilya                                  means Perilya Limited (ABN 85 009 193 695).

     Constitution                                        means the Company’s constitution.

     Corporations Act                                    means the Corporations Act 2001 (Cth).

     corporate debt                                      means all debt, as at the date of the Bidder’s Statement, excluding equipment finance leases and
                                                         insurance premium funding, in the ordinary course of business.

     Director                                            means a director of the Company.

     Ernst & Young                                       means Ernst & Young Transaction Advisory Services Limited (ABN: 87 003 599 844).

     ESOP                                                means the Perilya Limited Employee Share Option Plan originally approved by Shareholders on 18
                                                         November 2003 and re-approved by Shareholders on 29 November 2006.

     FIRB                                                Foreign Investments Review Board

     General Meeting or                                  means the Extraordinary General Meeting of Shareholders of the Company to be held at Conference
     Meeting                                             Suite, Level 8, Exchange Plaza Building, 2 The Esplanade, Perth, Western Australia on Thursday 5
                                                         February 2009 at 10.30am (Perth time), or any adjournment thereof.

     Independent Expert’s Report                         means the report of Ernst and Young set out in Annexure C.

     Listing Rules                                       means the listing rules of the ASX and any other rules of the ASX which are applicable to Perilya while it
                                                         is admitted to the official list of the ASX.

     Long Term Incentive Plan                            means the Perilya Long Term Incentive Plan approved by Shareholders on 31 October 2007 and
                                                         governed by the rules of the plan, the Perilya Long Term Incentive Share Plan Trust Deed dated 28
                                                         September 2007 and any relevant letter of offer.

     New Shares                                          means 197,672,000 Shares to be issued pursuant to the Subscription Agreement.

     Non-Associated Shareholders                         means Perilya shareholders that are not associated with the proposed Transaction




42
                                                                                            Perilya Limited 2009 Notice of Extraordinary General Meeting




Notice of Meeting or Notice    means the notice of Meeting accompanying this Explanatory Memorandum.

Option                         means an option to acquire a Share.

Performance Rights             means a right to be allocated a Share under the Long Term Incentive Plan.

Perilya Group                  means Perilya and its Related Bodies Corporate.

Related Body Corporate         has the meaning given in the Corporations Act.

Resolutions                    means the resolutions set out in the Notice of General Meeting.

Rising                         means Guangdong Rising Assets Management Co. Ltd.

Settlement                     means completion of the subscription for and allotment and issue of the New Shares under the
                               Subscription Agreement.

Share or Perilya Share         means a fully paid ordinary Share in the capital of the Company.

Shareholder                    means the holder of a Share.

Subscription Agreement         means the subscription agreement dated 5 December 2008 between Perilya and Zhongjin Lingnan, a
                               summary of which is contained in Annexure A to this Explanatory Memorandum.

Target’s Statement             means the target’s statement dated 15 December 2008 prepared by Perilya in relation to the CBH Bid.

Transaction or                 means the proposed share placement to Zhongjin Lingnan of the New Shares at an issue price of $0.23
Zhongjin Lingnan Transaction   per Share, as described in section 1 of this Explanatory Memorandum.

Zhongjin Lingnan               means Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd and, where the context requires,
                               Zhongjin Lingnan HK.

Zhongjin Lingnan HK            means Zhongjin Lingnan Mining (HK) Company Limited, a wholly-owned subsidiary of Zhongjin Lingnan.




                                                                                                                                                           43
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     Annexure A




     Summary of the Subscription Agreement                                     c) Zhongjin Lingnan obtaining all regulatory approvals necessary in
                                                                                  the People’s Republic of China for it to make an investment in a
     Under the Subscription Agreement, Perilya will place 197,672,000             foreign corporation within 35 days of the date of the Subscription
     new Shares to Zhongjin Lingnan or a Related Body Corporate of                Agreement. (Note: These approvals have been granted and
     Zhongjin Lingnan to raise $45,464,560 in cash. The New Shares will           announced accordingly by Perilya);
     rank pari passu with all other Shares.
                                                                               d) consent to the Transaction being obtained on terms reasonably
     A summary of the key terms of the Subscription Agreement is set out          acceptable to Zhongjin Lingnan and Perilya from certain banks
     below. Sections 5 and 6 of the Explanatory Memorandum explain                which have provided bank guarantee, hedging and lease
     the effect of the placement on Perilya’s financial position, capital         financing facilities to Perilya;
     structure and control.
                                                                               e) release of the security granted under a syndicated facility
     Settlement of the issue of New Shares to Zhongjin Lingnan (or its            agreement provided to Riverpoint Holdings Pty Ltd, to the
     Related Body Corporate) will occur 5 business days after satisfaction        reasonable satisfaction of Zhongjin Lingnan;
     or waiver of each of the conditions precedent referred to below
     (“Settlement Date”).                                                      f ) Perilya and its subsidiaries not being notified of, or becoming
                                                                                   aware of any facts or circumstances prior to Settlement which
     Deposit                                                                       indicate that certain mining leases located at Perilya’s Broken
                                                                                   Hill Operations (Broken Hill Tenements) will not be renewed on
     Zhongjin Lingnan shall pay to Perilya a deposit of $10,000,000
                                                                                   terms reasonably acceptable to Zhongjin Lingnan;
     (“Deposit”) on the earlier of 24 December 2008 and 3 business days
     after the receipt of all regulatory approvals required in the People’s    g) Shareholders approving in general meeting (i) the issue of New
     Republic of China for payment of the Deposit. If the conditions              Shares under the Subscription Agreement in accordance with
     precedent are not satisfied by 31 March 2009 (or any earlier                 and for the purposes of ASX Listing Rules 7.1 and 7.9 and for all
     period referred to in the conditions precedent) or the Agreement is          other purposes; and (ii) the acquisition by the Subscriber of the
     terminated, the Deposit will vest in Zhongjin Lingnan and Perilya will       New Shares in accordance with and for the purposes of item 7 of
     be required to repay it within 20 business days.                             section 611 of the Corporations Act; and
     Payment of the Deposit is conditional on the parties agreeing the         h) compliance by Zhongjin Lingnan with its obligation to pay the
     terms of a call option over the Mount Oxide Project (including               Deposit. (Note: This condition has been satisfied as announced
     the shares in Mount Oxide Pty Ltd) (”Call Option”), which will be            by Perilya).
     exercisable if Perilya fails to refund the Deposit if the Transaction     Zhongjin Lingnan may waive the conditions set out in paragraphs (b)
     does not proceed. The exercise price of the call option is $15 million    to (f ) above. Perilya may waive the condition set out in paragraph (h)
     (exclusive of goods and services tax) and Zhongjin Lingnan will be        above.
     entitled to set off the amount payable under the Call Option against
     the Deposit. The parties executed a Call Option Deed containing           If any one or more Conditions Precedent are not satisfied or waived
     the definitive terms of the Call Option (further details of which are     on or before 31 March 2009, all rights under the Subscription
     set out in Annexure B) and Zhongjin Lingnan paid the Deposit on 24        Agreement will terminate on that date.
     December 2008.
                                                                               Pre-Settlement Undertakings
     Perilya is liable for stamp and other duty payable on or in relation to
                                                                               Until Settlement, Perilya must ensure that none of the following
     the grant and exercise of the Call Option.
                                                                               occurs (each a “Material Adverse Change”):
     Conditions Precedent                                                      a) cessation of operation at the Broken Hill Project, other than as
     The obligations of Zhongjin Lingnan to subscribe for and Perilya             described in the Company’s announcement to ASX of 21 August
     to issue the New Shares under the Subscription Agreement do not              2008;
     become binding until each of the following conditions precedent are       b) disposal of all or any part of Perilya’s Mount Oxide Project,
     satisfied or waived:                                                         Broken Hill Project and Flinders Project unless otherwise agreed
     a) if required by the Foreign Acquisitions and Takeovers Act 1975            by Zhongjin Lingnan;
        (Cth), the earlier of (i) Zhongjin Lingnan being notified in writing   c) disposal of any other major assets of Perilya or any of its
        on behalf of the Federal Treasurer that there are no objections           subsidiaries which in the opinion of Zhongjin Lingnan would
        under the Australian Government’s Foreign Investment Policy to            have, or could reasonably be expected to have (whether now or
        Zhongjin Lingnan acquiring the New Shares; and (ii) the period            in the future) a material adverse effect on the business, assets,
        during which the Treasurer is empowered under the Foreign                 liabilities, financial or trading position, profitability or prospects
        Acquisitions and Takeovers Act 1975 (Cth) to make an order                of the Perilya Group, unless otherwise agreed by Zhongjin
        prohibiting the proposed acquisition of New Shares by Zhongjin            Lingnan, other than a disposal of the Company’s shares held in
        Lingnan expiring without any such order having been made;                 Silver Lake Resources Limited.
     b) there being no material breach by Perilya of any warranty (see
        below) and no Insolvency Event (defined below) occurring in
        respect of Perilya on or before the Settlement Date;


44
                                                                                                     Perilya Limited 2009 Notice of Extraordinary General Meeting




Further, until Settlement, Perilya must ensure that it and each of its        defined in section 9 of the Corporations Act), entering into a
Related Bodies Corporate does not do (or agree to do) any of the              compromise or arrangement with, or assignment for the benefit
following without the consent of Zhongjin Lingnan:                            of, any of its members or creditors, or any analogous event (each
                                                                              an “Insolvency Event”);
a) do anything outside the activities which are in the ordinary
   course of Perilya’s trading activities and which would not be          b) a Material Adverse Change;
   considered unusual for a company operating a business similar          c) an unremedied breach of any of Perilya’s obligations under the
   in kind to Perilya’s business at the relevant time;                       Subscription Agreement; and
b) alter its capital structure in any way (other than to issue shares     d) a breach of warranty by Perilya.
   on the exercise of any options on issue at the date of the
   Subscription Agreement granted under the Perilya Employee              In addition, either party may terminate the Subscription Agreement
   Share Option Plan);                                                    by serving notice on the other if CBH obtains more than 50% of
                                                                          the Shares prior to the Company convening the general meeting to
c) allot or agree to allot or issue any security such as an option, a     approve the Resolutions.
   share, loan capital or any security convertible into a share or loan
   capital;                                                               Warranties
d) declare of pay a dividend or make any distribution of assets,          Both parties have given standard warranties under the Subscription
   capital or profits;                                                    Agreement in relation to their solvency, authority and capacity to
e) alter its Constitution;                                                enter into the Subscription Agreement. In addition, Perilya has given
                                                                          the following customary warranties:
f ) reduce its share capital in any way or buy back any share;
                                                                          a) to the best of the knowledge, information and belief of
g) give any financial assistance for the acquisition of its own shares;
                                                                             Perilya, each of Perilya and its subsidiaries (“Perilya Group”)
h) conduct any investment discussions or negotiations with other             has conducted and is conducting its business in material
   parties regarding its capital structure; and                              compliance with all applicable legislation, regulations, by-laws
i)   enter into or vary any contract with a director, secretary or           or requirements of all authorities and is not in violation of any
     member of its senior executive management team.                         material law, statute, regulation, by-law, decree, rule, policy,
                                                                             directive, guideline, order, permit, license, certificate, approval or
Perilya is also required to exercise best endeavours to ensure the           authorisation applicable to its properties or activities;
Broken Hill Tenements are renewed as soon as possible.
                                                                          b) to the best of the knowledge, information and belief of
Commercial opportunities                                                     Perilya, each company in the Perilya Group is not aware of any
                                                                             legislation, regulation, by-law or requirement of any authority
Zhongjin Lingnan and Perilya have agreed that should the
                                                                             presently in force or proposed to be brought into force which it
opportunity arise in the future, it is their intention that they would
                                                                             anticipates it will be unable to comply with without adversely
enter into good faith negotiations with respect to potential sales
                                                                             affecting its financial condition, results of operations or business;
agreement(s) for up to 50% of Perilya’s zinc and lead concentrate
production from its Broken Hill Project and up to 50% of Perilya’s zinc   c) to the best of the knowledge, information and belief of Perilya,
silicate direct shippable ore from its Flinders Project, on commercial       each company in the Perilya Group holds every material licence,
arm’s length terms, subject to those concentrates and ore becoming           certificate, registration, permit, consent and qualification
available from existing off-take agreements to which Perilya is a            required to enable it to carry on its business as now conducted
party.                                                                       and each is valid and subsisting and in good standing and
                                                                             does not contain any condition or limitation which has a
Perilya will be entitled to terminate any such agreement by giving 12
                                                                             material adverse effect on the operations of its business as
months’ written notice if Zhongjin Lingnan’s interest in the ordinary
                                                                             now conducted and each is valid and subsisting and in good
shares of Perilya falls below 20%.
                                                                             standing and does not contain any condition or limitation which
Termination Events                                                           has a material adverse effect on the operations of its business
                                                                             as now conducted or proposed to be conducted and it has not
Zhongjin Lingnan is entitled to terminate the Subscription Agreement         received any notice of proceedings related to the revocation
forthwith by giving notice to Perilya, if any of the following events        or modification of any of them which if the subject of an
occur before the Settlement Date:                                            unfavourable decision, ruling or finding would materially and
a) Perilya or any of its subsidiaries being in liquidation or                adversely affect its financial condition, results of operation or
   provisional liquidation or under administration, having a                 business;
   controller (as defined in the Corporations Act) or analogous           d) except to the extent contemplated by the conditions precedent,
   person appointed to it or any of its property, being taken                the execution and delivery of the Subscription Agreement and
   under section 459(1) of the Corporations Act to have failed to            performance of its obligations under the Agreement do not
   comply with a statutory demand, being unable to pay its debts             conflict with:
   or otherwise insolvent, taking any step that could result in
   the company becoming an insolvent under administration (as



                                                                                                                                                                    45
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     Annexure A (continued)




     Warranties (continued)                                                     o) ASIC has not made any determination under section 708A(2) of
                                                                                   the Corporations Act that remains in force in relation to Perilya as
          i)   any statute, rule or regulation applicable to it (if any);
                                                                                   at the date of issue of the New Shares;
          ii) its Constitution, or any resolution of its directors or
                                                                                p) subject to Perilya issuing a notice under section 708(5)(e) of
              shareholders which are currently in effect;
                                                                                   the Corporations Act upon issuing the New Shares to Zhongjin
          iii) any mortgage, note, indenture, contract, agreement,                 Lingnan, it is not aware of any reason why Zhongjin Lingnan will
               instrument, lease, or other document to which it is a party or      not be able to rely on section 708A(5) of the Corporations Act
               by which it or any company in the Perilya Group is bound;           in selling all or some of the New Shares to a third party without
          iv) any judgment, decree or order binding on it or its properties        the need for disclosure to that third party under Part 6D of the
              or any company in the Perilya Group or its assets;                   Corporations Act;

          v) any applicable securities, laws and any by-laws, rules and         q) Perilya is in full compliance with its continuous disclosure
             regulations of the ASX;                                               obligations under the Corporations Act and the Listing Rules and
                                                                                   is not withholding any information from disclosure by reason of
     e) each company in the Perilya Group is in compliance in all
                                                                                   ASX Listing Rule 3.1A; and
        material respects with all terms and provisions of each contract,
        agreement, indenture, lease, policy, instrument, and licence            r)   all information concerning Perilya (and each member of the
        connected with the conduct of the business and each is valid and             Perilya Group) disclosed to Zhongjin Lingnan is complete
        binding in accordance with its terms and in full force and effect,           and accurate in all material respects and is not misleading
        and no material breach or default by any company in the Perilya              in any material respect. The material disclosed to Zhongjin
        Group or event which, with notice or lapse of time or both, could            Lingnan discloses all information which Perilya knows or could
        constitute a material breach or default by any company in the                reasonably be expected to know after having made reasonable
        Perilya Group, exists in relation to any of them;                            enquiries that it reasonably believes is material to a subscriber of
                                                                                     the New Shares.
     f ) no order prohibiting the sale of its securities has been issued
         and is currently effective and to the best of its knowledge            In the event the above warranties are untrue, inaccurate or
         no proceedings for this purpose have been instituted or are            misleading as at the date of the Subscription Agreement or on the
         pending, contemplated or threatened;                                   Settlement Date, Perilya has agreed to indemnify Zhongjin Lingnan
                                                                                against all loss arising directly or indirectly from the breach.
     g) the New Shares will when issued be fully paid ordinary shares in
        the capital of Perilya ranking equally in all respects with all other   Zhongjin Lingnan has given customary warranties that:
        Shares in its capital;                                                  a) as at the date of the Subscription Agreement, it has no voting
     h) the New Shares will when issued represent 50.1% of the enlarged            power in Perilya and neither it nor any of its associates is a party
        issued share capital of Perilya immediately following Settlement;          to any agreement, arrangement or understanding the economic
                                                                                   effect of which is to confer rights equivalent to, or substantially
     i)   except for the 8,700,000 options issued under the Perilya
                                                                                   equivalent to, the acquisition, holding or disposal of securities in
          Employee Share Option Plan and the 151,800 performance
                                                                                   the Company other than under the Subscription Agreement;
          rights issued under the Perilya Long Term Incentive Plan, there
          are no agreements, arrangements or understandings in force or         b) it is either: a person in relation to whom either or both of
          securities issued which call for the present or future issue of, or      sections 708(8)(a) and (b) apply in respect of the New Shares;
          grant to any person the right to require the issue of, any Shares        a “sophisticated investor” within the meaning of section
          or other securities in Perilya;                                          708(8)(c) of the Corporations Act and has given to Perilya a
                                                                                   certificate to that effect in accordance with that section; or a
     j)   there is no material litigation, arbitration, or administrative
                                                                                   “professional investor: within the meaning of section 708(11) of
          proceeding taking place, pending or to the knowledge of any of
                                                                                   the Corporations Act;
          its officers threatened against it or any of its properties or any
          company in the Perilya Group;                                         c) it acknowledges that Perilya is not issuing the New Shares for
                                                                                   the purpose of Zhongjin Lingnan selling or transferring them,
     k) the New Shares are in a class of securities that were quoted at
                                                                                   or granting, issuing or transferring interests in, or options or
        all times on the official list of the ASX in the 3 months before the
                                                                                   warrants over them;
        date on which the New Shares were issued;
                                                                                d) it is Zhongjin Lingnan’s present intention to be an investor in
     l)   the New Shares are in a class of securities for which trading on
                                                                                   the New Shares and to remain so for at least 12 months, which
          the official list of the ASX was not suspended for more than a
                                                                                   confirmation is understood to be a statement by Zhongjin
          total of 5 days in 12 months (the “Relevant Period”);
                                                                                   Lingnan of present intention only and not an undertaking not
     m) no exemption under section 111AS or 111AT of the Corporations              to sell, particularly where its investment objectives or market
        Act covered Perilya, or any person as director or auditor of               opportunities change; and
        Perilya, at any time in the Relevant Period;
                                                                                e) it agrees to be bound by the Constitution.
     n) no order under section 340 or 341 of the Corporations Act
        covered Perilya, or any person as director or auditor of Perilya, at
        any time in the Relevant Period;


46
                                                                         Perilya Limited 2009 Notice of Extraordinary General Meeting




Post Settlement Obligations
The Company has agreed to lodge a notice with ASX under section
708A(5)(e) of the Corporations Act.

Directors
From the Settlement Date, Zhongjin Lingnan may in its absolute
discretion nominate a number of directors equal to half of the
members of the Board, and Perilya will procure the appointment of
the nominees forthwith.

Directors’ Fiduciary duties
Perilya is required to procure that, subject to fiduciary duties, the
Board unanimously recommends that Shareholders vote to approve
the resolutions for the issue of the New Shares to Zhongjin Lingnan
and the election of new directors, and maintain its recommendation
at all times before and during the meeting at which those resolutions
are to be considered.
Perilya has agreed that it will not, and will procure that its
representatives will not:
a) directly or indirectly seek, invite or procure any other offer
   to invest in the Company via the issue of shares or any other
   security;
b) seek, invite or procure any other party to cause or issue a bid for
   all or part of the Company’s issued shares; or
c) participate in any discussions or negotiations, provide any
   information to any other party seeking to invest in the Company
   via the issue of shares or any other security or to issue a bid for
   some or part of the Company’s issued shares.
However, this does not prevent the Directors from discharging
their obligations with respect to their fiduciary duties to present
to Shareholders any other superior offer for shares or bid for the
Company’s issued shares that may be made on an unsolicited basis
and to make a recommendation to its shareholders based on the
merits of the offers or bids that may have been presented to the
Company and/or its shareholders before the Settlement Date.

Dealing in securities
So long as Zhongjin Lingnan holds at least 20% of the issued capital
in Perilya, it must not, and must procure that its Related Bodies
Corporate do not acquire Shares in reliance on the exception in
Item 9 of section 611 of the Corporations Act, save as to maintain a
relevant interest in no more than 52% of the Shares on issue from
time to time.

Assignment
Zhongjin Lingnan may assign its rights under the Subscription
Agreement to any Related Body Corporate.




                                                                                                                                        47
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     Annexure B




     Summary of the Call Option Deed                                           Title, property and risk

     Under the Call Option Deed, Perilya grants to Zhongjin a call option      Until Completion, the title to, property in and risk of the Sale Shares
     over the entire issued share capital of Mount Oxide Pty Ltd (Sale         remain solely with Perilya, but will pass to Zhongjin (or a person
     Shares), a wholly owned subsidiary of Perilya whose assets comprise       nominated by Zhongjin) on and from completion of the sale and
     the Mount Oxide Project.                                                  purchase of the Sale Shares (Completion) with all rights which
                                                                               were attached to or had accrued on the Sale Shares at Completion
     A summary of the key terms of the Call Option Deed is set out below.      (including the right to receive any dividend not yet paid on
     The effect of the Call Option Deed on the CBH Bid is considered in        Completion).
     sections 10.4 and 12.2(a) of this Explanatory Memorandum.
     Perilya Freehold Mining Pty Ltd (Freehold), another wholly owned          Payment of Purchase Price
     subsidiary of Perilya that has an interest in the Tenements and the       Zhongjin shall set off the Purchase Price against the Deposit and
     Applications (as defined below), is also a party to the Call Option       pay the difference between the Purchase Price and the Deposit
     Deed.                                                                     (Balance) within 30 days of Completion. Zhongjin may retain a part
                                                                               of the Balance equal to Zhongjin’s good faith estimate of loss arising
     Terms of Call Option                                                      from any claim under the Call Option Deed, pending agreement of
     In consideration of Zhongjin paying to Perilya A$1.00, Perilya grants     the claim between the parties or determination of the claim by a tax
     to Zhongjin the right to require Perilya to sell the Sale Shares to       authority or court.
     Zhongjin (or to a person nominated by Zhongjin) (Call Option) for         Zhongjin shall pay any remaining part of the Balance to Perilya within
     A$15 million (Purchase Price).                                            5 business days of such agreement or determination.
     The Call Option is exercisable by Zhongjin by giving a notice to
     Perilya in the form set out in Schedule 3 of the Call Option Deed (Call   Completion
     Exercise Notice).                                                         Completion must take place at the offices of Blake Dawson in Perth
     The Call Option is exercisable during the period (Call Period)            at 3pm on the date which is 3 business days after the business
     commencing on the date which Perilya fails to comply with its             day on which Perilya receives a Call Exercise Notice from Zhongjin
     obligation to repay the Deposit under the Subscription Agreement          (Completion Date) or such other time or place the parties may agree.
     (Default Date) to the earlier of the date on which Perilya repays         Completion can occur only once Zhongjin and Perilya have each
     the Deposit and 30 days from the Default Date. (Perilya is required       satisfied their respective obligations set out below.
     to repay the deposit under the Subscription Agreement within 20           At Completion, Perilya must deliver to Zhongjin:
     business days of a failure to satisfy a condition precedent (each of
                                                                               a) transfers (executed by Perilya and in registrable form) of the
     which must be satisfied by 31 March 2009 unless an earlier period
                                                                                  Sale Shares in favour of Zhongjin (or a person nominated by
     is referred to in the Subscription Agreement) or termination of the
                                                                                  Zhongjin);
     Subscription Agreement).
                                                                               b) any consent or consents to the share transfers contemplated by
     Nature of the Call Option                                                    any pre-emptive rights in Mount Oxide Pty Ltd’s (Mount Oxide’s)
     The Call Option confers on Zhongjin the right but not the obligation         constitution;
     to give Perilya a Call Exercise Notice which is irrevocable and which     c) the certificates for the Sale Shares;
     may only be given during the Call Period.
                                                                               d) all documents of, and evidencing title to, the Mount Oxide
     On the giving of a Call Exercise Notice, a contract arises under which       Assets (as is reasonably practicable) which comprise:
     Perilya must sell to Zhongjin or a person nominated by Zhongjin all
                                                                                   i)   the exploration permits (Tenements) EPM 10313, EPM 14307,
     the Sale Shares free from any encumbrance or restriction on transfer
                                                                                        EPM 14659 and EPM 14660 including the applications for
     and Zhongjin must buy all the Sale Shares from Perilya for the
                                                                                        exploration permits EPM 16800, EPM 16802, EPM 16803,
     Purchase Price.
                                                                                        EPM 16869 (Applications) once granted, or if Mount Oxide
     Lapse of Call Option                                                               is not the registered holder of the Tenements, all of its right,
                                                                                        title and interest in the Tenements and the Applications;
     If the Call Option has not been exercised before 5pm on the last day
     of the Call Period or if Settlement occurs under the Subscription             ii) all information, data and records available with respect
     Agreement, the Call Option automatically lapses.                                  to the Tenements and all information, reports, deeds and
                                                                                       agreements pertaining to claims of indigenous persons and
     If Zhongjin does not pay the Deposit under the Subscription                       indigenous rights and obligations arising under Native Title
     Agreement within 3 Business Days of the later of the date of the Call             law affecting the whole or any part of the Tenements (Mining
     Option Deed or the date Zhongjin receives the regulatory approvals                Information);
     in the People’s Republic of China for the payment of the Deposit
     under the Subscription Agreement, the Call Option automatically               iii) all of its right, title and interest in, and the benefit of, the
     lapses.                                                                            material contracts to which it is a party which are set out in
                                                                                        Schedule 1 of the Call Option Deed;




48
                                                                                                    Perilya Limited 2009 Notice of Extraordinary General Meeting




     iv) the plant and equipment set out in Schedule 1 of the Call       Pre-Completion obligations
         Option Deed;
                                                                         Until Completion, but subject to certain exceptions in the Call Option
     v) camp facilities located on the Tenements;                        Deed Perilya must procure that Mount Oxide (and where applicable,
     vi) drill cores and samples related to the Tenements; and           must procure that Freehold):

     vii) the environmental authority granted under the Environmental    a) conducts its affairs so as to comply in all material respects
          Protection Act 1994 (Qld) in respect to the Tenements or          with all Authorisations, applicable laws and regulations, its
          related to the Tenements (Environmental Authorities);             constitution and the terms and conditions of the Tenements;

e) all seals, minute books, statutory books and registers,               b) does not dispose or agree to dispose of any of the Mount Oxide
   certificates of incorporation, tax and financial records, copies of      Assets;
   taxation returns and Mount Oxide’s constitution;                      c) maintains in good working order and condition the material
f ) the Mount Oxide’s books and records;                                    Mount Oxide Assets and to ensure in the case of the Tenements
                                                                            that the same are kept validly subsisting, in good standing and in
g) authorities directed to Mount Oxide’s bankers authorising the            full force and effect;
   operation of each bank account of Mount Oxide in accordance
   with any details notified by Zhongjin;                                d) permits representatives of Zhongjin to visit and inspect the
                                                                            Tenements provided that each such representative agrees in
h) the written resignations of each director, secretary and public          writing with Perilya that he shall enter on the Tenements at his
   officer of Mount Oxide taking effect at Completion and including         own risk and will observe all safety regulations and requirements
   a release on terms reasonably acceptable to Zhongjin signed by           of Perilya from time to time in force; and
   each such director, secretary and public officer in respect of any
   claim that such person has against Mount Oxide;                       e) promptly delivers to Zhongjin a true copy of every material
                                                                            notice, document, financial statement, report, plan or other
i)   all current authorisations, consents, declarations, exemptions,        correspondence whatsoever received or prepared by or on behalf
     licences, notarisations, permits or waivers and other documents        of the Perilya Group, which materially affects or concerns the
     issued to Mount Oxide under any legislation relating to the            Mount Oxide Assets including in respect to any Application or
     conduct or operation of its business (Authorisations);                 Native Title issue;
j)   all passwords, codes, source codes or other means of access         f ) does not incur any liability or financial indebtedness;
     to and use of all Mount Oxide Assets comprising computers on
     which information is stored; and                                    g) does not declare itself trustee of or create, incur, allow to exist
                                                                            any encumbrance or otherwise encumber any of the Mount Oxide
k) all keys and codes necessary for Mount Oxide to lodge or file            Assets or assign, transfer, lease either in a single transaction or
   documents with any Governmental Agency, including ASIC.                  in a series of transactions any of the Mount Oxide Assets;
Perilya must also ensure that at Completion, a meeting of the            h) pays its financial indebtedness including all expenditure
directors of Mount Oxide is held at which it is resolved:                   commitments in respect of the Tenements, taxes and other
a) to register the transfers of the Sale Shares, despite any contrary       outgoings and expenses as and when the same respectively
   provision of its constitution;                                           become due and owing;
b) to cancel the existing share certificates for the Sale Shares and     i)   does not increase the amount of any of its liabilities, provide
   issue a new share certificate for the Sale Shares in the name of           financial accommodation to any other entity or create, incur,
   Zhongjin (or such person nominated by Zhongjin);                           allow to exist or otherwise assume any guarantee obligation;
c) to appoint as directors, secretaries and public officers (as          j)   materially observes, performs and fulfils the obligations on its
   appropriate) those persons nominated by Zhongjin, subject to               part to observe, perform or fulfil under each material contract to
   those persons providing their written consent;                             which it is a party and does not terminate, vary, amend or extend
                                                                              the terms of any such material contract (and in this regard if
d) to accept the resignations of each director, secretary and public
                                                                              the consent of Zhongjin is requested, that consent shall not be
   officer;
                                                                              unreasonably withheld);
e) to transfer the registered office to the address nominated by
                                                                         k) does not enter into any contract, arrangement or commitment or
   Zhongjin, subject to the occupier providing its written consent;
                                                                            engage in any material activity or transaction;
f ) to revoke all existing banking authorities and approve any new or
                                                                         l)   does not enter into any contract, arrangement or commitment
    revised banking authorities notified by Zhongjin; and
                                                                              to employ anyone in respect to the conduct or operation of its
g) to revoke all existing powers of attorney or other authorities             business;
   except as otherwise contemplated by the Call Option Deed.
At Completion, Zhongjin must deliver a written consent of each
person nominated by Zhongjin to act as a director, secretary or public
officer of Mount Oxide.




                                                                                                                                                                   49
     Perilya Limited 2009 Notice of Extraordinary General Meeting




     Annexure B (continued)




     Summary of the Call Option Deed (continued)                                a) transfer the Mount Oxide Shares;
                                                                                b) exercise any rights, including rights to appoint a proxy or
     Pre-Completion obligations (continued)                                        representative and voting rights, attending to the Sale Shares;
     m) does not change in any material respect any of its accounting           c) agree to a meeting being convened by shorter notice than is
        policies (except as required by the accounting standards or by             required by the Corporations Act or by the constitution of Mount
        law);                                                                      Oxide;
     n) does not change its constitution;                                       d) agree to a resolution being proposed and passed as a special
     o) does not merge or consolidate with any other corporation or                resolution at a meeting of which notice shorter than that required
        acquire any shares in, or the business or assets of, any other             by the Corporations Act or by the constitution of Mount Oxide
        person, firm, association, corporation or business organisation,           has been given;
        or enter into a joint venture, partnership, alliance or any other       e) receive on behalf of the registered member any notice from
        form of business venture or agree to do any of the foregoing;              Mount Oxide, including notice of a general meeting;
     p) does not declare or pay a dividend or do or omit to do any act          f ) request a meeting of Mount Oxide to be convened;
        whereby a dividend is deemed to have been paid, or make a
        distribution of, or revaluation of, the Mount Oxide Assets;             g) call and arrange to hold (or join in calling and arranging) a
                                                                                   meeting of Mount Oxide; and
     q) does not reduce its share capital, or transfer an amount to its
        share capital account from any of its other accounts, or allot or       h) receive any dividend or other entitlement paid or credited to
        issue any shares or any securities or loan capital convertible into        Perilya in respect of the Sale Shares.
        or exchangeable for shares, or purchase, redeem, acquire any
                                                                                Power of attorney
        such shares or securities, or agree to do so, or sell or give any
        option, right to purchase, or encumbrance over any such shares          With effect from the date the Call Option is exercised, Perilya (and
        or securities;                                                          Freehold) irrevocably appoints Zhongjin as its attorney, to execute
                                                                                all documents and do anything necessary or desirable in the opinion
     r)   does not institute, settle or dispose of any claim, litigation,
                                                                                of Zhongjin to give full effect to this document, including making
          investigation, arbitration or other like proceeding in relation to
                                                                                applications to transfer the Tenements and Applications.
          any of the material contracts;
                                                                                Zhongjin may exercise the power of attorney even if it is affected by
     s) does not agree to do anything referred to above;
                                                                                an actual or potential conflict of interest or duty, or might benefit
     t)   keeps Zhongjin informed about any claim, litigation,                  from exercising the power of attorney and will notify and provide
          investigation, arbitration or other like proceeding in relation to    reasonable details to Perilya (and Freehold) within 5 business days
          Mount Oxide or the Tenements after it becomes aware of it;            following any exercise of the power of attorney.
     u) uses best endeavours to undertake all obligations to be
                                                                                Warranties
        observed and performed under an agreement dated 3 October
        2008 between Perilya, Freehold and Mount Oxide (Freehold                Perilya has given standard warranties under the Call Option Deed in
        Agreement) and as may be required to achieve completion under           relation to its incorporation, solvency, authority and capacity to enter
        that agreement;                                                         into the Call Option Deed.

     v) exits from the Perilya Consolidated Group (as defined below) in a       In addition, Perilya has given standard warranties in respect of its
        manner that ensures that Mount Oxide is released to Zhongjin’s          ownership of the Sale Shares, the due incorporation and solvency
        reasonable satisfaction from any liability for the Tax affairs of the   of Mount Oxide, the assets of Mount Oxide, that there is no
        Perilya Consolidated Group on and with effect from Completion;          undisclosed encumbrances affecting Mount Oxide or the Mount
        and                                                                     Oxide Assets, the accuracy of Mount Oxide’s pro forma accounts, the
                                                                                validity and compliance by Mount Oxide with material contracts, the
     w) does not, without Zhongjin’s prior consent (such consent not to
                                                                                ownership and status of the Mount Oxide Assets and Mount Oxide’s
        be unreasonably withheld), agree to any conditions contained
                                                                                plant and equipment, the validity of and title to the Tenements,
        in a notice issued by or on behalf of the Minister under section
                                                                                compliance by Mount Oxide with legislation and the absence of
        151(4) of the Mineral Resources Act 1989 (Queensland) in relation
                                                                                litigation, completeness of Mount Oxide’s books and records, that
        to the transfer of the Tenements.
                                                                                all Authorisations necessary to carry on Mount Oxide’s business
     Post-Completion obligations                                                have been obtained and are valid, ownership of Mining Information,
                                                                                non-infringement of intellectual property rights, payment of taxes by
     For valuable consideration, Perilya appoints Zhongjin to be its            Mount Oxide, compliance by Mount Oxide with GST laws, currency of
     attorney from Completion until the Sale Shares are registered in the       all insurances required to be effected by Mount Oxide and in respect
     name of Zhongjin (or such person nominated by Zhongjin). Under             of the Mount Oxide Assets, compliance with environmental laws and
     this power of attorney, Zhongjin may do in the name of Perilya, and        that Mount Oxide has never employed and does employ any person
     on its behalf, everything necessary or desirable, in Zhongjin’s sole       as an employee.
     discretion, to:



50
                                                                             Perilya Limited 2009 Notice of Extraordinary General Meeting




Perilya must indemnify Zhongjin against any loss suffered or incurred
by it to the extent that the loss arises from or in connection with any
breach of warranty. However, Perilya is not liable for any warranty
claim unless the amount of each individual claim adjudicated against
or agreed by Perilya in respect of a breach of warranty exceeds
A$50,000 and until the total of all amounts adjudicated against or
agreed by Perilya in respect of breaches exceeds A$75,000. The
aggregate liability of Perilya in respect of all warranty claims shall not
exceed A$15 million.
Any payment to Zhongjin or to a related body corporate of Zhongjin
in respect of any claim against Perilya is taken to be a reduction of
the Purchase Price.

Tax and Stamp Duty
Perilya must pay to Zhongjin on demand an amount equal to the
amount needed to indemnify Zhongjin and Mount Oxide against
tax payable and a claim or liability incurred by either of them in
connection with the Mount Oxide’s membership of the Perilya Group
before Completion, to the extent that the tax, claim or liability arises
from certain specified events.
Perilya must pay all stamp and other duty (including penalties,
fines, interest and the like) and other government imposts payable
on or in connection with the Call Option Deed and any transaction
contemplated by it and all instruments of transfer and other
documents executed under or in connection with it when due or
earlier if requested in writing by Zhongjin.

Effect on Applications and Tenements
In respect to the Applications, Perilya (and Freehold) agree to
cooperate with Zhongjin, use best endeavours to obtain grants of
the relevant exploration permits, provide any information requested
by the Department of Mines and Energy Queensland (Department);
provide copies of all notices, correspondence and other documents
to or from the Department to Zhongjin and invite Zhongjin to
participate in native title negotiations
Freehold consents to Zhongjin lodging caveats with the Department
against each of the Tenements and irrevocably and unconditionally
appoints Zhongjin as its sole agent to do all things necessary
in respect of the Applications to attain the grant or any or all
exploration permits which are the subject of those Applications.




                                                                                                                                            51
                                              Perilya Limited 2009 Notice of Extraordinary General Meeting




Annexure C




Ernst & Young – Independent Expert’s Report
Independent Expert’s Report
Perilya Limited - Issue of Shares to Shenzhen Zhongjin Lingnan Nonfemet Co.
Ltd




24 December 2008
                                                                                                         24 December 2008
PART 1 – INDEPENDENT EXPERT’S REPORT 

The Directors
Perilya Limited
First Floor, Block E
661 Newcastle Street
LEEDERVILLE WA 6007


Dear Sirs

Independent Expert’s Report in relation to the Proposed Issue of Shares to Shenzhen 
Zhongjin Lingnan Nonfemet Co. Ltd 
On 9 December 2008, Perilya Limited (“Perilya” or “the Company”) announced that it had signed a share subscription agreement with
Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd (“Zhongjin”) (“the Share Subscription Agreement”), a Chinese metals and mining company,
under which Zhongjin agreed to subscribe for 197,672,000 fully paid ordinary shares in Perilya (“the Placement Shares”) at a price of 23
cents each, for a total cash consideration of $45,464,560 (“the Proposed Transaction”).

As a result of the Proposed Transaction, if it proceeds, Zhongjin will hold 50.1% of the expanded issued share capital of Perilya.

Under section 606 of the Corporations Act (“the Act”) an entity is generally prohibited from increasing its interest in the voting shares of a
listed company to greater than 20%. An exception to the prohibition is for the increase to be approved by shareholders of the company
under item 7 of section 611 of the Act. Accordingly, approval from Perilya shareholders for the issue of the Placement Shares to Zhongjin
under the Proposed Transaction is being sought pursuant to item 7 of section 611 of the Act.

To assist Perilya shareholders assess the Proposed Transaction, the directors of Perilya have appointed Ernst & Young Transaction Advisory
Services Limited (“Ernst & Young Transaction Advisory Services”) to prepare an independent expert’s report, the purpose of which is to
state whether or not, in our opinion, the issue of the Placement Shares to Zhongjin under the Proposed Transaction is fair and reasonable
to the Company’s shareholders not associated with the Proposed Transaction (“the Non-Associated Shareholders”).

In preparing our report we have had regard to Australian Securities and Investments Commission Regulatory Guide 111, Content of expert
reports (“RG 111”). RG 111 requires that where the transaction being considered for the purposes of item 7 of section 611 has a similar
effect on the company’s shareholding as a takeover bid then the transaction should be analysed as if it were a takeover bid. A takeover bid
generally involves a control transaction where one entity is looking to acquire or increase a controlling interest in another entity. With
Zhongjin obtaining a 50.1% interest in Perilya, in our view the Proposed Transaction represents a control transaction as intended under RG
111 and as such has been assessed on a basis consistent with a takeover bid.

In this regard, RG 111.10 provides that “an offer is 'fair' if the value of the offer price or consideration is equal to or greater than the value
of the securities the subject of the offer”. RG111.62 provides that an expert should usually give a range of values for the securities that are
the subject of the offer. In this independent expert’s report, we consider that, if the value of the consideration offered by Zhongjin for the
Placement Shares falls within the range of values assessed for a Perilya share, the issue of the Placement Shares to Zhongjin under the
Proposed Transaction would be fair.

RG 111.11 provides that “An offer is ‘reasonable’ if it is fair. It might also be ‘reasonable’ if, despite being ‘not fair’, the expert believes that
there are sufficient reasons for security holders to accept the offer in the absence of any higher bid before the close of the offer.” RG
111.12 lists a number of items which experts may consider when assessing the reasonableness of an offer. We have considered these in
the preparation of this report.

On 2 October 2008, CBH Resources Limited (“CBH”) announced its intention to issue a takeover offer for all of the shares in Perilya on the
basis of 4.2 CBH shares for every 1 Perilya share held (“the CBH Bid”). The Bidder’s Statement from CBH was sent to Perilya shareholders
on 2 December 2008. On 15 December 2008, Perilya released the Target’s Statement in which the Directors unanimously recommended
to Perilya shareholders to reject the CBH Bid. In the absence of a superior proposal, the Directors of Perilya have unanimously
recommended that Perilya shareholders approve the Proposed Transaction with Zhongjin. While we have undertaken a high level
comparison the CBH Bid with the Proposed Transaction with Zhongjin we have not considered the CBH Bid in detail and have not provided
an opinion as to whether or not the CBH Bid is fair and reasonable.

                                                                              Ernst & Young Transaction Advisory Services Pty Limited, ABN 87 003 599 844
                                                                                                          Australian Financial Services Licence No. 240585
                                                                                                                                              2




    Summary of Opinion 
    In forming its opinion, Ernst & Young Transaction Advisory Services has considered:

    ►     Whether the value of a Perilya share is higher or lower than the value of the consideration to be paid for the Placement Shares by
          Zhongjin under the Proposed Transaction. Consistent with RG 111 we have considered the value of Perilya in the circumstances of
          the Proposed Transaction assuming 100% ownership of the ‘target’ without consideration of the percentage holding of the ‘offeror’
          in the target company. In considering value we have also considered the prices at which Perilya’s shares have traded on the
          Australian Securities Exchange (“ASX”).

    ►     Whether a premium for control is being offered in relation to the issue of the Placement Shares, and whether this is appropriate in
          the circumstances.

    ►     Other qualitative factors which we believe to be relevant to the considerations of the Non-Associated Shareholders in their
          assessment of the issue of the Placement Shares.

    ►     The likelihood of an alternative superior offer being made with respect to Perilya.

    ►     The alternatives available to Perilya shareholders.

    In section 6.10 of the report we assessed the fair market value of a Perilya share to be in the range of 33 cents to 38 cents. The cash
    consideration to be paid by Zhongjin for the Placement Shares under the Proposed Transaction is 23 cents per share.

    Our assessment of the fair market value of a Perilya share on a 100% basis is below the cash consideration to be paid by Zhongjin.
    Accordingly, we are of the opinion that the issue of the Placement Shares to Zhongjin under the Proposed Transaction is not fair.

    In section 7 of the report we detailed other significant factors that may be relevant to the Non-Associated Shareholders in considering the
    reasonableness of the issue of the Placement Shares. The matters we considered include:

    ►     the 23 cents per share payable by Zhongjin is at an 82.4% premium to the 20 day volume weighted average price (“VWAP”) for a
          Perilya share on the ASX up to 5 December 2008, the last trading before the announcement of the Proposed Transaction, and a
          53.3% premium to the closing price on that date. The payment of a premium to market is to the benefit of the Non-Associated
          Shareholders;

    ►     with the increase in Perilya’s share price since the announcement it appears that the market has reacted favourably to the Proposed
          Transaction with Zhongjin. If the Proposed Transaction does not proceed there may be a decline in the Company’s share price to
          previous levels;

    ►     Perilya’s short term forecast cash flows indicate that without the Proposed Transaction with Zhongjin the Company will need to
          source new funding early in 2009 to help finance its ongoing operations. With the volatility in capital markets expected to continue
          through 2009, Perilya’s ability to readily source new debt or equity funding in these circumstances is uncertain. The issue of the
          Placement Shares to Zhongjin will provide Perilya with a level of funding without the need to dispose of assets or to secure new
          funding from an alternative source;

    ►     with a 50.1% interest and at least 50% representation of Perilya’s Board of Directors, Zhongjin will be able to control the Company in
          a general meeting of shareholders and be able to significantly influence its day-to-day operations;

    ►     Zhongjin’s dealings with Perilya as the largest shareholder and as having Board representation will be governed by the Act, the ASX
          Listing Rules, the Company’s Corporate Governance policies and common law;

    ►     based on the trading prices of CBH’s shares and Perilya’s shares since the announcement of the Proposed Transaction, the price of
          the Placement Shares being paid by Zhongjin is superior to the value being offered to Perilya shareholders under the CBH Bid;

    ►     the $45,464,560 cash to be provided to Perilya through the issue of the Placement Shares to Zhongjin under the Proposed
          Transaction will significantly strengthen the Company’s financial position at a time when there is substantial economic uncertainty
          globally and in an environment of continued low metal prices;

    ►     as one of China’s largest non-ferrous metal producers the strategic benefits of having Zhongjin as its major shareholder may provide
          Perilya with opportunities that may not generally be available in the ordinary course of business;




 
 
                                                                                                                                               3




    ►     if Perilya was to undertake a capital raising of a similar amount to the funds being provided by Zhongjin, given the current market
          conditions, it is likely that it would need to done at a deep discount to its market price, which would be substantially more dilutionary
          to the Non-Associated Shareholders than the issue of the Placement Shares at a premium to market;

    ►     based on recent market prices, Zhongjin is paying a premium for control, however in comparison to our assessed fair market value
          assessment of a Perilya share, no premium for control is being paid.

    Having had consideration to these factors, although we have assessed the issue of the Placement Shares to be not fair, in our opinion, the
    issue of the Placement Shares to Zhongjin under the Proposed Transaction is reasonable.

    On this basis, in our opinion, the issue of the Placement Shares to Zhongjin under the Proposed Transaction is not fair but reasonable.

    Other Matters 
    This independent expert’s report has been prepared specifically for Perilya shareholders. Neither Ernst & Young Transaction Advisory
    Services, Ernst & Young nor any employee thereof undertakes responsibility to any person, other than Perilya shareholders, in respect of
    this report, including any errors or omissions howsoever caused.

    This independent expert’s report constitutes general financial product advice only and has been prepared without taking into
    consideration the individual circumstances of the Perilya shareholders. The decision as to whether to approve or not approve the issue of
    the Placement Shares to Zhongjin under the Proposed Transaction is a matter for individual Perilya shareholders. Perilya shareholders
    should have regard to the Notice of Meeting and Explanatory Memorandum prepared by the Directors and management of Perilya in
    relation to the Proposed Transaction. Shareholders who are in doubt as to the action they should take in relation to Proposed Transaction
    should consult their own professional adviser.

    Our opinion is made as at the date of this letter and reflects circumstances and conditions as at that date. This letter must be read in
    conjunction with the full independent expert’s report as attached.

    Yours faithfully
    Ernst & Young Transaction Advisory Services Limited




    Ken Pendergast                                                               Stuart Bright
    Director and Representative                                                  Director and Representative




 
 
                                                                                                                                   1




    Contents
    Part 1 – Independent Expert’s Report
    1.          Details of the Proposed Transaction ................................................................1
    1.1         The Proposed Transaction ...................................................................................1
    1.2         Zhongjin................................................................................................................2
    2.          Scope of the Report ...........................................................................................3
    2.1         Purpose of the Report ..........................................................................................3
    2.2         Basis of Evaluation ...............................................................................................3
    2.3         Shareholders’ Decisions ......................................................................................4
    2.4         Limitations and Reliance on Information ..............................................................5
    3.          Overview of Perilya ............................................................................................6
    3.1         Company History ..................................................................................................6
    3.2         Mineral Assets ......................................................................................................7
    3.3         Financial Performance and Position ....................................................................9
    3.3.1       Perilya’s Recent Financial Performance ..........................................................................9
    3.3.2       Perilya’s Financial Position ........................................................................................10
    3.4         Capital Structure ................................................................................................13
    3.5         Share Price Performance ...................................................................................14
    4.          Effect on the Non-Associated Shareholders .................................................17
    5.          Economic and Industry Profile .......................................................................18
    5.1         Current Economic Conditions ............................................................................18
    5.2         The Zinc and Lead Market .................................................................................19
    5.3         Global Demand for Zinc and Lead .....................................................................19
    5.4         Global Supply of Zinc and Lead .........................................................................19
    5.5         Zinc and Lead Prices .........................................................................................20
    6.          Fair Market Value of a Perilya Share ..............................................................22
    6.1         Approach ............................................................................................................22
    6.2         Mineral Assets ....................................................................................................23
    6.2.1       Broken Hill and Beltana......................................................................................23
    6.2.2       Mt Oxide .............................................................................................................23
    6.2.3       Other Exploration ...............................................................................................24
    6.3         Other Assets and Liabilities................................................................................25
    6.4         Corporate Overheads.........................................................................................25
    6.5         Net Interest Bearing Liabilities ...........................................................................25
    6.6         Investments ........................................................................................................25
    6.6.1       Commercial Paper .............................................................................................25
    6.6.2       Investment in Listed and Unlisted Securities .....................................................26
    6.6.3       Summary ............................................................................................................26
    6.7         Value of Hedge Positions ...................................................................................27
    6.8         Tax Benefits .......................................................................................................27
    6.9         Exercise of Options ............................................................................................27
    6.10        Valuation Calculation .........................................................................................28
    7.          Other Significant Matters ................................................................................29
    7.1         Comparison with Market Prices .........................................................................29
    7.2         Perilya’s Financial Position ................................................................................29
    7.3         Control Issues ....................................................................................................30
    7.4         The CBH Bid ......................................................................................................30
    7.5         Strategic Rationale and Zhongjin’s Intentions for Perilya ..................................33




 
 
                                                                                                                                        2




    7.6               Dilutionary Impact of Any Alternative Capital Raising ........................................34
    7.7               Premium for Control ...........................................................................................34
    7.8               Alternative Offers ...............................................................................................35
    8.                Assessment of the Issue of the Placement Shares ......................................36
    8.1               Fairness..............................................................................................................36
    8.2               Reasonableness ................................................................................................36
    Appendix A Statement of Qualifications and Declarations ..............................................38
    Appendix B Valuation Methodologies.................................................................................40
    Appendix C Valuation of Broken Hill and Beltana .............................................................42
    Appendix D Discount Rate ...................................................................................................46
    Appendix E Sources of information ....................................................................................53
    Appendix F Glossary ............................................................................................................54


    Part 2 – Financial Services Guide




 
 
                                                                                                                              1




1.    Details of the Proposed Transaction

1.1   The Proposed Transaction
      On 9 December 2008, Perilya Limited (“Perilya” or “the Company”) announced that it had signed a share
      subscription agreement with Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd (“Zhongjin”) (“the Share Subscription
      Agreement”), a Chinese metals and mining company, under which Zhongjin agreed to subscribe for 197,672,000
      fully paid ordinary shares in Perilya (“the Placement Shares”) at a price of 23 cents each, for a total cash
      consideration of $45,464,560 (“the Proposed Transaction”).

      At the date of the announcement Perilya had on issue 196,882,640 shares. As a result of the Proposed Transaction,
      if it proceeds, Zhongjin will hold 50.1% of the expanded issued share capital of Perilya.

      The Proposed Transaction is subject to a number of conditions which include the following:

      ►     approval from the Foreign Investment Review Board;

      ►     all regulatory approvals necessary from the relevant Chinese authorities;

      ►     various consents from Perilya’s existing bankers and finance facility providers;

      ►     approval from Perilya shareholders; and

      ►     the payment by Zhongjin of a $10 million deposit (“the Deposit”) by the earlier of 24 December 2008 or three
            days after the receipt of all of the necessary approvals from the relevant Chinese authorities.

      The payment of the Deposit is conditional on a call option (“the Call Option”) being put in place between Perilya and
      Zhongjin with respect to the Mt Oxide Copper Project. Should the Proposed Transaction not proceed Zhongjin has
      the right to exercise the Call Option to effectively acquire Mt Oxide for $15 million, with the Deposit being set-off
      against the consideration prior to payment taking place.

      Under the Share Subscription Agreement, Zhongjin has the right to nominate such number of representatives as is
      equal to half of the members of the Board of Directors of Perilya.

      It is recognised in the Share Subscription Agreement that for as long as Zhongjin holds not less than 20% of the
      issued share capital of Perilya, it or any of its related entities must not acquire additional shares in the Company. An
      exception to this is by means of the “3% every six months” provision contained in item 9 of section 611 of the
      Corporations Act so as to maintain a relevant interest in no more than 52% of the shares on issue from time to time.

      The Share Subscription Agreement also contains acknowledgement between Perilya and Zhongjin that if the
      Proposed Transaction proceeds there may be future synergies and opportunities with respect to commercial
      arrangements for the Company’s products. In this regard both parties agreed that should such opportunities arise
      then they would enter into “good faith negotiations” with respect to sale agreement or agreements for:

      ►     up to 50% of the zinc concentrate produced at Broken Hill;

      ►     up to 50% of the lead concentrate produced at Broken Hill; and

      ►     up to 50% of the zinc silicate direct shippable ore from the Flinders Project.

      Any such agreements would be on commercial arm’s length terms and would be subject to those concentrates and
      ores becoming available from Perilya’s existing off-take agreements. Under the Share Subscription Agreement, if
      Zhongjin’s interest in Perilya falls to less than 20% then the Company may elect to terminate any of the agreements
      put in place by giving Zhongjin at least 12 months notice.

      At the date of the announcement of the Proposed Transaction with Zhongjin, Perilya was, and continues to be, the
      subject of a takeover offer from CBH Resources Limited (“CBH”), for all of the shares issued in Perilya on the basis of
                                                                                                                                2




      4.2 CBH shares for every 1 Perilya share held (“the CBH Bid”). The Directors of Perilya have unanimously
      recommended to shareholders to reject the CBH Bid.

      The Share Subscription Agreements allows either party to terminate the Proposed Transaction if CBH obtains more
      than a 50% interest in Perilya prior to the general meeting to approve the Proposed Transaction.

      The Placement Shares will be subscribed for by Zhongjin Lingnan Mining (HK) Company Limited, a wholly owned
      subsidiary of Zhongjin incorporated in Hong Kong.

1.2   Zhongjin
      Zhongjin is a major non-ferrous metal producer based in the Chinese city of Shenzhen in the Guangdong Province,
      located in south west China adjacent to the South China Sea. Incorporated in 1994, the company’s principal
      activity is the mining and processing of zinc, lead and other non-ferrous metals. Zhongjin is the China’s third largest
      zinc producer in terms of annual production. The company also produces aluminium windows and doors, and glass
      curtain walls. Zhongjin also invests in aluminium extrusion profiles, high-tech materials, finance, and real estate.

      Zhongjin is listed on the Shenzhen Stock Exchange and as at 19 December 2008 had a market capitalisation of 9.7
      billion Chinese Yuan (“CNY”) (A$2.1 billion). Guangdong Rising Assets Management Co. Ltd, a state-owned
      enterprise under the Guangdong Provincial Government holds approximately 38% of Zhongjin’s issued shares with
      the balance held by public and institutional investors.

      Zhongjin’s main mining operation is the Fankou mine located about 50 kilometres north east of Shaoguan City in
      Guangdong Province. Fankou has been operating for 40 years and is one of the lowest cost zinc and lead mines in
      the world. It is also the largest zinc and lead mine in China with annual production capacity being expanded in 2008
      from 150,000 to 180,000 tonnes per year.

      Production from the Fankou mine supplies approximately 50% of the feedstock requirements of Zhongjin’s
      Shaoguan and Danxia smelters. For the year ended 31 December 2007 the two smelters produced 181,500 tonnes
      of refined zinc metal, 92,200 tonnes of refined lead metal and 185 tonnes of refined silver.

      The Shaoguan Smelter, located about 10 kilometres north of Shaoguan City is expected to produce 200,000 tonnes
      of zinc and 100,000 tonnes of lead for 2008. The smelter is a key supplier of hot galvanizing zinc alloy to the
      Chinese market. The Danxia Smelter has an existing annual production capacity of zinc of 20,000 tonnes of zinc,
      however, with completion of a current expansion in 2009 it is anticipated the annual production capacity at Danxia
      will be increased to 100,000 tonnes of zinc.

      Shenzhen Nonfemet Technology Company Limited, a subsidiary of Zhongjin, is a leading supplier of battery
      materials in China and around the world. The company manufactures Hg-free metal powder products focusing on
      battery materials. Output for 2008 is estimated at 12,000 tonnes which represents over half of the domestic
      market.

      For the year ended 31 December 2007, Zhongjin reported an audited consolidated net profit of CNY1.2 billion
      (approximately A$273 million) on consolidated net sales revenue of CNY8.3 billion (approximately A$1.9 billion).
                                                                                                                                   3




2.    Scope of the Report

2.1   Purpose of the Report
      Under section 606 of the Corporations Act (“the Act”) an entity is prohibited from increasing its interest in the voting
      shares of a listed company to greater than 20%. An exception to the prohibition is for the increase to be approved by
      shareholders under item 7 of section 611 of the Act.

      With Zhongjin’s voting interest in Perilya increasing to 50.1% as a result of the Proposed Transaction, shareholder
      approval for the issue of the Placement Shares under the Proposed Transaction is being sought pursuant to item 7 of
      section 611 of the Act.

      To assist Perilya shareholders assess the Proposed Transaction the Directors of Perilya have appointed Ernst &
      Young Transaction Advisory Services Limited (“Ernst & Young Transaction Advisory Services”) as independent expert
      to prepare this report, the purpose of which is to state whether or not, in our opinion, the issue of the Placement
      Shares to Zhongjin under the Proposed Transaction is fair and reasonable to the Company’s shareholders not
      associated with the Proposed Transaction (“the Non-Associated Shareholders”).

2.2   Basis of Evaluation
      The Act does not define the meaning of ‘fair and reasonable’. Australian Securities and Investment Commission
      (“ASIC”) has issued Regulatory Guide 111: Content of expert reports (“RG 111”), which provides some guidance as
      to what matters the independent expert should consider and how ‘fair and reasonable’ should be interpreted in a
      range of circumstances.

      RG 111 requires that where the transaction being considered for the purposes of item 7 of section 611 has a similar
      effect on the company’s shareholding as a takeover bid then the transaction should be analysed as if it were a
      takeover bid. A takeover bid generally involves a control transaction where one entity is looking to acquire or
      increase a controlling interest in another entity.

      With Zhongjin obtaining a 50.1% interest in Perilya, in our view the Proposed Transaction represents a control
      transaction as intended under RG 111 and should be analysed on a basis consistent with a takeover bid. In relation
      to the circumstances of a takeover bid, RG 111 states, inter alia, that:

      ►     an offer is ‘fair’ if the value of the offer price or consideration is equal to or greater than the value of the
            securities that are the subject of the offer. The comparison is to be made assuming 100% ownership of the
            target without consideration of the percentage holding of the offeror in the target company. RG 111 provides
            that an expert should usually give a range of values for the securities the subject of the offer.

      ►     an offer is considered ‘reasonable’ if it is fair or, if the offer is “not fair”, it may still be ‘reasonable’ after
            considering other significant factors which justify the acceptance of the offer in the absence of a higher bid.

      In the circumstances of an item 7 of section 611 transaction, RG 111 recognises that an issue of shares for cash may
      have other benefits that should be considered in deciding whether the transaction is reasonable.

      Consistent with this guidance, in assessing whether or not the issue of the Placement Shares to Zhongjin under the
      Proposed Transaction is ‘fair’ to the Non-Associated Shareholders we have compared the fair market value of a
      Perilya share with the fair market value of the consideration being paid by Zhongjin.
                                                                                                                             4




      “Fair market value” in this context is considered to be “the amount at which an asset could be exchanged between a
      knowledgeable and willing but not anxious seller and a knowledgeable and willing but not anxious buyer both acting
      at arm’s length”.

      Our assessment of the fair value of Perilya reflects the fact that through the Proposed Transaction, Zhongjin will
      obtain a controlling interest in the Company. In determining the fair market value of a Perilya share on a controlling
      interest basis we have assessed the fair market value of the Company’s mineral assets. In assessing the value of the
      mineral assets we had access to the management of Perilya, management information and have relied on technical
      input from mineral industry consultants, AMC Consultants Pty Ltd (“AMC”). Our assessment of the fair market value
      of a Perilya share is summarised in section 6.

      The consideration to be paid by Zhongjin under the Proposed Transaction is a cash amount of 23 cents per share.

      The “other significant factors” considered in assessing the reasonableness of the issue of the Placement Shares to
      Zhongjin includes the following matters:

      ►     the level of control achieved by Zhongjin;

      ►     the CBH Bid;

      ►     Zhongjin’s intentions for Perilya;

      ►     the existence of any synergistic benefits;

      ►     the dilutionary impact of any alternative capital raising;

      ►     the existence of any premium for control; and

      ►     the alternatives.

      Consideration of other significant factors is contained in section 7.

      Our assessment of the issue of the Placement Shares is based on the economic, political, social, market and other
      conditions prevailing at the date of this report. As evidenced by the events of recent months these conditions can
      change significantly over relatively short periods of time with material effect.

      All amounts in this report are expressed in Australian dollars unless otherwise stated.

      A glossary detailing the abbreviations we have used in this report is contained in Appendix F.

2.3   Shareholders’ Decisions
      This independent expert’s report has been prepared specifically for the Non-Associated Shareholders of Perilya at
      the request of the Directors of the Company. As such, Ernst & Young Transaction Advisory Services, Ernst & Young
      and any member or employee thereof, takes no responsibility to any entity other than Perilya shareholders, in
      respect of this report, including any errors or omissions howsoever caused.

      This report constitutes general financial product advice only and has been prepared without taking into
      consideration the individual circumstances of Perilya shareholders. The decision to approve or not approve the
      issue of the Placement Shares to Zhongjin is a matter for individual shareholders. Shareholders should consider the
      advice in the context of their own circumstances, preferences and risk profiles. Shareholders should have regard to
      the Notice of Meeting and Explanatory Memorandum prepared by the Directors and management of Perilya.

      The decision as to whether or not to approve the issue of the Placement Shares is a matter for individual
      shareholders as to their expectation of future market conditions, investment objectives, risk profile, liquidity
      preferences, portfolio strategy and tax position. Perilya shareholders who are in doubt as to the action they should
      take in relation to the Proposed Transaction should consult their own professional adviser.

      Ernst & Young Transaction Advisory Services has prepared a Financial Services Guide in accordance with the
      Corporations Act. The Financial Services Guide is included as Part 2 of this report.
                                                                                                                              5




2.4   Limitations and Reliance on Information
      We have considered a number of sources in preparing the independent expert’s report and arriving at our opinion.
      These sources of information are detailed in Appendix E.

      This report is based upon financial and other information provided by Perilya and other parties. We have considered
      and relied upon this information. The information provided to us has been evaluated through analysis, enquiry and
      review for the purposes of forming an opinion as to whether the issue of the Placement Shares to Zhongjin under the
      Proposed Transaction is fair and reasonable to the Non-Associated Shareholders. However, we do not warrant that
      our enquiries have identified all of the matters that an audit, or an extensive examination or due diligence might
      disclose.

      Preparation of this report does not imply that we have, in any way, audited the accounts or records of Perilya. It is
      understood that the accounting information that was provided was prepared in accordance with generally accepted
      accounting principles and including Australian equivalents to International Financial Reporting Standards as
      applicable.

      In forming our opinion we have also assumed that:

      ►     Matters such as title, compliance with laws and regulations and contracts in place are in good standing and
            will remain so and that there are no material legal proceedings, other than as publicly disclosed.

      ►     The information set out in the Notice of Meeting and Explanatory Memorandum to be sent by Perilya to
            shareholders is complete, accurate and fairly presented in all material respects.

      ►     The publicly available information relied upon by Ernst & Young Transaction Advisory Services in its analysis
            was accurate and not misleading.

      To the extent that there are legal issues relating to assets, properties, or business interests or issues relating to
      compliance with applicable laws, regulations and policies, we assume no responsibility and offer no legal opinion or
      interpretation on any issue.

      The statements and opinions given in this independent expert’s report are given in good faith and in the belief that
      such statements and opinions are not false or misleading.

      Ernst & Young Transaction Advisory Services provided draft copies of this report to the Directors and management of
      Perilya for their comments as to factual accuracy, as opposed to opinions, which are the responsibility of Ernst &
      Young Transaction Advisory Services alone. Amendments made to this report as a result of this review have not
      changed the methodology or conclusions reached by Ernst & Young Transaction Advisory Services.
                                                                                                                              6




3.    Overview of Perilya

3.1   Company History
      Perilya was established in 1987. Listing on the Australian Securities Exchange (“ASX”) in July 1987, Perilya’s
      original focus was on identifying and securing undervalued exploration assets with the view of developing them as
      appropriate.

      In February 1994 the Company completed the acquisition of the Fortnum Gold Mine from Homestake Australia
      Limited. On acquisition Perilya successfully re-commissioned Fortnum to a 50,000 ounce a year operation.
      Production was gradually expanded to 70,000 ounces and over the period to the mine’s closure in August 2001,
      Fortnum had produced around 540,000 ounces of gold.

      In May 2002, Perilya acquired from the administrators of Pasminco Limited the Broken Hill mine, a zinc, lead and
      silver operation located at Broken Hill in western New South Wales approximately 1,200 kilometres from Sydney. On
      acquisition Perilya looked to reduce operating costs at the Broken Hill mine through the introduction of more
      efficient mining and operating practices and increase reserves through an active exploration program. It was
      anticipated that under Perilya the mine would operate at a rate of 2.45 million tonnes per annum (“mtpa”) and
      produce 330,000 tonnes of zinc concentrate, 120,000 tonnes of lead concentrate and 2.3 million ounces of silver
      per year.

      In September 2003, Perilya entered into an option agreement with respect to the Daisy Milano gold mine, located at
      Mt Monger in the Eastern Goldfields region of Western Australia, approximately 50 kilometres south east of
      Kalgoorlie. The option to acquire the project was exercised in January 2005 and in June 2005 production at Daisy
      Milano commenced. Reflecting a decision to concentrate on the development of the Company’s base metal
      operations, mining operations at Daisy Milano ceased in March 2007. In November 2007, Perilya sold the Daisy
      Milano gold mine and its gold exploration assets to Silver Lake Resources Limited.

      The Flinders Project comprises a number of tenements acquired over time directly by Perilya and through joint
      ventures and covers over 3,000 square kilometres (“kms2”) in Australia, 470 kilometres north of Adelaide. The
      project comprises several high grade zinc oxide deposits, including Beltana, which was the first of these deposits to
      be developed. Mining at the Beltana open pit mine commenced in March 2007 and was completed in February
      2008, with 316,400 tonnes of zinc silicate ore being extracted and stockpiled at an average grade of approximately
      32%, for a total of 108,000 tonnes of contained zinc.

      The Mt Oxide Copper Project is an advanced copper exploration project located in the Mt Isa region of north west
      Queensland. In July 2008 Perilya announced that it had received a number of expressions of interests in relation to
      the development of Mt Oxide. In September 2008 Perilya announced that it had entered into an agreement with
      Chalice Gold Mines Limited (“Chalice”) for the sale of the Mt Oxide Copper Project. Reflecting the continued
      downturn in capital markets and in copper prices, on 24 October 2008 it was announced that the sale to Chalice
      had been terminated.

      Perilya has interests in a number of other exploration projects. Further detail on these and Perilya’s other mineral
      assets is contained in section 3.2.
                                                                                                                               7




      In recent times the Company has been significantly impacted by the turmoil experienced in world economies and the
      significant fall in metal prices. In January 2007 when zinc prices were near their all time high, the market
      capitalisation of Perilya was in excess of $1.1 billion. By 30 June 2007 it had reduced to approximately $520
      million and by 30 June 2008 it had fallen to just over $30 million. Across the same period to 30 June 2008 zinc
      prices reduced by approximately 60%. After peaking in October 2007, lead prices decreased by approximately 55%
      in the period to 30 June 2008. The market capitalisation of Perilya based on the closing price on 5 December 2008,
      being the last trading day prior to the announcement of the Proposed Transaction with Zhongjin, was $29.5 million.

      In response to the lower metal prices, in August 2008 Perilya announced that it would be rationalising its operations
      at Broken Hill by scaling back production from a then current rate of 1.8 mtpa to 0.95 mtpa, with annual production
      expected of approximately 55,000 tonnes of contained zinc and 50,000 tones of contained lead. The resizing of
      operations is designed to maintain a level of production that is economically viable at current metal prices. Ore is to
      be sourced primarily from the Southern Operations area with the North Mine and Potosi exploration declines being
      placed under care and maintenance. The workforce at Broken Hill was to be reduced from 760 employees to 320.

      With the resizing of the operation at Broken Hill in a low metal price environment a key focus of management over
      the short term will be the reduction of direct cash operating costs. The expectation is for net cash costs at Broken
      Hill to decrease to a level of US$0.60 to US$0.65 per pound of payable zinc.

      The CBH Bid for Perilya was announced in October 2008 after a previous merger between Perilya and CBH, first
      announced in March 2008, was formally terminated in July 2008. CBH is a zinc and lead mining company which
      operates the Endeavor mine near Cobar in western New South Wales and is looking to develop the Rasp mine
      located within Consolidated Mining Lease 7 (“CML 7”) at Broken Hill. CML 7 is an area located between Perilya’s
      southern and northern mining leases at Broken Hill.

3.2   Mineral Assets
      Included below is a brief summary of Perilya’s mineral assets. It is of note that in response to the fall in metal prices
      and the worsening economic conditions globally, at 30 June 2008 Perilya raised an impairment charge against the
      Broken Hill operations of $134.9 million (including $74.7 million against the mine properties in use and $60.2
      million against property, plant and equipment) and an impairment charge against exploration, development and
      evaluation expenditure of $38.5 million. As a result the mine properties in use balance at 30 June 2008 was written
      down to ‘nil’. The $15.2 million exploration, development and evaluation expenditure carried forward at 30 June
      2008 related solely to the Mt Oxide Copper Project.

      The Broken Hill Operations
      Perilya has operated the Broken Hill operations since they were acquired in May 2002. The main activity at Broken
      Hill occurs within the Southern Operations area, which is a complex remnant underground mining operation. Ore is
      processed through Perilya’s 2.8 mtpa capacity concentrator. This infrastructure has the capacity and flexibility to
      operate at lower volumes with a variety of ore sources. Zinc and lead concentrates are railed from Broken Hill to Port
      Pirie in South Australia. The zinc concentrate is then shipped to South Korea and refined by by Korea Zinc Limited
      and Young Pong Corporation Limited (“the Korea Zinc Group”). The lead concentrate is refined at the Port Pirie
      smelter owned by Nyrstar Port Pirie Pty Ltd (Nyrstar”).

      Since acquisition, Perilya has mined over 11 million tonnes of ore and has shipped in excess of 730,000 tonnes of
      zinc and 350,000 tonnes of lead from this operation.

      As noted above, on 21 August 2008, in response to falling metal prices, Perilya decided to revise future ore
      production at Broken Hill from 1.8 mtpa to 0.95 mtpa in order to maintain a level of production that is economically
      viable at current metal prices. Under the revised production plan of 0.95 mtpa the operations will utilise stopes that
      are currently available or require minimal development within the Southern Operations area.

      Production from Broken Hill for the years ended 30 June 2007 (“FY07”), 30 June 2008 (“FY08”) and the 4 months to
      31 October 2008 (“YTD Oct08”) is summarised in the table below:
                                                                                                                       8




Broken Hill - Production                              FY07           FY08    YTD Oct08
Ore mined (kt)                                    1,718.1         1,788.5         552.5
Ore treated (kt)                                  1,751.7         1,745.4         585.6
Zinc concentrate (kt)                               186.1          183.1            58.8
Contained zinc (kt)                                  92.1           91.3            29.2
Zinc %                                                5.8            5.8             5.5
Lead concentrate (kt)                                 82.8           72.4           19.3
Contained lead (kt)                                   60.5           52.4           13.8
Lead %                                                 4.0            3.5            2.8
Contained silver (Moz)                              1.482          1.679          0.476
Source: Perilya Annual Report and YTD Oct08 management accounts


Broken Hill Operations - North Mine Deeps Development
Under the revised production plan, operations at North Mine have now been placed on care and maintenance.
During the FY08 period a total of 104,000 tonnes of ore was produced.

Pre-feasibility studies indicate that the North Mine Deeps resource contains 3.7 million tonnes at 11.3% zinc and
13.5% lead. The known resource can be accessed via either extending the existing operations decline or
refurbishing the existing non operational shaft. This high grade mineralisation offers Perilya the potential for a
significant ongoing mining operation at Broken Hill.

Broken Hill Operations – Potosi Development
The Potosi project, located approximately two kilometres north of the existing North Mine at Broken Hill, currently
contains a mineral resource of 1.6 million tonnes at 13% zinc and 3.1% lead. The mineral resource includes two
mining zones – Potosi North and Potosi Extended, which together represent approximately 50% of the targeted
mineralised zones along strike.

Further development of Potosi has been put on hold and has been placed on care and maintenance.

Flinders Project
The Flinders Project is a group of zinc silicate deposits located near Leigh Creek in South Australia. At the end of
September 2008 a total of 238,000 tonnes of zinc silicate ore from Beltana remained stockpiled at an approximate
average grade of 31%. The project has been placed on care and maintenance and it is expected shipments of the
stockpiled ore will commence when prices improve. Development work on the other deposits has ceased.

Broken Hill Extended Exploration
The Broken Hill ore body is the largest base metal ore body in the world and detailed modelling of the area has
identified additional prospective structures which have in turn defined a number of large targets. These targets
include the Broken Hill Southern extensions, Flying Doctor, Northern Lodes and the Pinnacles.
                                                                                                                               9




        Mt Oxide Copper Project
        The Mt Oxide Copper Project is 25 kilometres north of the existing Mount Gordon copper mine operated by Aditya
        Birla Limited. An advanced exploration prospect, Mt Oxide contains a resource of 15.5 million tonnes at grades of
        1.3% copper and 0.05% cobalt. A scoping study has demonstrated the potential of the existing resource which is
        still open at depth and along strike.

        With the proposed sale of the project to Chalice being terminated in October 2008, Perilya continues to assess the
        future development alternatives for Mt Oxide.

        Rockhampton
        Rockhampton is a copper, gold and zinc project which Perilya holds a 90% interest. The Rockhampton project is
        situated 10 kilometres south east of the old Mt Morgan mine, approximately 40 kilometres south of Rockhampton in
        Queensland. Perilya believes that the potential for discovering similar mineralisation to Mt Morgan within the
        Rockhampton project to be high.

        Tampang
        Tampang is a copper, gold exploration joint venture in which Perilya holds a 50% interest. The project is located in
        Sabah, Malaysia on the island of Borneo and consists of two prospecting licenses covering 327 kms2 in a region rich
        in porphyry copper deposits.

3.3     Financial Performance and Position
3.3.1   Perilya’s Recent Financial Performance
        The income statements of Perilya for the years ended 30 June 2006 (“FY06”), 2007 (“FY07”), and 2008 (“FY08”)
        and for the four months to 31 October 2008 (“YTD Oct08”) are summarised in the table below. The FY06, FY07 and
        FY08 amounts have been extracted from the Company’s audited annual reports, whereas the results for YTD Oct08
        have been prepared from Perilya’s unaudited management accounts.

        Perilya - Summary of Trading Performance ($000's)                      FY06        FY07          FY08    YTD Oct08

        Sales revenue                                                      341,585     357,070       266,785        77,462
        Other income                                                         6,532      13,285        25,515           166
        Total revenue                                                      348,117     370,355       292,300        77,628
        Changes in inventories of finished goods and work in progress         6,237      (8,525)      27,923       (16,080)
        Raw materials, power and consumables used                           (60,943)    (60,178)     (59,111)      (24,561)
        Employee benefits expense                                           (51,943)    (65,077)     (81,243)      (35,029)
        Depreciation and amortisation expense                               (35,820)    (31,265)     (48,334)       (3,398)
        External services and consultants                                   (37,118)    (37,861)     (49,635)      (13,650)
        Freight and handling                                                (26,189)    (19,167)     (30,526)      (18,492)
        Royalties                                                           (11,111)    (10,215)      (6,871)       (2,909)
        Foreign exchange gain/(loss)                                         (1,344)     (3,571)      (3,544)        4,949
        Impairment losses                                                   (20,121)     (1,315)    (188,211)       (1,097)
        Other expenses from ordinary activities                             (12,590)    (14,157)     (14,334)       (5,180)
        Total operating expenses                                           (250,942)   (251,331)    (453,886)     (115,447)
        Profit/(loss) from operations                                       97,175     119,024      (161,586)      (37,819)
        Financial income (interest)                                           3,384       8,723         6,339         1,095
        Financial expenses                                                   (2,872)     (7,707)      (12,781)       (2,577)
        Net financing costs                                                     512       1,016       (6,442)       (1,482)
        Profit/(loss) before income tax                                      97,687    120,040      (168,028)      (39,301)
        Income tax benefit/(expense)                                        (30,681)    (34,929)      25,772        11,790
        Profit from continuing operations                                    67,006      85,111     (142,256)      (27,511)
        Profit/(loss) from discontinued operations                                -      (2,628)       2,021            (2)
        Profit/(loss) for the year                                          67,006      82,483      (140,235)      (27,513)
        Source: Perilya Annual Reports and YTD Oct08 management accounts
                                                                                                                              10




        The following observations are made in relation to the historical operating performance of Perilya:

        ►     The YTD Oct08 results have been directly impacted by non recurring costs associated with downsizing the
              Broken Hill operations such as employee redundancy costs and other mine closure costs in relation to the
              satellite deposits.

        ►     Sales revenue for FY08 was 25% below the prior year due primarily to the reduction in zinc and lead prices.
              Sales revenue for YTD Oct08 has continued to fall on a pro rata basis when compared to FY08 reflecting the
              lower production and lower prices.

        ►     Other income for FY08 reflects the net gain on sale of available-for-sale financial assets.

        ►     Employee benefits expense incurred in FY08 reflected the full year impact of increases agreed to in FY07 and
              an increase in employee provisioning of approximately $4.4 million. The expense for YTD Oct08 includes
              redundancy costs associated with the resizing of operations at Broken Hill.

        ►     The impairment loss in FY08 related to:

              −     As a result of the lower production profile announced in August 2008 and the continued low metal
                    prices, the carrying value of the Broken Hill operations (the mine property together with plant and
                    equipment) was reduced by $135.8 million and the carrying value of the Broken Hill exploration assets
                    were reduced by $28.3 million. This impairment effectively reduced the book value of the operations
                    and exploration at Broken Hill to nil.

              −     All other exploration assets other than the Mt Oxide project were written down by $10.2 million to nil.

              −     A $13.8 million impairment against available-for-sale financial assets, with a $9.8 million being
                    applied against commercial paper and $4.0 million against securities. The impairment of these assets
                    reflects the downturn in world financial markets and the deterioration of local equity markets.

              −     Other assets were impaired by $0.1 million.

        ►     Net finance costs increased during the FY08 period which is directly attributable to the increase in debt during
              the period and reduced interest received from cash.

        In August 2008 Perilya closed out its hedge book realising $60.314 million in cash. The gains arising from this are
        being amortised over two years.

3.3.2   Perilya’s Financial Position
        The net asset position of Perilya as at 30 June 2006, 2007, and 2008 and at 31 October 2008 is summarised in the
        table below. The amounts at the end of FY06, FY07 and FY08 have been extracted from the Company’s audited
        annual reports and the balances as at 31 October 2008 have been extracted from the unaudited management
        accounts.
                                                                                                                    11




Perilya - Summary of Net Asset Position ($000's)                          FY06       FY07             FY08   YTD Oct08
Current assets
Cash and cash equivalents                                              125,048   147,455            26,532     10,777
Trade and other receivables                                             25,994    37,611            11,690      4,686
Inventories                                                             21,700    14,709            31,300     24,470
Financial assets                                                         7,096    20,741           169,999     34,514
Other                                                                        -         -             2,967          -
                                                                       179,838   220,516           242,488     74,447
Non current assets
Restricted cash                                                         10,560    25,592            10,444     24,724
Inventories                                                                  -         -             8,754          -
Exploration, development and evaluation expenditure                     22,223    33,169            15,193     20,726
Mine properties in use                                                  48,866    64,879                 -          -
Property, plant and equipment                                           54,194    69,984            30,818     35,657
Financial assets                                                             -         -                 -      1,435
Deferred tax                                                            21,262    33,886                 -     19,664
Other                                                                    5,021     1,003                37         28
                                                                       162,126   228,513            65,246    102,234
Total assets                                                           341,964   449,029           307,734    176,681
Current liabilities
Trade and other payables                                                36,525    46,460            51,940     19,714
Borrowings                                                               4,301    10,460            20,211      7,684
Current tax liabilitles                                                 27,523    27,020                 -          -
Provisions                                                               5,682     7,583            14,721      7,790
Other financial instrument liabilities                                  45,143    99,007            38,033          -
Deferred income                                                              -         -                 -     19,980
Other                                                                    5,368     4,611             1,938      1,938
                                                                       124,542   195,141           126,843     57,106
Non current liabilities
Borrowings                                                               2,769     5,191             5,794      7,482
Provisions                                                              20,855    26,754            24,777     29,121
Other financial instrument liabilities                                  23,932    34,396                 -          -
Deferred income                                                              -         -                 -     29,971
Other                                                                   38,445    38,274             2,710      2,648
                                                                        86,001   104,615            33,281     69,222
Total liabilitiles                                                     210,543   299,756           160,124    126,328
Net assets                                                             131,421   149,273           147,610     50,353
Source: Perilya Annual Reports and the YTD Oct08 management accounts


The following observations are made in relation to the historical financial position of Perilya:

►     Cash and cash equivalents on hand balance decreased from $147.5 million at FY07 to $26.5 million in FY08
      reflecting the lower metal prices experienced across the year. The balance was also impacted by the
      reclassification of commercial paper totalling $40 million from “cash” to “available-for-sale financial assets”.

►     The current financial assets balance at FY08 of $170.0 million was comprised of available-for-sale financial
      assets of $40.9 million and derivative financial instruments of $129.1 million. The available-for-sale financial
      assets balance includes commercial paper and investments in listed and unlisted companies. Derivatives
      include forward metal and currency contracts.

      The Company closed out its hedge book in August 2008. The YTD Oct08 current balance of $36.0 million and
      non-current balance of $1.4 million is comprised of available-for-sale financial assets of $32.5 million,
      represented by commercial paper and investments in listed and unlisted companies, and derivative financial
      instruments of $3.5 million, represented the hedging of sales as they occur.
                                                                                                                       12




►     The increase in inventories at FY08 reflects the increased volume of zinc and lead concentrates on hand at
      year end together with the zinc silicate ore stockpiled at Beltana (both current and non-current).

►     The reduction in exploration, development & evaluation expenditure, mine properties in use, and property,
      plant and equipment reflects the impairment of those assets brought about by the lower commodity prices
      and the decision to reduce production at Broken Hill from 1.8 mtpa to 0.95 mtpa.

►     Borrowings, current and non-current at YTD Oct 08 reflect hire purchase liabilities of $13.3 million and a
      insurance premium funding loan of $1.9 million.

►     Deferred income, both current and non-current, at YTD Oct08 relates to the gain associated with the close out
      of the hedge book in August 2008. These gains are being amortised over a two year period. This amount
      represents a non-cash item.

►     Other financial instrument liabilities includes the deferred option premiums paid on the forward metal and
      currency contracts totalling $30.3 million at FY08, and a total liability of $7.7 million associated with some of
      the forward metal and currency contracts.

►     The reduction in ‘Other’ in liabilities relates to the reduction in prepaid income from silver sales.

A review of Perilya’s cash flow statement for FY08 showed that net cash flow from operating activities decreased by
$142 million, from a $132.1 million inflow in FY07 to a $9.9 million outflow in FY08. The reduction reflected the
decrease in cash receipts brought about by the fall in metal prices across the year. Net cash outflow from investing
activities decreased $17.6 million in FY08. Net cash outflow from financing activities decreased $21.1 million in
FY08, with the major reduction being a $17.5 million fall in the level of dividends paid by the Company.

For the four months YTD Oct08, the net cash outflow from operations totalled $47.3 million, which included
significant redundancy costs associated with the restructure of operations at Broken Hill. Investing net cash flows
included capital expenditure of $6.5 million and exploration expenditure of $8.1 million. Net financing cash flows
for the four months totalled $46.8 million which included the inflow of $60.3 million associated with the close out of
hedge book and the outflow of $10.2 million associated with the repayment of borrowings.

Perilya’s Target’s Statement issued on 15 December 2008 in respect to the CBH Bid, contains reference to the
Company’s cash balance at 30 September 2008 being $22.3 million. The reduction in the cash balance to $10.8
million at 31 October 2008 reflects the payment of residual redundancies at Broken Hill of $1.9 million, capital
expenditure of $2.8 million, exploration expenditure of $1.5 million and the general movement in working capital
balances.
                                                                                                                          13




3.4   Capital Structure
      As at 30 November 2008, Perilya had on issue the following securities:

      ►     196,882,640 fully paid ordinary shares;

      ►     151,800 performance rights entitling the holders to that number of ordinary shares subject to the Company
            achieving certain financial milestones; and

      ►     8,700,000 unlisted share options over unissued ordinary shares with varying exercise prices and expiry dates,
            as follows:

               Expiry date         Exercise price   Number of options
                20/08/2009             0.88               50,000
                 7/03/2011             2.47              300,000
                 7/03/2012             2.67              100,000
                 7/03/2013             2.97              100,000
                17/07/2011             3.46              300,000
                17/07/2012             3.89              100,000
                17/07/2013             4.32              100,000
                30/09/2010             0.50            2,550,000
                30/09/2011             0.60            2,550,000
                30/09/2012             0.75            2,550,000
                                                       8,700,000
             Source: Datanalysis


      The shares are listed on the ASX and are held by approximately 8,000 shareholders. The top 10 shareholders of
      Perilya at 3 December 2008 collectively owned 52.7% (with the top 20 holding 57.3%) of the total shares on issue;
      as detailed in the table below.

      Perilya - Top 10 Shareholders (3 December 2008)                                 Share Holding % of issued
      ANZ Nominees Limited <Cash Income A/C>                                             27,017,264         13.7%
      HSBC Custody Nominees (Australia) Limited                                          23,468,303         11.9%
      J P Morgan Nominees Australia Limited                                              18,381,507          9.3%
      Citicorp Nominees Pty Limited                                                      17,107,777          8.7%
      National Nominees Limited                                                           7,233,023          3.7%
      CPU Share Plans Pty Limited <Perilya Employee Share Acquisition                     3,791,792          1.9%
      Mr Andrew Tsang                                                                     2,611,901          1.3%
      Yandal Investments Pty Ltd                                                          1,500,000          0.8%
      Mr Eric Hopgood and Mr Owen Hopgood                                                 1,366,000          0.7%
      C4 Shares Pty Ltd <C4 Share A/c>                                                    1,344,500          0.7%
                                                                                        103,822,067         52.7%
      Source: Perilya


      As at 3 December 2008, Perilya’s only two substantial shareholders (being those holding 5% or more of the
      Company’s issued share capital) were AXA Asia Pacific Holdings Limited (“AXA”) with a 9.5% interest and UBS
      Nominees Pty Ltd with a 6.8% interest.
                                                                                                                            14




3.5   Share Price Performance
      The share price performance of Perilya shares on the ASX for various periods is set out in the table below:

       Perilya - Share Trading History
                                                   High            Low          Close Average Daily Monthly liquidity
                                    Date               $
                                                       $             $              $      Volume      listed shares
       Annual Summary              2006           5.70           0.98           5.48       1,185,221
       (calendar year)             2007           5.80           2.58           2.64       1,529,772
                   Period to 19/12/2008           2.66           0.09           0.18       2,037,405

       Monthly summary           Dec-07           3.48           2.58           2.64       1,712,031                18.3%
                                  Jan-08          2.66           1.39           1.64       2,207,927                25.8%
                                 Feb-08           2.04           1.43           1.65       2,460,539                26.2%
                                 Mar-08           1.62           0.96           1.05       2,660,590                28.4%
                                  Apr-08          1.15           1.01           1.07       1,645,879                18.4%
                                 May-08           1.07           0.76           0.79       2,018,913                22.6%
                                  Jun-08          0.85           0.54           0.74       3,159,205                33.7%
                                   Jul-08         0.76           0.51           0.54       1,565,120                18.3%
                                 Aug-08           0.54           0.40           0.53       1,602,824                17.1%
                                 Sep-08           0.52           0.19           0.30       2,309,929                25.8%
                                  Oct-08          0.34           0.13           0.24       1,572,934                18.4%
                                 Nov-08           0.23           0.09           0.14       1,719,218                17.5%
                      Dec-08 to the 19th          0.20           0.13           0.18       1,411,252                10.8%
       Weekly summary        21/11/2008           0.16           0.10           0.11       2,317,342
                             28/11/2008           0.14           0.09           0.14       1,864,908
                              5/12/2008           0.16           0.13           0.15         636,044
                             12/12/2008           0.20           0.14           0.16       2,071,875
                             19/12/2008           0.20           0.16           0.18       1,525,836
      Source: Bloomberg


      At the beginning of January 2006, Perilya’s shares were trading on the ASX at levels of around $1.00. Over 2006 the
      Company’s share price traded up to reach a high of $5.70 on 28 December 2006, before going to $5.80 on 2
      January 2007. Over 2007, Perilya’s share price traded down to levels of around $4.00 before reducing to around
      $2.60 by the end of the year. As the table shows, over 2008 the Company’s share price has fallen from $2.64, the
      closing price on the last trading day in December 2007 to 74 cents at 30 June 2008, to a low of 8.5 cents on 26
      November 2008, before closing in November 2008 at 14 cents. The reduction in Perilya’s share price on the ASX
      reflects the significant decrease in zinc and lead prices over 2008, the worsening global economy and the continued
      deterioration of world financial markets.

      Reflecting the increase of its share price in November 2006 Perilya was included in the S&P/ASX 200 Index, which
      is made up of the top 200 companies listed on the ASX by market capitalisation. Perilya was removed from the
      S&P/ASX 200 Index in September 2008 and the S&P/ASX All Australian 200 Index, consisting exclusively of the
      top 200 listed Australian domiciled companies, in December 2008.

      Based on the analysis contained in the table, liquidity of Perilya’s shares has been fairly high with around 20% of the
      issued shares being traded each month. The spike in liquidity in June 2008 to 33.7% of total shares traded reflects
      ASX announcements outlining positive drill results at Mt Oxide, increase in resources at Flinders and Broken Hill and
      the announcement that the merger proposal between Perilya and CBH had been terminated.
                                                                                                                                                                                                                        15




Included below is a chart of Perilya’s share price and volume between 1 July 2007 and 19 December 2008. The
price is based on the daily closing price for each day.


                                                                                        Perilya - Share Price and Trading Volume History                                                      Announces
                                                                                                                                            Entered into                         Chalice       proposed
                                                Korea Zinc                 Increase in Mt           Perily a and CBH      Initial merger                       CBH
                       6.00                                                                                                                 agreement                        terminates       transaction               25000
                                                sells interest         Ox ide resource              announce merger           proposal                    launches
                       5.00                                                                                                                 w ith Chalice takeov er agreement to                       w ith
                                                                           of 203,000t Cu              proposal             terminated                                                                                  20000
                                                                                                                                                                                                Zhongjin
    Share price (A$)



                                                                                                                                             to sell Mt for Perily a  purchase




                                                                                                                                                                                                                                Volume (000's)
                       4.00
                                                                                                                                                                                                                        15000
                                                                                                                                                 Ox ide                          Mt Ox ide
                       3.00
                                                                                                                                                                                                                        10000
                       2.00
                       1.00                                                                                                                                                                                             5000

                       0.00                                                                                                                                                                                             0
                                                         Oct-07




                                                                               Dec-07




                                                                                                                                                                                     Oct-08




                                                                                                                                                                                                               Dec-08
                                                                                           Jan-08




                                                                                                                                            Jun-08
                              Jul-07


                                       Aug-07


                                                Sep-07




                                                                                                       Feb-08

                                                                                                                Mar-08


                                                                                                                         Apr-08




                                                                                                                                                      Jul-08


                                                                                                                                                               Aug-08


                                                                                                                                                                        Sep-08
                                                                  Nov-07




                                                                                                                                   May-08




                                                                                                                                                                                              Nov-08
                                                                                                                   Volume             Share Price



Besides the normal quarterly, half yearly and annual announcements on activities and results, the material
announcements made by Perilya over the period referred to in the chart are summarised as follows:

►                      on 1 August 2007, Korea Zinc sold its 9.78% interest (19,198,750 shares) via a book build to global
                       institutional investors;

►                      on 15 November 2007, Perilya announced excellent new drill intercepts at Mt Oxide;

►                      on 20 December 2007, Perilya decided to proceed with North Mine Deeps feasibility study as well as selling
                       its 8.86% stake in Herald Resources Limited.

►                      on 21 December 2007, the Mt Oxide resource drilling and feasibility study was approved.

►                      on 26 March 2008, the directors of Perilya and CBH announced a proposal to merge both businesses together
                       via interdependent schemes of arrangement;

►                      on 5 June 2008, Perilya announced “spectacular drill intercepts” at Mt Oxide;

►                      on 24 June 2008, it was announced that Perilya rejects the revised terms of proposed merger with CBH and as
                       such it was unlikely that the transaction would proceed;

►                      on 22 July 2008, it was announced that the merger implementation agreement between CBH and Perilya had
                       been formally terminated;

►                      on 21 August 2008, Perilya announced that it had completed an extensive review of its Broken Hill operation
                       and implemented a plan to resize the operation in light of low metal prices;

►                      on 11 September 2008, Perilya announced that it entered into a Heads of Agreement with Chalice for the sale
                       of the Mt Oxide Copper Project;

►                      on 2 October 2008, CBH launches an unsolicited hostile takeover bid for all of the issued shares in Perilya (i.e.
                       the CBH Bid);

►                      on 24 October 2008, it was announced that the agreement to sell Mt Oxide to Chalice had been terminated
                       due to the downturn in global financial and equity markets;

►                      on 7 November 2008, Perilya announced a significant upgrade to the reserves and resources at Broken Hill;

►                      on 12 November 2008, CBH lodged the bidders statement in respect to the CBH Bid for Perilya;

►                      on 25 November 2008, the Takeovers Panel acknowledges an application from Perilya in relation to the
                       takeover bid by CBH; and

►                      on 9 December 2008, Perilya announces the Proposed Transaction with Zhongjin.
                                                                                                                                                                        16




The last price at which Perilya shares traded on 5 December 2008, being the last trading day before the
announcement of the Proposed Transaction with Zhongjin, was 15 cents. In the period since, Perilya shares
recommenced trading after the announcement of the Proposed Transaction on 9 December 2008 and 19 December
2008, the Company’s shares have traded in the range of 15.5 cents and 20 cents, closing on 19 December 2008 at
18 cents.

The following chart shows the correlation between movements in Perilya’s share price with the zinc price together
with the S&P/ASX 300 Metals & Mining Index over the period between 1 July 2007 and 19 December 2008.


                                                     ASX 300 Metals & Mining vs Zinc Price vs Perilya Share Price

  160
  140
  120
  100
   80
   60
   40
   20
    0
                                   Oct-07




                                                       Dec-07




                                                                                                                                                      Oct-08




                                                                                                                                                                             Dec-08
        Jul-07


                 Aug-07


                          Sep-07




                                                                   Jan-08


                                                                            Feb-08


                                                                                     Mar-08


                                                                                              Apr-08




                                                                                                                Jun-08


                                                                                                                          Jul-08


                                                                                                                                    Aug-08


                                                                                                                                             Sep-08
                                            Nov-07




                                                                                                       May-08




                                                                                                                                                               Nov-08
                                                                ASX 300 Metals & Mining         Zinc Price        Perily a Share Price



The chart shows that the movement in Perilya’s share price up to mid-August 2007 was closely correlated with the
S&P/ASX 300 Metals & Mining Index; thereafter Perilya’s share price has significantly underperformed the index.
The close correlation between Perilya’s share price and the zinc price continued until January 2008; thereafter the
movement on Perilya’s share price was greater than the movement in zinc prices. Given the negative impact of lower
prices on the operations of Perilya the relative comparisons are not unexpected.
                                                                                                                           17




4.   Effect on the Non-Associated Shareholders
     At the date of this report, Perilya has on issue 196,882,640 shares, 151,800 performance rights and 8,700,000
     options with exercise prices between 50 cents and $4.32. The performance rights were granted in December 2007
     and vest subject to certain performance hurdles and total shareholder returns of Perilya in comparison to its peers.
     Given the Company’s recent performance it is unlikely that any of the performance rights will vest. Similarly, given
     the recent trading history of the Company’s shares it is unlikely that any of the options on issue will be exercised in
     the short term.

     Under the Proposed Transaction, if approved, Zhongjin is to be issued with 197,672,000 shares in Perilya.

     The table below sets out the impact on the Non-Associated Shareholders of the Proposed Transaction:

     Impact on Non-Associated Shareholders' Interest in Perilya                        Share Holding        % Interest
     Before the Proposed Transaction
     - The Non-Associated Shareholders                                                     196,882,640         100.0%
     After the Proposed Transaction
     - The Non-Associated Shareholders                                                     196,882,640          49.9%
     - Zhongjin                                                                            197,672,000          50.1%
                                                                                           394,554,640         100.0%

     The 50.1% represents the maximum shareholding that Zhongjin will obtain in Perilya under the Proposed
     Transaction. Based on Perilya’s top 10 shareholders at 3 December 2008, who at that date held 52.7% of the
     shares on issue, after the Proposed Transaction the top 10 would hold 74.4%, with Zhongjin’s 50.1% and the other
     nine holding a total collective interest of 24.3%. AXA would be the Company’s second largest shareholder with a
     4.6% interest, down from 9.5%.

     While the issue of any shares under the performance rights appears remote and the exercise of any of the options is
     unlikely, for illustrative purposes, on a fully diluted basis assuming 8,851,800 shares were issued, the Non-
     Associated Shareholders’ collective interest in the Company would increase from 49.9% to 51% and Zhongjin’s
     interest would decrease from 50.1% to 49%. Under this scenario, Zhongjin would continue to be Perilya’s largest
     shareholder by a significant amount.
                                                                                                                                         18




5.    Economic and Industry Profile

5.1   Current Economic Conditions
      The economic environment has changed considerably over the last 18 months. Following consecutive years of
      robust global economic growth from the early 2000’s, from early 2007 problems began to emerge in global financial
      markets as the implications of the sub-prime lending collapse in the United States became more wide spread. Over
      2008 the global financial crisis has escalated resulting in a halt in credit markets, highly volatile world equity
      markets and recessionary conditions in major economies throughout Europe, the United States, and most recently,
      Japan.

      While the economic growth of recent years was primarily driven by increased consumption from developing
      countries, specifically China and to a lesser extent India, the financial crisis has resulted in a slowdown in demand
      and production cut-backs. Analysts predict that China’s growth rate for the final three months of 2008 is likely to
      slow to between 5% and 6.5%, a growth rate that, if reached, will be the lowest recorded for 18 years. Emerging
      market economic growth is forecast to decline to 4.9% for 2009, down from 7.9% in 2007 and 6.3% in 2008.

      Declining demand and consumption, along with rising inventories have resulted in significant price decreases in
      most major commodities in recent months.

      Impacted by stringent credit markets and falling commodity prices, global equity markets have experienced high
      volatility, along with significant declines in value. Most of the world’s major indexes have fallen between 35% and
      55% since reaching their highs in mid to late 2007.

      The Dow Jones Industrial Average Index (“the Dow Jones”) performance is reflective of many equity markets globally,
      albeit with varying time lags. After reaching all time highs of 14,164 on 9 October 2007, the Dow Jones fell 46.7%
      to a five and a half year low of 7,552 on 20 November 2008. Over this period, the index recorded one day gains in
      excess of 8.5% and also experienced one day losses of up to 9.5%, illustrating the significant volatility in the market.
      This volatility observed is not uncommon in many other markets globally.

      The table below shows the decline in value of the world’s major indexes.

      World Equity Markets     ASX
                                                            ASX 300         Dow Jones                                                   Dow Jones
                                All         ASX 200                                           FTSE 100        Nikkei      Hang Seng
                                                         Metals & Mining Industrial Average                                             Euro Stoxx
                             Ordinaries
      Min                       3,333         3,353           2,279             7,552            3,781         7,163        11,016       2,166
                             (20 Nov 08)   (20 Nov 08)     (20 Nov 08)       (20 Nov 08)      (21 Nov 08)   (27 Oct 08)   (27 Oct 08) (21 Nov 08)
      Max                       6,854         6,829           6,136            14,165            6,732       18,262         31,638        4,558
                             (1 Nov 07)    (1 Nov 07)      (19 May 08)       (9 Oct 07)       (18 Jun 07)   (9 Jul 07)    (30 Oct 07)   (16 Jul 07)
      % change in value
                               -51.4%        -50.9%          -62.9%            -46.7%           -43.8%        -60.8%        -65.2%        -52.5%
      (Min. - Max.)
      Close 19 Dec 08           3,547         3,616           2,992             8,579            4,287         8,589        15,128        2,444

      Source:Bloomberg


      At the date of this report, world markets remain highly volatile, with the outcome of recent and ongoing fiscal and
      monetary policy changes being implemented in most major economies still unknown. It is widely projected that
      recessionary conditions are likely to continue into 2009 and given the much tighter credit conditions, investment
      and GDP growth will slow in most countries, including Australia.

      Overall, global real GDP is projected to expand only 0.9% in 2009, the weakest since records became available in
      1970. Beyond 2009, real GDP growth is expected to increase, albeit at a significantly lower level experienced in
      2006 (5.3%) and 2007 (5.2%).
                                                                                                                          19




5.2   The Zinc and Lead Market
      Typically occurring together in complex ore deposits, zinc and lead are generally co-produced. Together, zinc and
      lead are the two most widely used non-ferrous metals after aluminium and copper, with zinc being used in
      galvanising iron and steel, brass and bronze making, and in the production of other alloys. Lead is predominantly
      used in the production of batteries and pigments.

      Historically, the global market for zinc and lead has been typified by a wide base of producers and high competition.
      This competition has often led to periods of over production with producers reluctant to make significant supply
      cutbacks to keep supply and demand in balance. As a result, during economic slowdowns zinc and lead inventories
      have had a historical tendency to build up significantly and during economic recoveries, the metals’ prices often lag
      behind the other base metals as the high inventories are reduced.

      In the past five years, on the back of robust economic expansion in emerging countries, in particular China, demand
      for both zinc and lead increased, resulting in inventory shortages and substantial price increases. As a result of
      enhanced prices, existing operations have been expanded and the new mines opened, increasing total mine
      production.

      In recent months however, the global economic downturn has significantly reduced demand for zinc and lead. At the
      time of this report, both industries are experiencing difficult market conditions, with many companies’ costs of
      production exceeding zinc and lead prices. As a result, delaying of projects, reduction in production and mine
      closures are beginning to appear. The scale back of operations by both CBH and Perilya along with OZ Minerals
      Holdings Limited, the world’s second largest zinc miner, is typical of what is happening within the sector.

5.3   Global Demand for Zinc and Lead
      Global zinc demand increased at a cumulative rate of around 3.6% since 2003, as strong growth in China has offset
      the weakening demand from much of the western world. In 2007, there was a fundamental shift in the
      demand/supply balance from deficit to surplus, resulting in increasing inventories and lower prices.

      Lead demand has followed a similar pattern as zinc, albeit with a slight lag. Following the economic expansion of
      China in the early 2000’s, by 2003 the population’s growing wealth meant an emerging middle class were able to
      afford items requiring batteries, especially motor vehicles. As such, demand increased rapidly. This demand has
      tapered in recent years, as many western economies, specifically the United States, have slowed.

      Looking forward, in the short to medium term demand growth for both zinc and lead is expected to continue to ease
      as the United States and European economies remain weak and Chinese GDP growth slows.

5.4   Global Supply of Zinc and Lead
      Following prices spikes in zinc in late 2006 and lead in 2007, many companies developed new projects or expanded
      existing operations to increase production. Given the nature of mining operations, there was a significant lag
      between the time of all time high zinc and lead prices and when the additional supply reached world markets. As
      demand has declined in recent months, the supply/demand balance for both metals has moved toward an
      increased surplus which is expected to continue into the short term to medium term.

      At 19 December 2008 zinc inventories on the London Metals Exchange (“LME”) had increased 145,525 tonnes
      since the beginning of 2008 and at that date stood at 234,000 tonnes, more than twice the levels at the end of
      2007. Surpluses are expected to widen through 2009, putting further downward pressure on prices. However, with
      the downscaling of production expected due to the lower prices and higher input costs, inventories are expected to
      fall post 2010.

      LME lead inventories have decreased since late June, with levels falling 56.8% from 101,900 tonnes at 30 June
      2008 to be at 44,025 tonnes at 19 December 2008. Additional supply is expected to outpace demand beyond
      2009, resulting in an increase in inventory levels.
                                                                                                                          20




      The tables below outline zinc and lead supply and usage historically and for the nine months to 30 September 2008.

      Zinc Supply and Usage

      000's tonnes                   2003        2004    2005     2006       2007     YTD Sept07 YTD Sept08
      Mine Production               9,545      9,709    10,146   10,456    11,129        8,193           8,776
      Metal Production              9,912      10,392   10,229   10,658    11,353        8,424           8,825
      Metal Usage                   9,839      10,647   10,611   10,979    11,347        8,411           8,713
      Source: International Lead and Zinc Study Group

      Lead Supply and Usage
      000's tonnes                   2003        2004    2005     2006       2007     YTD Sept07 YTD Sept08
      Mine Production               3,113       3,123   3,412    3,516      3,602        2,651           2,891
      Metal Production              6,787       6,998   7,632    7,922      8,112        6,023           6,462
      Metal Usage                   6,844       7,296   7,803    8,061      8,147        6,074           6,427
      Source: International Lead and Zinc Study Group


5.5   Zinc and Lead Prices
      With the exception of a price spike in 1997, from the early 1990’s through to 2003 zinc prices have been relatively
      stable, generally trading between US$800 and US$1,000 per tonne (“/mt”). Over the five year period to 2008, the
      price of zinc increased at an annualised rate of 19.3%, in large part due to a rapid increase in zinc prices between
      July 2005 and November 2006, peaking at US$4,603/mt on 24 November 2006. The rising price over the period
      was attributed to the significant demand from China, driven primarily by the country’s construction projects.

      Since the beginning of 2007, the price of zinc has strongly trended downwards, on the back of increased supply and
      slowing demand. Zinc prices decreased by 21.9% from 2 January 2008 to US$1,903/mt on 30 June 2008. From
      30 June 2008 to 19 December 2008, the LME zinc price fell 40.2% to close at US$1,139/mt.

      Prior to 2003 lead prices remained stable due to a tight balance between demand and supply. Consistent with zinc,
      lead prices increased over 2003 and 2004 yet did not mirror the rapid increase in zinc prices from late 2005.
      Following an escalation in the demand for car and industrial batteries from emerging economies and heavy
      speculation on base metal commodities, world lead prices increased significantly over the period July 2006 to
      October 2007, rising four fold from US$981/mt on 3 July 2006 to a peak of US$3,989/mt on 10 October 2007.

      Since October 2007, lead prices have trended downward, with the exception of a brief upturn occurring in February
      2008. From the high reached on 10 October 2007 lead prices fell 55.8% to close at US$1,764/mt on 30 June
      2008. From 30 June 2008, lead prices have decreased a further 68.3%, closing at US$845/mt on 19 December
      2008.
                                                                                                                                                                                           21




The charts below illustrate the historical performance of both zinc and lead along with the closing LME inventories.

                                                    LME Zinc Closing Price/ Inventories

                      5,000                                                                                                                           1,000
                      4,000                                                                                                                           800




                                                                                                                                                                      Quantity ('000 mt)
     Price (US$/mt)

                      3,000                                                                                                                           600
                      2,000                                                                                                                           400
                      1,000                                                                                                                           200
                          -                                                                                                                           -
                              1998


                                     1999


                                             2000


                                                       2001


                                                                 2002


                                                                            2003


                                                                                       2004


                                                                                                  2005


                                                                                                            2006


                                                                                                                          2007


                                                                                                                                        2008
                                                                Zinc Price                    LME Inventories



                                                    LME Lead Closing Price/ Inventories


                      5,000                                                                                                                           250

                      4,000                                                                                                                           200




                                                                                                                                                              Quantity ('000 mt)
    Price (US$/mt)




                      3,000                                                                                                                           150

                      2,000                                                                                                                           100
                      1,000                                                                                                                           50
                          -                                                                                                                           -
                              1998


                                     1999


                                             2000


                                                       2001


                                                                 2002


                                                                            2003


                                                                                       2004


                                                                                                  2005


                                                                                                            2006


                                                                                                                          2007

                                                                Lead Price                LME Inventories                               2008

The charts evidence the significance of the recent economic cycle and the fact that the period of historically high
metal prices appear to be over.

The following chart illustrates the comparative prices of zinc and lead since the beginning of 1998. An interesting
aspect of the comparative trends is the lag between the upward and downward movement in zinc and lead prices
over the recent cycle.

                                                              LME Zinc/Lead Closing Price

                      5,000
                      4,000
    Price (US$/mt)




                      3,000
                      2,000
                      1,000
                          -
                              1998


                                      1999


                                              2000


                                                         2001


                                                                   2002


                                                                               2003


                                                                                          2004


                                                                                                     2005


                                                                                                                   2006


                                                                                                                                 2007


                                                                                                                                               2008




                                                                          Zinc Price             Lead Price



Looking forward, the softening of demand for iron and steel, as a result of the credit crisis, will result in an uncertain
outlook for zinc demand. It is likely that demand for zinc will be restrained for the rest of FY08 and across FY09.

Lead prices are expected to continue to decline from the high levels prevailing in late 2007 as demand continues to
ease across FY09 and into FY10.

The forecast prices used in our assessment of Perilya are detailed in Appendix C.
                                                                                                                                  22




6.    Fair Market Value of a Perilya Share

6.1   Approach
      We have valued Perilya on a fair market value basis. Consistent with requirements of RG 111 with respect to a
      control transaction, our valuation of the Company is based on 100% ownership. By definition, fair market value
      does not incorporate any special or additional value that may accrue to a particular purchaser because of that
      entity’s individual circumstances. In a competitive bid situation, potential purchasers may be prepared to pay to the
      seller part or all of the special value that they expect to realise from the acquisition.

      There are a number of methodologies available with which to value a business or the shares in a company. The
      principal methodologies used are as follows:

      ►     capitalisation of earnings;

      ►     discounted cash flow (“DCF”);

      ►     net realisable value of assets; and

      ►     market based assessments

      A brief overview of these methodologies is presented in Appendix B to this report.

      Each of these methodologies is appropriate in certain circumstances. The decision as to which methodology to
      utilise generally depends on the methodology most commonly adopted in valuing the asset in question and the
      availability of appropriate information.

      In assessing a value of Perilya, we have aggregated:

      ►     the fair market value of Perilya’s mineral assets including the Company’s Broken Hill operation, the stockpiles
            at Beltana and Mt Oxide together with consideration of the Company’s other exploration assets;

      ►     the fair market value of Perilya’s other assets and liabilities which are not reflected in the fair market value of
            the Company’s mineral assets;

      ►     the fair market value of corporate overheads;

      ►     the fair market value of accumulated tax losses; and

      ►     cash net of interest bearing liabilities.

      The valuation of Perilya’s underlying assets and liabilities is set out in the following sections, with the valuation
      summary included in section 6.10.
                                                                                                                              23




6.2     Mineral Assets
6.2.1   Broken Hill and Beltana 
        The mining operations at Broken Hill and Beltana are described in section 3.2 and in Appendix C. As detailed in
        Appendix C, we have applied the DCF methodology to value Broken Hill and Beltana.

        The commodity prices and A$:US$ exchange rate assumptions used by Ernst & Young Transaction Advisory Services
        for the purpose of the DCF analysis have been constructed by taking the average of forecast commodity prices from
        various brokers current at the date of this report.

        In Appendix D to this report we have assessed the discount rate used to value Perilya’s mineral assets, representing
        a real, post tax weighted average cost of capital (“WACC”), to be in the range of between 15.0% and 17.0%.

        On this basis the following table summarises the range assessed for Broken Hill and Beltana. Full details of our
        valuation are contained in Appendix C.

        Valu e of Mining Properties ($000's)                                               Low             Mid            High
        Broken Hill                                                                    39,780          40,486         41,206
        Beltana                                                                        11,495          11,575         11,656
        Total m ining prop erties                                                      51,275          52,060         52,862

        Sou rce : Ernst & You ng Transactio n A dvisory Services An alysis


        A sensitivity analysis for the Broken Hill operations is contained in Appendix C. This showed that the valuation of
        Broken Hill was particularly to metal prices. No sensitivity analysis was conducted for Beltana given the nature of
        the operation representing the sale of existing stockpiles over a relatively short period.

6.2.2   Mt Oxide 
        The Mt Oxide Copper Project is an advanced copper exploration project located in the Mt Isa region of north western
        Queensland. The project is located in the Mt Isa region of Queensland, 25 kilometres north of the existing Mount
        Gordon copper mine operated by Aditya Birla Limited. Mt Oxide contains a resource of 15.5 million tonnes at
        grades of 1.3% copper and 0.05% cobalt, representing 203,000 tonnes of contained copper and 7,750 tonnes of
        cobalt. A scoping study has demonstrated the potential of the existing resource which is still open at depth and
        along strike. At 31 October 2008 the expenditure incurred by Perilya on Mt Oxide totalled approximately $20.726
        million.

        In July 2008 Perilya announced that it had received a number of expressions of interests in relation to the
        development of Mt Oxide. On 11 September 2008 Perilya announced that it had entered into an agreement with
        Chalice for the sale of the Mt Oxide. The purchase consideration was to be satisfied by the issue of 200 million
        ordinary shares in Chalice. Based on the closing price of a Chalice share on 10 September 2008 of 12 cents the
        issue of the 200 million shares equated to a $24 million consideration. Reflecting the continued downturn in
        capital markets and in copper prices, on 24 October 2008 it was announced that the sale to Chalice had been
        terminated by mutual agreement.

        Subsequent to the termination of the transaction with Chalice, Perilya received a number of enquiries with respect to
        the possible sale of Mt Oxide. Some of these enquiries were from parties who had previously lodged expressions of
        interest prior to the announcement of the sale to Chalice. Through this process in early December 2008 an offer to
        acquire Mt Oxide for a cash consideration of $15 million was received from a third party. The offer was valid until 10
        December 2008.

        At the time Perilya was receiving renewed interest in Mt Oxide, the Company had been separately approached by
        Zhongjin and another Chinese company for a direct investment in Perilya. A consequence of this process was the
        announcement on 9 December 2008 of the Proposed Transaction with Zhongjin. As a consequence, the offer from
        the other third party was left to lapse.

        To support the repayment of the Deposit payable by Zhongjin to Perilya should the Proposed Transaction not
        proceed, the Company and Zhongjin are required to enter into the Call Option, which gives Zhongjin the right to
        acquire Mt Oxide for $15 million.

        Given the sales activity around Mt Oxide, including the proposed terms of the Call Option, for the purposes of this
        report we have assess the value of the Mt Oxide Copper Project to be $15 million.
                                                                                                                              24




6.2.3   Other Exploration 
        At 31 October 2008, the expenditure incurred by Perilya on its current exploration, development and evaluation
        projects, other than Mt Oxide, totalled $39.559 million as detailed in the following table:

        Perilya - Exploration Expenditure ($000's)                          As at
                                                                      31 Oct 2008
        Broken Hill Exploration                                            29,271
        Flinders                                                            8,836
        Kanowna                                                               625
        Dee Range                                                             360
        Tampang                                                               388
        Other                                                                  79
                                                                           39,559
        Source: Perilya management information


        Broken Hill exploration includes the North Mine Deeps and the Potosi Developments, both of which have been
        placed under care and maintenance, together with the extended exploration targets of Broken Hill Southern
        extensions, Flying Doctor, Northern Lodes and the Pinnacles. Flinders includes a number of targets including the
        Reliance advanced exploration prospect. The other areas represent earlier stage exploration projects.

        Reflecting the lower metal prices and the decision by the Company to resize operations at Broken Hill from 1.8 mtpa
        to 0.95 mtpa, at 30 June 2008 Perilya made an impairment write-down of $38.462 million to effectively writing-off
        all capitalised exploration, development and evaluation expenditure at that date except for Mt Oxide. In the four
        months to 31 October 2008 the $1.097 million of expenditure incurred on projects other than Mt Oxide has also
        been impaired. Accordingly, the $39.559 million spent on the Company’s exploration, development and evaluation
        projects has been written-off. The expenditure relevant to Mt Oxide was carried forward at 30 June 2008 and
        continues to be given the proposed transaction with Chalice and the offer received subsequent to that transaction
        being terminated.

        While it is likely that the Company will continually reassess its Broken Hill operations to determine the best course of
        action, at present it intends to source all of the required ore from its Southern Operations area, which has sufficient
        reserves, based on the pricing assumptions referred to in Perilya’s announcement of 7 November 2008, to support a
        0.95 mtpa mine life of nine years. Based on the metal price forecasts we applied, our valuation assessment shows
        that the Broken Hill operations become uneconomic after approximately six years even though at the reduced
        production rate the Southern Operations have sufficient reserves for a nine year mine life.

        Unless market conditions improve sufficiently to support a sustained increase in production, the likelihood of the
        North Mine Deeps and the Potosi Developments and any of the extended exploration targets being developed in the
        current economic environment is low. Without access to a processing plant, none of the Broken Hill prospects are by
        themselves sufficiently advanced to support a separate operation. Current metal prices and market conditions do
        not support the construction of a new plant, especially given the available capacity of Perilya’s existing plant at
        Broken Hill.

        For similar reasons, unless market conditions improve substantially the development of prospects within the
        Flinders project area is unlikely.

        With recessionary pressure being experienced in most of the world’s major economies and a greater than expected
        slowdown in the Chinese economy, there is an expectation that the current poor market conditions are going to
        deteriorate further through 2009 before they improve in 2010. With this short term outlook, demand for base
        metals over the next 12 to 24 months is expected to continue to be flat.

        Accordingly, while it is recognised that Perilya’s exploration, development and evaluation projects have upside
        potential, in the current world economic environment the value of such assets is questionable. Prior to the
        announcement of the Proposed Transaction with Zhongjin the Company had a market capitalisation of less than $30
        million. Given the current market conditions and the negative short term outlook, for the purposes of this report, we
        have not placed any value on Perilya’s other exploration assets.
                                                                                                                              25




6.3     Other Assets and Liabilities
        In valuing Perilya we have considered the fair market value of the other assets and liabilities which are not reflected
        in the fair market value of the Company’s mineral assets. The values have been based on the balances contained in
        the Company’s 31 October 2008 unaudited management accounts. The net amount is summarised in the following
        table:

        Value of Other Assets and Liabilities ($000's)                                                                   Value
        Receivables                                                                                                     4,714
        Trade creditors & accruals                                                                                    (19,714)
        Total value of other assets and liabilities                                                                   (15,000)
        Source: Perilya management accounts 31 October 2008


        As presented above we have assessed other net liabilities not included in the fair market value of the Company’s
        mineral assets to be negative $15 million.

6.4     Corporate Overheads
        Corporate overheads represent the costs of management, finance and administrative staff and other costs that have
        not been allocated to specific mineral assets. Based on discussions with Perilya management we have estimated
        the Company’s annual corporate overhead costs to be approximately $5 million.

        To calculate the present value of corporate overheads, on an after tax basis we have used a DCF approach and
        adopted the same discount rate range assessed for Perilya’s mineral assets across a period equating to the expect
        life of the Company’s mineral projects. On this basis we have valued corporate overheads, as a cost, to be in the
        range of $14.422 million to $15.136 million.

6.5     Net Interest Bearing Liabilities
        The calculation of Perilya’s net interest bearing liabilities based on the Company’s management accounts as at 31
        October 2008 is summarised in the table below.

        Value of Net Interest Bearing Liabilities ($000's)                                                               Value
        Cash                                                                                                           10,777
        Short term borrowing                                                                                           (7,684)
        Long term borrowings                                                                                           (7,482)
        Cash net of interest bearing liabilities                                                                       (4,389)
        Source: Perilya management accounts 31 October 2008


        The short term borrowing amount included in the table above relate to hire purchase agreements on plant and
        equipment of $5.788 million and an insurance premium funding loan of $1.896 million. The long term borrowing
        amount relates to hire purchase agreements. Perilya’s net interest bearing liabilities as at 31 October 2008 is
        $4.389 million.

6.6     Investments
6.6.1   Commercial Paper 
        At 31 October 2008 Perilya had an investment in commercial paper with a face value of $30 million and a carrying
        value of $21.783 million. The investments are unquoted and represent holdings in asset backed funds with maturity
        dates of between 18 months and five years. While they all continue to meet interest payments the recent volatility in
        capital markets has significantly impacted the liquidity and value of these investments.

        In early November 2008, Perilya disposed of two of its holdings for $3.2 million. These had a face value of $6
        million and a carrying value at 31 October 2008 of $4.75 million.
                                                                                                                                  26




        Based on the last statement received from the Company’s treasury broker, dated 21 November 2008, the remaining
        instruments had a value of $16.977 million. Together with the amount realised in November 2008, the value of the
        commercial paper is restated to $20.177 million.

        On the basis that the market for these types of investments is extremely thin, at the low end of our valuation range we
        have applied a 40% discount to the value of the remaining instruments. On this basis, for the purposes of this report
        we have value Perilya’s investment in commercial paper in the range of between $13.386 million and $20.177
        million.

6.6.2   Investment in Listed and Unlisted Securities 
        Perilya has listed and unlisted investments in a number of resource based companies. At 31 October 2008 the book
        value of these investments was stated at $10.7 million.

        For the companies listed on the ASX we have primarily based our valuation assessment on the last trading prices as
        at 19 December 2008 with the following exceptions:

        ►     in November 2008 Perilya disposed of its shares in Jabiru Metals Limited. These shares have been valued
              based on the net proceeds realised;

        ►     Perilya is the largest shareholder in Green Rock Energy Limited and in Silver Lake Resources Limited with an
              interest of 9.1% and 9.8% respectively. In determining the value of Perilya’s investment in these companies
              we have considered the size of Perilya’s interest, the liquidity of each company’s shares on the ASX and, based
              on this analysis, the likely period over which Perilya may be able to realise its investment in an orderly manner.
              Based on this analysis we have applied a 20% discount at the low end of our valuation range.

        On this basis, for the purpose of this report, we have valued Perilya’s investment in listed securities in the range of
        between $4.105 million and $4.914 million.

        Perilya holds unlisted options in a listed company which are exercisable at 50 cents on or before 30 April 2011. In
        applying the Binomial Option pricing model, as at 19 December 2008 the theoretical value of these options are
        assessed at $176,000. On the basis that they are unlisted, at the low end of our valuation range we have applied a
        30% discount. On this basis we have valued the unlisted options in the range of $123,000 and $176,000.

        Perilya also has an investment in two unlisted resource companies, one with a book value of approximately
        $514,000 and the other with a nil book value. Given the unlisted nature of these shares in that there is no readily
        available market where they can be traded and the current state of the resource sector, for the purposes of this
        report we have valued the investment in these companies at nil.

        Based on the above we have valued Perilya’s investments for the purpose of this report to be in the range of $4.228
        million to $5,090 million

6.6.3   Summary 
        Our valuation of Perilya’s investments is summarised as follows:

        Value of Investments ($000's)                                                        Low             Mid            High

        Value of commercial paper                                                        13,386          16,782          20,177
        Value of equity investments                                                       4,228           4,659           5,090
        Total value of all investments                                                   17,614          21,440          25,267

        Source: Ernst & Young Transaction Advisory Services Analysis
                                                                                                                               27




6.7   Value of Hedge Positions
      Our valuation of Perilya is based on the Company’s balance sheet as at 31 October 2008. Our valuations of Broken
      Hill and Beltana do not incorporate Perilya’s hedge positions, therefore the gains and/or losses from these positions
      need to be included separately. With respect to commodity hedging, Perilya only hedges what has been sold. On
      this basis the hedge position at any one time is fairly short.

      We have been advised by the Company’s management of the gains that Perilya has made on its commodity and
      exchange hedge positions that have matured in October, November and December 2008. These amounts are
      included in the table below. The gain on the October contracts is consistent with the value included in the 31
      October 2008 balance sheet.

      Perilya currently has hedge positions expiring in January and February 2009 in lead and for A$:US$ forward
      contract. These positions have been valued based on the commodity price and exchange rate assumptions for FY09
      included in our DCF analysis. The total value of Perilya’s hedge positions is $11.168 million.

      Value of Hedge Positions ($000's)                                                                                Value
      Gain on October contracts                                                                                        3,465
      Gain on November contracts                                                                                       3,323
      Gain on December contracts                                                                                       4,958
      Value of lead hedge positions                                                                                      (85)
      Value of currency hedge positions                                                                                 (492)
      Total value of hedge positions                                                                                 11,168
      Source: Ernst & Young Transaction Advisory Services Analysis


6.8   Tax Benefits
      At 30 June 2008, Perilya had carried forward tax losses amounting to approximately $24.959 million. In the period
      to 31 October 2008 Perilya closed out the majority of its hedge position, resulting in a taxable gain of approximately
      $60 million. Because of this gain it is not expected that Perilya will have any tax losses. As such, we have placed no
      value on the accumulated tax losses as at 30 June 2008. As Perilya is expected to record a tax loss for FY09, we
      have also not included a notional tax payment for the four months ending 31 October 2008.

      Perilya is not expected to be in a tax payable position over the forecast period due primarily to the tax amortisation
      of the Broken Hill mining operations. We have however included a tax expense in our valuation of Beltana. On the
      basis the tax losses will be available to be off-set against this tax expense assessed on Beltana we have include a
      value for the benefit associated with these tax losses. On a DCF basis this benefit is valued at between $4.298
      million and $4.358 million.

6.9   Exercise of Options
      Perilya has on issue 8,700,000 options with exercise prices between 50 cents and $4.32. On the basis that the
      market price of the Company’s shares has been well below this range, for the purposes of this report we have
      assumed that none will be exercised.
                                                                                                                               28




6.10   Valuation Calculation
       Our calculation of the value of a Perilya share is summarised in the table below:

       Summary of Values ($000's)                                                          Low              Mid           High
       Mining Properties
       Broken Hill                                                                      39,780         40,486          41,206
       Beltana                                                                          11,495         11,575          11,656
       Total mining properties                                                          51,275         52,060          52,862

       Exploration Assets
       Mt Oxide                                                                         15,000         15,000          15,000
       Other exploration assets                                                               -              -               -
       Total exploration assets                                                         15,000         15,000          15,000
       Total mining properties and exploration assets                                   66,275         67,060          67,862
       Other Asets and Liabilities
       Other assets and liabilities                                                    (15,000)       (15,000)        (15,000)
       Corporate overheads                                                             (14,422)       (14,771)        (15,136)
       Less: Net interest bearing liabilities                                           (4,389)        (4,389)         (4,389)
       Add: Value of investments                                                        17,614         21,440          25,267
       Add: Value of hedge positions                                                    11,168         11,168          11,168
       Add: Value of tax benefits                                                        4,298          4,327           4,358
       Total other assets and liabilites                                                   (731)         2,776          6,268
       Fair market value                                                                65,544         69,836          74,130
       Number of shares on issue                                                      196,883         196,883         196,883
       Fair market value per share ($)                                                     0.33           0.35            0.38
       Source: Ernst & Young Transaction Advisory Services Analysis

       The fairly narrow range primarily reflects that fact that the only variation between the high and the low is our discount
       rates. In addition, other than for Mt Oxide, which the value is the same across the range, we have attributed no value
       to Perilya’s other exploration assets. The value for Mt Oxide has been assessed to be $15 million without any
       variation at the low and high end of the range.

       The values assessed are at a significant premium to the prices at which Perilya’s shares have traded on the ASX and
       to the 23 cents per share being paid by Zhongjin for the Placement Shares under the Proposed Transaction. Based
       on the closing price of Perilya’s shares on 19 December 2008 of 18 cents, the mid-point of our range of 35 cents
       represents a 94% premium to market. While our assessment of the fair market value of Perilya has been determined
       on a 100% basis, compared to the trading prices on the ASX which reflect the buying and selling of minority
       interests, the premium between share price on market and a 100% value is usually not that large. Empirical
       evidence shows that control premiums paid, measured as the difference between the pre-bid price and the takeover
       price, are generally in the range of between 20% and 40%. The premium over the 23 cents to be paid by Zhongjin is
       52%. Whether Zhongjin is paying a control premium is considered in section 7.6.

       While Zhongjin is obtaining a 50.1% interest in Perilya which will enable it to control the Company in general
       meeting, it is not acquiring a 100% interest which would give it absolute control of the underlying operations and
       cash flows of the business.

       Given the volatility within equity markets of recent times and the ongoing economic uncertainty the differential
       between our assessed fair market assessment of a Perilya share and the recent trading prices is not unexpected.

       On this basis, for the purpose of this report, we have assessed the fair market value of a Perilya share to be in the
       range of between 33 cents and 38 cents. Our assessment has valued Perilya’s exploration assets, other than Mt
       Oxide, at ‘nil’ at both ends of our range. If a value was ascribed to exploration the value of a Perilya share would
       increase.
                                                                                                                               29




7.    Other Significant Matters

7.1   Comparison with Market Prices
      Included in the table below is a comparison of the recent trading prices of Perilya’s shares on the ASX with 23 cents
      per share to be paid by Zhongjin under the Proposed Transaction:

      Comparison of Market Price and the                    Perilya           Zhongjin         Zhongzin
      Proposed Transaction                                Market Price         Price          Premium /
                                                                                              (Discount)

      20 day VWAP to 5 Dec 2008 1                              12.6             23.0             82.4%
      5 Dec 2008 closing price                                 15.0             23.0             53.3%
      9 Dec 2008 VWAP2                                         17.7             23.0             29.9%
                             3
      9 Dec to 19 Dec VWAP                                     17.4             23.0             32.2%
      Notes:
      1 - Last trading day before announcement of the Proposed Transaction with Zhongjin.
      2 - Date of the announcement of the Proposed Transaction
      3 - Details for the nine trading days from date of announcement

      The analysis shows that the price to be paid by Zhongjin is at a significant premium to the market prices of Perilya’s
      shares leading up to the announcement of the Proposed Transaction on 9 December 2008. Since the
      announcement the premium has reduced, however the premium to market price continues to be substantial. The
      payment of a premium to market by Zhongjin is to the benefit of the Non-Associated Shareholders.

      The increase in share price since the announcement indicates a positive reaction to the Proposed Transaction from
      the market.

7.2   Perilya’s Financial Position
      While Perilya has restructured its operations in response to low metal prices and an uncertain global economy, the
      cost of this restructure and the ongoing impact of low commodity prices will continue to have a negative impact on
      the Company’s financial position. In this regard Perilya’s short term forecast cash flows indicate that without the
      Proposed Transaction the Company will need to source new funding early in 2009.

      With the volatility in capital markets is expected to continue through 2009, Perilya’s ability to readily source new
      debt or equity funding in these circumstances is uncertain. While the Directors and management of the Company
      can take action to reduce funding requirements, this would possibly lead to a further reduction or restructure of
      operations at Broken Hill. The Company does have assets that can be sold if required, however in the current
      economic climate the amount that could be realised from this would be uncertain.

      Faced with this issue, the Placement of Shares to Zhongjin under the Proposed Transaction will provide Perilya with a
      level of funding to finance its operations without the need to dispose of assets or to secure new funding from an
      alternative source. The pricing of the issue of the Placement Shares above market is to the advantage of the Non-
      Associated Shareholders.
                                                                                                                              30




7.3   Control Issues
      If the Proposed Transaction is approved Zhongjin will have a 50.1% interest in Perilya. To control a company in a
      general meeting, a shareholder would generally need to hold greater than 50% of the shares voted in an ordinary
      resolution or greater than 75% of the shares voted in a special resolution. Accordingly, with a greater than 50%
      interest Zhongjin would be able to control the outcome of the ordinary resolution. With respect to a special
      resolution, if more than 66.8% of the shares that Perilya has on issue are voted then Zhongjin would not be able
      control the outcome. If less than 66.8% of the shares are voted then Zhongjin’s 50.1% interest would be greater
      than the 75% majority required to pass a special resolution.

      If the resolution is to approve a transaction which involves Zhongjin or any of its related parties then it is likely that
      Zhongjin will be excluded from voting. In any other circumstances, given Zhongjin’s intended shareholding in Perilya
      it will be able to control, or at least significantly influence, the Company in general meeting.

      Under the Share Subscription Agreement, Zhongjin has the right to nominate such number of representatives as is
      equal to half of the members of the Board of Directors of Perilya. With a 50% Board representation, Zhongjin will be
      in a position to significantly influence the management and operational direction of Perilya. In stating this, the
      representatives of Zhongjin would need to exclude themselves from any business that involves Zhongjin or any
      related party. This may include the negotiation of any off-take agreements for any of the Company’s product.

      While Zhongjin may be able to control the Company in general meeting and will be able to significantly influence its
      day to day management of through representation of Perilya’s Board of Directors, it will need to consider the
      existence, needs and wants of the Company’s minority shareholders. The Act, the ASX Listing Rules, the Company’s
      Corporate Governance policies and common law, in part, help to protect minority shareholders against any
      unconscionable behaviour by a controlling shareholder. Any increase in Zhongjin’s shareholding from 50.1% would
      need to done on a basis consistent with the provisions of the Act and the ASX Listing Rules.

7.4   The CBH Bid
      While not a formal assessment of the CBH Bid, the purpose of this section is to provide some background on CBH,
      the CBH Bid and a high level comparison with the Proposed Transaction with Zhongjin.

      CBH is a resource company which owns and operates the Endeavor zinc and lead mine which in New South Wales.
      Other mineral assets held by CBH include the CML 7 mining lease at Broken Hill. Prior to the recent downturn in
      metal prices, CBH was looking to develop the Rasp zinc and lead mine within the CML 7 lease area, having
      completed a feasibility study into the establishment of a 750,000 tonnes per annum processing plant to produce on
      average 65,000 tonnes per annum (“tpa”) of zinc concentrate and 35,000 tpa of lead concentrate. It is CML 7
      which is the mining lease located between Perilya’s southern and northern mining leases.

      Other mineral assets held by CBH include the following:

      ►     the Panorama Project which is a proposed open cut zinc and copper mine located in the Pilbara region of
            north west Western Australia, approximately 160 kilometres south east of Port Hedland. The start-up
            schedule for the project is dependant on the receipt of final environmental approvals for the Western Australia
            government. Prior to the downturn in metal prices, expectations were for the project to be commissioned in
            the second half of 2011. The estimated construction capital cost of the project is approximately $230 million;

      ►     the Hera deposit is a gold/polymetallic deposit located 150 kilometres from the Endeavor mine. The deposit
            is under evaluation as a potential ore source for the Endeavor mine with a development plan in the final stages
            of evaluation;

      ►     the Cobar Basin exploration project in western New South Wales covers an area of approximately 3,100
            square kilometres of prospective Devonian aged marine clastics. These rocks host numerous gold and base
            metals deposits, most of which are positioned within basin margin faults on the eastern margin; and

      ►     The Panorama joint venture covers the mineralised Achean volcanic horizon that extends for 35 kilometres
            along strike from CBH’s Panorama project. CBH is earning a 60% interest in the property from Sipa Resources
            Limited through spending $4 million over four years.

      CBH also owns and operates a ship loading facility at the Newcastle port, which handles mineral concentrates for a
      number of base metal mines in New South Wales.
                                                                                                                   31




Production from Endeavor mine for FY07 and FY08 is summarised in the table below:

Endeavor Mine - Production                                     FY07           FY08
Ore treated (kt)                                             974.7         1,032.5
Zinc concentrate (kt)                                        102.3            92.0
Contained zinc (kt)                                           52.5            46.1
Zinc %                                                         6.2             5.4
Lead concentrate (kt)                                         54.2            42.6
Contained lead (kt)                                           26.6            21.3
Lead %                                                          3.4             2.8
Contained silver (Moz)                                       0.560           0.852
Source: CBH Annual Reports


During FY08, CBH implemented a number of capital expenditure initiatives that were expected to increase
production capacity at Endeavor to around 1.6 mtpa.

In response to falling metal prices and the completion of some of the capital expenditure initiatives, in June 2008
CBH announced that it was to undertake an operational restructure of the Endeavor mine. As a result of the
restructure the workforce at the mine was reduced from approximately 600 to 380. It was stated at that time that
the reduction in workforce was not expected to impact FY09 production, which was forecast to be around 1.3 million
tonnes.

With the continued deterioration of metal prices, in August 2008 CBH announced a revised operating plan for
Endeavor that would reduce production for FY09 to 940,000 tonnes, with the expectation that the annual mining
rate thereafter would be 800,000 tonnes per annum. The workforce was further reduced to around 230 employees.

CBH announced on 7 November 2008 that due to a further decline in metal prices, production in FY09 was to be
reduced to 658,000 tonnes, decreasing to 420,000 tonnes per annum thereafter. Workforce at Endeavor was
reduced to 115 employees.

The CBH Bid was announced on 2 October 2008 on the basis of 4.2 CBH shares for 1 Perilya share. The Bidder’s
Statement from CBH was sent to Perilya shareholders in early December 2008. In summary, the directors of CBH
gave the following reasons as to why Perilya shareholders should accept the CBH Bid:

►     Complementary Assets: CBH’s and Perilya’s operations at Broken Hill were adjacent to each other and CBH
      believed that the integration of both would create value in excess of what is achievable for each company on a
      standalone basis;

►     Focused value creation strategy: That CBH has a clear strategy focused on creating value for both CBH and
      Perilya shareholders;

►     Enhanced investment security: The merged group would have a diversified portfolio of assets with two long
      life production assets, several development opportunities and prospective exploration holdings; and

►     Premium to Perilya shareholders: The CBH Bid provides a premium to the prices at which Perilya shares have
      recently traded at.

A previous merger between Perilya and CBH by way of interdependent schemes of arrangement with CBH
shareholders and CBH convertible noteholders was announced in March 2008. Under the schemes, CBH
shareholders were to receive 1 Perilya share for every 3 CBH shares held, and CBH noteholders would receive Perilya
notes on terms that were substantially equivalent. The merger was required to be completed by the end of August
2008. In June 2008, although CBH had put forward a revised proposal of 1 Perilya share for every 3.5 CBH shares
held, Perilya effectively announced that it no longer supported the proposed merger with CBH. Perilya’s decision
was based on the recognition that in the period since March 2008 market conditions had deteriorated and there
had been a number of material changes to each company’s respective operations, including:
                                                                                                                       32




►     that Perilya had not had a chance to fully evaluate the impact of the operation restructure announced by CBH
      at Endeavor;

►     erosion of the anticipated short term benefits at Broken Hill as a result of a further technical evaluation of
      CBH’s Rasp mine project, declining metal prices and expected delays to that project;

►     an indicated lack of support of the proposed merger from CBH noteholders;

►     delays in the anticipated timetable;

►     the positive exploration results achieved at Mt Oxide; and

►     the significant fall in metal prices, in Perilya’s view changed the relative valuations of both company’s New
      South Wales operations, particularly the in the money position of Perilya’s hedge book, which meant that
      Perilya was better placed than CBH to weather a low commodity price cycle.

The proposed merger was formally terminated in July 2008.

Based on the number of shares that both company’s have on issue, if CBH is successful in obtaining 100% of the
issued shares of Perilya under the CBH Bid, Perilya shareholders will collectively hold 48.3% of the expanded issued
share capital of CBH.

On 15 December 2008, Perilya released the Target’s Statement in which the Directors unanimously recommended
to Perilya shareholders to reject the CBH Bid. In summary, the reasons for this recommendation included:

►     Superior proposal: Securing the financial and strategic support of Zhongjin via the Proposed Transaction is
      considered by the Directors to be a superior alternative cash based proposal to the CBH Bid;

►     Exposure to CBH’s debt: In economic times which are difficult and volatile, acceptance of the CBH Bid would
      expose Perilya shareholders to approximately $160 million of debt, represented by $139.5 million of
      unsecured 7.25% convertible notes and a Japanese Yen 1,361,400,000 (A$20.9 million) loan from Toho Zinc
      (CBH’s largest shareholders). Perilya is debt free and through the issue of the Placement Shares to Zhongjin
      will raise cash of $45,464,560;

►     Rationale for merger: With zinc and lead producers cutting production in response to low metal prices and
      falling demand, there is no “compelling financial or operational logic” for merging Perilya and CBH at this
      time;

►     Quality of Perilya’s assets: The CBH Bid does not reflect the superior quality of Perilya’s assets in that while
      Perilya shareholders would have 48.3% of the merged company, over the next few years Perilya’s assets would
      contribute over 60% of the projected zinc and lead production of the merged company;

►     CBH’s operating and development assets: The Directors of Perilya have concerns with respect to CBH’s
      operating and development assets given CBH has recently announced its third production cut at the Endeavor
      mine in less than six months and that the development of the Rasp and Panorama projects will require funding
      of over $300 million to develop;

►     Conditionality of the CBH Bid: The CBH Bid is highly conditional and will not proceed until all of the conditions
      are satisfied or waived. With the CBH Bid being open until 13 March 2009, any Perilya shareholders
      accepting the CBH Bid will not receive CBH shares until after that date.

Zhongjin has confirmed that if the Proposed Transaction does proceed it does not intend to accept the CBH Bid with
respect to the Placement Shares.

Included below is an analysis comparing the value of a Perilya share implied by the CBH Bid with the issue price of
the Placement Shares to Zhongjin. The analysis of CBH’s and Perilya’s share prices on the ASX are based on the
volume weighted average price (“VWAP”) for the day or days referred to. The “Implied Perilya” value represents the
CBH VWAP multiplied by 4.2, reflecting the terms of the CBH Bid. The period of the analysis is the last trading day
prior to the announcement of the Proposed Transaction, the day of the announcement and the four trading days post
the announcement.
                                                                                                                                                      33




      Co mparison of CBH Bid and the                       CBH                Im plied        Perilya       CBH Bid        Zhongjin       Zhongzin
      Propo sed Transaction                             VWAP (cents)          Perilya       VWAP (cents)   Premiu m /   Price (cen ts)   Premium /
                                                                              (cents)                      (Discount)                    (Discount)
      5 Dec 2008 VWAP 1                                        3.6              15.1            14.8          2.0%           23.0          55.4%
      9 Dec 2008 VWAP 2                                        3.9              16.4            17.7         (7.3%)          23.0          29.9%
      9 Dec to 19 Dec VWAP3                                    3.6              15.1            17.4         (13.2%)         23.0          32.2%

      Notes:
      1 - Last trading day before announcement of the Proposed Transaction with Zhongjin.
      2 - Date of the announcement of the Proposed Transaction
      3 - Details for the nine trading days from date of announcement


      Ignoring the qualitative matters raised by the Directors of Perilya in the Target’s Statement, the analysis shows that
      based on the trading prices of CBH’s shares and Perilya’s shares since the announcement of the Proposed
      Transaction, the price of the Placement Shares being paid by Zhongjin is superior to the value being offered to
      Perilya shareholders under the CBH Bid.

7.5   Strategic Rationale and Zhongjin’s Intentions for Perilya
      As referred to in section 7.2, the $45,464,560 cash to be provided to Perilya through the issue of the Placement
      Shares to Zhongjin under the Proposed Transaction will significantly strengthen the Company’s financial position at
      a time when there is substantial economic uncertainty globally and in an environment of continued low metal prices.
      While Perilya’s operations have been restructured to place the Company in a better position to endure a prolonged
      economic downturn, how long the present conditions will prevail cannot readily be predicted. The provision of the
      funds by Zhongjin will enable Perilya to take advantage of opportunities and continue the development of its mineral
      assets, including Mt Oxide, in a more timely and efficient manner. Perilya’s management believe the Proposed
      Transaction with Zhongjin will provide Perilya with a potential competitive advantage over some other resources
      companies.

      With a market capitalisation of around A$2.0 billion, Zhongjin is a significant company that is well funded. For the
      nine months ended 30 September 2008, Zhongjin reported an unaudited consolidated net profit of CNY759 million
      (approximately A$170 million) on consolidated net sales revenue of CNY5.9 billion (approximately A$1.3 billion). At
      that date Zhongjin had cash and cash equivalents of CNY1.2 billion (approximately A$270 million) and total debt of
      CNY1.3 billion (approximately A$280 million).

      As a major Chinese zinc and lead producer, having Zhongjin as a major shareholder should offer Perilya some
      strategic advantage with respect to marketing its product. In this respect, subject to the Company’s existing off-take
      agreements, Perilya and Zhongjin have agreed that should such opportunities arise they will enter into arms-length
      negotiations for the sale and purchase of up to 50% of Perilya’s production at Broken Hill and from the Flinders
      Project.

      Zhongjin has stated that it is supportive of Perilya’s current management and the operating plan under which the
      Company is being run. If the Proposed Transaction proceeds, it is Zhongjin’s intention to conduct a detailed review
      of Perilya’s mineral projects in order to properly assess their performance and prospects. Subject to the outcome of
      this review, it is Zhongjin’s intention that Perilya’s operations will continue in their present form. The detailed review
      is to be undertaken in consultation with the Company’s management.

      Subject to the results of the review, Zhongjin’s intentions for Perilya are as follows:

      ►      to be a strategic investor in Perilya and to use its expertise to assist in the future development of the
             Company’s business;

      ►      not to change the business of Perilya;

      ►      to give consideration of injecting further capital into Perilya on terms and conditions to be agreed with the
             Company;

      ►      not to change the employment of any present employee of the Company;

      ►      not to redeploy any of Perilya’s fixed assets or significantly change the Company’s existing policies in relation
             to financial matters and dividends; and

      ►      other than entering in to sale agreements for a portion of Perilya’s zinc and lead concentrates production and
             zinc silicate ore, not transfer to or acquire any property from the Company.
                                                                                                                                  34




      With respect to any off-take agreements that may be negotiated between Zhongjin and Perilya, Zhongjin
      understands that any such arrangements are subject to sufficient product becoming available under existing off-
      take agreements. On the basis that Zhongjin will be the Company’s largest shareholder, any off-take agreement
      between Zhongjin and Perilya may also require shareholder approval.

      While Perilya has no significant borrowings, in uncertain economic times where conditions in debt, equity and
      commodity markets are making it difficult for resource companies to secure new funding, having Zhongjin provide
      the $45,464,560 through the issue of the Placement Shares should provide the Company with the ability to operate
      at a reduced scale at Broken Hill and continue the development of its other mineral assets. It may also provide
      Perilya with the capacity to take advantage of other opportunities as and when they arise. This and the strategic
      nature of the relationship that Zhongjin intends to have with Perilya should be to the benefit to the Non-Associated
      Shareholders.

      Reflecting the increase in Perilya’s share price since the announcement of the Proposed Transaction, it appears that
      the market has responded positively to Zhongjin becoming the Company’s largest shareholder.

7.6   Dilutionary Impact of Any Alternative Capital Raising
      The issue of the Placement Shares to Zhongjin for cash of $45,464,560 at a price which is at a premium to prices at
      which Perilya shares were trading at prior to the announcement of the Proposed Transaction is less dilutionary for a
      Perilya shareholder than if a capital raising was done at market or below market.

      Given the uncertainty in world equity and debt markets the ability of a resource company such as Perilya to source
      new funding in the current environment is questionable. In sourcing new capital by way of a share issue it not
      unusual for shares to be offered at a discount to their current market price. Depending on market conditions and the
      financial position and the immediate need for funding, this discount could be significant.

      On 5 December 2008, the last trading day before the Proposed Transaction was announced, Perilya shares closed at
      15 cents. For illustrative purposes, in taking this price and applying a 10% discount to arrive at an issue price of
      13.5 cents, to raise $45,464,560, approximately 337 million shares would need to be issued compared to the
      197,672,000 being issued to Zhongjin under the Proposed Transaction. Under this scenario, the Non-Associated
      Shareholders, assuming they do not participate in the capital raising, would have an approximate 37% interest in
      the expanded capital of the Company compared to the 49.9% under the Proposed Transaction. If the discount was
      30%, the Non-Associated Shareholders’ collective interest would reduce to 31%.

      The issue of the Placement Shares at a price above the prices at which Perilya share have recently traded is a
      significant benefit to the Non-Associated Shareholders, especially at a time when sourcing new capital is
      particularly difficult.

7.7   Premium for Control
      A ‘premium for control’ generally represents the difference between the price per share which one party would be
      prepared to pay to obtain a controlling interest in a company and the price at which a share that does not carry with
      it control of that company could be acquired.

      In the case of the issue of shares for cash, the entity receiving the shares is paying a premium if the fair value of the
      shares being issued is less than the cash amount being paid. In the circumstance of an item 7 of section 611
      transaction, the greater the premium the better off the non-associated shareholders (i.e. those not involved in the
      transaction) will be.

      At 5 December 2008, the last trading day for Perilya before the Proposed Transaction was announced, the
      Company’s shares closed at a price of 15 cents. The VWAP over the five days including 5 December 2008 was 14.4
      cents. Compared to these prices the price being paid by Zhongjin represents a premium of 53.3% and 59.2%
      respectively. On this basis, compared to market the Non-Associated Shareholders are receiving a premium for
      control.

      In section 6.10, we assessed the fair market value of a Perilya share on a 100% interest basis to be in the range of
      33 cents to 38 cents. Based on this range, the price being paid by Zhongjin for the Placement Shares is at a
      discount to our assessed value. Under this comparison, the Non-Associated Shareholders are not receiving a
      premium for control.
                                                                                                                              35




7.8   Alternative Offers
      The Directors of Perilya have advised us that other than the Proposed Transaction and the CBH Bid they have not
      received any alternative offers for the acquisition of the Company’s shares. The share register of Perilya is fairly open
      with the top 10 shareholders at 3 December 2008 holding, in total, 52.7% of the shares on issue. No one
      shareholder is in a position to exert significant influence over the operations of the Company.

      While the possibility of an alternative bid or transaction cannot, at this time, be determined, the attractiveness of
      Perilya’s Broken Hill operations as a long term quality asset at a time when the Company’s share price is at or near
      recent historical lows may make Perilya an attractive takeover target to another party. This would partially depend
      on any potential acquirer’s view of zinc and lead prices, and the depth of the current economic downturn.

      However, Perilya shareholders should be aware that the likelihood of an alternative offer is not certain and cannot be
      predicted. Further, if any alternative bid is received there is no certainty that that the bid would be superior to the
      Proposed Transaction with Zhongjin or the CBH Bid.

      The analysis conducted in section 7.4 shows that based on the prices at which Perilya and CBH shares have traded
      at on the ASX, the Proposed Transaction with Zhongjin is superior to the CBH Bid. With respect to the other Chinese
      party that was considering a direct investment in Perilya, at 20 cents per share for a $30 million cash placement the
      conditional offer was lower than Zhongjin’s.

      It is relevant to note that the form of the CBH Bid and the Proposed Transaction with Zhongjin are different in nature.
      Under the CBH Bid, Perilya shareholders are being offered shares in CBH which if the take over was successful would
      represent a share in the combined CBH/Perilya company, whereas under the Proposed Transaction Zhongjin is
      subscribing for new shares for cash of $45 million that will paid into the Company, the form of Perilya’s shareholding
      will not change.

      In the absence of any alternative offer, we have no reason to believe that any potential acquirer would place a value
      on a Perilya share which would be higher than the fair market value of a Perilya share we assessed in section 6.10 or
      the amount to be paid by Zhongjin for the Placement Shares under the Proposed Transaction.
                                                                                                                           36




8.    Assessment of the Issue of the Placement Shares

8.1   Fairness
      We have concluded that the fair market value of a Perilya share is in the range of between 33 cents and 38 cents.
      Our valuation represents the underlying fair market value of a Perilya share on a 100% basis.

      The consideration to be paid by Zhongjin for the Placement Shares under the Proposed Transaction is 23 cents per
      share.

      Our assessment of the fair market value of a Perilya share on a 100% basis is below the cash consideration to be
      paid by Zhongjin. Accordingly, we are of the opinion that the issue of the Placement Shares to Zhongjin under the
      Proposed Transaction is not fair.

8.2   Reasonableness
      In section 7 we detailed other significant factors that may be relevant to the Non-Associated Shareholders in
      considering the reasonableness of the issue of the Placement Shares. The matters we considered include:

      ►     the 23 cents per share payable by Zhongjin for each Placement Share is at an 82.4% premium to the 20 day
            VWAP for a Perilya share on the ASX up to 5 December 2008, the last trading before the announcement of the
            Proposed Transaction, and a 53.3% premium to the closing price on that date. The payment of a premium is
            to the benefit of the Non-Associated Shareholders;

      ►     with the increase in Perilya’s share price since the announcement it appears that the market has reacted
            favourably to the Proposed Transaction with Zhongjin. If the Proposed Transaction does not proceed there
            may be a decline in the Company’s share price to previous levels;

      ►     Perilya’s short term forecast cash flows indicate that without the Proposed Transaction with Zhongjin, the
            Company will need to source new funding early in 2009 to help finance continuing operations. With the
            volatility in capital markets expected to continue through 2009, Perilya’s ability to readily source new debt or
            equity funding at this time is uncertain. The issue of the Placement Shares to Zhongjin will provide Perilya with
            the funding required to finance its operations without the need to disposed of assets or to secure new funding
            from an alternative source

      ►     with a 50.1% interest and at least 50% representation of Perilya’s Board of Directors, Zhongjin will be able to
            control the Company in a general meeting of shareholders and be able to significantly influence its day-to-day
            operations;

      ►     Zhongjin’s dealings with Perilya as the largest shareholder and as having Board representation will be
            governed by the Act, the ASX Listing Rules, the Company’s Corporate Governance policies and common law;

      ►     based on the trading prices of CBH’s shares and Perilya’s shares since the announcement of the Proposed
            Transaction, the price of the Placement Shares being paid by Zhongjin is superior to the value being offered to
            Perilya shareholders under the CBH Bid;

      ►     the $45,464,560 cash to be provided to Perilya through the issue of the Placement Shares to Zhongjin under
            the Proposed Transaction will significantly strengthen the Company’s financial position at a time when there is
            substantial economic uncertainty globally and in an environment of continued low metal prices;

      ►     as one of China’s largest non-ferrous metal producers the strategic benefits of having Zhongjin as its major
            shareholder may provide Perilya with opportunities that may not be available in the ordinary course of
            business;

      ►     if Perilya was to undertake a capital raising of a similar amount to the funds being provided by Zhongjin via the
            Proposed Transaction, given the current market conditions, it is likely that it would need to done at a deep
            discount to its market price, which would be substantially more dilutionary to the Non-Associated
            Shareholders than the issue of the Placement Shares at a premium to market;
                                                                                                                    37




►     based on recent market prices, Zhongjin is paying a premium for control, however in comparison to our
      assessed fair market assessment of a Perilya share, no premium for control is being paid.

Having had consideration to these factors, although we have assessed the issue of the Placement Shares to be not
fair, in our opinion, the issue of the Placement Shares to Zhongjin under the Proposed Transaction is reasonable.
                                                                                                                       38




Appendix A                        Statement of Qualifications and Declarations
Ernst & Young Transaction Advisory Services, which is wholly owned by Ernst & Young, holds an Australian Financial
Services Licence under the Corporations Act and its representatives are qualified to provide this report. The
directors of Ernst & Young Transaction Advisory Services responsible for this report have not provided financial
advice to Perilya.

Prior to accepting this engagement Ernst & Young Transaction Advisory Services considered its independence with
respect to Perilya with reference to RG112. In Ernst & Young Transaction Advisory Services’ opinion it is
independent of Perilya and Zhongjin. In this respect it is noted that the Sydney office of Ernst & Young were retained
by Zhongjin to provide tax advisory and due diligence services post the announcement of the Proposed Transaction.
The provision of these types of services does not impede our independence.

This report has been prepared specifically for Perilya shareholders in relation to the Proposed Transaction with
Zhongjin. Neither Ernst & Young Transaction Advisory Services, Ernst & Young and any employee thereof undertakes
responsibility to any person, other than Perilya shareholder, in respect of this report, including any errors or
omissions howsoever caused.

The statements and opinions given in this report are given in good faith and the belief that such statements and
opinions are not false or misleading. In the preparation of this report Ernst & Young Transaction Advisory Services
has relied upon and considered information believed after due inquiry to be reliable and accurate. Ernst & Young
Transaction Advisory Services has no reason to believe that any information supplied to it was false or that any
material information has been withheld from it. Ernst & Young Transaction Advisory Services has evaluated the
information provided to it by Perilya, its advisors, as well as other parties, through inquiry, analysis and review, and
nothing has come to its attention to indicate the information provided was materially mis-stated or would not afford
reasonable grounds upon which to base its report. Ernst & Young Transaction Advisory Services does not imply and
it should not be construed that it has audited or in any way verified any of the information provided to it, or that its
inquiries could have verified any matter which a more extensive examination might disclose.

The information relied upon in the preparation of this report is set out in Appendix D to this report.

Perilya has provided an indemnity to Ernst & Young Transaction Advisory Services for any claims arising out of any
mis-statement or omission in any material or information provided to it in the preparation of this report.

Ernst & Young Transaction Advisory Services provided draft copies of this report to the directors and management of
Perilya for their comments as to factual accuracy, as opposed to opinions, which are the responsibility of Ernst &
Young Transaction Advisory Services alone. Changes made to this report as a result of this review by the directors
and management have not changed the methodology or conclusions reached by Ernst & Young Transaction Advisory
Services.

Ernst & Young Transaction Advisory Services will receive a professional fee based on time spent in the preparation of
this report, estimated at approximately $130,000 (exclusive of GST). Ernst & Young Transaction Advisory Services
will not be entitled to any other pecuniary or other benefit whether direct or indirect, in connection with the making of
this report.
                                                                                                                        39




Mr Ken Pendergast and Mr Stuart Bright, who are both directors and representatives of Ernst & Young Transaction
Advisory Services and partners of Ernst & Young, have assumed overall responsibility for this report. Both have the
necessary experience and professional qualifications appropriate to the advice being offered. Other Ernst & Young
Transaction Advisory Services staff have been consulted in the preparation of this report where appropriate.

It is not intended that the report should be used for any other purpose other than to be included in the Notice of
Meeting and Explanatory Memorandum to be sent to the Perilya shareholders with respect to the Proposed
Transaction. In particular, it is not intended that this report should be used for any other purpose other than as an
expression of its opinion as to whether or not the issue of the Placement Shares to Zhongjin under the Proposed
Transaction is fair and reasonable to the Non-Associated Shareholders.

The financial forecasts used in the preparation of this report reflect the judgement of directors and management of
Perilya based on present circumstances, as to both the most likely set of conditions and the course of action it is
most likely to take. It is usually the case that some events and circumstances do not occur as expected or are not
anticipated. Therefore, actual results during the forecast period will almost always differ from the forecast and such
differences may be material. To the extent that our conclusions are based on forecasts, we express no opinion on
the achievability of those forecasts.

Ernst & Young Transaction Advisory Services consents to the issue of this report in the form and context in which it is
included in the Notice of Meeting and Explanatory Memorandum.
                                                                                                                     40




Appendix B                       Valuation Methodologies
Introduction

The four primary methodologies commonly used for valuing a company, business or assets are:

►     the DCF method.

►     the capitalisation of maintainable earnings method.

►     market based assessment.

►     the net asset backing method.

DCF

The DCF methodology is based on the net present value (“NPV”) of cash flows that are expected to be derived from
future activities. The forecast cash flows are discounted by a discount rate that reflects the time value of money and
the risk inherent in the cash flows. The discount rate represents a measure of the rate of return expected by the
parties funding the asset being valued.

Discounting of forecast cash flows has a strong theoretical basis. Considerable judgement is required in estimating
future cash flows and the valuer generally places great reliance on the medium to long term projections prepared by
management. A DCF valuation should not give a materially different result to the capitalisation of earnings
methodology.

This methodology is appropriate in valuing businesses that are in a start-up phase and are expecting considerable
volatility in earnings during the growth phase, as well as businesses with a finite life.

Capitalisation of Maintainable Earnings

Capitalisation of maintainable earnings is the most commonly used method for valuing companies or businesses
with a long operating history and an identifiable earnings trend. This method is not as suitable for start-up
businesses or businesses with an erratic earnings pattern or which have lumpy capital expenditure requirements.
This is an appropriate valuation method where the entity being valued has ongoing trading operations which
generate a fair return. This method involves capitalising the maintainable earnings of a business by a rate-of-return
which is based on open market expectations and current industry conditions, with the rate-of-return being expressed
as a capitalisation multiple. The capitalisation multiple reflects the risks of the business and the stream of income
that it generates.

In choosing an appropriate capitalisation multiple, reference is generally made to quoted market evidence and
market transaction. Review of such information is based on the premise that companies with similar characteristics
command similar values. An important element to any comparative analysis is therefore to identify listed
companies and market transactions which are similar to the company being valued, and since none will be identical,
assess the differences between them and how these differences might be expected to be reflected in their relative
values.
                                                                                                                    41




Market Based Assessment

This approach seeks to determine the value of an asset by reference to comparable transactions involving the sale of
similar assets. The information provided by such comparable transactions can be used as evidence that supports
fair market value of the company being valued. Adjustments may be required to those recorded transactions to take
into account differences in the timing, location, background and subject matter of the recorded transaction as
compared to the assets being appraised.

Net Asset Backing

This methodology involves the determination of the net realisable value of the assets of a business or company,
assuming an orderly realisation of those assets. This value includes a discount to allow for the time value of money
and for reasonable costs of undertaking the realisation. It is not a valuation on the basis of a forced sale, where
assets may be sold at values materially different to their fair market value. This methodology is appropriate where a
business or company is not making an adequate return on its assets, where there are surplus non-operating assets
or where the company does not have operating activities.
                                                                                                                     42




Appendix C                            Valuation of Broken Hill and Beltana

Valuation Methodology
Whilst there are a number of valuation methodologies that can be considered in making an assessment of the value
of a business, for the purposes of valuing mineral properties the most appropriate and common method used is the
discounted cash flow (“DCF”) method.

The DCF method calculates a net present value (“NPV”) by discounting the future cash flows to their present value
using an appropriate discount rate. The discount rate is generally determined as a weighted average cost of capital
(“WACC”).

The DCF method is routinely used to value mineral properties and can appropriately take account of the
uncertainties that commonly exist with such assets. In valuing Perilya’s Broken Hill mining operations and Beltana
we have used DCF analysis as our primary valuation method.

We have prepared cash flow projections for Broken Hill and Beltana based on detailed financial models for each
asset. As technical input into the models we have used the production forecasts and associated capital and
operating expenditures prepared by Company management.

Economic Forecast Assumptions
Zinc and Lead Price Forecasts
The zinc and lead price scenarios used by Ernst & Young Transaction Advisory Services for the purpose of the DCF
analysis has been constructed by taking the average of a range of recent brokers forecasts available as at 19
December 2008. The table below shows the commodity price assumptions that we have utilised in determining the
value of the Broken Hill and the Beltana projects. These price assumptions are on a real basis.

Price Forecast
(USD / tonne)                          FY09              FY10     FY11          FY12           FY13           FY14

Zinc                                  1,290            1,489     1,725         1,853         1,791          1,713
Lead                                  1,305            1,287     1,339         1,363         1,292          1,197

Source: Ernst & Young Transaction Advisory Services Analysis


Foreign Exchange Forecasts
The table below shows the A$:US$ exchange rate assumptions that we have used in valuing the Broken Hill and
Beltana projects. These forecasts have been prepared by taking the average of a range of recent brokers forecasts
available as at 19 December 2008.

Exchange Rate
Forecast (USD)                         FY09              FY10     FY11          FY12           FY13           FY14

Australian dollar                    0.6976           0.6950    0.7066       0.7226         0.7266         0.7328

Source: Ernst & Young Transaction Advisory Services Analysis
                                                                                                                     43




The Broken Hill Operations
Asset Description
Perilya has operated the Broken Hill operations since they were acquired in May 2002. The main activity at Broken
Hill occurs within the Southern Operations area, which is a complex remnant underground mining operation. Our
valuation of the Broken Hill production project only incorporates the Southern Operations. Ore is processed through
Perilya’s concentrator at Broken Hill. This infrastructure has the capacity and flexibility to operate at lower volumes
with a variety of ore sources. Zinc and lead concentrates are railed from Broken Hill to Port Pirie in South Australia.
The zinc concentrate is then shipped to South Korea and refined by the Korea Zinc Group. The lead concentrate is
refined at the Port Pirie smelter owned by Nyrstar Port Pirie Pty Ltd (Nyrstar”).

Asset Valuation
In conducting our valuation of the Broken Hill operations Perilya have provided us with an economic model that
represents management’s most likely predictions regarding future production, processing costs, treatment costs,
freight and handling charges, royalties, general operating costs, and capital expenditure of the Broken Hill
operations. Based on this economic model provided by Perilya, we have constructed a DCF that uses our preferred
commodity and exchange rate assumptions to value the Broken Hill operations as at 31 October 2008.

The major assumptions contained within the economic model are detailed in the table below.

Key inputs                                                                             Unit              Assumption

Mine Life                                                                            Years                         6
Total ore mined                                                                     tonnes                 7,014,755
Average grade - zinc                                                                    %                      6.05%
Average grade - lead                                                                    %                      4.84%
Average recoveries - zinc                                                               %                     90.10%
Average recoveries - lead                                                               %                     90.67%
Total sales - zinc                                                                  tonnes                   333,887
Total sales - lead                                                                  tonnes                   292,593

Source: Perilya Corporate Model


We have constructed our DCF calculations so that production ceases when the mine becomes uneconomic. Using
our preferred commodity price assumptions the Broken Hill mine becomes uneconomic in FY14, as such no revenues
and costs are forecast for this year and only cash flows relating to project abandonment are modelled. As such, the
production values in the table above reflect this.

The revenues have simply been calculated by multiplying the expected production by our preferred commodity price
assumptions and adding Perilya’s expectation of other revenues from commodities other than lead and zinc, these
additional amounts account for approximately 2% of total revenues.

We have used the mining operating costs contained in the economic model. The treatment charges calculated
within the economic model have based on current agreements. Sea freight has been assumed to fall from US$87
per tonne to US$40 per tonne; rail freight is expected to stay around $39 per tonne, other handling charges are
expected to be $16 per tonne for zinc and $4.80 per tonne for lead. Royalties are calculated at 4.0% of revenues
less costs. With respect to formulating the mining costs contained within the model for Broken Hill, Perilya
management commissioned, mineral specialists, Australian Mining Consultants (“AMC”) to independently review
the mining costs assumed. In reviewing the mining costs, AMC found them to be reasonable.

Perilya has written down the tax value of the Broken Hill mining property by approximately $135 million, this is being
amortised for tax over the remaining life of the mine. Due to this amortisation charge only a minimal amount of tax
is payable in FY12.

The major outputs of our DCF calculations for Broken Hill are contained in the table below. We have also assumed
net abandonment costs of $19.3 million. The amounts relating to FY09 relate to the period from 31 October 2008
to 30 June 2009.
                                                                                                                          44




Cashflow Summary
($000's)                                  FY09               FY10              FY11              FY12       FY13       FY14

Zinc sales (tonnes)                    69,078            50,609            56,700              50,400     50,400     56,700
Lead Sales (tonnes)                    50,531            52,605            47,367              50,087     48,528     43,474
Total revenue                         136,748           213,992           232,867             228,595    215,327    207,967
Operating costs                       134,182           198,956           204,100             195,787    193,630    195,923
Capital costs                           2,833             3,878             8,128               8,128      8,128      8,128

Source: Ernst & Young Transaction Advisory Services Analysis


The WACC applicable to our valuation of Perilya has been estimated by Ernst & Young Transaction Advisory Services
on a real, post-tax basis to be in the range of between 15.0% and 17.0%, as set out in Appendix D of this report.

We have derived a range of values for the Broken Hill operations by using the high and low end of our discount rate
range. Our valuation range for Broken Hill is $39.780 million to $41.206 million, with a mid-point of $40.486
million.

The table below demonstrates the sensitivity of the NPV calculated to changes in the major inputs. All values
contained in the table below have been calculated using the mid-point of our discount rate range of 16.0%.

                                                                      Commodity              Exchange   Operating    Capital
Sensitivity Analysis ($000's)                                             Price                  Rate      Costs      Costs

Percentage change in input
-20%                                                                            -             153,233    128,447     45,166
-10%                                                                            -              87,446     81,490     42,857
0%                                                                         40,486              40,486     40,486     40,486
10%                                                                        93,490                   -          -     38,114
20%                                                                       154,228                   -          -     35,743

Note: A dash indicates that the NPV calculated is negative and therefore the value is nil.


The sensitivity analysis indicates that Broken Hill is most sensitive to commodity price assumptions.

Beltana
Asset Description
Beltana is one of zinc silicate deposits making up the Flinders Project located near Leigh Creek in South Australia.
At the end of September 2008 a total of 238,000 tonnes of zinc silicate ore from Beltana remained stockpiled at an
approximate average grade of 31%, this represents the Beltana stockpile. The project has been placed on care and
maintenance and development work on the other deposits has ceased.
                                                                                                                   45




Asset Valuation
In conducting our valuation of the Beltana, Perilya have also provided us with an economic model that represents
management’s most likely predictions regarding future treatment costs, freight and handling charges, royalties and
general operating costs of the Beltana stockpile. Based on this economic model provided by Perilya, we have
constructed a DCF that uses our preferred commodity and exchange rate assumptions to value the Beltana
stockpile. The stockpile at Beltana is expected to be depleted in FY10.

The revenues have been calculated by multiplying the expected production by our preferred commodity price
assumptions.

We have used the mining operating costs found in the economic model. As the project is now only a stockpile these
are minimal. The treatment charges calculated within the economic model have based on current agreements. Sea
freight for Beltana is at current spot rates has been assumed to be US$80 per tonne in FY09 and increasing to
US$87 per tonne in FY10 when the stockpile is expected to be depleted, other handling charges are expected to be
$13.20 per tonne. Royalties are calculated at 3.5% of revenues less costs.

We have derived a range of values for the Beltana stockpile by using the high and low end of our discount rate range
(discussed further in Appendix 3). Our valuation range for the Beltana is $11.495 million to $11.656 million, with a
most likely value of $11.575 million. Because of the short life of the stockpile no sensitivity analysis has been
performed.
                                                                                                                   46




Appendix D                           Discount Rate
Introduction

The DCF method calculates the net present value, at the valuation date, of the future net cash flows the company or
business is expected to produce. The method requires that estimates are made of the timing and amount of all
expected future cash flows, and that those cash flows are discounted to a present value at the valuation date by
using a discount rate that takes into account the time value of money and the risks inherent in achievement of the
cash flows.

Our valuation of Perilya utilises cash flow forecasts that have been prepared on a real ungeared and post-tax basis.
To determine the net present value of these forecast cash flows we have developed a discount rate on real, post-tax
weighted average cost of capital (“WACC”) basis.

The discount rate in the form of a WACC represents the average of the rates of return required by providers of debt
and equity capital to compensate for the time value of money and the perceived risk or uncertainty of the cash flows,
weighted in proportion to the market value of the debt and equity capital provided.

The selection of an appropriate discount rate is ultimately a matter of professional judgment. Although valuation
theories do provide good guidance in determining discount rates, they are subject to various shortcomings. These
shortcomings are generally around the use of historical data to estimate future expectations on variables applied in
calculating discount rates. Despite these shortcomings valuation theories such as WACC and the capital asset
pricing model (“CAPM”), which is used to determine the cost of equity, are frequently used by practitioners because
of their relative simplicity.

Weighted average cost of capital

Under a classical tax system the WACC is calculated as follows:

                   E                     D
WACC = Re x           + Rd (1 − t c ) x
                  D+E                   D+E

Where:

WACC - post tax weighted average cost of capital

Re - required rate of return on equity capital

E - market value of equity capital

D - market value of debt

Rd - required rate of return on debt capital

tc - statutory corporate tax rate in Australia

In the following paragraphs we comment on each of the assumptions we make in respect of each of the main
variables in this formula.
                                                                                                                      47




Required rate of return on equity

The CAPM is a model for estimating the rate of return required by an equity investor on an investment. The CAPM
assumes that an investor holds a large portfolio comprising risk-free and risky investments. The total risk of an
investment comprises systematic risk and specific (or unsystematic) risk. Systematic risk is the variability in an
investment’s expected return that relates to general movements in capital markets (such as the share market) while
specific risk is the variability that relates to matters that are specific to the investment being valued.

The CAPM maintains that specific risk can be avoided by holding investments as part of a large and well-diversified
portfolio. The CAPM assumes that the investor will only require a rate of return sufficient to compensate for the
additional, non-diversifiable systematic risk that the investment brings to the portfolio. Diversification cannot
eliminate the systematic risk due to economy-wide factors that are assumed to affect all securities in a similar
fashion. Accordingly, whilst investors can eliminate specific risk by diversifying their portfolio, they will seek to be
compensated for the systematic risk by way of a risk premium on the expected return. The magnitude of this
compensation depends on the extent to which the company’s returns are correlated with the market as a whole. The
larger the correlation the greater the systematic risk faced by investors and the larger will be the required return on
capital.

The systematic risk is measured by the investment’s beta. The beta is a measure of the co-variance of the expected
returns of the investment with the expected returns on a hypothetical portfolio comprising all investments in the
market (“the Market Portfolio”) (i.e. it is a measure of the investment’s relative risk). A risk-free investment has a
beta of zero and the Market Portfolio has a beta of one. The greater the systematic risk of an investment the higher
the beta of the investment.

The CAPM assumes that the return required by an investor in respect of an investment will be a combination of the
risk-free rate of return and a premium for risk, which is measured by multiplying the beta of the investment by the
return earned on the Market Portfolio in excess of the risk-free rate.

Under CAPM the required rate of return on equity (Re) is calculated as follows:

Re = Rf + βe(Rm – Rf) + Rs

Where:
Re - rate of return on equity
Rf - risk free rate of return
ße - expected equity beta of the investment
Rm - expected rate of return on the market portfolio of risky investments
(Rm- Rf) - market risk premium
Rs - specific risk premium

Risk free rate
In the absence of an official risk free rate, most valuation practitioners adopt the yield on Government Bonds (in the
appropriate jurisdiction) of a term matching the cash flow forecast period as a proxy. A more accurate approach
would be to use the one-year spot bond rate for each future discounting period. This would avoid possible
distortions when a single long-term bond rate is adopted in circumstances in which the yield curve is steeply sloping
or the cash flows are significantly front or back ended. However, such forecasts are not readily available and the
yield on long term Government Bonds is broadly accepted in practice as an appropriate substitute.

Our selected risk free rate is based on the average of yield on 10-year Australian Commonwealth Government Bonds
for the 20 trading days prior to 19 December 2008. On this basis we have adopted a nominal risk free rate of 4.37%
for the purposes of determining an appropriate CAPM.
                                                                                                                                        48




Market risk premium

The market risk premium represents the additional return an investor expects to receive to compensate for
additional risk associated with investing in equities as opposed to assets on which a risk free rate of return is
earned.

The market risk premium refers to an investor’s expectations of the return required to compensate them for investing
in risky assets. However, such expectations are not observable and so historical returns are examined as a guide to
future expectations. This implicitly assumes that the historical risk premium measured over many decades will
provide a reasonable estimate of the future premium.

Some commentators have urged investors to distinguish between observed excess returns, which they argue have
exceeded investor’s expectations over a long period, and the prospective risk premium. Such commentators have
formed the view that it is not unreasonable to expect that future risk premiums should be different from past excess
returns, and that past excess returns should not necessarily shape expectations about future returns.1 These
commentators also note that investment risk has declined and the scope for diversification has increased, causing
some reduction in investor’s required rate of return.2

To understand risk and return in the stock market, long periods of historical results must be examined given the
volatility of the markets and variation in returns from one year to another. Judgements should be drawn from long
periods of financial market history, not simply from recent stock market performance. Even with a century or more
of data, market fluctuations have an impact, and estimates are imprecise.3

Elroy Dimson, Paul Marsh and Mike Staunton conducted one of the recent studies regarding the risk premium in
2002 using data from global stock markets between 1900 and 2001. They concluded that the risk premium for
Australia, measured as the excess return of equities over bills was 7.0% (geometric) and 8.5% (arithmetic). The
excess return of equities over bonds was measured as 6.3% (geometric) and 7.9% (arithmetic). They also concluded
that a global risk premium (excess over bonds) was 4.3% (geometric) and 5.4% (arithmetic).

Generally, most estimates for the Australian market fall within a range of approximately 4% to 8%. However,
investor’s expectations of the premium can change as the market fluctuates and perceptions of the riskiness of
equities change.

We note that regulators of natural monopoly assets such as electricity and gas transmission and distribution assets
have undertaken significant research and entertained substantial debate in respect of what is the appropriate
market risk premium. The ACCC and all Australian based regulators have settled on 6.0% as the appropriate market
risk premium.

For the purpose of this report we have adopted a market risk premium of 6.0%.




1 Robert D. Arnott and Peter L. Bernstein, First Quadrant L.P. What Risk Premium is “Normal”? Financial Analysts Journal, March/April

2002
2 Elroy Dimson, Paul Marsh and Mike Staunton, Triumph of the Optimists: 101 Years of Global Investment Returns, 2002
3 Elroy Dimson, Paul Marsh and Mike Staunton, Triumph of the Optimists: 101 Years of Global Investment Returns, 2002
                                                                                                                        49




Beta

The beta measures the expected relative risk of the equity in a company. The choice of the beta requires judgement
and necessarily involves subjective assessment as it is subject to measurement issues and a high degree of
variation. Accordingly sector averages may present a more reliable beta figure rather than placing reliance on the
beta of any one particular comparable company.

Beta can be expressed as an equity beta, which includes the effect of gearing on equity returns, and as an asset
beta, which removes the impact of gearing. The asset beta will be lower than the equity beta for any given
investment, with the extent of the difference dependent on the level of debt in the capital structure. The greater the
level of gearing, the greater is the risk faced by equity holders (as debt holders have a contractual right of return and
so first claim on the operating income). Accordingly, for a given asset beta, the equity beta will increase as the level
of gearing increases.

The asset beta provides a fundamental reflection of business risk as it refers to the riskiness of returns on the asset,
rather than returns to equity holders. Hence, asset betas can be compared across asset classes independent of the
impact of the financial structure adopted by the owners of the business.

Where there is publicly available evidence of the equity betas for companies with comparable risk profiles to the
business being valued, those betas may be useful in forming a view of an appropriate equity beta for the subject
business. For the purposes of the valuation, we have considered comparable companies, but not necessarily the
same, to Perilya that participate in similar industries in Australia and internationally.

Estimating equity betas requires taking a number of observations that form a regression of historical share market
returns against a market index. We have used 60 monthly data observations in estimating equity betas. For
comparable companies that did not have 60 monthly observations available, weekly observations were used. We
have sourced equity betas from Bloomberg relative to each company’s home exchange index.

We de-geared the equity betas using the average reported gearing of the comparable companies over a five-year
period (refer to the next section in this appendix entitled “Capital structure”). In calculating the WACC we have then
recalculated the equity beta based on an assumed capital structure. This is an exercise involving judgement, which
carries a significant possibility of estimation error. This is particularly so as it is based on debt levels at a single
point in time, when in fact the debt to equity position of a company may change over time and in many cases,
involves very complex capital structures.

We used the following formula to undertake the de-gearing and regearing exercise:

          ⎛
β e = β a ⎜1 +
                 D
                   (1 − tc )⎞
                            ⎟
          ⎝      E          ⎠

Where:
βe – the equity or geared beta
βa – the ungeared beta
tc – the statutory corporate tax rate in Australia
D/E - equals the market value of debt divided by the market value of equity capital
                                                                                                                         50




Our analysis of the ungeared betas for comparable companies is set out in the table below.

Comparable Company                     Market          Net Debt/        Geared         Ungeared Beta Regeared Beta
                                    Capitalisation1     Equity2       Beta(Local)3        (Local)4      (Local)
                                         $m's
Compass Resources Limited                  23.9            -0.18             1.75               1.75             1.81
Conquest Mining Ltd.                       51.6            -0.15             1.72               1.72             1.79
Jabiru Metals Ltd.                         57.5            -0.02             3.65               3.65             3.78
Hillgrove Resources Ltd.                   33.4            -0.08             2.56               2.56             2.65
Herald Resources Ltd.                      20.2            -0.38             1.16               1.16             1.20
Fox Resources Ltd.                         17.2             0.05             2.37               2.29             2.37
Kagara Ltd                                 73.6             0.06             3.33               3.19             3.31
CBH Resources Ltd.                         27.4            -0.03             2.50               2.50             2.59
Perilya Ltd.                               35.4            -0.12             3.15               3.15             3.27
OZ Minerals Limited                     1,716.7             0.03             2.38               2.32             2.41
Kings Minerals NL                          35.5            -0.04             2.13               2.13             2.21
Exco Resources Limited.                    17.3            -0.15             3.00               3.00             3.11
Mincor Resources NL                       110.4            -0.16             3.00               3.00             3.11
Forte Energy NL                            20.0            -0.07             1.18               1.18             1.23
Low                                                        -0.38             1.16               1.16             1.20
Simple Average                                             -0.09             2.42               2.40             2.49
Median                                                     -0.07             2.44               2.41             2.50
Weighted Average                                            0.00             2.45               2.40             2.49
High                                                        0.06             3.65               3.65             3.78
Source: Bloomberg

Notes:
1.    Market Capitalisation is at 19 December 2008.

2.    Net debt is total debt less cash and cash equivalents for four fiscal periods for each company over the period
      31 December 2003 to 30 June 2008 (where the information is available). Equity value is the average of the
      market capitalisation over the corresponding period.

3.    Raw beta calculated over a four year period to 19 December 2008 with monthly observations against the
      S&P/ASX 200 Index.

4.    Where the Net Debt/Equity ratio is negative the ungeared Beta has been taken to equal the Geared Beta.

The selection of a beta factor requires a high degree of professional judgement, particularly in circumstances in
which the betas for the comparable companies vary widely. We also note the inherent difficulties in analysing
companies that have integrated or diversified operations not directly comparable to Perilya’s.

In considering appropriate betas to adopt in respect to Perilya, we note that Perilya’s beta is slightly higher than the
betas of comparable companies. Accordingly, we have adopted a regeared equity beta for Perilya in the range of
2.35 to 2.75.

Capital structure

There is some debate whether there is an optimal capital structure for companies or whether there is a range of
capital structures that are consistent with an optimum position. Generally, the gearing level adopted should reflect
the level of debt that can reasonably be sustained by any company operating in an industry, rather than actual
gearing maintained by the current business owners.

The optimal capital structure will depend on the trade-off between the tax benefits of debt finance (the “tax shield”
provided by tax deductible interest payments) and the costs of financial risk to equity holders. The cost of financial
risk can outweigh the effects of tax deductibility if the level of debt causes a sufficiently high level of financial
distress (and thus higher probability of bankruptcy).
                                                                                                                          51




Issues considered in our evaluation of the optimal gearing include:

►     the debt/equity ratios of comparable companies.

►     that the debt/equity ratios of listed companies reflect market capitalisation which is calculated based on
      share price, and as a result may understate gearing due to the existence of a minority discount.

►     the range of equity betas adopted.

We have summarised the net debt position of Perilya in the table below.

Perilya - Net Debt Summary                                  Audited         Audited          Audited          Audited
                                                             FY05             FY06            FY07             FY08
                                                            $’000s           $’000s          $’000s           $’000s
Current interest bearing debt                                   4,965            4,301          10,460          20,211
Non-current interest bearing debt                               7,660            2,769           5,191           5,794
Total                                                         12,625            7,070           15,651          26,005
Less: Cash                                                    12,022          125,048          147,455          26,532
Net Debt                                                          603        (117,978)       (131,804)            (527)

Source: Perilya Annuall Reports FY05 - FY08


The market value of Perilya’s equity, based on the share price on 19 December 2008 of 18 cents is approximately
$35.4 million. Based on that market capitalisation, the Company’s debt to equity ratio is -1.5%, against an average
of 7.6%.

Historically, Perilya has had a debt to equity ratio of around -9%, reflecting the surplus cash in excess of debt levels.
However, as well as considering the Company’s current capital structure, in selecting an appropriate gearing ratio for
the WACC calculation, it is relevant to have regard to the industry standard capital structure, with a view to
determining Perilya’s optimal gearing ratio. We note that the average debt to equity ratio of comparable companies
is similar, at -7%. Accordingly we have assumed a 5.3% debt to equity ratio (debt to enterprise ratio of 5.0%) as an
appropriate proxy for Perilya’s optimal gearing ratio.

Specific Risk Premium

The specific risk premium represents the additional return an investor expects to receive to compensate for
additional risk not reflected in the beta of the comparable companies analysed. The betas of the comparable
companies reflect the risks associated with achieving the returns expected by equity investors.

Required rate of return on debt

In setting the required rate of return on debt, it is necessary to include a debt premium over the risk free rate. The
debt premium over the risk free rate reflects debt risk specific to the business being valued and represents the
premium charged by debt holders to reflect credit risk (i.e. the risk that the business will default on payments). In
arriving at an appropriate debt premium we have had regard to a number of factors including:

►     The costs of debt for other comparable companies; and

►     The gearing levels adopted for the purposes of calculating the WACC.

We have adopted a debt margin over the risk free rate of 281 basis points. This margin was taken to be the average
of the 20 trading days prior to 19 December 2008 of the credit spreads for Australian BBB credit rated companies,
which was 2.81%. On the basis of a risk free rate of 4.37%, this equates to a post-tax nominal cost of debt of 7.18%.

Corporate tax rate

There is some contention as to whether the statutory corporate tax rate or an effective tax rate should be used when
calculating the discount rate. Historically, the effective rate of tax has differed from the statutory corporate rate due
to differences between tax and accounting depreciation.
                                                                                                                          52




In practice, the statutory corporate tax rate is often used given the difficulties of estimating an effective rate of tax,
particularly in future years. Furthermore, following the Government’s recent tax reforms, most notably the abolition
of accelerated depreciation the difference between the statutory rate and effective rate is likely to be reduced. This
is on the basis that accelerated depreciation was a significant driver of the difference between statutory rates and
effective rates in the past.

Recognising that the cash flows to be discounted incorporate forecast tax payments, we have adopted the prevailing
statutory corporate tax rate of 30% at the valuation date when determining the post-tax WACC.

Inflation Rate

The cash flows that are the subject of this valuation are in real terms. In order to calculate a real risk free WACC we
have deflated the nominal WACC by an inflation expectation utilising the Fisher equation, as follows:

(1 + rreal) = (1 + rnominal) / (1 + π)

Where:

rreal =      real WACC

π=           long term forecast rate of inflation
rnominal = nominal WACC

The Reserve Bank has a stated monetary policy objective of keeping inflation in Australia within a range of 2% to
3%.

According to the September 2008 edition of the Access Economics the forecasts for the year–on-year % Change in
GDP deflator for Australia ranged of 1.2% to 4.3% for the years 2008 to 2011. As provided in their 3 December
2008 update, Global Insight forecasts inflation from the years 2008 to 2011 to range between 1.96% and 6.55%,
with the average long term forecast of 2.52%. Additionally, the figures provided by BIS Shrapnel as of August 2008,
forecasts inflation from the years 2008 to 2011 to range between 2.3% and 5.6%, with the long term forecast of
3.1%.

We have adopted a long-term inflation rate of 2.5%.

WACC

On the basis of the above, we have adopted the following inputs in our calculation of a range of WACCs:

P ara m e ter                                         Low W A CC          H ig h W A C C
R is k Fre e R a te ( R f )                              4 .37 %             4 .3 7%
M ark et R is k P re m ium (R m -R f )                    6.0 %               6.0 %
U ng ea red B eta                                         2.2 7               2.65
E qu ity B e ta (β e )                                    2.3 5               2.75
N om in al P re- Tax C o st of D e bt (R d)              7 .18 %             7 .1 8%
Ta x Ra te (t c )                                        3 0.0 %             3 0.0%
D eb t: E quity                                           5.3 %               5.3 %
D eb t Pro po rtio n (D / V )                             5.0 %               5.0 %
E qu ity P ro po rtio n (E / V )                         9 5.0 %             9 5.0%

C os t o f E q uity (R e)                                1 8.5 %             2 0.9%
N om in al P os t T ax W A C C                           1 7.8 %             2 0.1%
In fla tio n e stim ate (p )                              2.5 %               2.5 %
R ea l Po st Ta x W AC C                                 1 4.9 %             1 7.1%
S ay ,                                                   1 5.0 %             17 .0 %


Based on the foregoing analysis, we have assessed a real, post-tax discount rate to apply in our valuation of Perilya
to be in the range of 15.0% to 17.0%.
                                                                                                                53




Appendix E                       Sources of information
In preparing this report, we have had regard to the following sources of information:

►     ASIC Regulatory Guides 111 and 112.

►     Bloomberg.

►     Commodity and foreign exchange forecasts taken from Brokers consensus estimates.

►     Company budgets, forecasts and models prepared in relation to Broken Hill and Beltana.

►     Computershare.

►     Corporations Act.

►     DatAnalysis, [Online], Available from: http://www.aspectfinancial.com.au.

►     Draft Notice of Meeting and Explanatory Memorandum being prepared by Perilya.

►     Exploration expenditure summaries provided by Perilya

►     Financial data provided by Perilya, including information relating to investment and hedging positions.

►     Perilya’s share registry and transfer details as at 3 December 2008.

►     The Share Subscription Agreement between Perilya and Zhongjin in regards to the Proposed Transaction

►     Various management reports prepared and provided by Perilya management.

►     Various public disclosure documents submitted by Perilya to the ASX, including financial reports

►     Discussions with Perilya management.

►     Other publicly available information.
                                                                                                                               54




              Appendix F                  Glossary

Abbreviation                         Full Title / Description
Act                                  Corporations Act 2001
AMC                                  AMC Consultants Pty Ltd
ASIC                                 Australian Securities and Investment Commission
ASX                                  Australian Securities Exchange
AXA                                  AXA Asia Pacific Holdings Limited
the Call Option                      Zhongjin’s right to effectively acquire Mt Oxide for $15 million, with the Deposit being set-
                                     off against the consideration prior to payment taking place.
CAPM                                 Capital Asset Pricing Model
CBH                                  CBH Resources Limited
the CBH Bid                          a takeover offer for all of the shares in Perilya on the basis of 4.2 CBH shares for every 1
                                     Perilya share held.
Chalice                              Chalice Gold Mines Limited
CML 7                                Consolidated Mining Lease 7, an area located between Perilya’s southern and northern
                                     mining leases at Broken Hill.
CNY                                  Chinese Yuan
Date of this Report                  24 December 2008
DCF                                  Discounted Cash Flow
the Deposit                          The payment by Zhongjin of a $10 million deposit by the earlier of 24 December 2008 or
                                     three days after the receipt of all of the necessary approvals from the relevant Chinese
                                     authorities.
Dow Jones                            Dow Jones Industrial Average Index
Ernst & Young Transaction Advisory   Ernst & Young Transaction Advisory Services Limited
Services
FSG                                  Financial Services Guide
FYXX                                 Financial year ended 30 June XX
kms2”                                Square kilometres
Korea Zinc Group                     Korea Zinc Limited and Young Pong Corporation Limited
LME                                  London Metals Exchange
the Market Portfolio                 Hypothetical portfolio comprising all investments in the market
Meeting                              The General Meeting to be held on or around XX December 2008
/mt                                  Per tonne
mtpa                                 Million tonnes per annum
Non-Associated Shareholders          Perilya shareholders that are not associated with the Proposed Transaction
NPV                                  Net present value
Perilya, or the Company              Perilya Limited
Placement Shares                     197,672,000 fully paid ordinary shares in Perilya
Proposed Transaction                 Zhongjin subscribing for the Placement Shares at a price of 23 cents each, for a total cash
                                     consideration of $45,464,560
RG 111                               Australian Securities and Investments Commission Regulatory Guide 111, Content of
                                     expert reports
Share Subscription Agreement         The share subscription agreement between Perilya and Zhongjin in regards to the
                                     Proposed Transaction
tpa                                  Tonnes per annum
VWAP                                 Volume weighted average share price of the particular security on the ASX over a specified
                                     period of time
WACC                                 Weighted Average Cost of Capital
YTD                                  Year to Date
Zhongjin                             Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd
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