altona energyaltona energy is listed on the london stock exchange’s aim market. its current focus...

Annual report and accounts

2012

Altona Energy

Altona Energy plcLondonFirst Floor18-19 Pall MallLondonSW1Y 5LU

Registered Office:Third Floor55 Gower StreetLondon, WC1E 6HQ

AdelaideLevel 9420 King William StreetAdelaide South Australia 5000

BeijingUnit 2907, T3 of CCP77 Jianguo RoadChaoyang DistrictBeijing, China 100025

www.altonaenergy.com

Altona Energy is listed on the London StockExchange’s AIM market. Its current focus is on theevaluation and development of the Company’s 49%interest in its flagship coals-to-liquid Arckaringa CTLand Power Project to exploit the huge coal resourcescontained in three exploration licences covering2,500 sq. kms in the northern portion of the PermianArckaringa Basin in South Australia. The Project isdesigned to include a modern, combined-cycle powerstation adding 560Mw to the national grid and toproduce clean burning diesel fuel for Australia and theworld from a resource equivalent to 7.8 billion barrels.

Altona is a 49% partner in a Joint Venture with CNOOCNew Energy Investment Co., Ltd., a subsidiary of the ChinaNational Offshore Oil Corporation (CNOOC), to completethe Project Bankable Feasibility Study and expedite theproject’s development.

In addition to the Arckaringa project, Altona Energy hasconditionally acquired up to two coal exploration licences inthe Xinjiang Autonomous Region of the People’s Republic ofChina. These assets, once acquired are expected to provideearly cash flow to support the Company’s Arckaringaproject and future opportunities in clean energy.

AltonaEnergy

CONTENTSHighlights 1Our business 2Chairman and ManagingDirector’s statement 6Board of Directors 10

Directors’ report 12Directors’ responsibilities 15Independent Auditors’ report 16Consolidated statement of 17comprehensive income

Statements of financial position 18Statements of cash flows 19Statement of changes in equity 20Notes to the consolidated 21financial statements

Welcome to

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HIGHLIGHTS

SOUTHERN AUSTRALIA

Leigh CreekOlympic Dam

Prominent Hill

To Alice Springs Darwin

Murloocoppie

Westfield EL 4511

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Wintinna

Major Mines

Railways

Major Roads

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South Australia has rich mineral resources, with the state boasting the4th largest global copper deposit, the5th largest global gold deposit and produces9% of global uranium. The coal reservesare estimated at 20 billion tonnes, of whichArckaringa contains 7.8 billion tonnes.

Australia

• Key approvals granted by the South AustralianGovernment for the Arckaringa work programme

• Conditional purchase of a 95% indirect beneficialinterest in up to two advanced coal exploration licenceslocated in the People’s Republic of China

• Agreement with Maison Global to collaborate in thebusiness development of project opportunities inthe area of coal and biomass gasification in China

• Appointment of Parsons Brinckerhoff’s Global MiningBusiness group as Project Management Contractor

Altona Annual Report and Accounts 2012 1

The Arckaringa Project willconvert low value coal intofeedstock to produce highvalue hydrocarbons for fuelproduction – such as cleanburning diesel – and lowcost power generation.

Our business – the Arckaringa Project

Altona(49%) in partnership withCNOOC (51%) own 100%of the Arckaringa coal toliquids project.

2 Altona Annual Report and Accounts 2012

Coal to liquid (CTL) is a welldeveloped technology, currently bestdemonstrated in coal rich SouthAfrica, where commercial scale CTLplants have been operating for over50 years and now supply 160,000barrels or 30% of South Africa’sgasoline and diesel fuel needs.

OUR TECHNOLOGY –COAL TO LIQUID

Combined cycle

power plant

Fischer-Tropsch

synthesis

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These plants, like those proposed forthe Arckaringa Project, involve twomajor stages – a gasification stage toproduce synthetic gas or ‘syngas’,rich in hydrogen and carbon, and aliquefaction stage, where the syngasis reacted over a catalyst – theFischer-Tropsch process– to producehigh quality, ultra clean synthetic fuelsand chemical feedstocks.

Pre-feasibility Plant Design based on:

• Coal gasification

• Fischer-tropsch synthesis

• Combined cycle gas turbine power generation

There are eighteenwine regionsAdelaide is regarded as the winecapital of Australia. The Barossais a wine region of world acclaimwith some of the oldest vinesstill used for wine production.

Direct flights toAdelaide Airport which services regional, domesticand international travellers.The state of the art facility isthe newest and most efficientaviation terminal in Australia.

Coal can be a source of clean energy, particularly through the increased use of coal gasification used in syngas/synfuels plants and Integrated GasificationCombined Cycle power stations.


Our business

Our business is to become theleading supplier of clean energy inSouth Australia with minimumemissions of greenhouse gases,applying carbon capture & storageand also utilisation to producealternative fuels. Syngas is theintermediate feedstock from which awide range of high value products canbe generated – not just clean dieseland jet fuels, but also industrialproducts such as synthetic naturalgas, methanol, fertilisers and waxes.

The clean up and purificationprocesses leave a harmless glassyslag usable in construction, producesulphur for industrial sales and,allow Carbon Dioxide (CO2) to bestripped from the Syngas ready forsequestration or conversion toproducts such as fuel grade methanol.

Water released from the coal duringconversion to Syngas can becondensed into steam and thenalong with tail gases from the Fischer-Tropsch units to feed steam andcombined cycle gas turbines andgenerate power for the Project andsurplus electricity for export.

BenefitsDomestic fuel supply will replaceimports and enhance energy security,whilst power generation will help meetSouth Australia’s growing electricityneeds. CTL fuels are ultra clean touse – they contain zero sulphur,reduce gaseous and particulateemissions, increase engine efficiencyand lower maintenance costs and donot contain carcinogenic aromatics,as contained in conventional fuels.

CTL is a prime example of cleancoal technology – the associatedcombined cycle units producenegligible SOx, significantly less NOxand 10–20% less CO2 per unit ofpower generated than a conventionalcoal fired plant, whilst carbon captureand storage offers the potential toreduce the overall greenhouse gasemissions from CTL to below the‘well to wheel’ level of fuels derivedfrom crude oil.

South Australia is acreative state Galleries andstudios are spread across every region.And Australia’s Aboriginal people arethe custodians of the world’s oldestliving culture. South Australia is hometo a number of groups.

More than 700restaurants South Australia is aquaculture central. The bestoysters, crayfish, snapper, tunaand prawns come from thelocal waters.

A RANGE OF PRODUCTS


The coal resources of theArckaringa Basin were extensivelyexplored in the 1980s and severalfeasibility studies were carried outfor the Wintinna deposit, as a fuelsource for potential offsite baseload power stations and privateindustrial projects.

In 1984, a bankable feasibility studywas submitted to the South AustraliaGovernment. However, like otherprojects for which Wintinna was apotential source of supply, the powerstation was never built. Approximately24,000 metres of drilling in 105boreholes at 93 sites were completedin past exploration programs to definethe current deposit. Approximately 30% of the boreholes were cored ateither HQ or larger diameter and allboreholes were geophysically logged.A comprehensive set of hydro-geological, geo-technical, mining andenvironmental studies was alsocompleted for the Wintinna deposit at this time.

COAL RESOURCES

Eco tourismStay in wilderness retreatson Kangaroo Island andenjoy guided tours toSeal Bay or go on anoutback safari on theback of a camel.

Coal qualityWintinna Typical Raw Coal QualityQuality Parameter As received

Total Moisture 36.6%

Raw Ash 8.2%

Volatile Matter 23.6%

Total Sulphur 1.119%

Chlorine 0.03%

Specific Energy 17.1 (MJ/kg)%

Relative Density 1.25% (g/cc)

Source: A&B Mylec – “Wintinna Resource Coal Quality Review”

Coal resources(non-JORC)

Million TonnesDeposit Measured* Indicated* Inferred* Total

Wintinna 1,150 750 2,000 3,900

Westfield 100 200 500 800

Murloocoppie 250 300 2,600 3,150

* based on JORC equivalent standards of the day 7,850


Many art galleriesand museums Adelaide’scultural boulevard, North Terraceholds the city’s art and cultural sitesincluding the Art Gallery of SouthAustralia, the Migration Museumand South Australian Museum.

Group operational results The rationale for building a major strategic fuel and power source for SouthAustralia at the Arckaringa Project remains compelling. Macro economicconditions remain challenging for everyone, but we have put in place a verysolid foundation from which to progress this exciting project. We have in placea conditional agreement to acquire some very significant coal assets in China,which once acquired will not only give the Group much needed access toreliable working capital but also give us even better access to new contactswithin China who will be helpful as Arckaringa progresses.

The year to 30 June 2012 was aneventful year for Altona Energy as weprogressed our Arckaringa coal-to-liquids (“CTL”) project in South Australiaand leveraged our China connectionsto prepare to enter that market directly.We have completed a great deal of vitaldevelopment and approval work on the49% owned Arckaringa project, put inplace an agreement to conditionallypurchase two significant coal projectsin China with the potential to give theCompany crucial access to early cashflow, and; put in place an agreement withone of the PRC’s leading internationalengineering design, procurement andconstruction groups to collaborate inthe business development of projectopportunities in the area of coal andbiomass gasification in China.

Despite the very real progress madeduring the year, there are elements ofour projects in Australia and China thatare beyond our immediate control, and

CHAIRMAN & MANAGINGDIRECTOR’S STATEMENT

it is hard to deny that this has been asource of some frustration to the seniormanagement team, and no doubt toshareholders too. Decisions fromcentral and regional government, aswell as in large state owned enterprisessuch as our 51% Arckaringa partnersCNOOC-NEI, have been delayed orpostponed pending the once in adecade leadership changesannounced recently at the 18th PartyCongress in Beijing. We expect a returnto ‘business as usual’ now that thenew leadership is in place.

Despite these delays, the Altonamanagement team has worked hardto put in place all necessary work – inAustralia and in China – to ensure thatwe are ready to move forward onceapprovals are received in the case ofour application for a Mining Licence inChina, and investment decisionstaken to proceed to the next projectphase at Arckaringa.

Chris SchrapeManaging Director

Christopher LambertChairman


Financial resultsThe financial loss of the Group for the12 months ended 30 June 2012 of£1,861,000 (2011: £1,593,000) was inline with expectations and includedthe benefit during the period of a£50,000 tax credit (2011: £104,000) inrespect of research and developmentcosts available to the Group. On 20February 2012 we placed 20,000,000new Ordinary Shares at a price of 5pence and on 08 March 2012 weplaced a further 20,000,000 newOrdinary Shares at a price of 5 penceto raise a total of £2million to provideadditional working capital.

As at 30 June 2012, the Grouphad cash of £1,252,000 (2011:£1,563,000). Under the terms of theJV, CNOOC-NEIA, will wholly fundthe BFS for the Arckaringa Projectup to the budget of A$40million,however the Group will requirefurther funds to meet its operationalcommitments over the next twelvemonths, which the Directors areconfident of procuring.

ArckaringaThe enormous potential in the CTLmarket is very well illustrated by the factthat the Arckaringa coal asset in SouthAustralia alone could sustain fuelproduction of some 330,000 Barrelsper Day (BPD), or in other words,

Rich and diverseheritage South Australia’s175 years of Europeansettlement is only a fractionof a story that dates back40,000 years.

the total amount of fuel imported byAustralia in 2011, for 70 years.

In terms of progress at Arckaringa,we are pleased with much that wehave achieved this year.

We have had key approvals granted bythe South Australian Government for theArckaringa work programme such as theProgramme for Environment Protectionand Rehabilitation (“PEPR”) and wehave got the water permitting and workarea clearance processes under way.

We have received all the necessaryregulatory approvals for our test drillingprogramme from the South Australianauthorities, namely the Department ofManufacturing Innovation TradeResources and Energy (DMITRE) andthe SA Arid Lands Natural ResourcesManagement Board (SAALRM) andreceived a Work Area Clearance fromthe relevant Native Title ClaimantGroup (AMYAC).

We have held preliminary discussionswith Drilling Contractors with theappropriate expertise to carry out thetest drilling programme, which includes:

• Completing hydro-geological testwells to enable refinement of theexisting hydro-geological modelwhich underpins the ground watermanagement plan

• Completing in-fill coal and coalgeotechnical boreholes to facilitatethe open cut mine design

The Drilling Contractor selected forthis test programme will have all thenecessary previous experience andequipment for drilling in the PermianCoal Measures in South Australia. It isanticipated that the drilling programmewill commence in the first quarter of2013 and be completed by the end ofthe second quarter of 2013. Theprogramme will provide us with datato further refine our mine developmentplan and enable us to finalise ouroverall project execution strategy.

Finally, we were delighted to be ableto recently announce the appointmentof Parsons Brinckerhoff’s GlobalMining Business group to act as ourProject Management Contractor tooversee the Arckaringa Minedevelopment and the design andbuild activities for the project. Theirfirst task will be to assist Altona withthe selection of the drilling contractor.

Coal to Liquids in AustraliaAustralia has clear ambitions tobecome the leading supplier of LNG inthe world, with some AUS$170bn ofinvestment already committed andanother AUS$100bn for further LNGinvestment planned. Indeed, Australian


LNG projects under construction nowrepresent more than 70 per cent of allLNG plants under construction globally.

However, a Business Council of Australiareport recently noted that resourcesprojects in Australia are 40 per centmore expensive than in the USA, andthat the Australian labour-force on suchprojects is 60 per cent less productivethan its US counterparts. And theseworrying statistics are only likely to getworse in the medium term, withsubstantial reductions in US shippingtime and costs to Asia when thePanama Canal widening is completedin 2014 which would allow lower costUSA LNG to become commerciallyavailable in Australia’s prime market.

There may be an alternative solutionhowever: the CTL industry. Coal ischeap to produce, is more predictablethan LNG in terms of quality andreserves, and Australia has plenty of it,being the largest exporter in the world.

Coal has always been considered asa polluting source of energy, but nowcoal gasification is gaining far morefriends in the environmental worldinternationally, for the production ofchemicals, electricity and synfuels(coal-based synfuels contain nocarcegenes, aromatics or sulphur andminimum particulates). Gasified coal

200 cellar doors onits doorstep Many wineries have cellar doors open for tastings.There are more than 200 cellardoors, from Shiraz in the Barossa,to Riesling in the Clare Valley andbig reds in the Coonawarra.

can be converted into Diesel, Naptha,Jetfuel, Methanol, Gasoline, Fertilisers,Petrochemicals and electricity. The by-products are CO2, water and sulphurdioxide (SO2), which can be processedinto commercial products. The onlyeffluent is an inert vitrified ash, which isused in construction and for road fill.

It is clear that Australia can establishCTL as a key component in its longterm clean energy strategy to provide areliable and stable source of chemicals,energy and fuels; firstly to meet its ownenergy needs, and secondly to exportto its Asian neighbours. Altona’sArckaringa project continues to beextremely well positioned to be a keypart of the CTL story in Australia.

ChinaThe board is fully cognisant thatadding a cash generating project toour asset portfolio would help Altonameet its working capital obligationsand therefore underpin Altona and ourArckaringa projects future. As a resultearlier in the year senior managementset about exploring a number ofopportunities open to us.

In March, we announced theconditional purchase of a 95% indirectbeneficial interest in two advancedcoal exploration licences located inthe People’s Republic of China (PRC).

The formal signing process took placeat a ceremony held in the presence ofhigh level PRC regional governmentand industry representatives, wherewe received very positive support forour development plans.

Since March, the mining licenceapplication, in respect of the first licence,has been submitted to the Chineseauthorities. The submission is currentlyon hold pending completion of the 18thParty Congress, at which point weexpect the mining licence applicationprocess to continue. In conjunction withthis process, the vendor and the boardhave identified and held preliminarydiscussions with a number of minecontracting firms. When the conditionsfor the acquisition are met and themining licence has been granted,Altona will seek to appoint a contractorto operate the mine, giving us thepotential to move this new, significantcoal asset rapidly into production.

Once acquired and fully operational itis expected that the Chinese projectwill provide a steady source ofrevenue, profits and cashflow thatwith time will mitigate the need toraise funds from shareholders andarrest further dilution of existingshareholders. It will also provide uswith a stronger platform for Altona’sparticipation in the Arckaringa Project,

Lovingly called the‘Festival State’ SouthAustralia prides itself on art andculture. There are many art andcultural festivals. There’s the AdelaideFestival, Adelaide Film Festival,Cabaret Festival and Feast Festival.


CHAIRMAN & MANAGINGDIRECTOR’S STATEMENTContinued

Adelaide is Australia’smost diverse stateHome to long summers, stunningbeaches and award-winning wine,events and festivals. It’s the gateway tothe unique National Landscapes of theFlinders Ranges and Kangaroo Island.

particularly to cover working capitalneeds during the Bankable FeasibilityStudy (“BFS”). This acquisition wouldalso give us the ability to strengthenour shareholder base and by holdingincome-producing coal assets inChina of the nature and size coveredby the Acquisition enables us toconsider, in due course, a dual listingon the Hong Kong Stock Exchange,and the Company has engaged aHong Kong based corporate advisorto help us evaluate this option.

In April, we were also able toannounce an agreement with MaisonGlobal to collaborate in the businessdevelopment of project opportunitiesin the area of coal and biomassgasification in China for the productionof transportation fuels, energy productsand power. Maison Global is one of thePRC’s leading international engineeringdesign, procurement and constructiongroups, with extensive experience in thePRC in coal and biomass gasificationprojects for the production oftransportation fuels and power. MaisonGlobal was founded in 1999 and wasone of the first western engineeringand construction companies managedaccording to international practices tobe established in the PRC.

The combination of Altona’s capabilitiesand its relationships with leading

clean energy technology providers isnow complemented by a leadingDesign-Build Contractor in China withsuccessful experience in clean energyprojects. The agreement with MaisonGlobal should provide excitingopportunities to collaborate on cleancoal project opportunities in China,one of the world’s largest markets forclean coal energy.

OutlookThe rationale for building a majorstrategic fuel and power source forSouth Australia at the ArckaringaProject remains compelling.

Macro economic conditions remainchallenging for everyone, but we haveput in place a very solid foundationfrom which to progress this excitingproject. We have in place aconditional agreement to acquiresome very significant coal assets inChina, which once acquired will notonly give the Group much neededaccess to reliable working capital butalso give us even better access tonew contacts within China who will behelpful as Arckaringa progresses.

It is true that things have progressedslower than we – and no doubtshareholders – would like. Chineseleadership changes have slowed downour applications with the Chinese

system of local government, and someof the actions and decisions from ourstrategic partner CNOOC-NEI have alsobeen affected by this factor. Whilstadopting a methodical and cautiousapproach to date, CNOOC NEI remainsa great partner for Altona in this project,both in terms of its financial strength andoperating knowledge and experience.Ultimately, the reward for Altonashareholders from our partnership with avery large multinational company will bea substantial share of a high quality,long life, world class project.

With all this in mind we would liketo thank all those involved in theCompany for their hard work as wellas you, our shareholders for yoursupport and patience. We lookforward to updating you all on ourprogress as we move forward.

Christopher LambertChairman

Chris SchrapeManaging Director

13 November 2012


Christopher Walter LambertExecutive Chairman

Mr Lambert’s financial background ispredominantly commodity based inthe City of London. Mr Lambertheaded up the London and globaltrading operations for Elders FinanceGroup, The Rural and Industries Bankof Western Australia, Barclays Bankand Prudential Securities (USA)London. During his time at thesecompanies, he was responsible forglobal dealing operations in the majorfinancial centres around the world,along with the structuring of corporateand project finance transactions forgovernments, central banks, industrialcompanies and mining houses.

Christopher John SchrapeManaging Director

Mr Schrape is a graduate of theUniversity of Melbourne – B.A(Economics). He has more than30 years experience in the resourceand mining industries, including asChief Executive Officer of Griffin Coalin Western Australia and 20 yearswith Rio Tinto in a variety of seniormanagement and marketing roles inAustralia and overseas, notably asMarketing Manager with Indonesia’slargest coal operation (PT KaltimPrima Coal) for 6 years from projectstart-up in 1991. Before joiningAltona Energy, Mr Schrape wasengaged as a Marketing Adviser forseveral prospective coal and powerprojects in Asia.

BOARD OF DIRECTORS

Peter FagianoExecutive Director

Mr Fagiano was previously, for12 years, Operations Director ofProcess & Technology Division forJacobs Engineering UK Limited(‘Jacobs’), here he led the technoeconomic studies in respect ofAltona’s CTL project for theArckaringa Coal.

Prior to that he spent 12 years insenior management roles at ABBGroup, where he was responsible forleadership of their upstream oil andgas engineering projects. He hasduring his 45 year career in thehydrocarbon and minerals sectorcarried out projects for majorinternational energy companies inAustralasia, China, Europe, India, the Middle East, North Africa, NorthAmerica and Russia. Mr Fagiano is a chartered engineer with a BSc Honsin Chemical Engineering. He is amember of the Institute of ChemicalEngineers and Institution of Gas Engineers and a Fellow of The Geological Society.

CORPORATEINFORMATION

SECRETARY AND REGISTERED OFFICEStephen RonaldsonThird Floor, 55 Gower Street, London WC1E 6HQ

AUDITORS BDO LLP55 Baker Street, London W1U 7EU

NOMINATED ADVISERWH Ireland Limited24 Martin Lane, London EC4R 0DR

BROKER Old Park Lane Capital Plc.49 Berkeley Square, London W1J 5AZ


Zheng (Michael) QiangExecutive Deputy Chairman

Mr Zheng began his career as aneconomist at the China EconomicCommission before moving to theChina Rare Earth Office of The StateCouncil Rare Earth Leading Group ofthe State Planning Commission,where he was in charge of rare earthproduction. He subsequently becamethe Deputy General Manager of theChina Rare Earth DevelopmentCorporation, a commercial arm ofthe State Council Rare EarthLeading Group. Mr Zheng has alsopreviously held senior managementpositions in the Beijing office ofAMR Technologies Inc. (“AMR”),a resources company listed on theToronto Stock Exchange, where heco-coordinated relations withChinese entities and was responsiblefor AMR’s direct liaison with theChinese Government.

Phillip George SutherlandNon-executive Director

Mr Sutherland is currently theChief Executive Officer of the CivilContractors Federation (SouthAustralian Branch). Prior to this(from 2001 to 2007) Mr Sutherlandwas the Chief Executive Officer ofand Chief Industry Advocate for theSouth Australian Chamber of Minesand Energy (SACOME). Prior tohis employment with SACOME,Mr Sutherland held various rolesincluding senior managementpositions in local, state andfederal government.

Mr Sutherland is well known ingovernment, industry and mediacircles and is a graduate in businessmanagement from the SouthAustralian Institute of Technologyand the University of South Australia.He is a Fellow of the AustralianInstitute of Management and aMember of both the AustralianInstitute of Company Directors andAustralian Human Resources Institute.

BANKERS HSBC Bank Plc 39 Tottenham Court Road, London W1T 2AR

REGISTRARS Share Registrars LimitedSuite E, First Floor, 9 Lion & Lamb Yard,Farnham, Surrey GU9 7LL

SOLICITORS Ronaldsons Solicitors55 Gower Street, London WC1E 6HQ

Freehills101 Collins Street, Melbourne Victoria 3000



DIRECTORS’ REPORT

The Directors are pleased to presenttheir report and the audited financialstatements of the Group and theCompany for the year ended 30 June 2012.

Company formationAltona Energy Plc is a publiclylisted company incorporated anddomiciled in England & Wales.The Company’s ordinary shares aretraded on the Alternative InvestmentMarket (‘AIM’) operated by theLondon Stock Exchange.

Principal activityThe principal activity of the Group isthe evaluation of the development of an integrated CTL plant and co-generation power facility, supportedby an open-cut coal mine at itsArckaringa Project in South Australia.The developments during the periodare detailed in the Chairman andManaging Director’s Statement.

Business review andfuture developmentsA full review of the Group’s activitiesduring the year, recent events andexpected future developments iscontained within the Chairman andManaging Director’s Statement onpages 6 to 9.

Principal risks and uncertaintiesThe principal risks and uncertaintiesfor the Group include the technical,economic and regulatory outcome

of the BFS, and are detailed in theChairman and Managing Director’sStatement.

Key performance indicatorsThe Group’s principal focus is theevaluation of the development of an integrated CTL plant and co-generation power facility, supportedby an open-cut coal mine at itsArckaringa Project in South Australia.

Other key performance indicators theGroup monitor on a regular basis are;

• cash management – sufficient tomeet its commitments: and

• minimum spend commitments/licenceand environmental compliance

Pursuant to the JV, it has been agreedthat CNOOC-NEIA will manage andoperate the BFS work programmeinitially utilising its in-house technicalresources, augmented by leadingspecialised consultants and activelyassisted by the Altona team. The firststage of the BFS has a budget ofA$12 million, after which the secondstage, which has an A$28 millionbudget, will commence.

The approved first stage BFS iscontinuing and the work programmeincludes:

• detailed review of coal depositgeology and consideration ofsupplemental drilling;

• groundwater investigation andverification;

• groundwater management researchand design;

• environmental baseline studies;

• open cut coal mining methodologyoptions; and

• product market research

The Group cash at 30 June 2012 was£1,252,000 (2011: £1,563,000).

Results and dividendsThe loss of the Group after taxationamounted to £1,861,000 (2011:£1,593,000), which included a sharebased payments expense of £nil(2011: £191,000). The Directors donot recommend payment of adividend (2011: £nil).

Financial instrumentsNote 2 of the financial statementsdetails the risk factors affecting theGroup and summarises the Group’spolicies for mitigating such risksthrough holding and issuing financialinstruments. These policies havebeen followed during the currentand prior year.

Directors and directors’ interestsThe Directors of the Group and theCompany and their interests in theordinary share capital of theCompany were:

Number of ordinary shares Number of options

30 June 2012 30 June 2011 30 June 2012 30 June 2011

Christopher Lambert 6,100,000 6,000,000 11,500,000 11,500,000Anthony Samaha(i) – 1,500,000 – 7,500,000Christopher Schrape 600,000 500,000 9,500,000 9,500,000Phillip Sutherland – – 1,500,000 1,500,000Peter Fagiano 1,000,000 1,000,000 1,000,000 1,000,000Michael Zheng(ii) 2,500,000 2,500,000 9,500,000 9,500,000

(i) Anthony Samaha resigned as a Director on 28 June 2012.

(ii) Michael Zheng holds the above shares and options in his own name but he is also the Chief Executive Officer and Managing Director of Tongjiang InternationalEnergy Co., Ltd which at the date of this report holds a further 18.4% of the ordinary shares in the Company.


Third party indemnity insuranceThe Company provides Directors’ andOfficers’ liability insurance at a cost of£14,000 (2011: £14,000).

Political contributions andcharitable donationsDuring the period there were nocharitable or political donations(2011: £nil).

Payment to suppliersThe Company’s and Group’s policyis to settle terms of payment withsuppliers when agreeing terms ofbusiness, to ensure that suppliers areaware of the terms of payment and toabide by them. Trade payables of theCompany as at 30 June 2012 wereequivalent to 47 (2011: 71) days’purchases, based on the averagedaily amount invoiced by suppliersto the Group during the year.

Post reporting date eventsDetails of post reporting date eventsare disclosed in note 21 of thefinancial statements.

Going concernThe Company raises money forexploration and capital projects asand when required. There can be noassurance that the Group’s projectswill be fully developed in accordancewith current plans or completed ontime or to budget. Future work on thedevelopment of these projects, thelevels of production and financialreturns arising therefrom may beadversely affected by factors outsidethe control of the Group.

Under the terms of the JV, CNOOC-NEIA, will fund the BFS for theArckaringa Project and thereby theGroup’s licence commitments up toA$40million, however the Grouprequires further funds to meet its

operational commitments over the nexttwelve months. The Directors remainconfident that the Group’s potentialfrom the development of theArckaringa project, together with theGroup’s historic proven ability to raiseadditional funds, will enable the Groupto fully finance its future working capitalrequirements beyond the period oftwelve months of the date of thisreport. However, there can be noguarantee that the required funds willbe raised within the necessarytimeframe. Consequently a materialuncertainty exists that may castsignificant doubt on the Group’s abilityto fund this cash shortfall and thereforebe able to meet its commitments anddischarge its liabilities in the normalcourse of business for a period notless than twelve months from the dateof this report.

The financial statements do notinclude the adjustments that wouldresult if the Group was unable tocontinue in operation.

AuditorsThe Directors review the terms ofreference for the auditors and obtainwritten confirmation that the firm hascomplied with its ethical guidance onensuring independence. The level offees charged is reviewed by theBoard to ensure they remaincompetitive and to ensure no conflictsof interest arise. BDO LLP hasindicated their willingness to continuein office as auditors of the Group.

RemunerationThe Company remunerates the Boardat a level commensurate with the sizeof the Company and the experienceof its Directors. The RemunerationCommittee has reviewed theDirectors’ remuneration and believesit upholds the objectives of the

Company with regard to this issue.Details of Directors’ emoluments andof payments made for professionalservices rendered are set out innote 6 to the Financial Statements.

Financial instrumentsThe financial risk managementpolicies and objectives are set outin detail in note 2 of the financialstatements.

Corporate governanceThe Directors are committed tomaintaining high standards ofcorporate governance. The Directorshave established procedures,so far as is practicable, given theCompany’s size, to comply with theUK Corporate Governance Code asmodified by the recommendations ofthe Quoted Companies Alliance.The Company has adopted andoperates a share dealing code forDirectors and senior employees onsubstantially the same terms as theModel Code appended to theListing Rules of the UKLA.

The BoardThe Board meets regularly throughoutthe year. To enable the Board toperform its duties, each of theDirectors has full access to all relevantinformation and to the services of theCompany Secretary. If necessary theNon-Executive Directors may takeindependent professional advice atthe Company’s expense. The Boardcurrently includes two Non-ExecutiveDirectors. The Board has delegatedspecific responsibilities to thecommittees described below.

The audit committeeThe audit Committee comprisesPhillip Sutherland (Chairman) andChristopher Schrape, with twomeetings held during the period

ended 30 June 2012. The Committeereviews the Company’s annual andinterim financial statements beforesubmission to the Board for approval.The Committee also reviews regularreports from Management and theexternal auditors on accounting andinternal control matters. Whenappropriate, the Committee monitorsthe progress of action taken in relationto such matters. The Committeealso recommends the appointmentof, and reviews the fees of, theexternal auditors.

The remuneration committeeThe remuneration committee is madeup of Phillip Sutherland (Chairman)and Christopher Lambert, with twomeetings held during the periodended 30 June 2012. It is responsiblefor reviewing the performance of the Directors and for settingthe scale and structure of theirremuneration, paying due regard to the interests of shareholders as a whole and the performance of the Company.

Control proceduresThe Board has approved financialbudgets and cash forecasts. In addition, it has implementedprocedures to ensure compliancewith accounting standards andeffective reporting.

Provision of informationto auditorsAs far as the Directors are aware,there is no relevant audit informationof which the Company’s auditors areunaware. Each Director has takenappropriate steps to ensure thatthey are aware of such relevantinformation, and that the Company’sauditors are aware of that information.

Annual General MeetingThis report and the FinancialStatements will be presented toshareholders for their approval at theCompany’s Annual General Meeting(“AGM”). The Notice of the AGM willbe distributed to shareholderstogether with the Annual Report.

By order of Board:

Christopher LambertDirector

13 November 2012


DIRECTORS’ REPORTContinued


DIRECTORS’ RESPONSIBILITIES

The Directors are responsible forpreparing the annual report and thefinancial statements in accordancewith applicable law and regulations.

Company law requires the Directorsto prepare financial statements foreach financial year. Under that law theDirectors have elected to preparethe group and company financialstatements in accordance withInternational Financial ReportingStandards (IFRSs) as adopted by theEuropean Union. Under company lawthe Directors must not approve thefinancial statements unless they aresatisfied that they give a true and fairview of the state of affairs of the groupand company and of the profit or lossof the group and company for thatperiod. The Directors are also requiredto prepare financial statements inaccordance with the rules of theLondon Stock Exchange for companiestrading securities on AIM.

In preparing these financial statements,the Directors are required to:

• select suitable accounting policiesand then apply them consistently;

• make judgements and accountingestimates that are reasonable andprudent;

• state whether they have beenprepared in accordance with IFRSsas adopted by the European Union,subject to any material departuresdisclosed and explained in thefinancial statements; and

• prepare the financial statements onthe going concern basis unless it isinappropriate to presume that thecompany will continue in business.

The Directors are responsible forkeeping adequate accounting recordsthat are sufficient to show and explainthe company’s transactions anddisclose with reasonable accuracy atany time the financial position of thecompany and enable them to ensurethat the financial statements complywith the requirements of theCompanies Act 2006. They are alsoresponsible for safeguarding theassets of the company and hencefor taking reasonable steps for theprevention and detection of fraudand other irregularities.

Website publicationThe Directors are responsible forensuring the annual report and thefinancial statements are madeavailable on a website. Financialstatements are published on thecompany’s website in accordancewith legislation in the United Kingdomgoverning the preparation anddissemination of financial statements,which may vary from legislation inother jurisdictions. The maintenanceand integrity of the company’swebsite is the responsibility of theDirectors. The Directors’ responsibilityalso extends to the ongoingintegrity of the financial statementscontained therein.

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF ALTONA ENERGY PLC

We have audited the financialstatements of Altona Energy Plc forthe year ended 30 June 2012 whichcomprise the consolidated statementof comprehensive income, theconsolidated and company statementsof financial position, the consolidatedand company statements of cashflows, the consolidated and companystatements of changes in equity andthe related notes. The financialreporting framework that has beenapplied in their preparation isapplicable law and InternationalFinancial Reporting Standards (IFRSs)as adopted by the European Unionand, as regards the parent companyfinancial statements, as applied inaccordance with the provisions of theCompanies Act 2006.

This report is made solely to thecompany’s members, as a body, inaccordance with Chapter 3 of Part 16of the Companies Act 2006. Our auditwork has been undertaken so thatwe might state to the company’smembers those matters we arerequired to state to them in anauditor’s report and for no otherpurpose. To the fullest extentpermitted by law, we do not accept orassume responsibility to anyone otherthan the company and the company’smembers as a body, for our auditwork, for this report, or for theopinions we have formed.

Respective responsibilities ofdirectors and auditorsA description of the scope of anaudit of financial statements isprovided on the APB’s website atwww.frc.org.uk/apb/scope/private.cfm

Scope of the audit of thefinancial statementsAn audit involves obtaining evidenceabout the amounts and disclosures inthe financial statements sufficient togive reasonable assurance that thefinancial statements are free frommaterial misstatement, whethercaused by fraud or error. This includesan assessment of: whether theaccounting policies are appropriateto the group’s and the parent

company’s circumstances and havebeen consistently applied andadequately disclosed; thereasonableness of significantaccounting estimates made by thedirectors; and the overall presentationof the financial statements.

Opinion on financial statementsIn our opinion:

• the financial statements give a trueand fair view of the state of thegroup’s and the parent company’saffairs as at 30 June 2012 and of thegroup’s loss for the year then ended;

• the group financial statements havebeen properly prepared inaccordance with IFRSs as adoptedby the European Union;

• the parent company financialstatements have been properlyprepared in accordance with IFRSsas adopted by the European Unionand as applied in accordance withthe provisions of the CompaniesAct 2006; and

• the financial statements havebeen prepared in accordancewith the requirements of theCompanies Act 2006.

Emphasis of matter –going concernIn forming our opinion on the financialstatements, which is not modified, wehave considered the adequacy of thedisclosures made in note 1 to thefinancial statements concerning theGroup’s ability to continue as a goingconcern. This is dependent on raisingfurther funds to meet its operationaland capital commitments over thenext twelve months. Although thedirectors expect to raise funds withinthe necessary timeframe, there canbe no guarantee that they will do so.Consequently a material uncertaintyexists which may cast significantdoubt over the Group’s ability tocontinue as a going concern. Thefinancial statements do not includethe adjustments that would result ifthe Group was unable to continue asa going concern.

Opinion on other matters prescribedby the Companies Act 2006In our opinion the information given inthe directors’ report for the financialyear for which the financial statementsare prepared is consistent with thefinancial statements.

Matters on which we are requiredto report by exceptionWe have nothing to report in respectof the following matters where theCompanies Act 2006 requires us toreport to you if, in our opinion:

• adequate accounting records havenot been kept by the parentcompany, or returns adequate forour audit have not been receivedfrom branches not visited by us; or

• the parent company financialstatements are not in agreementwith the accounting records andreturns; or

• certain disclosures of directors’remuneration specified by law arenot made; or

• we have not received all theinformation and explanations werequire for our audit.

Anne Sayers(Senior Statutory Auditor)

For and on behalf of BDO LLP,Statutory AuditorLondonUnited Kingdom

13 November 2012

BDO LLP is a limited liability partnershipregistered in England and Wales (with registerednumber OC305127).



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 30 June 2012

Group

2012 2011 Notes £’000 £’000

Share based payments expense – (191)Other administrative expenses (1,915) (1,520)

Total administrative expenses and loss from operations 4 (1,915) (1,711)Finance income 5 4 14Loss before taxation (1,911) (1,697)Tax 9 50 104Loss for the year attributable to the equity holders of the parent (1,861) (1,593)

Other comprehensive incomeExchange differences on translating foreign operations (203) 1,662Total comprehensive (loss)/income attributable to the equity holders of the parent (2,064) 69

Loss per share expressed in penceBasic and diluted attributable to the equity holders of the parent 8 (0.42p) (0.38p)

The notes on pages 21 to 40 form part of these financial statements.


STATEMENTS OF FINANCIAL POSITIONAs at 30 June 2012

Group Company

2012 2011 2012 2011 Notes £’000 £’000 £’000 £’000

ASSETSNon-current assetsIntangible assets 10 12,424 12,227 – –Property, plant and equipment 11 – 11 – 4Investment in subsidiaries 12 – – 1,432 1,432Other receivables 13 79 3 11,746 11,430Total non-current assets 12,503 12,241 13,178 12,866Current assetsTrade and other receivables 13 160 192 107 166Cash and cash equivalents 1,252 1,563 1,220 1,424Total current assets 1,412 1,755 1,327 1,590Total assets 13,915 13,996 14,505 14,456

LIABILITIESNon-current liabilitiesProvisions 15 300 300 300 300Current liabilitiesTrade and other payables 14 251 188 199 143Total current liabilities 251 188 199 143Total liabilities 551 488 499 443Net assets 13,364 13,508 14,006 14,013

EQUITYShare capital 16 472 432 472 432Share premium 13,810 11,930 13,810 11,930Merger reserve 2,001 2,001 2,001 2,001Foreign exchange reserve 3,215 3,418 – –Retained deficit (6,134) (4,273) (2,277) (350)Total equity 13,364 13,508 14,006 14,013

The financial statements were approved by the Board and authorised for issue on 13 November 2012 and signedon its behalf by:

Christopher LambertDirector

Registered number 5350512(Incorporated in England and Wales)



STATEMENTS OF CASH FLOWSFor the year ended 30 June 2012

Group Company

2012 2011 2012 2011 £’000 £’000 £’000 £’000

Operating activities(Loss)/profit (1,861) (1,593) (1,927) 316Finance income (4) (14) (4) (14)Depreciation 11 22 4 20Foreign exchange on loans to controlled entities – – 213 (1,717)Share options expensed – 191 – 191Increase in receivables (74) (135) (16) (110)Increase /(decrease) in payables 62 (80) 55 31Cash used in operations (1,866) (1,609) (1,675) (1,283)Income tax benefit received 14 244 – –Net cash flows used in operating activities (1,852) (1,365) (1,675) (1,283)

Investing activitiesPayments to acquire intangible fixed assets (383) (647) – –Acquisition of plant and equipment – (22) – (14)Loans to subsidiary – – (453) (866)Interest received 4 14 4 14Net cash flows used in investing activities (379) (655) (449) (866)

Financing activitiesProceeds from issue of shares 2,000 1,156 2,000 1,156Issue costs paid (80) – (80) –Net cash inflow from financing 1,920 1,156 1,920 1,156

Net decrease in cash and cash equivalents (311) (864) (204) (993)Cash and cash equivalents at beginning of the year 1,563 2,427 1,424 2,417Cash and cash equivalents at 30 June 1,252 1,563 1,220 1,424



STATEMENTS OF CHANGES IN EQUITYFor the year ended 30 June 2012

Foreign Share Share Merger exchange Retained Total capital Premium reserve reserve deficit equity £’000 £’000 £’000 £’000 £’000 £’000

GROUPAs at 1 July 2010 414 10,394 2,001 1,756 (2,473) 12,092Total comprehensive income for the period – – – 1,662 (1,593) 69Issue of share capital 16 1,140 – – – 1,156Costs of issue of share capitalShare based payments – – – – 191 191Deferred share issue 2 396 – – (398) –Balance at 30 June 2011 432 11,930 2,001 3,418 (4,273) 13,508Total comprehensive income/loss for the period – – – (203) (1,861) (2,064)Issue of share capital 40 1,960 – – – 2,000Costs of issue of share capital – (80) – – – (80)Balance at 30 June 2012 472 13,810 2,001 3,215 6,134 13,364

COMPANYAs at 1 July 2010 414 10,394 2,001 – (459) 12,350Total comprehensive income for the period – – – – 316 316Issue of share capital 16 1,140 – – – 1,156Costs of issue of share capitalShare based payments – – – – 191 191Deferred share issue 2 396 – – (398) –Balance at 30 June 2011 432 11,930 2,001 – (350) 14,013Total comprehensive loss for the period – – – – (1,927) (1,927)Issue of share capital 40 1,960 – – – 2,000Costs of issue of share capital – (80) – – – (80)Balance at 30 June 2012 472 13,810 2,001 – (2,277) 14,006

The following described the nature and purpose of each reserve within owners’ equity:

Reserve Description and purpose

Share premium Amount subscribed for share capital in excess of nominal value.Merger reserve Reserve created on issue of shares on acquisition of subsidiaries in prior years.Share based payments reserve Reserve created for equity settled share based payments to employees and consultants.Foreign exchange reserve Cumulative translation differences of net assets of subsidiaries.Retained deficit Cumulative net gains and losses recognised in the consolidated statement of

comprehensive income



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

The principal accounting policies are summarised below. They have been applied consistently throughout the year.

Basis of preparationThe financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£’000)unless otherwise stated.

These financial statements have been prepared in accordance with IFRS as adopted for use in the European Union (EU),and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Going concernThe financial statements have been prepared on a going concern basis. The Company raises money for exploration andcapital projects as and when required. There can be no assurance that the Group’s projects will be fully developed inaccordance with current plans or completed on time or to budget. Future work on the development of these projects,the levels of production and financial returns arising therefrom may be adversely affected by factors outside the controlof the Group.

Under the terms of the JV, CNOOC-NEIA, will fund the BFS for the Arckaringa Project and thereby the Group’s licencecommitments up to A$40million, however the Group requires further funds to meet its operational commitments over thenext twelve months. The Directors remain confident that the Group’s potential from the development of the Arckaringaproject, together with the Group’s historic proven ability to raise additional funds, will enable the Group to fully finance itsfuture working capital requirements beyond the period of twelve months of the date of this report. However, there can beno guarantee that the required funds will be raised within the necessary timeframe. Consequently a material uncertaintyexists that may cast significant doubt on the Group’s ability to fund this cash shortfall and therefore be able to meet itscommitments and discharge its liabilities in the normal course of business for a period not less than twelve months fromthe date of this report.

The financial statements do not include the adjustments that would result if the Group was unable to continue in operation.

New standards and interpretationsThe financial statements have been drawn up on the basis of accounting standards, interpretations and amendmentseffective at the beginning of the accounting period.

(i) The following new standards, interpretations and amendments to published standards effective in the yearhave been adopted by the Group:

International Accounting Standards (IAS/IFRS) Effective date

IAS 24 Revised – Related Party Disclosures 1 Jan 2011IFRIC 14 Amendment – IAS 19 Limit on a defined benefit asset 1 Jan 2011IFRS 7* Amendment – Transfer of financial assets 1 Jul 2011Improvements to IFRSs (2010) Miscellaneous amendments resulting from the IASB’s 1 Jan 2011

annual improvements projects

1. ACCOUNTING POLICIES continued

(ii) Standards, amendments and interpretations, which are effective for reporting periods beginning after thedate of these financial statements which have not been adopted early:

Standard Description Effective date

IAS 12* Deferred Tax: Recovery of Underlying Assets 1 Jan 2012IAS 1* Amendment – Presentation of Items of Other Comprehensive Income 1 Jul 2012IFRS 9* Financial instruments 1 Jan 2013IFRS 10* Consolidated financial statements 1 Jan 2013IFRS 11* Joint arrangements 1 Jan 2013IFRS 12* Disclosure of Involvement with Other Entities 1 Jan 2013IAS 28* Investments in Associates (revised 2011) 1 Jan 2013IAS 27* Separate Financial Statements (revised 2011) 1 Jan 2013IFRS 13* Fair Value Measurement 1 Jan 2013IAS 19* Employee Benefits 1 Jan 2013

* Not yet endorsed by European Union. The adoption of IFRS 9 will eventually replace IAS 39 in its entirety and consequently may have a material affect thepresentation, classification, measurement and disclosures of the Group’s financial instruments, however its impact on the financial statements has notyet been assessed. The Group have reviewed the likely impact of IFRS 11, and as a joint operator consider that the current policy for accounting for itsjoint arrangements will remain unchanged therefore except for the amended disclosure requirements of IAS 24 (Revised), the new standards,amendments and interpretations are not expected to materially affect the Group’s reporting or reported numbers in future periods.

Basis of consolidationThe consolidated financial statements incorporate the financial statements of the Company and entities controlled by theCompany (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operatingpolicies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement ofcomprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies intoline with those used by other members of the Group. All inter-group transactions, balances, income and expenses areeliminated in full on consolidation.

Significant accounting estimates and assumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, thathave a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the nextfinancial year are discussed below:

(i) Impairment of intangiblesThe Group determines whether intangibles are impaired when facts and circumstances suggest that the carryingamount may exceed its recoverable amount. Such indicators include the point at which a determination is made as towhether or not commercial reserves exist. The carrying amount of intangibles at 30 June 2012 in disclosed in note 10.

(ii) Share based payment transactionsThe Group measures the cost of equity settled transactions by reference to the fair value of the equity instruments atthe date at which they are granted. The fair value is determined using a Black-Scholes model. Refer to note 17 forvariables entered into the model.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSContinued



Foreign currenciesThe functional currency and presentation currency of the company is UK Pounds Sterling.

Transactions entered into by group entities in currency other than the currency of the primary economic environment inwhich they operate (the “functional” currency) are recorded at rates ruling when the transactions occur. Foreign currencymonetary assets and liabilities are translated at the rates ruling at the reporting date.

Non–monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translatedusing the exchange rate at the date of the transaction. Non–monetary assets and liabilities denominated in foreigncurrencies that are stated at fair value are translated to Pounds Sterling at the foreign exchange rates ruling at the datesthe fair value was determined.

On consolidation, the results of the operations are translated into Pounds Sterling at average rates approximating tothose ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rateruling at the reporting date. Exchange differences arising on translating the opening net assets at closing rate arerecognised directly in equity (the “foreign exchange reserve”).

Exchange differences recognised in the statement of comprehensive income of group entities’ separate financialstatements on the translation of long-term monetary items forming part of the Group’s net investment in the overseasoperation concerned are reclassified to the foreign exchange reserve if the item is denominated in the functionalcurrency of the Company or the overseas operation concerned.

Business combinationsAcquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the businesscombination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurredor assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The acquiree’sidentifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 RevisedBusiness Combinations are recognised at their fair values at the acquisition date.

Jointly controlled assetsJointly controlled assets are arrangements in which the Group holds an interest on a long term basis which are jointlycontrolled by the Group and one or more venturers under a contractual arrangement. The Group’s exploration,development and production activities are sometimes conducted jointly with other companies in this way. Since thesearrangements do not constitute entities in their own right, the consolidated financial statements reflect the Group’s costsincurred and assets and liabilities, which are directly related to the Group’s interest and contribution.

TaxationDeferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generallyrecognised for all deductible temporary differences to the extent that it is probable that taxable profits will be availableagainst which those deductible temporary differences can be utilised except for differences arising on investments insubsidiaries and jointly controlled entities where the group is able to control the timing of the reversal of the differenceand it is probable that the difference will not reverse in the foreseeable future.

Recognition of the deferred tax assets is restricted to those instances where it is probable that the taxable profit will beavailable against which the difference can be utilised.

Deferred tax is calculated based on rates enacted or substantively enacted at the reporting date and expected to applywhen the related deferred tax asset is realised or liability settled.

Current and deferred tax is charged or credited in the consolidated statement of comprehensive income, except when itrelates to items charged or credited directly to equity, in which case the related tax is also dealt with in equity. Researchand Development tax credits are recognised when they can be determined to be reliably measured.


ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it isprobable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount ofthe obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligationat reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision ismeasured using the cash flows estimated to settle the present obligation, its carrying amount is the present value ofthose cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party,the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of thereceivable can be measured reliably.

Intangible assets – exploration and evaluation assetsExploration and evaluation expenditure in relation to each separate area of interest are recognised as an exploration andevaluation asset in the year in which they are incurred where the following conditions are satisfied:

(i) the rights to tenure of the area of interest are current; and

(ii) at least one of the following conditions must also be met:

a) the exploration and evaluation expenditures are expected to be recouped through successful development andexploration of the area of interest, or alternatively, by its sale, or

b) exploration and evaluation activities in the area of interest have not, at the reporting date, reached a stage whichpermits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and activeand significant operations in, or in relation to, the area of interest are continuing.

Exploration and evaluation assets are initially measured at cost and include the acquisition of rights to explore, studies,exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation and amortisationof assets used in exploration and evaluation activities. General, administrative and share based payment costs are onlyincluded in the measurement of exploration and evaluation costs where they are related directly to exploration andevaluation activities in a particular area of interest.

Exploration and evaluation assets are assessed for impairment when facts or circumstances suggest that the carryingamount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of theexploration and evaluation asset (or the cash-generating unit(s) (‘CGU’) to which it has been allocated, being no largerthan the relevant area of interest) is estimated to determine the extent of the impairment loss (if any).

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimateof its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment loss been recognised for the asset in previous years.

Property, plant and equipmentProperty, plant and equipment are recorded at cost less depreciation and any impairment.

The carrying amount of property, plant and equipment is reviewed annually by Directors to ensure it is not in excess ofthe recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cashflows that will be received from the assets employment and subsequent disposal. The expected net cash flows havebeen discounted to their present value in determining recoverable amounts.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, onlywhen it is probable that future economic benefit associated with the item will flow to the entity and the cost of the itemcan be measured reliably. All other repairs and maintenance are charged to the consolidated statement ofcomprehensive income during the financial period in which they are incurred.





DepreciationDepreciation is calculated on a straight-line basis so as to write off the net cost of each asset over its expected useful lifeto its estimated residual value. Leasehold improvements are depreciated over the period of the lease or estimated usefullife, whichever is the shorter, using the straight-line method. The estimated useful lives, residual values and depreciationmethod are reviewed at the end of each annual reporting period, with the effect of any changes recognised on aprospective basis.

The following useful lives are used in the calculation of depreciation:

Plant and equipment 3 –5 years

LeasingWhere substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an ‘operatinglease’), the total rentals payable under the lease are charged to the consolidated statement of comprehensive income ona straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of therental expense over the lease term on a straight-line basis. The land and buildings elements of property leases areconsidered separately for the purposes of lease classification.

Financial assetsThe only financial assets currently held by the Group are classified as loans and receivables and cash and cashequivalents. These assets are non-derivative financial assets with fixed or determinable payments that are not quoted inan active market. They are initially recognised at fair value plus transaction costs that are directly attributable to theiracquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, lessprovision for impairment.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on thepart of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of theamounts due under the terms receivable, the amount of such a provision being the difference between the net carryingamount and the present value of the future expected cash flows associated with the impaired receivable. For receivables,which are reported net, such provisions are recorded in a separate allowance account with the loss being recognisedwithin administrative expenses in the consolidated statement of comprehensive income. On confirmation that thereceivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Loans and receivables comprise trade and other receivables and cash and cash equivalents in the statement offinancial position.

Included within loans and receivables are cash and cash equivalents which include cash in hand and other short termhighly liquid investments with a maturity of three months or less. Any interest earned is accrued monthly and classifiedas interest. Short term deposits comprise deposits made for varying periods of between one day and three months.

For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents asdefined above.

Derecognition – financial assetsThe Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or ittransfers the asset and substantially all the risk and rewards of ownership of the asset to another entity.


Financial liabilitiesThe Group classifies its financial liabilities into one category. This is other financial liabilities. At present, the Group doesnot have any liabilities classified as fair value through profit or loss.

The Group’s accounting policy for the other financial liabilities category is as follows:

Trade payables and other short-term monetary liabilities, are initially recognised at fair value and subsequently carried atamortised cost using the effective interest method. All interest and other borrowing costs incurred in connection withthe above are expensed as incurred and reported as part of financing costs in the consolidated statement ofcomprehensive income.

Derecognition – Financial liabilitiesThe Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled orthey expire.

Investments in subsidiariesIn its separate financial statements the Company recognises its investments in subsidiaries at cost, less any provision forimpairment. The cost of acquisition includes directly attributable professional fees and other expenses incurred inconnection with the acquisition. It also includes share based payments issued to employees of the Company for servicesprovided to subsidiaries.

Finance incomeFinance income is recognised as interest accrues using the effective interest method. This is a method of calculating theamortised cost of a financial assets and allocating the interest income over the relevant period using the effective interestrate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financialasset to the net carrying amount of the financial asset.

Merger reserveThe difference between the fair value of an acquisition and the nominal value of the shares allotted in a share exchangehas been credited to a merger reserve account, in accordance with the merger relief provisions of the Companies Act2006 and accordingly no share premium for such transactions has been setup.

Share based paymentsThe Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments aremeasured at fair value at the date of grant. The equity-settled share-based payments are expensed to the consolidatedstatement of comprehensive income or capitalised to investments or intangibles in the statement of financial positionover a straight line basis over the vesting period based on the Group’s estimate of shares that will eventually vest.

Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensiveincome is charged with the fair value of goods and services received over a straight line basis over the vesting periodbased on the Group’s estimate of shares that will eventually vest, except where it is in respect to costs associated withthe issue of securities, in which case it is charged to the share premium account.




2. FINANCIAL INSTRUMENTS – RISK MANAGEMENT

The financial instruments were categorised as follows: Other Loans and financial receivables liabilities Total £’000 £’000 £’000

GROUP 30 JUNE 2012Assets as per statement of financial positionTrade and other receivables 92 – 92Cash and cash equivalents 1,252 – 1,252 1,344 – 1,344Liabilities as per statement of financial positionOther financial liabilities – non-current – 300 300Trade and other payables – 251 251 – 551 551

GROUP 30 JUNE 2011Assets as per statement of financial positionTrade and other receivables 106 – 106Cash and cash equivalents 1,563 – 1,563 1,669 – 1,669Liabilities as per statement of financial positionOther financial liabilities – non-current – 300 300Trade and other payables – 177 177 – 477 477

COMPANY 30 JUNE 2012Assets as per statement of financial positionOther receivables – non current 11,670 – 11,670Trade and other receivables 89 – 89Cash and cash equivalents 1,220 – 1,220 12,979 – 12,979Liabilities as per statement of financial positionOther financial liabilities – non-current – 300 300Trade and other payables – 199 199 – 499 499

COMPANY 30 JUNE 2011Assets as per statement of financial positionOther receivables – non current 11,430 – 11,430Trade and other receivables 93 – 93Cash and cash equivalents 1,424 – 1,424 12,947 – 12,947Liabilities as per statement of financial positionOther financial liabilities – non-current – 300 300Trade and other payables – 143 143 – 443 443

2. FINANCIAL INSTRUMENTS – RISK MANAGEMENT continued

The Group’s financial instruments comprise of cash and sundry receivables and payables that arise directly from its operations.

The main risks arising from the Group’s financial instruments are credit risk, liquidity risk and currency risk. The Directorsreview and agree policies for managing these risks and these are summarised below. There have been no substantivechanges to the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing thoserisks or the methods used to measure them from previous periods unless otherwise stated in this note.

There is no significant difference between the carrying value and fair value of receivables and cash and cash equivalents.

Credit riskCredit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to theGroup. The Group has adopted a policy of only dealing with creditworthy counterparties, as assessed by the Directorsusing relevant available information.

Credit risk also arises on cash and cash equivalents and deposits with banks and financial institutions. The Group’s cashdeposits are only held in banks and financial institutions which are independently rated with a minimum credit agencyrating of A.

There were no bad debts recognised during the period and there is no provision required at the reporting date.

Liquidity riskLiquidity risk arises from the Group’s management of working capital. It is the risk that the Group will encounter difficultyin meeting its financial obligations as they fall due. Short term payables are classified as those payables that are duewithin 30 days.

The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they becomedue. To achieve this aim, it seeks to maintain cash balances (or agreed facilities) to meet expected requirements for aperiod of at least 45 days.

Currency riskThe functional currencies of the companies in the Group are Pounds Sterling and Australian Dollars. The Group does nothedge against the effects of movements in exchange rates. These risks are monitored by the Board on a regular basis.

The following table discloses the year end rates applied by the Group for the purposes of producing the financial statements:

Foreign currency units to £1.00 GBP Australian Dollar

At 30 June 2012 1.54At 30 June 2011 1.51

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at thereporting date are as follows:

Liabilities Assets

2012 2011 2012 2011 £’000 £’000 £’000 £’000

Australian Dollar 52 34 36 152

The impact of a 10% fluctuation in the value of the Australia Dollar would result in net translation gains or losses of£1,639 (2011: £19,000) movement in the consolidated statement of comprehensive income and net assets of the Group.The only monetary asset the Company has is the intercompany loan. A 10% fluctuation in the value of the AustralianDollar would result in a net translation gain or loss of £1,250,000 (2011: £1,215,000).




2. FINANCIAL INSTRUMENTS – RISK MANAGEMENT continued

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at thereporting date are as follows:

Assets

2012 2011 £’000 £’000

Australian Dollar 11,670 11,430

Borrowing facilities and interest rate riskThe Group and Company finances its operations through the issue of equity share capital. There are no significantborrowings and therefore no significant exposure to interest rate fluctuations.

The Group and Company manages the interest rate risk associated with the Group and Company cash assets byensuring that interest rates are as favourable as possible, whether this is through investment in floating or fixed interestrate deposits, whilst managing the access the Group and Company requires to the funds for working capital purposes.

The interest rate profile of the Group’s cash and cash equivalents was as follows:

Pound Sterling Australian Dollar Total £’000 £’000 £’000

30 June 2012Cash at bank floating interest rate 1,220 32 1,25230 June 2011Cash at bank floating interest rate 1,423 140 1,563

At reporting date, cash at bank floating interest rate is accruing weighted average interest of 0.06% (2011: 0.6%).As required by IFRS 7, the Group has estimated the interest rate sensitivity on year end balances and determined thata two percentage point increase or decrease in the interest rate earned on floating rate deposits would have causeda corresponding increase or decrease in net income in the amount of £28,000 (2011: £60,000).

Capital managementThe Group considers its capital to comprise its ordinary share capital, share premium and accumulated retainedlosses as well as the reserves (consisting of share based payments reserve, foreign currency translation reserve andmerger reserve).

The Group’s objective when maintaining capital is to safeguard the entity’s ability to continue as a going concern,so that it can provide returns for shareholders and benefits for other stakeholders.

The Company meets its capital needs by equity financing. The Group sets the amount of capital it requires to fund theGroups project evaluation costs and administration expenses. The Group manages its capital structure and makesadjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.

The Company and Group do not have any derivative instruments or hedging instruments. It has been determined that asensitivity analysis will not be representative of the Company’s and Group’s position in relation to market risk andtherefore, such an analysis has not been undertaken.

Fair valuesThe fair values of the Group and Company’s financial instruments approximates to their carrying value.

3. REVENUE AND SEGMENTAL INFORMATION

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operatingdecision maker. The chief operating decision maker, who is responsible for allocating resources and assessingperformance of the operating segment and that make strategic decisions, has been identified as the Board of Directors.

The Group had no operating revenue during the period.

During the year ended 30 June 2012 the Group operated in one segment being the evaluation of the Arckaringa coal andCTL project in South Australia. The Parent Company serves as an administrative head office and is based in the UnitedKingdom. During the year ended 30 June 2012 the Group’s operations spanned three countries, Australia, China and theUnited Kingdom. Included within the results of the administrative and corporate operations are the results of the Chinesebranch. The activity of the Chinese branch does not breach the 10% level required to be separately analysed.

Segment resultSegment result

2012 2011 £’000 £’000

Continuing operationsCoal and CTL project (Australia) (197) (296)Administration and Corporate (United Kingdom and China) (1,718) (1,415) (1,915) (1,711)Finance income 4 14Loss before tax (1,911) (1,697)Income tax benefit 50 104Loss after tax (1,861) (1,593)

The prior year share based payment charge is included within the UK segment result.

Segment assets and liabilitiesNon-current assets Non-current liabilities

2012 2011 2012 2011 £’000 £’000 £’000 £’000

Coal and CTL project (Australia) 12,503 12,227 – –Administration and Corporate (United Kingdom) – 14 300 300Total of all segments 12,503 12,241 300 300

Total assets Total liabilities

2012 2011 2012 2011 £’000 £’000 £’000 £’000

Coal and CTL project (Australia) 12,511 12,402 52 44Administration and Corporate (United Kingdom) 1,404 1,594 499 444Total of all segments 13,915 13,996 551 488

Other segment information

Depreciation and amortisation Capital expenditure

2012 2011 2012 2011 £’000 £’000 £’000 £’000

Continuing operationsCoal and CTL project (Australia) 7 – 383 547Administration and Corporate (United Kingdom) 4 20 – –Total of all segments 11 20 383 547




4. LOSS FROM OPERATIONS

Group

2012 2011 £’000 £’000

This has been arrived at after charging:Audit fee 20 20Fees payable to the Company’s auditor and its associates in respect of :The auditing of accounts of subsidiaries of the Company pursuant to legislation 10 10Legal fees in connection with the acquisition of a beneficial interest in mining licences (note 20) 180 –Depreciation 11 22Staff costs1 788 677Share based payments expense – 191Operating lease charges – land and buildings 172 145Net foreign currency losses 3 1

1 The Group recognised salaries and fees and long term payments of £1,116,000 (2011: £1,023,000) during the year, of which £328,000 (2011: £346,000)was capitalised to intangibles.

5. FINANCE INCOME

Group

2012 2011 £’000 £’000

Bank interest receivable 4 14

6. STAFF COSTS (including directors)

Group Company

2012 2011 2012 2011 £’000 £’000 £’000 £’000

Salaries and fees 1,020 949 889 732Long term benefits/incentives 96 74 64 54Share based payments – 148 – 123Salaries expense 1,116 1,171 953 909Capitalised to intangible assets (328) (346) (198) (185)Total 788 825 755 724

The Group averaged 10 employees during the period ended 30 June 2012 (2011: 8 employees). The Companyaveraged 9 employees during the period (2011: 7 employees). The amount capitalised to intangible assets relates toa portion of the staff costs in connection with three of the Group’s Directors.

Directors have been assessed as the only key management of the Group.

6. STAFF COSTS (including directors) continued

Fees/ Other Share based Total

Salary benefits Pension payments 2012 2011 £’000 £’000 £’000 £’000 £’000 £’000

Christopher Lambert 225 – – – 225 290Christopher Schrape 130 – 33 – 163 262Anthony Samaha(i) 169 – – – 169 168Michael Zheng 142 – – – 142 100Phillip Sutherland(ii) 49 – – – 49 27Peter Fagiano(iii) 150 9 – – 159 143Total Key Management 2012 865 9 33 – 907 Total Key Management 2011 819 3 20 148 990

(i) Anthony Samaha resigned as a Director on 28 June 2012 and included in his remuneration is an amount of £37,500 paid as a termination fee.

(ii) Peter Fagiano was appointed as a Director on 1 January 2011.

(iii) Phillip Sutherland performed additional consulting services totalling £19,243 in 2012 (2011:£nil), further details are included in note 19.

The total amount payable to the highest paid director in respect of emoluments was £225,000 (2011: £250,000).

No Directors exercised any share options during the period. The pension expense relates to compulsory superannuationin Australia.

The Company provides Directors’ and Officers’ liability insurance at a cost of £14,000 (2011: 14,000). This cost is notincluded in the above table.

7. LOSS FOR THE FINANCIAL YEAR

The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included its ownstatement of comprehensive income in these financial statements. The Company’s loss for the year was £1,927,000(2011: profit £316,000).

8. LOSS PER SHARE

The loss for the period attributed to shareholders is £1,861,000 (2011: loss £1,593,000).

This is divided by the weighted average number of Ordinary shares outstanding calculated to be 445.2million (2011: 419.4million) to give a basic loss per share of 0.42pence (2011: basic loss per share of 0.38pence).

As inclusion of the potential ordinary shares would result in a decrease in the loss per share they are considered to beanti-dilutive and, as such, the effect of the dilution has not been applied in the calculation. The potential future shareissues that may dilute the loss per share relate to options in issue and deferred shares disclosed at note 17.




9. TAX

Group

2012 2011 £’000 £’000

Total taxation – Current year taxationGroup corporation tax credit 50 104

Factors affecting the tax charge for the yearLoss on ordinary activities before tax (1,861) (1,697)

Loss on ordinary activities at the Group standard rate of 26% (2011: 28%) (483) (446)Effects of:Non-deductible expenses 26 64Difference in overseas tax rates (12) (38)Refund of prior year over paid tax 17 –Tax concession (research & development) 33 104Unutilised tax losses carried forward 469 420Total tax credit for the period 50 104

Unprovided deferred tax asset:Group tax losses carried forward of £15,216,000 (2011: £13,400,000) multiplied bystandard rate of corporation tax 25% (2011: 26%) recoverable only when it is probablethat the taxable profit will be available 3,804 3,484

10. INTANGIBLE ASSETS

Group

2012 2011 £’000 £’000

Exploration and evaluationCostAt beginning of period 12,227 10,039Additions 383 547Currency translation adjustment (186) 1,641Carrying value at 30 June 12,424 12,227

Exploration and evaluation relates to the development of an integrated coal-to-liquid plant and co-generation powerfacility, supported by an open-cut coal mine at its Arckaringa Project in South Australia.

11. PROPERTY, PLANT AND EQUIPMENT

Group Company £’000 £’000

CostOpening balance at 1 July 2010 69 67Additions 22 14At 30 June 2011 91 81Fully depreciated (91) (81)At 30 June 2012 – –

DepreciationOpening balance at 1 July 2010 58 57Depreciation charge for the year 22 20At 30 June 2011 80 77Depreciation charge for the year 11 4Fully depreciated (91) (81)At 30 June 2012 – –

Net book valueAt 30 June 2012 – –At 30 June 2011 11 4At 30 June 2010 11 10

12. INVESTMENTS

Unlisted investmentsCompany

2012 2011 £’000 £’000

CostInvestments in subsidiaries 1,432 1,432

The Company capitalised within investments in subsidiaries, share based payments of £1,432,000 in respect of shareoptions granted to employees of the Company for work performed on the Project.

Company

2012 2011 £’000 £’000

Opening balance 1,432 1,432Additions – –Closing balance 1,432 1,432

Holding

2012 2011Subsidiaries of Altona Energy Plc Country of Registration % % Nature of Business

DirectAltona Australia Pty Ltd Australia 100 100 Dormant holding CompanyAltona Investment Holding Ltd British Virgin Islands 100 – Holding Company

IndirectArckaringa Energy Pty Ltd Australia 100 100 Evaluation of the Arckaringa Project




13. TRADE AND OTHER RECEIVABLES

Group Company

2012 2011 2012 2011 £’000 £’000 £’000 £’000

Current trade and other receivableOther receivables (i) 10 29 6 29Tax credit receivable 48 20 – –Taxes and Social security receivable 42 29 42 29Prepayments and rent deposit(iii) 60 114 59 108 160 192 107 166Non current trade and other receivableLoans due from Group companies(ii) – – 11,670 11,430Rent deposit(iii) 76 – 76 –Tenement bond 3 3 – – 79 3 11,746 11,430

(i) Other receivables are non interest bearing and generally repayable between 30-60 days.

(ii) The loans to wholly owned subsidiaries are non interest bearing and are repayable on demand, however payment is not anticipated to be within one year.

(iii) Rent deposit is refundable upon expiry of the lease.

The trade and other receivables remain within their contractual maturity at 30 June 2012 and 30 June 2011.

14. TRADE AND OTHER PAYABLES

Group Company

2012 2011 2012 2011 £’000 £’000 £’000 £’000

Trade payables 131 112 118 106Accruals and other payables 120 76 81 37 251 188 199 143

Trade and other payables are non interest bearing and are normally settled on terms of 30 days from month end.The trade and other payables remain within their contractual maturity at 30 June 2012 and 30 June 2011.

15. PROVISIONS

Group Company

2012 2011 2012 2011 £’000 £’000 £’000 £’000

Non current provisionProvision for success fee(i) 300 300 300 300

(i) Upon completion of stage 1 of the BFS the Group will pay Michael Zheng £100,000 and upon the completion of stage 2 of the BFS, the Group will payMichael Zheng £200,000.

During the year ended 30 June 2012 the Group paid £nil (2011: £nil) of the success fee to Michael Zheng.

16. SHARE CAPITAL

AuthorisedGroup Company

2012 2011 2012 2011 £’000 £’000 £’000 £’000

1,000,000,000 Ordinary shares of 0.1p each(2011: 1,000,000,000) 1,000 1,000 1,000 1,000

Allotted, called up and fully paid

Group Company

2012 2011 2012 2011 £’000 £’000 £’000 £’000

471,656,853 ordinary shares of 0.1p each (2011: 431,656,853) 472 432 472 432

During the period the Company issued the following Ordinary 0.1 pence fully paid shares for cash:

Number of Nominal valueDate Issue price shares £’000

01 July 2010 Opening balance 414,068,526 41413 August 2010 Options exercised at 4.75p per share 1,628,082 225 August 2010 Options exercised at 0.1p per share 1,628,082 217 December 2010 Options exercised at 4.75p per share 1,628,082 221 December 2010 Success fee shares to Michael Zheng 2,500,000 220 June 2011 Tongjiang placement at 9.8p per share (gross) 10,204,081 1030 June 2011 Closing balance 431,656,853 43220 February 2012 Placing shares at 5p per share 20,000,000 2008 March 2012 Placing shares at 5p per share 20,000,000 2030 June 2012 Closing balance 471,656,853 472

See note 19, related party transactions for details of the issue to Michael Zheng in the prior year.

Details of contingent options and shares to be issued under the acquisition agreement are detailed in note 20.




17. SHARE BASED PAYMENTS

The Company periodically grants share options to employees, consultants and Directors, as approved by the Board.At 30 June 2012 and 30 June 2011, the following share options were outstanding in respect of the ordinary shares:

Year ended 30 June 2012 Forfeited/ Number of Exercise Number expired/ Exercised options price perGrant date Expiry date of options Issued in year cancelled in year outstanding option

03.08.06 02.08.11 3,000,000 – (3,000,000) – – 8.00p1

03.08.06 02.08.11 3,000,000 – (3,000,000) – – 12.00p1

03.08.06 02.08.11 3,000,000 – (3,000,000) – – 16.00p1

24.04.07 23.04.12 211,429 – (211,429) – – 9.50p1

20.08.08 19.08.13 11,125,000 – – – 11,125,000 5.00p1

20.08.08 19.08.13 12,075,000 – – – 12,075,000 7.00p2

05.01.10 04.01.14 12,750,000 – – – 12,750,000 7.00p3

30.03.10 29.03.15 6,500,000 – – – 6,500,000 0.10p4

30.03.10 29.03.15 1,300,000 – – – 1,300,000 10.00p5

28.06.12 27.06.13 – 7,000,000 – – 7,000,000 10.00p6

28.06.12 27.06.14 – 7,000,000 – – 7,000,000 15.00p6

28.06.12 27.06.15 – 6,000,000 – – 6,000,000 20.00p6

52,961,429 20,000,000 (9,211,429) – 63,750,000

Year ended 30 June 2011 Forfeited/ Number of Exercise Number expired/ Exercised options price perGrant date Expiry date of options Issued in year cancelled in year outstanding option

03.08.06 02.08.11 3,000,000 – – – 3,000,000 8.00p1

03.08.06 02.08.11 3,000,000 – – – 3,000,000 12.00p1

03.08.06 02.08.11 3,000,000 – – – 3,000,000 16.00p1

24.04.07 23.04.12 211,429 – – – 211,429 9.50p1

20.08.08 19.08.13 11,125,000 – – – 11,125,000 5.00p1

20.08.08 19.08.13 12,075,000 – – – 12,075,000 7.00p2

05.01.10 04.01.14 12,750,000 – – – 12,750,000 7.00p3

30.03.10 29.03.15 1,628,082 – – (1,628,082) – 0.10p1

30.03.10 29.03.15 6,500,000 – – – 6,500,000 0.10p4

30.03.10 29.03.15 3,256,164 – – (3,256,164) – 4.75p1

30.03.10 29.03.15 1,300,000 – – – 1,300,000 10.00p5

57,845,675 – – (4,884,246) 52,961,429

1 – No vesting conditions.2 – Vested 12 months from the date of grant.3 – 50% of options vest immediately, with 50% vesting 12 months from date of grant.4 – 3,000,000 options vest upon completion of Stage 1 of BFS and 3,500,000 options vest upon completion of Stage 2 of the BFS (Refer note 19).5 – 25% of options vest every 6 months.6 – Note 20 details the options issued in connection with the acquisition of the mining licences.

The highest and lowest price of the Company’s shares during the year was 9.04p and 3.02p (2011: 14.3p and 8p).The share price at year end was 3.41p (2011: 9p).

In March 2010, the Company agreed success fees with Michael Zheng, a director of the Company, in respect of theachievement of the JV (Refer note 19). These success fees include the issue of 2,500,000 fully paid ordinary shares inthe Company upon completion of conditions precedent to the JV. The deferred shares were issued in the year ended2011 and were not included in the above tables.

The Group recognised £nil (2011: £191,000) related to equity-settled share based payment transactions during the year,of which £nil (2011: £nil) was capitalised to intangibles. There is a further £nil (2011: £nil) to be recognised in thesubsequent financial period, in relation to the above issue of options.

18. COMMITMENTS

As at 30 June 2012, the Group had the following material commitments:

Exploration commitmentsThe Group has three exploration tenements in South Australia. The exploration commitments relating to EL 4512Wintinna, to EL 4511 Westfield and to EL 4513 Murloocoppie were met during the 2012 financial year. Under the terms ofits three ELs, the Group expects that its share of exploration commitments will be borne by CNOOC under the terms ofthe Joint Venture agreement.

Total operating lease commitmentsLeasing arrangements – Operating leases relate to office facilities.

Group Company

2012 2011 2012 2011 £’000 £’000 £’000 £’000

Non-cancellable operating lease payments:Not longer than one year 106 148 106 148 106 148 106 148

19. RELATED PARTY TRANSACTIONS

The Key Management personnel are considered to be the Directors. Details of their remuneration are included in note 6to the financial statements.

In the prior year the Group issued Mr Zheng with 2,500,000 fully paid ordinary shares and paid him £100,000 under thesuccess fee agreement entered into between Mr Zheng and the Company. These payments were in respect of milestoneachievements which were established in March 2010 when the Company agreed success fees with Mr Zheng, whichwere contingent in respect of the achievement of the JV and its subsequent progress. Upon satisfaction of thecompletion of conditions precedent to the JV, Mr Zheng was entitled to receive £100,000 and be issued with 2,500,000fully paid ordinary shares in the Company, during 2011 the conditions precedent in respect of these two conditions weremet and the payments were made. Furthermore in 2010 Mr Zheng was issued with 6,500,000 options, exercisable at0.1p, of which 3,000,000 vest upon completion of Stage 1 of the BFS and 3,500,000 vest upon completion of Stage 2 ofthe BFS. Mr Zheng will receive a further £100,000 upon completion of Stage 1 of the BFS and a further £200,000 uponcompletion of Stage 2 of the BFS.

The share based payments calculation is disclosed in note 17 Share Based Payments, and the financial impact isincluded in the numbers disclosed in note 6 Staff Costs. The cash element above is disclosed in note 15 Provisions.

During the period, the Company paid £225,000 (2011: £250,000) to CJL Consultants Limited, a company related toChristopher Lambert, for Director Fees. These fees are included in the numbers disclosed in note 6 Staff Costs.

During the period, the Group paid £30,000 (2011: £27,000) in respect of Directors fees to Sutherland People Pty limited,a company related to the Group by Phil Sutherland, a common Director, a further amount of £19,243 (2011: £10,000) in respect of consulting services provided to the subsidiary company Arckaringa Energy Pty Limited (2011: £nil). At 30 June 2012, there was £nil owing/owed (2011: £nil).




20. CONTINGENT CAPITAL COMMITMENTS

On 27 June 2012 Altona entered into an agreement, which is subject to certain conditions, to acquire an 95% beneficialinterest in two mining licences (“ML1 and ML2”) in Xinjiang Autonomous Region of the People’s Republic of China.

The acquisition is subject to certain conditions being met, which are the conversion of the Exploration Licences (“EL”)into a mining licence (“ML”), the transfer of the ML to Altona’s designated local subsidiary and, in respect of the optionand cash consideration, the attainment of certain net operating profit targets.

The consideration is split into two separate parts, which distinguishes between each EL. Following the conversion ofEL1 from an exploration licence into a mining licence (“ML1”) the agreement requires that ML1 will be transferred tothe Altona Group.

In respect of EL2 Altona has the option to acquire EL2 and if Altona elects to exercise this option then following theconversion of EL2 from an exploration licence into a mining licence (“ML2”) then ML2 will also be transferred to the AltonaGroup. It is expected that Altona will elect to exercise its option to acquire EL2, should the mining licence be granted.

The entire consideration for each EL is payable under the SPA is contingent on the completion of specific milestones,including the transfer of the ML, into the Altona Group and the consideration can be summarised as follows:

Consideration EL1 EL2

Contingent shares 50,000,000 50,000,000Contingent cash consideration £3,825,000 £3,825,000Share options 20,000,000 20,000,000– at 10p strike price, exercisable at 12 months 7,000,000 7,000,000– at 15p strike price, exercisable at 24 months 7,000,000 7,000,000– at 20p strike price, exercisable at 36 months 6,000,000 6,000,000

The contingent share considerationThe share consideration is a total of 50,000,000 shares for each of EL1 and EL 2 and the settlement of the shareconsideration is conditional upon the following:

• conversion of the relevant Exploration Licence to a Mining Licence; and

• transfer of the Mining Licences to the Altona’s designated local subsidiary.

Contingent cash considerationThe cash element of the consideration is £3,825,000 for each of EL1 and EL 2 and the settlement of the cashconsideration is conditional upon the following:

• conversion of the relevant Exploration Licence to a Mining Licence;

• transfer of the Mining Licences to Altona’s designated local subsidiary; and

• for each mining licence the attainment of certain Net Operating Profit in each of the first 3 years of operation.

The cash consideration will only be payable out of the net operating profits of each relevant ML utilising operating cashflows received by Altona and subject to the aforementioned conditions and is payable in three instalments over threeyears, as follows:

• £1,275,000, on the First Payment Date (15 December 2013);

• £1,275,000, on the Second Payment Date (15 December 2014); and

• £1,275,000, on the Third Payment Date (15 December 2015).

20. CONTINGENT CAPITAL COMMITMENTS continued

The share optionsUnder the agreement Altona agreed to grant the Seller options to subscribe for 20,000,000 ordinary shares of thecompany for each of EL1 and EL 2. The 20,000,000 options are structured to vest and become exercisable under thesame milestone structure applicable to the cash consideration. The 20,000,000 options are divided into three parcels atrespective subscription prices of 10, 15 and 20 pence per share, as below:

Share options EL1 EL2

10p strike price, exercisable at 12 months 7,000,000 7,000,00015p strike price, exercisable at 24 months 7,000,000 7,000,00020p strike price, exercisable at 36 months 6,000,000 6,000,000 20,000,000 20,000,000

The options will only vest and become exercisable once the following conditions have been met in respect of each of the EL’s:

• the conversion of the relevant EL to an ML;

• transfer of the Mining Licences to the Altona’s designated local subsidiary; and

• for each mining licence the attainment of certain Net Operating Profit in each of the first 3 years of operation.

As at 30 June 2012 the Share options in respect of EL1 had been granted on 28 June 2012.

In the event that the Seller fails to procure conversion of EL1 to an ML by 15 December 2012 then the Seller must payAltona a remedy of £200,000 within 10 business days after receiving a written notice from Altona and either party mayterminate the Share Purchase Agreement, the Bonds and the Options.

As at 30 June 2012 the Group had the option to purchase either one or two coal licences in China. The ability to exercisethe option rests on matters outside the control of the Company and consequently the Directors have not accounted forany of the potential consideration or obligations under the option agreement within the financial statements. The optionconsideration in respect of the EL1 options has been given a £Nil valuation because they are considered to be worthlessuntil such time as the company exercises its option to acquire EL1.

21. POST REPORTING DATE EVENTS

There were no post reporting date events to disclose.



Altona Energy is listed on the London StockExchange’s AIM market. Its current focus is on theevaluation and development of the Company’s 49%interest in its flagship coals-to-liquid Arckaringa CTLand Power Project to exploit the huge coal resourcescontained in three exploration licences covering2,500 sq. kms in the northern portion of the PermianArckaringa Basin in South Australia. The Project isdesigned to include a modern, combined-cycle powerstation adding 560Mw to the national grid and toproduce clean burning diesel fuel for Australia and theworld from a resource equivalent to 7.8 billion barrels.

Altona is a 49% partner in a Joint Venture with CNOOCNew Energy Investment Co., Ltd., a subsidiary of the ChinaNational Offshore Oil Corporation (CNOOC), to completethe Project Bankable Feasibility Study and expedite theproject’s development.

In addition to the Arckaringa project, Altona Energy hasconditionally acquired up to two coal exploration licences inthe Xinjiang Autonomous Region of the People’s Republic ofChina. These assets, once acquired are expected to provideearly cash flow to support the Company’s Arckaringaproject and future opportunities in clean energy.

AltonaEnergy

CONTENTSHighlights 1Our business 2Chairman and ManagingDirector’s statement 6Board of Directors 10

Directors’ report 12Directors’ responsibilities 15Independent Auditors’ report 16Consolidated statement of 17comprehensive income

Statements of financial position 18Statements of cash flows 19Statement of changes in equity 20Notes to the consolidated 21financial statements

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Annual report and accounts

2012

Altona Energy

Altona Energy plcLondonFirst Floor18-19 Pall MallLondonSW1Y 5LU

Registered Office:Third Floor55 Gower StreetLondon, WC1E 6HQ

AdelaideLevel 9420 King William StreetAdelaide South Australia 5000

BeijingUnit 2907, T3 of CCP77 Jianguo RoadChaoyang DistrictBeijing, China 100025

www.altonaenergy.com

altona energyaltona energy is listed on the london stock exchange’s aim market. its current focus...

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