Letter from the Chairman
27th July 2007

Dear Shareholder,

The Company has proposed a General Meeting of shareholders at 10.00 a.m. on Friday, 31st August, 2007 at Level 14, 31 Queen Street, Melbourne. At the meeting, shareholders will be asked to consider and, if thought fit, pass the following as ordinary resolutions:

  1. ratify the issue of 65,853,651 shares at an issue price of 4.1 cents per share in January 2007;

  2. authorise the issue of 133 million ordinary shares at an issue price of 25 cents per share, to raise $33.25 million, by way of a placement to various sophisticated and professional investors arranged through
    E.L. & C. Baillieu Stockbroking Limited in accordance with an agreement signed on 18th July 2007;

  3. authorise the issue of 30 million ordinary shares to the members of Helm Energy-Australia, LLC (“HEA”), comprising the non-cash component of the consideration to acquire the entire issued capital of HEA, in accordance with a Sale Agreement signed on Tuesday, 24th July 2007; and

  4. authorise the issue of 4,000,000 options to an entity associated with the Company’s Chief Operating Officer and Executive Director, Mr Ian Gorman.

The proposed acquisition of HEA was announced to Australian Securities Exchange Limited (“ASX”) on 29th June, 2007 and the placement through E.L. & C. Baillieu Stockbroking Limited and Wilson HTM Corporate Finance Limited on 23rd July, 2007.  

HEA is a participant in various joint ventures with the Company’s wholly-owned subsidiary, Lowell Petroleum N.L., in the Bowen Basin, Queensland, Australia.  At present HEA has a 25% interest under two joint ventures in which Molopo also has a 25% interest; these joint ventures relate to (i) Authority to Prospect 564P and a sub-lease of part of Petroleum Lease 94, and (ii) Authority to Prospect 602P. Also, Molopo and HEA are carrying out certain activities in connection with the Mungi field (within PL 94) on a sole risk basis in which each has a 50% interest; the assets involved include a spur pipeline from Mungi Central to processing facilities at Mungi and a gas compression unit. The acquisition will result in Molopo having a 50% interest in the two joint ventures, through Lowell Petroleum N.L. and HEA, and a 100% interest in the sole risk assets currently owned jointly with HEA.

The proposed placement is intended to augment Molopo’s working capital. Molopo is currently involved in a number of projects that will require significant funding. In addition, the price for the acquisition of HEA involves a cash payment of A$6 million in addition to the issue of the shares referred to in resolution 3.

Further details of the resolutions are set out in the Explanatory Memorandum, which accompanies and forms part of this Notice of General Meeting. Shareholders are urged to consider the material in full before determining how they will vote at the General Meeting.

Your directors recommend that you vote in favour of the resolutions that will be put to the Meeting although, of course, Mr Ian Gorman, who is an Executive Director, will abstain from voting on the resolution regarding the options proposed to be issued to him under the Employee Incentive Scheme.

If you are unable to attend the General Meeting but wish to vote on the above Items, please complete the
attached proxy form and return it by delivery, mail or facsimile (to be received no later than 10.00 a.m. on Wednesday, 29th August) to:

Molopo Australia Limited
C/- Link Market Services Limited
Locked Bag A14 Sydney South NSW 1235
Facsimile: (02) 9287 0309
Or if you are delivering: Level 12, 680 George Street, Sydney NSW 2000.

Yours faithfully,

Molopo Australia Limited
Don Beard
Chairman


THIS IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR ATTENTION.
The document should be read in its entirety. If you are in doubt as to how to deal with it, please consult your financial or other professional adviser.

MOLOPO AUSTRALIA LIMITED
ABN 79 003 152 154

NOTICE OF GENERAL MEETING AND EXPLANATORY MEMORANDUM

Notice is given that a General Meeting of Molopo Australia Limited will be held at Level 14, 31 Queen Street, Melbourne Victoria on Friday, 31st August 2007 commencing at 10.00 am.

NOTICE OF MEETING
Notice is hereby given that a General Meeting of the members of Molopo Australia Limited will be held
at Level 14, 31 Queen Street, Melbourne, Victoria, 3000 on Friday, 31st August, 2007 at 10.00 a.m.

BUSINESS

  1. RATIFICATION OF JANUARY 2007 PLACEMENT

    To consider and, if thought fit, pass the following resolution:

    “That approval is given, for the purposes of ASX Listing Rules 7.4 and 7.5, to the earlier placement
    by the Company of 65,853,651 shares at $0.041 per share in January 2007.

    In respect of this resolution, the Company will disregard votes cast by –

    (i) any of the subscribers to whom the shares were issued, and

    (ii) associates of any of those subscribers.

  2. AUTHORISATION FOR PLACEMENT OF 133 MILLION SHARES ARRANGED THROUGH E.L. & C. Baillieu Stockbroking Limited and wilson htm corporate finance limited

    To consider and, if thought fit, pass the following resolution:

    “That approval is given, for the purposes of ASX Listing Rules 7.1 and 7.3, to the issue by
    the Company of 133 million ordinary shares in the Company at an issue price of 25 cents per share,
    payable in full on allotment, on the terms and conditions set out in the Explanatory Memorandum accompanying the Notice of Meeting.” 

    In respect of this resolution, the Company will disregard votes cast by –

    (i) any of the subscribers to whom the shares are to be issued, and

    (ii) associates of any o    f those subscribers.

  3. AUTHORISATION FOR THE ISSUE OF 30 MILLION ORDINARY SHARES TO THE MEMBERS OF HELM ENERGY-AUSTRALIA, LLC, (“HEA”) AS PART OF THE CONSIDERATION FOR THE ACQUISITION OF 100% OF HEA.

    To consider and, if thought fit, pass the following resolution:

    “That approval is given, for the purposes of ASX Listing Rules 7.1 and 7.3, to the issue by the Company
    of 30 million ordinary shares in the Company to the members of Helm Energy-Australia, LLC (”HEA”) as
    part of the consideration for the acquisition of the entire issued capital of HEA in accordance with the Sale Agreement entered into on 24th July, 2007 between William M. Obering and Julie T. Obering (as vendors), Lowell Petroleum N.L (as purchaser) and the Company.”

    In respect of this resolution, the Company will disregard votes cast by:

    (i) the HEA vendors; and (ii) associates of any of the HEA vendors.

  4. APPROVAL FOR THE ISSUE OF INCENTIVE OPTIONS TO AN ENTITY ASSOCIATED WITH THE COMPANY'S CHIEF OPERATING OFFICER, MR IAN GORMAN

    To consider and, if thought fit, pass the following resolution:

    “That approval is given, for the purposes of ASX Listing Rule 10.14 and Chapter 2E of the Corporations Act, to the issue to Gorman Family Investments Pty Ltd (ACN 124 769 713), an entity associated with the Company’s Chief Operating Officer, Mr Ian Gorman, of 4,000,000 options, and for the allotment of shares
    to it consequent upon exercise of the options, on the terms set out in the Explanatory Memorandum
    attached to and forming part of this notice.

    In respect of this Resolution, the Company will disregard votes cast by or on behalf of Mr Gorman and persons who are his associate

VOTING
Further details regarding the above Resolutions are set out in Sections 1 to 4 of the Explanatory Memorandum, which accompanies and forms part of this Notice of Meeting. Terms used in this Notice of Meeting have the meaning ascribed to them in the Explanatory Memorandum.

BY ORDER OF THE BOARD
Ric Sotelo
Chief Financial Officer
27th July 2007

If you are not able to attend the General Meeting of the members of Molopo Australia Limited, which will be
held at Level 14, 31 Queen Street, Melbourne, Victoria, 3000 on Friday, 31st August, 2007 at 10.00 a.m, please complete and return the attached form of proxy, which must be received at the address given below not later than 48 hours before the commencement of the Meeting. Any proxy form received after that time will not be valid for
the scheduled Meeting.

Proxy form documents may be lodged by posting it in the reply paid envelope provided (Australia only), or delivering it to the address or faxing it to the facsimile number below:

By mail or hand delivery:
Molopo Australia Limited C/- Link Market Services Limited, Locked Bag A14 Sydney South NSW 1235.
Delivering it to Level 12, 680 George Street, Sydney NSW 2000

By facsimile:
Australian based investors: (02) 9287 0309
Overseas based investors: 61 2 9287 0309

NOTES:
The details of the resolutions contained in the Explanatory Memorandum accompanying this Notice of General Meeting should be read together with and form part of this Notice of Annual General Meeting.

Under the Company’s Constitution, the Chairman of the board will act as chairman of the Meeting.  Where the Chairman is appointed as proxy, he intends voting undirected proxies in favour of all resolutions set out in the Notice of Meeting.

PROXIES:

  1. A member entitled to attend and vote at the meeting has the right to appoint not more than two proxies.

  2. A member who is entitled to cast 2 or more votes may appoint 2 proxies and may specify the proportion or number of votes each proxy is appointed to exercise. If the member appoints two proxies and the appointment does not specify the proportion or number of the member’s votes each proxy may exercise, each proxy may exercise one half of the member’s votes. If the member appoints two proxies, neither proxy may vote on a
    show of hands.

  3. A proxy need not be a member of the Company.

  4. Proxies given by corporations must be signed in accordance with the constituent documents of the corporation or the laws in force in its place of incorporation, or by a duly appointed attorney. For Australian corporations, it is sufficient if the proxy is signed by two directors, a director and the secretary, or (in the case of a proprietary company) a person who is the sole director and secretary.

  5. To be valid, the form appointing the proxy and the power of attorney or other authority (if any) under which
    it is signed (or any attested copy thereof) must be lodged with the Company not more than 48 hours before the meeting by delivery or mail to: C/- Link Market Services Limited, Locked Bag A14, Sydney South NSW 1235, Level 12, 680 George Street, Sydney NSW 2000 or by faxing (02) 9287 0309 & 61 2 9287 0309.

  6. A proxy form accompanies this Notice of Meeting.

EXPLANATORY MEMORANDUM

IMPORTANT NOTICE

This Explanatory Memorandum is an explanation of, and contains information about, the resolutions to be considered at the General Meeting of the members of Molopo Australia Limited, which is scheduled for Friday,
31st August, 2007 at 10.00 a.m. It is given to Molopo Australia Limited shareholders to help them determine
how to vote on the resolutions set out in the accompanying Notice of Meeting.

Shareholders should read this Explanatory Memorandum in full because material in some sections also has relevance to resolutions dealt with in other sections. This Explanatory Statement forms part of the accompanying Notice of Meeting and should be read with the Notice of Meeting.

If you are in doubt about what to do in relation to proposals contemplated in this Explanatory Memorandum, you should consult your financial or other professional advisor.

This Explanatory Memorandum is dated 27th July, 2007.

1. RATIFICATION OF JANUARY 2007 PLACEMENT

Resolution 1 seeks approval, by way of ratification, of a placement made in January, 2007.

ASX Listing Rule 7.1 restricts the number of shares that can be issued by the Company without shareholder approval in any 12 month period (determined on a rolling basis), to 15% of the number of shares on issue at the beginning of that period. Various exceptions are set out in ASX Listing Rule 7.2. 

ASX Listing Rule 7.4 states that where shares are issued without approval, but the issue is subsequently
ratified in accordance with ASX Listing Rule 7.5, those shares are treated as having been issued with approval. 

The effect of the ratifying approval is to increase the number of shares that can be issued in future without
approval because the shares will –

(i)  no longer form part of those issued without approval during the 12 month period; and

(ii)  increase the base figure by reference to which the 15% threshold is determined.

The shares referred to in this Resolution comprise the 65,853,651 shares issued during January, 2007
at an issue price of $0.041 per share, payable in full on application. The shares rank equally with all other
issued fully paid ordinary shares in the Company.

All of the subscribers were professional investors or other persons to whom the Company was allowed
to issue shares without a prospectus or other form of disclosure document under Chapter 6D of
the Corporations Act.

The funds raised by the issue were used to fund the further appraisal of the Company’s energy portfolio
and general working capital.

In respect of this resolution, the Company will disregard votes cast by –

(i)  any of the subscribers to whom the shares were issued, and

(ii)  associates of any of those subscribers.

However, the Company need not disregard a vote if –

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

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

2.  Authorisation for the placement of 133 million ordinary shares arranged through E.L. & C. Baillieu Stockbroking Limited and wilson HTM corporate finance limited

Resolution 2 requests Shareholder approval for the Company to issue 133,000,000 ordinary shares
(“the Placement”) at 25.0 cents per share to professional investors and other entities to which the Company
is entitled to issue shares without the need for a prospectus or other disclosure document under Part 6D.2
of the Corporations Act . This could include some existing shareholders.

The Placement is conditional on approval by shareholders of this Resolution.

As mentioned earlier, ASX Listing Rule 7.1 restricts the number of shares that can be issued by the Company without shareholder approval in any 12 month period (determined on a rolling basis), to 15% of the number of shares on issue at the beginning of that period. Various exceptions are set out in ASX Listing Rule 7.2. The number of shares involved in the Placement exceeds 15% of the Company’s existing issued shares, being approximately 18% of that number.

Shares issued with approval, or under an exception, are treated as being part of the base number, i.e. as if
being on issue at the start of the period, thus increasing the number of shares that can be issued in future
without approval. In other words, shareholder approval of an issue increases the number of shares that can be issued in future without shareholder approval.

The Placement has been managed by E.L. & C. Baillieu Stockbroking Limited (“Baillieu”) in accordance with an agreement signed between the Company and Baillieu on 18th July 2007 (“Placement Agreement”). In accordance with the Placement Agreement, Baillieu and Wilson HTM Corporate Finance Limited have procured agreements with various investors who have agreed to participate in the Placement (“Resolution 2 Investors”). The Resolution
2 Investors have a firm obligation to take up and pay for the 133 million shares, subject to shareholder approval being obtained in accordance with the Placement Agreement and the commitments entered into by them through Baillieu and Wilson HTM. 

Each share will be issued on the same terms and rank equally in all respects with the existing ordinary shares in the Company then on issue. The shares will be issued to the Subscribers shortly after the General Meeting the subject of this Explanatory Memorandum and no later than three months after the date of the General Meeting.

The issue price of 25 cents per ordinary share represents a discount of 13.8% to Molopo’s closing share price
of 29 cents as at Wednesday, 18th July, being the day on which the Placement Agreement was signed with
Baillieu and announced to ASX.

If Resolution 2 is approved and the Company issues all 133,000,000 shares, the total number of issued shares in the Company will increase from 740,956,877 to 873,956,877. The holders of the newly issued shares will own 15.2% of the expanded capital and existing holders 84.8% of that expanded capital. 

If Resolutions 2 and 3 are approved and the Company issues all 163,000,000 shares referred to in Resolutions 2 and 3, the total number of issued shares in the Company will increase from 740,956,877 to 903,956,877, with the following result:

  • Helm Hydrocarbons Limited (which is associated with the HEA vendors) and the HEA vendors will own, in aggregate, 39,480,000 million shares (being 4.4% of the expanded capital), comprising the 9,480,000 shares currently held by Helm Hydrocarbons Limited (as at Tuesday 24th July 2007) and the 30 million shares being issued to the HEA vendors;

  • The Resolution 2 Investors will own 14.7% of the expanded capital (disregarding any shares in the Company currently owned by them); and

  • Existing investors, other than Helm Hydrocarbons Limited, currently own 731,476,877 existing shares (i.e. the total issued shares in the Company being 740,956,877 less 9,480,000 shares held by Helm Hydrocarbons Limited as at 24th July 2007), will end up owning 80.9% of the expanded capital.

The purpose of the Placement is to supplement funds raised earlier this year, thereby providing the Company with the requisite funds to increase its interest in Bowen Basin, Queensland, Australia, and to advance its core projects. The capital raised will be used to assist the Company in funding some or all of the following:

  • The $6.0 million cash portion of the consideration payable in connection with the acquisition of Helm Energy-Australia, LLC (“HEA”), which holds coal bed methane (“CBM”) interests in Queensland’s Bowen Basin. This assumes that the transaction reaches completion as planned;

  • The Company’s new development wells at the Mungi gas fields (PL 94 – northern portion), commencing with one dual lateral well, followed by two triple lateral wells;

  • The Company’s share of expenditure in relation to continued appraisal and production testing at the Timmy gas prospect (ATP 602P);

  • The Company’s share of expenditure in relation to the Gloucester Phase II appraisal programme, as approved by the Molopo / Lucas Gloucester Joint Venture in March this year and announced on 8th March, which has been designed to establish reserves across the Gloucester Basin and to ascertain production capabilities prior to a development decision;

  • The Company’s share of expenditure in relation to its CBM project in Liu Lin, Shanxi Province, in the People’s Republic of China (“the PRC”), aimed at meeting the PRC’s latest regulations for the certification of gas reserves, and involving completion of two new production test wells drilled earlier in the year, as well as additional activities (including three cored exploration holes and one dual lateral well);

  • The Company’s exploration expenditure in relation to its petroleum interests in South Africa, based on the Exploration Rights recently granted by the Petroleum Agency of South Africa, as announced on 9th May this year, and now owned 100% by the Company as a result of the Company increasing its interest in the entity holding those rights from 50% to 100%, as announced on 15th May 2007.

The capital raised will also be used to provide the Company with additional working capital.

In respect of this resolution, the Company will disregard votes cast by –

(i)  any of the subscribers to whom the shares are to be issued, and

(ii)  associates of any of those subscribers.

However, the Company need not disregard a vote if –

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

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

Having regard to Chapter 6 of the Corporations Act, the Company will not be able to issue shares to any entity under the Placement if as a result any person’s voting interest in the Company will become greater than 20%.
The only exception is where the relevant entity already has a voting interest of more than 19% and has held
that interest for more than 6 months; in that case, the number of shares the Company will be able to issue to
that entity will be such as restricts the increase in voting power of that person to 3% or less.

3.  AUTHORISATION FOR THE ISSUE OF 30 MILLION ORDINARY SHARES TO THE MEMBERS OF
HELM ENERGY-AUSTRALIA, LLC (“HEA”) AS PART OF THE CONSIDERATION FOR THE ACQUISITION
OF 100% OF hea.

On 29th June 2007 the Company announced that it had signed a Heads of Agreement with Helm Energy, LLC  
to acquire HEA’s CBM interests in Queensland’s Bowen Basin. HEA is a special purpose company whose activities have been restricted to the acquisition and ownership of various interests in the Bowen Basin, Queensland, Australia, including its 25% participation interest in two Joint Ventures in which the Company
also has a 25% participating interest through the Company’s wholly-owned subsidiary, Lowell Petroleum N.L.
The Joint Ventures relate to (i) Authority to Prospect ATP564P and a sub-lease over part of Petroleum Lease 94 and (ii) Authority to Prospect 602P.  HEA’s interests include a 25% interest in the Mungi Gas Field and the Harcourt, Bindaree, Timmy, Lilyvale, Oak Park and Sirius gas prospects, as well as HEA’s share of gas
production at Mungi. HEA owns a 50% interest in a gas compression unit, also at Mungi, under a 50/50 sole risk joint venture between HEA and the Company’s wholly-owned subsidiary, Lowell Petroleum N.L.

Having regard to the fact that HEA is a special purpose entity, with activities restricted to the ownership of
the interests referred to in the Heads of Agreement, the parties determined that it would be preferable for the Company to acquire 100% of HEA rather than its assets.

On 24th July 2007 the Company announced that it had signed a Purchase and Sale Agreement (“PSA”)
to acquire 100% of the shares in HEA from its existing owners, William M. Obering and Julie T. Obering
(“the HEA vendors”).  The HEA vendors are also the owners of Helm Energy, LLC.

The consideration for the acquisition of HEA is $6.0 million in cash and the issue by the Company of 30.0 million ordinary shares credited as fully paid and ranking equally with all other issued shares of the Company. Under the PSA the shares are treated as being issued by the Company at an issue price of 25 cents per share in satisfaction of the part of the price for the shares in HEA.

Based on the cash and non-cash components of the acquisition consideration, the total consideration of the acquisition is $13.5million. The directors believe that this consideration is reasonable based on the Company’s
own internal assessment of the prospectivity of the area, especially with the introduction of development techniques based on horizontal drilling.

The Company has sufficient funds to meet the cash component of the purchase price, but is raising additional funds, by way of the Placement referred to in relation to Resolution 2 above, to augment its working capital
having regard to the level of its proposed expenditure on the various projects specified in the commentary on that Resolution set out above. Some of the funds raised under the Placement may be used to pay for the $6.0million cash portion of the acquisition consideration payable to HEA. 

Resolution 3 seeks approval, for the purposes of Listing Rule 7.1 and 7.3, to the issue by the Company of
30 million ordinary shares to the HEA vendors, as part of the acquisition consideration for HEA. It should be
noted that, under the PSA, completion is conditional on approval being given, in accordance with ASX Listing
Rule 7.3, by the Company’s shareholders to the allotment and issue by the Company of the 30 million shares
to the HEA vendors.

Under Resolution 3, each share will be issued on the same terms and rank equally in all respects with the existing ordinary shares in the Company then on issue. The shares, if issued, will be issued to the HEA vendors on completion of the PSA and, in any event, no later than three months after the date of the General Meeting the subject of this Explanatory Memorandum.

As mentioned elsewhere in this Explanatory Memorandum, ASX Listing Rule 7.1 restricts the number of shares that can be issued by the Company without shareholder approval in any 12 month period (determined on a rolling basis), to 15% of the number of shares on issued at the beginning of that period. Various exceptions are set out in ASX Listing Rule 7.2.  Shares issued with approval, or under an exception, are treated as being part of the base number, i.e. as if being on issue at the start of the period, thus increasing the number of shares that can be issued in the future without approval.

Information as to the ownership structure of the Company if the Placement and the issue to the vendors are approved by the Company’s shareholders, and completion occurs under the PSA, is set  out above in the commentary regarding Resolution 2.

If shareholders approve the acquisition of HEA and the transaction is completed, the Company’s participation interests in Authority to Prospect ATP564P, a sub-lease over part of Petroleum Lease 94 and Authority to
Prospect 602P, will increase from 25% to 50%. Therefore the Company’s interests in the Mungi gas fields and
the Harcourt, Bindaree, Lilyvale, Oak Park and Sirius gas prospects will increase from 25% to 50%, except that in Mungi the sole risk wells where each of the Company and HEA have a 50% interest, the Company’s interest will increase to 100%.  In addition, the Company’s 50% interest in the gas compression unit at Mungi will increase
from 50% to 100%.

If shareholders approve the acquisition of HEA and the transaction is completed, the Company’s share of production and concomitant revenue from Mungi will increase by 100%. The Company is not able to make forecasts of future production given the natural decline of wells and fluctuations in production during the year
due to the requirement for maintenance and workovers. As an indication of the impact of the acquisition of HEA
on production and revenue from Mungi, the following historical examples are given:

  • During the month of June 2007, the Company’s gas sales would have been 25.5 terajoules (“TJ”) instead of
    12.7 terajoules, had the Company acquired HEA prior to 1 June 2007;

  • During the last quarter of the financial year (three months to 30 June 2007), the Company’s gas sales revenue would have been $253,650 instead of $126,825, had the Company acquired HEA prior to 1 April 2007.

As mentioned earlier, the above examples are quoted to indicate the financial impact of the acquisition of HEA based on the resultant 100% increase in gas production and sales revenue. 

It should be noted that, during the month of June 2007, the Company and HEA in combination accounted for
86.7% of total production and gas sales from Mungi, which is the sub-lease over part of Petroleum Lease 94. This percentage however may change in the future, depending on the following:

  • The productivity of existing sole risk wells (in which the Company’s interest will increase from 50% to 100% should shareholders approve the acquisition of HEA and the transaction proceeds to completion);

  • The productivity of other existing wells (in which the Company’s interest will increase from 25% to 50% should shareholders approve the acquisition of HEA and the transaction proceeds to completion); and

  • The number of new wells drilled in the future and the level of participation in these new wells by each of the joint venture partners.

If shareholders approve the acquisition of HEA, the Company’s expenditure commitments in ATP 564P and ATP 602P are expected to double.  Following renewal of ATP 564P which is expected shortly, the Company’s share of commitment expenditure in ATP 564P will increase from $130,000 to $260,000 over the next few years through to the expiry date of 31 Dec 2009.  Similarly, the Company’s share of commitment expenditure in ATP 602P will increase from $675,000 to $1,350,000 over the next 12 years through to the expiry date of 31 Dec 2018.

As at 30 June 2006 Helm Energy Australia LLC ("HEA") had carry forward Australian revenue losses of $15,926,794. Upon acquisition of shares in HEA by the Molopo Australia Group, these losses may be available to HEA provided that it satisfies either the continuity of ownership test or the same business test for the period from the beginning of the year in which the respective losses were incurred until the end of the year of recoupment.

Preliminary advice in respect to the USA tax treatment of Helm is that upon acquisition by the Company, HEA will likely qualify as a disregarded entity for the purposes of USA tax, on the basis that the company does not carry on business activities nor derive income in the USA. A disregarded entity is relieved of tax in the USA on its foreign branch (Australian) activities.

In respect of this resolution, the Company will disregard votes cast by:

(i)  the HEA vendors; and

(ii) associates of any of the HEA vendors.

However, the Company need not disregard a vote if –

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

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

4. APPROVAL FOR THE ISSUE OF OPTIONS TO AN ENTITY ASSOCIATED WITH
THE CHIEF OPERATING OFFICER, MR IAN GORMAN

Resolution 4 seeks approval that options be granted to an entity associated with the Company’s Chief Operating Officer, Mr Ian Gorman, who is an Executive Director. 

These options were offered to Mr Gorman as an important part of his remuneration package and as a key
incentive for him to join the Company, in the critical role of Chief Operating Officer.  As shareholders will be
aware, Mr Gorman joined the Group, initially as a director of its wholly-owned subsidiary, Lowell Petroleum N.L.
in October, 2006.  He became a director of the Company on 9th November 2006 and Chief Operating Officer and Executive Director on 4th April 2007. As Mr Gorman was to be appointed as a director, the offer of the options
was necessarily subject to shareholder approval.

Mr Gorman currently has no shares in the Company, and did not participate in the Placement of 133 million shares which is the subject of Resolution 2.

When offered to Mr Gorman, the Company’s share price was 4.0 cents so that the options were ‘out of the money’, i.e. the exercise price was higher than the current market price. Since then the market price has risen substantially. 

During the period since his appointment Mr Gorman has made a substantial contribution to the Company
by substantially strengthening the CBM technical and operating team, directing the Company’s exploration
and development efforts, and assisting in the communication of the Company’s strategy and operational plans
to the market. 

Subject to approval of this Resolution, the options will be issued to Mr Gorman’s superannuation fund, namely Gorman Family Investments Pty Ltd (ACN124 769 713), as trustees for Gorman Family Superannuation Fund. 
If approval is given, all of the options will be issued within 1 month of the date of the Meeting.

ASX Listing Rules 10.11 and 10.14 preclude an issue of options to a director without the approval by the holders of ordinary shares at a general meeting of the Company. In addition, Chapter 2E of the Corporations Act prohibits the giving of a financial benefit to a related party of the Company unless a specified exception in that Chapter applies or the benefit is given in accordance with shareholder approval. 

Under Chapter 2E of the Corporations Act, shareholders must be provided with all information, known to the Company or to any of its Directors, reasonably required for shareholders to decide whether or not it is in the Company’s interest to issue the options. The Resolution has been provided to ASIC and any comments made
by ASIC have been notified to shareholders.

Mr Gorman and any person who, under the Corporations Act, is an associate of Mr Gorman for the purposes of that Chapter, are prohibited from voting on the Resolution except where that person votes as proxy for another person, who is eligible to vote, pursuant to a written direction as to how the vote is to be cast. If any votes are cast in contravention of that prohibition, the Resolution will not be effective unless it would have been passed if any votes so cast in favour of the Resolution were disregarded.

The options will be granted pursuant to the terms and conditions set out in the Company’s Employee Incentive Scheme, shown in Attachment I. The terms and conditions of the Employee Incentive Scheme were approved at an extraordinary general meeting of shareholders held on 27th April 2000.

The terms of Mr Gorman’s options are as follows:

  • 2,000,000 options with an exercise price of 5.0 cents and a term of three years; and

  • 2,000,000 options with an exercise price of 7.5 cents and a term of three years.

This exercise price and the number of shares subject to the options may be adjusted for subsequent
capital reorganisations in accordance with the ASX Listing Rules and the terms of the Company’s Employee Incentive Scheme.

No funds will be raised from the above issue of options to Mr Gorman, as they will be issued for nil consideration.  The maximum number of options that may be acquired by Mr Gorman under this Resolution is 4,000,000.

Since the last approval of the Employee Incentive Scheme, the following persons referred to in Listing Rule 10.14 received securities:

  • Mr David William King received 1,750,000 options on 30 April 2000 for nil consideration;

  • Mr Richard J Haren received 1,250,000 options on 30 April 2000 for nil consideration;

  • M David Casey received 650,000 options on 30 April 2000 for nil consideration, and 1,500,000 options on
    22 January 2002 for nil consideration;

  • Mr Don Beard received 3,000,000 options on 22 January 2002 for nil consideration;

  • Mr Wally Borovac received 1,250,000 options on 30 April 2000 for nil consideration;

  • As approved at the 2006 AGM, Mr Don Beard received 3,000,000 options on 5 December 2006 for nil consideration;

  • As approved at the 2006 AGM, Mr Stephen Mitchell received 6,000,000 options on 7 December 2006 
    for nil consideration;  and

  • As approved at the 2006 AGM, Mr Wally Borovac received 2,000,000 options on 7 December 2006
    for nil consideration. 

Currently, Mr Don Beard, Mr Stephen Mitchell, Mr Wally Borovac and Mr Ian Gorman are the only persons
under Listing Rule 10.14 entitled to participate in the Employee Incentive Scheme.

The opportunity cost and potential benefit foregone by the Company in issuing options to Mr Gorman is that on exercise of the options, the Company may be obliged to issue shares at less than their market price at the time. It is believed that the incentive for Mr Gorman to improve shareholder wealth over the term of the options outweighs this cost and the benefit foregone. Any benefit to Mr Gorman will depend on circumstances existing when the options are exercised, including the Company’s share price, the taxes payable by him in respect of the options, and the shares issued on exercise.

No further options may be issued to Mr Gorman or any other related party under the Company’s Employee Incentive Scheme without approval of the shareholders.

Mr Gorman is currently paid a salary of $250,000 per year (excluding statutory superannuation) in his role as
Chief Operating Officer. Mr Gorman currently holds no options.

The options were agreed in discussions with Mr Gorman on 10th July 2006, subject to shareholder approval. On this date, the Company’s closing share price was 4.0 cents, which was lower than the exercise price of Mr Gorman’s options (exercisable at 5.0 cents and 7.5 cents). The total value of the options agreed with Mr Gorman was approximately $57,000 as at 10th July 2006 (based on a risk free rate of 5.80%).

Following the oral agreement with Mr Gorman on 10th July 2006, the options were included in subsequent
written agreements relating to the appointment of Mr Gorman, initially as a non-executive director and later as Executive Director and Chief Operating Officer, as follows:

  • The first written agreement was signed on 10th October 2006, appointing Mr Gorman in the role of
    non-executive director of a subsidiary of the Company. On the trading day before this agreement was signed, the closing share price was 4.0 cents. The options subsumed in this agreement comprised half of the options agreed on 10th July 2006, i.e. 1 million options exercisable at 5 cents with a term of three years, and 1 million options exercisable at 7.5 cents with a term of 3 years. The value of these options as at the date of this agreement was $28,400 (based on a risk free rate of 5.64%);

  • The second written agreement was signed with Mr Gorman on 4th April 2007, appointing Mr Gorman on a full time basis, as Chief Operating Officer and Executive Director. The options subsumed in this agreement comprised the balance of the options initially agreed with Mr Gorman on 10th July 2006, i.e. 1.0 million options at 5.0 cents, and 1.0 million options at 7.5 cents. On the trading day before 4th April 2007, the closing share price was 10.0 cents, and as a result, the value of the options subsumed in the second agreement was $122,300 (based on a risk free rate of 5.87%).

It should be noted that, while the options subsumed in the second agreement were ‘in the money’, as mentioned above they were part of the options agreed with Mr Gorman on 10th July 2006, when these options were out of the money.

Given the appreciation in the Company’s share price, the value of the options agreed with Mr Gorman has increased to $1.10million as at 24 July 2007 (based on a risk free rate of 6.10%).   

The above options valuations have been determined by using the Black-Scholes (1973) equation, an accepted option valuation technique which takes into consideration share price volatility, risk free rate, the option exercise price, the term of the option before expiry and the share price. 

The following table is a summary of the above option valuations and the corresponding inputs applied to
the Black-Scholes (1973) equation:

Valuation Date
10 July 2006
10 October 2006
4 April 2007
24 July 2007
Valuation
$57,000
$28,400
$122,300
$1.10 million
No. of options in valuation with an exercise price at 5.0 cents
2,000,000
1,000,000
1,000,000
2,000,000
No. of options in valuation with an exercise price at 7.5 cents
2,000,000
1,000,000
1,000,000
2,000,000
Term of option from Valuation Date
3 years
3 years
3 years
3 years
Risk Free Rate
5.80%
5.64%
5.87%
6.10%
Share price volatility applied to Black-Scholes (1973) equation
65
65
65
65

Of course, valuation of options is inherently problematic as it is dependent on a prediction of the likely future performance of the underlying shares subject to the options, as well as other factors such as inflation.

The exercise of the options will not result in any material dilution of the interests of shareholders, having regard to the fact that the issued capital of the Company comprises 740,956,877 shares as at the date of this Notice of Meeting, with the number of issued shares increasing to 903,956,877 assuming Resolutions 2 and 3 are approved.

As mentioned above, Mr Gorman currently has no shares in the Company, nor did he participate in the Placement which was the subject of Resolution 2. 

On 26th July 2007, being the last trading day prior to the date on which this Explanatory Statement was finalised, the closing price of ordinary shares in the Company on the Australian Stock Exchange was 31.5 cents. During the 12 months prior to that date the market price has varied between 3 cents and 32.5 cents.

In respect of this Resolution, Mr Gorman, and entities that are associated with him, are precluded from voting.

ANNEXURE I

MOLOPO AUSTRALIA LIMITED. EMPLOYEE INCENTIVE SCHEME TERMS AND CONDITIONS

1.     Definitions

1.1.For the purposes of this Scheme, unless the context requires otherwise, the following words and phrases shall have the meaning given to them below:

"Associate" has the same meaning as in Division 13A of Part III of the Tax Act.

"ASX" means Australian Stock Exchange Limited (A.C.N. 008 624 691).

"Bonus Issue" means a Pro-Rata Issue of securities to the holders of Shares for which no consideration is
payable (including an issue by way of capitalisation of profits, share premium account, capital redemption reserve,
or any other reserve).

"Bonus Securities" means securities issued under a Bonus Issue.  "Business Day" has the same meaning as in the Listing Rules.

"Change of Control" means any change in the shareholding of the Company as a result of which the composition
of the Board of Directors of the Company can be determined or controlled by parties who were not able to determine or control the composition of the Board of Directors at the time at which relevant Shares were issued under
this Scheme.

"Company" means Molopo Australia Limited (A.C.N. 003 152 154).

"Date of Issue" means the date on which Shares are issued to a Participant.

"Directors" means the Board of Directors of the Company from time to time.

"Eligible Associate" means a Relative or Associate of an Eligible Person, who is

a)  nominated by that Eligible Person, by written notice to the Directors, as the recipient of Options under this Scheme; and

b)  acceptable to the Directors.

"Eligible Person" means any person who is a Director, senior officer, full-time or part-time employee, or consultant, of the Company or any Related Body Corporate.

"Exercise Date" means the date on which an Option is exercised validly in accordance with the requirements
of this Scheme.

"Exercise Notice" means a notice duly executed by an Optionholder, or a duly appointed attorney or personal representative of the Optionholder, stating that the Optionholder or the personal representative exercises a specified number of Options and, if that number is less than the total number of Options held by the Optionholder and the Optionholder holds Options which were issued on different dates or which have different Exercise Prices, properly identifies the Options being exercised.

"Exercise Period" means such period or periods as may be determined by the Directors for the purposes of this definition, and notified to the Participant at the time of inviting the Participant to apply for the grant of the Option or, if no such period is so determined, any time between the Grant Date and the Expiry Date.

"Exercise Price" means the Initial Exercise Price or such other price as from time to time is applicable as a result of the adjustments required to be made in accordance with the provisions of this Scheme.

"Expiry Date" means, in respect of any Option, the earliest of:

a)  the date determined by the Directors for the purposes of this definition, and notified to the Participant at the time of inviting the Participant to apply for the grant of the Option (which must be specified on the certificate or other statement issued to the Participant in respect of the Option);

b)  any earlier date on which the Option ceases to be exercisable, lapses, or expires under any other provision of this Scheme; and

c)  the date five years after the Option is granted, or such other period (if any) as from time to time
is specified under the Corporations Law as the longest period during which a valid Option may
remain exercisable.

"Grant Date" means, in respect of any Option, the date on which the Directors resolve to grant the Option.

"Initial Exercise Price" means the price determined by the Directors for the purposes of this definition, and notified to the Participant at the time of inviting the Participant to apply for the grant of the Option, which must be :

(a)  not less than the Market Price on the day on which the Directors make the determination; and

(b)  not less than the minimum Exercise Price (if any) required in respect of Options under the Listing Rules at the time on which the Option is issued; and

(c)    specified on the certificate or other statement issued to the Participant in respect of the Option.

"Listing Rules" means the Official Listing Rules from time to time of ASX.

"Market Price" means, in respect of Shares, on the day that such a price is to be determined, the weighted average market price of the Shares calculated by reference to the Register of Sales in respect of the Shares produced by ASX in respect of the five (5) Business Day period up to, and including, the Business Day prior to the day on which such price is to be determined.

"Option" means an Option to subscribe for one Share (or such other number as may be applicable in accordance with the provisions for adjustment set out in this Scheme) at the Exercise Price during such period or periods prior to the Expiry Date as are applicable under this Scheme from time to time.

"Optionholder" means a person whose name is entered in the Register as the holder of an Option.

"Option Certificate" means a certificate issued by the Company certifying that the person named in the certificate is entered in the Register as the holder of a specified number of Options.

"Participant" means each person to whom an Option is granted under this Scheme.

"Pro-Rata Issue" means an issue of Shares by the Company where the Shares are offered to holders of issued Shares on a pro-rata basis.

"Record Date" means a date specified by the Company or any other relevant entity as the date by reference to which any entitlement regarding Shares will be determined (whether in relation to any dividend or other distribution, an issue of securities, rights to subscribe for or buy securities, or otherwise).

"Register" means the register of Optionholders maintained under the Corporations Law.

"Related Body Corporate" has the meaning given to that term under the Corporations Law.

"Relate" has the same meaning as in the Tax Act. 

"Scheme" means the Molopo Australia Limited. Employee Incentive Scheme established by this document.

"Share" means an ordinary share in the capital of the Company.

"Tax Act" means the Income Tax Assessment Act 1936 of Australia.

1.2. Where a word or phrase is given a particular meaning, other parts of speech and grammatical forms of that word or phrase have corresponding meanings.

1.3. Words importing the masculine gender shall include the feminine and the neuter genders, and the singular shall include the plural and vice versa.

2. Establishment of the Scheme

2.1   The Scheme created by this document shall be called the Molopo Australia Limited Employee Incentive Scheme.

2.2   Subject to these Terms and Conditions, the Directors may administer the Scheme as they may determine from time to time in their absolute discretion.

3. Object of the Scheme

The object of the Scheme is to facilitate the issue of Options over shares in the capital of the Company to Eligible Persons and thereby to advance the interests of the Company and its shareholders by providing sufficient incentives to attract and retain personnel of high calibre to the Company.

4. Grant of Options

4.1. Subject to these Terms and Conditions, the Directors may administer the Scheme as they may determine from time to time in their absolute discretion.

4.2. The Directors may issue invitations to Eligible Persons to apply for a specified number of Options to be granted to each Eligible Person or an Eligible Associate free of charge on the terms and conditions of this Scheme. Each invitation must specify the Initial Exercise Price, the Expiry Date, and the applicable Exercise Periods (if any). Subject to any express provision of this Scheme the Directors have an unfettered discretion to determine the persons to whom invitations will be issued, the number of Options specified in the invitation, the Initial Exercise Price, the Expiry Date, and any applicable Exercise Periods.

4.3. As soon as practicable after the Grant Date, the Directors shall issue to each Participant a certificate or a statement of the holding (depending on whether securities of the Company are held in certificated or uncertificated form) showing the number of Options granted to the Participant, the Initial Exercise Price, the Expiry Date and other terms and conditions applicable to those Options.

4.4. The total number of Shares over which Options granted under this Scheme may subsist at any time must not exceed 10 percent of the total number of issued Shares. No single Participant may be granted Options over a number of Shares greater than 5 percent of the issued Shares.

5. Duration of Options

5.1. An Option expires at 4.00pm Melbourne Time on the Expiry Date applicable to it.

5.2. An Option lapses automatically if it is not exercised before that time.

6. Exercise of Options

6.1. Subject to Clause 6.3, an Optionholder may exercise an Option at any time during an Exercise Period by delivering to the Company at its registered office, or such other address as may be stipulated by the Directors for the purpose of this Scheme:

(a) A duly completed and signed Exercise Notice;

(b) If applicable, the power of attorney under which the Exercise Notice is signed or a notarised copy;

(c) Payment in full of the Exercise Price; and

(d) If any Option Certificate has been issued for the relevant Options, the relevant Option Certificate.

6.2. Payment may be made by cheque but, if so:

(a)    No Shares will be issued until the Company received cleared funds; and

(b) The Option will be regarded as having not been validly exercised if the cheque is not honoured on first presentation.

6.3. A Notice of Exercise must relate to Options conferring an entitlement to at least 1,000 Shares.

7. Issue of Shares

7.1  The Company must issue Shares upon valid exercise of an Option within 10 Business Days of the Exercise Date, but in any event prior to any applicable Record Date occurring after the Exercise Date.

7.2  Subject to Clause 7.3, Shares issued upon exercise of an Option rank equally in all respects with all other issued Shares from the date of issue.

7.3  Any Bonus Securities issued as a result of the exercise of an Option rank equally in all respects with other issued securities of that type as from the date of issue.

7.4  Forthwith after the Company issues Shares as a result of the exercise of Options, it must apply to ASX for official quotation of those Shares. If any Bonus Securities are issued by the Company as a result of an Option being exercised and, at the time, those Bonus Securities are in a class of securities which are listed for official quotation by ASX, the Company must apply to ASX forthwith for official quotation of the Bonus Securities so issued.

8 Assignment

An Option issued under this Scheme may not be assigned or otherwise transferred.

9 Reorganization of Capital

9.1  Subject to Clause 9.2,  if after the Grant Date in respect of an Option and before the Exercise Date the issued capital of the Company is reorganised (whether by consolidation, subdivision, reduction by way of return of capital
on each Share, reduction by cancellation of capital that is lost or not represented by available assets, pro-rata cancellation of a specified proportion of the Shares held by each Shareholder, or otherwise) the number of Shares
to be issued upon exercise of an Option and the Exercise Price ( or both) must be adjusted, as appropriate, to ensure that :

(a)  Optionholders are not disadvantaged by any such reorganisation; and

(b)  Optionholders do not receive any benefit from the reorganisation that the holders of other securities of the Company do not receive.

9.2  If the Listing Rules require that specified adjustments be made in respect of Options as a result of a reorganisation of capital, the adjustments referred to in Clause 9.1 must be made in accordance with the applicable Listing Rules, and the making of those adjustments is deemed to satisfy the requirements of Clause 9.1. For clarity, it is recorded that, as at the date of the adoption of this Scheme, the applicable Listing Rule is 7.22.

9.3  If, in relation to the relevant reorganisation, the Shareholders resolve that fractions are to disregarded or, that any rounding is to occur, the adjustments under Clause 9.1 must be made on the same basis.

10. Bonus Issues

10.1 If, after the Grant Date in respect of an Option, but before the Exercise Date, the Company makes any Bonus Issue, an Optionholder is entitled upon exercising the Option to receive, without cost, a number of Bonus Securities equal to the number which the Optionholder would have received had the Optionholder exercised the Option prior to the Record Date for that Bonus Issue.

10.2  For clarity, if more than one relevant Bonus Issue occurs, the entitlement to Bonus Securities is determined on a cumulative basis to take account of any entitlement to Bonus Securities which would have been derived from a prior Bonus Issue.

10.3  If, in connection with a Bonus Issue, any Bonus Securities were paid up by the application of amounts standing to the credit of any particular account of the Company, the Bonus Securities issued to an Optionholder on exercise of an Option must be paid up by applying amounts standing to the credit of the same account. The Company must preserve a balance in each such account at all times sufficient to allow it to satisfy this requirement.

11 Other New Issues of Securities

11.1 An Option issued under this Scheme does not confer on the Optionholder any right to participate in any issue of securities, or other transaction, in respect of which entitlements are conferred by the Company on the holders of issued Shares, although if the Option is exercised before the Record Date for that issue, or other transaction, the Shares and Bonus Securities (if any) issued as a result will confer the same entitlement in respect of the issue, or other transaction, as is conferred by all other issued Shares.

11.2 If the Company proposes to make any issue of Shares or other securities, or to carry out any other transaction in respect of which the holders of issued Shares are to receive an entitlement, and the Optionholder has the right under this Scheme to exercise the Option before the proposed Record Date for that issue or other transaction, the Company must notify the Optionholder of the proposal at least 9 Business Days before the relevant Record Date.

11.3 If, after the Grant Date in respect of an Option and before the Expiry Date, the Company makes a
Pro- rata Issue of Shares (other than a Bonus Issue) the Exercise Price is to be adjusted in accordance with the following formula:

0' = 0 - E [ P - (S+D) ]

N+l

O' = the new Exercise price. The new exercise price must not be reduced below the par value (if any) of the Shares if, at the time or issuing, the Corporations Law prohibits the Company from issuing Shares at less than their par value
O = the old Exercise Price
E = the number of Shares into which one Option is exercisable
P = The Market Price for the period ending on the day before the ex-rights date or
ex-entitlements date
S = the subscription price for a Share under the Pro-rata Issue
D = the dividend due but not yet paid on the existing Shares (except those to be issued under the Pro-rata Issue)
N = the number of Shares with rights or entitlements that must be held to receive a right to one new Share

For the avoidance of doubt, the intent is that, on exercising the Option, the Optionholder derives the benefit
of any bonus element in the Pro-rata Issue. This benefit is the same as that conferred on the holder of Shares having an entitlement in the Pro-rata Issue. There is no change in the number of Shares subject to Option. Any rounding necessary to avoid fractions of a cent is to occur after aggregating the exercise price for all Options exercised at anyone time.

12. Notification of Adjustments

As soon as practicable after any Bonus Issue or Pro-rata Issue, but in any event no later than required by the Listing Rules, the Company must notify each Optionholder of any change to the Exercise Price or the number of Shares subject to the Option (including any Bonus Securities).

13. Options not Quoted

The Company must not apply to ASX for official quotation of any Options granted under this Scheme.

14. Takeovers

14.1 If, after the Grant Date in respect of an Option but before the Expiry Date a takeover announcement is made,
or takeover offers are dispatched under a takeover scheme, in respect of Shares, or a Change of Control occurs, the Directors must notify each Optionholder of that occurrence and, if any Optionholder would not otherwise be entitled to exercise an Option during the ensuing 30 days after the notice is served, that an additional Exercise Period has arisen (being that period of 30 days, which must be specified).

14.2  Upon notice being given of a general meeting to consider a resolution for the winding up of the Company,
each Option shall be exercisable during the period prior to the date of the meeting, despite any other provision of this Scheme.

14.3 If, in any scheme of arrangement relating to the Company, specific provision is not made for Options issued under this Scheme, and the other provisions of this Scheme do not provide for any adjustment to take account of the effect of the Scheme, the number of Shares subject to each Option or the Exercise Price (or both) shall be adjusted in such manner as is appropriate to ensure that, as far as possible,

(a) Optionholders are not disadvantaged by the scheme of arrangement; and

(b)  Optionholders do not derive a benefit from the adjustment that is disproportionate to the benefits derived by the holders of other securities of the Company under the scheme of arrangement.

15. Determination of Adjustments

If any event occurs as a result of which an adjustment is required to the number of Shares subject to any Option or the Exercise Price (or both) the Directors may refer the calculation of the appropriate amount of any such adjustment to the auditors or a member of the Institute of Chartered Accountants in Australia for determination. In making any determination the relevant person is regarded as acting as an expert and not as an arbitrator and the provisions of any statute relating to arbitration do not apply to the determination.

16. Stamp Duty

All stamp duty (if any) payable on, or in relation to the grant of any Option, or the issue of any Share, under
this Scheme is to be borne solely by the Participant who must keep the Company indemnified against any liability
for the same.

17. Cancellation of Options

17.1 If any of the following events occurs, each Option issued to the relevant Eligible Person, or the Eligible Associate nominated by that Eligible Person, expires and is automatically cancelled on the date, or at the end of the period, stipulated in relation to the relevant event:

(a) termination of the employment of an Eligible Person by dismissal for fraud, defalcation, or gross misconduct - immediately on the date the event occurs;

(b) termination of employment of an Eligible Person as a result of resignation (except as a result of total and permanent disability) – 6 months after termination;

(c) termination of employment of an Eligible Person as a result of death, or total and permanent disability - 12 months after termination;

(d) termination of employment for any other reason not referred to above - 6 months after termination;

(e) resignation of the Eligible Person as a Director -6 months after the resignation becomes effective;

(f) removal of the Eligible Person from office as a director, or the failure of that person to be re-elected as a Director at a meeting at which the person stands for re-election - 6 months after the person ceases to be a Director;

(g) the Eligible Person ceasing to be a director as a result of a contravention of any statute, or the making of an order made by the Australian Securities Commission or a court of competent jurisdiction - immediately upon the person ceasing to be a Director;

(h) the Eligible Person ceasing to be a Director for any other reason - 12 months after the person ceases to be a Director.

17.2  For the purposes of clause 17.1:

(a)   a person is regarded as not having resigned as, or as having ceased to be, a Director where the person is
required by the Articles of Association or section 228 of the Corporations Law to retire but is eligible to, and does, stand for re-election; and

(b)   a person is not regarded as having resigned from employment, or as having ceased to by an employee,
if at or about the same time the person is re-engaged as an employee of the Company or a Related Body Corporate.

18. Administration

The Scheme shall be administered by a sub-committee of the Board of Directors, which shall be comprised of
Directors nominated by the Board, who shall have the power to:

(a)  determine appropriate procedures for the administration of the Scheme consistent with its terms;

(b)   delegate to any one or more persons for such period, and on such conditions as they may determine, the exercise of any of their powers or discretions arising under the Scheme; and

(c)   suspend or terminate the Scheme at any time, but only on the basis that such suspension or termination shall have no adverse effect on any accrued right of any Participant.

All costs associated with the administration of the Scheme shall be borne by the Company.

19 Power To Vary Rules

19.1 The Directors, subject to obtaining any necessary prior approval of shareholders in accordance with the Listing Rules, may at any time, and from time to time by supplemental document, revoke, add to or vary all or any of the terms and conditions contained in this document (as varied from time to time) and may, by the same or any other document, declare any new or other terms and conditions concerning the issue of Shares to Participants, provided that the additions, alterations or variations:

(a) relate to the issue of Shares or the Company's or the Director's powers or discretions;

(b)  do not affect a Participant's entitlement to any Shares which arose before the date of variation, alteration or addition, unless prior written consent is obtained from each affected Participant; and

(c)  except as provided in this document, do not vary, alter or add to any rights or restrictions attaching to the Shares, unless the prior written consent is obtained from each affected Participant.

19.2  This document shall not be capable of being revoked, added to or varied otherwise than as provided
in this Clause.

20 Commencement

Subject to the Company in general meeting passing any necessary resolutions to approve the Scheme, the Scheme shall take effect from March I, 1997.

21 Notices

21.1 Any notice required to be given pursuant to the Scheme shall be in writing and shall be given by:

(a) delivering it to the party personally, or at their address, on a Business Day during ordinary
business hours; or

(b) by sending it to the address of the party by prepaid airmail post if overseas, otherwise by prepaid
ordinary post.

21.2 A notice shall be deemed to be given and received:

(a) if given in accordance with subclause 21.1 (a), on the Business Day next after the day of delivery; or

(b) if given in accordance with subclause 21.1 (b ), five business days after the day of posting.

22 Proper Law

The provisions of the Scheme shall be governed and construed according to the laws of Victoria, Australia.

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