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					Ignite Energy Resources Pty
Limited
Independent Expert’s Report and Financial Services Guide

20 April 2010
The Directors
                                                                                                                                    Grant Thornton Corporate Finance Pty Ltd
Ignite Energy Resources Pty Limited                                                                                                 ABN 59 003 265 987
Level 9                                                                                                                             AFSL 247140
267 Collins Street                                                                                                                  Level 17, 383 Kent Street
Melbourne VIC 3000                                                                                                                  Sydney NSW 2000
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20 April 2010                                                                                                                       E info@gtnsw.com.au
                                                                                                                                    W www.grantthornton.com.au




Dear Sirs

Independent Expert’s Report and Financial Services Guide

Introduction

Ignite Energy Resources Pty Ltd (“Ignite” or the “Company”) is a private company incorporated in
Australia which owns a catalytic hydrothermal reactor technology known as the ‘Cat-HTR’
technology that can be used in the process of converting raw materials such as brown coal (lignite)
and modern biomass (wood waste and aquatic plants) into various high energy density fuels and
high grade coal products. Ignite also holds an exploration license in Victoria, Australia which
contains significant reserves of lignite or ‘brown coal’ (“EL4416”).

Karmin Exploration Inc. (“Karmin”) is a mining and exploration company listed on the Canadian
TSX Venture Exchange (“TSXV”). Karmin holds interests in exploration assets located in Brazil.
Karmin’s market capitalisation as at 7 April 2010 was approximately C$7.1 million or A$7.7 million1.

Proposed Transaction

On 15 March 2010, Ignite and Karmin entered into a Share Exchange Agreement to be
implemented by way of a share swap of one ordinary share in Karmin2 (“Karmin Share”) for each
ordinary share in Ignite (“Ignite Share”) (the “Agreement”). The Agreement will effectively result in
a reverse takeover transaction of Ignite into Karmin (the “Proposed Transaction”) with the existing




1Based on the exchange rate prevailing on 7 April 2010.
2 Following a consolidation of Karmin Shares on a ratio of six (6) existing Karmin Shares into one (1) Karmin Share. The
number of Karmin shares on issue following completion of the consolidation will be reduced from 38,493,588 shares to
6,415,598 shares.


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                                                                                                                2




shareholders of Ignite (“Ignite Shareholders”) holding approximately 96.3%3 of the enlarged share
capital of Karmin (“Combined Group”).

In conjunction with the Proposed Transaction, Karmin intends to raise a minimum of C$30 million
and up to a maximum of C$40 million at a minimum issue price of C$1.765 (“Capital Raising”) to
fund the commercialisation of the Cat-HTR technology and working capital requirements.

If the Proposed Transaction and the Capital Raising are implemented, existing shareholders of
Ignite will own between 85.3% and 87.8% of the Combined Group.

As at the date of this report, Ignite also has on issue certain share options and convertible notes.
Based on the terms of the Share Exchange Agreement, each option in Ignite Shares (“Ignite
Option”) will be exchanged for an option to purchase shares in the Combined Group on equivalent
terms and conditions. Furthermore, Karmin has an obligation to service Ignite’s obligations in
relation to any outstanding convertible instrument of the Company.

The Proposed Transaction is subject to a number of conditions precedent as summarised in section
1.2, including Karmin completing the Capital Raising. Refer to section 1.3 for discussions in relation
to the Capital Raising and the proposed use of funds.

The Directors of Ignite unanimously recommend that the Ignite Shareholders vote for the Proposed
Transaction, in the absence of a superior proposal. Each director of Ignite who is eligible intends to
vote in favour of the Proposed Transaction.

Effects of the Proposed Transaction

If the Proposed Transaction is implemented, then:

• Karmin will acquire all Ignite Shares and Ignite will become a wholly owned subsidiary of
  Karmin;

• shares issued to Ignite Shareholders under the Proposed Transaction will be quoted on the
  TSXV;

• Ignite Shareholders will collectively own approximately 96.3% of the Combined Group prior to
  the Capital Raising and between 85.3% and 87.8% of the Combined Group following the Capital
  Raising;

• Ignite will assume control of the management and the board of the Combined Group;

• The Combined Group will likely adopt the name Ignite Energy Resources Incorporated; and




3 Assuming existing Ignite convertible instrument will not be converted before implementation of the Proposed

Transaction. Based on the terms of the Share Exchange Agreement, Karmin has an obligation to service Ignite’s
obligations in relation to any outstanding convertible instrument of the Company.
                                                                                                      3




• The Combined Group will have access to a minimum of C$30 million and up to a maximum of
  C$40 million in cash resources (before associated transaction costs) on completion of the Capital
  Raising.

Purpose of the report and basis of the assessment

The Directors of Ignite have engaged Grant Thornton Corporate Finance to prepare an
independent expert’s report to state whether, in Grant Thornton Corporate Finance’s opinion the
purchase of Ignite Shares by Karmin is fair and reasonable to the non-associated shareholders of
Ignite (“Non-Associated Shareholders”) for the purposes of Section 611(7) of the Corporations Act.

The scope of our independent expert report is only limited to the purchase of Ignite Shares by
Karmin and does not extend to any other resolutions included in the Notice of Meeting.

In our opinion, the Proposed Transaction is not a ‘control’ transaction as contemplated by
Regulatory Guide 111 “Content of expert reports” (“RG 111”) from the perspective of Ignite
Shareholders as they will retain 96.3% of the Combined Group’ issued share capital prior to the
Capital Raising and they will control the board and management of the Combined Group.

In forming our opinion on the Proposed Transaction, we have compared:

• the value per Ignite Share prior to the Proposed Transaction to the assessed value per share of
  the Combined Group after the Proposed Transaction and the Capital Raising; and

• the likely advantages and disadvantages associated with the Proposed Transaction.

For the purpose of this report, an independent technical specialist, AMC Consultants Pty Ltd
("AMC"), was engaged to provide a technical specialist report in relation to the fair market value of
the exploration assets held by Karmin. The report prepared by AMC (“AMC Report”) is included as
Appendix D to this report and was prepared in accordance with the Code for the Technical
Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert
Reports, 2005 (the "Valmin Code" ).

Furthermore, Grant Thornton Corporate Finance has been provided with a number of reports from
independent specialists recently commissioned by Ignite. These reports have assessed various
aspects of the Cat-HTR technology including examining and evaluating the process design from a
capital expenditure requirement perspective and the financial outcome of the potential
product/output of the technology.

Ignite has also provided an independent specialist report which comments on the nature and
availability of coal minerals in EL4416.

Summary of opinion

Grant Thornton Corporate Finance has concluded that the Proposed Transaction is fair and
reasonable to the Ignite Shareholders.
                                                                                                                        4




Fairness assessment

In forming our opinion in relation to the fairness of the Proposed Transaction to the Ignite
Shareholders, Grant Thornton Corporate Finance has compared the value per Ignite Share prior to
the Proposed Transaction (on a minority basis) to the assessed value per share of the Combined
Group following completion of the Proposed Transaction and the Capital Raising (on a minority
basis).

The following table summarises our assessment:

                                                                          Section             Low                 High
                                                                          reference            A$                      A$

Value per share pre-Proposed Transaction (minority basis) (1)               8.1.2             1.77                 1.90


Value per share post-Proposed Transaction (minority basis)(1)                 10.7            1.73                 1.83


Discount (A$)                                                                                (0.04)               (0.07)
Discount (%)                                                                                 -2.3%                -3.7%


Source: Calculations
(1) We note that the exchange ratio between Ignite and Karmin Shares is on a one-for-one basis after consolidation of
Karmin Shares. Accordingly, comparing the value per Ignite Share prior to the Proposed Transaction with the value per
share of the Combined Group post the Proposed Transaction is appropriate.

The high end of our assessed value per share of the Combined Group on a minority interest basis
post-Proposed Transaction falls within the range of our assessed value per share on a minority basis
pre-Proposed Transaction. Accordingly, we conclude that the Proposed Transaction is fair to the
Ignite Shareholders. Set out below is a graphic representation of our fairness assessment:

                                                                Overlapping
                                                                  range

     Value per share
     pre-Proposed
     Transaction
     (minority basis)




     Value per share
     post-Proposed
     Transaction
     (minority basis)




                                1.70                1.75           1.80               1.85     1.90             1.95

                                                                          $A

Source: Calculations


Whilst we have concluded that the Proposed Transaction is fair to Ignite Shareholders, we note the
low end of our valuation range of the value post Proposed Transaction is below our assessed value
range of Ignite prior to the Proposed Transaction.
                                                                                                           5




We note that the minimum value per share of the Combined Group required to ensure Ignite
Shareholders are not disadvantaged by implementing the Proposed Transaction is A$1.77. In the
event that the fair market value per share of the Combined Group is below A$1.77, then the
Proposed Transaction would not be fair. However, under these circumstances we believe that the
Proposed Transaction is still reasonable having regard to the reasonableness considerations set out
below.

In our assessment of the value per share of the Combined Group, we have assumed completion of
the Capital Raising of a minimum of C$30 million and up to a maximum of C$40 million at the
minimum issue price will be C$1.765 per Karmin Share as advised by the Management of Karmin
and Ignite. We note that in the event that the minimum issue price of the Capital Raising is lower
than C$1.765, this may cause Grant Thornton Corporate Finance to change our opinion and this
Independent Expert’s Report may become invalid.

Reasonableness of the Proposed Transaction

For the purpose of assessing whether the Proposed Transaction is reasonable to the Ignite
Shareholders, we have considered the following likely advantages and disadvantages associated with
the Proposed Transaction:

Advantages

• If the Proposed Transaction is implemented, Ignite Shareholders will exchange Ignite Shares for
  Karmin Shares which are listed on the TSXV. Ignite Shareholders will be able to trade those
  shares freely on the TSXV. Ownership of shares in a listed entity will provide Ignite Shareholders
  with increased liquidity in relation to their investment;

• The Capital Raising will contribute to further progress the commercialisation of the CAT-HTR
  technology as well as developing the mineral resources within EL4416;

• Ignite’s auditors have included an ‘emphasis on matter’ in their 2009 audit report drawing
  attention to a potential going concern issue as Ignite has generated negative earnings and current
  liabilities exceeded its current assets by A$15.8 million. The Proposed Transaction offers Ignite
  Shareholders the opportunity to materially reduce any going concern issues associated with
  Ignite’s existing capital structure. Ignite has historically raised capital through private placements
  or other equity raisings. If the Proposed Transaction and Capital Raising does not complete and
  Ignite continues to incur losses and fail to complete future capital raisings, or market and sector
  conditions deteriorate, Ignite may be unable to continue as a going concern;

• Ignite Shareholders will hold shares in a publicly listed entity which will be required to comply
  with the continuous disclosure regime. This will ensure that the shareholders will receive
  information on Ignite in a timely and transparent manner and as such, expedite and improve
  investment decisions;

• The TSXV is catered for junior exploration companies and technology ventures. Accordingly,
  Ignite may have an enhanced ability to raise the required funds on the TSXV and more generally
  in the United States (“US”) and Canada due to the greater degree of sophistication of these
  financial markets;
                                                                                                     6




• The Proposed Transaction will improve the profile of Ignite in the market and in turn, may result
  in a greater following by the investment and broking community. This may have a positive impact
  on the Combined Group’s share price and assist future capital raising activities; and

• The board and management of the Combined Group will be controlled by Ignite. In addition, we
  note that the existing Ignite Shareholders as a whole will become the controlling shareholders in
  the Combined Group, holding between 85.3% and 87.8% (after the Capital Raising) of the
  Combined Group.

Disadvantages

• Ignite Shareholders may be exposed to exchange rate risk as a result of having an investment in a
  Canadian-listed company as compared to investing in an Australian private company;

• As Ignite Shareholders will hold an investment in the Combined Group which will be listed in a
  different tax jurisdiction, there could be adverse tax treatments pertaining to capital gains tax or
  withholding dividends or other adverse tax consequences. Grant Thornton Corporate Finance
  has not provided any taxation advice in relation to the Proposed Transaction. Ignite Shareholders
  should consider the information contained in the Notice of Meeting in relation to taxation
  implications;

• Ignite Shareholders will share any future profits and dividends associated with the Cat-HTR
  technology with the existing shareholders of Karmin. However, we note that the existing
  shareholders of Karmin will own a maximum of 3.7% of the Combined Group’s issued share
  capital prior to the Capital Raising;

• Ignite Shareholders will be exposed to Karmin’s existing operations, being its 30% investment in
  a Brazilian zinc exploration asset which is relatively uncertain and risky;

• Compliance costs are expected to increase to maintain a listed status on the TSXV; and

• Ignite Shareholders will be issued shares in Karmin Exploration Inc. which includes Karmin’s
  existing operations, assets and liabilities. Potential future liabilities currently unknown and
  unforeseen from Karmin’s existing operations may crystallise in the future. As the largest
  shareholders in the Combined Group, Ignite Shareholders will be exposed to any future liabilities
  which may materialise. However, we note that Karmin has provided representations and
  warranties in relation to the historical affairs of Karmin in the Agreement.
                                                                                                        7




Other factors

Ignite Shareholders’ position if the Proposed Transaction is not approved

If the Proposed Transaction is not approved, Ignite will remain a private company and it would be
the current directors’ intention to continue operating in line with its objectives. Ignite Shareholders
who retain their shares will continue to share in any benefits and risks in relation to Ignite’s ongoing
business. Ignite will need to raise funding to finance its commercialisation efforts with regards to the
CAT-HTR technology as well as developing the mineral resources within EL4416.

If the Proposed Transaction is not implemented, Ignite will remain a private company and it may
find it more challenging to raise the required funds to commercialise the CAT-HTR technology and
reduce its level of indebtedness. Additionally, if market conditions deteriorate or sentiment towards
“clean coal technologies” changes adversely, fund raising could potentially be more dilutive.

Taxation

Grant Thornton Corporate Finance has not provided any taxation advice in relation to the
Proposed Transaction. Ignite Shareholders should consider the information contained in the Notice
of Meeting and Explanatory Memorandum and other offering documents to be provided by Karmin
in relation to taxation implications of the Proposed Transaction.

Alternative proposals

The directors of Ignite have advised that the Proposed Transaction is currently the only proposal
available to Ignite at the date of this report. The directors have undertaken not to solicit any
competing proposal or to participate in discussions or negotiations in relation to any competing
proposals in conjunction with the execution of the Agreement.

Grant Thornton Corporate Finance is of the opinion that if an alternative proposal on better terms
were to emerge, this may occur prior to the shareholders meeting convened to consider the
Proposed Transaction. In the event that an alternative offer on better terms emerges, shareholders
are entitled to vote against the Proposed Transaction.

Dividend policy

If the Proposed Transaction is implemented, the dividend policy of the Combined Group will be
determined by the board of the Combined Group. The Combined Group does not anticipate paying
a dividend for the financial year ending 31 December 2010. The Combined Group intends to review
the dividend policy on an annual basis.

Based on the likely advantages and disadvantages identified above, it is our opinion that on balance,
the likely advantages associated with the Proposed Transaction outweigh the disadvantages.
Accordingly, the Proposed Transaction is reasonable to the Ignite Shareholders.

Accordingly, Grant Thornton Corporate Finance has concluded that the Proposed
Transaction is fair and reasonable to the Ignite Shareholders.
                                                                                                      8




Other matters

Grant Thornton Corporate Finance has prepared a Financial Services Guide in accordance with the
Corporations Act. The Financial Services Guide is set out in the following section.

The decision of whether or not to approve the Proposed Transaction is a matter for each Ignite
Shareholder based on their own views of value of Ignite and expectations about future market
conditions, Ignite performance, risk profile and investment strategy. If Ignite Shareholders are in
doubt about the action they should take in relation to the Proposed Transaction, they should seek
their own professional advice.


Yours faithfully
GRANT THORNTON CORPORATE FINANCE PTY LTD




ANDREA DE CIAN                                     SCOTT GRIFFIN
Director                                           Director
                                                                                                       1




                                                                                        20 April 2010

Financial Services Guide

1   Grant Thornton Corporate Finance Pty Ltd

Grant Thornton Corporate Finance Pty Ltd (“Grant Thornton Corporate Finance”) carries on a
business, and has a registered office, at Level 17, 383 Kent Street, Sydney NSW 2000. Grant
Thornton Corporate Finance holds Australian Financial Services Licence No 247140 authorising it
to provide financial product advice in relation to securities and superannuation funds to wholesale
and retail clients.

Grant Thornton Corporate Finance has been engaged by Ignite Energy Resources Pty Ltd (“Ignite”
or the “Company”) to provide general financial product advice in the form of an independent
expert’s report in relation to the proposed transactions with Karmin Exploration Inc. (“Karmin”).
This report is included in the Company’s Notice of Meeting and Explanatory Memorandum.

2   Financial Services Guide

This Financial Services Guide (“FSG”) has been prepared in accordance with the Corporations Act,
2001 and provides important information to help retail clients make a decision as to their use of
general financial product advice in a report, the services we offer, information about us, our dispute
resolution process and how we are remunerated.

3   General financial product advice

In our report we provide general financial product advice. The advice in a report does not take into
account your personal objectives, financial situation or needs.

Grant Thornton Corporate Finance does not accept instructions from retail clients. Grant Thornton
Corporate Finance provides no financial services directly to retail clients and receives no
remuneration from retail clients for financial services. Grant Thornton Corporate Finance does not
provide any personal retail financial product advice directly to retail investors nor does it provide
market-related advice directly to retail investors.

4   Remuneration

When providing the Report, Grant Thornton Corporate Finance’s client is the Company. Grant
Thornton Corporate Finance receives its remuneration from the Company. In respect of the Report,
Grant Thornton Corporate Finance will receive from Ignite a fixed fee of A$40,000 plus GST,
which is based on commercial rate plus reimbursement of out-of-pocket expenses for the
preparation of the report. Our directors and employees providing financial services receive an
annual salary, a performance bonus or profit share depending on their level of seniority.

Except for the fees referred to above, no related body corporate of Grant Thornton Corporate
Finance, or any of the directors or employees of Grant Thornton Corporate Finance or any of those
related bodies or any associate receives any other remuneration or other benefit attributable to the
preparation of and provision of this report.
                                                                                                                            2




5    Independence

Grant Thornton Corporate Finance is required to be independent of Ignite in order to provide this
report. The guidelines for independence in the preparation of independent expert’s report are set
out in Regulatory Guide 112 Independence of expert issued by the Australian Securities and Investments
Commission (“ASIC”). The following information in relation to the independence of Grant
Thornton Corporate Finance is stated below.

“Grant Thornton Corporate Finance and its related entities do not have at the date of this report, and have not had
within the previous two years, any shareholding in or other relationship with Ignite (and associated entities) that could
reasonably be regarded as capable of affecting its ability to provide an unbiased opinion in relation the Propose
Transaction.

Grant Thornton Corporate Finance has no involvement with, or interest in the outcome of the transaction, other than
the preparation of this report.

Grant Thornton Corporate Finance will receive a fee based on commercial rates for the preparation of this report. This
fee is not contingent on the outcome of the transaction. Grant Thornton Corporate Finance’s out of pocket expenses in
relation to the preparation of the report will be reimbursed. Grant Thornton Corporate Finance will receive no other
benefit for the preparation of this report.

Grant Thornton Corporate Finance considers itself to be independent in terms of Regulatory Guide 112
“Independence of expert” issued by the ASIC.”

6    Complaints process

Grant Thornton Corporate Finance has an internal complaint handling mechanism and is a member
of the Financial Ombudsman Service (membership no. 11800). All complaints must be in writing
and addressed to the Chief Executive Officer at Grant Thornton Corporate Finance. We will
endeavour to resolve all complaints within 30 days of receiving the complaint. If the complaint has
not been satisfactorily dealt with, the complaint can be referred to the Financial Ombudsman
Service who can be contacted at:

PO Box 579 – Collins Street West
Melbourne, VIC 8007
Telephone: 1800 335 405

Grant Thornton Corporate Finance is only responsible for this report and FSG. Complaints or
questions about the General Meeting should not be directed to Grant Thornton Corporate Finance.
Grant Thornton Corporate Finance will not respond in any way that might involve any provision of
financial product advice to any retail investor.
                                                                                          3




Compensation arrangements

Grant Thornton Corporate Finance has professional indemnity insurance cover under its
professional indemnity insurance policy. This policy meets the compensation arrangement
requirements of section 912B of the Corporations Act, 2001.
                                                                    4




Contents




Page

1      Outline of the Proposed Transaction                          5

2      Purpose and scope of the report                              8

3      Profile of the coal industry                                 12

4      Profile of the oil industry                                  17

5      Profile of Ignite                                            22

6      Profile of Karmin                                            32

7      Valuation methodologies                                      38

8      Valuation of Ignite                                          42

9      Valuation of Karmin                                          48

10     Valuation of the Combined Group                              54

11     Evaluation of the Proposed Transaction                       58

12     Sources of information, disclaimer and consents              63

Appendix A – Valuation methodologies                                67

Appendix B – Glossary                                               69

Appendix C –Discount Rate                                           72

Appendix D – AMC Report                                             78




Ignite Energy Resources Pty Limited – Independent Expert’s Report
                                                                                                                      5




1     Outline of the Proposed Transaction

1.1     Proposed Transaction

Ignite Energy Resources Pty Ltd (“Ignite” or the “Company”) is a private company incorporated in
Australia which owns a catalytic hydrothermal reactor technology known as the ‘Cat-HTR’
technology that can be used in the process of converting raw materials such as brown coal (lignite)
and modern biomass (wood waste and aquatic plants) into various high energy density fuels and
high grade coal products. Ignite also holds an exploration license in Victoria, Australia which
contains significant reserves of lignite or ‘brown coal’ (“EL4416”).

Karmin is a mining and exploration company listed on the Canadian TSX Venture Exchange
(“TSXV”). Karmin’s holds interests in exploration assets located in, Brazil. Karmin’s market
capitalisation as at 7 April 2010 was approximately C$7.1 million or A$7.7 million.

On 15 March 2010, Ignite and Karmin entered into a Share Exchange Agreement to be
implemented by way of a share swap of one ordinary share in Karmin (“Karmin Share4”) for every
one ordinary share in Ignite (“Ignite Share”) (the “Agreement”). The Agreement will effectively
result in a reverse takeover transaction of Ignite into Karmin (the “Proposed Transaction”) with
the existing Ignite Shareholders holding approximately 96.3% of the enlarged share capital5.

In conjunction with the Proposed Transaction, Karmin intends to raise a minimum of C$30
million and up to a maximum of C$40 million at a minimum issue price of C$1.765 (“Capital
Raising”) to fund the commercialisation of the Cat-HTR technology and working capital
requirements.

If the Proposed Transaction is implemented, existing shareholders of Ignite (“Ignite
Shareholders”) will own approximately 96.3% of the enlarged share capital of Karmin (the
“Combined Group”) prior to the Capital Raising and between 85.3% and 87.8% of the Combined
Group following the Capital Raising. Both parties have the right to terminate the Agreement if the
Proposed Transaction does not complete by 1 October 2010. Both parties are potentially liable to
pay a break fee of C$250,000 in accordance with the terms of the Agreement.

As at the date of this report, Ignite has also on issue options and convertible notes. Based on the
terms Share Exchange Agreement, each Ignite option will be exchanged for an option to purchase
shares in the Combined Group on equivalent terms and conditions. Furthermore, Karmin has an
obligation to service Ignite’s obligations in relation to any outstanding convertible instrument of
the Company.

The Proposed Transaction is subject to a number of conditions as summarised below, including
the approval by the shareholders of Ignite (“Ignite Shareholders”). The Independent Expert’s



4 Following a consolidation of Karmin shares on a ratio of six (6) existing Karmin Shares into one (1) Karmin Share. The
number of Karmin shares on issue following completion of the consolidation will be reduced from 38,493,588 shares to
6,415,598 shares.
5 Assuming existing Ignite convertible instrument will not be converted before implementation of the Proposed

Transaction. Based on the terms of the Share Exchange Agreement, Karmin has an obligation to service Ignite’s
obligations in relation to any outstanding convertible instrument of the Company.


Ignite Energy Resources Pty Limited – Independent Expert’s Report
                                                                                                    6




Report is to accompany a notice of meeting and explanatory memorandum to be sent to the Ignite
Shareholders.

The Directors of Ignite unanimously recommend that the Ignite Shareholders vote for the
Proposed Transaction, in the absence of a superior proposal. Each director of Ignite who is eligible
intends to vote in favour of the Proposed Transaction.

1.2    Conditions precedent

Apart from the customary condition precedents for a transaction of this nature, the Proposed
Transaction is subject to the following key conditions precedent:

• Ignite Shareholders approve the Proposed Transaction;

• Karmin receives approval from the shareholders of Karmin (“Karmin Shareholders”) to
  consolidate the number of Karmin Shares on issue on a 6:1 basis and change Karmin’s name to
  Ignite Energy Resources;

• All required regulatory approvals are obtained;

• Karmin completes the Capital Raising; and

• Karmin assumes the obligations of Ignite with regards to any outstanding loan notes convertible
  into Ignite Shares.

1.3    Capital Raising

The Combined Group is seeking to raise a minimum of C$30 million and up to a maximum of
C$40 million in conjunction with the Proposed Transaction.

Desjardins Securities Inc has been appointed as broker for the Capital Raising. The main terms of
the Capital Raising are summarised below:

• the issue price is a minimum of C$1.765 per share;

• the implied number of new shares expected to be issued is a maximum of 15.9 million shares;
  and

• the brokerage fees payable comprise:

         i    6% of total funds raised; and

         ii   1.02 million to 1.36 million compensation warrants (representing 6% of the implied
              number of new shares to be issued in the Combined Group via the Capital Raising).
              The compensation warrants provides the holder with the option to convert one
              compensation warrant into one Ignite Share or one share in the Combined Group.




Ignite Energy Resources Pty Limited – Independent Expert’s Report
                                                                                                 7




The proceeds of the Capital Raising will be used for:

•     the construction of a commercial demonstration plant;

•     repayment of loan notes outstanding;

•     mining licence applications and resource development;

•     technology development with Sydney University;

•     bio-refinery project development; and

•     business development.

1.4     Effects of the Proposed Transaction

If the Proposed Transaction is implemented, then:

• Karmin will acquire all Ignite Shares and Ignite will become a wholly owned subsidiary of
  Karmin;

• shares issued to Ignite Shareholders under the Proposed Transaction will be quoted on the
  TSXV;

• Ignite Shareholders will collectively own approximately 96.3% of the Combined Group prior to
  the Capital Raising and between 85.3% and 87.8% of the Combined Group following the
  Capital Raising;

• Ignite will assume control of the management and the board of the Combined Group;

• The Combined Group will likely adopt the name Ignite Energy Resources Incorporated; and

• The Combined Group will have access to a minimum of C$30 million and up to a maximum of
  C$40 million in cash resources (before associated transaction costs) on completion of the
  Capital Raising.




Ignite Energy Resources Pty Limited – Independent Expert’s Report
                                                                                                     8




2     Purpose and scope of the report

2.1    Purpose

Section 606 of the Corporations Act prohibits the acquisition of a relevant interest in issued voting
shares of a company if the acquisition results in the person’s voting power in the company
increasing, either from below 20% to more than 20%, or from a starting point between 20% and
90%, unless an exception in Section 611 of the Corporations Act applies without making an offer
to all shareholders of the company.

Based on the form of the Proposed Transaction, Karmin will purchase 100% of the issued shares
in Ignite which is prohibited under section 606 of the Corporations Act without issuing a takeover
offer.

Item 7 of Section 611 of the Corporations Act allow non-associated shareholders to waive this
prohibition by passing a resolution at a general meeting. ASIC’s Regulatory Guide 74 “Acquisitions
agreed to by shareholders” (“RG74”) requires that shareholders approving a resolution pursuant to
Section 623 of the Corporations Act (the predecessor to Section 611(7) of the Corporations Act)
be provided with a comprehensive analysis of the proposal, including whether or not the proposal
is fair and reasonable to the non-associated shareholders. The Independent Directors (directors not
associated with the proposal) may satisfy their obligations to provide such an analysis by either:

• commissioning an independent expert’s report; or

• undertaking a detailed examination of the proposal themselves and preparing a report for the
  non-associated shareholders.

Accordingly, the Directors of Ignite have engaged Grant Thornton Corporate Finance to prepare
an independent expert’s report to state whether, in Grant Thornton Corporate Finance’s opinion
the Proposed Transaction is fair and reasonable to the non-associated shareholders of Ignite
(“Non-Associated Shareholders”) for the purposes of Section 611(7) of the Corporations Act.

Whilst our Independent Expert’s Report is required under Item 7 of Section 611 of the
Corporations Act, we note that the substance of the Proposed Transaction is for the current Ignite
Shareholders to retain 96.3% of the enlarged share capital of the Combined Group prior to
completion of the Capital Raising.

The scope of our independent expert report is only limited to the purchase of Ignite Shares by
Karmin and does not extend to any other resolutions included in the Notice of Meeting.

2.2    Basis of assessment

In preparing this report, Grant Thornton Corporate Finance has had regard to RG74 and
Regulatory Guide 111 “Content of expert reports” (“RG 111”). RG 111 establishes certain
guidelines in respect of independent expert’s reports prepared for the purposes of the
Corporations Act. RG 111 is framed largely in relation to reports prepared pursuant to Section 640
of the Corporations Act and comments on the meaning of “fair and reasonable” in the context of a
takeover offer.


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RG111 requires the non-associated shareholders to be provided with a comparison and clear
summary of the likely advantages and disadvantages of the proposed transactions. Comparing the
value of the shares to be acquired under the proposal and the value of the consideration to be paid
is only one element of the assessment.

RG111 also prescribes different assessment approach depending on whether the transactions are
considered to be ‘control’ transactions. If the Proposed Transaction is approved, Ignite
Shareholders will collectively own approximately 96.3% of the Combined Group prior to the
Capital Raising and between 85.3% and 87.8% of the Combined Group following the Capital
Raising. Based on the terms of the Agreement, Ignite will assume control of the management and
board of the Combined Group.

RG111 requires the independent expert’s report to focus on the substance of the transaction rather
than on the legal mechanism used to effect the transaction. In our opinion, the Proposed
Transaction is not a ‘control’ transaction as contemplated by RG111 from the perspective of Ignite
Shareholders as they will retain 96.3% of the Combined Group’ issued share capital prior to the
Capital Raising and they will control the board and management of the Combined Group.

In our opinion, the most appropriate basis on which to evaluate the Proposed Transaction is to
compare:

• the value per Ignite share prior to the Proposed Transaction to the assessed value per share of
  the Combined Group after the Proposed Transaction have been implemented; and

• the likely advantages and disadvantages associated with the Proposed Transaction.

We note that sections 38 to 43 of RG 111 address the specific requirements of an independent
expert’s report prepared in relation to the approval for a sale of securities, rather than the issue of
new shares, by shareholders not associated with the transaction in accordance with item 7 of
section 611 of the Corporations Act. Specifically, under these circumstances the non-associated
shareholders may be forgoing:

•   the opportunity of receiving a takeover bid; and

•   sharing in any premium for control.

Based on the terms of the Proposed Transaction, whereby all the shareholders of Ignite will receive
the same offer for the sale of their shares to Karmin, we do not believe the specific requirements
of RG 111 sections 38 to 43 apply. Accordingly, in our assessment of the Proposed Transaction we
have had regard to the provisions included in RG 111 in relation to the preparation of an
independent expert’s report in accordance with section 640 of the Corporations Act.

For the purpose of this report, an independent technical specialist, AMC Consultants Pty Ltd
("AMC"), was engaged to provide a technical specialist report which assesses the fair market value
of the exploration assets held by Karmin. The report prepared by AMC (“AMC Report”) is
included as Appendix D to this report and was prepared in accordance with the Code for the
Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for
Independent Expert Reports, 2005 (the "Valmin Code" ).


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Furthermore, Grant Thornton Corporate Finance has been provided with a number of reports
from independent specialists recently commissioned by Ignite. These reports have assessed various
aspects of the Cat-HTR technology including examining and evaluating the process design from a
capital expenditure requirement perspective and the financial outcome of the potential
product/output of the technology. Specifically, Ignite has provided the following reports to Grant
Thornton Corporate Finance:

• Assessment of the Process Design and Financial Performance of a Coal (Lignite) Liquefaction
  Process;

• Report on the Nature and Quantity of Products from Lignite Modification using the Cat-HTR
  technology;

• Report on the Examination of Chars Produced from the process using the Cat-HTR technology;

• Report on Markets for the Products Produced from the process using the Cat-HTR technology;

• Liquid Solid Fuel Products of Ignite’s Super Critical Water (SCW) Process for Power
  Generation: Greenhouse-Gas Reduction Potential; and

• Market Appraisal of Ignite Upgraded Coal (produced using the Cat-HTR technology) for the
  International Energy and Steelmaking Markets.

Ignite has also provided an independent specialist report which comments on the nature and
availability of coal minerals in EL4416.

2.3    Independence

Prior to accepting this engagement, Grant Thornton Corporate Finance considered its
independence with respect to the Proposed Transaction with reference to the ASIC Regulatory
Guide 112 “Independence of Expert’s Reports” (“RG 112”).

Grant Thornton Corporate Finance is independent of Ignite, and its Directors and all other
relevant parties to the Proposed Transaction. Grant Thornton Corporate Finance has no
involvement with, or interest in, the outcome of the approval of the Proposed Transaction other
than that of an independent expert.

Grant Thornton Corporate Finance has no involvement with, or interest in, the outcome of the
approval of the Proposed Transaction other than that of independent expert. Grant Thornton
Corporate Finance is entitled to receive a fee based on commercial rates and including
reimbursement of out-of-pocket expenses for the preparation of this report.

Except for these fees, Grant Thornton Corporate Finance will not be entitled to any other
pecuniary or other benefit, whether direct or indirect, in connection with the issuing of this report.
The payment of this fee is in no way contingent upon the success or failure of the Proposed
Transaction.




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2.4    Consent and other matters

Our report is to be read in conjunction with the Notice of Meeting and Explanatory Memorandum
dated on or around 23 April 2010 in which this report is included, and is prepared for the exclusive
purpose of assisting the Ignite Shareholders in their consideration of the Proposed Transaction.

This report should not be used for any other purpose.

Grant Thornton Corporate Finance consents to the issue of this report in its form and context and
consents to its inclusion in the Notice of General Meeting and Explanatory Statement.

This report constitutes general financial product advice only and in undertaking our assessment, we
have considered the likely impact of the Proposed Transaction to the Ignite Shareholders as a
whole. We have not considered the potential impact of the Proposed Transaction on individual
Ignite Shareholders. Individual shareholders have different financial circumstances and it is neither
practicable nor possible to consider the implications of the Proposed Transaction on individual
shareholders.

The decision of whether or not to approve the Proposed Transaction is a matter for each Ignite
Shareholder based on their own views of value of Ignite and expectations about future market
conditions, Ignite’s performance, risk profile and investment strategy. If Ignite Shareholders are in
doubt about the action they should take in relation to each of the Proposed Transaction, they
should seek their own professional advice.




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3     Profile of the coal industry

Ignite’s catalytic hydrothermal technology (“Cat-HTR”) technology (patents outstanding) can be
used in the process to convert geologically young brown coal (lignite) into various higher density
energy fuels and high grade coal products, including thermal coal, semi-soft coking coal (“SSCC”)
and low volatile pulverised coal injection (“PCI”) coal. These high grade coal products have
various uses in the electricity generation and other industrial areas.

3.1      Overview

Coal is formed through the compression of vegetable matter over millions of years. The quality
and type of each coal deposit is determined by the temperature and pressure as well as by the
length of time in formation. Initially, the peat is converted into lignite or ‘brown coal’ and then,
over many more millions of years, the continuing effects of temperature and pressure produces
further changes that transform the lignite into ‘sub-bituminous’ coals. Further chemical and
physical changes occur until these coals become blacker and harder, forming the ‘bituminous’ or
‘hard’ coals.

The world coal market primarily consists of a steam/thermal coal market and a coking coal market.
The steam coal market consists of demand for coal for electricity generation, producing steam and
heat for industrial uses and use in blast furnaces. The coking coal market consists solely of demand
for coals as fuel for smelting iron.

Set out below is the graph of coal spectrum.

                                                                Carbon/Energy content                               High

                                                         Moisture content
       High




                                                 48%                                              52%
                                            Low rank coals                                      Hard coal
           % World Resources




                                  Lignite         Sub-Bituminous                  Bituminous                   Anthracite
                                   20%               28%                               51%                        <1%



                                                                             Thermal           Metallurgical
                                                                            Steam coal         Coking coal




          Use                  Largely power           Power generation, Cement manufacture, Manufacture or Domestic/industrial
                                generation                         Industrial use            iron and steel    including
                                                                                                             smokeless fuel
Source: Australian Coal Association




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3.2    Consumption

Coal plays a critical role as the world’s primary energy source. Coal’s share of world energy
consumption was approximately 27% in 2006 and is expected to increase to 28% by 2030. The
main reasons for coal to be a primary energy source are:

• its dominant position in the electricity generation and industrial sectors in emerging Asian
  economies, particularly China and India;

• its enhanced ability to withstand future substitution by natural gas, nuclear power and renewable
  fuels due to the abundance of coal reserves;

• coal is cheaper on an energy equivalent basis compared to other fossil fuels; and

• the further development of coal-related emission reduction technologies.

Coal can be used for power generation, steel manufacturing and industrial process. According to
the Energy Information Administration (“EIA”), International Energy Outlook 2009, coal power
generation accounted for approximately 62% of global coal consumption in 2006, and generated
approximately 42% of global electricity.

The EIA also suggests that global coal consumption is expected to increase from 127.5 quadrillion
British Thermal Unit (“BTU”) in 2006 to 190.2 quadrillion BTU in 2030, which represents an
average annual growth of 1.9% from 2006 to 2015 and 1.6% from 2015 to 2030. The total
consumption of coal by China and India is expected to account for the majority of the increase in
global coal consumption.

Although the coal reserves are split almost equally between sub-bituminous and bituminous coals,
the global volume for sub-bituminous and brown coal traded is virtually zero as a result of:

• the inability to stockpile these type of coals due to their tendency to self combust; and

• the inefficiencies in transporting these type of coals due to their high moisture content.

Accordingly, the sub-bituminous and brown coal are generally consumed at the point at which they
are mined.

Furthermore, among the bituminous coal, thermal coal commands a lower price compared with
coking coal and it is priced and supplied based on its energy producing qualities.

3.3    Reserves

The global recoverable reserves of coal were estimated by the EIA to be approximately 930 billion
tonnes in total by the end of 2006, which is expected to last for approximately 137 years at the
current consumption level. Approximately 80% of the global recoverable reserves of coal are
located in the following countries:

• the US (28%);


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• Russia (19%);

• China (14%);

• other Non-OECD Europe and Eurasia (10%); and

• Australia/New Zealand (9%).

In 2005, the above countries produced approximately 4.9 billion tonnes (equivalent to 95.8
quadrillion BTU) of coal, representing 75% of the total global coal production.

Set out below is the global recoverable reserves of coal as at the end of 2005.

                            Recoverable anthracite and     Recoverable lignite and
Country                                                                              Total recoverable coal
                                           bituminous             subbituminous
                                        Billion tonnes             Billion tonnes           Billion tonnes
North America                                     127                         146                      273

Central & South America                             8                          10                       18

Europe                                              9                          41                       51

Eurasia                                           103                         146                      249

Middle East                                         2                           0                         2

Africa                                             54                           0                       55

Asia & Oceania                                    170                         114                      284

World Total                                       473                         457                      930

Source: EIA

3.4       Coal prices

The majority of coal traded in international markets is bought and sold pursuant to term contract
arrangements in which the key terms in relation to the volume, energy value, transport and other
specifications are agreed.

Price negotiations usually start from the existing term contract as a reference base. The benchmark
prices for the year are usually negotiated and agreed between the major producers, such as BHP
Billiton, Xstrata, Rio Tinto and Vale and the major buyers such as Indian, Chinese and Japanese
companies. Subsequent coal prices tend to settle with reference to those benchmark prices,
adjusted for the specific energy specifications of the coal.

Coal is priced according to its energy content and relative supply and demand fundamentals. Coal
with high moisture content like lignite is less efficient to burn and its prices are lower than coal
with low moisture content.

Historically, coal prices are generally less volatile than the prices for oil and natural gas, however,
the recent reduction in coal production in Europe and the continued demand for coal from China
has caused coal prices to become increasingly volatile. During the period between 2004 and 2008,
the prices of thermal coal increased at an annualised rate of 37.3%. The increase is believed to be
caused by demand outstripping supply and disruptions in the coal production process.



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Ignite’s Cat-HTR technology can be used in the process to convert geologically young brown coal
(lignite) into various higher density energy fuels and various high grade coal products, including
thermal coal, SSCC and low volatile PCI coal. The graph below shows the historical prices for
thermal coal, SSCC and low volatile PCI coal from 2004 to 2009.

                                                       Historical Coal Prices


                         300
                         250
    US$ per tonne




                         200
                         150
                         100
                              50
                               0
                                     2004       2005          2006          2007      2008          2009

                                                        Thermal          SSCC        PCI


Source: Independent specialist’s report provided by Ignite

3.5                           Outlook

The coal consumption in the Organisation for Economic Co-operation and Development
(“OECD”) countries during 2009 and 2010 is expected to grow moderately, mainly driven by the
contraction of the global economy. However, growth in coal consumption is expected from non-
OECD countries, with China and India forecast to be the most significant contributors.

The following graph shows the historical and forecast coal consumption from 1990 to 2030.


                                            Historical and Forecast Coal Consumption


                               200
                               180
            Quadrillion BTU




                               160
                               140
                               120
                               100
                                80
                                60
                                40
                                20
                                 0
                                     1990    2005      2006       2010     2015    2020      2025    2030


Source: EIA


Going forward, prices are expected to recover from the low levels of 2009. Demand for coal is
expected to increase due to the recovery of the global economy in 2010. Although the continued
improvements in energy efficiencies and increased focus on reducing carbon emissions by OECD
countries will have a negative impact on coal demand and coal price, this will be partly offset by
increasing demand for coal from China, India and other developing countries.



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Summarised below is the forecast prices for thermal coal, SSCC and low volatile PCI coal to 2014:


                                                Forecast Coal Prices


                    140
                    120
    US$ per tonne




                    100
                     80
                     60
                     40
                     20
                      0
                          2010             2011                   2012          2013              2014

                                                Thermal              SSCC         PCI


Source: Various brokers’ reports sourced from the public domain


The independent specialist reports commissioned by Ignite have also estimated the potential prices
in which upgraded coal products produced using Ignite’s CAT-HTR technology can possibly
command if sold in the commercial market based on the prices forecast in 2010. The potential
prices are summarised below:

 Upgraded coal product type                                                  Potential price range (US$ per tonne)

                                                                                           Low                            High

 Thermal coal                                                                        Plus US$75                      Plus US$75

 SSCC                                                                                   US$108                          US$114

 Low volatile PCI                                                                       US$120                          US$150

Source: Independent specialist report commissioned by Ignite, January 2010




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4     Profile of the oil industry

4.1       Overview

    One of the products that the Cat-HTR technology produces from lignite is non-conventional
    crude oil which can be further processed into transportation fuels such as jet fuel, diesel and
    potentially gasoline.

    The oil and gas industry can be divided into two principal segments, being the upstream
    segment and the downstream segment. The upstream segment produces and processes crude oil,
    natural gas liquids and natural gas. The downstream segment refines these outputs into fuels,
    lubricants and petrochemical products and markets them.

    Oil and gas reserves are categorised as Proved, Probable and Possible.

    4.2     International oil industry

    Oil accounts for a large percentage of the world’s energy consumption, ranging from 32% for
    Europe and Asia to 53% in the Middle East. Oil consumption as the total energy requirements
    for other geographic region is as follows: South and Central America (44%), Africa (41%), and
    North America (40%).

    The world consumed approximately 30.6 billion barrels of oil in 2008, with developed nations
    being the largest consumers. The US consumed approximately 24% of the total worldwide oil
    produced in 2008.

    The production, distribution, refining and retailing of oil, taken as a whole, represents the
    world's largest industry in terms of dollar value.

    4.2.1   Oil demand

    The demand for petroleum products, and consequently crude oil, is dependent on the level of
    economic activity and real gross domestic product in particular. The level of real gross domestic
    product can explain just under 90% of the demand for petrol.

    Oil demand from the transportation sector, in particular road and air transportation, accounts
    for the majority of the total consumption of petroleum products.

    Demand for oil gradually increased in recent years with a compounded average growth rate
    (“CAGR”) of approximately 1.3% for the period between 1998 and 2008 in conjunction with
    strong global economic growth. World oil consumption decreased in second half of 2008 as a
    result of the global financial crisis.




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  Set out below is the global crude oil consumption between 1998 and 2008:


                                               Global Crude Oil Consumption 1998 - 2008
     Millions of barrels / day
            86                                                                                                         -0.5%
                                                                                                         1.3%
            84                                                                                    0.9%
                                                                                    1.6%
            82
                                                                          3.4%
            80                                                  1.8%
                                                      1.2%
            78                             0.8%
                                 1.1%
            76
                      2.3%
            74

            72

            70

            68
                  1998       1999       2000      2001       2002      2003      2004      2005      2006       2007       2008

  Source: BP Statistical review of World Energy June 2009


  The increase of oil consumption in the Asian region especially was significant during the last ten
  years, especially in China and India.

  4.2.2      Oil supply

  The world’s crude oil supply is comprised of two primary sources being the state owned
  producers located in countries which are members of the Organisation of Petroleum Exporting
  Countries (“OPEC”) and the privately owned producers located in non-OPEC countries.

  As at December 2008, global proven oil reserves (1P reserve) are estimated at 1,258 billion
  barrels. OPEC countries held approximately 76% of the world’s crude oil reserves with the
  production accounting for approximately 45% of the world oil supply due to the restrictions on
  the oil production quota set up by OPEC according to the BP Statistical Review of World
  Energy in June 2009. Set out below are 1P reserves by production region as at December 2008:

   Proven Oil Reserves by Region, as at December 2008

   Region                                                                Billion Barrels                                       % Share

   Middle East                                                                     754.1                                          60%

   Europe & Asia                                                                   142.2                                          11%

   Africa                                                                          125.6                                          10%

   South and Central America                                                       123.2                                          10%

   North America                                                                    70.9                                           6%

   Asia Pacific                                                                     42.0                                           3%

   Total                                                                         1,258.0                                          100%

  Source: BP Statistical review of World Energy June 2009




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  Set out below is the historical crude oil production between 1998 and 2008:


                                        Global Crude Oil Production 1998 - 2008
      Millions of barrels / day

           84
           82
           80
           78
           76
           74
           72
           70
           68
           66
                 1998      1999      2000      2001         2002   2003   2004   2005   2006   2007   2008

  Source: BP Statistical review of World Energy June 2009


  Global oil production fell by 0.2% in 2007, the first decline since 2002. OPEC members
  reduced their production by 350,000 barrels per day (“bpd”) due to production cuts
  implemented in November 2006 and February 2007. Global oil production increased by 0.4% in
  2008, with the production from OPEC members increasing by 2.7% and non-OPEC members
  decreasing by 1.4%.

  4.2.3     Oil price

  Crude oil is one of the most actively traded commodities with different grades of oil attracting
  different prices depending on the level of demand and supply. The quality of crude oil is
  primarily determined by its hydrocarbon content, density and the sulphur content. Heavy crude
  oil is generally used to make products such as tar and bitumen and is generally priced less than
  light crude oil, which is used to produce automotive gasoline and other refined products.

  Ignite’s Cat-HTR has the capability to convert low value lignite into non-conventional crude oil.
  Ignite’s management has represented that hydro-processing the resultant oil may enable the large
  scale production of transportation fuels such as diesel, jet fuel and potentially gasoline. The
  prices of these grades of oil typically follow similar trends to crude oil.

  Crude oil can be traded on the spot market, future market and via contractual arrangements.
  There are over 150 different types of internationally traded crude oil (know as markers). Crude
  oil is generally priced against a number of key markers (“marker crude”). The main requirement
  for a marker crude is that it is sold in sufficient volumes to provide liquidity in the physical
  market.

  The primary marker crudes used today include:

  • West Texas Intermediate (“WTI”) – WTI is traded on a spot and futures basis on the New
    York Metals Exchange (“NYMEX”). WTI is a light crude oil with high quality and is
    excellent for refinery. It is an ideal crude oil to be refined in the US;




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  • Brent – Brent offers pricing information based on the physical spot trading of oil produced in
    the North Sea; and

  • Tapis Asia Pacific Pricing Index (“APPI”) – The price is determined by an independent panel
    where producers, refiners and traders are asked for information on actual trades and their best
    estimates. Any estimates that are widely high or low are discarded and the average quoted
    price is the market price for Tapis APPI.

  The price of physical oil trades is based on a marker crude with adjustments for quality and
  supply and demand factors.

  Set out below is the historical daily closing price for WTI, Brent and Tapis crude oil benchmark
  over the period between 2000 and 2009:


                                                                Historical Crude Oil Prices

                      180
                      160
                      140
     US$ per barrel




                      120
                      100
                       80
                       60
                       40
                       20
                        0
                             2000


                                    2001


                                                  2002


                                                                2003


                                                                          2004


                                                                                   2005


                                                                                                  2006


                                                                                                            2007


                                                                                                                         2008


                                                                                                                                2009


                                                                                                                                              2010
                                                                           Brent                 Tapis             WTI

  Source: Reuters


  Overall, the changes in Brent, Tapis APPI and WTI oil benchmarks are highly correlated.

  Set out below are the nominal future prices for Brent crude oil quoted on the NYMEX as at
  March 2010:


                                                                       Brent Crude Oil Future Prices

                       100
                       98

                       96
                       94
                       92
                       90

                       88
                US$




                       86
                       84
                       82
                       80
                       78
                       76
                       74
                       72
                       70
                         2010              2011          2012            2013             2014           2015        2016              2017          2018




  Source: Reuters



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  4.2.4       Outlook

  Set out below is the forecast supply and demand of crude oil as per EIA forecasts:

                                  Forecast Global Crude Oil Demand / Supply 2010 - 2030
      Millions of barrels daily
             140

             120

             100

               80

               60

               40

               20

                0
                          2010            2015           2020             2025        2030
                                      Forecast Consumption      Forecast Production


  Source: EIA

  We note the following with regards to the above graph:

  •      global oil demand is forecast to increase at a CAGR of 1.3% per year in the period from
         2010 to 2030. Global oil demand is forecast to increase from 85 million bpd in 2006 to 107
         million bpd in 2030 as a result of growing demand for crude oil from transportation and
         industrial activities; and

  •      the EIA forecasts crude oil prices to rise in the period from 2010 to 2030 and producers are
         forecast to ramp up production to take advantage of higher prices. Increase in supply is also
         expected to come from countries with recent discoveries, such as Kazakhstan, Brazil and
         Canada.




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5       Profile of Ignite

5.1.1      Introduction

Ignite is a private Australian technology and resource company based in Melbourne, Victoria. The
Company was formed in 2008 as a result of a merger between Ignite Energy Pty Ltd, which owns
the intellectual property rights to the Cat-HTR technology (patents outstanding) and Victoria Coal
Resources Pty Ltd (“VCR”), a coal and coal bed methane developer. VCR acquired Ignite Energy
Pty Ltd for a consideration amounting to A$65 million consisting of a mix of cash and scrip. Upon
completion of the merger, the merged group adopted the name Ignite Energy Resources Pty Ltd
(i.e. Ignite). Ignite’s key focus is to advance and commercialise the Cat-HTR technology as well as
develop the coal bed contained within EL4416.

Subsequent to the merger of Ignite Energy Pty Ltd and VCR in November 2008, Ignite has
significantly advanced the lignite conversion process to further enhance the Cat-HTR technology’s
viability. A pilot scale plant utilising the Cat-HTR technology’s design process has been created and
is currently subject to a series of testing agreements with the University of Sydney.

Detailed below is a brief history of Ignite’s since 2007:

May 2007           Ignite Energy engineering team designs pilot scale continuous flow process based
                   on Cat-HTR process.

Jun 2007           Ignite Energy Pty Ltd was established to commercialise their Cat-HTR
                   technology.

Jan 2008           Lignite Cat-HTR Plant commissioned at Somersby, New South Wales (“NSW”)
                   (the “Pilot Plant”)

Aug 2008           VCR acquires Ignite Energy Pty Ltd and the combined group is subsequently
                   renamed Ignite Energy Resources Pty Ltd.

Sep 2008           Ignite acquires Australian engineering assets of Energies Australia Pty Ltd (“Best
                   Energies”).

Mar 2009           Ignite agreed in principle terms in relation to the acquisition of all of the
                   remaining rights, titles, interests and natural resource opportunities contained
                   within EL4416 from CBM Resources.

Aug 2009           Ignite acquired Licella which was formed to commercialise production of 2nd
                   Generation Bio Fuels.

Jan 2010           Ignite’s acquisition of all of the remaining rights, titles, interests and natural
                   resource opportunities contained within EL4416 from CBM Resources was
                   completed based on the terms agreed in March 2009.

March 2010         Ignite acquired all the issued and outstanding ordinary shares of Maxall Energy
                   Ltd (“Maxall”) for A$2 million. Ignite issued 1,081,081 Ignite Shares and will issue
                   8,108,108 options in May 2010, which are exercisable at Ignite’s election upon the
                   achievement of key future milestones.




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Further details of the Cat-HTR technology and the mineral assets contained within EL4416 are set
out below.

5.1.2    Overview of the Cat-HTR technology

The Cat-HTR technology or the catalytic hydrothermal reactor technology is designed to convert
low value lignite and modern biomass into non-conventional crude oil and various upgraded coal
products. The Cat-HTR technology utilises water at or near supercritical temperatures and
pressures together with proprietary catalyst systems to selectively de-polymerise and de-oxygenate
the geologically young lignite and convert into various higher density energy fuels and high grade
clean coal products.

The non-conventional crude oil that is produced can be further processed into transportation fuels
such as diesel, jet fuel and potentially gasoline. The upgraded coal products produced using the
Cat-HTR technology includes thermal coal, SSCC and low volatile PCI coal. The products can be
used for a variety of purposes, including in blast furnaces and in supercritical steam boilers for
power generation.

Lignite is widely available, however, it emits a high level of greenhouse gasses when used to
generate electricity under conventional methods. The Cat-HTR technology, if used in the
conversion process, can potentially reduce carbon dioxide (“CO2”) emissions typically associated
with conventional methods by approximately 40%. The use of the technology in conjunction with
power generation could potentially reduce the carbon emissions of a traditional brown coal power
station by up to 50%.

The following chart sets out briefly the lignite conversion process using the Cat-HTR technology:




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               Lignite
                                       Slurry
                                        Tank          Heater   Cat- HTR             Heat Recovery
                                     + pressure                 Reactor             Heat Exchanger
              Water +
              catalyst
        ‘Agent of Change’


                                                                        Oil & Speciality Chemicals



                                                                    Upgraded Coal & Micronized Carbon
            Potential                         Product
           CO2 Credits                       Separation

                                                                                   Gas



                                                                                  Water



Source: Independent specialist reports

In mid-2008, Ignite built and continues to operate a 2.5 inch reactor bore continuous flow Cat-
HTR Pilot Plant module located in Somersby, NSW. The plant was constructed by Best Energies
and has the capacity to process 4,000 tonnes per annum (“tpa”) of lignite. According to
independent specialists reports commissioned by Ignite, the Pilot Plant has the capability to
convert one tonne of lignite into up to one barrel of non-conventional crude oil and up to 330kg
of high grade upgraded coal. The Cat-HTR technology can also be applied in the conversion of
cellulosic biomass to high-quality bio-crude oil. Ignite’s achievements have resulted in the receipt
of a matching funds grant from the Australian Government in the amount of $A2.3 million to
contribute towards the costs of building a commercial demonstration plant for the use of the Cat-
HTR technology in this application.

As discussed in section 2.2, Grant Thornton Corporate Finance has been provided with a number
of reports prepared for Ignite by independent specialists. These reports have assessed various
aspects of the Cat-HTR technology including examining and evaluating the process design from a
capital expenditure requirement perspective and the financial outcome of the potential
product/output of the technology.

Based on a review of the independent specialists reports and discussions with the management of
the Company, we understand that the modular Cat-HTR plant design has a relatively low capital
cost structure and it can produce 60% less CO2 than competing coal conversion technologies and
is economically viable on a much smaller scale.

In July 2009, Ignite and TRUenergy Development Pty Ltd (“TRUenergy”), a private Australian
energy company, signed a Memorandum of Understanding (“MOU”) to develop a 30,000 tpa three
module commercial demonstration plant that will utilise Ignite’s direct coal-to-oil and upgraded
coal process (the “Pre-Commercial Plant”). A formal agreement was subsequently entered into by
Ignite and TRUenergy in March 2010 pursuant to the MOU.

Ignite currently has 14 patents in various stages of examination, filing and preparation relating to
various aspects of its technology, including the Cat-HTR technology. Together, Ignite has filed for
patents for its Cat-HTR technology in around 47 countries worldwide.


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5.1.3    Overview of EL4416

EL4416 covers an area of 3,837 km2 located within the Gippsland Basin region of south-east
Victoria. The Gippsland basin, which encompasses the LaTrobe Valley, is a large coal mining
district and provides electricity from four major brown coal-fired power stations into the
Australian national electricity grid.

Ignite (via its predecessor, VCR) and CBM Resources Pty Ltd (“CBM Resources”) entered into a
farm-in agreement in December 2005 in relation to exploration license 4416 (“EL4416”).

Subsequent to the merger between VCR and Ignite Energy Pty Ltd, Ignite entered into
negotiations with CBM Resources to amend and expand the existing farm-in agreement such that
Ignite will acquire all of the rights, title and interests and natural resource opportunities contained
within EL4416 from CBM Resources. In March 2009, Ignite and CBM Resources agreed the
general terms of this transaction as summarised below:

• Ignite to issue to CBM Resources 25 million Ignite Shares at A$1.65 per share;

• CBM Resources to receive a 3% over riding revenue interest (“ORRI”) on any and all products
  sold or produced from EL4416;

• Ignite to pay CBM Resources an amount equal to US$15 million cash for reimbursement of
  development and operating costs in relation to EL4416 incurred by CBM Resources;

The acquisition of additional rights contained within EL4416 agreed upon in March 2009 was only
completed in January 2010. However, Ignite issued convertible notes to CBM Resources rather
than paying the agreed cash consideration.

The convertible notes are payable in eight instalments after repayment of all other existing senior
debt. At each instalment due date, CBM Resources has the option to convert the amount due into
Ignite Shares at A$1.2375 per Ignite Share.

EL4416 contains brown coal (lignite), other minerals and potentially coal bed methane in three
major deposits area, being Gormandale, Gellionadale and Stradbroke. The following table sets out
a summary of the total coal resources contained in EL4416:




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Classification                                                            Tonnes     Ash %    Moisture %
                                                                        (millions)     (db)

Gormandale
Measured                                                                     2,300    4.0%        65.8%
Indicated                                                                    1,660    4.4%        64.4%
Total measured and indicated                                                 3,960    4.2%        65.2%
inferred                                                                     2,160    4.7%        64.6%

Gelliondale
Measured                                                                       280    6.9%        64.4%
Indicated                                                                    2,980    6.0%        61.1%
Total measured and indicated                                                 3,260    6.1%        61.4%
inferred                                                                     2,940    6.2%        61.1%

Stradbroke
Measured                                                                         0    0.0%         0.0%
Indicated                                                                    2,580    3.4%        57.0%
Total measured and indicated                                                 2,580    3.4%        57.0%
inferred                                                                     1,490    3.9%        56.3%

Source: Independent specialist report commissioned by Ignite, January 2010

The coal contained in EL4416 is considered low rank coal due to its high moisture content. Ignite’s
strategy is to develop the coal resources within EL4416 concurrent with the commercialisation of
the Cat-HTR technology. As at the date of this report, Ignite has the following arrangements to
develop the resources within EL4416:

• a joint venture agreement was entered into with Laxmi Resources Pty Limited (“Laxmi”) and
  T&P Group Pty Ltd (“T&P”) through an established joint venture company, Gelliondale
  Sustainable Energy Resources (“GSER”), to develop an initial 15 million tpa lignite mine on the
  Gelliondale deposit. Under the agreement, Laxmi will hold a 90% interest in GSER with the
  remaining 10% to be held by Ignite. T&P has been appointed as the joint venture manager. As
  consideration for entry into the joint venture agreement, Laxmi will pay Ignite a total of A$8
  million as consideration;

• Ignite is in advanced negotiations with ASX-listed Cougar Energy Limited (“Cougar”) regarding
  the establishment of a 50:50 joint venture involving underground coal gasification (“UCG”)
  projects on EL4416. It is contemplated that, subsequent to the finalising of a bankable feasibility
  study, the joint venture will utilise Cougar’s licensed technology on EL4416 to produce a gas
  suitable for use in power generation or the manufacture of other petrochemical products; and

• a joint venture with Latrobe Fuels (“LF”) to seek approval to develop a mine on Gormandale
  South deposit combined with LF’s adjacent Exploration Licences.




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5.2       Financial information

The following table summarises the audited income statements for Ignite for the financial years
ended 31 December 2008 and 2009.

Income Statements                                                           FY08            FY09
                                                                          Audited         Audited
                                                                           A$'000          A$'000

Revenue
Sales                                                                          -               206
Other income                                                                  31             1,088
Expenses
Legal and accounting                                                         479               356
Other expenses                                                             1,688            3,502
Finance expenses                                                             614                48
Employee benefits expenses                                                 1,689            2,032
Exploration and evaluation costs                                           2,554                 -
Loss on sale of investment                                                 2,052                 -
Depreciation and amortisation                                                  48              645
Profit/(loss) before tax                                                  (9,092)          (5,290)
Income tax expense                                                              -                -
Net profit/(loss) after tax                                               (9,092)          (5,290)

Source: Ignite


We note the following in relation to Ignite’s income statements:

• Ignite was established in September 2008 following the merger of VCR and Ignite Energy Pty
  Ltd;

• other income relates to interest income, net foreign exchange gains and sundry income;

• other expenses relates to administrative overhead, consulting fees, air travel, contractors and
  other expenses. These expenses increased significantly during 2009;

• during FY08, Ignite incurred a one-off A$2 million loss relating to the disposal of an investment
  to former Ignite Energy Pty Ltd shareholders; and

• during FY09, Ignite incurred costs in the amount of A$90,000 in relation to the Initial Public
  Offering (“IPO”) which was subsequently aborted.




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The audited balance sheets for Ignite as at 31 December 2008 and 2009 are set out below:

Balance Sheets                                                           Dec-08           Dec-09
                                                                         Audited          Audited
                                                                          A$'000           A$'000
Current assets
Cash and cash equivalents                                                   826            1,961
Trade and other receivables                                               2,699              776
Total current assets                                                      3,525            2,737
Non-current assets
Plant and equipment                                                       1,930            2,510
Exploration and evaluation                                               58,599           59,437
Intangible assets and goodwill                                           62,243          101,863
Total non-current assets                                                122,773          163,811
Total assets                                                            126,297          166,547
Current liabilities
Trade and other payables                                                 11,997           18,422
Provisions                                                                  113               76
Total current liabilities                                                12,110           18,498
Related party payables                                                   21,759            8,512
Total liabilities                                                        33,869           27,010
Net assets                                                               92,428          139,537
Equity
Contributed equity                                                      104,909          156,833
Accumulated losses                                                      (12,869)         (18,159)
Employee equity benefit reserve                                             389              863
Total equity                                                             92,428          139,537

Source: Ignite


We note the following in relation to Ignite’s balance sheets:

Dec-08

• In September 2008, Ignite acquired the business assets and liabilities of Best Energies for cash
  consideration amounting to A$0.75. The acquisition resulted in the recognition of goodwill
  amounting to A$0.6 million;

• In November 2008, VCR acquired all of the shares in Ignite Energy Pty Ltd for consideration
  consisting of cash amounting to A$10 million and an equity issue amounting to A$55 million.
  The acquisition resulted in the recognition of various intangible assets, including patents and
  licences amounting to A$10.3 million and intellectual property amounting to A$51.4 million;

• Related party payables include A$17 million owing to CBM Resources which reflected a
  reimbursement for development and operating costs incurred by CBM Resources in relation to
  EL4416 since both parties entered into the farm-in agreement.




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Dec-09

• The auditors have included an ‘emphasis on matter’ in their 2009 audit report drawing attention
  to a potential going concern issue as Ignite has generated negative earnings and current liabilities
  exceeded its current assets by A$15.8 million. Ignite has historically raised capital through
  private placements or other equity raisings. However, should Ignite continue incur losses and fail
  to complete future capital raisings, Ignite may be unable to continue as a going concern.

• In August 2009, Ignite acquired 100% of the voting shares of Licella for scrip consideration
  amounting to A$40 million, with an implied value of A$1.65 per Ignite Share. The acquisition
  resulted in the recognition of patents and licences amounting to A$6.3 million and intellectual
  property amounting to A$33 million. Licella is an Australian-based company which operates a
  pilot plant on the North Central Coast of New South Wales. The company was originally
  established in February 2008 to commercialise the process of transforming renewable woody-
  waste materials into various second generation bio-fuels;

• Between July and November 2009, Ignite raised A$1.6 million through the issue of 834,244
  shares at an average price of A$1.91 per share; and

• Between November and December 2009, Ignite raised A$2.8 million through the issue of
  1,521,993 at A$1.82 per share.

Ignite had the following loans outstanding as at 31 December 2009:

Loan Notes                                                                                 Dec 2009
                                                                                             A$'000

CBM Resources                                                                                 17,075
Brookstone Pty Ltd                                                                               747
Riverside Equities                                                                             7,168
Victor Hughes                                                                                  1,286
TOTAL                                                                                         26,276

Source: Ignite


CBM Resources

Pursuant to the completion of the agreement between Ignite and CBM Resources described in
section 5.1.3, the project costs payable to CBM Resources which reflected a reimbursement for
development and operating costs incurred by CBM Resources in relation to EL4416 to date was
formalised in the form of convertible notes. Under the convertible note deed, the convertible notes
are repayable in eight quarterly instalments after repayment of all other existing senior debt. At
each instalment due dates, CBM Resources has the option to convert the amount due into Ignite
Shares at A$1.2375 per Ignite Share.

Brookstone Pty Ltd

In September 2008, Ignite entered into a promissory note agreement with CBM Resources. Under
the agreement, interest is payable to CBM Resources at a rate of 6% per annum. The loan
agreement was established with a repayment date of September 2009. As part of the discussions in
March 2009, both parties agreed to the issuance of a new promissory note to replace the expired

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promissory note. The note was subsequently re-assigned from CBM Resources to Brookstone Pty
Ltd.

Riverside Equities

In June 2006, Ignite entered into a senior secured convertible loan agreement with Riverside
Equities. Under the loan agreement, interest is payable to Riverside Equities at a rate of 3.5% per
annum. The loan agreement was established with a repayment date of May 2010 or as agreed by
Ignite and Riverside Equities from time to time. If the Proposed Transaction is completed, the
total amount is required to be repaid. Furthermore, under the loan agreement, Riverside Equities
may convert some or all of the unpaid loan into Ignite Shares at A$1.23 per share.

We note that in January 2010, Ignite repaid A$150,000 on the senior secured convertible note due
to Riverside Equities. Management intends to repay the remaining balance outstanding from the
proceeds of the Capital Raising which will reduce the Combined Group’s indebtedness following
the completion of the Proposed Transaction.

Victor Hughes

In September 2008, an unsecured loan agreement was entered into between Ignite and Victor
Hughes, a director of Ignite. Under the loan agreement, no interest is payable to Victor Hughes.
The loan agreement was established with a repayment date of March 2009 or as agreed by Ignite
and Victor Hughes from time to time. As at the date of this report, the loan is outstanding.

Management intends to repay the remaining balance outstanding from the proceeds of the Capital
Raising which will reduce the Combined Group’s indebtedness following the completion of the
Proposed Transaction.

5.3       Capital structure

As at the date of this report, Ignite has approximately 169 million ordinary shares on issue. The
capital structure of Ignite as at the date of this report is set out below:

Shareholder                                                         Shares Held         Interest
                                                                           '000
Cellulo Pte Ltd                                                          28,052           16.6%
CBMR Resources                                                           25,000           14.8%
Karr Capital Inc                                                         10,902            6.5%
Prima Development, LLC                                                    8,823            5.2%
Wayne Rogers                                                              6,400            3.8%
Rapport Alpha LP                                                          6,368            3.8%
Reliable Resources Capital I LLC                                          6,000            3.6%
Reliable Resources Capital II LLC                                         6,000            3.6%
Reliable Resources Capital III LLC                                        6,000            3.6%
Reliable Resources Capital IV LLC                                         6,000            3.6%
Other shareholders                                                       59,462           35.2%

Total                                                                   169,007          100.0%

Source: Ignite




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As at the date of this report, Ignite has 15.5 million options on issue with a weighted average
exercise price of A$1.31 (“Ignite Options”). Based on the terms Share Exchange Agreement, each
Ignite Option will be exchanged for an option to purchase shares in the Combined Group on
equivalent terms and conditions.




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6     Profile of Karmin

    6.1.1    Introduction

Karmin is an exploration company listed on the TSXV. The company was incorporated in 1995 to
focus on mineral exploration and development of base metals and gold projects in Brazil.

As at the date of this report, Karmin’s only projects relate to a 30% interest in the Aripuanã
polymetallic (Pb-Zn-Cu-Ag±Au) sulphide deposit in Mato Grosso State, located at Aripuanã,
Brazil (the “Aripuanã Project”) and a 100% interest in the oxide concessions of the complete
Aripuanã District.

    6.1.2    Aripuanã Project

During 2000, Mineração Rio Aripuanã Ltda. (“MRA”), now a wholly owned subsidiary of Karmin,
signed a Contract of Association (the “Contract of Association”) with Anglo American Brasil Ltda
(“Anglo”) to unitize the district and explore for base and precious metals in areas adjacent to the
town of Aripuanã. The venture was undertaken via Anglo and MRA’s 70% and 30% interests,
respectively, in a Brazilian company, Mineração Dardanelos Ltda (“Dardanelos”).

During 2004, the Contract of Association was amended to allow Votorantim Metais S/A (“VM”),
a leading global zinc producer, to earn into the 70% interest in Dardanelos held by Anglo.

The current structure of the interests in the Aripuanã Project is set out below.

             Karmin
                                                 Anglo                               VM
                 MRA

                                 30%                                70%

                                              Dardanelos

                                           Aripuanã Project
Source: Karmin


According to AMC’s independent specialist report, VM is currently fully funding the Aripuanã
Project to a bankable feasibility study. Karmin is not required to contribute until 18 months
following the completion of the study.

The Aripuanã Project is a zinc project in Brazil, covering a district with five areas of mineralisation
(Arex, Ambrex, Babacu, Massaranduba and Mocoto) over a 25 kilometre strike length.

Three mineralised styles have been identified:

• a basal copper/gold stringer zone;

• an upper banded, massive and disseminated zinc, lead and silver zone; and

• gold and sulphides in quartz veins developed in a late shearing event.


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Up to five continuous mineralised horizons occur in the east and three in the west, extending over
nine kilometres in length and up to one kilometre in width. Zinc is considered the most important
economic mineral, followed by lead with copper, gold and silver as significant by-products.

According to AMC’s independent specialist report, the future exploration and development of the
Aripuanã Project will require further land acquisition in order to cover infrastructure and other
aspects of the project. It will be necessary for the developers of the Aripuanã Project to acquire
additional areas or obtain land rights, including a safety strip around the mines, and areas for the
project structures, such as tailings dam/impoundment, waste dumps, areas for environmental
compensation and roads for ore transportation or vehicle traffic in general. Furthermore, it may be
necessary to obtain mineral or civil land rights on several properties for the electrical power
transmission line and water pipeline.

  6.1.3       Oxide concessions

Karmin owns 100% of the oxide concessions of the complete Aripuanã District. These consist of a
weathered oxidized zone from surface up to 40 metres thick covering the complete concession.
Mineralisation in the oxide zone consists of three styles, including:

• weathered massive sulphides, known as gossans;

• gold in quartz veins developed in a late shearing event; and

• alluvial deposits.

6.2      Financial information

The following table summarises the income statements (in Canadian dollars) of Karmin for the
financial years ended 30 April 2008 and 2009:

Income Statements                                                           FY08             FY09
                                                                          Audited          Audited
                                                                           C$'000           C$'000
Revenue
Sales                                                                          -                -
Other income                                                                   3                -
Expenses
Exploration and prospecting costs                                              58               32
General and administrative                                                    227              247
Unrealised loss on investment held for trading                                  7                -
Depreciation and amortisation                                                  4                 4
Borrowing costs                                                                 -               12
Profit/(loss) before tax                                                    (293)            (294)
Income tax expense                                                              -                -
Net profit/(loss) after tax                                                 (293)            (294)

Source: Karmin annual reports


We note the following in relation to Karmin’s income statements:

• as discussed in section 6.1 and reflected in the financial information presented above, Karmin’s
  operations consist of an interest in the Aripuanã Project, a venture which is managed by VM.


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   Consequently, Karmin did not engage in significant operating activities during the 2008 and
   2009 financial years; and

• General and administration costs include employee stock option expenses and legal fees.

The balance sheets (in Canadian dollars) for Karmin as at 30 April 2009, 30 October 2009 and 31
January 2010 are set out below:

Balance Sheets                                                       Apr-09     Oct-09         Jan-10
                                                                    Audited    Audited       Unaudited
                                                                     C$'000     C$'000         C$'000
Current assets
Cash and cash equivalents                                               44         18              31
Marketable securities                                                     3          3              3
Receivables                                                               1          1              1
Total current assets                                                    48         22              35
Non-current assets
Property, plant and equipment                                           93         91              90
Mining property                                                        884        884             884
Total non-current assets                                               978        976             974
Total assets                                                         1,025        998           1,010
Current liabilities
Payables                                                               462        419             424
Shareholder loan (interest bearing)                                    205        298             345
Total current liabilities                                              668        717             769
Total liabilities                                                      668        717             769
Net assets                                                             358        281             241
Equity
Common stock                                                        16,159     16,159          16,159
Stock options                                                          485        485             485
Paid-in capital                                                         62         62              62
Retained Earnings                                                   (16,349)   (16,426)       (16,466)
Total equity                                                           358        281             241


Source: Karmin annual and interim reports and management accounts


We note the following in relation to Karmin’s balance sheets:

• property, plant and equipment relate to office equipment held in Canada and land and buildings
  located in Brazil. The land and buildings were acquired approximately 10 years ago and are
  carried at cost less accumulated depreciation;

• mining property relates to Karmin’s interest in the Aripuanã Project;

• shareholder loan relates to amounts payable in respect of earlier years’ management fees and
  rent expenses; and

• stock options relate to options issued to officers, directors and consultants of Karmin.




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6.3      Capital structure

As at the date of this report, Karmin has 38,493,588 Karmin Shares and 2,850,000 unlisted
employee stock options (“Karmin Options”) on issue.

Karmin’s ordinary share structure as at the date of this report is set out below:

Shareholder                                                           Shares Held           Interest
                                                                             '000

Karr Securities Inc                                                         13,652            35.5%
Iannozzi, John A                                                             1,820             4.7%

McCallum, Douglas                                                            1,518             3.9%
Ciccarelli, Robert                                                             200             0.5%

Fisher, William J                                                              105             0.3%
Manson, Matthew L                                                               40             0.1%

Other shareholders                                                          21,159            54.9%

Total                                                                       38,494           100.0%

Source: Reuters


Karmin’s unlisted employee stock option structure as at the date of this report is set out below:

                  Exercise                   Number of              Weighted average remaining life
                   price                      options                          (years)
                    C$                         '000

                    0.20                        1,650                            4.72
                    0.56                        1,200                            2.03

Source: Karmin annual reports


Following completion of the share consolidation, Karmin Shares will reduce from 38.5 million to
6.4 million shares whilst the number of existing options will reduce from 2.85 million to 0.475
million.




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6.4           Share price performance

The movements in Karmin’s share price (in Canadian dollars) and volumes traded on the TSXV
since 1 January 2009 are set out below:



           300,000                                                                                                 0.40



                                                                                                                   0.35
           250,000


                                                                                                                   0.30


           200,000
                                                                                                                   0.25




                                                                                                                          Price ($C)
  Volume




           150,000                                                                                                 0.20



                                                                                                                   0.15
           100,000


                                                                                                                   0.10


            50,000
                                                                                                                   0.05



                0                                                                                                  0.00
                Jan-09   Feb-09      Apr-09       Jun-09      Aug-09       Oct-09       Dec-09       Jan-10


Source: Reuters

We note the following with regards to the share price history shown above:

 Date                      Comments

 1 April 2009              Karmin released its interim financial statements and corresponding management discussion
                           and analysis for the period ended 31 January 2009. The share price of Karmin closed at
                           C$0.21.

 22 June 2009              Karmin released a progress report in relation to the Aripuanã Project stating that VM had
                           substantially completed the pre-feasibility study. The share price of Karmin closed at C$0.23.

 21 August 2009            Karmin released its annual financial statements and corresponding management discussion
                           and analysis for the year ended 30 April 2009. The share price of Karmin closed at C$0.23.

 23 September 2009         Karmin released its interim financial statements and corresponding management discussion
                           and analysis for the period ended 31 July 2009. The share price of Karmin closed at C$0.25.

 30 December 2009          Karmin released its interim financial statements and corresponding management discussion
                           and analysis for the period ended 31 October 2009. The share price of Karmin closed at
                           C$0.20.

 19 March 2010             Karmin announced the Proposed Transaction and released a copy of the Agreement. As a
                           result, trading of Karmin Shares was halted. The last traded share price of Karmin C$0.185.

 22 March 2010             Karmin released an updated announcement regarding the Proposed Transaction which
                           included an adjustment to an “administrative error” in the announcement released on 19 March
                           2010. Karmin Shares remained on a trading halt.

Source: Reuters



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Set out below is the share price performance (in Canadian dollars) of Karmin since January 2009:

 Karmin                               Share price (C$)                      Average weekly
                                                                              volume ('000)

                               High               Low               Close

 Month of
 Jan-09                        0.27               0.17               0.25              55
 Feb-09                        0.26               0.24               0.25              72
 Mar-09                        0.30               0.21               0.21               3
 Apr-09                        0.28               0.20               0.25              17
 May-09                        0.35               0.27               0.35              24
 Jun-09                        0.34               0.23               0.23              24
 Jul-09                        0.26               0.23               0.23              11
 Aug-09                        0.26               0.21               0.26              46
 Sep-09                        0.26               0.16               0.18               7
 Oct-09                        0.26               0.15               0.23              51
 Nov-09                        0.24               0.18               0.23              36
 Dec-09                        0.25               0.17               0.25              19
 Jan-10                        0.25               0.18               0.18               6
 Feb-10                        0.20               0.16               0.20              10
 Mar-10                        0.21               0.17               0.20              48
 Week ended
 04-Dec-09                     0.23               0.19               0.19              41
 11-Dec-09                     0.20               0.18               0.18              20
 18-Dec-09                     0.19               0.17               0.17              17
 25-Dec-09                     0.18               0.17               0.17                 -
 01-Jan-10                     0.25               0.17               0.25               9
 08-Jan-10                     0.25               0.25               0.25              18
 15-Jan-10                     0.20               0.18               0.18               8
 22-Jan-10                     0.20               0.18               0.18                 -
 29-Jan-10                     0.20               0.18               0.18                 -
 05-Feb-10                     0.20               0.18               0.18                -
 12-Feb-10                     0.20               0.18               0.19              11
 19-Feb-10                     0.19               0.16               0.19              25
 26-Feb-10                     0.20               0.19               0.20               5
 05-Mar-10                     0.20               0.20               0.20                -
 12-Mar-10                     0.40               0.17               0.19             121
 18-Mar-10                     0.40               0.19               0.19                -

Source: Reuters




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7     Valuation methodologies

7.1     Introduction

As part of assessing whether or not the Proposed Transaction is fair to the Ignite Shareholders,
Grant Thornton Corporate Finance has analysed the fair market value of:

•     Ignite;

•     Karmin; and

•     Combined Group.

In each case, Grant Thornton Corporate Finance has assessed values using the concept of fair
market value. Fair market value is commonly defined as:

“the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing but not
anxious buyer and a knowledgeable, willing by not anxious seller acting at arm’s length.”

Fair market value excludes any special value. Special value is the value that may accrue to a
particular purchaser. In a competitive bidding situation, potential purchasers may be prepared to
pay part, or all, of the special value that they expect to realise from the acquisition to the seller.

Specifically, our fairness assessment has been determined by comparing the value per Ignite Share
prior to the Proposed Transaction (on a minority basis) to the assessed value per share of the
Combined Group following completion of the Proposed Transaction (on a minority basis).

In our opinion, the Proposed Transaction does not constitute a control transaction from Ignite
Shareholders’ perspective. The substance of the Proposed Transaction is that the Ignite
Shareholders are not expected to transfer control of Ignite and accordingly we have conducted our
valuation assessment on minority basis both prior to and post the Proposed Transaction.

7.2     Valuation methodologies

RG 111 outlines the appropriate methodologies that a valuer should generally consider when
valuing assets or securities for the purposes of, amongst other things, share buy-backs, selective
capital reductions, schemes of arrangement, takeovers and prospectuses. These include:

• discounted cash flow (“DCF”) method and the estimated realisable value of any surplus assets;

• application of earnings multiples to the estimated future maintainable earnings or cash flows of
  the entity, added to the estimated realisable value of any surplus assets;

• amount available for distribution to security holders on an orderly realisation of assets;

• quoted price for listed securities, when there is a liquid and active market; and




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• any recent genuine offers received by the target for any business units or assets as a basis for
  valuation of those business units or assets.

Further details on these methodologies are set out in Appendix A to this report. Each of these
methodologies is appropriate in certain circumstances.

RG111 does not prescribe the above methodologies as the method(s) that an expert should use in
preparing their report. The decision as to which methodology to use lies with the expert based on
the expert’s skill and judgement and after considering the unique circumstances of the entity or
asset being valued. In general, an expert would have regard to valuation theory, the accepted and
most common market practice in valuing the entity or asset in question and the availability of
relevant information.

7.3    Selected valuation methods

  7.3.1    Ignite

The value of Ignite Shares is primarily related to the value that could be derived from the
commercialisation of the Cat-HTR technology.

Management of Ignite, in conjunction with their technical consultants, have prepared detailed long-
term cash flow forecasts in relation to the Cat-HTR technology. However, certain key assumptions
are by their very nature highly judgemental and are based on future events which may or may not
happen. As part of the preparation of this report, we have reviewed the forecasts provided by
Ignite.

Specifically, we note that:

• the forecast cash flows were not prepared based on a normal going concern operating basis,
  rather they were prepared to demonstrate the financial viability of the Cat-HTR technology
  compared with alternative existing technologies;

• the forecast cash flows were prepared based on Ignite’s current arrangement with TruEnergy in
  relation to the construction of the Pre-Commercial Plant which will be used in testing and
  demonstrating the technology’s capability in a commercial setting. Based on discussions with the
  Ignite management, we understand that Ignite is currently investigating alternative strategies;

• it is highly uncertain that Ignite may or may not be able to secure the required debt and equity
  funds to commercialise the Cat-HTR technology in accordance with the forecast financial
  information provided to us;

• the construction of the Pre-Commercial Plant for the Cat-HTR technology has not commenced
  as at the date of this report; and

• the development of the Pre-Commercial Plant is subject to normal project risks which may delay
  the completion of the plants, or the economic benefits attributable to Ignite may be different to
  those estimated.




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Based on the above, it is our opinion that the forecast cash flows were based on key assumptions
that are by their very nature subjective and based on hypothetical assumptions and accordingly are
“projections” rather than “forecasts”. Whilst there are techniques a valuer can employ to address
the potential risks and uncertainties associated with these forecasted assumptions, the results could
be potentially misleading when used to form a view in relation to the fairness of the Proposed
Transaction.

We further note that RG 111 and ASIC Regulatory Guide 170 “Prospective financial information”
indicate that prospective financial information which is based on hypothetical assumptions (rather
than reasonable grounds) is likely to be misleading and provide limited information to investors.

As a result, we have only referred to the values implied by the DCF valuation method as a cross-
check.

We have relied on the recent capital raisings to sophisticated investors conducted by Ignite as the
primary valuation methodology. In relation to the recent capital raisings, the Directors of Ignite
have represented the following:

• the sophisticated investors were deemed independent parties to Ignite and its associates;

• the profile of the sophisticated investors satisfies the definition of “sophisticated investors” for
  the purpose of Chapter 6D of the Corporations Act;

• the consideration for the issue of the Ignite Shares was cash;

• the Ignite Shares were issued through an independent professional brokerage house; and

• the issue of Ignite Shares to the sophisticated investors was on an arm’s length basis.

Accordingly, in our opinion, the prices implied in the recent capital raisings reflect:

• the risks associated with the commercialisation of the Cat-HTR technology;

• the risks associated with Ignite securing the required capital to fund the construction of the
  lignite conversion plant;

• the risks associated with the development of the Pre-Commercial Plant; and

• economic factors in general, including the supply and demand for non-conventional crude oil
  and high grade coal products, lignite price, prices of non-conventional crude oil and high grade
  coal products and exchange rates.

Furthermore, whilst based on the legal form of the Proposed Transaction, Karmin will purchase
100% of Ignite’s issued capital, the shareholding of existing Karmin Shareholders in the Combined
Group will be a maximum of 3.7% of the enlarged share capital before the Capital Raising. This
shareholding is consistent with the size of the capital raisings conducted by the Company in 2009
and accordingly, further supports the use of this valuation methodology for the purpose of our
assessment.


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  7.3.2    Karmin

We note that Karmin is listed on TSXV and its key asset is a 30% interest in the Aripuanã Project.
We have assessed the fair market value of Karmin using the sum-of-parts method by aggregating:

• fair market value of the exploration assets;

• value of other assets (net of liabilities) as at the date of this report;

• deducted net present value of corporate overheads; and

• deducted the costs associated with the Proposed Transaction.

The valuation of exploration assets for independent expert’s report purposes are typically carried
out in conjunction with an independent technical specialists with expertise in the relevant minerals
in accordance with RG112 and generally accepted market practice.

Valuations of exploration assets, which are highly judgemental, are typically carried out by
independent technical specialists using methodologies which require a high degree of industry
knowledge. For the purposes of this report, AMC has assessed the fair market value of Karmin’s
interest in the Aripuanã Project. The AMC Report was completed in accordance with the
VALMIN Code.

A copy of the AMC Report is included as Appendix D to this report.

As Karmin is quoted on the TSXV, we have referred to the quoted price of listed securities
method as cross-check to the values derived using the sum-of-parts method.

7.4    Key valuation assumptions

In assessing the fairness of the Proposed Transaction, we have assumed that the Combined Group
completes the Capital Raising to raise a minimum of C$30 million and up to a maximum of C$40
million at the minimum issue price of C$1.765 per share.

The following table sets out the exchange rates adopted by Grant Thornton Corporate Finance in
the valuation of Karmin Shares and Ignite Shares:

                                                                              A$/C$    US$/C$

   Exchange rate                                                              0.9350   1.0250



In order to select appropriate exchange rates for our valuation, we have had regard to the recent
spot rates and the short-term and long-term forward rates for the A$, US$ and C$.




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8      Valuation of Ignite

As outlined in section 7.3.1, Grant Thornton Corporate Finance has assessed the fair market value
of Ignite Shares by referring to recent capital raisings undertaken by the Company.

8.1       Recent transactions

Over the last 9 months to the date of this report, Ignite has undertaken the following capital
raisings involving cash considerations:

Period              Section reference   Issue price (A$) Number of Ignite   % of issued    Total amount
                                                          Shares issued          capital          raised
                                                                   (‘000)                       (A$’000)


July 2009 to             Note 1              1.78 - 1.91             834         0.50%            1,589
November 2009

November 2009 to         Note 2                    1.82             1,522        0.90%            2,770
December 2009


Source: Ignite


Note 1

Ignite undertook a capital raising which was managed by Martin Place Securities Pty Ltd (“MPS”)
which commenced in July 2009 and completed in November 2009. The capital raising was offered
to US-based investors and Australian-based investors. The average issue price of the capital raising
was US$1.54 to the US-based investor (which equates to A$1.78 based on the average exchange
rate prevailing between July 2009 to December 2009 of A$/US$0.865) and A$1.91 to the
Australian-based investor.

Ignite has confirmed that the capital raising process was completed on an arms length, commercial
basis to parties not related to the directors, management or existing substantial shareholders of
Ignite. Ignite considers the subscribers to be sophisticated investors in accordance with the
requirements of the Corporations Act.

Note 2

Ignite has advised that the capital raising related to one investor group and the total investment was
$2.77 million. We note that pursuant to subscribing to Ignite Shares, the investor group entered
into a joint venture agreement with Ignite and established a joint venture company (“GSER”) to
develop an initial 15 million tpa lignite mine on the Gelliondale deposit as described in section
5.1.3 of this report. Ignite has confirmed that the capital raising involved third parties on an arms
length, commercial basis. Consequently, it is reasonable to consider the issue price agreed upon in
this transaction is representative of the fair market value of Ignite Shares at that point in time.

As part of the subscription terms, Ignite has committed to the investor group that the subscription
price per Ignite share will be a 15% discount to the issue price of any future listing that Ignite will
undertake. The minimum issue price of the Capital Raising is C$1.765 or A$1.85 (based on an
exchange rate of C$/A$0.954). Based on the terms of the subscription agreement Ignite will be


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required to issue a maximum of 247, 860 additional shares to the investors in conjunction with the
minimum Capital Raising price to satisfy the 15% discount requirement. As a result, the issue price
of A$1.82 included in the above table may be reduced. However, we note that there is currently
uncertainty in relation to the effective issue price of the Capital Raising. If the Capital Raising is
conducted at a price higher than the minimum issue price, the number of additional shares to be
issued by Ignite will materially reduce. If the issue price of the Capital Rasing is in excess of C$2.10,
the number of additional shares to be issued by Ignite will be nil. Whilst we have not reflected the
potential dilutive effect of the additional Ignite Shares in the table above (due to uncertainty in
relation to the effective issue price of the Capital Raising), we have however, included the
maximum number of new shares in our consideration of the total number of shares outstanding in
the post-transaction assessment.

  8.1.1     Movements since the capital raising

Before reaching our conclusion on the fair market value of Ignite based on the capital raisings
conducted between July and December 2009, we have considered movements in Ignite’s financial
position, further developments in the Cat-HTR technology and the general Australian share market
performance since December 2009.

Developments in the CAT-HTR technology

Management has confirmed that there has been no material breakthrough in the CAT-HTR
technology since the capital raising was completed in December 2009 which would lead Ignite to
believe that the issue prices agreed upon in the capital raising would no longer be reflective of the
underlying value of the technology post December 2009.

Ignite’s financial position and other elements

We have been advised by the management of Ignite that there has been no material changes to
Ignite’s balance sheet position since 31 December 2009 that would cause the issue prices implied in
the capital raisings to be materially affected.

After December 2009, Ignite formalised the following agreements:

 i. an agreement to acquire all of the remaining rights, titles, interests and natural resource
    opportunities contained within EL4416 from CBM Resources based on the terms agreed in
    March 2009 (The balance sheet as at 31 December 2009 includes EL4416 as part of the
    Company’s assets);

ii. a joint venture agreement with Laxmi and T&P to develop an initial 15 million tpa lignite mine
    on the Gelliondale deposit within EL4416; and

iii. an agreement with TRUenergy to develop the Pre-Commercial Plant.

Whilst these agreements were formalised post December 2009, they were in negotiations or the
terms were already agreed upon before the capital raising was completed. We understand that
potential investors at the time were aware that Ignite was in these negotiations and as such, the
capital raising prices would have already reflected the terms of these agreements.



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Acquisition of Maxall

Ignite acquired all the issued and outstanding shares of Maxall for A$2 million in March 2010.
Ignite issued 1,081,081 Ignite Shares and will issue 8,108,108 options in May 2010, which are
exercisable at Ignite’s election upon the achievement of key future milestones. These key future
milestones are non-market based conditions mainly relating to different scientific, technical and
financial events associated with the development of projects related to Maxall’s proprietary
technology. These options have an exercise price of A$1.85 per share (i.e. A$15 million in total),
have no expiry date and will gradually vest over time if and when the non-market based conditions
are met. As the total aggregated exercise price of the options is A$15 million and there is significant
uncertainty of whether or not the vesting conditions will be met, we have assumed that the current
fair market value of the options is negligible.

Subsequent private placement

Ignite undertook a minor private placement in March 2010. Under the private placement, Ignite
issued 52,085 Ignite Shares at a price of A$1.92 per share. The number of shares issued represented
less approximately 0.03% of Ignite’s issued capital.

Movements in the general stock market and prices of renewable energy stocks in Australia

We have also reviewed the movements in the general stock market from the date of the equity
raisings up to March 2010 by reference to the S&P/ASX 200 Index and the S&P/ASX 200
Utilities Index6 as set out in the diagram below:


                              S&P/ASX 200 Index and the S&P/ASX 200 Utilities Index


     5,500



    5,000



    4,500



    4,000



    3,500



    3,000
        Jul-09                 Sep-09                    Nov-09                 Jan-10                M ar-10


                                           S&P ASX 200 Utilities      S&P ASX 200



Source: Reuters


As at 30 March 2010, the S&P/ASX 200 Index has increased by approximately 3% since
December 2009 and increased 19% since July 2009, the S&P/ASX 200 Utilities Index has also
increased by approximately 3% since December 2009 and increased 7% since July 2009.


6 The S&P/ASX 200 Utilities Index is represented by listed Australian companies with business and activities in the
industries of electric, gas or water utilities, or companies that operate as independent producers and/or distributors of
power.


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We have further considered the movement in share prices of a number of listed companies in
Australia operating in the renewable energy or related sector as summarised below:

Company                               Market Cap             VWAP       VWAP         Close            Increase/(decrease) from
                                         Current             Jul-09     Dec-09      Current            Jul-09          Dec-09
                                       A$million               A$          A$           A$                 %                 %

Linc Energy Ltd                              775                 1.58    1.52         1.66                5%               9%
Carbon Energy Ltd                            319                 0.53    0.78         0.55                3%             -30%
Geodynamics Ltd                              183                 0.91    0.81         0.63              -31%             -22%
Dyesol Ltd                                   128                 0.84    0.96         0.99               17%               3%
Carnegie Wave Energy Ltd                      56                 0.22    0.13         0.11              -50%             -17%
Cougar Energy Ltd                            106                 0.10    0.09         0.12               18%              34%
Pacific Energy Ltd                            39                 0.33    0.32         0.30               -8%              -7%
Petratherm Ltd                                23                 0.30    0.37         0.25              -20%             -34%
Viridis Clean Energy Group                    19                 0.28    0.19         0.10              -66%             -51%
Bluglass Ltd                                  27                 0.21    0.19         0.14              -34%             -25%
WHL Energy Ltd                                 9                 0.05    0.07         0.04              -22%             -48%
Eden Energy Ltd                               18                 0.07    0.07         0.10               41%              36%
White Energy Company Ltd                     611                 2.12    2.42         2.60               23%               7%
Average                                      178                                                        -9%              -11%

Source: Reuters


We note that in general there has been a slight decline in the market prices of companies in the
‘clean technology’ or related renewable energy sector since the two fund raisings carried out by
Ignite.

  8.1.2       Fair market value of Ignite Shares

Based on the analysis and discussions set out in the sections above, we believe the issue price
implied in the capital raisings conducted by the Company between July 2009 and December 2009 is
representative of the current underlying value of Ignite Shares.

The issue price of Ignite Shares implied in the capital raisings determined in section 8.1 reflected
transactions for minority shareholdings and accordingly, does not include a premium for control.
We note that this is consistent with the substance of the Proposed Transaction, whereby the
existing Ignite Shareholders will control in excess of 95% of the Combined Group.

The fair market value of the Ignite Shares implied in recent capital raising is set out below:

Ignite                                                                  Section                 Low                     High
                                                                        reference


Adopted fair market value of Ignite per share (A$)                         8.1                   1.78                    1.91
Number of Ignite Shares outstanding ('000)                                 5.3                169,007                169,007
Implied equity value of Ignite (A$'000)                                                       300,832                321,958
Less: Cost associated with the Proposed Transaction (A$'000)             Note 1               (1,196)                 (1,196)
Fair market value pre-Proposed Transaction (A$'000)                                           299,636                320,762
Fair market value of Ignite per share on a minority basis (A$)                                   1.77                    1.90

Source: Calculations

Note 1: In undertaking the Proposed Transaction, Ignite will incur transaction costs regardless of
whether the Proposed Transaction is implemented or otherwise. Ignite has advised that the cost is
estimated to be approximately A$1.2 million. These costs were not known at the time of the capital
raisings and accordingly, we have incorporated them into our valuation assessment.



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Based on the above, Grant Thornton Corporate Finance has adopted a range of between A$1.77
and A$1.90 per Ignite Share for the equity value pre-Proposed Transaction on a minority basis.

8.2    Valuation cross check

  8.2.1       DCF valuation

Prior to reaching our valuation conclusion we have considered the reasonableness of our valuation
assessment by comparing it to the underlying value of Ignite.

The key assumptions used in the assessment are summarised below:

• Based on discussions with the management in relation to their current strategy to commercialise
  the Cat-HTR technology, the forecast cash flows have been based on the annual processing
  plant of 500,000 tpa of lignite;

• Ignite will source the main raw material consisting of lignite from coal reserves in EL4416. The
  forecast cash flows does not include any cost associated with extracting and transporting the
  lignite from the coal mines to the plant which management has assumed will be borne by
  Ignite’s joint venture partners;

• The potential output of the Cat-HTR technology lignite conversion is non-conventional oil,
  which closely reflects marine diesel oil (“MDO”), and upgraded coal, which closely reflects
  SSCC. We have sourced the future prices of these commodities based on publicly available
  information as well as the expert report engaged by Ignite to comment on the prices.

  The exchange rate assumptions adopted to convert the commodity prices from US$ to A$ have
  been based on our review of publicly available information and forward exchange rates. The
  following table sets out the MDO, SSCC and exchange rates adopted in the DCF.

       Year                                MDO $US                            SSCC $US                            US$/A$
                                           (per tonne)                        (per tonne)

       1                                   650                                99                                  0.90
       2                                   707                                104                                 0.86
       3                                   748                                104                                 0.83
       4                                   813                                95                                  0.80 (LT)
       5                                   869                                77 (LT)                             0.80
       6                                   829                                77                                  0.80
       7                                   878 (LT)                           77                                  0.80

  Source: Independent Specialists’ Reports, various brokers’ reports sourced from the public domain and Reuters
  Note: LT denotes long term forecast adopted.


• The discount rate adopted ranges between 20.7% and 22.7%. Refer to Appendix D for further
  details regarding the discount rate adopted; and

• The valuation has been conducted on a fully diluted basis assuming Ignite’s outstanding
  convertible loan notes and options are converted/exercised into Ignite Shares.

Grant Thornton Corporate Finance has estimated the underlying indicative value of Ignite’s equity
in the range of A$1.47 to A$1.77 per Ignite Share.


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Based on this analysis, we note the following:

    •    the high end of the underlying equity value based on a DCF methodology is consistent
         with our assessed value of Ignite Shares;

    •    the DCF methodology is based on a limited exploitation of the CAT-HTR technology as
         the cash flows of Ignite are only based on one plant with a capacity of 500,000 tpa; and

    •    the capital raising prices of Ignite is based on a minority parcel of shares and do not
         include a control premium whilst our assessed value of Ignite Shares based on a DCF
         methodology is on a 100% basis and inclusive of a control premium.

Based on the above discussions and valuation, we have concluded that our adopted value of Ignite
Shares based on the recent capital raisings is reasonable.




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9       Valuation of Karmin

As outlined in section 7.3.2, we have valued Karmin’s issued capital pre-Proposed Transaction
using the sum-of-parts method.

9.1      Sum-of-parts method

Set out below is a summary of our valuation assessment of Karmin (in Canadian dollars) pre-
Proposed Transaction:

Karmin                                                         Section             Low            High
                                                              reference         C$'000          C$'000

Exploration assets                                              9.1.1             6,278           6,278
Tax losses                                                      9.1.2                    -               -
Other assets and liabilities                                    9.1.3              (644)          (644)
Value of stock options                                          9.1.4              (277)          (277)
Corporate overheads                                             9.1.5              (300)          (200)
Costs in relation to the Proposed Transaction                   9.1.6              (275)          (275)
Fair market value of Karmin (control basis)                                       4,783           4,883
Number of existing Karmin Shares on issue                       '000             38,454          38,454

Market value of Karmin per share (control basis)                    C$             0.12            0.13

Minority discount                                               9.1.7              10%             10%
Market value of Karmin per share (minority basis)                   C$             0.11            0.11

In A$                                                                              Low            High
Exchange rate ($A/$C)                                               7.4          0.9350          0.9350
Market value of Karmin (minority basis)-A$'000                                    4,603          4,700
Market value of Karmin per share (minority basis)-A$                               0.12           0.12
Source: Calculations

    9.1.1     Exploration assets

The exploration assets of Karmin comprise a 30% interest in the Aripuanã Project and 100% of
the oxide concessions of the complete Aripuanã District. AMC has assessed the value of the
Aripuanã Project to be in the range of US$20 million to US$34 million with a preferred value of
US$25 million on a 100% basis and the oxide concessions to be US$0.5 million.

Based on the terms of the Contract of Association, Karmin only owns a 30% interest in the joint
venture company. In addition, VM, which is currently fully funding the Aripuanã Project to a
bankable feasibility study, can determine in its absolute discretion when and if to commence the
development of the project. In this case, Karmin will have 180 days to decide whether to
participate or not in the construction of the project and in the funding of its respective share of the
capital.

If Karmin does not have the funds to contribute towards the production when it is required by
VM, Karmin’s interest will be continuously diluted. As such, Karmin’s interest in the Aripuanã
Project should reflect the ownership on a minority basis. Typically, a shareholding of less than 50%
represents a minority position and its relative market value is less than the shareholding of a
controlling interest. The difference is typically referred to as a minority discount and can range


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from 15% to 35% depending on the circumstances. We have applied a minority discount of 25%
to the value of the Aripuanã Project determined on a control basis by AMC.

The value adopted for Karmin‘s exploration assets as set out in the table below:

                                                                                  Preferred     Preferred
Karmin - Exploration Assets
                                                                                      value         value
                                                                                   US$'000       C$'000

AMC valuation of 100% of Aripuana Project                                            25,000       25,625

Value of Karmin's 30% interest (control basis)                                       7,500        7,688

Adopted minority discount                                                              25%           25%

Value of Karmin's 30% interest (minority basis)                                      5,625        5,766
Value of Karmin's 100% interest in surface gold rights                                  500          513

Total value of exploration and mineral assets                                         6,125         6,278

Source: Reuters, AMC and Calculations

Accordingly, Grant Thornton Corporate Finance has adopted the value of Karmin’s exploration
assets to be C$6.3 million.

  9.1.2      Taxation losses

As at 31 January 2010, Karmin has C$2.3 million in tax losses carried forward.

For valuation purposes, unutilised tax losses may have a value as the hypothetical purchaser of a
company can use the tax losses to offset against future taxable income, subject to satisfying certain
taxation rules.

With respect to the potential utilisation of tax losses by Karmin, Grant Thornton Corporate
Finance notes that:

• Karmin does not currently generate any material earnings or positive cash flows;

• Karmin’s exploration assets are at an early stage of exploration;

• the existing tax losses relate to operational activities conducted predominantly in Brazil; and

• management have indicated that Karmin has not yet determined whether its mining property
  contains ore reserves that are economically recoverable.

Based on the above, it is not possible to predict with reasonable certainty whether Karmin will be
able to generate sufficient earnings in the future to be able to utilise the tax losses. Accordingly, we
have not ascribed a value to Karmin’s unutilised tax losses.

  9.1.3      Other assets and liabilities

We have also considered in our assessment the other assets and liabilities included in Karmin’s
balance sheet as at 31 January 2010 excluding Karmin’s exploration assets amounting to


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approximately C$884,000. A significant proportion of the assets consist of property, plant and
equipment. A significant proportion of the liabilities relate to loans from a Karmin shareholder of
approximately C$345,000. The breakdown of the assets and liabilities (in Canadian dollars) is set
out below.

Karmin - Other assets and liabilities                                                          Actual
                                                                                               C$'000

Cash                                                                                               31
Accounts receivables                                                                                  1
Investment in a public company                                                                        3
Property, plant and equipment                                                                      90
Accounts payable and accrued liabilities                                                         (424)
Interest bearing shareholder loan                                                                (345)
Total other assets and liabilities                                                               (644)


Source: Karmin


  9.1.4      Karmin Options

The Karmin Options relate to a stock option plan that Karmin has established under which
employees, officers, directors and consultants of Karmin and its subsidiaries may be granted stock
options for Karmin Shares. Karmin currently has 2.85 million Karmin Options on issue. The value
of the Karmin Options has been determined using the binomial option pricing model.

We have assessed the total value of Karmin Options to be C$277,000 having regard to the
following key assumptions:

• the remaining life of the options range from 2.0 to 4.7 years as at 18 March 2010;

• underlying Karmin share price of C$0.185 as at 18 March 2010;

• interest rate of 0.22%, being yield on three month treasury bills according to the Bank of
  Canada as at 18 March 2010; and

• assessed volatility over the life of options of 100%.




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   9.1.5      Capitalised corporate overheads

Karmin incurs ongoing corporate costs which have not been incorporated in the value of the
exploration assets. These costs are associated with maintaining office premises, the executive
management teams, finance and corporate administration. The costs also include expenditure
incurred to meet compliance and continuous disclosure requirements as part of being a listed entity
and directors fees. We have reviewed Karmin’s historical and currently available income statement
as well as received advice from Karmin’s management as to the appropriate levels of ongoing
corporate overhead and have adopted C$100,000 as the ongoing cost.

For the purpose of the valuation, we have capitalised the corporate overheads of Karmin using the
capitalisation of earnings methodology at a multiple range of 2 to 3 times.

The following table calculates the capitalised value of corporate overheads in (Canadian dollars):

Karmin - Corporate overheads                                                      Low            High
                                                                                C$'000         C$'000

Ongoing corporate overheads                                                       100             100
Capitalisation multiple for ongoing corporate overheads                             2                3
Capitalised value of corporate overheads                                          200             300

Source: Karmin financial statements and calculations


The capitalised value of the residual corporate overheads has been estimated between C$0.2
million and $0.3 million.

   9.1.6      Costs in relation to the Proposed Transaction

In undertaking the Proposed Transaction, Karmin will incur transaction cost regardless of whether
the Proposed Transaction is implemented or otherwise. Karmin has advised that the cost is
estimated to be approximately C$275,000.

   9.1.7      Minority discount

The value derived using the sum-of-parts-method is on a 100% basis. We note that existing
Karmin Shareholders will collectively hold a maximum of 3.7% of the Combined Group. Typically,
a shareholding of less than 50% represents a minority position and its relative market value is less
than the shareholding of a controlling interest. The difference is typically referred to as a minority
discount and can range from 15% to 35% depending on the circumstances.

Accordingly, we have applied a minority discount of 10% to our valuation assessment of Karmin
and have considered the following:

• existing Karmin Shareholders will collectively hold a maximum of 3.7% of the issued capital of
  the Combined Group if the Proposed Transaction is implemented;

• the board and management of Karmin post the implementation of the Proposed Transaction
  will be controlled by Ignite; and



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• Karmin’s main asset is a 30% interest in the Aripuana Project which has already been considered
  on a minority basis in our assessment in section 9.1.1.

9.2      Valuation cross-check

Prior to reaching our valuation conclusion, we have considered the quoted security price of
Karmin. In accordance with the requirements of RG111, we have considered the listed securities’
depth, liquidity, and whether or not the market value is likely to represent the value of Karmin.

The following table summarises the monthly trading volume of Karmin Shares since January 2009:

Month end                                           Volume traded    Monthly VWAP       Total value of Volume traded as
                                                                         price (C$)     shares traded    % of free float*

January 2009                                              242,100              0.24           57,786              1.15%
February 2009                                             289,000              0.25           72,405              1.37%
March 2009                                                 13,061              0.26            3,440              0.06%
April 2009                                                 73,500              0.26           19,225              0.35%
May 2009                                                   99,800              0.33           32,717              0.47%
June 2009                                                 106,500              0.30           32,148              0.50%
July 2009                                                  51,000              0.23           11,730              0.24%
August 2009                                               194,000              0.23           45,135              0.92%
September 2009                                             32,233              0.24            7,706              0.15%
October 2009                                              223,730              0.22           48,841              1.06%
November 2009                                             149,694              0.20           29,900              0.71%
December 2009                                              86,937              0.19           16,145              0.41%
January 2010                                               25,500              0.23            5,775              0.12%
February 2010                                              41,632              0.19            7,730              0.20%

Note: As at 11 March 2010, there were 21,119,266 Karmin Shares considered to be free float.
Source: Reuters


Based on the above table we note the following:

• there has been a historically low level of consistent trading in Karmin Shares;

• the monthly volume traded as a percentage of free-float shares ranged between 0.06% and
  1.37% with an average of 0.55%.

• notwithstanding the level of liquidity, Karmin complies with the full disclosure regime required
  by the TSXV. As a result, the market is fully informed about the performance of the Karmin;
  and

• in the absence of a takeover or other share offers, the trading share price represents the value in
  which minority shareholders could realise their investment.

Given the low level of liquidity of Karmin, we have only relied to the quoted listed securities
valuation method as guidance and cross-check to our primary valuation methodology based on the
fair market value of net assets.

Our assessment of the Karmin’s equity value using the quoted listed price is set out below.

The quoted price of listed securities method is based on the Efficient Market Hypothesis (“EMH”)
which states that the share price at any point in time reflects all publicly available information and
will change “almost” instantaneously when new information becomes publicly available.

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We have selected the share market prices of Karmin based on recent trading up until 18 March
2010, one day before Karmin announced the Proposed Transaction.

Set out below is a summary of the share market prices at which Karmin Shares traded on the
TSXV for various periods of recent trading:

 Market share prices                                                 Low                High             VWAP
                                                                      C$                  C$               C$

 1 week prior to 18 March 2010                                       0.17               0.40               0.19
 1 month prior to 18 March 2010                                      0.16               0.40               0.19
 2 months prior to 18 March 2010                                     0.16               0.40               0.19
 3 months prior to 18 March 2010                                     0.16               0.40               0.20

Note: Karmin Shares traded at C$0.40 on 12 March 2010. Apart from the trading on 12 March 2010, Karmin Shares did
not trade above C$0.25 during the three months ended 18 March 2010.
Source: Reuters and calculations

Based on the above, we have assessed the value of Karmin Shares on a minority basis to be in the
range of C$0.19 to C$0.20.

We note that our assessed value of Karmin Shares ranging from C$0.19 to C$0.20 per share is
higher than the value derived using the sum-of-parts-method of C$0.11 on a minority basis. In
relation to this difference, we note the following:

    •    Karmin’s only asset is a 30% passive investment in the Aripuanã Project, an early stage
         zinc exploration project. VM, one of the world largest zinc producer, is currently fully
         funding the exploration/drilling of the project and accordingly, the share price of Karmin
         may reflect speculation in relation to the prospectivity of the project;

    •    Karmin may only receive limited information on the progress and prospects of the project
         and as such, the Karmin share price may only reflect the limited information available; and

    •    The other 70% partner of the Aripuanã Project is VM which is one of the largest zinc
         producers in the world and accordingly it will be able to access significant capital and
         intellectual resources to develop the project.

Accordingly, based on the discussions and analysis set out above, we believe our valuation
assessment of Karmin as set out in section 9.1 above is reasonable.




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10 Valuation of the Combined Group

As outlined in section 1.1, Ignite Shareholders will collectively own shares in the Combined Group
following the Proposed Transaction. The valuation assessment from Ignite Shareholders’
perspective involves attributing a value to the Combined Group. The valuation of the Combined
Group involves aggregating:

• the fair market value of Ignite;

• the fair market value of Karmin;

• the proceeds from the capital raising;

• deducting the additional capitalised corporate overheads costs associated with the Combined
  Group; and

• deducting the costs associated with the Proposed Transaction.

We have also considered the total number of shares that will be on issue following the completion
of the Proposed Transaction.

Each of the above has been discussed in detail below.

10.1 Fair market value Ignite

The fair market value of Ignite has been determined in section 8.1.2 which implies a valuation
range of A$300 million to A$321 million for the fair market value of Ignite’s equity on a minority
basis.

10.2 Fair market value of Karmin

The fair market value of Karmin has been determined in section 9.1 which implies a valuation
range of A$5.0 million to A$5.1 million for the fair market value of Karmin’s equity on a minority
basis.

10.3 Proceeds from Capital Raising

In conjunction with the Proposed Transaction, the Combined Group intends to raise a minimum
of C$30 million and up to a maximum of C$40 million at a minimum issue price of C$1.765 per
Karmin Share. Completion of the Capital Raising is a condition precedent in the Agreement and as
such, should be considered in the post-Proposed Transaction assessment.

As the Agreement does not specify the Capital Raising issue price per Karmin Share, we have been
advised by the management of Ignite that the minimum issue price will be C$1.765 per Karmin
Share. We note that in the event that the issue price is reduced by the parties closer to the date of
completion, this may cause Grant Thornton Corporate Finance to change our opinion and this
Independent Expert’s Report may become invalid.




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Based on the above, the implied number of new Karmin Shares that will be issued pursuant to the
Capital Raising is approximately 17.0 million shares. The amount to be raised, in Australian dollars,
is approximately A$32.1 million7.

We understand that the Desjardins Securities, a Canadian broker firm has been engaged to manage
the Capital Raising process and is entitled to earn the following fee:

• 6% of total funds raised; and

• 1.02 million to 1.36 million compensation warrants (representing 6% of the implied number of
  new shares to be issued in the Combined Group via the Capital Raising). The compensation
  warrants provides the holder with the option to convert one compensation warrant into one
  Ignite Share or one share in the Combined Group.

10.4 Costs associated with the Proposed Transaction

The costs associated with the Proposed Transaction will differ depending on the amount of capital
raised. A significant cost relates to the broker fees from the Capital Raising. The brokerage fees
payable comprise:

• 6% of total funds raised; and

• 1.02 million to 1.36 million compensation warrants (representing 6% of the implied number of
  new shares to be issued in the Combined Group via the Capital Raising). The compensation
  warrants provides the holder with the option to convert one compensation warrant into one
  Ignite Share or one share in the Combined Group. Grant Thornton Corporate Finance has
  valued the compensation warrants between C$0.75 million and C$1.0 million.

Based on the above, the estimated broker fee payable ranges between C$2.6 million and C$3.4
million. In addition, management has advised that additional expenses amounting to C$0.5 million
are estimated to be incurred as a result of undertaking the Capital Raising.

10.5 Additional corporate overheads

We have been advised that the Combined Group will incur approximately C$80,000 per annum of
additional costs compared to the total corporate overheads of the two companies on a standalone
basis pursuant to the Proposed Transaction.

For the purpose of the valuation, we have capitalised the additional corporate overheads using the
capitalisation of earnings methodology at a multiple range of 2 to 3 times.




7 Based on the exchange rate of A$/C$0.935 which reflects the average exchange rates as discussed in section 7.4 of this
report.


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The following table calculates the additional capitalised value of corporate overheads in (Canadian
dollars):

Additional corporate overheads                                                              Low        High
                                                                                          C$'000      C$'000

Additional corporate overheads                                                                80          80
Capitalisation multiple                                                                        2           3
Capitalised value of additional corporate overheads                                          160         240

Source: Karmin and calculations


The additional capitalised value of the corporate overheads has been estimated between C$0.16
million and C$0.24 million.

10.6 Number of Combined Group shares outstanding

The number of shares outstanding following the Proposed Transaction is set out below:

Combined Group                                                               Section         Low        High
                                                                            reference         '000       '000


Number of Karmin Shares on issue (pre-Proposed Transaction)                                 38,454     38,454
Number of Karmin Shares to be consolidated (pre-Proposed Transaction)         Note 1       (32,045)   (32,045)
Number of new Karmin Shares to be issued to the Ignite Shareholders         1.1 and 5.3    169,007    169,007
                                                                                           175,416    175,416


Number of new shares to be issued in conjunction with the Capital Raising      10.3         16,997     22,663
Number of new shares pursuant to satisfying 15% discount                      Note 2           248        248
Total number of shares on issue post-Proposed Transaction                                  192,661    198,327

Source: Calculations

Note 1: In conjunction with the Proposed Transaction, Karmin will undertake a share
consolidation of its issued share capital on a 6:1 basis which leaves the number of Karmin Shares
outstanding following the consolidation to be approximately 6.4 million Karmin Shares. The
consolidated number of shares is also based on the assumption that the outstanding convertible
securities of Ignite will not be converted before the completion of the Proposed Transaction.

Note 2: As discussed in section 8.1.1, a maximum of 247, 860 new shares may be if the Capital
Raising price is C$1.765.




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10.7 Valuation conclusion

The value of the Combined Group post-Proposed Transaction in Australian dollars is summarised
below.

Combined Group                                                    Section                    Low                 High
Post-Proposed Transaction                                        Reference                A$'000               A$'000


Fair market value of Ignite's equity                                10.1                  299,636             320,762
                                       (1)
Fair market value of Karmin's equity                                10.2                    4,603               4,700
                              (1)
Proceeds from capital raising                                       10.3                   32,086              42,781
Less: Costs associated with the Proposed Transaction(1)             10.4                   (3,262)              (4,171)
Less: Capitalised additional corporate overhead costs(1)            10.5                     (257)               (171)
                                                                                          332,806             363,900
Number of shares outstanding post-Proposed Transaction ('000)       10.6                  192,661              198,327
Fair market value per share post-Proposed Transaction (A$)                                   1.73                1.83


Note 1: The exchange rate adopted to convert to Australian dollars from Canadian dollars is A$/C$0.935 which reflects
the average exchange rates as discussed in section 7.4 of this report.




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11 Evaluation of the Proposed Transaction

11.1 Fairness of the Proposed Transaction

In forming our opinion in relation to the fairness of the Proposed Transaction to the Ignite
Shareholders, Grant Thornton Corporate Finance has compared the value per Ignite share prior to
the Proposed Transaction (on a minority basis) to the assessed value per share of the Combined
Group following completion of the Proposed Transaction and Capital Raising (on a minority
basis).

For the purpose of this report, we note that the Proposed Transaction is not considered a control
transaction under RG 111. Ignite’s existing shareholders are expected to hold between 85.3% and
87.8% (after the Capital Raising) of the Combined Group’s issued capital pursuant to the Proposed
Transaction. The rationale for the basis of comparison reflects the fact that existing Ignite
Shareholders will be receiving shares constituting controlling interests in the Combined Group and
they will still retain significant control over Ignite’s assets and operations pre and post Proposed
Transaction.

The following table summarises our assessment:

                                                                   Section                    Low                  High
                                                                   reference                    A$                   A$

                                                            (1)
Value per share pre-Proposed Transaction (minority basis)            8.1.2                     1.77                 1.90


Value per share post-Proposed Transaction (minority basis) (1)       10.7                      1.73                 1.83


Discount (A$)                                                                                 (0.04)               (0.07)
Discount (%)                                                                                  -2.3%               -3.7%


Source: Calculations
(1) We note that the exchange ratio between Ignite and Karmin Shares is on a one-for-one basis after consolidation of
Karmin Shares. Accordingly comparing the value per share of Ignite prior to the Proposed Transaction with the value
per share of the Combined Group post the Proposed Transaction is appropriate.

The high end of our assessed value per share of the Combined Group on a minority interest basis
post-Proposed Transaction falls within the range of our assessed value per share on a minority
basis pre-Proposed Transaction. Accordingly, we conclude that the Proposed Transaction is fair to
the Ignite Shareholders. Set out below is a graphic representation of our fairness assessment:




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                                                   Overlapping
                                                     range

    Value per
    share pre-
    Proposed
    Transaction
    (minority




    Value per
    share post-
    Proposed
    Transaction
    (minority


                         1.70          1.75            1.80         1.85       1.90          1.95

                                                              $A

Source: Calculations

Whilst we have concluded that the Proposed Transaction is fair to Ignite Shareholders, we note the
low end of our valuation range of the value post Proposed Transaction is below our assessed value
range of Ignite prior to the Proposed Transaction.

We note that the minimum value per share of the Combined Group required to ensure Ignite
Shareholders are not disadvantaged by implementing the Proposed Transaction is A$1.77. In the
event that the fair market value per share of the Combined Group is below A$1.77, then the
Proposed Transaction would not be fair. However, under these circumstances we believe that the
Proposed Transaction is still reasonable having regard to the reasonableness considerations set out
below.

In our assessment of the value per share of the Combined Group, we have assumed completion of
the Capital Raising of a minimum of C$30 million and up to a maximum of C$40 million at the
minimum issue price will be C$1.765 per Karmin Share as advised by the Management of Karmin
and Ignite. We note that in the event that the minimum issue price of the Capital Raising is lower
than C$1.765, this may cause Grant Thornton Corporate Finance to change our opinion and this
Independent Expert’s Report may become invalid.

11.2 Reasonableness of the Proposed Transaction

For the purpose of assessing whether the Proposed Transaction is reasonable to the Ignite
Shareholders, we have considered the following likely advantages and disadvantages associated
with the Proposed Transaction:

  11.2.1    Advantages

• If the Proposed Transaction is implemented, Ignite Shareholders will exchange Ignite Shares for
  Karmin Shares which are listed on the TSXV. Ignite Shareholders will be able to trade those
  shares freely on the TSXV. Ownership of shares in a listed entity will provide Ignite
  Shareholders with increased liquidity in relation to their investment;


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• The Capital Raising will contribute to further progress the commercialisation of the CAT-HTR
  technology as well as developing the mineral resources within EL4416;

• Ignite’s auditors have included an ‘emphasis on matter’ in their 2009 audit report drawing
  attention to a potential going concern issue as Ignite has generated negative earnings and current
  liabilities exceeded its current assets by A$15.8 million. The Proposed Transaction offers Ignite
  Shareholders the opportunity to materially reduce any going concern issues associated with
  Ignite’s existing capital structure. Ignite has historically raised capital through private placements
  or other equity raisings. If the Proposed Transaction and Capital Raising does not complete and
  Ignite continues to incur losses and fail to complete future capital raisings, or market and sector
  conditions deteriorate, Ignite may be unable to continue as a going concern;

• Ignite Shareholders will hold shares in a publicly listed entity which will be required to comply
  with the continuous disclosure regime. This will ensure that the shareholders will receive
  information on Ignite in a timely and transparent manner and as such, expedite and improve
  investment decisions;

• The TSXV is catered for junior exploration companies and technology ventures. Accordingly,
  Ignite may have an enhanced ability to raise the required funds on the TSXV and more generally
  in the US and Canada due to the greater degree of sophistication of these financial markets;

• The Proposed Transaction will improve the profile of Ignite in the market and in turn, may
  result in a greater following by the investment and broking community. This may have a positive
  impact on the Combined Group’s share price and assist future capital raising activities; and

• The board and management of the Combined Group will be controlled by Ignite. In addition,
  we note that the existing Ignite Shareholders as a whole will become the controlling
  shareholders in the Combined Group, holding between 85.3% and 87.8% (after the Capital
  Raising) of the Combined Group.

  11.2.2   Disadvantages

• Ignite Shareholders may be exposed to exchange rate risk as a result of having an investment in
  a Canadian-listed company as compared to investing in an Australian private company;

• As Ignite Shareholders will hold an investment in the Combined Group which will be listed in a
  different tax jurisdiction, there could be adverse tax treatments pertaining to capital gains tax or
  withholding dividends or other adverse tax consequences. Grant Thornton Corporate Finance
  has not provided any taxation advice in relation to the Proposed Transaction. Ignite
  Shareholders should consider the information contained in the Notice of Meeting in relation to
  taxation implications;

• Ignite Shareholders will share any future profits and dividends associated with the Cat-HTR
  technology with the existing shareholders of Karmin. However, we note that the existing
  shareholders of Karmin will own a maximum of 3.7% of the Combined Group’s issued share
  capital prior to the Capital Raising;




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• Ignite Shareholders will be exposed to Karmin’s existing operations, being its 30% investment in
  a Brazilian zinc exploration asset which is relatively uncertain and risky;

• Compliance costs are expected to increase to maintain a listed status on the TSXV; and

• Ignite Shareholders will be issued shares in Karmin Exploration Inc. which includes Karmin’s
  existing operations, assets and liabilities. Potential future liabilities currently unknown and
  unforeseen from Karmin’s existing operations may crystallise in the future. As the largest
  shareholders in the Combined Group, Ignite Shareholders will be exposed to any future
  liabilities which may materialise. However, we note that Karmin has provided representations
  and warranties in relation to the historical affairs of Karmin in the Agreement.

  11.2.3    Other factors

Ignite Shareholders’ position if the Proposed Transaction is not approved

If the Proposed Transaction is not approved, Ignite will remain a private company and it would be
the current directors’ intention to continue operating in line with its objectives. Ignite Shareholders
who retain their shares will continue to share in any benefits and risks in relation Ignite’s ongoing
business. Ignite will need to raise funding to finance its commercialisation efforts with regards to
the CAT-HTR technology as well as developing the mineral resources within EL4416.

If the Proposed Transaction is not implemented, Ignite will remain a private company and it may
find it more challenging to raise the required funds to commercialise the CAT-HTR technology
and reduce its level of indebtedness. Additionally, if market conditions deteriorate or sentiment
towards “clean coal technologies” changes adversely, fund raising could potentially be more
dilutive.

Taxation

Grant Thornton Corporate Finance has not provided any taxation advice in relation to the
Proposed Transaction. Ignite Shareholders should consider the information contained in the
Notice of Meeting and Explanatory Memorandum and other offering documents to be provided
by Karmin in relation to taxation implications of the Proposed Transaction.

Alternative proposals

The directors of Ignite have advised that the Proposed Transaction is currently the only proposal
available to Ignite at the date of this report. The directors have undertaken not to solicit any
competing proposal or to participate in discussions or negotiations in relation to any competing
proposals in conjunction with the execution of the Agreement.

Grant Thornton Corporate Finance is of the opinion that if an alternative proposal on better terms
were to emerge, this may occur prior to the shareholders meeting convened to consider the
Proposed Transaction. In the event that an alternative offer on better terms emerges, shareholders
are entitled to vote against the Proposed Transaction.




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Dividend policy

If the Proposed Transaction is implemented, the dividend policy of the Combined Group will be
determined by the board of the Combined Group. The Combined Group does not anticipate
paying a dividend for the financial year ending 31 December 2010. The Combined Group intends
to review the dividend policy on an annual basis.

  11.2.4   Reasonableness conclusion

Based on the above likely advantages and disadvantages identified above, it is our opinion that on
balance, the likely advantages associated with the Proposed Transaction outweigh the
disadvantages. Accordingly, the Proposed Transaction is reasonable to the Ignite Shareholders.

11.3 Overall conclusion

Based on the above, Grant Thornton Corporate Finance has concluded that the Proposed
Transaction is fair and reasonable to the Ignite Shareholders.




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12 Sources of information, disclaimer and consents

12.1 Sources of information

In preparing this report Grant Thornton Corporate Finance has used various sources of
information, including:

•   Share Exchange Agreement between Karmin and Ignite dated 15 March 2010;
•   Draft Explanatory Memorandum Notice of General Meeting;
•   Draft annual reports of Ignite for FY07, FY08 and FY09;
•   Interim report of Ignite for half year ended on 31 December 2008;
•   Annual reports of Karmin for FY08 and FY09;
•   Unaudited interim financial statements of Karmin for 31 October 2009 released by management
    in the public domain;
•   Unaudited balance sheet of Karmin as at 31 January 2010 provided by the Karmin management;
•   releases and announcements by Karmin on the TVSX;
•   Ignite and Karmin websites;
•   Energy Information Administration (“EIA”), International Energy Outlook 2009;
•   Reuters;
•   IBISWorld Industry Report, ‘World price – Energy – Thermal coal’ dated 29 July 2009;
•   various broker’s reports;
•   Discussions with management;
•   Various documents provided by management including the independent specialist reports
    commissioned by Ignite which have assessed various aspects of the Cat-HTR technology
    including examining and evaluating the process design from a capital expenditure requirement
    perspective and the financial outcome of the potential product/output of the technology as well
    as an independent specialist report which comments on the nature and availability of coal
    minerals in EL4416; and
•   Other publicly available information.

12.2 Qualifications and independence

Grant Thornton Corporate Finance Pty Ltd holds Australian Financial Service Licence number
247140 under the Corporations Act and its authorised representatives are qualified to provide this
report.

Grant Thornton Corporate Finance provides a full range of corporate finance services and has
advised on numerous takeovers, corporate valuations, acquisitions, and restructures. Prior to
accepting this engagement, Grant Thornton Corporate Finance considered its independence with
respect to Ignite and all other parties involved in the Proposed Transaction with reference to the
ASIC Regulatory Guide 112 “Independence of expert” and APES 110 “Code of Ethics for
Professional Accountants” issued by the Accounting Professional and Ethical Standard Board. We
have concluded that there are no conflicts of interest with respect to Ignite, its shareholders and all
other parties involved in the Proposed Transaction.




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Grant Thornton Corporate Finance and its related entities do not have at the date of this report,
and have not had within the previous two years, any shareholding in or other relationship with
Ignite or its associated entities that could reasonably be regarded as capable of affecting its ability
to provide an unbiased opinion in relation to the Proposed Transaction.

Grant Thornton Corporate Finance has no involvement with, or interest in the outcome of the
Proposed Transaction, other than the preparation of this report.

Grant Thornton Corporate Finance will receive a fee based on commercial rates for the
preparation of this report. This fee is not contingent on the outcome of the Proposed Transaction.
Grant Thornton Corporate Finance’s out of pocket expenses in relation to the preparation of the
report will be reimbursed. Grant Thornton Corporate Finance will receive no other benefit for the
preparation of this report.

12.3 Limitations and reliance on information

This report and opinion is based on economic, market and other conditions prevailing at the date
of this report. Such conditions can change significantly over relatively short periods of time.

Grant Thornton Corporate Finance has prepared this report on the basis of financial and other
information provided by Ignite and publicly available information. Grant Thornton Corporate
Finance has considered and relied upon this information. Grant Thornton Corporate Finance has
no reason to believe that any information supplied was false or that any material information has
been withheld. Grant Thornton Corporate Finance has evaluated the information provided by
Ignite and other experts through inquiry, analysis and review, and nothing has come to our
attention to indicate the information provided was materially misstated or would not afford
reasonable grounds upon which to base our report. Nothing in this report should be taken to imply
that Grant Thornton Corporate Finance has audited any information supplied to us, or has in any
way carried out an audit on the books of accounts or other records of Ignite.

This report has been prepared to assist the directors of Ignite in advising the Ignite Shareholders in
relation to the Proposed Transaction. This report should not be used for any other purpose. In
particular, it is not intended that this report should be used for any purpose other than as an
expression of Grant Thornton Corporate Finance’s opinion as to whether the Proposed
Transaction is fair and reasonable to the Ignite Shareholders.

Ignite has indemnified Grant Thornton Corporate Finance, its affiliated companies and their
respective officers and employees, who may be involved in or in any way associated with the
performance of services contemplated by our engagement letter, against any and all losses, claims,
damages and liabilities arising out of or related to the performance of those services whether by
reason of their negligence or otherwise, excepting gross negligence and wilful misconduct, and
which arise from reliance on information provided by Ignite, which Ignite knew or should have
known to be false and/or reliance on information, which was material information Ignite had in its
possession and which Ignite knew or should have known to be material and which Ignite did not
provide to Grant Thornton Corporate Finance. Ignite will reimburse any indemnified party for all
expenses (including without limitation, legal expenses) on a full indemnity basis as they are
incurred.




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12.4 Consents

Grant Thornton Corporate Finance consents to the issuing of this report in the form and context
in which it is included in the Notice of General Meeting and Explanatory Memorandum to be sent
to the Ignite Shareholders. Neither the whole nor part of this report nor any reference thereto may
be included in or with or attached to any other document, resolution, letter or statement without
the prior written consent of Grant Thornton Corporate Finance as to the form and content in
which it appears.




Ignite Energy Resources Pty Limited – Independent Expert’s Report
Appendix A – Valuation methodologies

Capitalisation of future maintainable earnings

The capitalisation of future maintainable earnings multiplied by appropriate earnings multiple is a
suitable valuation method for businesses that are expected to trade profitably into the foreseeable
future. Maintainable earnings are the assessed sustainable profits that can be derived by a
company’s business and excludes any abnormal or “one off” profits or losses.

This approach involves a review of the multiples at which shares in listed companies in the same
industry sector trade on the share market. These multiples give an indication of the price payable by
portfolio investors for the acquisition of a parcel shareholding in the company.

Discounted future cash flows

An analysis of the net present value of forecast cash flows or DCF is a valuation technique based
on the premise that the value of the business is the present value of its future cash flows. This
technique is particularly suited to a business with a finite life. In applying this method, the expected
level of future cash flows are discounted by an appropriate discount rate based on the weighted
average cost of capital. The cost of equity capital, being a component of the WACC, is estimated
using the Capital Asset Pricing Model.

Predicting future cash flows is a complex exercise requiring assumptions as to the future direction
of the company, growth rates, operating and capital expenditure and numerous other factors. An
application of this method generally requires cash flow forecasts for a minimum of five years.

Orderly realisation of assets

The amount that would be distributed to shareholders on an orderly realisation of assets is based on
the assumption that a company is liquidated with the funds realised from the sale of its assets, after
payment of all liabilities, including realisation costs and taxation charges that arise, being distributed
to shareholders.

Market value of quoted securities

Market value is the price per issued share as quoted on the ASX or other recognised securities
exchange. The share market price would, prima facie, constitute the market value of the shares of a
publicly traded company, although such market price usually reflects the price paid for a minority
holding or small parcel of shares, and does not reflect the market value offering control to the
acquirer.
Comparable market transactions

The comparable transactions method is the value of similar assets established through comparative
transactions to which is added the realisable value of surplus assets. The comparable transactions
method uses similar or comparative transactions to establish a value for the current transaction.

Comparable transactions methodology involves applying multiples extracted from the market
transaction price of similar assets to the equivalent assets and earnings of the company. The risk
attached to this valuation methodology is that in many cases, the relevant transactions contain
features that are unique to that transaction and it is often difficult to establish sufficient detail of all
the material factors that contributed to the transaction price.
Appendix B – Glossary


A$                                 Australian Dollars

Agreement                          Share Exchange Agreement dated 15 March 2010

AMC                                AMC Consultants Pty Ltd

                                   The technical specialist report prepared by AMC which assesses the fair market
AMC Report
                                   value of the exploration assets held by Karmin

Anglo                              Anglo American Brasil Ltda

APPI                               Tapis Asia Pacific Pricing Index

                                   The Aripuanã polymetallic (Pb-Zn-Cu-Ag±Au) sulphide deposit in Mato Grosso
The Aripuanã Project
                                   State, located at Aripuanã, Brazil and owned by Anglo, VM and Karmin

ASIC                               Australian Securities and Investments Commission

ASX                                Australian Securities Exchange

bdp                                Barrels per day

Best Energies                      Best Energies Australia Pty Ltd

BTU                                British Thermal Unit

C$                                 Canadian Dollars

CAGR                               Compounded average growth rate

                                   The proposed capital raising to be undertaken by the Combined Group to raise
Capital Raising
                                   a minimum of C$30 million and up to a maximum of C$40 million

Cat-HTR                            Ignite’s catalytic hydrothermal technology

CBM Resources                      CBM Resources Pty Ltd

CO2                                Carbon dioxide

The Combined Group                 Combined Karmin and Ignite after the Proposed Transaction

The Company                        Ignite Energy Resources Pty Ltd

                                   The contract between MRA, now a wholly owned subsidiary of Karmin, and
Contract of Association            Anglo to unitize the district and explore for base and precious metals in areas
                                   adjacent to the town of Aripuanã

Corporations Act                   Corporations Act, 2001

Cougar                             Cougar Energy Limited

Dardanelos                         Mineração Dardanelos Ltda

DCF                                Discounted cash flow

EIA                                Energy Information Administration

                                   Exploration license 4416 which covers an area of 3,387 km2 located within the
EL4416
                                   Gippsland Basin region of south-east Victoria

EMH                                Efficient Market Hypothesis

FIRB                               Foreign Investment Review Board

FSG                                Financial Services Guide

FY                                 Financial year

Grant Thornton Corporate Finance   Grant Thornton Corporate Finance Pty Ltd
GSER                          Gelliondale Sustainable Energy Resources

Ignite                        Ignite Energy Resources Pty Ltd

Ignite Options                Options of Ignite on issue

Ignite Notes                  The outstanding loan notes in Ignite as at the date of this report

Ignite Shares                 Ordinary shares in Ignite

Ignite Shareholders           Shareholders of Ignite

Karmin                        Karmin Exploration Inc.

Karmin Options                The existing employee share options in Karmin Shares

Karmin Shares                 Ordinary shares in Karmin

Karmin Shareholders           Shareholders of Karmin

Laxmi                         Laxmi Resources Pty Limited

LF                            Latrobe Fuels
                              Licella Pty Ltd
Licella

MDO                           Marine diesel oil

MOU                           Memorandum of Understanding

MPS                           Martin Place Securities Pty Ltd

MRA                           Mineração Rio Aripuanã Ltda

Non-Associated Shareholders   The non-associated shareholders of Ignite

NYMEX                         New York Metals Exchange

OECD                          Organisation for Economic Co-operation and Development

OPEC                          Organisation for Petroleum Exporting Countries

ORRI                          Overriding revenue interest

PCI                           Pulverised coal injection

                              Ignite’s pilot plant which incorporates the Cat-HTR technology, located at
The Pilot Plant
                              Somersby, NSW

                              The 30,000 tpa three module commercial demonstration plant that will utilise
The Pre-Commercial Plant
                              Ignite’s direct coal-to-oil and upgraded coal process

Proposed Transaction          The proposed reverse takeover transaction between Ignite and Karmin

RG 74                         ASIC Regulatory Statement 74 “Acquisitions agreed to by shareholders”

RG 111                        ASIC Regulatory Statement 111 “Content of expert reports”

RG 112                        ASIC Regulatory Statement 112 “Independence of experts”

RG 170                        ASIC Regulatory Statement 170, “Prospective financial information”

SSCC                          Semi-soft coking coal

T&P                           T&P Group Pty Ltd

tpa                           Tonnes per annum

TRUenergy                     TRUenergy Development Pty Ltd

TSXV                          TSX Venture Exchange, Canada
US$               United States Dollars

UCG               Underground coal gasification

                  The Code for the Technical Assessment and Valuation of Mineral and
The Valmin Code
                  Petroleum Assets and Securities for Independent Expert Reports, 2005

VCR               Victoria Coal Resources Pty Ltd
                  Votorantim Metais S/A
VM

VWAP              Volume Weighted Average Price

WACC              Weighted Average Cost of Capital

WTI               West Texas Intermediate
Appendix C –Discount Rate

Introduction

The cash flows assumptions associated with the Cat-HTR technology have been prepared on a
nominal, ungeared and post-tax basis. Accordingly, we have assessed a range of nominal, post-tax
discount rate for the purpose of calculating its net present value.

The discount rate was determined using the weighted average cost of capital (“WACC”) formula.
The 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.
However, we note that the selection of an appropriate discount rate is ultimately a matter of
professional judgment.

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

                  D                      E
WACC = R d ×         × (1 − t ) + R e ×
                 D+E                    D+E

Where:

•   Re = the required rate of return on equity capital;
•   E = the market value of equity capital;
•   D = the market value of debt capital;
•   Rd = the required rate of return on debt capital; and
•   t = the statutory corporate tax rate.

WACC Inputs

Required rate of return on equity capital

We have used the Capital Asset Pricing Model (“CAPM”), which is commonly used by
practitioners, to calculate the required return on equity capital.

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 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 assumes that specific risk can be avoided by holding investments as part of a large and
well-diversified portfolio and 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 non
diversifiable systematic risk by way of a risk premium on the expected return. The extent of this
compensation depends on the extent to which the company’s returns are correlated with the market
as a whole. The greater the systematic risk faced by investors, the larger the required return on
capital will be demanded by investors.

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 - 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 non-diversifiable 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 systematic 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 the CAPM, the required nominal rate of return on equity (Re) is estimated as follows:

R e = R f + β e (R m − R f )

Where:

• Rf = risk free rate
• βe = expected equity beta of the investment
• (Rm – Rf) = market risk premium

Risk Free Rate

In the absence of an official risk free rate, the yield on the Australian Commonwealth Government
Bonds is commonly used as a proxy. The risk free rate adopted for our valuation is based on the
yield on 10-year Australian Commonwealth Government Bonds. We note that as at 29 March 2010,
the yield on 10-year Australian Commonwealth Government Bonds was 5.79%.

In the absence of an official risk free rate, the yield on the Australian Commonwealth Government
Bonds is commonly used as a proxy. We have observed the yield on the 10 year Australian
Commonwealth Government Bond for a period of 5, 10 and 20 days prior to 29 March 2010
(inclusive) as set out in the table below:

10 year Australian Commonwealth Government Bond Yields as at 29 March 2010              Average (%)
5 days to 29 March 2010                                                                         5.73
10 days to 29 March 2010                                                                        5.69
20 days to 29 March 2010                                                                        5.61

Source: RBA


Based on the above, we have adopted the risk free rate of 5.69%, which is primarily based on the 10
days average yield on 10-year Australian Commonwealth Government Bond as at 29 March 2010.
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.

Empirical studies of the historical risk premium in Australia over periods of up to 100 years suggest
the premium is between 6% and 8%. For the purpose of the valuation of Ignite, Grant Thornton
Corporate Finance has adopted a market risk premium of 6%.

We note that our adopted premium is consistent with the market risk premium used by regulatory
authorities in Australia (such as the Australian Competition and Consumer Commission and all
other state based regulators).

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.

An equity beta includes the effect of gearing on equity returns and reflects the riskiness of returns
to equity holders. However, an asset beta excludes the impact of gearing and reflects the riskiness
of returns on the asset, rather than returns to equity holders. Asset betas can be compared across
asset classes independent of the impact of the financial structure adopted by the owners of the
business.

For the purpose of this report, we have had regard to the observed equity betas of companies
engaged in the clean coal technology and technology commercialisation sectors as at February 2010.
We have also considered the asset betas of these companies.

The asset betas of the selected companies are calculated by adjusting the equity betas for the effect
of gearing to obtain an estimate of the business risk of the comparables, a process commonly
referred as degearing. We have then recalculated the equity beta based on an assumed ‘optimal’
capital structure deemed appropriate for the business (regearing). This is a subjective exercise,
which carries a significant possibility of estimation error.

We used the following formula to undertake the degearing and regearing exercise:

                D           
β e = β a 1 +     × (1 − t )
                E           

Where:

• βe = Equity beta
• βa = Asset beta
• t = corporate tax rate
Our analysis of the betas for comparable companies selected is set out in the following table.

Company                            Market Cap ($m)    Beta      Debt/Equity         Asset      Regeared
                                            Mar-10   Mar-10         Mar-10           Beta     Equity Beta


Linc Energy Ltd                               775      1.49           0.02           1.47              1.48
Carbon Energy Ltd                             319      2.79           0.00           2.79              2.82
Dyesol Ltd                                    128      1.15           0.00           1.15              1.16
Carnegie Wave Energy Ltd                       56      1.35           0.00           1.35              1.36
Cougar Energy Ltd                             106      1.89           0.00           1.89              1.91
Petratherm Ltd                                 23      0.76           0.00           0.76              0.77
Bluglass Ltd                                   27      0.18           0.00           0.18              0.18
WHL Energy Ltd                                  9      2.61           0.00           2.61              2.64
Eden Energy Ltd                                18      1.74           0.00           1.74              1.76
White Energy Company Ltd                      611      1.61           0.09           1.52              1.53

Mean                                                                  0.02           1.50              1.51
Median                                                                0.00           1.49              1.51

Source: Reuters and calculations

Equity betas were sourced from Reuters and are calculated over a five-year period to March 2010
with monthly observations.

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. For the purposes of
this report, Grant Thornton Corporate Finance has adopted an equity beta (βe) of 1.51.

Specific risk premium

We note that the assessment of the specific risk premium associated with a company is subject to a
number of factors including:

• the nature and size of the business compared to the selected comparable companies;

• future prospects of the company (i.e. companies with a higher net profit margin will receive a
  lower rating risk); and

• industry risks (i.e. industry risk is the risk specific to the industry which would be expected to
  impact all firms in the industry).

In this regard, we note that the underlying value of Ignite is primarily related to the value that could
be derived from the commercialisation of the Cat-HTR technology. Considering that the Cat-HTR
technology has not been implemented in a large scale production scenario, there are significant risks
associated with the forecasts prepared on such a basis. Consequently, we have applied a specific risk
premium in the range of 6 % to 8% to reflect the abovementioned risks associated with Ignite.

Required return of debt capital

For the purpose of estimating the cost of debt relevant to Ignite, Grant Thornton Corporate
Finance has had regard to the Reserve Bank of Australia’s indicator lending rates for small
businesses as at March 2010, being 8.60%.
Based on the above, Grant Thornton Corporate Finance has adopted a post-tax cost of debt in the
order of 6.02% for estimating the WACC.

Capital Structure

When forming a view on the gearing ratio used to calculate the WACC, Grant Thornton Corporate
Finance has considered the gearing ratio which a hypothetical purchaser of the business would
adopt in order to generate a balanced return given the inherent risks associated with debt financing.
Factors which a hypothetical purchaser may consider include the return to shareholders after
interest payments, and the ability of the businesses to raise external debt.

In determining the appropriate capital structure for the purpose of this report, we have had regard
to Ignite’s capital structure and the average gearing ratio of comparable companies. We note that
the majority of comparable companies of Ignite were 100% equity financed. This trend is reflective
of the nature of the industry and the accessibility to debt capital by participants within the industry.
Consequently, we have adopted a debt-to-equity ratio comprising 0% debt and 100% equity based
on observed capital structures for comparable companies operating in the technology sector.

WACC calculation

The nominal discount rate determined using the WACC formula is set out below.

Discount Rate                                                  Low                         High


Risk free rate                                                 5.69%                      5.69%

Beta                                                           1.51                        1.51

Market risk premium                                            6.00%                      6.00%

Company specific risk premium                                  6.00%                      8.00%

Cost of equity                                                20.77%                      22.77%

Cost of debt                                                   8.60%                      8.60%

Tax shield                                                    30.00%                      30.00%

Net cost of debt                                               6.02%                      6.02%

Debt ratio                                                     0.00%                      0.00%

WACC post tax                                                 20.77%                      22.77%


Source: Reuters and Calculations
Comparable companies

The companies considered to be comparable to Ignite are described below.

 Company                     Decription


                             Engaged in the exploration for coal resources, and the development and commercialisation of coal-to-
 Linc Energy Ltd             liquids processes through the combined utilisation of underground coal gasification and gas-to-liquid
                             technologies.

                             Engaged in the construction and commission of its underground coal gasification project in
 Carbon Energy Ltd           Queensland. The company is undertaking uranium exploration in Western Australia, South Australia,
                             Queensland and the Northern Territory.

                             Engaged in the industrialisation and commercialisation of Dye Solar Cell (DSC) technology, through
                             the provision of a range of products and services, including materials, consulting, research and
 Dyesol Ltd
                             development, collaborative product development, licensing, training, and manufacturing, and
                             laboratory facilities.

                             Focused on developing and commercialising its CETO Wave Energy technology, which is capable of
 Carnegie Wave Energy Ltd
                             producing zero-emission power and desalinated water.

                             Engaged in the development and commercialisation of underground coal gasification projects and the
 Cougar Energy Ltd
                             development of electricity generation projects.

                             Engaged in testing hot rocks, specifically granitic and hydrothermal iron oxide systems, with high
 Petratherm Ltd
                             temperatures, and establishing an emission free, renewable source for power generation.

                             Engaged in the development and commercialisation of technology for the manufacture of epitaxially
 Bluglass Ltd
                             grown gallium nitride on substrates at low temperature.

                             Focused on developing and commercialising energy assets including wind energy, solar, biomass and
 WHL Energy Ltd
                             clean fossil fuels.

                             Engaged in providing access to range of green energy opportunities. Eden holds interests in hydrogen
 Eden Energy Ltd             fuels, coal bed/coal mine methane, a conventional gas play, and geothermal (deep heat mining)
                             energy.

                             The principal activities of the company consist of the development and exploitation of the binderless
 White Energy Company Ltd
                             coal briquetting technology and evaluation of the mining exploration assets.
Appendix D – AMC Report
AMC Consultants Pty Ltd
ABN 58 008 129 164



Level 19, 114 William Street
MELBOURNE VIC 3000
T     +61 3 8601 3300
F     +61 3 8601 3399
E     amcmelb@amcconsultants.com.au




12 March 2010




Grant Thornton Corporate Finance Pty Ltd
Level 17
383 Kent Street
Sydney NSW 2000

Cc The Independent Directors
Ignite Energy Resources Pty Ltd
Level 9
267 Collins Street
Melbourne VIC 3000


                           INDEPENDENT TECHNICAL SPECIALIST'S REPORT
                                                    ARIPUANÃ PROPERTY
                                                 AMC REFERENCE: 110013

Ignite Energy Resources Pty Ltd ("Ignite") has engaged Grant Thornton Australia
Limited ("Grant Thornton") as the independent expert in relation to a proposed
transaction between Ignite and Karmin Exploration Inc ("Karmin"). Grant Thornton has
engaged AMC Consultants Pty Ltd ("AMC") to provide an independent technical
specialist’s report for inclusion in an Independent Expert’s Report in relation to the
proposed transaction.

Grant Thornton requires AMC to provide an independent assessment of the fair market
value of the Aripuanã exploration property in Mato Grosso State, Brazil, which is held in
joint venture between Karmin (30%) and Votorantim Metals (“Votorantim”) (70%), as at 1
March 2010. AMC is also asked to provide an opinion on the value of surface gold rights
held independently by Karmin over part of the project area. The Code for the Technical
Assessment and Valuation of Mineral and Petroleum Assets and Securities for
Independent Expert Reports, 2005 (the "Valmin Code")1 defines a technical value as an


1
    Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports, The
    VALMIN Code 2005 Edition, Prepared by The VALMIN Committee, a joint committee of the Australasian Institute of Mining and
    Metallurgy, the Australian Institute of Geoscientists and the Mineral industry Consultants Association with the participation of the
    Australian Securities and Investment Commission, the Australian Stock Exchange Limited, the Minerals Council of Australia, the
    Petroleum Exploration Society of Australia, the Securities Association of Australia and representatives from the Australian finance sector.




     ADELAIDE                 BRISBANE                MELBOURNE                    PERTH             UNITED KINGDOM              VANCOUVER
+61 8 8201 1800            +61 7 3839 0099          +61 3 8601 3300          +61 8 6330 1100          +44 1628 778 256         +1 604 669 0044

                                                     www.amcconsultants.com.au
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




assessment of future net economic benefit and a fair market value as one which adds or
subtracts from a technical value a premium or discount relating to market, strategic or
other considerations. AMC’s assessment in this report is of fair market value.

In this arrangement Ignite agreed to provide information requested by AMC, provide
indemnities to AMC and meet AMC's costs. AMC has taken instruction from Grant
Thornton. AMC has declared that it is able to act independently.

AMC has completed its engagement as a Specialist in accordance with the Valmin Code
to the extent possible. For the purposes of preparing this report, AMC reviewed material
technical reports, in particular a Canadian National Instrument 43-101 Technical Report
prepared for Karmin by AMEC International (Chile) S.A. (AMEC), a division of AMEC
Americas Limited, and held discussions with Karmin staff. The Valmin Code states
(clause 65) “Where inspection of a Material Mineral or Petroleum Asset or Tenement is
likely to reveal information or data that is Material to a Report, the Expert, or, where
relevant, the Specialist(s) must inspect it, providing it is practicable to do so. If an
inspection is not made, the Expert or Specialist must be satisfied that there is sufficient
current information available to allow an informed appraisal to be made without an
inspection.” In this case AMC formed the view that a site inspection was unlikely to
reveal material information or data and there were difficulties with the practicality of a
site visit. In these circumstances, in view of the quality of the independent AMEC report
described above and the other reports reviewed, AMC formed the view that it could fulfil
its brief without a site visit.

In this report use is made of the term Mineral Resources in relation to the Aripuanã
project. This term is used in accordance with the Canadian CIMM and NI43-101
standards. The term as used is consistent with the term Mineral Resources as defined
under the JORC Code2, although estimates have not been reported under that Code.

AMC has not audited the information provided to it, but has aimed to satisfy itself that all
of the information has been prepared in accordance with proper industry standards and
is based on data that AMC considers to be of acceptable quality and reliability. Where
AMC has not been so satisfied, AMC has included comment in this report.

An independent legal report on the status of the Aripuanã tenements provided by
Karmin to AMC and to Grant Thornton, concludes that “there is no indication that any
lack of expenditure or other requirements jeopardizes the extension of the leases”.
AMC's valuation has been prepared on the basis that the legal status of the tenements
is secure.

AMC has provided its opinion based on methods appropriate for exploration properties.
A Pre-Feasibility Study managed by Votorantim is in progress, so that the information
available on costs, production estimates and cash flows is not finalised and is




2
    Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. The Joint Ore Reserves
    Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals
    Council of Australia, 2004 Edition.




AMC 110013 : March 2010                                                                                                ii
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




insufficient for AMC to prepare a discounted cash flow model. AMC therefore has
considered other methods to value the exploration assets. These methods are
commonly used to value exploration projects and are discussed in this report.

Except where otherwise identified, all monetary figures in this report are expressed in
US Dollars ("US$").

Yours faithfully




P L McCarthy FAusIMM (CP), MSME           R L Webster B.app.Sc. (Geology), MAusIMM
Director                                  Principal Geologist




AMC 110013 : March 2010                                                              iii
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




                                                     CONTENTS

1     INTRODUCTION ..................................................................................................... 1
2     SCOPE OF WORK AND VALUATION METHODOLOGY....................................... 2
      2.1 Scope of Work ................................................................................................ 2
          2.1.1   Exchange Rates ............................................................................... 2
      2.2 Valuation Methodology ................................................................................... 2
3     THE ARIPUANÃ PROJECT .................................................................................... 4
      3.1 Introduction..................................................................................................... 4
      3.2 Location and Description ................................................................................ 4
      3.3 Land Holding and Mineral Tenements ........................................................... 5
      3.4 Exploration History ......................................................................................... 7
      3.5 Geology .......................................................................................................... 7
      3.6 Mineral Resources and Ore Reserves ........................................................... 9
      3.7 Mining ........................................................................................................... 11
      3.8 Metallurgy ..................................................................................................... 11
      3.9 Marketing ...................................................................................................... 12
      3.10 Environment ................................................................................................. 12
4     VALUATION OF THE ARIPUANÃ PROJECT ....................................................... 13
      4.1 Introduction................................................................................................... 13
      4.2 Past Expenditure Method ............................................................................. 13
      4.3 Previous Valuations ...................................................................................... 14
      4.4 Past Transactions ......................................................................................... 14
      4.5 Comparable Transactions ............................................................................ 14
          4.5.1    San Anton ....................................................................................... 14
          4.5.2    Panorama ....................................................................................... 15
          4.5.3    Izok Lake ........................................................................................ 15
          4.5.4    Century Area .................................................................................. 16
          4.5.5    Parys Mountain............................................................................... 16
          4.5.6    Dairi ................................................................................................ 16
          4.5.7    Abra ................................................................................................ 17
          4.5.8    Coricancha ..................................................................................... 17
          4.5.9    Ambler ............................................................................................ 17
          4.5.10 Silvertip ........................................................................................... 18
      4.6 Other Valuation Methods .............................................................................. 18
      4.7 Karmin’s Surface Gold Rights ...................................................................... 18
      4.8 Conclusion.................................................................................................... 19
5     LIMITATIONS AND ASSUMPTIONS .................................................................... 20
           5.1.1  Reliance on Information.................................................................. 20
           5.1.2  Effective Date ................................................................................. 20
           5.1.3  Standard of Work............................................................................ 20
           5.1.4  Consent .......................................................................................... 21
           5.1.5  Reliance on Report ......................................................................... 21
           5.1.6  Indemnity ........................................................................................ 21
6     PRINCIPAL SOURCES OF INFORMATION ......................................................... 22
7     AMC’S AND AUTHORS’ QUALIFICATIONS......................................................... 23




AMC 110013 : March 2010                                                                                                       i
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




                             APPENDICES

APPENDIX A LIST OF TENEMENTS




AMC 110013 : March 2010                     ii
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




1     INTRODUCTION

Ignite Energy Resources Pty Ltd ("Ignite") has engaged Grant Thornton Australia
Limited ("Grant Thornton") as the independent expert in relation to a proposed
transaction between Ignite and Karmin Exploration Inc ("Karmin"). Grant Thornton has
engaged AMC Consultants Pty Ltd ("AMC") to provide this independent technical
specialist’s report for inclusion in an Independent Expert’s Report in relation to the
proposed transaction.

The Aripuanã exploration project is operated by Votorantim Metals (“Votorantim”), a
private company which is part of the Votorantim Group, one of the largest economic
groups in Brazil. Votorantim operates the largest integrated single plant aluminum facility
in the world, produces around 70% of Brazil’s nickel and is the largest producer of zinc
in Latin America. It operates two zinc metallurgical facilities.

Votorantim does not have the usual public disclosure obligations in relation to mineral
resources and ore reserves, nor does it provide regular market updates on the progress
of exploration and studies. For that reason AMC’s investigations for this report were
constrained largely to information that has been provided by Votorantim to Karmin its
30% joint venture partner, which in turn has released information to the market as it was
obtained. Both Karmin and Ignite were cooperative in obtaining information for AMC as
requested, within the constraints of this arrangement.

The most recent public Mineral Resource statement for the property is contained in a
report titled “Aripuanã Property NI 43–101 Technical Report Mato Grosso State –
Brazil”, dated 31 September 2007, prepared for Karmin by AMEC International (Chile)
S.A. (AMEC), a division of AMEC Americas Limited. Subsequent public reports by
Karmin have provided exploration updates. A second key document is entitled
“Votorantim Metals. Aripuanã Project. Technical Progress Report December 2009”.

The latter report provides a different project concept than is contained in the 2007
AMEC report, with estimates of tonnages and grades that could be mined largely by
underground methods. AMC understands that these estimates are not yet in a form that
would permit their release as estimates of mineral resources or ore reserves. AMC
views the 2009 report as a work in progress and has been informed by it but not relied
upon it in forming a view of the valuation of the Aripuanã project.




AMC 110013 : March 2010                                                                   1
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




2       SCOPE OF WORK AND VALUATION METHODOLOGY

2.1     Scope of Work

The purpose of this report is to prepare an independent assessment of the fair market
value of the Aripuanã exploration property in Mato Grosso State, Brazil, which is held in
joint venture between Karmin (30%) and Votorantim Metals (“Votorantim”) (70%), as at 1
March 2010.

AMC has completed its engagement as a Specialist in accordance with the Valmin Code
to the extent possible. For the purposes of preparing this report, AMC reviewed material
technical reports and held discussions with Karmin staff.

The Valmin Code states (clause 65) “Where inspection of a Material Mineral or
Petroleum Asset or Tenement is likely to reveal information or data that is Material to a
Report, the Expert, or, where relevant, the Specialist(s) must inspect it, providing it is
practicable to do so. If an inspection is not made, the Expert or Specialist must be
satisfied that there is sufficient current information available to allow an informed
appraisal to be made without an inspection.”

In this case AMC formed the view that a site inspection was unlikely to reveal material
information or data and there were difficulties with the practicality of a site visit. In these
circumstances, in view of the quality of the independent AMEC report described above
and the other reports listed in Section 6, AMC formed the view that it could fulfil its brief
without a site visit.

2.1.1      Exchange Rates

Throughout this report, currencies have been converted at the following exchange rates
effective 1 March 2010:
                          One US dollar = 1.058 Canadian Dollars.
                          One US dollar = 1.123 Australian Dollars.

2.2     Valuation Methodology

Valuation of exploration assets is subjective and usually involves a judgment after
application of several different commonly used methodologies. These include:
x       The Past Expenditure method which applies a judgment of effectiveness and
        prospectivity enhancement (using a prospectivity enhancement multiple or “PEM”
        generally in the range of 0.5 to 3.0) to past exploration expenditure.
x       Use of Actual or Comparable Transactions as a basis to estimate a market value.
        As many such transactions involve farm-in or joint venture deals, it can be
        necessary to modify the Deemed Expenditure in such a deal for the time impact of
        the farm-inor’s (or buyer’s) expenditure obligation and the probability that the earn-
        in expenditure will be completed. The Deemed Expenditure is inherent in all farm-
        in deals and measures the value placed on the vendor’s interest (usually the whole




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      project) at the time of the deal, if it can be assumed that the earn-in expenditure
      will be completed, in accordance with the formula:

                               Vendor' s % interest at completion
Deemed Expenditur e ($)                                                     x Buyer' s " earn - in" obligation ($)
                          Buyer' s % interest at completion of " earn - in"


      This approach includes an adjustment to take into account the market conditions
      at the time that the transaction was done and any similarities and differences with
      the property being valued, including geographic location and the relative
      exploration potentials.
      There is a distinction between the underlying value of the tenements (and related
      information) brought to a transaction and the value of participation in the joint
      venture itself, which includes the tenements and the expenditure of the farm-inor.
      As the expenditure proceeds, and if the exploration is successful, the discounts for
      probability and time will reduce and value of the tenements will increase until they
      may reach or exceed the undiscounted valuation calculated at the time the deal
      was done.
x     Use of values per square kilometre of exploration title derived from Actual or
      Comparable transactions in similar geological terrains. Small mining leases with
      identified Mineral Resources usually transact at much higher unit values than large
      exploration licenses, other things being equal. Mature areas with limited obvious
      prospectivity usually transact at the lower end of the range and areas of limited
      exploration testing but with evidence of good mineralisation at the higher end.
x     Use of value per unit of metal contained in resources (“Yardstick Values”). Again
      this is based on comparable transactions. While this can be useful in valuing gold
      projects, it is much less reliable for base metals because capital costs,
      infrastructure requirements and net operating margins can vary widely.
x     An Expected Value approach where there is sufficient information to enable an
      indicative Net Present Value calculation which takes into account risk associated
      with the status of the project.

All of these approaches are used where applicable to help judge the value range for a
particular tenement or project. That value is considered to represent a measure of future
economic worth or of sale value to a hypothetical third party. The impact of taxation,
either as a benefit for exploration expenditure or as a possible deduction to economic
value if a mine results, is considered to be inherent in the final value chosen.

The Valmin Code considers both a “Technical Value” and a “Strategic Value”, which is a
premium or discount to the former, in assessing a Fair Market Value. In this case, AMC
has estimated a Fair Market Value by taking into account recent transactions for projects
but has not considered short-term trends in the market capitalization of exploration
companies.




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3     THE ARIPUANÃ PROJECT

3.1   Introduction

In 2004 a Joint Venture agreement was signed between Karmin, Anglo American
(“Anglo”) and Votorantim to complete an exploration program and feasibility assessment
of the Aripuanã polymetallic (Pb-Zn-Cu-A-Au) sulphide deposit in Mato Grosso State,
Northwestern Brazil. Votorantim has been joint venture operator since that time.

The joint venture company is Mineração Dardanelos Ltda (“MDL”). With the agreement,
Anglo transferred 49% of its shares to Votorantim and with the issue of a final feasibility
assessment document, Anglo would transfer the other 29% to Votorantim. Once this has
occurred the stock structure of MDL will be Votorantim owning 70% of the company’s
shares and Karmin the remaining 30%. The joint venture relates to the sulphide
orebodies only, with Karmin retaining 100% of the rights to surface oxide gold deposits.
AMC was not shown any analysis that showed these deposits are likely to be
independently viable and has not considered them in valuation of the Aripuanã project.
They are discussed further in Section 4.7.

In late 2007 Votorantim commissioned GRD Minproc (GRD) to conduct engineering
work to drive a Bankable Feasibility Study for the project, including a detailed review and
sign-off on the latest resource model available in accordance of NI 43-101 requirements.
Votorantim was to be responsible for estimation of ore reserves and preparation of a life-
of-mine production schedule. This work was slowed down in 2008 because of low metal
prices but has continued to progress, although the latest draft report (incomplete) still
refers to a “preliminary feasibility assessment”.

3.2   Location and Description

The Aripuanã deposit is located in Mato Grosso state, Western Brazil, north-northwest
of Cuiabá and Brasilia. It lies 25 km from the town of Aripuanã, which is situated
1,200 km north-northwest of Brasilia. Aripuanã is connected by 972 km of paved and
non-paved road to Cuiaba, the capital of Mato Grosso state (Figure 1).




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Figure 1     Aripuanã Location Map

                     Amazonas                                           N
                                                             Pará

                                        Apiacás
                              Aripuanã
                                                                            Vila Rica
                             ^      Juruena




                                                                                 Tocantins
                                              Tabaporã
                   Rondônia

                                          Mato Grosso Gaúcha do
                                                                    Norte
                                                   Nova
                               Nova Lacerda       Mutum


                                                  Cuiaba                Araguaiana
                   Bolívia
                                        Cáceres
                                                         Rondonópolis
                          Legend
                                                                        Goiás
                                                            Alto Araguaia
                           City
                            Roads
                                               Mato Grosso do Sul




The project lies at 250m to 350m above sea level and comprises two deposits, Arex and
Ambrex, which occur approximately 2 km apart on a steep ridge surrounded by flat
ground. Vegetation is dense on the ridge, but has been largely cleared in surrounding
areas which are used primarily for agricultural purposes and extensive cattle grazing.
The climate is hot and humid, with a well marked rainy season from October to April.
Average annual rainfall is 2,026 mm, while annual evaporation is 1,216 mm.

Local infrastructure is limited. Access to the deposit site is via dirt roads and tracks,
while Aripuanã city is linked to the national road system by unpaved roads of variable
quality during the year. The town has an unpaved airstrip suitable for light aircraft. There
are no regular flights. Transport by road in summer (rainy) season is a critical issue,
which affects the project’s attractiveness and feasibility.

Currently, there is no power grid in the mine site, but a 261 MW hydroelectric station is
due to be completed at Aripuanã city in 2011. Numerous rivers occur close to the
project, and water supply is not expected to be an issue. No skilled mining workforce
exists in the district. Aripuanã has a hospital and limited medical facilities, plus primary
schools, but no secondary schools.

Historically the region is characterized by small gold placer deposits, most of them
abandoned for some years. The local wood industry is in crisis due the stringent
environmental regulatory legislation in the Legal Amazon area.

3.3   Land Holding and Mineral Tenements

As a result of the original joint venture arrangements involving Anglo, Karmin and
Votorantim, parts of the surface landholding are registered under the names of




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representatives of each of the three companies. There are some irregularities in the land
holdings due to the way in which they have evolved. The land registration process is
ongoing and must be maintained to protect the titles against the claims of prospectors,
indigenous groups and others.

While the areas proposed for mining and processing plant have already been acquired,
additional areas are needed for a buffer zone around the mines, and areas for project
infrastructure, such as tailings storage facilities, waste dumps, areas for environmental
compensation and roads for ore transportation or vehicle traffic in general. Land
acquisition is also required for the electrical power transmission line and water pipeline.

It is reported by Votorantim that no protected areas such as Private Reserve of Natural
Heritage, Permanent Preservation Areas or land rights areas impact on the project.
Specific constraints on development exist within the Legal Amazon, with the legal
environmental reserve covering 80% of the total area of the property.

The mineral resources at Aripuanã are covered by 25 mining tenements listed in
Appendix A. The tenements, which have a combined area of 11,046 hectares, are
registered at the Departamento Nacional da Produção Mineral, the Brazilian mining
regulatory agency within the Ministry of Mines and Energy (“DNPM”) in the name of
Mineração Dardanelos Ltda., Anglo American Brasil Ltda, Anglogold Ashanti Brasil
Mineração Ltda. and Votorantim Metais Zinco S/A. Of those 25 tenements, six had their
Final Study Report submitted in the 1990s. The approval process was suspended due
to a request for interruption that was based on the technical-economic feasibility
situation at the time. In May 2008, the DNPM requested the submission of new
assessments as a result of the increase in metal prices. The requirement was fulfilled on
14 February, 2008, and, of the six tenements, one had its Final Study Report approved
on 11 July, 2008.

Applications for Environmental Licenses, referred to as Utilisation Guides, are at various
stages.

AMC has not independently verified the legal status of the mineral assets but has been
provided with a copy of a letter to Karmin from Fraga, Bekierman and Pacheco Neto
lawyers dated March 2, 2010, which sets out their status. This letter has also been
provided to Grant Thornton, and AMC's valuation has been prepared on the basis that
the legal status is secure. AMC has relied in particular on Clause 11 of the letter which
states:

“According to the information gathered in the documents already under our possession,
Votorantim’s reports and DNPM online data, the tenures encompassed by the
Association Agreement are Active, meaning that the owner is validly authorized to
exercise the mineral rights granted and there is no decision or order to the contrary. Also
trusting on the data gathered on line and Vororantim’s Technical Report, there is no
indication that any lack of expenditure or other requirements jeopardizes the extension
of the leases.”

The above statement was qualified by a footnote in regards to lease 866.631, which had
an inconsistent status on the DNPM database and was to be further checked.




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3.4     Exploration History

Recent history of the deposit began with Garimpeiros (artisanal miners) discovering gold
mineralization in streams draining the area in the 1980s with a major gold rush between
1988 and 1992. Western Mining Corporation optioned the centrally located Expedito
licenses between 1992 and 1994, dropping them when they left Brazil. Anglo American
Brasil Ltda acquired the surrounding properties in 1993 and carried out systematic
exploration culminating in the discovery of the Arex deposit in 1995. Madison do Brasil
optioned Expedito's claims and in turn optioned the property to Karmin. In 1996 Karmin
(then called Ambrex) discovered the Ambrex deposit and surrounding mineralization at
Upper & Lower Toddy, Massaranduba and Babaçu. In 1997, Noranda optioned the
Karmin property, but dropped it in 1998. In 1999, Anglo American and Karmin formed a
joint venture to explore the district jointly. Exploration by the Anglo American and Karmin
JV included airborne geophysics and core drilling, and focused on the Arex, Ambrex and
Mocotó areas.

Massive sulphide mineralisation was discovered at Aripuanã following systematic
exploration by Anglo American Ltda. (Anglo) in 1995. Thereafter there have been
several phases of exploration involving Anglo and Karmin, during which geological
mapping, geochemical and geophysical surveys and drilling were completed.
Votorantim negotiated an arrangement to acquire Anglo’s interests in 2004, since when
it has managed exploration activities.

Diamond drilling has been the primary exploration tool, and a total of 292 holes have
been completed, of which 224 holes have tested the Arex and Ambrex deposits. This
total includes a small number of shallow RC drill holes. Core size varies from HW
(76.2mm) to HQ (63.5mm) and NQ (47.6mm). The field work completed is summarized
in Table 1.

Table 1      Exploration History
            Ground          Aerial                          Stream
           Geophysics     Geophysics   Mapping     Soil      Sed.      Drilling    Core
                                2          2
Year         (km)           (km )       (km )    Geotech    Geoch.       (m)      Geotech
2004           18             0           0         0         0         9,189      2,878
2005            0             0          15        657       317        9,557      1,348
2006           55             0          445      4,341      237       12,074      1,708
2007            0             0          211      1,577       0        29,435      3,440
2008            0            197         853      2,018      249       14,502      4,496
Total           73           197        1,524     8,593      803       74,758      13,870



3.5     Geology

The Aripuanã polymetallic deposits are considered to be typical of mineralization
developed in volcanogenic massive sulphide, Noranda-type settings. The deposits are
located on the central-southern portion of the Amazon Shield. Paleoproterozioc and
Mesoproterozoic lithostratigraphic units predominate in the region, and are assigned to
the 1.85-1.55 Ga Rio Negro-Juruena geochronological province.




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The lithological assemblage generally strikes NW-SE, and at surface generally dips
between 35° and 70° NE. Felsic volcanic rocks predominate in the deposit area.
Stratigraphic features have been offset by sinistral, east-west wrench faults. Massive,
stratabound sulphide mineralization, as well as vein and stockwork-type discordant
mineralization, have been described and form two main elongate, basin-shaped
mineralized zones, Arex and Ambrex. Up to five other, continuous mineralized horizons
occur to the east, and three additional zones occur to the west of Arex-Ambrex. The
mineralized horizons extend for over 9 km total length and over 1 km average width.

The individual mineralized bodies have complex shapes due to intense tectonism. The
Arex mineralized zone has dimensions of 1,400m in length, 200m down dip and 60m of
maximum thickness. The Ambrex mineralized zone extends for 1,050m in length, 400m
down dip and has a 150m maximum thickness. Mineralization, in order of economic
abundance, comprises zinc, lead, copper and accessory gold and silver.

The Arex and Ambrex deposits are VHMS (volcanic-hosted massive sulphide-style)
deposits subsequently deformed and metamorphosed under greenschist facies
conditions. Two fundamental styles of mineralisation are recognised, namely:
x     Proximal and distal stratabound massive sulphides comprising stratabound Zn-Pb
      mineralisation; with sphalerite, galena, pyrite and pyrrotite, often finely banded,
      with fine-grained pyrite, pyrrotite and sphalerite, sometimes associated with
      galena.
x     Stockwork/Stringer facies: Cu-Au bearing stringers in the footwall of the
      stratabound mineralisation, containing chalcopyrite and pyrrotite, with stockwork
      and breccia textures, corresponding to hydrothermal feeder zones.

The Gossan bodies, which frequently mark the position of overthrust faults, contain
moderate levels of gold, but tonnages are limited and thus do not appear to be
economic at this time.




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Figure 2     Geological Map of the Aripuanã Property (from AMEC 2007)




3.6   Mineral Resources and Ore Reserves

The latest published information is contained in the 2007 AMEC NI 43-101 report and is
summarized in the following tables.




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Ambrex Mineral Resources*

                  Tonnage               Zn               Pb                Cu               Au               Ag
                      (kt)             (%)               (%)              (%)              (g/t)             (g/t)
Indicated           18,322             4.03             1.52              0.09             0.18               36
Inferred             3,528             4.29             1.51              0.07             0.25               42
* Resources reported for Ambrex are contained in the stope shapes defined using a NSR cut-off of US$ 20/t.


Arex Mineral Resources - Cut-off 1.8% ZnEq

                  Tonnage               Zn               Pb                Cu               Au               Ag
                      (kt)             (%)               (%)              (%)              (g/t)             (g/t)
Indicated            9,380             2.54             1.00              0.58             0.45               35
Inferred             2,245             2.54             1.02              0.51             0.60               20


Details of sampling, data verification, geological interpretation and resource modeling
are given in the AMEC report, which is available from the Karmin website at
http://www.karmin.com/assets/pdf/AMECAripuana-TechnicalReport-2007.10.31.pdf.

AMEC’s relevant conclusions in relation to the mineral resource estimates are
reproduced here:
x      AMEC recognizes that the interpretation respects the data recorded in the logs
       and the sections, as well as the interpretation from adjoining sections, and is
       consistent with the known characteristics of this deposit type. The lithologic model
       has been diligently constructed in conformance to industry standard practices.
x      The geology of Ambrex and Arex deposits is reasonably well understood. Main
       mineralization controls (lithological and structural controls) have been identified,
       and have been used in domaining for grade estimation.
x      Drilling and sampling procedures, sample preparation and assay protocols for the
       different drilling campaigns meet acceptable practices for core drilling in the
       exploration and mining industry.
x      The Au, Ag, Cu, Pb and Zn assay data from the Votorantim exploration campaigns
       are sufficiently precise and accurate to be used for resource estimation purposes.
x      AMEC does not consider the procedures used for determination of bulk density as
       best practice to be used for resource estimation purposes. However, considering
       the large amount of determinations, the low porosity of most local lithologies and
       the large sample size used in the bulk density determinations, AMEC has used
       this information to estimate the average density of the main mineral types in the
       Arex and Ambrex deposits.
x      Drilling density is sufficient to generate a reliable resource estimate at a global
       scale, but is insufficient to capture local features.
x      In terms of grade estimation, the resource model is globally reasonable, and the
       stratabound and stringer estimates are globally unbiased.




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x     Mineralization remains open in the areas in between Arex and Ambrex and at the
      bottom of both bodies. Other exploration targets like Massaranduba and Boroca
      present potential to add mineral resources to the property.

Since 2007, studies by GRD and Votorantim have refined the resource models and
changed the previous mine planning emphasis from open pit mining to underground
mining. AMC’s assessment of the recent work is that by applying higher cut-off grades
and more selective mining;
x     Around six million tonnes can be mined from Ambrex at grades of 6 to 7% Zn and
      around 2.5% Pb.
x     Arex is likely to deliver around seven million tonnes at 5 to 6% Zn and around 2%
      Pb.
x     Both will have Ag credits, with Arex having Au and Cu credits.

There is potential to develop an open pit in the upper portion of Arex, which would
increase the metal recovery but deliver lower grades. Around 1 Mt of ore might be
recovered from an open pit.

3.7   Mining

Based on the studies reviewed, AMC considers that underground mining at 0.8 to
1.0 Mtpa is likely to provide the best investment case. Two ramp-access mines will be
required to access the two deposits, with stoping based generally on cut-and-fill
methods and sublevel open stoping in the lower Ambrex orebodies. Multiple internal
ramps and ventilation raises will be required to access the various ore lenses.

While geotechnical work has suggested that mining conditions will be good, AMC’s
experience is that mining in these geological conditions can be complex with local areas
requiring careful ground support.

3.8   Metallurgy

The proposed metallurgical process comprises:
x     Primary, Secondary and Tertiary crushing.
x     Single stage closed circuit ball milling with cyclone classification.
x     Talc or light mineral flotation including cleaning and hydrostatic separation.
x     A light tail stream which proceeds directly to final tail is produced.
x     Copper/lead bulk flotation followed by copper/lead concentrate cleaning.
x     Copper/lead separation flotation of the copper/lead cleaned concentrate.
x     Copper cleaning flotation of the flotation “scalped” product from the copper/lead
      separation.
x     Lead cleaning flotation of the copper/lead separation flotation reject stream.
x     Zinc bulk flotation followed by cleaning of the zinc concentrate produced.




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x     Zinc flotation tailings and light flotation tailings are thickened separately and the
      thickener underflow tails are sent to the tailings dam.

Testwork to date indicates the following metallurgical recoveries to concentrate:
                          Zinc     91%
                          Lead     90.4%
                          Copper   73.9%
                          Silver   72.6%
                          Gold     88.6%

Further metallurgical testwork and pilot plant studies are required to refine the design
and improve the estimates of recovery.

3.9   Marketing

Concentrates could be sold to Brazilian smelters or could be exported. A major
impediment to development is the ability to transport concentrates (and deliver supplies)
as the project is located around 3,000 km from the nearest established Brazilian port.
The region is not served by regular railway lines, and at least 270 km of the access
roads are unpaved with access seriously impeded during the rainy season (November to
April). Thus logistics will be expensive and capital will be required to upgrade access for
construction and operation, subject to negotiation with provincial and national
governments.

3.10 Environment

Studies to date have addressed the key infrastructure and closure requirements, without
identifying any “show stoppers”. However, environmental legislation in the Legal
Amazon region is tending to become more restricted as time passes. AMC considers
that having Votorantim as operator, with local knowledge and connections, is crucial in
advancing the project to feasibility.




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4     VALUATION OF THE ARIPUANÃ PROJECT

4.1   Introduction

Karmin’s principal asset is its 30% interest in Aripuanã. Votorantim is fully funding the
project to a bankable feasibility study, and Karmin is not required to contribute until
18 months after the completion of the study.

Prima facie, Karmin’s market capitalisation of about US$7.5M (26 February 2010), after
adjustment for other balance sheet items, should reflect a fair market value of its interest
in Aripuanã. However, stock market prices reflect global and regional conditions and
sentiments that can and do change rapidly. In addition, the market can be poorly
informed from time to time and AMC’s responsibility in this report is to conduct an
assessment of the Aripuanã project and provide an opinion of its fair market value
without reference to the current share market price of Karmin.

4.2   Past Expenditure Method

The Past Expenditure method of valuation is usually used on early-stage projects,
before significant mineral resources have been estimated. It becomes less useful as the
project advances into studies, as is the case with Aripuanã. Prospectivity enhancement
multiples (“PEMs”) as high as three times can apply when accrued expenditure remains
low but has given excellent results, with the prospect of a resource estimate in the near
future. As the project advances further, the PEM tends to fall again. This can be
explained by saying that the value of a mineral property in relation to past expenditure
tends to be a maximum before serious (and expensive) feasibility studies begin.

At this stage of the Aripuanã project, AMC considers that the exploration spending has
been effective and that a PEM in the range 1.2 to 1.4 is appropriate.

Votorantim has reported to Karmin that it has spent the following sums on the Aripuanã
project (calculated by Karmin at one C$=1.71 Reals):

                                  Brazilian Real   Canadian Dollars
                                     (Millions)        (Millions)
                          2004          2.75              1.6
                          2005          6.64              3.9
                          2006          7.81              4.6
                          2007         16.94              9.9
                          2008          8.04              4.7
                          Total        42.18             24.7


Votorantim carried out pre-feasibility studies through 2009 and, from the work
undertaken, AMC estimates that at least a further C$1.0M was expended in that year,
taking the total to at least C$25.7M.




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Applying the chosen PEMs, AMC values the project based on past expenditure at
C$30.8 to $36.0M, or US$29.1M to US$34.0M. While AMC is aware that substantial
expenditure must have taken place on the properties prior to 2004 it was not able to
obtain details of that expenditure. AMC considers that the expenditure since 2004 is
most relevant and provides a reasonable basis for valuation using this method.

4.3     Previous Valuations

AMC is advised by Karmin and Ignite that there have been no previous public valuations
of the Aripuanã exploration project.

4.4     Past Transactions

In February 2000 Anglo American Brasil Ltda (“AAB”) agreed with Mineracao Rio
Aripuanã Ltda (“MRA”), an 85% subsidiary of Karmin, to form a new corporate entity, to
be owned 70% AAB and 30% by MRA. MRA contributed its 2,000 Ha Aripuanã property
which hosts the Valley deposit (as it was then known) and AAB contributed the
surrounding 9,046 Ha property which hosts the Arex deposit. To maintain its interest
AAB agreed to spend a minimum of US$3.25M before 30 June 2003. MRA would be
free carried through to completion of a bankable feasibility study.

Because exploration properties were contributed by both parties AMC is unable to
estimate a value of the combined entity from the details of the transaction, but it is not
inconsistent with a substantial valuation.

In June 2004 Votorantim agreed to earn into AAB’s position through an undisclosed
transaction, which included a requirement to spend US$1.6M by December 2005. Due
to the lack of detail, AMC is unable to ascribe a value to this transaction.

As discussed in Section 4.2 above, exploration expenditure of at least C$25.7M since
(and including) 2004 has been successful and has greatly enhanced the value of the
project since these transactions occurred.

4.5     Comparable Transactions

AMC has identified a number of transactions that provide some guidance to the value of
Aripuanã. These are described below in chronological order.

4.5.1     San Anton

In July 2004, Kings Minerals joint ventured the San Anton project in Guanajuato State,
Mexico, with Wheaton Minerals. Kings Minerals was to spend US$13M to earn 75%,
with Wheaton having the right to earn back up to 70% by spending US$39M. The
agreement involved staged payments. San Anton is gold-silver-copper-zinc-lead
porphyry system that had received limited modern exploration and had no estimated
mineral resources. The total concession area was 8,459 Ha.




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By calculation, and assuming the terms of the initial joint venture were subsequently
met, the value of the tenements brought to the joint venture was US$4.3M and the value
of the completed joint venture was US$17.3M. However, to determine the value at the
time the joint venture was agreed a discount must be applied for the probability of the
earn-in being completed and for the time value of money. The value of the tenements at
the time of the deal with a 50% discount for probability and time is US$2.2M.

The second part of the deal acknowledged that the project might come to have a value
substantially in excess of US$39M if exploration was successful.

By comparison, the status of San Anton at the time of this deal was somewhat similar to
the AAB part of the Aripuanã project prior to its joint venture with Karmin. The merger of
properties and subsequent exploration of Aripuanã have enhanced its value well beyond
the value that can be attributed to San Anton in July 2004.

4.5.2     Panorama

In May 2005 CBH Resources Ltd entered into a joint venture with Sipa Resources Ltd to
earn a 60% interest in the Panorama project in a volcanogenic massive sulphide belt
120 km from Port Hedland in Western Australia by spending A$4M over five years. The
project included three copper-zinc deposits and five other prospects, including Indicated
Resources of 0.97 Mt at 0.7% Cu and 9.9% Zn, with further Inferred Resources in an
area of 58 sq km.

By calculation, and assuming the terms of the initial joint venture were subsequently
met, the value of the tenements brought to the joint venture at today’s exchange rate
was US$2.4M and the value of the completed joint venture was US$5.9M. The value of
the tenements at the time of the deal with a 50% discount for probability and time is
US$1.2M.

As in the San Anton transaction, this is analogous to a much earlier phase of exploration
at Aripuanã.

4.5.3     Izok Lake

In February 2006 Wolfden Resources announced the acquisition of several prospective
base metal projects from Canadian producer Inmet. For the issuance of 13.5 million
shares (valued at approximately C$52.7 million), Wolfden acquired Izok Lake (16.5
million tonnes grading 2.2% Cu,11.4% Zn, 60 g/t Ag), Gondor (7.3 million tonnes
grading 0.2% Cu, 4.8% Zn, 46 g/t Ag), and Hood projects (3.2 million tonnes grading
2.6% Cu, 3.6% Zn, 18 g/t Ag). Nearly all of the resources were in the Indicated category.

The consideration recognised the synergy realised by Wolfden by combining these new
projects with its High Lake and Ulu Gold projects to create a Nunavut-centred mining
company. It was expected at the time that Wolfden would rapidly advance the Izok Lake
projects to Feasibility, but it sold out a year later to Zinifex Ltd.




AMC 110013 : March 2010                                                                 15
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
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At advanced pre-feasibility, these projects were at a similar stage to Aripuanã today.
The deal value of US$49.8M (at today’s exchange rate) is more than the value of
Aripuanã because:
x       The properties were copper-rich when prices were higher and they are of higher
        grade than Aripuanã.
x       The total contained metal was substantially more than at Aripuanã.
x       There was a synergy value for the buyer.
x       The consideration was in shares and not in cash.

After these considerations, the deal is not inconsistent with a US$20M to $30M value for
Aripuanã today.

4.5.4     Century Area

In March 2006 Zinifex Limited entered into a joint venture agreement with SmartTrans
Holdings Limited to earn a 70% interest in nine base metal exploration tenements
covering 78,000 Ha located in the vicinity of the Century zinc mine in north-west
Queensland through the expenditure of A$10M over 7.5 years. By calculation, and
assuming the terms of the joint venture were met, the value of the tenements brought to
the joint venture was US$3.8M which should be discounted to US$1.5M after applying a
50% discount for time and probability of completion.

This was an early-stage exploration property and had value because of its proximity to
an operating mine.

4.5.5     Parys Mountain

In April 2008 Western Metals Ltd signed a Term Sheet to acquire 100% of the advanced
Parys Mountain Cu-Pb-Zn-Ag-Au project on the island of Anglesey in North Wales from
Anglesey Mining plc, who reportedly had spent A$29M on exploration and development,
although no Mineral Resources were reported. The terms were an immediate payment
of A$7.6M in cash and shares followed by a further payment of A$21.5M on completion
of a successful bankable feasibility study, which was expected to cost Western Metals
A$12-15M. In the event, the transaction did not proceed beyond due diligence.

The implied value, had the deal proceeded, lies between the immediate US$6.8M
payment (at today’s exchange rate) and the total payment of US$25.9M, the higher
figure requiring substantial discounting for time and probability at the time of the deal.

The past expenditure was of the same order as for Aripuanã and the resources were
less well defined, although more on-site development had been done.

4.5.6     Dairi

In July 2008 Indonesian company PT Bumi successfully offered A$563.5M to acquire
Herald Resources Limited. Herald’s main asset was an 80% interest in the Dairi lead-




AMC 110013 : March 2010                                                                 16
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
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zinc deposit in Sumatra, which was stalled at the pre-development stage due to local
permitting issues. The project had a resource base of 17.9 Mt at 12.6% Zn and 7.3% Pb,
with reserves of 6.5 Mt at 14.4% Zn and 8.7% Pb.

While the overall resource tonnage at Dairi was only 53% of the Aripuanã resource, the
grades, contained metal and financial returns were much more attractive. As the
transaction was for the company and included other assets it is not possible to derive a
project value other than to say that a high grade base metal project with feasibility
studies completed can be very valuable in the right market environment.

4.5.7     Abra

In May 2008 Hunan Nonferrous Metals Corporation successfully offered $0.83 per share
for 70% of the shares in Abra Mining Limited that it did not already own. This price
effectively valued 100% of the company at A$117M, but included a substantial takeover
and control premium at a time when metal prices had peaked and the market
capitalisation of Abra has since fallen to about A$23M. Abra’s principal asset was the
Abra Cu-Pb-Zn-Ag-Au deposit and surrounding 2,850 sq km of exploration tenements
about 200 km north of Meekatharra in Western Australia. The Abra project included a
reported Inferred resource in the Abra deposit of 50 Mt at 4.0% lead and 10 Mt at 0.6%
copper.

This example is not inconsistent with a valuation exceeding US$ 20M for Aripuanã.

4.5.8     Coricancha

In October 2009 Nystar NV agreed to buy 85% of the Coricancha mine in Peru from
Gold Hawk Resources Inc for US$15M in cash. Production from the mine had been
suspended the previous year due to ground instability and it had very limited ore
reserves of about 460,000t at 4.8 g/t Au, 171 g/t Ag, 2.2% Pb and 2.9% Zn. The
business plan was based on a three year remaining life.

As the mine was in a care and maintenance condition there was little capital expenditure
required. This example is not inconsistent with a valuation exceeding US$20M for
Aripuanã.

4.5.9     Ambler

In December 2009 NovaGold Resources Inc agreed to buy the Ambler project in
northern Alaska from subsidiaries of Rio Tinto plc for US$29M. Ambler was an
undeveloped Cu-Zn-Au-Ag volcanogenic massive sulphide project within a 14,000 Ha
exploration property. Rio Tinto retained a royalty that could be purchased at any time for
US$10M. The project had Indicated Resources of 16.8Mt at 4.14% Cu, 6.03% Zn,
0.94% Pb, 59.6 g/t Ag and 0.83 g/t Au. Inferred Resources were 11.9Mt at 3.56% Cu,
4.99% Zn, 0.8% Pb, 48.4 g/t Ag and 0.67 g/t Au.




AMC 110013 : March 2010                                                                 17
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




The total Indicated and Inferred resource tonnage was about 85% of Aripuanã but the
grades, particularly for copper, were substantially higher. The price of US$39M
(including royalty) would suggest a valuation of US$20 to $25M for Aripuanã.

4.5.10    Silvertip

In February 2010 Silvercorp Metals Inc agreed to buy a 100% interest in the Silvertip
silver-lead-zinc project covering 216 sq km in northern British Columbia. Total
consideration was C$15M with 50% in shares and 50% in cash. The project had
Indicated Resources of 2.4Mt at 9.4% Zn, 6.7% Pb, 352 g/t Ag and 0.54 g/t Au. Inferred
Resources were 0.5 Mt at 9.8% Zn, 6.2% Pb, 343 g/t Ag and 0.23 g/t Au.

The total resource tonnage was only 8% of Aripuanã although the grades were
substantially higher.

4.6   Other Valuation Methods

In view of the advanced stage of exploration at Aripuanã, AMC considers that an
approach based on a value per square kilometre of exploration tenements is not
appropriate. Similarly, Yardstick Values based on in-ground metal content are not
meaningful except as a ranking tool. On that basis the Izok Lake, Dairi, Abra and Ambler
properties described above rank higher than Aripuanã while the others rank lower. Other
factors such as resource grades, location, metal prices and exploration stage can be
more important.

AMC considers that a Net Present Value approach, or an Expected Value approach
including a probability risk weighting, could be used once the present Votorantim
technical studies become available. At present, aspects of the studies have not been
finalised to an extent to permit AMC to prepare meaningful valuation models.

4.7   Karmin’s Surface Gold Rights

AMC was asked to provide an opinion on the value of surface gold rights held by Karmin
over part of the project area. Karmin reports that it owns 100% of the oxide concessions
of the complete Aripuanã District. These consist of a weathered oxidized zone from
surface up to 40 metres thick covering the complete concession. Mineralization in the
oxide zone is of three styles: firstly weathered massive sulphides, known as gossans, as
found at “Expedito’s Pit” overlying the Ambrex deposit, secondly gold in quartz veins
developed in a late shearing event, as found at Cabeça Branca and Arex, and thirdly
alluvial deposits which were exploited by artisanal miners up to the early 1990s.
According to a report by Anglo, the best grades to date have been 8m grading 9.55 g/t
gold and 14m grading 4.73 g/t gold at the Cabeça Branca area, near Mocoto and
adjacent to the Arex resource where 25m grading 5.2 g/t gold was found.

From the information provided, AMC was not able to confirm the extent of Karmin’s
surface gold rights. AMC was advised by Karmin that exploration and evaluation was
done by Anglo prior to 2000. A review report by ACA Howe dated July 12, 2000
concluded that the database including assay quality control was of “uncertain reliability”




AMC 110013 : March 2010                                                                 18
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




and that the entire resource was classified as an Inferred Resource under the JORC
Code. The gold component comprised an estimated 333,000t at 7.3 g/t gold and 5.1 g/t
silver.

Karmin advised AMC that any value would be realised by doing further exploration and
resource estimation prior to selling the gold rights into the Aripuanã project once it is
operational, at which time a separate gold recovery circuit might be justified.

AMC concedes that the surface gold rights must have a separate and positive value to
Karmin. On the limited information available AMC considers that this value would not
exceed US$0.5M.

4.8   Conclusion

Using the Past Expenditure method (Section 4.2) AMC estimates the value of 100% of
the Aripuanã project at US$29.1M to US$34.0. With reference to comparable
transactions (Section 4.5), AMC estimates the value of 100% of the Aripuanã project at
US$20M to US$25M. This valuation includes the Arex and Ambrex deposits and the
exploration potential of the Aripuanã tenements.

AMC concludes that the Fair Market Value of 100% of the Aripuanã project lies in the
range US$20M to US$34.0, with a preferred value of US$25M.

This valuation reflects the following key observations:
x     Recent studies have enhanced the economics of the project by replacing open pit
      mining with selective underground mining, so that AMC expects the project is likely
      to proceed under a reasonable range of long-term metal price forecasts.
x     Since the current joint venture was established there has been substantial
      investment and progress. Any discount for probability and time that might have
      applied to a valuation based on the transaction at the time the joint venture was
      established is no longer appropriate.
x     The valuation of Aripuanã is particularly dependent on expectations of the long-
      term zinc price, on future environmental constraints in the Legal Amazon and on
      resolution of the challenges of transportation to and from the project site.

It should be noted that a valuation of Karmin’s 30% interest in the Aripuanã project
should take into account Karmin’s free-carried position through to completion of a
bankable feasibility study. Karmin also holds surface gold rights, to which a value of
$0.5M may be attributable.




AMC 110013 : March 2010                                                                19
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




5       LIMITATIONS AND ASSUMPTIONS

5.1.1     Reliance on Information

In AMC’s letter of engagement, Ignite agreed to comply with the obligations of the
commissioning entity under the Valmin Code, including that to the best of its knowledge
and understanding, complete, accurate and true disclosure of all relevant material
information has been made.

Ignite has advised AMC in writing that to the best of its knowledge and understanding
complete, accurate and true disclosure has been made to AMC of all material
information relevant to the projects described in our report. In preparing this document,
to the extent that it is based on information and reports provided by Ignite, AMC has
relied on information and reports provided to it by Ignite. AMC accepts no liability in
respect of such data or information, save that it has exercised reasonable care as set
above, in the use of such data and information. AMC makes no representation and gives
no warranty as to the accuracy or completeness of the data or information contained in
any information or reports that it has relied on.

Ignite and Grant Thornton have been provided with drafts of our report to enable
correction of any factual errors and notation of any material omissions. The views,
statements, opinions and conclusions expressed by AMC are based on the assumption
that all data provided to it by Ignite are complete, factual and correct to the best of
Ignites’ knowledge.

5.1.2     Effective Date

The conclusions in this report are effective as at the date of the report, however those
conclusions could change in the future depending on changes in metal prices and/or
results and technical changes at the proposed operations and/or results of exploration
and/or status of tenements. AMC disclaims responsibility for any changes that may have
occurred after the date of this report.

5.1.3     Standard of Work

AMC warrants that in the preparation of this report it has taken reasonable care in
accordance with standards ordinarily exercised by members of the profession generally
who practice in the same locality and under similar conditions. AMC accepts no liability
whatsoever in respect of any failure to exercise a degree or level of care beyond such
reasonable care. No other warranty, express or implied, is given, save where
necessarily incorporated by statute. The report has been prepared in accordance with
the scope of work and for the purpose outlined in the engagement letter dated
25 February 2010 and should be read in full. No responsibility is accepted for the use of
any part of this report in any other context or for any other purpose or by third parties.
This report does not purport to give to legal advice.




AMC 110013 : March 2010                                                                 20
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




5.1.4     Consent

AMC consents to the use of this report by Ignite and Grant Thornton. Neither AMC’s
report nor any part of it, nor any reference to it, may be used for any other purpose
without AMC’s prior written consent.

5.1.5     Reliance on Report

To the extent permitted by law, AMC accepts no liability whatsoever, whether in
contract, in tort or negligence or otherwise, for any loss or damage (including
consequential or economic loss or damage) arising as a result of any person other than
the named addressees acting or refraining from acting in reliance on any information,
opinion or advice contained in this document.

No person (including the clients) is entitled to use or rely on this document and its
contents at any time at which any fees (or reimbursement of expenses) due to AMC are
outstanding and, in those circumstances, AMC may require the return to it by any
person of all copies of this document and any part of it in their possession.

5.1.6     Indemnity

Ignite has indemnified AMC in regard to damages, losses and liabilities related to or
arising out of AMC’s engagement other than those arising from willful default,
negligence or unlawful act on our part.




AMC 110013 : March 2010                                                             21
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




6     PRINCIPAL SOURCES OF INFORMATION

The following are presented in chronological order:
x     Karmin Exploration Inc. Press Release Feb 16, 2000. Karmin Exploration Inc. and
      Anglo American Brasil LTDA. Sign Formal Agreement.
x     Letter report to Karmin Exploration Inc from A C A Howe International Limited on
      assessment of estimate of Arex deposit resource as estimated by Anglo American
      Brasil Ltda. July 12, 2000.
x     Aripuanã Project Arex and Ambrex Resource Evaluation. Anglo American
      May 2002.
x     Karmin Exploration Inc. Press Release. June 23, 2004. Karmin Exploration
      announces a new partner for the 23.7 million tonne Aripuanã polymetallic massive
      sulphide project in Brazil.
x     Aripuanã Property NI 43–101 Technical Report Mato Grosso State – Brazil, dated
      31 September 2007, prepared for Karmin by AMEC International (Chile) S.A.
      (AMEC), a division of AMEC Americas Limited.
x     Karmin Exploration Inc. Corporate Presentation. Aripuanã Zinc Project, Brazil,
      2008.
x     Karmin Exploration Inc. Press Release 26 August 2008. Drill results from Aripuanã
      Feasibility Study, Brazil Includes 7 metres grading 15.3% zinc and 3.6 grammes
      per tonne gold.
x     Votorantim Metals internal presentation. Aripuanã Project, MT(Zn VMS). Late
      2008.
x     Votorantim Metals. Projeto Aripuanã MT. Relatorio de Progresso. Trabalhos de
      Pesquisa 2008.
x     Karmin Exploration Inc. Press release. Jun 17 2009. Karmin Exploration update on
      its 30% owned Aripuanã Base/Precious Metals project, Brazil. Minproc technical
      study completed, project partner Votorantim assessing options for development of
      the project.
x     Karmin Exploration Inc. Management’s Discussion and Analysis for the period
      ended October 31, 2009.
x     Votorantim Metals. Aripuanã Project. Technical Progress Report December 2009.

x     Letter dated March 2, 2010 from Fraga, Bekierman Pacheco Neto Advogados re
      Karmin assets in Brazil.




AMC 110013 : March 2010                                                              22
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




7     AMC’S AND AUTHORS’ QUALIFICATIONS

AMC is a firm of mineral industry consultants whose activities include the preparation of
due diligence reports, valuations and reviews of mining and exploration projects for
equity and debt funding and for public reports.

Neither AMC nor the contributors to this report or members of their immediate families
have any pecuniary or beneficial interest in Ignite Energy Resources Pty Ltd, Karmin
Exploration Inc. or Votorantim Metals.

AMC is being paid a fee according to its normal per diem rates and out of pocket
expenses in the preparation of this report. Its fee is not contingent on the outcome of
any transaction subject to this report.

AMC has been separately retained by Ignite Energy Resources Pty Ltd to prepare an
independent technical report on certain coal deposits in eastern Victoria.

Peter Lyle McCarthy
BSc (Min Eng), M.GeoSc (Mineral Economics), FAusIMM (CP), MSME, MAICD.

1.    I am a qualified mining engineer and geoscientist employed as Principal
      Consultant, Director and Chairman of AMC Consultants Pty Ltd.
2.    I graduated with the degree of Bachelor of Science in Mining Engineering from the
      University of New South Wales in 1976. I graduated with the degree of Master of
      Geological Science in Mineral Economics from Macquarie University in 1986.
3.    I have been a member of the Australasian Institute of Mining and Metallurgy for
      forty years and was its President in 2007 and 2008. I am a Fellow and Chartered
      Professional of that Institute.
4.    I have been employed in the minerals industry continuously for more than forty
      years and have been a consultant for more than 25 years. I have been engaged in
      preparing valuations of mineral properties for 23 years.
5.    I have twenty years experience as a non-executive director of mineral exploration
      companies.

Rodney Leonard Webster
B.app.Sc. (Geology), MAusIMM

1.    I am a qualified geologist employed as Principal Geologist of AMC Consultants Pty
      Ltd.
2.    I graduated with a degree of Bachelor of Applied Science in Geology from the
      Royal Melbourne Institute of Technology in 1980.
3.    I have been a member of the Australian Institute of Mining and Technology for
      approximately 20 years.
4.    I have been employed in the mining industry for 30 years.




AMC 110013 : March 2010                                                                23
INDEPENDENT TECHNICAL SPECIALIST’S REPORT
Aripuanã Property




                             APPENDIX A


                          LIST OF TENEMENTS




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