Concerns over WAM major shareholder

Less than a week before shareholders are due to meet, West Australian Metals Ltd has sought legal advice to clear up claims that dissident shareholder Vladimir Nikolaenko could control more than 40 per cent of the company.

The company today outlined its concerns over a letter circulated to shareholders from Vargas Holdings Pty Ltd, Kaliara Pty Ltd and Mallee Minerals Pty Ltd, all entities controlled by Mr Nikolaenko.

"A German investment newsletter has recently claimed, following a lengthy interview with Mr Nikolaenko, that it believes Mr. Nikolaenko may control more than 40% of the voting shares in the company," West Australian said.

"The company has written to the lawyers acting for Mr Nikolaenko seeking to obtain confirmation as to the position in relation to this claim.

"This claim, yet to be confirmed or denied by Mr Nikolaenko or his lawyers as representing the true legal position, is consistent with claims made by Mr. Nikolaenko in conversations with current members of the Board in the lead up to the calling of the shareholders meeting, during which Mr. Nikolaenko threatened to exert "control" and claimed to control more than 20% of the company's shares."

All three parties have called for a meeting to oust non-executive director Terry Shanahan and appoint Gary Stokes, Kevin Judge and David Sanders as directors.

The shareholders meeting is scheduled to be held on Monday.

Below is the West Australian's announcement:

Letter to Shareholders from Requisitioning Parties

You may have recently received a two page letter dated 21 July 2008, from Vargas Holdings Pty Ltd, Kaliara Pty Ltd and Mallee Minerals Pty Ltd (Requisitioning Parties), entities that are controlled by Mr. Vladimir Nikolaenko.

Your Board is concerned that this letter, which the Board believes contains a number of serious material misrepresentations, might influence shareholders of West Australian Metals Limited (Company) to vote at the General Meeting convened for 10.00 am (Australian Western Standard Time) on Monday, 4 August 2008, in the manner suggested by a proxy form attached to that letter.

We enclose a copy of an Australian Securities Exchange (ASX) announcement issued by the Company and dated 25 July 2008, being when the Board became aware that the letter had been sent to shareholders, urging shareholders to take no action.

AREAS OF CONCERN

NIKOLAENKO APPEARS TO BE SEEKING CONTROL

Mr. Nikolaenko claims his companies are not seeking to take control of the Company. However, your Board is very concerned by claims attributed to Mr. Nikolaenko that he may control in excess of the takeover threshold of twenty percent (20%) of the voting shares in the Company. A German investment newsletter has recently claimed, following a lengthy interview with Mr Nikolaenko, that it believes Mr. Nikolaenko may control more than 40% of the voting shares in the Company. The Company has written to the lawyers acting for Mr Nikolaenko seeking to obtain confirmation as to the position in relation to this claim. This claim, yet to be confirmed or denied by Mr Nikolaenko or his lawyers as representing the true legal position, is consistent with claims made by Mr. Nikolaenko in conversations with current members of the Board in the lead up to the calling of the shareholders meeting, during which Mr. Nikolaenko threatened to exert "control" and claimed to control more than 20% of the Company's shares.
West Australian Metals Ltd.

INDEPENDENCE OF NIKOLAENKO NOMINEES

Mr. Nikolaenko claims his nominees to the Board are "completely independent" and that there is no relationship between his companies and the nominees.

Your Board is aware of the following facts:

Mr. Gary Stokes

Mr. Stokes is the Chief Executive of Magna Mining NL (formerly Reefton Mining NL). Mr. Nikolaenko resigned from the Magna Mining NL board a few weeks ago. Mr. Stokes works from Mr. Nikolaenko's offices and Magna Mining NL shares phone and fax numbers with Mr. Nikolaenko's private companies.

Mr. David Sanders

Mr. Sanders is a practice executive of the law firm which acts for the Requisitioning Parties and has written on behalf of the Requisitioning Parties. Mr Nikolaenko controls the Requisitioning Parties and holds his relevant interest in the Company through the Requisitioning Parties. Your Board is aware of every director's responsibility to act in the interests of all shareholders. However, the Board believes that Mr. Nikolaenko claiming that the nominees to the Board are "completely independent" is clearly misleading.

SHARE PRICE

Mr. Nikolaenko appears to be suggesting that your Board is failing to "properly manage and promote" the Company, by virtue of its $60 million market capitalisation. Mr. Nikolaenko goes on to estimate the "in ground" value of Marenica at $300 million.

It is not usual for a Board to disparage an optimistic valuation of its major asset. However, Mr. Nikolaenko appears to be suggesting that your Company is not being properly promoted by virtue of the difference between his assessment and that of the market.

Your Board is deeply concerned that Mr. Nikolaenko is creating an expectation that the Company's share price could be 5 times its current value based on currently available exploration information, and believes that this assertion is misleading.

First, Mr. Nikolaenko appears to be combining the Company's JORC compliant inferred resource of 15 million pounds U308 with the company's target (not a resource) for the Priority Area of 17-27 million pounds. The ASX Listing Rules do not even allow valuations on "in-ground values" as they can be misleading. Nor does the ASX allow these different categories to be added together, for obvious reasons.

Secondly, or perhaps in the alternative, it appears to assume a grossly inflated valuation per pound for uranium inferred resource. The market is simply not prepared to pay such a valuation. Thirdly, it takes no account of the fact that the Company is yet to complete a feasibility study, a necessary pre-requisite to the assumption of economic viability implicit in Mr. Nikolaenko's valuation.

None of this is to say that your Board is not working hard and diligently towards establishing the true value of the project or that shareholders should not remain optimistic about Marenica's prospects. Your Board believes that its JORC compliant resources will increase (a new statement is due out shortly, which is consistent with the Company's previous ASX announcement aiming for an end of July 2008 release) and that the uranium spot price will recover.

However, your Board is determined to manage the project and its promotion in a professional manner with the advice received from its advisers, ensuring that at all times it complies with JORC standards, and ASX resource reporting requirements.

Promoters are relatively easy to find - economic ore bodies are not!

Real shareholder wealth is generated through technical success, driven by a knowledgeable, experienced and dedicated exploration team.

MARENICA LICENCE RIGHTS

When your Company signed its original agreement with Jaco Smith, it acquired a right to 80% of the shares of Marenica Minerals (Proprietary) Limited, a Namibian company that was set up under the agreement to hold the Marenica exploration rights. This right was subject to the Company spending Namibian $1,500,000, which it completed over twelve months ago. These rights are not disputed by Smith or Nikolaenko. The company has legal advice confirming the existence of these rights.

The Board believes it is grossly misleading and damaging to suggest that these rights and the Company's interests are not "secure".

The Board also believes it is misleading for Nikolaenko to suggest that he "has been endeavouring to bring the parties together". Mr. Nikolaenko has been actively negotiating on behalf of Mr. Smith for him to gain effective veto rights over the management of the project. This has been resisted by the Board and as a result, Mr. Nikolaenko threatened to seek the appointment of a new Chief Executive Officer. When the Board declined Mr. Nikolaenko's request for Gary Stokes to be appointed, Mr. Nikolaenko demanded the appointment of Messrs Judge and Sanders as directors within 48 hours. When your Board requested the time to assess and interview his nominees, the Requisitioning Parties requisitioned the shareholders meeting.

KEEPING SHAREHOLDERS ADEQUATELY INFORMED

The Board learned of the Requisitioning Parties letter to shareholders dated 21 July 2008, on Friday, 25 July 2008.

The Board understands that, at the date of this letter, not all shareholders have received a copy of that, or this letter.

In an endeavour to ensure that all shareholders of WME are fully informed, and have had an opportunity to consider the manner in which they wish to vote at the meeting of shareholders requisitioned by the Requisitioning Parties, the Board intends to apply to the Court seeking a short postponement of that meeting. The Board anticipates the Court will hear that application on Wednesday, 30 July 2008, or Thursday, 31 July 2008. The Board will inform shareholders, after that time, of the outcome of that application.

RECOMMENDATION

Your Board recommends that shareholders:

(i) vote against the resolution to remove Terence Shanahan; and

(ii) vote against the resolutions to appoint the three persons nominated by the Requisitioning Parties (Messrs Stokes, Judge and Sanders), for the reasons set out in the Explanatory Memorandum accompanying the Notice of Meeting dispatched to all of the Company's shareholders on 3 July 2008.