Merlin Diamonds : Notice of Annual General Meeting – 25/10/2017

NOTICE IS HEREBY GIVEN that the Annual General Meeting of Merlin Diamonds Limited (the "Company") will be held at Pullman Albert Park, 65 Queens Road, Melbourne, Victoria 3004, Australia, on 29 November 2017, commencing at 9.00 am for the following purposes:

1. Financial Statements and Reports

   To receive and consider the Financial Statements of the Company and the Reports of the Directors and of the Auditor for the financial year ended 30 June 2017.

2. Election of Director

   To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

   "That Mr Henry Herzog who holds office until the close of the meeting in accordance with clause 14.4(a) of the Company's Constitution, and, being eligible, be re-elected as a director of the Company."

   SPECIAL RESOLUTION
3. Approval of 10% Placement Capacity - Shares

   To consider and, if thought fit, to pass the following resolution as a special resolution:

   "That for the purposes of ASX Listing Rule 7.1A and for all other purposes, approval is given for the issue of Equity Securities totalling up to 10% of the issued capital of the Company (at the time of the issue) calculated in accordance with the formula prescribed in ASX Listing Rule 7.1A2 and on the terms and conditions set out in the Explanatory Memorandum."

   ORDINARY RESOLUTIONS
4. Ratify an issue of up to 481,111 Convertible Notes and 37,008,512 Options over Ordinary Shares.

   To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

   "To approve the Company, in accordance with ASX Listing Rule 7.1 and for all other purposes, issuing 481,111 convertible notes at a price of $1 per convertible note and 37,008,512 Options over Ordinary Shares to the parties and on the terms and conditions as set out in the Explanatory Statement to the Notice of Meeting dated 26 October 2017."

5. Approval of Merlin Diamonds Limited 2014 Incentive Share Scheme

   To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

   "For the purpose of ASX Listing Rule 7.2 Exception 9 (b), to approve the issue of fully paid ordinary shares of the Company under the Merlin Diamonds Limited 2014 Incentive Share Scheme".

   NON-BINDING ORDINARY RESOLUTION
6. Remuneration Report

To consider and, if thought fit, to pass the following resolution as an ordinary resolution:

"That the Remuneration Report of the Company (which forms part of the Directors' Report) for the financial year ended 30 June 2017 be adopted."

Note: The vote on this resolution is advisory only and does not bind the Directors or the Company.

By Order of the Board and dated this 24th day of October 2017.

PETER LEE

Company Secretary

A copy of the 2017 Annual Report is available on our website at www.merlindiamonds.com.au

The Company will disregard any votes cast on Resolution 3 by a person who may participate in the issue of equity Securities under the resolution and a person who may obtain a benefit, except a benefit solely in the capacity of a holder of ordinary shares, if the Resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form, or, it is cast by the Chair 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.

The Company will disregard any votes cast on Resolution 4 by (a) any person who participated in the issue; any person who may obtain a benefit; and (b) and associate of that person.

However, the Company need not disregard a vote on the resolution if (a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or (b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

The Company will disregard any votes cast on Resolution 5 by a director of the Company.

However, the Company need not disregard a vote on the resolution if (a) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or (b) it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides.

The Company will disregard any votes cast on Resolution 6 by (a) key management personnel of the Company; and (b) closely related parties of the key management personnel.

The key management personnel (KMP) of the Company are set out in the Remuneration Report. However, the Company need not disregard a vote on Resolution 6 if:

1. it is cast by a person other than a person who is a key management person as proxy for a person who is entitled to vote in accordance with the directions on the proxy form; or

2. it is cast by a person who is a key management person as a proxy for a person who is entitled to vote and the proxy is a directed proxy (that is, the proxy specifies how the proxy is to vote on the proposed resolution); or

3. it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, the chair has been given an open proxy and the proxy appointment expressly authorises the chair to exercise the proxy vote even if the resolution is connected directly or indirectly with the remuneration of a member of the KMP. For the purpose of this resolution, if the chair is appointed as set out in this clause and you do not complete any of the boxes on the proxy form opposite resolution 6, you will be directing the chairman to vote in favour of resolution 10.

   OPEN VOTES HELD BY CHAIRMAN

   The Chairman intends to vote all open proxies held by the Chairman in favour of all resolutions.

   NOTES TO THE NOTICE OF ANNUAL GENERAL MEETING

4. A Member entitled to attend and vote at the aforementioned meeting is entitled to appoint not more than two other persons as his/her proxy or proxies to attend and vote, in certain circumstances, instead of the Member at the meeting.

5. If a Member appoints one proxy, that proxy may vote on a show of hands.

6. If a Member appoints two proxies neither may vote on a show of hands. However, if you appoint two proxies to represent you at the Meeting, you must show in the space provided either the percentage of your Shareholding or the number of votes (you are entitled to one vote for each Share you own upon a poll being declared) those proxies are to represent. If you do not complete this section then each proxy may, on a poll, vote half of your Shareholding. A separate proxy form must be submitted for each proxy you appoint.

7. A proxy need not be a Member of the Company.

8. If you appoint a proxy to represent you and vote on your behalf at the Meeting and that person is also a Member or has already been appointed as a proxy for another Member, your vote may not be counted on a show of hands. This is because, on a show of hands, your proxy's vote is only counted once irrespective of the number of Members that that person represents. However, if a poll is taken and your proxy votes, your vote will be counted in full in reaching a decision.

9. The Proxy Form together with the Power of Attorney (if any) or a certified copy of the Power of Attorney (if any) under which it is signed must be lodged at either Level 12, 680 George Street, Sydney, NSW 2000, mailed to Locked Bag A14, Sydney South, NSW 1235 or the Registered Office of the Company or by being sent by fax to (+61) 02 9287 0309, not less than forty-eight (48) hours before the time of the commencement of the meeting.

10. Signing Proxies

11. Joint Holding - All holders must sign.

12. Shares in Company Names - Companies must execute this form in the way provided by Law.

13. Individual - Must be signed by the Member or their attorney.

14. For the purpose of the Meeting, Shares will be taken to be held by the persons who are registered holders at 7pm, on 27 November 2017. Accordingly, share transfers registered after that time will be disregarded in determining entitlements to attend and vote at the Meeting.

15. COMPANY REPRESENTATIVE

    If Shares are held in a company name and it is intended that a representative of the company attend the Meeting rather than lodge a proxy prior to the Meeting, the person attending the Meeting must present authority from the company director/s signed in the way provided by law.

    EXPLANATORY MEMORANDUM TO SHAREHOLDERS

    This Explanatory Statement provides shareholders of the Company with information in respect of the resolutions to be considered at the Annual General Meeting of the Company to be held Pullman Albert Park, 65 Queens Road, Melbourne 3004 on 29 November 2017 at 9.00 am. Shareholders should carefully review this Explanatory Statement and the associated Notice of General Meeting (Notice) to which this Explanatory Statement is attached.

    If you have difficulty in properly understanding this documentation, you should consult your financial or legal adviser.
16. RECEIVE AND CONSIDER THE REPORTS FOR THE YEAR ENDED 30 JUNE 2017

    This item is intended to provide an opportunity for Shareholders to raise questions on the reports themselves and on the performance of the Company generally.

    The Company's Annual Report 2017 has been made available to Shareholders. There will be an opportunity for Shareholders at the meeting to comment on and ask questions about the Company's management, operations, financial position, business strategies and prospects.

17. ELECTION OF DIRECTORS

    Article 14.4(a) of the Company's Constitution requires that one-third of the Directors (excluding the Managing Director) must retire by rotation at the conclusion of the annual general meeting of the Company. Accordingly, Mr Henry Herzog retires and being eligible offers himself for re-election.

    A profile about Mr Herzog follows:

    Mr Herzog has more than 40 years of corporate and management experience. He has been a Director of the Company since December 2009. Mr. Herzog has served in various positions as President, Vice President or Director of a number of publicly listed companies in Australia and the United States, predominantly in the mining sector. Mr. Herzog was responsible for the restructuring and reorganization of several publicly listed companies including Golden River Resources Corporation, where he served as its President and Chief Executive Officer from 1986-1988 and as a Vice President from 1988-1989. For at least the past five years, Mr. Herzog has also been managing a number of private investment entities. Age 75

    Directors' Recommendation

    The Board of Directors supports the nomination of Mr Herzog.

18. APPROVAL OF 10% PLACEMENT CAPACITY - SHARES

The purpose of this special resolution is to authorise the Directors to seek Shareholder approval to allow it to issue a further 10% of the Company's issued share capital under Listing Rule 7.1A during the 10% Placement Period in addition to and without using the Company's 15% placement capacity under Listing Rule 7.1.

This effectively gives the Directors a 25% placement capacity less that part of its placement capacity not available under Listing Rule 7.1

Listing Rule 7.1A came into effect on 1 August 2012 and enables "eligible entities" to issue Equity Securities up to 10% of its issued share capital through placements over a 12 month period after the annual general meeting if the Equity Securities are in an existing quoted class of the Company's securities ("10% Placement Facility"). The 10% Placement Facility is in addition to the Company's 15% placement annual capacity under Listing Rule 7.1. An "eligible entity" for the purposes of Listing Rule 7.1A is an entity that is not included in the S&P/ASX 300 Index and has a market capitalisation of $300 million or less. The Company is an eligible entity. The Company is seeking Shareholder approval by way of a special resolution to have the ability to issue Equity Securities under the 10% Placement Facility during the period up to 12 months after the Meeting. As Resolution 3 is a special resolution 75% of votes cast by Shareholders present and eligible to vote at the Meeting must be in favour of Resolution 5 for it to be passed.

If Shareholders approve Resolution 3 the exact number of Equity Securities that may be issued under the 10% Placement Facility will be determined in accordance with the formula prescribed in Listing Rule 7.1A.2 (refer below).The Company will comply with the disclosure obligations under Listing Rules 7.1A.4 and 3.10.5A upon the issue of any Equity Securities under the 10% Placement Facility.

Description of Listing Rule 7.1A

Shareholder approval

The ability to issue Equity Securities under the 10% Placement Facility is subject to shareholder approval by way of a special resolution at an annual general meeting, which is in addition to its 15% annual placement capacity.